OTIS REPORTS FOURTH QUARTER AND FULL YEAR 2022 RESULTS

Delivers MSD fourth quarter natural progress and robust Service working revenue margin growth; broadcasts 2023 outlook supported by strong New Tools backlog and 4.1% upkeep portfolio progress

• 4Q Web gross sales down 3.6% and natural gross sales up 6.1% with GAAP EPS up 9.2% and adjusted EPS up 4.2%
• 4Q New Tools orders up 4%; FY up 7%; backlog up 3%, adjusted backlog up 11% at fixed forex
• Upkeep portfolio models up 4.1%
• FY Web gross sales down 4.3% and natural gross sales up 2.5% with GAAP EPS up 2.4% and adjusted EPS up 7.5%
• FY GAAP money stream from operations of $1.6 billion; free money stream of $1.45 billion, or 115% of internet earnings
• Asserting 2023 outlook* with natural gross sales up 4 to six%, adjusted earnings per share of $3.35 to $3.50 and free money stream of $1.5 to $1.55 billion

FARMINGTON, Conn., Feb. 1, 2023 /PRNewswire/ — Otis Worldwide Company (NYSE:OTIS) reported full yr internet gross sales of $13.7 billion with 2.5% natural progress. GAAP diluted earnings per share (EPS) elevated 2.4% to $2.96 and adjusted diluted EPS elevated 7.5% to $3.17.

“Otis ended the yr on a excessive word, with robust efficiency within the fourth quarter, together with mid single digit natural gross sales progress in each New Tools and Service and continued Service working revenue margin growth,” stated Chair, CEO & President Judy Marks. “For the third yr in a row, we delivered robust annual outcomes. We’re efficiently navigating by macro challenges which have pressured our enterprise. In 2022 we delivered 7.1% progress in New Tools Orders, accelerated progress in our industry-leading Service portfolio to 4.1%, and grew adjusted EPS excessive single digits — whereas distributing over $1.3B to shareholders, together with $850M by share repurchases. Our robust fourth quarter and full yr outcomes present momentum into 2023. We are going to stay targeted on driving top-line progress — together with continued strong portfolio progress and executing on  our robust New Tools backlog — whereas additionally increasing working revenue margins, returning money to shareholders by our capital-allocation technique, and pursuing extra progress towards our ESG objectives.”

Key Figures

Fourth quarter internet gross sales of $3.4 billion decreased 3.6% versus the prior yr, with a 6.1% enhance in natural gross sales which was greater than offset by an 8.2% headwind from overseas alternate. Natural gross sales elevated in each segments, up 5.1% in New Tools and 6.9% in Service.

Fourth quarter GAAP working revenue of $491 million decreased $5 million and adjusted working revenue decreased $10 million. Excluding a $49 million influence from overseas alternate, adjusted working revenue at fixed forex elevated $39 million, pushed by Service. GAAP working revenue margin expanded 40 foundation factors to 14.3% and adjusted working revenue margin was flat versus prior yr at 14.7% because of advantages from section efficiency and blend offset by company price headwinds.

GAAP EPS elevated 9.2% to $0.71 and adjusted EPS elevated 4.2% to $0.75, pushed by working revenue progress at fixed forex and a decrease efficient tax charge, partially offset by headwinds from overseas alternate.

Full yr internet gross sales decreased 4.3%, as a 5.9% headwind from overseas alternate greater than offset a 2.5% enhance in natural gross sales. GAAP and adjusted working revenue decreased $75 million and $32 million, respectively, as section working revenue progress was greater than offset by overseas alternate headwinds. GAAP and adjusted working revenue margin expanded 20 foundation factors and 30 foundation factors, respectively, on account of robust Service section efficiency and blend tailwinds. GAAP and adjusted EPS elevated 2.4% and seven.5%, respectively, pushed by working revenue progress at fixed forex, a discount within the efficient tax charge and decrease noncontrolling curiosity, partially offset by overseas alternate headwinds.

New Tools

Within the fourth quarter, internet gross sales of $1.5 billion decreased 6.5% with a 5.1% enhance in natural gross sales greater than offset by an 8.1% headwind from overseas alternate. Natural gross sales had been up 12.0% and 10.7% in EMEA and the Americas, respectively, and down barely in Asia, with low teenagers progress in Asia Pacific, offset by 4.3% declines in China.

GAAP working revenue decreased $11 million to $66 million and adjusted working revenue decreased $4 million to $72 million as quantity, productiveness, and decrease SG&A expense had been greater than offset by commodity headwinds and unfavorable combine. GAAP and adjusted working revenue margin contracted 40 foundation factors and 10 foundation factors, respectively.

Fourth quarter New Tools orders had been up 4% at fixed forex from excessive single digit progress in Asia Pacific and EMEA and mid single digit progress in China, greater than offsetting mid single digit declines within the Americas. Full yr New Tools orders had been up 7% with excessive teenagers progress within the Americas and mid teenagers progress in EMEA and Asia Pacific, offset by mid single digit declines in China. GAAP New Tools backlog was up 3%, adjusted backlog at fixed forex elevated 11% versus the prior yr.

Full yr internet gross sales decreased 8.8% with a 1.7% lower in natural gross sales pushed by macro headwinds, largely in China, and supply-chain and set up associated delays, primarily within the Americas. GAAP working revenue decreased $101 million and adjusted working revenue decreased $61 million as productiveness and decrease SG&A expense had been greater than offset by the influence from decrease quantity, together with associated below absorption, unfavorable combine and $107 million in commodity headwinds. GAAP and adjusted working revenue margin contracted 100 foundation factors and 50 foundation factors, respectively.

Service

Within the fourth quarter, internet gross sales of $2.0 billion decreased 1.4%, with a 6.9% enhance in natural gross sales greater than offset by an 8.3% headwind from overseas alternate. Natural upkeep and restore gross sales elevated 6.5% and natural modernization gross sales elevated 8.8%.

GAAP working revenue of $461 million elevated $14 million and adjusted working revenue of $472 million elevated $51 million at fixed forex because of increased quantity, and favorable pricing and productiveness, partially offset by annual wage inflation. GAAP and adjusted working revenue margin expanded 100 foundation factors and 70 foundation factors, respectively.

Full yr internet gross sales decreased 0.6% with a 6.0% enhance in natural gross sales greater than offset by a 6.7% headwind from overseas alternate. GAAP working revenue elevated $27 million and adjusted working revenue elevated $179 million at fixed forex pushed by increased quantity, favorable pricing and productiveness, partially offset by annual wage inflation. GAAP and adjusted working revenue margin each expanded 50 foundation factors.

Money stream

Fourth quarter money from operations of $464 million elevated $187 million and free money stream of $430 million elevated $194 million versus prior yr from increased internet earnings from operations and provider cost timing.      

Full yr money from operations of $1.6 billion decreased $190 million and full yr free money stream of $1.45 billion decreased $149 million pushed by decrease internet earnings from operations, increased stock to assist backlog conversion, and timing of collections, partially offset by decrease capital expenditures. 

2023 Outlook*

Otis is saying its full yr outlook:

• Web gross sales of $13.8 to $14.1 billion, up 1.5 to 4%
• Natural gross sales up 4 to six%
• Natural New Tools gross sales up 3 to five%
• Natural Service gross sales up 5 to 7%
• Adjusted working revenue of $2.20 to $2.25 billion, up $130 to $175 million at fixed forex; up $70 to $130 million at precise forex
• Adjusted EPS of $3.35 to $3.50, up 6 to 10%; adjusted efficient tax charge between 26.0% and 26.5%
• Free money stream of $1.5 to $1.55 billion with conversion of 105 to 115% of GAAP internet earnings

*Notice: Once we present outlook for natural gross sales, adjusted working revenue, adjusted EPS, adjusted efficient tax charge and free money stream on a forward-looking foundation, a reconciliation of the variations between the non-GAAP expectations and the corresponding GAAP measures typically shouldn’t be accessible with out unreasonable effort. See “Use and Definitions of Non-GAAP Monetary Measures” beneath for extra data.

About Otis

Otis is the world’s main elevator and escalator manufacturing, set up and repair firm. We transfer 2 billion folks a day and keep roughly 2.2 million buyer models worldwide, the {industry}’s largest upkeep portfolio. Headquartered in Connecticut, USA, Otis is 69,000 folks robust, together with 41,000 area professionals, all dedicated to assembly the various wants of our prospects and passengers in additional than 200 nations and territories worldwide. For extra data, go to www.otis.com and observe us on LinkedIn, Instagram, Fb and Twitter @OtisElevatorCo.

Use and Definitions of Non-GAAP Monetary Measures

Otis Worldwide Company (“Otis”) reviews its monetary leads to accordance with accounting ideas typically accepted in america (“GAAP”). We complement the reporting of our monetary data decided below GAAP with sure non-GAAP monetary data. The non-GAAP data introduced offers traders with extra helpful data, however shouldn’t be thought of in isolation or as substitutes for the associated GAAP measures. Furthermore, different corporations might outline non-GAAP measures otherwise, which limits the usefulness of those measures for comparisons with such different corporations. We encourage traders to evaluate our monetary statements and publicly filed reviews of their entirety and to not depend on any single monetary measure. A reconciliation of the non-GAAP measures (referenced on this press launch) to the corresponding quantities ready in accordance with GAAP seems within the connected tables. These tables present extra data as to the gadgets and quantities which were excluded from the adjusted measures.

Adjusted internet gross sales, natural gross sales, adjusted promoting, basic and administrative (“SG&A”) expense, adjusted working revenue, adjusted internet earnings, adjusted diluted earnings per share (“EPS”), adjusted efficient tax charge, adjusted remaining efficiency obligation (“RPO”), fixed forex and free money stream are non-GAAP monetary measures.

Adjusted internet gross sales represents internet gross sales (a GAAP measure), excluding vital gadgets of a non-recurring and/or nonoperational nature (“different vital gadgets”).

Natural gross sales represents consolidated internet gross sales (a GAAP measure), excluding the influence of overseas forex translation, acquisitions and divestitures accomplished within the previous twelve months and different vital gadgets. Administration believes natural gross sales is a helpful measure in offering period-to-period comparisons of the outcomes of the Firm’s ongoing operational efficiency.

Adjusted SG&A expense represents SG&A expense (a GAAP measure), excluding restructuring prices and different vital gadgets.

Adjusted basic company bills and different represents basic company bills and different (a GAAP measure), excluding restructuring prices and different vital gadgets.

Adjusted working revenue represents earnings from persevering with operations (a GAAP measure), excluding restructuring prices and different vital gadgets.

Adjusted internet curiosity expense represents internet curiosity expense (a GAAP measure), adjusted for the impacts of non-recurring acquisition associated financing prices and associated internet curiosity expense pending the completion of a transaction.

The adjusted efficient tax charge represents the efficient tax charge (a GAAP measure) adjusted for different vital gadgets and the tax influence of restructuring prices and different vital gadgets.

Adjusted internet earnings represents internet earnings attributable to Otis Worldwide Company (a GAAP measure), excluding restructuring prices and different vital gadgets, together with associated tax results. Adjusted EPS represents diluted earnings per share attributable to frequent shareholders (a GAAP measure), adjusted for the per share influence of restructuring and different vital gadgets, together with associated tax results.

Adjusted RPO or Adjusted Backlog represents RPO (in any other case referred to herein as backlog sometimes) (a GAAP measure) excluding different vital gadgets.

Administration believes that adjusted internet gross sales, natural gross sales, adjusted SG&A, adjusted basic company bills and different, adjusted working revenue, adjusted internet earnings, adjusted EPS, the adjusted efficient tax charge and adjusted RPO are helpful measures in offering period-to-period comparisons of the outcomes of the Firm’s ongoing operational efficiency.

Moreover, GAAP monetary outcomes embody the influence of adjustments in overseas forex alternate charges (“AFX”). We use the non-GAAP measure “at fixed forex” or “CFX” to point out adjustments in our monetary outcomes with out giving impact to period-to-period forex fluctuations. Beneath U.S. GAAP, earnings assertion outcomes are translated in U.S. {dollars} on the common alternate charge for the interval introduced. Administration believes that this non-GAAP measure is helpful in offering period-to-period comparisons of the outcomes of the Firm’s ongoing operational efficiency.

Free money stream is a non-GAAP monetary measure that represents money stream from operations (a GAAP measure) much less capital expenditures. Administration believes free money stream is a helpful measure of liquidity and a further foundation for assessing Otis’ skill to fund its actions, together with the financing of acquisitions, debt service, repurchases of frequent inventory and distribution of earnings to shareholders.

Once we present our expectations for adjusted internet gross sales, natural gross sales, adjusted working revenue, adjusted internet curiosity expense, adjusted internet earnings, adjusted efficient tax charge, adjusted EPS and free money stream on a forward-looking foundation, a reconciliation of the variations between the non-GAAP expectations and the corresponding GAAP measures (anticipated diluted EPS from persevering with operations, working revenue, the efficient tax charge, internet gross sales and anticipated money stream from operations) typically shouldn’t be accessible with out unreasonable effort because of probably excessive variability, complexity and low visibility as to the gadgets that will be excluded from the GAAP measure within the related future interval, comparable to uncommon good points and losses, the final word end result of pending litigation, fluctuations in overseas forex alternate charges, the influence and timing of potential acquisitions and divestitures, and different structural adjustments or their possible significance. The variability of the excluded gadgets might have a big, and probably unpredictable, influence on our future GAAP outcomes.

Cautionary Assertion

This communication incorporates statements which, to the extent they don’t seem to be statements of historic or current truth, represent “forward-looking statements” below the securities legal guidelines. Occasionally, oral or written forward-looking statements may be included in different data launched to the general public. These forward-looking statements are meant to supply administration’s present expectations or plans for Otis’ future working and monetary efficiency, primarily based on assumptions at the moment believed to be legitimate. Ahead-looking statements might be recognized by means of phrases comparable to “imagine,” “count on,” “expectations,” “plans,” “technique,” “prospects,” “estimate,” “challenge,” “goal,” “anticipate,” “will,” “ought to,” “see,” “steerage,” “outlook,” “medium-term,” “near-term,” “assured,” “objectives” and different phrases of comparable that means in reference to a dialogue of future working or monetary efficiency. Ahead-looking statements might embody, amongst different issues, statements regarding future gross sales, earnings, money stream, outcomes of operations, makes use of of money, dividends, share repurchases, tax charges, analysis & growth spend, credit score scores, internet indebtedness and different measures of monetary efficiency or potential future plans, methods or transactions, or statements that relate to local weather change and our intent to attain sure environmental, social and governance targets or objectives, together with operational impacts and prices related therewith, and different statements that aren’t historic info. All forward-looking statements contain dangers, uncertainties and different components that will trigger precise outcomes to vary materially from these expressed or implied within the forward-looking statements. For these statements, Otis claims the safety of the secure harbor for forward-looking statements contained within the U.S. Non-public Securities Litigation Reform Act of 1995. Such dangers, uncertainties and different components embody, with out limitation: (1) the impact of financial circumstances within the industries and markets through which Otis and its companies function within the U.S. and globally and any adjustments therein, together with monetary market circumstances, fluctuations in commodity costs and different inflationary pressures, rates of interest and overseas forex alternate charges, ranges of finish market demand in development, pandemic well being points (together with COVID-19 and variants thereof and the continued financial restoration therefrom and their results on, amongst different issues, international provide, demand and distribution), pure disasters (whether or not on account of local weather change or in any other case) and the monetary situation of Otis’ prospects and suppliers; (2) the impact of adjustments in political circumstances within the U.S. and different nations through which Otis and its companies function, together with the results of the continued battle between Russia and Ukraine and associated sanctions and export controls, on basic market circumstances, commodity prices, international commerce insurance policies, forex alternate charges and stakeholder notion within the close to time period and past; (3) challenges within the growth, manufacturing, supply, assist, efficiency and realization of the anticipated advantages of superior applied sciences and new services; (4) future ranges of indebtedness, capital spending and analysis and growth spending; (5) future availability of credit score and components that will have an effect on such availability, credit score market circumstances and Otis’ capital construction; (6) the timing and scope of future repurchases of Otis’ frequent inventory (“Frequent Inventory”), which can be suspended at any time because of numerous components, together with market circumstances and the extent of different investing actions and makes use of of money; (7) fluctuations in costs and delays and disruption in supply of supplies and companies from suppliers, whether or not on account of COVID-19, the continued battle between Russia and Ukraine or in any other case; (8) price discount or containment actions, restructuring prices and associated financial savings and different penalties thereof; (9) new enterprise and funding alternatives; (10) the end result of authorized proceedings, investigations and different contingencies; (11) pension plan assumptions and future contributions; (12) the influence of the negotiation of collective bargaining agreements and labor disputes and labor inflation within the markets through which Otis and its companies function globally; (13) the impact of adjustments in tax, environmental, regulatory (together with amongst different issues import/export) and different legal guidelines and rules within the U.S. and different nations through which Otis and its companies function, together with on account of the continued battle between Russia and Ukraine; (14) the power of Otis to retain and rent key personnel; (15) the scope, nature, influence or timing of acquisition and divestiture exercise, the combination of acquired companies into present companies and realization of synergies and alternatives for progress and innovation and incurrence of associated prices; (16) the dedication by the Inner Income Service and different tax authorities that the distribution or sure associated transactions must be handled as taxable transactions in reference to the separation (the “Separation”) from United Applied sciences Company (now referred to as Raytheon Applied sciences Company (“RTX”); and (17) our obligations and disputes which have or might hereafter come up below the agreements we entered into with RTX and Provider Company in reference to the Separation. The above checklist of things shouldn’t be exhaustive or essentially so as of significance. For extra data on figuring out components that will trigger precise outcomes to differ from these said in forward-looking statements, see Otis’ registration assertion on Kind 10 and the reviews of Otis on Kinds 10-Ok, 10-Q and 8-Ok filed with or furnished to the SEC sometimes. Any forward-looking assertion speaks solely as of the date on which it’s made, and Otis assumes no obligation to replace or revise such assertion, whether or not on account of new data, future occasions or in any other case, besides as required by relevant regulation.

Media Contact
Katy Padgett
+1-860-674-3047
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Investor Relations Contact
Michael Rednor
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SOURCE Otis Worldwide Company