Q3 2020 Earnings Call
October 26, 2020
© 2020 OTIS WORLDWIDE CORPORATION.
Forward-Looking Statements
Note: All results and expectations in this presentation reflect continuing operations unless otherwise noted.
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," "confident" and other words of similar meaning in connection with a discussion of future operating or financial performance or the separation and distribution. 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 and other measures of financial performance or potential future plans, strategies or transactions of Otis following its separation from United Technologies Corporation, including the estimated costs associated with the separation and distribution 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 in the U.S. and globally and any changes therein, including financial market conditions, fluctuations in commodity prices, interest rates and foreign currency exchange rates, levels of end market demand in construction, the impact of weather conditions, pandemic health issues (including COVID-19 and its effects, among other things, on global supply, demand, and distribution disruptions as the outbreak continues and results in an increasingly prolonged period of travel, commercial and/or other similar restrictions and limitations), natural disasters and the financial condition of Otis' customers and suppliers; (2) challenges in the development, production, delivery, support, performance and realization of the anticipated benefits of advanced technologies and new products and services; (3) future levels of indebtedness, and capital spending and research and development spending; (4) future availability of credit and factors that may affect such availability, including credit market conditions and Otis' capital structure; (5) the timing and scope of future repurchases of Otis' common stock, which may be suspended at any time due to various factors, including market conditions and the level of other investing activities and uses of cash; (6) delays and disruption in delivery of materials and services from suppliers; (7) cost reduction efforts and restructuring costs and savings and other consequences thereof; (8) new business and investment opportunities; (9) the anticipated benefits of moving away from diversification and balance of operations across product lines, regions and industries; (10) the outcome of legal proceedings, investigations and other contingencies; (11) pension plan assumptions and future contributions; (12) the impact of the negotiation of collective bargaining agreements and labor disputes;
-
the effect of changes in political conditions in the U.S. and other countries in which Otis and its businesses operate, including the effect of changes in U.S. trade policies or the United Kingdom's withdrawal from the European Union, on general market conditions, global trade policies and currency exchange rates in the near term and beyond; (14) the effect of changes in tax, environmental, regulatory (including among other things import/export) and other laws and regulations in the U.S. and other countries in which Otis and its businesses operate; (15) the ability of Otis to retain and hire key personnel; (16) the scope, nature, impact or timing of acquisition and divestiture activity, including among other things integration of acquired businesses into existing businesses and realization of synergies and opportunities for growth and innovation and incurrence of related costs; (17) the expected benefits of the separation and distribution; (18) a determination by the Internal Revenue Service and other tax authorities that the distribution or certain related transactions should be treated as taxable transactions; (19) risks associated with indebtedness incurred as a result of financing transactions undertaken in connection with the separation; (20) the risk that dis-synergy costs, costs of restructuring transactions and other costs incurred in connection with the separation will exceed
Otis' estimates; and (21) the impact of the separation on Otis' businesses and Otis' resources, systems, procedures and controls, diversion of management's attention and the impact on relationships with customers, suppliers, employees and other business counterparties. The above list of factors is not exhaustive or necessarily in order of importance. For additional information on identifying factors that may cause actual results to vary from those stated in forward-looking statements, see Otis' registration statements on Form 10 and Form S-3 and the reports of Otis on Forms 10-K,10-Q and 8-K filed with or furnished to the SEC from time to time. Any forward-looking statement speaks only as of the date on which it is made, and Otis assumes no obligation to update or revise such statement, whether as a result of new information, future events or otherwise, except as required by applicable law.
© 2020 OTIS WORLDWIDE CORPORATION. | 2 |
Highlights
• Executing on long-term strategy
• New Equipment share gain, up ~70 bps1 year-to- date
• Bolt-on M&A, innovative new products, productivity and IoT expansion
• Strong liquidity position
• $1.7 billion cash balance
• Repaid $250M of debt…additional $100M planned in Q4
• Launched social initiative programs
• 'Made to Move Communities'
• 'Our Commitment to Change'
1 Based on Otis internal estimates.
© 2020 OTIS WORLDWIDE CORPORATION.
Q3 orders
Salesforce Tower | The Link |
Chicago, Illinois | Puteaux, France |
Industry 4.0 Escalator factory opening
Optimizing China footprint
Haining, China
3
Q3 2020 update
Q3 2020
Results
Revised 2020
Outlook
- New Equipment orders up slightly at constant currency1…down ~1% on a rolling 12- month basis
- New Equipment backlog up 3% versus prior year at constant currency1
- Organic1 sales down 1.2%...NE down 1.0%, Service down 1.4%
- Adjusted operating profit margin1 expanded 120 bps…Service segment margin expanded 160 bps
- Free cash flow1 of $311M…117% conversion
- Improved organic1 sales outlook…expected to be down 2 to 3%
- Adjusted operating profit1 up $30 to $40M at constant currency1…$60M improvement from the prior outlook at the midpoint
- Adjusted operating profit1 margin expansion of 60 bps at the midpoint
- Adjusted diluted EPS1 expected to be ~$2.42…$0.17 improvement from the prior midpoint
- Free cash flow1 ~$1.15B…$100M improvement from the prior midpoint…~135% conversion1 of GAAP net income
1 See appendix for additional information regarding these non-GAAP financial measures
© 2020 OTIS WORLDWIDE CORPORATION. | 4 |
Q3 2020 results
($ millions, except per share amounts)
Sales
3,3133,268
Q3 2019 | Q3 2020 |
Organic1 | (1.2%) |
FX | 0.2% |
Net divestitures/other | (0.4%) |
Total net sales | (1.4%) |
Operating profit
GAAP | 482 | 454 |
Adjusted1 | 470 | 503 |
Adjusted | 14.2% | 15.4% |
margin1 | ||
Q3 2019 | Q3 2020 |
Q3 adjusted operating profit1 up $33M…up $30M at constant currency1
Q3 adjusted operating profit margin1 expanded 120 bps…160 bps Service margin expansion
Diluted earnings per share
GAAP $0.73$0.61
$0.69
Adjusted1 $0.55
Q3 2019 | Q3 2020 |
Adj. EPS drivers | |
Operating profit1 | $0.06 |
Net interest1 | $0.01 |
Tax1 | $0.07 |
1 See appendix for additional information regarding these non-GAAP financial measures
© 2020 OTIS WORLDWIDE CORPORATION. | 5 |
New Equipment
($ millions)
Net sales
1,450 | Y/Y | |
1,423 | (1.9%) | |
Q3 2019Q3 2020
Operating profit
GAAP | 115 | 95 | (17.4%) | ||
Adjusted1 | 114 | 102 | (10.5%) | ||
Adjusted | 7.9% | 7.2% | (70) bps | ||
margin1 | |||||
Q3 2019 | Q3 2020 | ||||
1 | See appendix for additional information regarding these non-GAAP financial measures. | ||||
2 | Based on Otis internal estimates. |
© 2020 OTIS WORLDWIDE CORPORATION.
Q3 Results
-
Orders up slightly at constant currency1
…down ~1% on a rolling 12-month basis - Share up ~40 bps2 …YTD share up ~70 bps2
- New Equipment backlog up 3% at constant currency1
- Organic1 sales down 1.0%
- Americas down slightly
- EMEA down 2.2%
- Asia down 0.4%…China up MSD
- Adjusted operating profit1 down $9M at constant currency1…material productivity and cost containment offset by mix, field inefficiencies and under-absorption
6
Service
($ millions)
Net sales
Y/Y | ||
1,863 | 1,845 | (1.0%) |
Q3 2019Q3 2020
Operating profit
GAAP | 407 | 409 | 0.5% | |
Adjusted1 | 397 | 422 | 6.3% | |
Adjusted | 22.9% | + 160 bps | ||
margin1 | 21.3% | |||
Q3 2019 | Q3 2020 |
1 See appendix for additional information regarding these non-GAAP financial measures.
© 2020 OTIS WORLDWIDE CORPORATION.
Q3 Results
- Maintenance units up 1% versus prior year
- Modernization orders down 7.3% at constant currency1...up double digits in Asia
- Organic1 sales down 1.4%
- Maintenance & Repair down 1.3%
- Modernization down 2.1%
- Adjusted operating profit1 at constant currency1 up $19M with margin1 expansion of 140 basis points…strong contribution from productivity and cost containment
7
2020 financial outlook
Improving 2020 outlook across key metrics
Prior outlook | Current outlook | |
Organic1 sales
Adjusted operating
profit1
Adjusted net
income & EPS1
Free cash flow1 &
capital deployment
Otis down 2 to 4%
New Equipment down mid to high single digits
Service flat to down low single digits
Constant currency1 flat to down $50M Actual currency down $40 to $100M
Adjusted net income1 $955 to $1,000M
Adjusted EPS1 $2.20 to $2.30
Free cash flow1 $1.0 to 1.1B
2020 Debt repayment $350M
Dividend payout ratio ~40%
Otis down 2 to 3%
New Equipment down mid single digits
Service flat to down slightly
Constant currency1 up $30 to $40M
Actual currency up $5 to $15M
Adjusted net income1 ~$1,050M
Adjusted EPS1 ~$2.42
Free cash flow1 ~$1.15B
2020 Debt repayment $350M
Quarterly dividend per share $0.20
1 See appendix for additional information regarding these non-GAAP financial measures.
© 2020 OTIS WORLDWIDE CORPORATION. | 8 |
2020 organic1 sales outlook
Prior outlook (July 28, 2020) | Updated outlook | |
New Equipment | down mid to high single | down mid single |
Americas | down mid single to ~10% | down mid single |
EMEA | down high single | down mid to high single |
Asia | down mid single | down low to mid single |
Service | flat to down low single | flat to down slightly |
Maintenance & repair | flat to down slightly | flat to down slightly |
Modernization | flat to down low single | ~flat |
Otis | down 2 to 4% | down 2 to 3% |
1 See appendix for additional information regarding these non-GAAP financial measures.
Sequential improvement in Q4 at the midpoint & high-end
- Faster than expected New Equipment recovery in all major regions…Q4 growth at the midpoint & high-end
- Resilient maintenance business
- Stronger than expected modernization demand in Asia Pacific
© 2020 OTIS WORLDWIDE CORPORATION. | 9 |
2020 adjusted operating profit1 drivers
up $30 to $40M | up | ||||||||||
$30 - 40M | ~$(25M) | $5 to $15M | |||||||||
$(60) - (70M) | $60 - 70M | ||||||||||
Volume & mix | Cost containment | Cost containment | $1,877 - 1,887M | ||||||||
$1,872M | Under-absorption | Service productivity | Transactional FX | ||||||||
Pricing & bad debt | Volume | ||||||||||
Material productivity | Price concessions & | ||||||||||
Cost containment | bad debt | ||||||||||
2019 adjusted | New Equipment | Service | Corporate/other | FX2 | 2020 adjusted | ||||||
operating profit 1 | operating | ||||||||||
vs. prior outlook | profit1outlook | ||||||||||
+$10M | +$35M | +$15M | +$20M | +$80M | |||||||
(at the midpoint) | |||||||||||
1 See appendix for additional information regarding these non-GAAP financial measures. | |||||||||||
2 Assumes prospective EUR @ 1.15 and CNY @ 7.00 | |||||||||||
© 2020 OTIS WORLDWIDE CORPORATION. | 10 | ||||||||||
Capital deployment outlook
($billions) | ||||||||||||||
2020 Sources and uses of cash | Q3 2020 Leverage | |||||||||||||
Cash | $1.7 | |||||||||||||
~ 0.35 | ~ 1.15 | |||||||||||||
~ 0.26 | ~ 1.75 | Debt | $6.1 | |||||||||||
~ 1.4 | ~ 0.2 | |||||||||||||
Net debt / | 2.1x | |||||||||||||
EBITDA1,2 | ||||||||||||||
2019 | Debt | Dividends | NCI / M&A / 2020 free cash | 2020 | ||||||||||
ending cash | repayment | (Q2-Q4) | other | flow1outlook | estimated | |||||||||
balance | cash balance | |||||||||||||
1 See appendix for additional information regarding these non-GAAP financial measures. | ||||||||||||||
2 Trailing 12 months adjusted earnings before interest, taxes, depreciation and amortization. | ||||||||||||||
© 2020 OTIS WORLDWIDE CORPORATION. | 11 | |||||||||||||
Otis fundamentals1
Iconic global brand in a large, growing industry
Sustainable growth over the medium-term | Gaining share in NE2 | ||
Expanding Service portfolio | Expanding margins through productivity | ||
Investing through the cycle | Sustainable level of R&D and Capex | ||
Robust free cash flow3 generation | >100% FCF conversion3 | ||
Focus on creating shareholder value | ~40% dividend payout4 | ||
1 | Based on Otis' current expectations. | ||
2 | Based on Otis internal estimates. | ||
3 | See appendix for additional information regarding these non-GAAP financial measures. | ||
4 As a percentage of GAAP net income. | |||
© 2020 OTIS WORLDWIDE CORPORATION. | 12 | ||
© 2020 OTIS WORLDWIDE CORPORATION.
Appendix
© 2020 OTIS WORLDWIDE CORPORATION. | 14 |
Appendix
Backlog and orders
($billions, at constant currency1)
Remaining performance obligation
Y/Y | ||||
16.2 | 16.3 | 16.5 | + 2% | |
Modernization | + 1% | |||
Maintenance | + 1% | |||
& Repair | ||||
New Equipment | + 3% | |||
Q3 | Q2 | Q3 | ||
2019 | 2020 | 2020 |
New Equipment orders
Q3 2020 | 12-month | |
Region | Y/Y | rolling |
Total Otis | 0.1% | (1.2%) |
Americas | (4.7%) | 1.2% |
EMEA | 4.2% | (1.7%) |
Asia | 1.7% | (2.4%) |
1 See additional information regarding these non-GAAP financial measures.
© 2020 OTIS WORLDWIDE CORPORATION. | 15 |
Appendix
Q3 2020 adjusted operating profit1 drivers
+$30M at constant currency1
$3M
$20M
$(9)M$19M
Under absorption / | Productivity | Cost containment | $503M | |||
field inefficiencies | Cost containment | Transactional FX | ||||
$470M | Mix | Volume | ||||
Material productivity | Pricing concessions | |||||
Cost containment
Q3 2019 adjusted | New | Service | Corporate / | FX | Q3 2020 adjusted |
operating profit 1 | Equipment | Other | operating profit 1 |
120 basis points of adjusted operating profit margin1 expansion
1 See additional information regarding these non-GAAP financial measures.
© 2020 OTIS WORLDWIDE CORPORATION. | 16 |
Appendix
Year-to-date 2020 results
($ millions, except per share amounts)
Sales
9,7659,263
YTD 2019 | YTD 2020 |
Organic1 | (3.3%) |
FX | (1.4%) |
Net divestitures | (0.4%) |
Total net sales | (5.1%) |
Operating profit
GAAP | 1,378 | 1,199 |
Adjusted1 | 1,399 | 1,410 |
Adjusted | 14.3% | 15.2% |
margin1 | ||
YTD 2019 | YTD 2020 |
YTD adjusted operating profit1 up $11M…up $33M at constant currency1
YTD adjusted operating profit margin1 expanded 90 bps to 15.2%
Diluted earnings per share
GAAP | $2.07 | $1.51 |
Adjusted1 | $1.77 | $1.86 |
YTD 2019 | YTD 2020 |
Adj. EPS drivers | |
Operating profit1 | $0.02 |
Net interest1 | $0.04 |
Tax1 | $0.05 |
NCI | ($0.02) |
1 See additional information regarding these non-GAAP financial measures
© 2020 OTIS WORLDWIDE CORPORATION. | 17 |
Appendix
New Equipment
($ millions)
Net sales
4,221 | Y/Y | |
3,840 | (9.0%) | |
YTD 2019YTD 2020
Operating profit
GAAP | 312 | 238 | (23.7%) | |
Adjusted1 | 320 | 258 | (19.4%) | |
Adjusted | 7.6% | 6.7% | (90) bps | |
margin1 | ||||
YTD 2019 | YTD 2020 |
- See additional information regarding these non-GAAP financial measures.
- Based on Otis internal estimates.
© 2020 OTIS WORLDWIDE CORPORATION.
YTD Results
- Orders down 2.4% at constant currency1
- Share up ~70 bps2
- Organic1 sales down 7.0%
- Americas down 9.7%
- EMEA down 9.4%
- Asia down 3.5%
- Adjusted operating profit1 down $52M at constant currency1
18
Appendix
Service
($ millions)
Net sales
Y/Y | ||
5,544 | 5,423 | (2.2%) |
YTD 2019YTD 2020
Operating profit
GAAP | 1,181 | 1,190 | 0.8% |
Adjusted1 | 1,180 | 1,216 | 3.1% |
Adjusted | 21.3% | 22.4% | + 110 bps |
margin1 | |||
YTD 2019YTD 2020
1 See additional information regarding these non-GAAP financial measures.
© 2020 OTIS WORLDWIDE CORPORATION.
YTD Results
- Modernization orders down 2.9% at constant currency1
- Organic1 sales down 0.5%
- Maintenance & Repair down 0.8%
- Modernization up 0.9%
- Adjusted operating profit1 up $47M at constant currency1 with margin1 expansion of 110 basis points
19
Appendix
Additional information
Prior FY20 outlook (July 28, 2020) | FY20 outlook | |
Standalone cost | ~$150M | ~$130M |
(~$175M run rate) | (~$175M run rate) | |
Restructuring expense | $70 - 80M | $70 - 80M |
Non-service pension expense | $5 - 15M | ~$5M |
Net interest expense | ~$135M | ~$125M |
Adjusted effective tax rate | ~31.5% | ~30.5% |
Noncontrolling interest expense | ~$160M | ~$165M |
Capital expenditures | $170 - 200M | ~$180M |
Diluted shares outstanding | ~434M | ~435M |
© 2020 OTIS WORLDWIDE CORPORATION. | 20 |
Appendix
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.
Organic sales, adjusted selling, general and administrative ("SG&A") expense, earnings before interest taxes and depreciation ("EBITDA"), adjusted EBITDA, adjusted operating profit, adjusted net income, adjusted diluted earnings per share ("EPS"), adjusted effective tax rate and free cash flow are non-GAAP financial measures.
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 SG&A expense represents SG&A expense (a GAAP measure), excluding restructuring costs, other significant items and allocated costs for certain functions and services previously performed by United Technologies Corporation ("UTC") prior to our separation ("UTC allocated costs") and including estimated standalone public company costs, as though Otis' operations had been conducted independently from UTC ("standalone costs"). Standalone costs for the 2019 fiscal year are based on quarterly estimates determined during Otis' annual planning process for the 2020 fiscal year.
Adjusted operating profit represents income from continuing operations (a GAAP measure), excluding restructuring costs, other significant items and allocated costs for certain functions and UTC allocated costs and including estimated standalone public company costs.
Adjusted net income represents net income from continuing operations (a GAAP measure), excluding restructuring costs and other significant items and UTC allocated costs and including estimated standalone public company costs, estimated adjustments to non-service pension expense, net interest expense and income tax expense as if Otis was a standalone public company ("standalone operating income adjustments"). Adjusted EPS represents diluted earnings per share from continuing operations (a GAAP measure), adjusted for the per share impact of restructuring, other significant items and standalone operating income adjustments.
The adjusted effective tax rate represents the effective tax rate (a GAAP measure) adjusted for the tax impact of restructuring costs, significant items and the tax impact of the additional adjustments (estimated standalone public company costs, interest expense and non-service pension expense).
EBITDA represents net income from operations (a GAAP measure), adjusted for noncontrolling interests, income tax expense, net interest expense, non-service pension expense and depreciation and amortization. Adjusted EBITDA represents EBITDA, as calculated above, adjusted for the impact of restructuring, other significant items and UTC allocated costs including estimated standalone public company costs. Management believes that adjusted SG&A, EBITDA, adjusted EBITDA, adjusted operating profit, 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 as if it had been a standalone public company.
Additionally, 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 is a non-GAAP financial measure that 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.
When we provide our expectations for organic sales, adjusted operating profit, adjusted net income, adjusted effective tax rate, adjusted EPS and 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.
© 2020 OTIS WORLDWIDE CORPORATION. | 21 |
Appendix
Pro forma standalone financials reconciliation
($millions)
- Reflects costs for certain functions and services performed by UTC organizations that are allocated to Otis for purposes of carve-out financial statements.
- Adjustments have been made to 2019 to represent estimated standalone public company costs, as though Otis' operations had been conducted independently from UTC. 2020 costs are reflected as a part of GAAP operating profit and are not adjusted.
- Non-servicepension expenses included in GAAP net income attributable to Otis includes amounts associated with Otis' participation in UTC retained pension plans. The amounts related to these plans are removed from Otis' results for the 2019 year, as though Otis' operations have been conducted independently from UTC.
- 2019 Net Interest reflects adjustments as though Otis' February 2020 debt issuance took place in 2019.
- The adjusted effective tax rate represents the effective tax rate (a GAAP measure)adjusted for the tax impact of restructuring costs, other significant items and the tax impact of the additional adjustments (standalone costs, additional interest expense and non-service pension expenses)
© 2020 OTIS WORLDWIDE CORPORATION. | 22 |
Appendix
Organic sales reconciliation
Q3 2020 | Total Otis | New | Service | Maintenance | Modernization | ||
Equipment | & Repair | ||||||
Organic | (1.2%) | (1.0%) | (1.4%) | (1.3%) | (2.1%) | ||
FX | 0.2% | (0.3%) | 0.7% | 0.7% | 0.6% | ||
Net acquisitions / divestitures | (0.2%) | (0.1%) | (0.3%) | (0.1%) | (0.9%) | ||
Other | (0.2%) | (0.5%) | 0.0% | 0.0% | 0.0% | ||
Total net sales growth | (1.4%) | (1.9%) | (1.0%) | (0.7%) | (2.4%) | ||
YTD 2020 | Total Otis | New | Service | Maintenance | Modernization | ||
Equipment | & Repair | ||||||
Organic | (3.3%) | (7.0%) | (0.5%) | (0.8%) | 0.9% | ||
FX | (1.4%) | (1.7%) | (1.1%) | (1.1%) | (0.9%) | ||
Net acquisitions / divestitures | (0.4%) | (0.1%) | (0.6%) | (0.4%) | (1.5%) | ||
Other | 0.0% | (0.2%) | 0.0% | 0.0% | 0.0% | ||
Total net sales growth | (5.1%) | (9.0%) | (2.2%) | (2.3%) | (1.5%) | ||
© 2020 OTIS WORLDWIDE CORPORATION. | 23 | ||||||
Appendix
Adjusted operating profit at constant currency reconciliation
($millions) | Q3 2019 | Q3 2020 | Y/Y | YTD 2019 | YTD 2020 | Y/Y | |||
New Equipment | |||||||||
Adjusted operating profit | 114 | 102 | (12) | 320 | 258 | (62) | |||
Impact of foreign exchange | 3 | 3 | 10 | 10 | |||||
Adjusted operating profit at constant currency | 105 | (9) | 268 | (52) | |||||
Service | |||||||||
Adjusted operating profit | 397 | 422 | 25 | 1,180 | 1,216 | 36 | |||
Impact of foreign exchange | (6) | (6) | 11 | 11 | |||||
Adjusted operating profit at constant currency | 416 | 19 | 1,180 | 1,227 | 47 | ||||
Otis Consolidated | |||||||||
Adjusted operating profit | 470 | 503 | 33 | 1,399 | 1,410 | 11 | |||
Impact of foreign exchange | (3) | (3) | 22 | 22 | |||||
Adjusted operating profit at constant currency | 500 | 30 | 1,432 | 33 | |||||
© 2020 OTIS WORLDWIDE CORPORATION. | 24 | ||||||||
Appendix
SG&A reconciliation
($millions) | Q3 2019 | Q3 2020 | YTD 2019 | YTD 2020 |
SG&A expense | 444 | 481 | 1,329 | 1,387 |
Restructuring | (1) | (11) | (26) | (27) |
One-time separation costs | (7) | (18) | (10) | (69) |
UTC allocated corporate expenses (a) | (20) | 0 | (56) | (16) |
Standalone public company costs (b) | 37 | 0 | 95 | (1) |
Other | 2 | (1) | 1 | (2) |
Adjusted SG&A | 455 | 451 | 1,333 | 1,272 |
- Reflects costs for certain functions and services performed by UTC organizations that are allocated to Otis for purposes of carve-out financial statements.
- Adjustments have been made to 2019 to represent estimated standalone public company costs, as though Otis' operations had been conducted independently from UTC. 2020 costs are reflected as a part of GAAP operating profit and are not adjusted.
© 2020 OTIS WORLDWIDE CORPORATION. | 25 |
Appendix
Diluted earnings per share reconciliation
Q3 2019 | Q3 2020 | YTD 2019 | YTD 2020 | |
GAAP diluted earnings per share | $0.73 | $0.61 | $2.07 | $1.51 |
Impact of non-recurring items on diluted earnings per share | ($0.18) | $0.08 | ($0.30) | $0.35 |
Adjusted diluted earnings per share | $0.55 | $0.69 | $1.77 | $1.86 |
© 2020 OTIS WORLDWIDE CORPORATION. | 26 |
Appendix
Free cash flow1 reconciliation
($millions) | Q3 2019 | Q3 2020 | YTD 2019 | YTD 2020 |
Operating cash flow1 | 364 | 348 | 1,015 | 1,171 |
Capital expenditures | (35) | (37) | (98) | (112) |
Free cash flow1 | 329 | 311 | 917 | 1,059 |
GAAP net income | 317 | 266 | 898 | 655 |
FCF conversion | 104% | 117% | 102% | 162% |
1 Operating cash flow excludes dividends paid to noncontrolling interests.
© 2020 OTIS WORLDWIDE CORPORATION. | 27 |
Appendix
Other reconciliations
Trailing 12-month EBITDA
($millions) | Q4 | Q1 | Q2 | Q3 |
2019 | 2020 | 2020 | 2020 | |
Net income attributable to Otis | 218 | 165 | 224 | 266 |
Noncontrolling interest | 36 | 37 | 41 | 44 |
Income tax expense | 183 | 125 | 109 | 103 |
Net interest expense | -6 | 5 | 41 | 39 |
Non-service pension expense | 5 | -3 | 1 | 2 |
Depreciation & amortization | 45 | 43 | 49 | 48 |
EBITDA | 481 | 372 | 465 | 502 |
Restructuring | 10 | 6 | 20 | 20 |
Loss on disposal of businesses | 8 | 0 | 0 | 0 |
One-time separation costs | 33 | 32 | 21 | 29 |
Fixed asset impairment | 0 | 67 | 0 | 0 |
UTC allocated corporate expenses (a) | 24 | 16 | 0 | 0 |
Standalone public company costs (b) | -42 | 0 | 0 | 0 |
Other | 4 | 0 | 0 | 0 |
Adjusted EBITDA | 518 | 493 | 506 | 551 |
Trailing 12 month adjusted EBITDA (c) | 2,068 |
Remaining performance obligation (RPO)
($billions) | Q3 | Q2 | Q3 |
2019 | 2020 | 2020 | |
RPO at actual currency | 16.2 | 16.4 | 16.9 |
FX | 0.0 | (0.1) | (0.4) |
RPO at constant currency | 16.2 | 16.3 | 16.5 |
New Equipment backlog
Growth % | Q3 |
2020 | |
Constant currency | 3% |
FX | 2% |
Actual currency | 5% |
- Reflects costs for certain functions and services performed by UTC organizations that are allocated to Otis for purposes of carve-out financial statements.
- Adjustments have been made to 2019 to represent estimated standalone public company costs, as though Otis' operations had been conducted independently from UTC. 2020 costs are reflected as a part of GAAP operating profit and are not adjusted.
- Our revolving and term loan credit agreements require that we maintain a maximum consolidated leverage ratio, commencing with the test period ending September 30, 2020. Please review our credit agreements as filed with the SEC from time to time for more information regarding the adjustments and other terms related to the calculation of such ratio, which differ in certain respects from Adjusted EBITDA provided herein.
© 2020 OTIS WORLDWIDE CORPORATION. | 28 |
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Otis Worldwide Corporation published this content on 23 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 October 2020 13:39:06 UTC