Otis Worldwide Corporation

Good morning and welcome to Otis's second quarter 2026 earnings conference call. This call is being carried live on the internet and recorded for replay. Presentation materials are available for download from Otis's website at www.otis.com. I'll now turn it over to email the suit senior vice president treasurer and interim head of investor relations. Please go ahead.

Thank you, Krista. Welcome to Otis' second quarter 2026 earnings conference call. On the call with me today are Judy Marks, Chair, CEO, and President, and Cristina Mendez, Executive Vice President and CFO. Please note, except where otherwise noted, the company will speak to results from continuing operations, excluding restructuring and significant non-recurring items. A reconciliation of these measures can be found in the appendix of the webcast. We also remind listeners that the presentation contains forward-looking statements which are subject to risks and uncertainties. OTIS's SEC filings, including our forms 10-K and 10-Q, provide details and important factors that could cause actual results to differ materially. I'd like to turn the call over to Judy.

Thank you, Imelda. Good morning, afternoon, and evening, everyone. Thank you for joining us. We hope everyone listening is safe and well. Starting on slide three, We achieved significant top line growth as we delivered a solid quarter with a significant step up in organic sales growth driven by accelerating service growth and improving trends in new equipment along with strong cash generation. Service remains the key growth engine of the business with 9% organic sales growth supported by 24% modernization growth, double digit repair growth, and accelerating maintenance trends. Modernization orders were up 9% to end the quarter with a backlog up 26% at constant currency. We strongly believe that the investments we are making in capacity, quality, pricing, and commercial execution are enhancing our competitive position and yielding continued growth in our service business. In new equipment, we're encouraged by the sequential improvement in sales and the stabilization in margins. While orders were down 5% in the quarter, backlog increased 4% at constant currency and the business is showing greater stability supported by a sales turnaround in the Americas at a robust 10% growth. We delivered another quarter of strong cash generation with adjusted free cash flow of $290 million, up 19% year over year. The strength of our cash flow reflects the resilience of our business model. Importantly, this allows us to continue investing in growth and strategic investments, including the acquisition of a majority stake in WeMaintain, while also returning a significant portion of free cash flow to shareholders through share repurchases and dividends. In the first half of 2026, we bought back approximately $800 million of shares and raised our dividend 5%, returning over $1.1 billion to our shareholders. These results reflect our progress in executing our strategy and investing and strengthening our service business. Service margins declined year over year as labor and material cost increases have added pressure on margins as we ramp up our operations to execute on our strong repair and modernization backlog. With continued service revenue growth, we expect a sustained recovery in margins in the next quarters. With that, Let me turn to our second quarter financial results on slide four. Otis delivered net sales of $3.9 billion with organic sales up 6%. Adjusted operating profit, excluding a $7 million foreign exchange tailwind, decreased by $32 million in the quarter as higher volume and price were offset by inflation, mix, and productivity impacts. Adjusted operating profit margin declined 100% and 80 basis points to 15.2%. Adjusted EPS declined 4% or 4 cents in the quarter due to operational performance, partially offset by favorable foreign exchange rates. I want to take a step back and look at the significant transformation journey we've been on as shown on slide five. From 2020 to 2025, we drove growth through a focus on boosting the size of our portfolio, Introducing innovative products like Gen 3 and Gen 360, connecting 1.1 million units on Otis 1, and industrializing our modernization business. With keen operational focus, we optimized and developed resiliency in our supply chain and executed on uplift and China transformation programs. These programs yielded sustained operational performance improvement over the past five years. Starting this year, we added four operational initiatives. First, we drove value-driven AI micro pricing across maintenance and repair. Second, we shifted our portfolio mix focus toward high-value service segments and geographies. Third, we took a proactive approach in our repair offering to drive customer uptime and service growth. And fourth, we made a strategic decision to invest in service quality through our Service Excellence Initiative to sustain portfolio growth in our key markets in the Americas and EMEA. We are seeing early signs of progress in this area and an opportunity to build a stronger operating foundation. The investment in service quality impacted margins in the short term, but we see it as necessary to fuel our growth. Service quality leads to customer satisfaction and retention, which feeds our flywheel for service volume growth across maintenance, Repair, and Modernization. Today, we're sharing our plan to work structurally on our service operating model, which will drive frontline excellence. It's a program to unlock the full value of our operating potential at the local level, where our 45,000 field colleagues serve our customers every day. This will be a natural extension of the transformation we started with Uplift, which freed the frontline from transactional activities to become more customer-centric. We will standardize our core field and sales processes and drive operational excellence across our frontline. Our service operating model will leverage the learnings from the tactical investments we're undertaking in service excellence, which, as I said, are delivering promising results. We have exceptional operating territories across our network that consistently deliver robust growth, excellent customer service, and strong operational performance. Our objective is to systematically use standardized systems and tools to consistently bring every operating territory to this level of excellence. Our focus on the front line is the logical next step in our journey since SPIN to build a more consistent, high-performance company. But we still have work to do to get there. Slide 6 summarizes our progress in service margins, which improved sequentially in Q2, but we are still seeing pressure largely from productivity and cost headwinds and the timing of our micro pricing actions. In Q1, we communicated a plan to invest $50 million in service excellence and pricing with the goal to drive retention improvement and pricing upsides in maintenance and repair. We have invested $15 million in the quarter on track with the plan and we're encouraged to see a step change improvement in our service quality metrics. Our Service Quality Index has improved seven points in the operating territories targeted in the investment plan. In a good portion of these operating territories, we have also seen retention improvement, but the recovery timing varies. Although our overall retention rate ex-China was down this quarter, we believe this will improve as we continue to provide high quality service to customers. On cost and pricing, we were able to broadly offset the impact of the Middle East conflict with pricing actions and saw a strong ramp up of our micro pricing initiatives in the repair business. Productivity and cost headwinds were higher than we anticipated this quarter. This has been driven by three main factors. First, our ongoing strategic investments in service excellence impacted productivity and together with inflationary increases, led to higher than expected labor and material costs. Second, as we ramped up resources to execute a strong repair and mod backlog, workforce onboarding took longer than expected for newly hired mechanics to reach full effectiveness, especially for highly skilled activities in repair and modernization. Third, the acceleration of mod and repair execution required higher labor rates to make resources available where and when needed. We believe a large part of these headwinds are temporary while we adjust our operations through our service operating model to deliver on our growing backlog. With that, I'll turn it over to Cristina to walk through our segment results in more detail.