Otis continues to deliver mid-single digit organic Service growth and strong margin expansion 1Q Net sales up 2.7% and organic sales up 3.8% driven by Service net sales up 5.8% with organic sales up 6.5% 1Q GAAP EPS up 8.9% and adjusted EPS up 10.0% with GAAP operating profit margin expansion of 50 basis points and adjusted operating profit margin expansion of 80 basis points 1Q New Equipment orders down 10%, backlog down 2%, ~flat at constant currency 1Q Mod orders up 13%, backlog up 14%, up 15% at constant currency Maintenance portfolio units increased 4.1% 1Q GAAP cash flow from operations of $171 million; adjusted free cash flow of $155 million 1Q share repurchases of $300 million Updated full-year outlook1; increasing adjusted EPS to $3.83 to $3.90 and full year share repurchase target to $1 billion FARMINGTON, Conn., April 24, 2024 /PRNewswire/ -- Otis Worldwide Corporation (NYSE:OTIS) reported first quarter 2024 net sales of $3.4 billion with 3.8% organic growth. GAAP earnings per share (EPS) increased 8.9% to $0.86 and adjusted EPS increased 10.0% to $0.88. "Otis continues to demonstrate the strength of our Service-driven business model with maintenance portfolio growth above 4% and both year over year and quarter over quarter Service margin expansion," said Judy Marks, Chair, CEO & President. "In addition, modernization strength continues, including another quarter of orders growth above 10% leading to mid-teens backlog growth and organic sales growth of nearly 10%. After delivering a strong first quarter, we are raising our EPS outlook driven by operational performance and increasing our share repurchase target to $1 billion for the year. With confidence in our long-term strategy, we have raised the quarterly dividend 14.7%, reinforcing our commitment to creating shareholder value." Key Figures ($ millions, except per share amounts) Quarter Ended March 31, 2024 2023 Y/Y Y/Y (CFX) Net sales $                 3,437 $                 3,346 2.7 % 3.9 % Organic sales growth 3.8 % GAAP Operating profit $                    544 $                    513 $                      31 Operating profit margin 15.8 % 15.3 % 50 bps Net income $                    353 $                    331 6.6 % Earnings per share $                   0.86 $                   0.79 8.9 % Adjusted non-GAAP comparison Operating profit $                    561 $                    518 $                      43 $                    50 Operating profit margin 16.3 % 15.5 % 80 bps Net income $                    361 $                    335 7.8 % Earnings per share $                   0.88 $                   0.80 10.0 % First quarter net sales of $3.4 billion increased 2.7% versus the prior year. Excluding a 1.2% headwind from foreign exchange, organic sales grew 3.8%. First quarter GAAP operating profit of $544 million increased $31 million and adjusted operating profit of $561 million increased $43 million at actual currency and $50 million at constant currency, driven by Service. GAAP operating profit margin expanded 50 basis points to 15.8% and adjusted operating profit margin expanded 80 basis points to 16.3%, driven by favorable segment performance and mix. GAAP EPS of $0.86 increased 8.9% compared to prior year and adjusted EPS of $0.88 increased 10.0% due to strong operational performance. New Equipment Quarter Ended March 31, ($ millions) 2024 2023 Y/Y Y/Y (CFX) Net sales $                 1,280 $                 1,307 (2.1) % (0.5) % Organic sales (0.5) % Segment operating profit $                      71 $                      69 $                        2 $                        6 Segment operating profit margin 5.5 % 5.3 % 20 bps In the first quarter, net sales of $1.3 billion decreased 2.1% versus the prior year. Excluding a 1.6% headwind from foreign exchange, organic sales were roughly flat as strong performance in the Americas and low single digit growth in EMEA and Asia Pacific was offset by a decline in China. Segment operating profit of $71 million increased $2 million at actual currency and $6 million at constant currency due to favorable price, productivity, and commodity tailwinds, which offset lower volume and unfavorable mix. Segment operating profit margin expanded 20 basis points to 5.5%. New Equipment orders were down 10% at constant currency with growth in EMEA and Asia Pacific more than offset by declines in the Americas and China. New Equipment backlog decreased 2% at actual currency and was flat at constant currency in the quarter. Service Quarter Ended March 31, ($ millions) 2024 2023 Y/Y Y/Y (CFX) Net sales $                 2,157 $                 2,039 5.8 % 6.6 % Organic sales 6.5 % Segment operating profit $                    523 $                    479 $                      44 $                     47 Segment operating profit margin 24.2 % 23.5 % 70 bps In the first quarter, net sales of $2.2 billion increased 5.8% versus the prior year. Excluding a 0.8% headwind from foreign exchange, organic sales grew 6.5%. Organic maintenance and repair sales increased 5.8% and organic modernization sales increased 9.7%. Segment operating profit of $523 million increased $44 million at actual currency and $47 million at constant currency due to higher volume, favorable pricing and productivity, which were partially offset by annual wage inflation. Segment operating profit margin expanded 70 basis points to 24.2%. Cash flow Quarter Ended March 31, ($ millions) 2024 2023 Y/Y Cash flow from operations $            171 $            278 $        (107) Free cash flow $            140 $            253 $        (113) Adjusted free cash flow $            155 $            253 $          (98) First quarter cash from operations of $171 million decreased $107 million, free cash flow of $140 million decreased $113 million and adjusted free cash flow of $155 million decreased $98 million versus prior year driven by an increase in net income more than offset by changes in working capital. 2024 Outlook1 Otis is revising its full year outlook: Net sales of $14.5 to $14.8 billion Organic sales up 3 to 5% Organic New Equipment sales approximately flat Organic Service sales up 6 to 7% Adjusted operating profit of $2.40 to $2.45 billion, up $160 to $190 million at constant currency; up $135 to $175 million at actual currency Adjusted EPS of $3.83 to $3.90, up 8 to 10%; adjusted effective tax rate of approximately 25.5% Adjusted free cash flow of approximately $1.6 billion 1Note: When we provide outlook for organic sales, adjusted operating profit, adjusted effective tax rate and adjusted free cash flow on a forward-looking basis, a reconciliation of the differences between the non-GAAP expectations and the corresponding GAAP measures generally is not available without unreasonable effort. See "Use and Definitions of Non-GAAP Financial Measures" below for additional information. About Otis Otis is the world's leading elevator and escalator manufacturing, installation and service company. We move 2.3 billion people a day and maintain approximately 2.3 million customer units worldwide, the industry's largest maintenance portfolio. Headquartered in Connecticut, USA, Otis is 71,000 people strong, including 42,000 field professionals, all committed to meeting the diverse needs of our customers and passengers in more than 200 countries and territories worldwide. For more information, visit www.otis.com and follow us on LinkedIn, Instagram, and Facebook Use and Definitions of Non-GAAP Financial Measures Otis Worldwide Corporation ("Otis") reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP"). We supplement the reporting of our financial information determined under GAAP with certain non-GAAP financial information. The non-GAAP information presented provides investors with additional useful information, but should not be considered in isolation or as substitutes for the related GAAP measures. Moreover, other companies may define non-GAAP measures differently, which limits the usefulness of these measures for comparisons with such other companies. We encourage investors to review our financial statements and publicly filed reports in their entirety and not to rely on any single financial measure. A reconciliation of the non-GAAP measures (referenced in this press release) to the corresponding amounts prepared in accordance with GAAP appears in the attached tables. These tables provide additional information as to the items and amounts that have been excluded from the adjusted measures. Below are our non-GAAP financial measures: Non-GAAP measure Definition Organic sales Represents consolidated net sales (a GAAP measure), excluding the impact of foreign currency translation, acquisitions and divestitures completed in the preceding twelve months and other significant items of a non-recurring and/or nonoperational nature ("other significant items"). Management believes organic sales is a useful measure in providing period-to-period comparisons of the results of the Company's ongoing operational performance. Adjusted selling, general and administrative ("SG&A") expense Represents SG&A expense (a GAAP measure), excluding restructuring costs and other significant items. Adjusted operating profit Represents income from continuing operations (a GAAP measure), excluding restructuring costs and other significant items. Adjusted net interest expense Represents net interest expense (a GAAP measure), adjusted for the impacts of non-recurring acquisition related financing costs and related net interest expense pending the completion of a transaction. Adjusted net income Represents net income attributable to Otis Worldwide Corporation (a GAAP measure), excluding restructuring costs and other significant items, including related tax effects. Adjusted earnings per share ("EPS") Represents diluted earnings per share attributable to common shareholders (a GAAP measure), adjusted for the per share impact of restructuring and other significant items, including related tax effects. Adjusted effective tax rate Represents the effective tax rate (a GAAP measure) adjusted for other significant items and the tax impact of restructuring costs and other significant items. Constant currency GAAP financial results include the impact of changes in foreign currency exchange rates ("AFX"). We use the non-GAAP measure "at constant currency" or "CFX" to show changes in our financial results without giving effect to period-to-period currency fluctuations. Under U.S. GAAP, income statement results are translated in U.S. dollars at the average exchange rate for the period presented. Management believes that this non-GAAP measure is useful in providing period-to-period comparisons of the results of the Company's ongoing operational performance. Free cash flow Represents cash flow from operations (a GAAP measure) less capital expenditures. Management believes free cash flow is a useful measure of liquidity and an additional basis for assessing Otis' ability to fund its activities, including the financing of acquisitions, debt service, repurchases of common stock and distribution of earnings to shareholders. Free cash flow should not be considered an alternative to, or more meaningful than, net cash flows provided by operating activities, or any other measure of liquidity presented in accordance with GAAP. Adjusted free cash flow Represents cash flow from operations (a GAAP measure) less capital expenditures, adjusted to exclude certain items management believes affect the comparability of operating results. Management believes adjusted free cash flow is a useful measure of liquidity that provides investors additional information regarding the Company's ability to fund its activities, including the financing of acquisitions, debt service, repurchases of common stock and distribution of earnings to shareholders. Adjusted free cash flow should not be considered an alternative to, or more meaningful than, net cash flows provided by operating activities, or any other measure of liquidity presented in accordance with GAAP. Management believes that organic sales, adjusted SG&A, adjusted general corporate expenses and other, adjusted operating profit, adjusted net interest expense, adjusted net income, adjusted EPS and the adjusted effective tax rate are useful measures in providing period-to-period comparisons of the results of the Company's ongoing operational performance. When we provide our expectations for adjusted net sales, organic sales, adjusted operating profit, adjusted net interest expense, adjusted net income, adjusted effective tax rate, adjusted EPS, free cash flow and adjusted free cash flow on a forward-looking basis, a reconciliation of the differences between the non-GAAP expectations and the corresponding GAAP measures (expected diluted EPS from continuing operations, operating profit, the effective tax rate, net sales and expected cash flow from operations) generally is not available without unreasonable effort due to potentially high variability, complexity and low visibility as to the items that would be excluded from the GAAP measure in the relevant future period, such as unusual gains and losses, the ultimate outcome of pending litigation, fluctuations in foreign currency exchange rates, the impact and timing of potential acquisitions and divestitures, and other structural changes or their probable significance. The variability of the excluded items may have a significant, and potentially unpredictable, impact on our future GAAP results. Cautionary Statement This communication contains statements which, to the extent they are not statements of historical or present fact, constitute "forward-looking statements" under the securities laws. From time to time, oral or written forward-looking statements may also be included in other information released to the public. These forward-looking statements are intended to provide management's current expectations or plans for Otis' future operating and financial performance, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as "believe," "expect," "expectations," "plans," "strategy," "prospects," "estimate," "project," "target," "anticipate," "will," "should," "see," "guidance," "outlook," "medium-term," "near-term," "confident," "goals" and other words of similar meaning in connection with a discussion of future operating or financial performance. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash, dividends, share repurchases, tax rates, research & development spend, restructuring actions (including UpLift), credit ratings, net indebtedness and other measures of financial performance or potential future plans, strategies or transactions, or statements that relate to climate change and our intent to achieve certain environmental, social and governance targets or goals, including operational impacts and costs associated therewith, and other statements that are not historical facts. All forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. For those statements, Otis claims the protection of the safe harbor for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995. Such risks, uncertainties and other factors include, without limitation: (1) the effect of economic conditions in the industries and markets in which Otis and its businesses operate and any changes therein, including financial market conditions, fluctuations in commodity prices and other inflationary pressures, interest rates and foreign currency exchange rates, levels of end market demand in construction, pandemic health issues ...