Otis Worldwide (OTIS) 30 Oct 242024 Q3 Earnings call transcript

Good morning, and welcome to Otis' Third Quarter 2024 Earnings Conference Call. This call is being carried live on the Internet and recorded for replay. Presentation materials are available for download from Otis' website at www.otis.com. I'll now turn the call over to Michael Rednor, Senior Vice President of Investor Relations.

Thank you, Krista. Welcome to Otis' Third Quarter 2024 Earnings Conference Call.

me Christina Judy and Mendez, with and Chair, CFO. call and President; Executive the today Marks, are CEO On Vice President to Please company excluding otherwise where and results speak restructuring items. note, operations, from nonrecurring noted, significant continuing except will the can measures of found in these the of the webcast. reconciliation be A appendix

important and presentation provide We uncertainties. including filings, Otis' the statements, that quarterly on are XX-Q, contains factors XX-K Form reports remind on actual also differ that subject cause which details SEC our forward-looking materially. listeners results to and could Form risks to

over Now I'd like to to Judy. turn the call

at allocation through we've repurchases strategy. share capital exciting Year-to-date, and in $XXX generated the $XXX generated Thank top quarter our on you, million portfolio and hope of of growth flow service $XXX Thank X.X% third XX% all X.X% all XX million in cash recently. million morning, several growth model overall quarter we execute increased third Through results. line Slide with continue backlog free high growth and and I had with X and you and safe our currency. achieved QX with months evening, as on adjusted share In well. points repurchases. organic Starting basis in modernization our and operating demonstrate flow the Mike, profit accomplishments everyone. strength and first solid single-digit of growth service-driven we achieved good are maintenance delivered XXXX, year-to-date QX million contributing. QX, We approximately as completed X.X%. In us. to the expanded bringing have to by for we in returned we Otis $XXX constant to we disciplined returned adjusted of of joining business sales in free highlights margin afternoon adjusted business cash EPS adjusted Service, lines X. Otis

Otis energy in global now XXXX hub establishing, improving certified Korea has XX obtained for manufacturing sites certification. management. through the ISO manufacturing and standard our example, For maintaining implementing,

the strategy announced also to facility. we meet while commercial increase infrastructure in escalators manufacturing India, our addition, of capabilities month, localized and residential, the and proud year and third a our elevators growing expanding of to expansion demand Bengaluru in country. help Forbes our reflect earlier colleagues the And for last, will In This capacity for manufacturing row, the the named we're one employers our best commitment this be world's well-being. to Magazine by in

our on to Moving performance orders Slide X.

year versus the Equipment first third New X the in improvement quarters conditions. sequential quarter, of challenging were down market orders a X% the despite continued

high of softness Europe, orders to single X% in a approximately APAC while in Excluding was than strong by in XX% growth strength result to China EMEA greater returned in China, digits continued decline bringing year-to-date due delivered performance region. weakness more XX% orders growing excellent Orders Southeast and declined by Japan in the Asia. growth in increased with continued high Western Americas, to North first in than continued single-digit XX%. and Orders a driven America, A half. the economic Northern after

constant New versus X% currency Our backlog at Equipment prior was the year. down

to excluding low quarter, backlog, up single similar the digits. was Equipment Although China, last New

approximately orders bounce year-to-date orders to up quarter. see and prior we XX%, With mod in backlog mid bookings, growth faced modernization prior greater versus expect maintenance increased XX% the the project from year This in And orders consecutive constant modernization a X% our service, major years to quarter fourth compare of marked in delivering quarter. X% at the back currency a solid last, challenging increased year. X or within each portfolio we growth as

XX elevators In our customer have highlights Central the quarter. share Collins will to in XXX several Melbourne, third we to deliver, at from modernize Street colleagues the across As Business Australia, globe the continue District. Otis

Our the been Line more Metro escalators of more than the maintained proud Denmark, Township, recaptured In portfolio. install has X than have Otis vertical, new a Pennsylvania. worked Gen Otis Nordics, in And and the ONE [ X-floor signature the ] decades. the and closely X,XXX. number Bethlehem United and Luke's the units ReGen the continued network our in Center, SkyRise the organization The GenX Otis featured part elevators to provide Otis for Luke's campus add States, local X we've drives units online. for Domea the customers past This than [ elevators making XX a was be support expanding with units business. almost metro's and construction XXX will we're we've Hospital units expansion of to elevators, for the after in and years. Reflecting for recaptured been binhib than Tianjin ] XXX Vale them X China leading valued Sweden, including our infrastructure XXX platform. customer for ], of return peak metro to XXX Anderson a years. In more specific total edition. XXXX [ in edge [ modernization city's with X X new Otis St. installed of welcome and as IoT XX has products University Metro ] using the XX In Otis to will more strength along selected the years. [ Health customer GenX with to GenX teams and the a B building's original Shopping to unit at the ] Tianjin in St. a This equipment has housing brings

X%. headwind, $X.X operating X. Otis driven sales results QX million segment. to Adjusted organic net the on foreign billion sales with Turning approximately up by $X delivered was of million, excluding $X profit, a Slide up Service exchange

results headwinds. the Third through year-to-date prior performance adjusted quarter. of over it to against in X% turn offset exchange quarter year. XX% our the was $X.XX This to X.X%. With in a quarter adjusted more brings the of or tough growth approximately grew EPS detail. I'll Operational partially approximately Cristina third EPS that, in by foreign to growth EPS compare walk

Starting Slide X. Judy. the which sales Service, of by Thank X.X% organic Total with you, was driven sales growth X.X%. up quarter QX performance was in segment on

driven than New down Equipment in as X.X%, weak. XX% decline a organic market sales greater China by were conditions remain

low Excluding and flat China, the and new Japan single China The decline Southern was growth equipment in Americas. as offset by single-digit Europe digits. was low strength EMEA well Western offset driven sales was by in increased in strength as by low APAC, in partially the in as Europe. shortly single-digit Taiwan Central growth

impact digits was the was China pricing all Similar China. under with Equipment low up flat in first across to geographies. growth XX% severe quarter, be contributions of all regions Service to with of repair of in with pressure X billion, to quarter, sales XX% in and ramp-up approximately Modernization lines X of supported declines by quarters the and Pacific, the in growth last the increased year-over-year, over outside year-to-date on in which volumes. XX%, sales in delivered regions in continued Asia relatively sales around widely mix We pricing and business. Maintenance single XX%, on sequentially. maintenance from grew and excluding points, portfolio New growth of repair up although as organic approximately a X.X%, about continued $X.X growth continues acceleration up excellent X% all up accelerated strong in the of organic organic our bringing mid-single-digit was pricing sales churn were year. we price including the quarter, expected

on performance X. operating profit Slide segment Turning to QX

constant New product headwinds. by at that Equipment operating volume profit X.X%. $XXX operating the Operating commodity down we approximately has imply profit of of mitigated was from and commodity $XX backlog, New regional have productivity to $XX That pricing pricing been continues flow million a of for from higher than Equipment and and $XXX the solid $XX impacts at largely drop-through the lower constant margins headwind $XX about headwind the more productivity, sales Service profit Year-to-date, inflation. of of benefits China, uplift wage through from at benefit increased $XXX including as in million mix more million stablings were are million favorable including million benefits $XXX currency annual on at of New pricing revenue has productivity, currency tailwinds. profit as prior offset by million the costs which operating currency and million million. declined versus down would and and a than and offset volume, lower Equipment profit year. In over constant came uplift

quarter profit margins year basis where compared our expanded facing the have difficult XX.X%. margins XX points in points operating strong XX remained prior of a to while even operating XXXX. Year-to-date, result, XX.X%, basis at margins profit expanded third As

headwinds. X% with grew lower positively. XX of growth, in cost year-to-date adjusted drop operational as operating Supported uplift a Service With $XX or a contributing third $X.XX basis sustained the XX.X% On Adjusted EPS achieved margins of performance while our percentage slight lower labor our these and by a are total benefit by the million, mitigate profit points a segment, we sales the organic improving initiatives, we inflation to year-over-year. in in strong helping various share SG&A by initiatives quarter. sales, the quarter of performance count

the Moving we operations third cash quarter. in cash saw $XXX within and adjusted free the generated improvement to in cash. We quarter, sequential million of flow from

in China. we we with despite facing. of expansion, to are the flow digit X.X%, final delivered excellence various orders. the We across year-to-date, while to our returning greater focus on facing shareholders share notably growth continue across with outside service China business, buybacks. headwinds million the the mid-single to have that With quarter driver, or adjusted macro work move and points Overall, margin the in while growth business working lower organic of into cash due We to operational challenges the $XXX are offset we EPS year-end grew as year most mix we through new regions continued equipment drive to sales macro all of X.X% into

our Let it turn to me outlook. to Judy back discuss now XXXX

X. Slide on Now

on outlook, our first XXXX shape up. some markets update you our updated outlook, discussing to XXXX we let anticipate Before me industry giving including on financial color how

improvement. side, now On outlook we expect up be signs the from of Americas the demand prior flat the to roughly customer are signals showing positive as

new resilient, XX%, converted warranty Offsetting single new into few global change year were the units outlook installed remains the APAC. We that EMEA service mid-single to outlook expect grow years the booked There our digits to equipment Overall, a new equipment markets, we approximately expect Asia in the coming this off ago to high this on takes or and to and down equipment a global base. no be units digits are we to XX% is roughly as XXXX. decline. for market pressure service and be down down China expect our base

new point, somewhere we ] mark, despite government rates markets units. the next anticipate rates. should of clearly stimulus China measures. China. market year global the [ X% expect a decline improvement remains in equipment XX% dependent We versus question sequential we low new growth equipment digits and but currently single anticipate equipment all to on in Americas, the XXXX, the softness towards be units, in impact Looking in currently Overall, year's this a market combined up of at new EMEA equipment we improve across anticipate in range regions, a to new this APAC

in demonstration to base mid-single the all side, will a grow modernization clear the service regions. market continue the On resiliency the strongly anticipate industry. of the at X We digits, continue should to installed around grow of

financial $XX.X Cristina approximately this in X.X%. and on our both strong moment. organic sales and XXXX. We growth of will give all outlook across of sales a Turning lines growth remains profit, now to color more for with Service approximately for of billion business expect

share up Our by is is our with to sales driven prior in up the expected China of outlook currency approximately tax $XXX about count change driven and in $X.XX, our New from operational by rate. million similarly in Adjusted outlook anticipate benefit X%, the around million by performance currency change China to now operating EPS and actual at and from strong reduction of constant a continuous our be driven the end approximately improvement adjusted $XXX specifically the with expectations come up prior lower New Equipment. at low Equipment. We the profit

within come billion to $X.X flow to cash generate billion to this through billion the plan we year in return to $X.X shareholders dividends cash free adjusted of and $X expected repurchases. range a share and We

to and overall quarters anticipate throughout Overall, deliver a customers on more business to continue program, few the shareholders, growth some continue strategy the we to this track, progress value remain and make steady while deliver more to service-driven drive is our model we including uplift year. with which the challenges mitigating organization globe. we faced We to for EPS helping value our efficient and will company X% past

Christina to hand let me our detail. it outlook in Now to discuss more

and Total Taking more look with Service approximately be segment. you, to Thank starting organic X.X%, our on a up Judy. solid are our by sales outlook driven sales detailed at expected performance Slide X. in

new high to is Asia We that high a to be sales equipment single expect Asia XXXX China. expected organic be digits, to market high decline in than due in conditions earlier. Total offset severe clients down by challenging single-digit mentioned the mid- driven with growth a strong to down by teens in China more in Pacific, Judy

market prior in unchanged performed outlook the segment weaker are Our for guidance. year. we by situation the this the Pacific has from than Asia expected the China. Overall, equipment and new Americas, EMEA driven

better of and combined of at than year, Americas, mid-single-digit be projected to we APAC and However, performed the we XXXX. the anticipate world of the has start up for EMEA rest the the growth

Service above X% largely from our to This of our project and grow or momentum X% as perform has least line Our to the guidance, we anticipate organic bit we line the modernization of the approximately segment expectations X.X%. service at prior of of execution prior in growth quite In well than and sales anticipate timing a to due We the growth in backlog. modernization maintenance continued high and our year. with repair quarter includes the continues fourth more range. end gone been sales through with have at

and third our a row business X% growth severe in the headwinds the better, of we service be new past year the in years and model. have of to power offsetting this faced resiliency sales the expect organic We over or of equipment demonstrating

margin productivity year, Turning driven uplift been million. operating has solid grow $XXX In to expand year to and continued points Slide service, for we constant basis And XX. At profit by by pricing. approximately profit year-to-date. expect performance volume, currency, full XX to this approximately is excellent expected operating the aided

For and now year. the lower being and more versus mix uplift result to new by basis of from pricing than backlog expected from Tailwinds continued market equipment, the benefits offset points are as from New headwinds operating China including margins a profit volume XX contract from productivity, commodities Equipment sales are prior weakness. emanating

similar headwind new saw similar currency $XX fourth outlook with organic third quarter rate would slightly equipment we a quarter. And Equipment to profit around actual the $XX we dollar updated currency. the New what a growth constant in basis, decline So assumes larger in million of at in on anticipate million to a

this in overall We driven is expect and The equipment margin by service China update the And points, performance. of are volumes, change expansion operating by driven Service driven our adjusted exclusively volumes. to profit new we through by sales outlook mitigating headwind basis pricing. XX productivity

Turning to cash flow.

China billion with payments to equipment from new adjusted achieve outlook, year. in our down of We The profit volumes $X.X are for the operating impacting lower expected expect coupled flow to free cash $X.X cash range fewer the flow billion. order

focus last to working we we in expect cash We and control improve what continue QX, ramp-up on year. similar flow can free capital, strong to to

EPS to bridge Slide on Moving XX. the XXXX

growth expect adjusted outside performance. currency, We $X.XX approximately of prior driven approximately $X.XX. approximately And $X.XX EPS we to of by of operating This profit largely versus growth constant of operational year EPS deliver expect or China. is At X%. the

$X.XX naturally the expense exchange. While headwinds Reductions to effective weaker higher in lower due to $X.XX headwind Minority are to rate for and a we from China count be interest anticipated share and moved to tax performance. of China the year. anticipate foreign a lower interest expense about the offset

we China in China; market. some X this shaping In give have first, small areas: some we color XXXX how at adjusted second, EPS China, bridge, outcomes a been and up year-to-date. continued range the see on Let the commentary additional to to have on significant largely give uncertainty of impact our China included due point. On we mitigate you although able now me additional EPS the to

backlog the and down we under QX, As in pressure. business exited China ship and remains Equipment mid-teens, book New is the

year-end, stimulus in unless puts for we region to the additional begins it on follow-through into of said and volumes the $X.XX it see naturally Equipment remain to accelerate a policy front been policy the see Lower upwards has exit mix as much pressure XXXX. region, today, into of optimistic on and terms rate headwind being run While the we China possible we could impacts EPS. the the New in for here margin

talk a XXXX, about with starting me Service. Now let bit

We expect margin growth year line or top to mid-single-digit continued the service well continue next and better business expansion. with performing

margin approximately to February, achieve XX at served of the the in this points basis over Day margin expansion expect we would that achieve annually. Investor Service expansion medium we more points business or of basis our XX While slightly year, term

you feel to about basis XXX combined, Equipment, digits within or points the low between few the we in expect good Service years, about as we China, So of years the the think New better excluding growing in X would be the of rest XXXX. somewhere past margin single combined, segment. On as and expansion world XXX

While months heading we our there assume are guidepost will still that line low XXXX. single year that Equipment XXXX, down digits, go, determine for QX, New good starting orders a and the the backlog few in a top if this ending will ends backlog be in exactly into to which fairly

uncertain Equipment for Judy mentioned New segment earlier, As sales profit. both for remains the China and

than second driven new throughout new being outside action now impacted margin new of XX% being margin change a regional China. by meaningful expect within policy by The persist in equipment equipment more of stimulus the rate sales shift and we is half As mix our equipment XXXX. revenue rate without would with to the in

this program uplift headwinds deliver to results our the ability while the with demonstrate to business poses work from closing, on continuing productivity first drive our to X cost to to and model. market align continue will service-driven offset through We rightsizing our that conditions. In current the months the our

We focus expanding productivity including and our initiatives. modernization what can drive continue on throughout our to on executing the including growing backlog we continuing to portfolio control, uplift organization,

through We Thank XXXX. With perform the set for the continue us that, to to please Krista, to up remainder in drive questions. line the you. open of year, well results

first question Coe Wolfe Instructions] with of Nigel from Your the [Operator line Research. comes

Thanks for Cristina. details on the FY 'XX

And pricing to deteriorate. deflationary starting so been, fundamentals Just it by message being offset pressure I'm of obviously, input sort -- costs. China has are the that seems just that wondering really

OE just getting right whether that's I'm there's So wondering any not within mix lower strategy really if the China margins, seeing the wondering we're is over pressure and whether irrational X China. China? in if the years X I'm pricing next the function change now, a And just just of to of the

Yes. quarter, market, as the It Equipment myself and in that's heard And Nigel. say this China similar down how year to the second weak. Listen, Thanks, you finish. was New to XX% actually is think we quarter. remains Cristina going

We business believe China We as we trading and units. sure are XXXX our XXXX. into make segment now off go to for the remains China XXX,XXX about constantly that volume, liquidity be price strong at will

we've As is revenue our equipment new we've significantly fairly double-digit. and looked as shared, down

flattish Our to up slightly. Service revenue is

teens. are up portfolio Our units still high

of down you -- in have billion if $X.X to down this we've top revenue the $XXX X/X say, in our we're year our pivot to going line and we're revenue the revenue is China for So making And working. year-to-date in is to company. million China, and as the in been we're heard put still Service. Christina be in organic of you About China now growth going strategy service guide,

structurally really we New contribution points. couple is our a at total only down when Now look China, Equipment of

focused best really competitive. remains on still optimizing our points, and the are delivering equipment. has been though China few seeing we're for a down environment deflationary ability we of and trying to commodities the on So always even -- It competitive in new pricing

us is is XXX,XXX expansion us to scale market pricing. unit growing up picking not a some and for business competitive and seeing we are market see you'll seeing of healthy [indiscernible] to is We drive and want. The mod nicely, secure still as margin me, irrational pricing market terms grow a in the we there. We're mod

incentives was mod that the positive. that we people little the quarter. of October there of bit renewal not been lot equipment Our wanted. the are was at seeing quarter, pick bit of later the in that a orders to have was year-to-date were very announced the China not resistance with a in quarter level specificity. early was a as about more it bigger But was announced the in little understand waiting prior up. for We're That stimulus positive. And to

Our are The yet teens. Service high units revenue Service up up X%. again, was

XX, billion, X at in So Form is we've reported you you was business if as not $XXX China think down It's the our contribution, did that since team that's And that the we which back lowest look our $X.X million, it even years. drop. revenue in -- at we've our is China in yet has reshaping. had a look made, level of XXXX,

to the So mix and the adding regions Obviously, new including we're is China, X service equipment well. carefully. the and line margin top the very business, doing significantly and watching on mix in are the other

Was great. would obviously service that plan great obviously, just unchanged. Judy, the That's been service quick sort flat outlook on for margins one Service, your just, the And adverse. maybe you've the year-over-year, mix of mod a And then kept Okay. have the color. that's quarter?

getting just just the bit of actually leverage bit on in the perhaps? color inflation operating terms worse of terms there more a So labor maybe whether is and the in a margins services impacting within

is this Nigel, Cristina.

thanks in the from QX. are volumes, see quarter, of So mainly QX, you timing and is of have with in coming ] was they on sequentially, [indiscernible] going they you are in ] broadly there expectations. ramp-up when was modernization. good through [ it coming up, And in seen to and a flow that in repair line of [ XX.X this the the Service fact, XX.X And services margins,

we approximately price. the all X have line mix in excluding churn. and quarter, productivity impact And Price is and points, of have of a also broadly uplift. very in [indiscernible] good the also wage that up expectations. was inflation this compensating in and is We performance with

performance say, in is modernization in I up line nicely. be ramping QX opportunity an as service for steady see can state So and expectations, very with would we this very

anticipated if look Yes. come picking half side the to the And of thing, the up on year. the we repair you over conversion in those contributing to in Nigel, led quarter, with Both up the at by second of backlog delivery keep Americas. and to XX%. mode, you in repair going XX%. other really up XX% if our how Repair normalize. we've of the It's of half we year We recall, performed That's the mod, continue anticipating second last mod terms were sales. on are really picking nicely. was of the up [indiscernible]

we're like year So -- strong to quarter. wrap repair, third looks it maintenance, a above quarter similar like but again point this we'll and fourth with

Jeffrey the Sprague Vertical next Research from Partners. comes of line with Your question

thinking does or that the I we're with playbook realign trajectory in also kind shape above below a And China? you the right, and in equipment world, form you angle of bit we the Judy, little a rest about historically guess could equipment new same drill just way, as mod of new globally into if exists the business. mods little is bit specific of the think certainly question China? my

Jeff. it does, Yes,

relative the of world. to China So margins rest due new in margins the in mod attractive, China look like equipment

as portfolio China, days, -- this will portfolio accelerate obviously, that in It's and that play food anywhere more think out a the year world. early seeing when about well. grow and but CAGR rapidly you So a versus we're else in younger

-- position our a mad So of a in mods. mod to from units in not and with the old kits start industrialize unique lot do modernize we're to there's

our to of Commodities, benefits the China. in line already most are handling means get we're in which these on of So Gen GenX GenX units, factories our scale. X our MOD we're going

was seen program the little what China terms you in mod very give And included, that of And frame, just I'm our challenge was everything the elevators rapid believe we've in equipment appliances available promising. in optimistic time. time to terms October obviously, thought This strong I as rules was reason demand, July needed very growth. So why of orders is, has terms all spoke were in mod we context again, important. from mod think The getting of the the early which in taken a to segment about I but these orders weren't for is about, a And it and escalators third to quarter. out renewal in as in cars, very that with little they in locally. announced be

to nicely. seen see You're going mod back in bounce China. We've already in October

You're going or came we orders into X were orders see our double as globally, significant for to mod mod X digit. more quarters, up quarter this

in from expect the projects. but quarter projects a QX a to moved in of to there the were world, quarter, some timing issues fourth You we will come mod the we significant did quarter. couple have third see of slight compare a those we return the with pretty of terms projects. East And have in mod year, in. last to double digit in the in Those some fourth And rest major then the saw Middle

double the back backlog means third conversion fourth remain quarter we'll will So than into be for we've what margin. better margin think was to row now quarter, proven a Equipment is the which digit next in the the seen strong globally the in you've New I year. mod going the And

margins seeing in mod XX% the we're strategy that new now have seeing we're in and medium than to we last mod mod, year anticipate take we the term. hold and put we equipment, the margins greater So line to industrialize do place of sight

market right number step of number, the I the Doesn't XXX,XXX the is wondered is on is as actually just healthy. to that right? So picture, over to in sort population number have we just And as second I going of characterize that grind world China XX,XXX, I big a then like biggest what big right? you additional is lower don't shrinking, China India, the units think just it years? and XXX,XXX, know, though, a really from, picture call still back, right, if overbuilt

without to a of I Jeff, at, means it it year, 'XX say, XX%, taken when lower improvement Otis potential or again, sequential are X/X think China as not actually is you've what new as 'XX going growth to lower to volume did to grind we rate. there's stimulus you And a going year. grind see lower at it's the for as looking decaying the but next X% in impact, from decreasing this that over in because much XXX,XXX down of to equipment we're XXX,XXX. at out

So comparison actually actually give next growth to when the January we'll year, -- to in improvement the here it top service, the see see 'XX. it line going time we look with equipment. late going we're specifics. guide and at in in see all sequential But this We're sit in we you clearly new and we

question the of comes next from Julian with Mitchell line Barclays. Your

Maybe fourth just had clarification profit one quarter of operating sort the on dynamics.

million think So the months XX. Slide was million I That's Slide And I guided constant X and on think $XXX XX. then up on you've up the currency. full at $XX year XX about

million is QX, increase So you ] have but this sort year-on-year equipment in of million new $XX million [ $XX I QX. or down $XX in think plus

of bigger a a So like. it in looks uplift service, sort it's

driving general your seasonality Just that? help is what's profits. QX like bit a on looks in of kind us of guide normal sort it stronger than maybe understand And the the seasonality

analysis. it is is very Julian, a this Cristina. good And

flow-through about look good modernization said, Service of margin in constant and and continue top execution, be is million, means top margin with have profit we above seasonality. line strong. growing And million. service of XX% driven ramp-up QX. of by not productivity. But the continue the of you expansion at expansion back very grown by as to $XX into margin operating working which good to additional year-to-date, a expected to $XX of up you have profit in It's of currency repair operating continually the expect performing it's on on we QX, when line just ramping So and performance driven

we because X%. price order minus line to strong performance the see operating [indiscernible] flow effect. QX. a And other profit side, at profit volume service equipment rightly profit a approximately have decline QX $XX operating that below million, Equipment, overall, and as through And to quarter. be of $XX fading expect more QX, as additionally, in out the the decline in or you on deliver, in the X% in with the margin On in we approximately mix But said, in means commodities level we growth with New compensate we the very same top into operating and less million the

very we're Julian. that Yes. XX% achievable rate on And is everything based seeing,

equipment XXXX the And then maybe margin outlook. for

you next Equipment next about sort Judy, had of to early, think, half. you're second margins margin New placeholder year thinking might year good when talked of about the but in Equipment and sort New I this be it's realize a similar

quarter, it's running of think sounds running fourth and X% you're I and mid-single Equipment. third New or it sort at of X% less So QX like QX third for at sort digits quarter, you're in there.

Equipment as New percent in XXXX X-ish of margin it So today. or looks sort

program of that cost-out planning on the what's uplift margins? Just working up on happening understand kind try starting measures? the its new equipment and Anything to of of And through you pricing? are get nose enact sort assuming sort for further in help or second maybe There's year. to us there

of you're new new XX% impact as Without of equipment very I Cristina the said, [ the Yes. again, the world for is by and mix. China driven in what is for margins, seeing guiding, contribution of accurate equipment. the 'XX terms less as rest over revenue now, think of you're ]

at Just year little -- in our ] is sense, revenue. XX% so a a XX of all over this going to you China [ get finish

on holding updated planned outlook it's really that is quarter, the rate, run saw will and dynamic. you and Last uplift and we on the track. But to the is well, XXXX, program deliver changed So we've in our that. that and continue

turn Before on why over don't I little to give maybe does color, I and for just how a look top this line XXXX. Cristina more sales you the

total. New Equipment low backlog ends And where the New fourth our So digits. up backlog is of Right in we'll in ] terms see is excluding orders. Equipment single X our now, New again, down [ China, quarter up Equipment,

growth have expect that we along China. we and see. Our everywhere expect we'll New single-digit but China, year this the -- of we to In we'd line, low would outside top for saw lines next wait year, Equipment

We haven't preprogrammed any stimulus.

field. what it People's capabilities the end prepared whether are the and the I in factory in week we're week all the mod, for New our the both waiting of our at see comes National happens have with Congress. And we next think stimulus, we to we the Equipment have or in capacity,

talk low if X the in line, that. Day, X.X had X.X% in X.X all backlog average will at service with growth. X for strong I units, and years On of digits, think every the or year-end, we lot, quarter minus Investor by could comes the be the kind has or Service What a mid-single to to really at where of we've globe So And quarters this XX,XXX our down growing everyone minute, Service shared of at the take we service understand as end in, a plus million top portfolio. And just about think it's the units portfolio growth straight important portfolio really, units. New at service million year. I is almost customer we're X adding our we largest to Equipment,

XX%, we service-driven XX with XX,XXX have that is that adding that it That repair at XX, such our modernization it all model. faith almost drives which drives customers, business again for for business. that we're density of maintenance which why service then So productivity, XX, the us also us high-margin additional And this drives years relationship drives retention rate us gives continuous business. our support and gives in

very the We've and and is next get are XX% will portfolio by pricing on me repair get the side heard year, repair be Will volume, solid at inflation, maintenance price with we next portfolio to will maintenance say inflation, every and said, where Expect this it but volumes. year. same price north at watching level? it, very next We're normalize, We that on points. 'XX. Repair into still of in as that strong year. said, Service be a year, like-for-like year. going I Cristina as It strong, look repair as solid getting we the but see the been tailwind but service growth. that going backlog driven growth. in So X to price we world you've increased depends we growth, it be will

So expect the right plus. what -- high but -- better, we because year do you expect That's we're we backlog single it ] we up looking now, to digit if not X%, is as quarter too, XX third normalize. mod [ next should growing. is And did at and backlog the exit mod,

is beyond So I some the just on wanted at the look look 'XX as this growing not China term, low because the near-term we're get high-teen portfolio and our rest growing itself. as in top line, we you portfolio which to 'XX the world doesn't plus, in in Equipment even the concerned medium China color digit. give me why New of And still single if portfolio out mid-teens we is and on

to don't So it. a work being years knock-on see because we out a time few effect that have we there

focused do on recaptures improving time are and we retention to rates. have We our

doing better and are Our China conversion much rates like. the in

Cristina profit. it turn over for other any you me Let comments on on to

and me let you And the Julian, very analysis. had on side, profit Judy. you, thank good a comment, No, Yes.

year, margin on up better of top So equipment. Service because margin as expansion. next in single decline digit line, But will new low side, less continue is or recapping slightly the we expect lower with Judy decline sequentially the that now

in XX we our Day was have February going that This margin year, basis You Service expansion. over of recall that grow driven. we in points Investor said annual to back

are service. around when basis expect 'XX XXX we points. We 'XX, XX you points and But margin of XXX, expansion in together put

mix. mentioned tailwinds other have benefited going this and year, commodities and the next the you Equipment, year gradually volumes price out. that as are side, effect I have fade rightly But before, New On we we to of said, the additionally, as

this going mean when next half stronger together, XXXX, basis year. it equipment, of a decline. profit to you rate is Service that we approximately XX So second everything mid-single would together but all digit of weaker and is year in would a the persist segment, new to grow put overall expected margin the have points XXX margin of But to mean operating

Wells of line the from comes question Joe O'Dea Fargo. with next Your

Can that pressure, kind market growth understand into office growth you that an but year, elaborate share little outlook gain you're other at and of a and Europe and you're and the as and consider I versus pressure factors we seeing on more versus for bit next seeing And growth the play. trying to think just price the volume? backlog and in multifamily Americas

shoots. repeat I'm the Dodge, early Listen, won't is lagging. And this I leading, again in We really green Americas, Joe. to and them forward we're the are some really Thanks, you. for indicators, know moving really first quarter think some Yes. the with seeing I know projects like all are pleased we ABI

think XX over to next you're going months. I to this out that see XX settle all the

seeing definitely segment are market in We improvement in Equipment QX. New the

pricing. knew in anywhere was You but the third in increased And the back quarter. the low it delivered. And we we'd It saw North second was America, quarter, did We We in in we our single digit, that. said come were needed in the It up anywhere our we actually, XX%. half. was we orders best world. best the

infrastructure if large after in equipment growth down But that really quarter look year, and the at job for If have quarter the we in in of stability. year-to-date, Americas you sequential Canada won you seeing new first 'XX, orders. market eliminate quarter, we're X.X% shown more we're we nice

from we of Some get again, and the sales teams. -- this our

full sales in in been our was equipment the hotter have talking is has the significantly, to new the single XX-month-plus down to sight Fed because of line sales even prior X% good it got rates. Americas, gotten though the As a customers, We've changed backlog after and came in low a for up quarter, strong digits for a year. the Americas our mid-single they're better perform than the really lot our the digit the sentiment backlog

quarter in about We mid-single portfolio America expect the for year-to-date. well. Service and single sales the were They in digit, into the continuing digit. Mod low we year-to-date, anticipate the are there fourth up we're the as both orders Americas, quarter the and great to third fourth that quarter. is XX%. digit up in be quarter, mid-single Repairs

We were for teens mod to the single up expect year-to-date, low and they're up and that high sales quarter continue digit.

itself buildings. well. itself point. inflection But market all quarter Middle better. And If than to commentary we this quarter, best is which industrial performing of -- -- North at seeing when a infrastructure is East quarter, Americas this the little we and different And the heard but performance I the which were is last go very at very believe the challenging, still well. we different what this doing verticals doing in is to we're the is verticals, has America, real So much our you market were look us stabilized. we're had verticals EMEA, when a we in is look it's up --

Europe Europe Spain little strong. well South us and is North And uncertainty Germany. backlog Central We're EMEA Europe despite did weaker. is market solid. Africa the seeing for our are environment in even pressure very a is this quarter very well. but in and France, doing in

up X%. is year-to-date Equipment New

team performing first half the The though even quarter is in very strong So well. EMEA. was down orders, by

roll XX-month the I Our and there. outperforming really believe is in orders we're market up EMEA X.X%,

rolling in up EMEA, out our year is over very is and well. GenXXX last backlog Our product

different inflection Americas. seeing quarter, think EMEA I we're environment. in So commentary And a we're outperforming this challenging little in in a the

really in commentary. that That's some of sort And mix helpful obviously, indicators. trends we see leading

wanted to that just some it that And to China about the you for there think of in hear build-out market we forward, ask next about to sizing the obviously, do for year? and as thinking potential get cost you we a it. appreciate as But you could did think about into market. about this then things costs relates or serve it moving those as and how on structure more today range I volumes So that while,

to continue to customer-centric this work ability looking China, about more everything program, uplift would we from listen, drive we is to coming second, But be do everywhere more our way for operational to with And actually this have at the One, common our market. growth. the the we're in we're reasons. footprint. hear changing China. in costs to have definitely processes will significant on based X You out But

equipment into our modernization have our new moved factories. We

the some So workforce. tough team incredible obviously credit looking facilities operating that our used to right pretty Sally to do for modernization times now. don't economic we're give I have do under anymore. And at that and

with in and get is price business going But that I and take to I abilities where the when rational you We're first guide down. we're customers' our our trying cash not driving what's pay. when think service with really a mod to including in everywhere -- globe, you ready going is volume answer, our As the for to and pricing will think balance take China in a of That's the to coming margins about a unit off. When tell field my China, nascent where new said we fill to New in I gainfully that employed. business in mod mod keep put to is We're about just in equipment think strong or volume a -- business unit business we I of factories grow to for Equipment, to of mod the the sake about what to smart that are happen taking us same continue believe our crossover position price can't highest. really what yet.

in that so units in up, And right? we have XXX,XXX picks equipment year as China. new And this the segment

be, to going As decade peg can't but picks XXX,XXX that units to have we in just we the sometime I today. actually serve world when the around this have market China as going a hit mod will than up, mod and to market larger segment. that's we're

of Your next from Stanley. with question Chris comes Snyder the Morgan line

China But of on just seen be And we've color coming year. or months? could I the interested for that you're here in watching means anything China that Judy, outcomes kind ultimately, perspective all the your next more actions far come stimulus in appreciate of so would weeks potential it construction. the in range I China just what

by encouraged what's implementation going to date be the announced is Thanks, to Yes. are the methods, Chris. we regulations. been Listen,

liquidity development. the believe we've the in us, all to local that relief, first and We environment were how revenue, the of to want grow debt because that. will our talked made And You we equipment service in are focused a potential how. this to announcements secretaries Despite business. on billion will continue new indication economic the you in to positive will China. know party use the China, $X.X business this. of we're grow The and this stabilize governments grow mod regulated of and we're it's now our We and watch

modernization next more get actually is early the with Our will liquidity for accelerate look more. to of know which population, National Friday, the think confidence going X,XXX But with going think we're X. with week is well most a in our white as with I first finished, People's members senior this accounts. allow of some customers It's projects us a going with readout to projects special in next we time aging the there's the key Chris, give the meeting Congress, the November our is stimulus more, to to

So happens we'll in what there. I see will the ground be China on in November.

to are important to be top under it's to to dedication I and for deliver think we've the be to customers continuing able think on thank customers our had and them to delivering. and you their for this line able about time, decline our When our the in and business. our they colleagues grow to yet focus talk our talk stressful service

happy color, for have our to Cristina we're see as We a this not guide in impacting going earnings. in and We to share be does, more. come if even anticipate do financials, quarter If we'll out. for I 'XX given fourth 'XX. But quarter think yet. all fourth you I'll more today with I all it because So not know that potential rules that you the

impact stimulus anticipated have positive the We any of not on China.

next X sound and level, quarter segment units anticipate service growth added million market, XX new any stimulus. at the is not XX when we equipment our China teens. modernization the available -- with there's Service. So this for Same we does ] the units mid [ in to market, that available for year for high

convert. we're XXX,XXX plenty units plenty So up now to can portfolio. X% got China, recapture, That's in We've in still we our service share. more to more

most the local the importantly, our are governments but rules understand we customers need and to do and we to need So that. implementation hopeful,

the I follow appreciate up If could I Americas. just on that.

QX customer that QX And [ that better of QX? ]. a half that maybe about the QX change, see customers we down demand -- really to is ], XX if signals rate of sharp talked You 'XX demand look from a XX order Or first into function starting in driver? obviously, customer orders then just better number very at you [ up is really comps? in Were improvement Americas,

you payment some especially know, had certainly or Chris, Americas, gets in that were -- comps. There but down in is canceled. want really get between clear no, we activity, everywhere we are it's and a sign world, back I about negotiable get an we if a a to and not the be when that. But we lot seeing proposal that we something the order project and

what waiting think go. more to So were segments, just I doing. But turned that and in to waiting lot their had the economy was we're have than our market said, in third have conviction close, but all And as -- hear Fed going we was office, commercial, see have that that customers what it's the the quarter, to waiting to is a project talking the to doing, I infrastructure the residential, for comps. industrial positive really

is next can comps positive team kind performance regardless quarter that expect you year. Our of and fourth into of performing, and

JPMorgan with Baumann Chase. Patrick from comes question final Our

talk you one you on anything that size of that parse wrong, drivers, in depressing give Can cash The growth? down Just X, China -- working growth drags and -- assume better out around called you billion I'm $X.X could this year. $X.X capital maybe next free about drag kind out that than that me expect had on digit first -- if cash or flip maybe you correct the and year one year else the embedded flow in should unusual operating flow. mid-single this profits. what next Does billion year be but free X payment to to better that you of terms should

there. dynamics on So just to I check the wanted

Cristina. this Pat, is

to are of So you cash mix. have to The our And yes, billion the means $X.X approximately the cash payments billion $XXX for down guidance we in Equipment income generated is New billion, Year-to-date, $X.X overall, is flow right. to there up have an and year-to-date of capital. year-to-date, situation China. reduction million we flow. that. One related order million $X.X adjusted $X.X $XXX reasons see net But when are the billion performance that and business That the you X built working

timing the On down declining, the later one job, we payments. and service of in side, collect repair. growing we because service because we equipment for don't collection are get and on China, especially other we the when is side, new execute But example, the the on

also ramp-up is to of because ramp-up the now start in some of we capital to working And that We'll payables of stabilize modernization because the execute mix to QX business in QX. We collecting we in top while payments unwound. $XXX have overall, projects, now impact of expect be but the going suppliers million, good the line QX. this

stabilize less expect million that cash to than question of pay approximately last up guide $XXX is is you more faster the cash QX. And growth. flow or should in flow, your profit we So the same into pick cash in mix, to business level expectation We yes, as the year are the delivered flow XXXX, we should a right. in that then QX operating at deliver

going $X.X to million billion do buybacks it, and $X.X to And if about Patrick, perspective, we're $X capital versus from you of roughly $XXX billion allocation of billion. this share a think dividend

million. because the ] that $XXX has almost spin down, time the probably first great to bringing the to have since cash significantly do We $X balance [ job since a ability from team done our billion

So be share to obviously able back share we our this of -- this are with working element to cash every shareholders. to

Makes sense.

earnings? be conversion XXX% so And year adjusted should back above of next

XXX%. guide in January. least We'll At

then That margins. And makes last on sense. just one service

XX for the could talk you relative points year next this guiding something just why to would X the ]X for basis you're to the less flow around If margin factors about than [ year. expansion

reverse, year on Just next that that any it better that over expected will to were period? guess, make this than factors X-year XX closer the I to color year the

of not top working mention. being, providing and are, can yes. come. are what in year on on this we the basis have of the for price, are course, productivity this the color to points time we XX just the terms we that, what going of the of And guiding if Day, actions some Investor to in overdrive. same will But we continue uplift we We And implemented is we At is and back we committed is now the trends. and end, target

business, for modernization margins expected are And Understood. continue part guide as year? that next those to of expanding

January. Yes, in you'll that Yes. see

now that you. for to the closing Thank over conclude Judy does like to session. And And and ladies question-and-answer remarks. I gentlemen, Marks today's would turn call

Thank you, Krista.

growth. to the growth macro the profitable portfolio service headwinds our order flywheel demonstrate solid our fuel repair of business final resiliency of validates a our service-driven the in that X in Our We and model. the further driving year modernization, and on results remain first months continues to shareholder maintenance focused and value strong mitigating overall in and deliver quarter beyond,

close for new opportunity wish joining. to safe contributions this As and like role. I Stay Thank and the to Mike take Otis his well, you in to call, everyone. many I'd his him thank for success

does gentlemen, call. Thank disconnect. Ladies your now conclude and conference that and today's you for may participation, you