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- **Service Dominance**: 6% Service growth (14% modernization) drove Q3 results, with operating margin up 20 bps to 17.1%.
- **Modernization Surge**: 27% order growth and $337M free cash flow highlight multiyear modernization opportunity.
- **China Stabilization**: New Equipment sales down 20% YoY in Q3, but sequential improvement expected; modernization orders +150% YoY.
- **Margin Expansion**: Service margins at record 25.5%, with repair accelerating to 10%+ in Q4.
- **EPS Growth**: Full-year adjusted EPS guidance raised to $4.04-4.08 (+5-7% YoY), supported by Service flywheel and cost savings.

**【CEO Summary Section】**
- **Q3 Highlights**: Organic sales grew 2% driven by 6% Service growth (including 14% modernization sales). Adjusted operating profit margin expanded 20 basis points to 17.1%, and adjusted EPS rose 9% to $1.09. Free cash flow was $337 million, with full-year guidance of $1.45 billion.
- **Modernization Momentum**: Modernization orders surged 27%, with backlog up 22%. Notable projects include Shanghai's largest bond-funded renewal and Dubai's SkyRise elevator installation.
- **Portfolio Growth**: Service portfolio nears 2.5 million units, with maintenance growing 4% and repair accelerating to 7% YoY.

**【CFO Financial Commentary】**
- **Service Segment**: Operating profit rose $49 million (70 bps margin expansion) due to repair acceleration and modernization backlog conversion. Repair sales expected to exceed 10% growth in Q4.
- **New Equipment**: Organic sales declined 5% (excluding China, +7%), but orders returned to growth for 5th consecutive quarter. China transformation savings of $30 million/year expected, with 2025 restructuring costs reduced to $220 million.
- **Financial Outlook**: Full-year net sales $14.5-14.6 billion, adjusted EPS $4.04-4.08 (+5-7% YoY). Free cash flow guidance maintained at $1.45 billion.

**【Q&A Key Highlights】**
- **Service Retention**: CEO Judy Marks emphasized rebuilding customer trust through investments in service excellence, targeting sequential improvement in retention rates.
- **China New Equipment**: Sales down 20% YoY in Q3, but sequential stabilization expected. Modernization orders up 150% YoY, driven by bond stimulus.
- **Free Cash Flow**: CFO Cristina Mendez noted working capital headwinds but expects 2026 return to 100% conversion rate. Q4 cash flow projected similar to 2024 levels.
- **Repair Growth**: Repair sales ramping up to 10%+ in Q4, supporting Service margin expansion and customer satisfaction.


Otis Worldwide Corporation (OTIS) Q3 2025 Earnings Call Transcript

- **Service Segment Strength**: 4% organic growth, 22% modernization orders, and record 24.9% operating margin highlight resilience. Repair sales acceleration (6% YoY) and modernization backlog (16% growth) set up H2 growth.
- **China Transformation**: $40M cost savings target raised from $20M. Orders expected to stabilize in H2, with focus on profitable Service and modernization.
- **Tariff Mitigation**: 2025 impact reduced to $25-35M, offset by pricing adjustments and furloughs. Service-driven margins to offset New Equipment headwinds.
- **2026 Outlook**: Americas backlog up 5%, positioning for recovery. Service segment's 90% operating profit contribution ensures long-term resilience.

**【CEO Summary Section】**
- **Q2 Highlights**: Service segment drove strong performance with 4% organic sales growth and 22% modernization orders. New Equipment orders declined 1% due to China's economic challenges, but rest of world orders grew 11%. Backlog increased 16% at constant currency.
- **Cost Savings**: UpLift program on track for $200M run rate savings by year-end. China transformation now targets $40M in savings, up from $20M.
- **Market Outlook**: Global New Equipment market expected to decline mid-single digits. Service segment growth driven by aging installed base (22M units). China orders expected to stabilize in coming quarters.

**【CFO Financial Commentary】**
- **Q2 Results**: Net sales $3.6B (flat YoY), adjusted EPS $1.97 (2% H1 growth). Service operating profit margin hit record 24.9%. New Equipment margins pressured by lower volumes and mix.
- **Tariff Impact**: 2025 impact reduced to $25-35M (from $50M+), partially offset by pricing adjustments. Year-to-date impact minimal.
- **2025 Guidance**: Adjusted EPS $4-4.10 (4-7% growth). Service organic sales +5%, New Equipment -7%. Free cash flow $1.4-1.5B, with $800M+ share buybacks.

**【Q&A Key Highlights】**
- **Service Growth Dynamics**: Repair sales accelerated to 6% YoY (Q1: 1%), driven by 8% backlog. Modernization execution expected to ramp in H2. Service margins to expand as UpLift savings materialize.
- **China Strategy**: Orders sequentially stable in H1, targeting stabilization in H2. Focusing on value and Service attachment, reducing unprofitable New Equipment activity.
- **Tariff Mitigation**: Reciprocal tariff rates improved, furloughs in production facilities to reduce Q3 New Equipment volume shortfall.
- **2026 Outlook**: Strong Americas backlog (+5% Q2) positions for recovery. Service flywheel resilience despite New Equipment challenges.

Otis Worldwide Corporation (OTIS) Q2 2025 Earnings Call Transcript

- **Resilient Q1 Performance**: Flat sales but 5% EPS growth driven by service margin expansion.
- **Service Dominance**: 4% service growth, 12% modernization orders, and 24.6% service margin.
- **Tariff Risk Management**: $45M-$75M impact offset by FX and supply chain shifts.
- **2025 Outlook**: $14.7B midpoint sales, 50bps margin expansion (excluding tariffs), $1.6B free cash flow.


**【CEO Opening Remarks】**
- Celebrated 5-year anniversary as an independent company, with adjusted operating margins expanded 220bps and $6B capital returned to shareholders.
- Q1 2025: Flat organic sales ($3.3B net sales), 4% service growth, 12% modernization orders, and 5% adjusted EPS growth.
- Free cash flow of $186M and $250M share buybacks; 8% dividend increase announced.

**【CFO Financial Breakdown】**
- **Service Segment**: 3% maintenance/repair growth (2% pricing), 10% modernization sales growth; 40bps margin expansion to 24.6%.
- **New Equipment**: 7% decline (China -20%, Americas -HSD), 5.7% operating margin (20bps expansion).
- **Tariff Impact**: $45M-$75M 2025 impact on new equipment, partially offset by FX and mitigation efforts.

**【Market Outlook】**
- **Global New Equipment**: Mid-single-digit decline (China -10%, APAC +mid-single, EMEA +low-single).
- **Service Growth**: 5-7% (maintenance +mid-single, modernization +low-teens).
- **2025 Guidance**: $14.6B-$14.8B net sales, $2.4B-$2.5B adj. op. profit, $1.6B adj. free cash flow.

**【China Transformation】**
- Targeting $90M 2025 savings and $230M annual run rate by year-end.
- Positioning for service/modernization growth despite new equipment challenges.


Otis Worldwide (OTIS)-23 Apr 25-2025 Q1 Earnings call transcript

- **Service Dominance**: Q4 Service sales up 7.8%, Modernization orders surge 18%, driving $682M free cash flow.
- **China Transformation**: $30M annual cost savings by 2025, Service portfolio growth to 435k units.
- **2025 Outlook**: $4-4.10 EPS, $1.6B free cash flow, 60bp margin expansion.
- **China New Equipment**: 10% decline expected, stabilizing at 350-400k units post-2025.
- **Modernization Growth**: 18% Q4 orders, targeting high-single-digit 2025 growth with double-digit margins.


**【CEO Summary Section】**
- Organic sales growth of 1.9% in Q4, driven by 7.8% Service segment growth and 18% Modernization orders.
- Adjusted free cash flow of $682 million, highest quarterly result since spin.
- China business transformation targeting $30 million annual cost savings by end of 2025.
- 2025 outlook: $14.1-14.4 billion net sales, $4-4.10 adjusted EPS, $1.6 billion free cash flow.

**【CFO Financial Commentary】**
- Q4 Service operating profit up $54 million at constant currency, margin expansion to 24.5%.
- Full year adjusted EPS growth of 8.2% to $3.15, driven by Service resilience.
- 2025 guidance: $2.4-2.5 billion adjusted operating profit, 60 basis points margin expansion.

**【Q&A Key Highlights】**
- China New Equipment market expected to decline 10% in 2025, stabilizing at 350-400k units.
- Service margin headwinds from Modernization mix offset by UpLift cost savings ($70M in 2024, $200M+ by H2 2025).
- Americas New Equipment orders up 14% in Q4, but 2025 revenue growth constrained by lower backlog.
- Modernization margins surpassing New Equipment, targeting double-digit Modernization margins.
- China Service portfolio growth to 435k units, 4%+ annual expansion with 1 million connected units.


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