OTIS REPORTS FIRST QUARTER 2025 RESULTS (Form 8-K)

OTIS REPORTS FIRST QUARTER 2025 RESULTS

Otis delivers mid-single digit organic Service sales growth and strong Service operating profit margin expansion

•Service net sales up 1% with organic sales up 4%

•GAAP operating profit margin down 350 bps, adjusted operating profit margin up 40 bps

•GAAP EPS down 29% and adjusted EPS up 5%

•Maintenance portfolio units up 4%

•Modernization orders up 12%, backlog up 13%, up 14% at constant currency

•GAAP cash flow from operations of $190 million; adjusted free cash flow of $186 million

•Share repurchases of approximately $250 million

FARMINGTON, Conn., April 23, 2025 - Otis Worldwide Corporation (NYSE:OTIS) reported first quarter 2025 net sales of $3.3 billion with organic sales flat versus the prior year. GAAP earnings per share (EPS) decreased 29% to $0.61 and adjusted EPS increased 5% to $0.92.

"Otis delivered solid performance supported by the strength of our Service segment, which contributed mid-single digit organic sales growth and 40 basis points of operating profit margin expansion. We continued to execute our modernization strategy with orders up 12% leading to a mid-teens backlog growth that sets us up well for the rest of the year. We also grew our industry leading maintenance portfolio 4% again this quarter," said Chair, CEO & President Judy Marks. "With this strong performance, confidence in our strategy, and commitment to creating value for our shareholders, yesterday we announced a dividend increase for the fifth consecutive year."

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Key Figures

($ millions, except per share amounts)			Quarter Ended March 31,
			2025						2024						Y/Y						Y/Y (CFX)
Net sales			$	3,350					$	3,437					(3)		%				-		%
Organic sales growth																					-		%
GAAP
Operating profit			$	411					$	544					$	(133)
Operating profit margin			12.3		%				15.8		%				(350) bps
Net income			$	243					$	353					(31)		%
Earnings per share			$	0.61					$	0.86					(29)		%
Adjusted non-GAAP comparison
Operating profit			$	560					$	561					$	(1)					$	15
Operating profit margin			16.7		%				16.3		%				40 bps
Net income			$	368					$	361					2		%
Earnings per share			$	0.92					$	0.88					5		%

First quarter net sales of $3.3 billion decreased 3% versus the prior year, driven primarily by New Equipment in China.

First quarter GAAP operating profit of $411 million decreased $133 million driven by UpLift transformation costs, separation-related adjustments, and other non-recurring items. Adjusted operating profit of $560 million decreased $1 million at actual currency and increased $15 million at constant currency, driven by Service. GAAP operating profit margin contracted 350 basis points to 12.3% and adjusted operating profit margin expanded 40 basis points to 16.7%, driven by favorable segment mix and favorable segment performance partially offset by headwinds in corporate costs.

GAAP EPS of $0.61 decreased 29% compared to the prior year driven by UpLift transformation costs, separation-related adjustments, and other non-recurring items. Adjusted EPS of $0.92 increased 5% due to solid operational performance and a lower share count, partially offset by FX headwind.

Service

						Quarter Ended March 31,
($ millions)						2025						2024						Y/Y						Y/Y (CFX)
Net sales						$	2,187					$	2,157					1		%				4		%
Organic sales																								4		%
Segment operating profit						$	537					$	523					$	14					$	29
Segment operating profit margin						24.6		%				24.2		%				40 bps

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In the first quarter, net sales of $2.2 billion increased 1%, with a 4% increase in organic sales. Organic maintenance and repair sales increased 3% and organic modernization sales increased 10%.

Segment operating profit of $537 million increased $14 million at actual currency and $29 million at constant currency due to higher volume, favorable pricing and productivity, partially offset by inflationary pressures including higher labor and higher material costs, and mix. Segment operating profit margin expanded 40 basis points to 24.6%.

New Equipment

						Quarter Ended March 31,
($ millions)						2025						2024						Y/Y						Y/Y (CFX)
Net sales						$	1,163					$	1,280					(9)		%				(6)		%
Organic sales																								(7)		%
Segment operating profit						$	66					$	71					$	(5)					$	(4)
Segment operating profit margin						5.7		%				5.5		%				20 bps

In the first quarter, net sales of $1.2 billion decreased 9% versus the prior year, with approximately 10% organic growth in Asia Pacific and mid-single digit organic sales growth in EMEA more than offset by a greater than 20% decline in China and a high-single digit decline in the Americas.

Segment operating profit of $66 million decreased $5 million at actual currency and $4 million at constant currency from the impacts of lower volume and unfavorable mix, partially offset by productivity and commodity tailwinds. Pricing was relatively flat. Segment operating profit margin expanded 20 basis points to 5.7%.

New Equipment orders were down 1% at constant currency with greater than 20% growth in Asia Pacific and mid-teens growth in the Americas offset by a greater than 20% decline in China and a mid-single digit decline in EMEA. New Equipment backlog decreased 4% at actual currency and decreased 3% at constant currency.

Cash flow

						Quarter Ended March 31,
($ millions)						2025						2024						Y/Y
Cash flow from operations						$	190					$	171					$	19
Free cash flow						$	156					$	140					$	16
Adjusted free cash flow						$	186					$	155					$	31

First quarter cash flow changes were driven by a benefit from changes in working capital offset by a decrease in net income.

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2025 Outlook1

Otis is revising its full year outlook:

•Net sales of $14.6 to $14.8 billion, up 3 to 4%

•Organic sales up 2 to 4%

◦Organic New Equipment sales down 1 to 4%

◦Organic Service sales up 5 to 7%

•Adjusted operating profit of $2.4 to $2.5 billion, up $105 to $135 million at constant currency excluding ($75) to ($45) million of tariff impact, up $55 to $105 million at actual currency including the tariff impact

•Adjusted EPS of $4.00 to $4.10, up 4 to 7%; adjusted effective tax rate of approximately 24.8%

•Adjusted free cash flow of approximately $1.6 billion

1 Note: When we provide outlook for organic sales, adjusted operating profit, adjusted EPS, 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 2.4 billion people a day and maintain approximately 2.4 million customer units worldwide, the industry's largest Service portfolio. Headquartered in Connecticut, USA, Otis is 72,000 people strong, including 44,000 field professionals, all committed to manufacturing, installing and maintaining products to meet 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 @OtisElevatorCo.

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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 and other significant items.
Adjusted noncontrolling interest in earnings			Represents noncontrolling interest in earnings (a GAAP measure), excluding restructuring costs and other significant items, including related tax effects.
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.

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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 expense, adjusted operating profit, adjusted net interest expense, adjusted noncontrolling interest in earnings, 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 noncontrolling interest in earnings, 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.

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