The speaker introduces the conference call and the presenters, Michael Rednor, Judy Marks, and Anurag Maheshwari. They mention that the call is being recorded and presentation materials are available for download. Michael Rednor reminds listeners that the company will speak to results from continuing operations and that the presentation contains forward-looking statements. Judy Marks then discusses the company's solid first quarter, with mid-single-digit organic sales growth driven by the Service business and expanding operating margins. She also mentions growth in the maintenance portfolio and solid modernization sales.

In the first quarter, Mod orders increased by 12.9% and the company saw growth in all regions. Despite challenging market conditions, operational excellence led to a 10% growth in adjusted EPS. The company also executed its capital strategy well, repurchasing $300 million of shares and increasing their quarterly dividend by 14.7%. They also made progress towards their environmental goals and their sustainability journey will be shared in their next DSG report. New Equipment orders were down 10% as expected, but their backlog remained steady. The Service segment had consistent solid performance with 13% orders growth and 15% backlog growth, setting them up well for modernization sales in the future.

In the first quarter, Otis received orders for projects in China, Canada, Japan, and the United Kingdom, showcasing the hard work of their global colleagues. These projects include providing elevators and escalators for a metro line expansion in China, a hospital in Canada, and a tower in Japan, as well as renewing a service contract and modernizing elevators in the UK. Despite challenging market conditions, Otis delivered $3.4 billion in net sales with organic growth every quarter since the end of 2020. Adjusted operating profit and EPS also saw strong growth in the quarter.

The fourth paragraph of the article discusses the improvement in tax rate and early results from uplift, which helped to offset headwinds from foreign exchange translation and increased interest expense. The segment sales performance for Otis new equipment was roughly flat, with growth in the Americas and declines in China. Service sales saw organic growth across all regions and lines of business. New Equipment operating profit also saw an increase due to favorable pricing, productivity, and commodity tailwinds.

In the first quarter, the company's service operating profit increased by $47 million at constant currency due to higher volume, favorable pricing, and productivity. This led to a 70 basis point margin expansion for the segment. The company also saw improvements in SG&A and overall adjusted margins, resulting in a 10% growth in EPS. Despite subdued new equipment markets, the company's service business, modernization strategy, and uplift program helped offset the decline. As a result, the company is raising its profit guidance for the year. The company's global market outlook for new equipment remains unchanged, with the Americas and EMEA expected to be down low-single digits in units. However, the outlook for Asia has been revised to be down mid-single digits due to weakness in China. The service market remains strong.

The paragraph discusses the expected growth in the global install base for Otis, as well as their 2024 financial outlook. This includes projected net sales, adjusted operating profit, and adjusted EPS, as well as plans for returning free cash flow to shareholders and acquiring a minority interest in Nippon Otis. The segment outlook for 2024 remains consistent with the prior outlook, with no change in expectations for New Equipment sales in EMEA.

Due to a weaker market in China, China New Equipment sales are expected to decrease by 10%, but this will be offset by better backlog conversion in the Americas and Asia Pacific. Overall, organic sales are expected to grow by 6-7%, with operating profit also increasing due to strong contributions from service. The company also expects to achieve adjusted free cash flow of $1.6 billion and plans to repurchase $1 billion in shares and increase their dividend. As a result, the adjusted EPS guidance for 2024 has been raised by $0.03 to a range of $3.83 to $3.90.

The paragraph discusses the expected growth in EPS and operating profit for the second quarter. It also mentions the anticipated decline in orders for New Equipment, but steady growth in the service sector. Sales are expected to be flat due to currency fluctuations. Profit margins for New Equipment and Service are predicted to remain consistent. The tax rate is expected to be around 20%, resulting in a 10% increase in EPS. The company's strategy is expected to lead to continued growth for the rest of the year.

Judy Marks, CEO of the company, discusses the company's financial outlook and plans to return $1.6 billion cash to shareholders. She also mentions the growth of their portfolio and backlog, as well as the success of their UpLift program. The operator then opens the floor for questions, and the first question is about the company's Mod product. Marks explains that Mod sales and orders have shown healthy double-digit growth, and the company's strategy is on track. They have seen strong demand in all regions, particularly in Asia Pacific and China.

The company is experiencing a mix of major projects and strong demand for volume packages from customers. They are performing well and have surpassed New Equipment margins with Mod margins in the first quarter. This is due to productivity improvements and cost control measures. The Mod market has potential for significant growth in all regions.

The backlog for new equipment was flat at constant currency year-on-year, with TTM orders expected to be down in the second quarter. The company expects the new equipment backlog to potentially decrease slightly or remain flat by the end of the year, but sees potential for growth in the Mod side. Service margins performed well in the first quarter and are expected to continue to increase in the second quarter.

Judy Marks, CEO of Otis Elevator Company, discusses the company's strong performance in the first quarter of 2021. She mentions that the company has seen growth in its portfolio and service pricing, leading to a 4 plus basis points increase in service margins. She also addresses concerns about wage inflation and assures that the company is focused on productivity to offset any potential impact. Marks also mentions the success of the company's service-driven business model and gives a shoutout to Wales, where Otis has had success. This level of detail in the conference call is unusual for the company.

Nigel asks Anurag if there will be more quarterly updates in the future and asks for more details on the tax rate and corporate expenses. Anurag responds that they provided more details this quarter due to the lower tax rate and higher corporate expenses, mainly due to ForEx. He also explains that the increase in AR and lengthening of billing cycles is mainly due to timing.

The speaker discusses the company's recent performance and future projections, highlighting their high conversion rate and confidence in reaching 100% conversion this year. They also mention the increase in working capital and attribute it to lower down payments and timing of billings. The speaker addresses concerns about pricing in China, stating that it is a highly competitive market and the company is not getting price for New Equipment. However, they have offset this with productivity and lower commodity prices. The New Equipment market in China is down 10% and is expected to continue declining.

The speaker is discussing the China segment for 2024 and predicts it will have about 450,000 units. They expect New Equipment pricing to remain competitive and plan to focus on increasing sales channels and growing market share. In terms of service pricing, they mention that it has been challenging for the past three years and their strategy is to focus on productivity and cost reduction. They also mention that input costs are coming down and their backlog margin for New Equipment is higher compared to last year.

The speaker discusses the recent market trends in North America, including the weak but improving New Equipment market and the decline in ABI and Dodge Momentum indexes. They attribute the weakness to tough comparisons and expect more stability in 2024. They also mention that all verticals in North America were down this quarter, with commercial being hit harder than residential. The speaker also mentions plans for increasing share repurchases due to potential opportunities related to repatriation.

Judy Marks, the CEO of Otis Elevator Company, discusses the company's M&A strategy and recent financial developments. She mentions a decrease in cash balance and a share repurchase, as well as potential bolt-on opportunities for the company. She also discusses the company's strong balance sheet and its focus on service, capital, and operational strategies.

The sales growth guidance for modernization has been increased to 8-9%, but the backlog has grown by 15%. This is due to conversion times and the company expects sales growth to catch up with backlog growth in the next few quarters. The company has learned from their experience in new equipment service and is encouraged by the trajectory of modernization. Service pricing contributed 3 points to the quarter, and the company is expecting 100 basis points of net pricing for 2024, but an extra 2 points have been added.

Anurag Maheshwari clarifies that the 300 basis points mentioned excludes mix and churn and that pricing is consistent in the Service business across different regions. The Service margins are growing due to productivity. A question is asked about price pressure in China and where margins will converge to in the long-term. Judy Marks responds that they are not predicting a trough this year and that the Chinese government is taking action to address the issue.

The company's team will respond quickly to changes in sentiment and liquidity easing. They will focus on finding a balance between pricing, market share, and margins in order to maintain profitability. The company's service sector is growing in China and will continue to do so. The company is also focused on capital allocation and will consider bolt-on acquisitions that are accretive to their business model.

The speaker discusses the importance of integrating new equipment in a strategic location to increase density and routes. They mention the successful acquisition of Schindler's portfolio in Japan and the growth of their Service business in the country. The speaker also mentions the strength of the Indian market, which is the second largest for new equipment after China and has high conversion rates similar to mature markets. They installed their first unit in India in 1890.

Judy Marks discusses the growth of Otis Elevator Company in India, citing factors such as a large population and rising middle class driving demand for higher-end residential and multi-use buildings. She mentions investments in adding colleagues and expanding the supply chain, and emphasizes the strength of their team in India. She also touches on supply chain constraints, stating that they have worked through the majority of issues.

In the first quarter, the company has seen a decrease in savings on commodities compared to last year, but they are still expecting to save $15-20 million. They have locked in their commodities for the rest of the year and have a strong supply chain team. They are also focusing on dual sourcing and resiliency in their supply chain. The company's factories have delivered on new equipment in the first quarter. The CEO is pleased with the first quarter results and is confident in the company's progress for the rest of the year.

This summary was generated with AI and may contain some inaccuracies.