Q3 2025 Otis Worldwide Corp Earnings Call

October 29, 2025

A replay presentation materials are available for download from Otis Otis is web site at Www Dot Otis Dot Com I'll now turn it over to Rob Queretaro, Vice President of Investor Relations. Please go ahead.

Thank you Sarah welcome to Otis third quarter 2025 earnings conference call on.

On the call with me today are Judy marks chair, CEO, and President and Kristina Mendes Executive Vice President and CFO.

Please note, except where otherwise noted the company will speak to results from continuing operations, excluding restructuring and significant nonrecurring items are.

A reconciliation of these measures can be found in the appendix of the webcast.

We also remind listeners that the presentation contains forward looking statements, which are subject to risks and uncertainties.

<unk> SEC filings, including our Form 10-K, and quarterly reports on Form 10-Q provide details on important factors that could cause actual results to differ materially now I'll turn it over to Judy.

Thank you Rob Good morning afternoon, and evening, everyone. Thank you for joining US we hope that everyone listening is safe and well starting with Q3 highlights on slide three.

<unk> delivered strong third quarter results and return to growth as we executed well on our service driven business model.

Organic sales in the quarter were up 2% driven by service, which grew 6%, notably modernization organic sales grew 14%.

Adjusted operating profit margin expanded by 20 basis points overall, driven by service margin expansion of 70 basis points.

This strong performance together with a lower share count drove a 9% increase in adjusted earnings per share in the quarter.

Our maintenance portfolio continued to grow 4% and we are on track to approach $2 5 million units in our service portfolio by year end.

Modernization order growth accelerated to 27% and backlog increased 22%.

New equipment orders grew 4% returning to growth for the first time since the fourth quarter of 2023.

Supported by moderating declines in China, and good momentum across the other regions.

Adjusted free cash flow increased sequentially as anticipated to $337 million, giving us good line of sight to deliver our adjusted free cash flow outlook of approximately 1.4 of $5 billion for the full year.

We opportunities Opportunistically completed approximately $250 million in share repurchases during the third quarter, bringing the year to date total to approximately $800 million fulfilling our full year outlook.

We continue to innovate both in our product and go to market approaches for.

For example, we recently launched Otis arise Mod packages in our EMEA region, which represents our largest modern modernization opportunity currently.

Otis arise Mod is a new suite of flexible phased modernization packages designed to help building owners upgrade their elevators in a way that creates less disruption for passengers and provides customers with options for a phased project and predictable budget.

Otis arise Mod reflects our commitment to customer centric innovation and positions us to capture long term modernization demand across the region.

Also during the quarter Otis was named time magazine's list of the world's best companies for 2025, and again recognized by Forbes as one of the world's best employers. These.

These recognitions reflect our commitment to our absolutes are strong culture global impact and commitment to excellence.

Turning to our orders performance on slide four combined.

New equipment and modernization orders grew 9% in the quarter with notable strength in Americas, EMEA and China.

Our combined backlog increased 3% and excluding China increased 11%.

Our total backlog, including maintenance and repair remains near historically high levels, which should support growth in the coming quarters.

New equipment orders increased 4% in the quarter and excluding China, we saw a robust 7% growth with EMEA up high teens, driven by southern Europe, and the Middle East while Americas grew mid single digits.

The strength was partially offset by a low single digit decline in Asia.

We have seen improvement in China year over year comparisons and we expect China, new equipment orders to be down mid single digits for the second half of the year.

At constant currency, our new equipment backlog declined 1% year over year, but excluding China. It grew 8%.

We had our highest modernization order since spin up 27% driven.

Driven by strong 20, plus percent orders growth in Americas, and China and high teens growth in EMEA.

Our quarter end backlog grew 22% positioning us well for the coming quarters.

We continue to believe we're in the early innings of a multiyear growth cycle in modernization driven by the aging of the 22 million unit installed base.

All regions contributed to our service portfolio growth of 4% in the quarter, we saw low teens growth in China.

Mid single digit growth in Asia Pacific and low single digit growth in Americas and EMEA.

Judy Marks: To be down mid-single digits for the second half of the year. At constant currency, our new equipment backlog declined 1% year over year, but excluding China, it grew 8%. We had our highest modernization order since spin up 27%, driven by strong 20+% orders growth in Americas and China and high teens growth in EMEA. Our quarter-end backlog grew 22%, positioning us well for the coming quarters. We continue to believe we're in the early innings of a multi-year growth cycle in modernization, driven by the aging of the 22 million unit installed base. All regions contributed to our service portfolio growth of 4% in the quarter. We saw low teens growth in China, mid-single-digit growth in Asia-Pacific, and low single-digit growth in Americas and EMEA.

Our global teams continue to execute well and this quarter, we secured a number of strategic customer wins that underscore our ability to deliver differentiated solutions deepened relationships and expand our footprint across key markets.

In the Americas, we secured a project at 100 Macallister in San Francisco, a landmark 1930 Gothic Revival in Art Deco building that serves the University of California Law School.

Our quarter end backlog grew 22% positioning us well for the coming quarters.

Otis will install five gen three elevators with compass destination, dispatching delivering advanced vertical transportation, while preserving the building's historic character.

We continue to believe we're in the early innings of a multiyear growth cycle in modernization driven by the aging of the 22 million unit installed base.

The project is being managed by plant construction, along standing noticed partner and highlights our commitment to quality innovation and heritage preservation.

All regions contributed to our service portfolio growth of 4% in the quarter, we saw low teens growth in China.

Mid single digit growth in Asia Pacific and low single digit growth in Americas and EMEA.

In China Otis was awarded the largest bond funded elevator renewal project in Shanghai with 106 units at the Sunshine waterfront residential community.

Judy Marks: Our global teams continue to execute well, and this quarter we secured a number of strategic customer wins that underscore our ability to deliver differentiated solutions, deepen relationships, and expand our footprint across key markets. In the Americas, we secured a project at 100 McAllister in San Francisco, a landmark 1930 Gothic Revival and Art Deco building that serves the University of California Law School. Otis will install five Gen3 elevators with Compass Infinity AI dispatching system, delivering advanced vertical transportation while preserving the building's historic character. The project is being managed by Plant Construction, a long-standing Otis partner, and highlights our commitment to quality, innovation, and heritage preservation. In China, Otis was awarded the largest bond-funded elevator renewal project in Shanghai, with 106 units at the Sunshine Waterfront Residential Community.

We're upgrading legacy Otis roped elevators to our Odessa rise mod packages preserving key components to optimize the bond budget and adding AI enabled safety cameras to prevent E bike entry.

In the Americas, we secured a project at 100 Macallister in San Francisco, a landmark 1930 Gothic Revival in Art Deco building that serves the University of California Law School.

Our customer has requested handover by year end with a fast paced schedule requiring 10 units replaced every 10 days.

Otis will install five gen three elevators with compass destination, dispatching delivering advanced vertical transportation, while preserving the building's historic character.

This project showcases our ability to deliver safe and efficient solutions under tight timelines.

In Dubai, we've secured a new project with sugar Realty to equip Showbizzy Haven.

The project is being managed by plant construction, along standing notice partner and highlights our commitment to quality innovation and heritage preservation.

Premium residential development in Dubai, Marina Otis will supply 29 units, including twenty-five sky rise elevators and for Gen. Two machine room was high speed systems as well as our EMS to point out elevator management system.

In China Otis was awarded the largest bond funded elevator renewal project in Shanghai with 106 units at the Sunshine waterfront residential community.

This project further reinforces our presence in the high end residential segment and marks an important step in building a strong relationship with sugar Realty.

Judy Marks: We're upgrading legacy Otis roped elevators to our Otis Arise mod packages, preserving key components to optimize the bond budget and adding AI-enabled safety cameras to prevent e-bike entry. Our customer has requested handover by year-end, with a fast-paced schedule requiring 10 units replaced every 10 days. This project showcases our ability to deliver safe and efficient solutions under tight timelines. In Dubai, we've secured a new project with Shoba Realty to equip Shoba Sea Haven, a premium residential development in Dubai Marina. Otis will supply 29 units, including 25 SkyRise elevators and four Gen2 machine roomless high-speed systems, as well as our EMS 2.0 elevator management system. This project further reinforces our presence in the high-end residential segment and marks an important step in building a strong relationship with Shoba Realty.

We're upgrading legacy Otis roped elevators to our Odessa rise mod packages preserving key components to optimize the bond budget and adding AI enabled safety cameras to prevent E bike entry.

In South Korea Otis was selected for the landmark Quay project. The first urban architectural design innovation project designated by the Seoul Metropolitan Government.

Our customer has requested handover by year end with a fast paced schedule requiring 10 units replaced every 10 days this.

We will provide a total of 54 units, including twenty-five sky rise elevators, and compass $3 60 destination management system to optimize passenger journeys.

This project showcases our ability to deliver safe and efficient solutions under tight timelines.

This project highlights our role in shaping next generation urban mobility, and we're proud to support this innovative development in Seoul.

In Dubai, we've secured a new project with sugar Realty to equip Showbizzy Haven.

Premium residential development in Dubai, Marina Otis will supply 29 units, including twenty-five sky Rice elevators and for Gen. Two machine room was high speed systems as well as our EMS to point out elevator management system.

Finally last week I had the privilege of joining our customers at the celebratory ribbon cutting of the new J P. Morgan Chase Global headquarters in New York at 270 Park Avenue.

Otis installed 89 units, including 72 high performance Sky rise elevators, and 12, escalators and introduced our compass Infinity, AI dispatching system, which continuously learns and optimizes passenger flow.

This project further reinforces our presence in the high end residential segment and marks an important step in building a strong relationship with sugar Realty.

Judy Marks: In South Korea, Otis was selected for the landmark K-Project, the first urban architectural design innovation project designated by the Seoul Metropolitan Government. We'll provide a total of 54 units, including 25 SkyRise elevators and Compass 360 destination management system to optimize passenger journeys. This project highlights our role in shaping next-generation urban mobility, and we're proud to support this innovative development in Seoul. Finally, last week, I had the privilege of joining our customers at the celebratory ribbon cutting of the new JPMorgan Chase global headquarters in New York at 270 Park Avenue. Otis installed 89 units, including 72 high-performance SkyRise elevators and 12 escalators, and introduced our Compass Infinity AI dispatching system, which continuously learns and optimizes passenger flow. We're proud to support JPMorgan Chase at this landmark site and beyond.

In South Korea Otis was selected for the landmark Quay project. The first urban architectural design innovation project designated by the Seoul Metropolitan Government.

We're proud to support J P. Morgan Chase at this landmark site and beyond.

We will provide a total of 54 units, including twenty-five sky rise elevators, and compass $3 60 destination management system to optimize passenger journeys.

Turning to our third quarter results on slide five.

Otis delivered net sales of $3 $7 billion with organic sales up 2%.

Adjusted operating profit margin, excluding 17 million dollar foreign exchange tailwind increased by $16 million driven by strength in the service segment.

This project highlights our role in shaping next generation urban mobility, and we're proud to support this innovative development in Seoul.

Finally last week I had the privilege of joining our customers at the celebratory ribbon cutting of the new J P. Morgan Chase Global headquarters in New York at 270 Park Avenue.

Adjusted operating margin expanded by 20 basis points to 17, 1%.

Adjusted EPS grew approximately 9% or nine cents in the quarter driven by strong operational performance favorable foreign exchange rates, a lower tax rate and a lower share count.

Adjusted free cash flow was $337 million in the quarter and $766 million year to date.

With that I'll turn it over to Kristina to walk through our results in more detail.

We're proud to support J P. Morgan Chase this landmark site and beyond.

Thank you Uli.

Judy Marks: Turning to our third quarter results on slide five, Otis delivered net sales of $3.7 billion, with organic sales up 2%. Adjusted operating profit margin, excluding a $17 million foreign exchange tailwind, increased by $16 million, driven by strength in the service segment. Adjusted operating margin expanded by 20 basis points to 17.1%. Adjusted EPS grew approximately 9% or $0.09 in the quarter, driven by strong operational performance, favorable foreign exchange rates, a lower tax rate, and a lower share count. Adjusted free cash flow was $337 million in the quarter and $766 million year to date. With that, I'll turn it over to Cristina to walk through our results in more detail.

Turning to our third quarter results on slide five.

Starting with service on slide six.

Service organic says grew 6% with growth in all lines of business.

Otis delivered net sales of $3 $7 billion with organic sales up 2%.

This acceleration represent the highest organic services growth this year in line with expectations and demonstrate the fundamentals of our shuttle bus flywheel.

Adjusted operating profit margin, excluding $17 million foreign exchange tailwind increased by $16 million driven by strength in the service segment.

Maintenance and repair organic sales grew 4% with maintenance driven by 4% portfolio growth and 3% positive price partially.

Adjusted operating margin expanded by 20 basis points to 17, 1%.

Adjusted EPS grew approximately 9% or nine cents in the quarter driven by strong operational performance favorable foreign exchange rates, a lower tax rate and a lower share count.

Partially offset by mix on churn.

Our repair business continued to accelerate to 7% growth year over year.

After a first half of the year marked by the transformation changes in our brand test I suspect that repair activity is improving in the second half.

Adjusted free cash flow was $337 million in the quarter and $766 million year to date.

With that I'll turn it over to Kristina to walk through our results in more detail.

And we expect repairs has to continue ramping up to 10, especially on growth or are off in the fourth quarter.

Cristina Mendez: Thank you, Judy. Starting with service on slide six, service organic sales grew 6% with growth in all lines of business. This acceleration represents the highest organic service sales growth this year in line with expectations and demonstrates the fundamentals of our service flywheel. Maintenance and repair organic sales grew 4%, with maintenance driven by 4% portfolio growth and 3% positive price, partially offset by mix and churn. Our repair business continued to accelerate to 7% growth year over year. After the first half of the year marked by the transformation changes in our branches, as expected, repair activities improved in the second half, and we expect repair sales to continue ramping up to 10% growth or above in the fourth quarter.

Thank you Uli.

Starting with service on slide six.

Modernisation says also saw significant acceleration in the quarter with organic sales growth of 14% on the back of our robust growing backlog at the end of the second quarter.

Service organic sales grew 6% with growth in all lines of business.

This acceleration represent the highest organic services growth this year in line with expectations and demonstrate the fundamentals of our shoulders flywheel.

Furthermore, the outlook for them on that and I say its young remains as strong and the 18 installed base should continue to support sustainable and modernization and growth in the coming years.

Maintenance and repair organic sales grew 4% with maintenance driven by 4% portfolio growth and 3% positive price.

Service operating profit of $621 million increased $49 million at constant currency.

CRE offset by mix on churn.

Our repair business continued to accelerate to 7% growth year over year.

With higher volume, okay, what about pricing and productivity more than offsetting higher labor costs and make sunshine.

After a first half of the year marked by the transformational changes in our brand test.

I suspect it.

Operating profit margins expanded 70 basis points to 25, 5% in the quarter.

Repair activities improving in the second half.

And we expect <unk> to continue ramping up to 10% growth or above in the fourth quarter.

The highest margin expansion out of the year.

And Mark and another record quarter in service my incentive scheme.

Cristina Mendez: Modernization sales also saw significant acceleration in the quarter, with organic sales growth of 14% on the back of our robust growing backlog at the end of the second quarter. Furthermore, the outlook for modernization remains strong, and the aging installed base should continue to support sustainable modernization growth in the coming years. Service operating profit of $621 million increased $49 million at constant currency, with higher volume, favorable pricing, and productivity more than offsetting higher labor costs and mix and churn. Operating profit margins expanded 70 basis points to 25.5% in the quarter, the highest margin expansion of the year, and marked another record quarter in service margins since the spin. Turning now to new equipment on slide seven, new equipment organic sales declined 5% in the quarter, as the strength in Asia-Pacific and EMEA were more than offset by declines in China and the Americas.

Modernization and says also saw significant acceleration in the quarter with organic sales growth of 14% on the back of our robust growing backlog at the end of the second quarter.

Turning now to new equipment on the slide seven.

New equipment organic says declined 5% in the quarter as.

Furthermore, the outlook for them on that nice ACO remains as strong and the aging installed base should continue to support sustainable and modernization and growth in the coming years.

The strength in Asia Pacific and EMEA were more than offset by declines in China and America.

EMEA sales grew 3% driven by robust growth in the middle East.

Service operating profit of $621 million increased $49 million at constant currency with higher volume.

While you were a wash relatively flat.

Asia Pacific grew high single digits, driven by strong growth in India, Japan, and southeast Asia, partially offset by weakness in Korea.

Pricing and productivity more than offsetting higher labor costs and make sunshine.

Americas declined 7%.

Operating profit margins expanded 70 basis points to 25, 5% in the quarter.

We continue to work through last year's backlog.

However, thanks to solid order for four months for five consecutive quarters.

Highest margin expansion out of the year.

<unk> has a growing backlog provides line of sight for the region to deliver positive me up women's has growth in the near future.

And Mark and another record quarter in service <unk>.

Turning now to new equity men's onto slide seven.

Excluding China, our neocon backlog grew 8%.

New equipment organic says declined 5% in the quarter.

And while China is still relatively weak.

Strength in Asia Pacific and EMEA were more than offset by declines in China on M&A cost.

This decline versus the prior year is expected to moderate in the second half.

Cristina Mendez: EMEA sales grew 3%, driven by robust growth in the Middle East, while Europe was relatively flat. Asia-Pacific grew high single digits, driven by strong growth in India, Japan, and Southeast Asia, partially offset by weakness in Korea. Americas declined 7%, as we continue to work through last year's backlog. However, thanks to solid orders performance for five consecutive quarters, Americas' growing backlog provides line of sight for the region to deliver positive new equipment sales growth in the near future. Excluding China, our new equipment backlog grew 8%. While China is still relatively weak, the sales decline versus the prior year is expected to moderate in the second half. China new equipment sales declined approximately 20% in the third quarter. New equipment operating profit of $59 million declined $24 million at constant currency, and operating profit margins declined 170 basis points to 4.7%.

China, New equipment sales declined approximately 20% in the third quarter.

EMEA sales grew 3% driven by robust growth in the middle East.

New equipment operating profit of $59 million declined $24 million at constant currency.

You were a wash relatively flat.

Asia Pacific grew high single digits, driven by strong growth in India, Japan and Southeast Asia.

Operating profit margins declined 170 basis points to four 7%.

Sally offset by weakness in Korea.

Americas declined 7% as we continued to walk through last year's backlog. However.

The operating profit decline was driven by lower volumes unfavorable price sorry.

However, thanks to solid orders for four months for five consecutive quarters Americas growing backlog provides line of sight or the region to deliver positive New York Women's sales growth in the near future.

You've had the wings I MX.

These were partially offset by productivity, including the benefits of restructuring actions.

The margin decline was more moderate than anticipated. Thanks.

Excluding China, our neocon backlog grew 8%.

Thanks to better than unexpected that says, especially in Americas.

And while China is still relatively weak.

And ongoing efforts to reduce costs.

As part of our China transformation.

Sales declined versus the prior year is expected to moderate in the second half.

You saw the progress we now anticipate 2025 in year savings of approximately $30 million.

China, New equipment has declined approximately 20% in the third quarter.

On the China transformation, and we have captured more than $20 million the athlete.

New equipment operating profit of $59 million declined $24 million at constant currency.

On an annualized run rate basis, we continue to target approximately $40 million per year.

Operating profit margins declined 170 basis points to four 7%.

I would I believe savings targets have not changed we continue to expect 2025 in year savings of $70 million and to reach annual run rate savings of 200 million or less by the end of the year.

Cristina Mendez: The operating profit decline was driven by lower volumes and favorable price, static headwinds, and mix. These were partially offset by productivity, including the benefits of restructuring actions. The margin decline was more moderate than anticipated, thanks to better than expected sales, especially in Americas, and ongoing efforts to reduce cost as part of our China transformation. Due to our progress, we now anticipate 2025 in year savings of approximately $30 million from the China transformation, as we have captured more than $20 million year to date. On an annual run rate basis, we continue to target approximately $40 million per year. Our average savings targets have not changed. We continue to expect 2025 in year savings of $70 million and to reach annual run rate savings of $200 million by the end of the year.

The operating profit decline was driven by lower volumes unfavorable price that you've had the wings I MX.

These were partially offset by productivity, including the benefits of restructuring actions.

Note, we have reviews I wouldn't expect the full year 'twenty, five restructuring and transformation costs to approximately $220 million.

The margin decline was more moderate than anticipated. Thanks.

Thanks to better than unexpected says, especially in Americas.

I will now turn it back to Julie to discuss our 2025 outlook.

And ongoing efforts to reduce costs.

Thanks, Christina starting on slide eight with the market outlook.

As part of our China transformation.

You saw the progress we now anticipate 2025 in year savings of approximately $30 million.

Before discussing our updated 2025 outlook I'd like to briefly discuss our global market expectations.

We've continued to see improvements in the Americas. Therefore, we are upgrading our outlook to up low single digits.

On the China transformation.

We have captured more than $20 million year to date.

On an annualized run rate basis, we continue to target approximately $40 million per year.

This upgrade is supported by continued growth in the U S and Canada, particularly within the infrastructure and residential verticals.

I would I believe savings targets have not changed we continue to expect 2025 <unk> savings of $70 million.

Notably we've also seen encouraging developments in the data Center data Center segment. This quarter a vertical we believe holds strong potential for sustained growth given increasing demand for digital infrastructure.

To reach annual run rate savings of $200 million by the end of the year.

Cristina Mendez: Note, we have reduced our expected full year 2025 restructuring and transformation cost to approximately $220 million. I will now turn it back to Judy to discuss our 2025 outlook.

Note, we have reviews, our expected full year, 'twenty, five restructuring and transformation costs to approximately $220 million.

Our outlook for EMEA, and Asia remains unchanged with EMEA growing low single digits and Asia declining high single digits.

I will now turn it back to Julie to discuss our 2025 outlook.

In EMEA, we continue to see greater than 20% growth in the middle East supported by strong project activity and urban development.

Judy Marks: Thanks, Cristina. Starting on slide eight with the market outlook. Before discussing our updated 2025 outlook, I'd like to briefly discuss our global market expectations. We've continued to see improvements in the Americas. Therefore, we are upgrading our outlook to up low single digits. This upgrade is supported by continued growth in the U.S. and Canada, particularly within the infrastructure and residential verticals. Notably, we've also seen encouraging developments in the data center segment this quarter, a vertical we believe holds strong potential for sustained growth given increasing demand for digital infrastructure. Our outlook for EMEA and Asia remains unchanged, with EMEA growing low single digits and Asia declining high single digits. In EMEA, we continue to see greater than 20% growth in the Middle East, supported by strong projects activity and urban development.

Thanks, Christina starting on slide eight with the market outlook.

Before discussing our updated 2025 outlook I'd like to briefly discuss our global market expectations. We've.

Central and southern Europe are on pace for mid single digit growth, partially offset by softer trends in western Europe, and the U K and Nordics.

We've continued to see improvements in the Americas. Therefore, we are upgrading our outlook to up low single digits.

Within Asia, our outlook for China is unchanged down low teens overall, we continue to expect a mid single digit decline globally.

This upgrade is supported by continued growth in the U S and Canada, particularly within the infrastructure and residential verticals.

But while new equipment industry orders are expected to decline. This year, we anticipate the industry installed base will continue to grow mid single digits with low single digit growth in Americas, and EMEA and mid single digit growth in Asia.

Notably we've also seen encouraging developments in the data Center data Center segment. This quarter vertical we believe holds strong potential for sustained growth given increasing demand for digital infrastructure.

This growth reflects the 830000 units that were installed two years ago that are now rolling off the warranty period.

Our outlook for EMEA, and Asia remains unchanged with EMEA growing low single digits and Asia declining high single digits.

Turning to our financial outlook, we continue to expect our service segment to drive full year revenue and profit growth.

In EMEA, we continue to see greater than 20% growth in the middle East supported by strong project activity and urban development.

We anticipate total net sales of $14 $5 billion to $14 6 billion with.

Judy Marks: Central and Southern Europe are on pace for mid-single digit growth, partially offset by softer trends in Western Europe and the U.K. and Nordics. Within Asia, our outlook for China is unchanged, down low teens. Overall, we continue to expect a mid-single digit decline globally. While new equipment industry orders are expected to decline this year, we anticipate the industry installed base will continue to grow mid-single digits, with low single digit growth in Americas and EMEA and mid-single digit growth in Asia. This growth reflects the 830,000 units that were installed two years ago that are now rolling off their warranty period. Turning to our financial outlook, we continue to expect our service segment to drive full year revenue and profit growth. We anticipate total net sales of $14.5 billion to $14.6 billion, with organic sales growth of approximately 1%.

Central and southern Europe are on pace for mid single digit growth, partially offset by softer trends in western Europe, and the U K and Nordics.

<unk> sales growth of approximately 1%.

The third quarter marked our return to organic sales growth driven by accelerating repair and modernization as well as moderating declines in new equipment organic sales.

Within Asia, our outlook for China is unchanged download teams overall, we continue to expect a mid single digit decline globally.

We expect these improving trends to continue in the fourth quarter.

These trends should also flow through to the bottom line.

Our adjusted operating profit outlook is $2 $4 billion to $2 5 billion up 75 million to $95 million at actual currency, including the impact of incremental tariffs imposed in 2025.

This growth reflects the 830000 units that were installed two years ago that are now rolling off the warranty period.

We've narrowed the range and increased the midpoint of our adjusted EPS outlook to $4.04 to $4 eight reps.

Turning to our financial outlook, we continue to expect our service segment to drive full year revenue and profit growth we.

We anticipate total net sales of $14 5 billion to $14 6 billion with organic sales growth of approximately 1%.

Representing an increase of 5% to 7% compared to 2024.

We anticipate adjusted free cash flow of approximately $145 billion for the year in line with the midpoint of the previous guide.

Judy Marks: The third quarter marked our return to organic sales growth, driven by accelerating repair and modernization, as well as moderating declines in new equipment organic sales. We expect these improving trends to continue in the fourth quarter. These trends should also flow through to the bottom line. Our adjusted operating profit outlook is $2.4 billion to $2.5 billion, up $75 million to $95 million at actual currency, including the impact of incremental tariffs imposed in 2025. We've narrowed the range and increased the midpoint of our adjusted EPS outlook to $4.04 to $4.08, representing an increase of 5% to 7% compared to 2024. We anticipate adjusted free cash flow of approximately $1.45 billion for the year, in line with the midpoint of the previous guide. As I previously mentioned, in the third quarter, we completed our full year target of approximately $800 million in share repurchases.

Third quarter marked our return to organic sales growth driven by accelerating repair and modernization as well as moderating declines in new equipment organic sales.

As I previously mentioned in the third quarter, we completed our full year target of approximately $800 million in share repurchases.

We expect these improving trends to continue in the fourth quarter.

Now pass it back to Christina to review the 2025 outlook in more detail.

These trends should also flow through to the bottom line.

Julie.

Our organic says outlook on slide nine we.

Our adjusted operating profit outlook is $2 $4 billion to $2 5 billion up $75 million to $95 million at actual currency, including the impact of incremental tariffs imposed in 2025.

We continue to expect organic sales growth of approximately 1% for the full year driven by a strength in our service business.

Partially offset by a decline in New York women as we walk through last year's backlog.

We've narrowed the range and increased the midpoint of our adjusted EPS outlook to $4 <unk>.

The new agreement, we have improved our americas' organic says outlook.

It's a $4 eight.

Mid single digits due to improving shipments in the second half of the year.

Getting an increase of 5% to 7% compared to 2024.

We have seen five consecutive quarters of orders growth in the region and we have a solid backlog and that in the fourth quarter.

We anticipate adjusted free cash flow of approximately $145 billion for the year in line with the midpoint of the previous guide.

Asia is there's still expected to decline low teens with high single digit growth in Asia Pacific more than offset by a greater than 20% decline in China.

As I previously mentioned in the third quarter, we completed our full year target of approximately $800 million in share repurchases.

Judy Marks: I'll now pass it back to Cristina to review the 2025 outlook in more detail.

I'll now pass it back to Christina to review the 2025 outlook in more detail.

As mentioned before the China, New equipment says yeah, it'll but he had a decline is moderating sequentially in the back half of the year.

Cristina Mendez: Thank you, Judy. Moving to our organic sales outlook on slide nine, we continue to expect organic sales growth of approximately 1% for the full year, driven by a strength in our service business, partially offset by a decline in new equipment as we work through last year's backlog. Within new equipment, we have improved our Americas organic sales outlook to down mid-single digits due to improving shipments in the second half of the year. We have seen five consecutive quarters of orders growth in the region, and we have a solid backlog entering the fourth quarter. Asia is still expected to decline low teens, with high single digit growth in Asia-Pacific more than offset by a greater than 20% decline in China. As mentioned before, the China new equipment sales year over year decline is moderating sequentially in the back half of the year, thanks to an easy comparison.

Thank you Julie.

Moving to our organic says outlook on slide nine.

Thanks to an easy comparison.

We continue to expect organic sales growth of approximately 1% for the full year driven by a strength in our service business.

And taken together, we expect Njoku meant organic says to decline approximately 7% for the full year.

Partially offset by a decline in New York women as we walk through last year's backlog.

Within service.

We have maintained our growth outlook across all segments.

The new agreement, we have improved our americas' organic says outlook.

Maintenance and repair is expected to grow mid single digits, we seemed range of our previous outlook.

<unk> mid single digits due to improving shipments in the second half of the year.

The change to mid single digit growth is mainly rounding given maintenance and repair has grown 4% year to date and.

We have seen five consecutive quarters of orders growth in the region and we have a solid backlog entering the fourth quarter.

And we expect approximately 5% growth in the fourth quarter.

Asia is still expected to decline low teens with high single digit growth in Asia Pacific more than offset by a greater than 20% decline in China.

Anticipated repair to continue ramping up with growth accelerating to 10% drop off in the fourth quarter.

We are pleased to see the repair backlog normalizing with solid execution execution time, driving customer satisfaction, and we are well resourced to execute as we have continued to ramp up sales mechanics similar last year.

As mentioned before the China, New equipment says yea over year decline is moderating sequentially in the back half of the year.

Thanks to an easy comparison.

Cristina Mendez: Taken together, we expect new equipment organic sales to decline approximately 7% for the full year. Within service, we have maintained our growth outlook across all segments. Maintenance and repair is expected to grow mid-single digits within range of our previous outlook. The change to mid-single digit growth is mainly rounding, given maintenance and repair has grown 4% year to date, and we expect approximately 5% growth in the fourth quarter. We anticipate repair to continue ramping up, with growth accelerating to 10% or above in the fourth quarter. We are pleased to see the repair backlog normalizing, with shorter execution time driving customer satisfaction, and we are well-resourced to execute as we have continued to ramp up field mechanics similar to last year.

And taken together, we expect <unk> organic sales to decline approximately 7% for the full year.

In modernization after a solid third quarter, we have good line of sight to deliver approximately 10% growth in 2025 on the back of our strong backlog.

Within service, we have maintained our growth outlook across all segments.

Maintenance and repair is expected to grow mid single digits, we seemed range of our previous outlook.

Turning to our financial outlook on slide 10.

The change to mid single digit growth is mainly rounding given maintenance and repair has grown 4% yesterday.

We now expect adjusted operating profit to grow $75 million to $95 million on an actual currency basis.

And we expect approximately 5% growth in the fourth quarter.

Including the impact of studies.

Anticipated repair to continue ramping up with growth accelerating to 10% sort of off in the fourth quarter.

On a constant currency basis, and excluding the impact of tariffs, we expect adjusted operating profit rose $65 million to $85 million.

We continue to anticipate a tariff impact of approximately $30 million for the full year.

Assuming current reciprocate on section 232 30 rates.

As a reminder, the tariff impact is primarily in our P 2025 backlog as we have suggested contract terms and pricing.

Cristina Mendez: In modernization, after a solid third quarter, we have good line of sight to deliver approximately 10% growth in 2025 on the back of our strong backlog. Turning to our financial outlook on slide 10, we now expect adjusted operating profits to grow $75 million to $95 million on an actual currency basis, including the impact of tariffs. On a constant currency basis and excluding the impact of tariffs, we expect adjusted operating profits to grow $65 million to $85 million. We continue to anticipate a tariff impact of approximately $30 million for the full year, assuming current reciprocal and Section 232 tariff rates. As a reminder, the tariff impact is primarily in our pre-2025 backlog, as we have adjusted contract terms and pricing. Adjusted operating margin is expected to expand by approximately 30 basis points in line with our previous expectations.

In modernization after a solid third quarter, we have good line of sight to deliver approximately 10% growth in 2025 on the back of our strong backlog.

Adjusted operating margin is expected to expand by approximately 30 basis points in line with our previous expectations.

Turning to our financial outlook on slide 10.

We now expect adjusted operating profit to grow $75 million to $95 million on an actual currency basis.

Cash flow has sequentially improved in the third quarter and we have good line of sight to de lever the guide of approximately $145 billion for the year as.

Including the impact of studies.

On a constant currency basis, and excluding the impact of tariffs, we expect adjusted operating profit rose $65 million to $85 million.

As we anticipate fourth quarter cash flow to be in line with last year.

Looking at the Big picture.

25 is on the pace to be another challenging year in new equipment, which satisfy climbing over $350 million at constant currency similar to 'twenty four.

We continue to anticipate a tariff impact of approximately $30 million for the full year.

Assuming current reciprocate on section 232, Saudi rates.

Despite the ongoing challenging me equipment price and volumes.

As a reminder, the tariff impact is primarily in our peak 2025 backlog as we have suggested contract terms and pricing.

We are effectively managing costs to mitigate that one of the incremental margins.

At the same time, we expect to deliver another year of solid adjusted operating profit growth. Thanks to the strength of our shadow flywheel.

Adjusted operating margin is expected to expand by approximately 30 basis points in line with our previous expectations.

With 5% top line growth driven by volumes on price and.

Cristina Mendez: Cash flow has sequentially improved in the third quarter, and we have good line of sight to deliver the guide of approximately $1.45 billion for the year, as we anticipate fourth quarter cash flow to be in line with last year. Looking at the big picture, 2025 is on the pace to be another challenging year in new equipment, with sales declining over $350 million at constant currency, similar to 2024. Despite the ongoing challenge in new equipment price and volumes, we are effectively managing costs to mitigate our decremental margins. At the same time, we expect to deliver another year of solid adjusted operating profits growth, thanks to the strength of our service flywheel, with 5% top line growth driven by volumes and price, and ongoing margin expansion driven by density, productivity, and our uplift program.

Cash flow has sequentially improved in the third quarter I would have good line of sight to deliver the guide of approximately $145 billion for the year.

And ongoing margin expansion, even by the NCD productivity and our uplift program.

Moving into 2025 EPS bridge on slide 11.

We anticipate fourth quarter cash flow to be in line with last year.

We have not reached the rains are raising the midpoint of our outlook.

Looking at the Big picture one.

With only two months to go we now have good visibility for full year results.

125 is on the pace to be another challenging year in new equipment with sales declining over $350 million at constant currency similar to 'twenty four.

We expect full year, adjusted EPS of $4.04 to $4.08.

This is driven by a strong operational performance in our service segment.

Despite the ongoing challenging me equipment price and volumes, we are effectively managing costs to mitigate that one of the incremental margins.

Fully offset by a decline in new equipment.

Favorable foreign exchange rates and a lower share count are expected to offset the headwinds from <unk> and higher interest income.

At the same time, we expect to deliver another year of solid adjusted operating profit growth. Thanks to the strength of our Saturdays flywheel.

Interest expense.

Taking together this represents adjusted EPS growth of five 7% for the year.

With 5% top line growth driven by volumes on price and on.

In mining expansion, even by the NCD productivity and our uplift program.

While it is too early to provide formal 2026 guidance. We remain confident we can continue to deliver solid earnings growth in the coming years through the strength of our shabby Street M business model.

Cristina Mendez: Moving to 2025 EPS bridge on slide 11, we are narrowing the range and raising the midpoint of our outlook. With only two months to go, we now have good visibility for full year results. We expect full year adjusted EPS of $4.04 to $4.08. This is driven by a strong operational performance in our service segment, partially offset by a decline in new equipment. Favorable foreign exchange rates and a lower share count are expected to offset headwinds from tariffs and higher interest expense. Taken together, this represents adjusted EPS growth of 5% to 7% for the year. While it is too early to provide formal 2026 guidance, we remain confident we can continue to deliver solid earnings growth in the coming years through the strength of our service-driven business model.

Moving into 2025 EPS bridge on slide 11.

We have not only in the range and raising the midpoint of our outlook.

The global installed base continues to expand supporting mid single digit growth in our service portfolio.

With only two months to go we now have good visibility for full year results.

We expect full year adjusted EPS of $4.04 before.

Which should continue to drive our maintenance and repair business.

We had also nearly eating's of a multiyear growth cycle in modernization and due to the aging of the installed base.

<unk>.

This is driven by our strong operational performance in our service segment.

Fully offset by a decline in New York women.

Combined with our productivity and cost savings initiatives, we have a strong foundation to continue delivering sustainable revenue and earnings growth.

Favorable foreign exchange rates and a lower share count are expected to offset the headwinds from <unk> and higher interest income.

With that I will kindly ask Sara to please open the line for questions. Thank you.

Interest expense.

Taking together this represents adjusted EPS growth of five 7% for the year.

Thank you if you would like to ask a question. Please press star one on your telephone keypad. If you would like to withdraw your question simply press Star One again please.

Please ensure that your phone is not on mute when called upon thank you.

Your first question comes from that.

Joe O'dea with Wells Fargo. Your line is open.

Cristina Mendez: The global installed base continues to expand, supporting mid-single digit growth in our service portfolio, which should continue to drive our maintenance and repair business. We are also in the early innings of a multi-year growth cycle in modernization due to the aging of the installed base. Combined with our productivity and cost savings initiatives, we have a strong foundation to continue delivering sustainable revenue and earnings growth. With that, I will kindly ask Sarah to please open the line for questions. Thank you.

The global installed base continues to expand supporting mid single digit growth in our service portfolio.

Hi, good morning, Thanks for taking my questions.

Can you talk a little bit about the efforts that under are underway on the maintenance side in terms of what youre doing on on retention and recapture and you know when we think about.

Which should continue to drive our maintenance and repair business.

We are also nearly eating's of a multiyear growth cycle in modernization and due to the aging of the installed base.

That growth.

Combined with our productivity and cost savings initiatives, we have a strong foundation to continue delivering sustainable revenue and earnings growth.

Might be pacing kind of in the 3% range.

On revenue kind of what your visibility is with respect to the timeline to see that stepping up as you achieve some of your targets around retention and recapture.

With that I will kindly ask Sara to please open the line for questions. Thank you.

Operator: Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Please ensure that your phone is not on mute when called upon. Thank you. Your first question comes from Joe O'Day with Wells Fargo. Your line is open.

Yeah. Thanks, Joe as we've shared all year, we were not pleased with where we ended 2024 and we made a conscious decision to invest invest in our service excellence invest to make sure that we could retain our customers more we'll share those outcomes at fourth quarter.

Thank you if you would like to ask a question. Please press star one on your telephone keypad. If you would like to withdraw your question simply press Star one again.

Please ensure that your phone is not on mute.

Thank you.

Your first question comes from.

Joe O'dea with Wells Fargo. Your line is open.

[Analyst]: Hi, good morning. Thanks for taking my questions. Can you talk a little bit about the efforts that are underway on the maintenance side in terms of what you're doing on retention and recapture? When we think about that growth that might be pacing kind of in the 3% range on revenue, what your visibility is with respect to the timeline to see that stepping up as you achieve some of your targets around retention and recapture?

<unk> statistically, but I will tell you it's going to be a long journey, we should see some sequential improvement, but returning to the 94% retention rate will take sustained time to rebuild customers trust as well as to gain them back.

Hi, good morning, Thanks for taking my questions.

Hum.

Can you talk a little bit about the efforts that under are underway on the maintenance side.

Terms of you know what youre doing on on retention and recapture and you know when we think about.

Having said that we continue to add about 100000 units this year and as I shared in my opening remarks, we're going to approach $2 5 million units in our portfolio that gives us the density not just for maintenance and for productivity and maintenance, but it gives us additional repair.

That growth.

Be pacing kind of in the 3% range.

Revenue kind of what your visibility is with respect to the timeline to see that stepping up as you achieve some of your targets around retention and recapture.

Judy Marks: Yeah, thanks, Joe. As we've shared all year, we were not pleased with where we ended 2024, and we made a conscious decision to invest, invest in our service excellence, invest to make sure that we could retain our customers more. We'll share those outcomes at fourth quarter statistically, but I will tell you, it's going to be a long journey. We should see some sequential improvement, but returning to the 94% retention rate will take sustained time to rebuild customers' trust as well as to gain them back. Having said that, we continue to add about 100,000 units this year, and as I shared in my opening remarks, we're going to approach 2.5 million units in our portfolio. That gives us the density not just for maintenance and for productivity in maintenance, but it gives us additional repair opportunities, and we'll talk more about that, I'm sure, this morning.

Opportunities and we'll talk more about that I'm sure. This morning.

So we have good line of sight, we understand our conversion rates, we'll share those as well we're pleased with where those are heading directionally and again, our focus is on on customer satisfaction and driving retention rates up recapture rates, we're pleased with as well, both Otis and non Otis equipment.

<unk> statistically, but I will tell you it's going to be a long journey are we should see some sequential improvement, but returning to the 94% retention rate will take sustained time to rebuild customers trust as well as to gain them back.

And we will continue to drive towards portfolio growth will share more at our Investor Day next spring, but we do believe that we should be growing at higher than our 4% portfolio. We're pleased we've done that now for over two years.

After being a traditional 1% growth, but theres more more to happen in the maintenance portfolio. So stay tuned.

I appreciate those details and then.

On Americas, and in new equipment, and what Youre seeing in a little bit better outlook. There just in terms of any more color on how the last few months have are.

Opportunities and we'll talk more about that I'm sure. This morning.

Judy Marks: We have a good line of sight. We understand our conversion rates. We'll share those as well. We're pleased with where those are heading directionally. Our focus is on customer satisfaction and driving retention rates up. Recapture rates we're pleased with as well, both Otis and non-Otis equipment, and we'll continue to drive towards portfolio growth. We'll share more at our investor day next spring, but we do believe that we should be growing at higher than a 4% portfolio. We're pleased we've done that now for over two years after being a traditional 1% growth, but there's more to happen in the maintenance portfolio, so stay tuned.

Kind of unfolded when you talk about infrastructure and Rajeev, if some of the verticals, where you're seeing a little bit better activity.

Are these things that were in the pipeline and you just didn't think they were going to happen in the back half of the year and any other color on what you attribute some of the demand kind of coming through here too.

We're much more positive on America's gross based on two factors one the demand we're seeing and that's even that's only with one interest rate change, but the demand we're seeing residential as I said infrastructure are driving most of these improvements.

After being a traditional 1% growth, but theres more more to happen in the maintenance portfolio. So stay tuned.

The improvements, but all geographies in the Americas showed growth. This quarter. So we were we were very pleased with that the second thing we're seeing Joe is on the new equipment execution side that gets us equally.

[Analyst]: I appreciate those details. On Americas and new equipment and what you're seeing and a little bit better outlook there, just in terms of any more color on how the last few months have unfolded when you talk about infrastructure and resi as some of the verticals where you're seeing a little bit better activity, were these things that were in the pipeline? You just didn't think they were going to happen in the back half of the year? Any other color on what you attribute some of the demand coming through here to?

I appreciate those details and then.

On Americas, and in new equipment, and what Youre seeing in a little bit better outlook. There just in terms of any more color on how the last few months have.

Excited about the future we had shared with you last quarter that we had started seeing some some challenges at job sites, where there had been slowed down by other trades as we came through the third quarter, we saw that basically being eliminated and back to a normal cycle of construction at new equipment sites.

Kind of unfolded when you talk about infrastructure in and <unk> some of the verticals, where youre seeing a little bit better activity.

So with the backlog growing in Newark.

Judy Marks: We're much more positive on Americas growth based on two factors. One, the demand we're seeing, and you know that's even that's only with one interest rate change, but the demand we're seeing. Residential, as I said, infrastructure are driving most of these improvements, but all geographies in the Americas showed growth this quarter. We were very pleased with that. The second thing we're seeing, Joe, is on the new equipment execution side that gets us equally excited about the future. We had shared with you last quarter that we had started seeing some challenges at job sites where there had been slowdown by other trades. As we came through this third quarter, we saw that basically being eliminated and back to a normal cycle of construction at new equipment sites.

Equipment in the Americas, and this was our fifth straight quarter of growth in especially in a in Americas about 4% that 4% is on top of 23% same quarter last year, So Joe and our team are just really driving Joe Armes shirt right driving this growth on growth.

Improvements, but all geographies in the Americas showed growth. This quarter. So we were we were very pleased with that the second thing we're seeing Joe is on the new equipment execution side that gets us equally.

And you know we have we have a great Gen. Three core product that's out there we're addressing so many different segments now and so we're really seeing that growth and then it's going to come through its five quarters now we say there's about an 18 month lag, especially in North America from the time, we take an order till we see that revenue.

Come through which is why we are a we're feeling good about Americas revenue in the next few quarters.

Thank you I appreciate it.

Judy Marks: With the backlog growing in new equipment in the Americas, and this was our fifth straight quarter of growth, especially in Americas, about 4%. That 4% is on top of 23% same quarter last year. Joe and our team are just really driving Joe Armis are driving this growth on growth. You know we have our great Gen3 core product that's out there. We're addressing so many different segments now. We're really seeing that growth, and then it's going to come through. It's five quarters now. We say there's about an 18-month lag, especially in North America, from the time we take an order till we see that revenue come through, which is why we're feeling good about Americas revenue in the next few quarters.

So with the backlog growing in Newark.

The next question comes from Nigel Coe with Wolfe Research Your line is open.

Equipment in the Americas, and this was our fifth straight quarter of growth in especially.

Thanks, Good morning.

In Americas about 4% that 4% is on top of 23% same quarter last year, So Joe and our team are just really driving Joe Armes shirt right driving this growth on growth.

So really nice momentum and and repair activity I think you said.

Judy 10% growth in nerve repair.

In the fourth quarter, just maybe just talk about.

Sort of the visibility on that.

And you know we have we have our great Gen. Three core product that's out there we're addressing so many different segments now and so we're really seeing that growth and then it's going to come through its five quarters now we say there's about an 18 month lag, especially in North America from the time, we take an order till we see that revenue come.

And really whats driving this sort of this this crunch towards growth in the back half of the year.

And just maybe the.

The implied maintenance growth would be probably sub 4% wouldn't be back of repair.

I know that mix is a negative headwinds.

The to the kind of a cool maintenance growth rates. So maybe just talk about why you're seeing the pressure points on mix and how that resolved so kind of improves as we go into 'twenty 'twenty six.

Through which is why we are a we're feeling good about America's revenue.

In the next few quarters.

Sure Nigel I will let me take the repair and I'll handle handover the maintenance to Christina if you look at our sequential repair improvement started out fairly anemic at 1% growth in the first quarter went to six in the second quarter, we were 7% this quarter and we have line of sight to it.

[Analyst]: Thank you. Appreciate it.

Thank you I appreciate it.

Operator: The next question comes from Nigel Coe with Wolfe Research. Your line is open.

The next question comes from Nigel Coe with Wolfe Research Your line is open.

[Analyst]: Thanks. Good morning. Really nice momentum in repair activity. I think you said, Judy, 10% growth in repair in the fourth quarter. Maybe just talk about the visibility on that and what's driving this crunch towards growth in the back half of the year. Maybe the implied maintenance growth would be probably sub 4% when we back up repair. I know that mix is a negative headwind to the core maintenance growth rate. Maybe just talk about where you're seeing the pressure points on mix and how that resolves or improves as we go into 2026.

Thanks, Good morning.

So really nice momentum and and repair activity I think you said.

Judy 10% growth in nerve repair.

<unk> 10 in the fourth quarter, which gives us the confidence for the outlook for maintenance and repair to be mid single digit.

In the fourth quarter, just maybe just talk about.

Sort of the visibility on that.

And then really whats driving this sort of crunch towards growth in the back half of the year and then just maybe.

Especially now through October we're seeing orders pick up as well so that gives us even more confidence in repair.

The implied maintenance growth would be probably sub 4%.

I was pleased to see us really with that with that revenue growth two straight quarters, six and seven and now 10, we are going to turn that backlog much quicker and Christina mentioned that helps with customer satisfaction no. One wants to wait in the queue to get an elevator and escalator repaired. So we have we have made sure we have our.

If I can repair.

That mix is a negative headwinds.

To the.

Kind of a cool maintenance growth rate. So maybe just talk about where you're seeing the pressure points on mix and how that resolved so kind of improves as we go into 2026.

Judy Marks: Sure, Nigel. Let me take the repair and I'll hand over the maintenance to Cristina. If you look at our sequential repair improvement, started out fairly anemic at 1% growth in the first quarter, went to 6% in the second quarter. We were 7% this quarter, and we have line of sight to at least 10% in the fourth quarter, which gives us the confidence for the outlook for maintenance and repair to be mid-single digit. Especially now through October, we're seeing orders pick up as well, that gives us even more confidence in repair. I was pleased to see us really with that revenue growth, two straight quarters, six and seven, and now 10. We are going to turn that backlog much quicker. Cristina mentioned that helps with customer satisfaction. No one wants to wait in the queue to get an elevator or an escalator repaired.

Mechanics available the parts available and we've put a concentrated effort to backlog conversion and that that rolls through the modernization backlog conversion as well, you'll recall that was 5% second quarter now.

For organic it's 14% this quarter and our backlog is still growing.

<unk> 10 in the fourth quarter, which gives us the confidence for the outlook for maintenance and repair to be mid single digit.

So we've got pretty good line of sight to the service revenues and what's going to happen on in the fourth quarter and especially in repair as you know the elevators are aging.

Especially now through October we're seeing orders pick up as well so that gives us even more confidence in repair.

We've got 8 million plus over 20 years old and when they don't become modernized they do tend to break more frequently because of usage and age and so we think we think the repair business is going to stay strong.

But I was pleased to see us really with that with that revenue growth two straight quarters, six and seven and now 10, we are going to turn that backlog much quicker and Christina mentioned that helps with customer satisfaction no. One wants to wait in the queue to get an elevator and escalator repaired. So we have we have made sure we have.

It'll it could moderate over time back to kind of more traditional you know mid to high single digit versus you know, 10%, but we think it's going to remain strong Kristina I'll turn maintenance do you yeah.

Judy Marks: We have made sure we have our mechanics available, the parts available, and we've put a concentrated effort to backlog conversion. That rolls through to modernization backlog conversion as well. You'll recall that was 5% second quarter. Now, again, for organic, it's 14% this quarter, and our backlog's still growing. We've got a pretty good line of sight to the service revenues and what's going to happen in the fourth quarter. Especially in repair, as you know, the elevators are aging. You know we've got 8 million plus over 20 years old, and when they don't become modernized, they do tend to break more frequently because of usage and age. We think the repair business is going to stay strong. I think it could moderate over time back to kind of more traditional mid to high single digit versus 10%, but we think it's going to remain strong.

Our mechanics available the parts available and we've put a concentrated effort to backlog conversion and that that rolls through the modernization backlog conversion as well, you'll recall that was 5% second quarter now.

And I said on maintenance.

When you say that the we like seeing maintenance on Hooper together, because depending on where you are in the world. The contract was set up is if it annualized places where everything is included therefore everything easy maintenance all those what are the maintenance fee is smaller and then we have a lot of repair activity. So it's better to see them together.

Again for organic it's 14% this quarter and our backlog is still growing so we've got pretty good line of sight to the service revenues and what's going to happen on in the fourth quarter and especially in repair as you know.

But talking about maintenance of specifically our performance. These ER has been very stable you have to date, we have grown maintenance, 3% and we expect this to continue going for what the Formula is as follows we have a growing portfolio of 4% because of a 3% price.

Elevators are aging.

That means that there is a headwind in make Sunshine and D C.

It'll it could moderate over time back to kind of more traditional you know mid to high single digit versus 10%, but we think it's going to remain strong Kristina I'll turn maintenance do you.

Exactly the area, we are focusing on at the moment Judy mentioned before all the axion around customer retention improvement investment in service excellence is going to be a midterm journey, but we are positive about they need shall we saw as we are getting from those investments.

Judy Marks: Cristina, I'll turn maintenance to you.

Cristina Mendez: Yeah, Nigel, on maintenance, we have always said that we like seeing maintenance and repair together because depending on where you are in the world, the contractual setup is different. You have places where everything is included, therefore everything is in maintenance, others where the maintenance fee is smaller, but then we have a lot of repair activity. It is better to see them together. Talking about maintenance specifically, our performance this year has been very stable. Year to date, we have grown maintenance 3%, and we expect this to continue going forward. The formula is as follows. We are growing portfolio 4%. We have a 3% price, and that means that there is a headwind in mix and churn. This is exactly the area we are focusing on at the moment. Judy mentioned before all the actions around customer retention improvement, investment in service excellence.

Yeah, and I got on maintenance.

I always say that we like seeing maintenance on Hooper together, because depending on where you are in the world. The contract was set up is if it Andrew have places where everything is include that therefore, everything easy maintenance all of those what are the maintenance fee is smaller but then we have a lot of productivity. So he's meant that to see them together.

The other headwind would be the geographic mix of the growth and we are also focusing on growing in high value markets and also focusing on emotional Fisher price out of what he has seen so with all of these components, we expect maintenance growth to improve going forward and again the best way to look into this is to bundle. The main thing that's happening there.

Talking about maintenance and specifically our performance. This year has been very stable year to date, we have grown maintenance, 3% and we expect this to continue going forward.

Okay.

I'll follow up offline on that.

Maybe.

The Formula is as follows we are growing portfolio of 4%.

A quick one on the on the <unk> nuclear margins.

A 3% price and that means that there is a headwind in make sunshine and this is exactly the area. We are focusing on at the moment Judy mentioned before all the <unk> around customer retention improvement investment in service excellence is going to be a midterm journey.

<unk> came in a bit better obviously, not great margins, but it came in a bit better than we expected just wondering if the furlough maybe wasn't quite as impactful as expected and then the question. We're getting is normally for key margins would be much lower in <unk> than <unk> that doesn't seem to be what you're signaling and so just maybe talk about that as well.

Cristina Mendez: This is going to be a mid-term journey, but we are positive about the initial results we are getting from those investments. The other headwind would be the geographic mix of the growth, and we are also focusing on growing in high-value markets and also focusing on a more sophisticated price algorithm. With all of these components, we expect maintenance growth to improve going forward. Again, the best way to look into this is to bundle maintenance and repair.

We are positive about they need sales results, we are getting from those investments.

Let me talk to <unk>. So we we had two things really help us on on margins are in three Q1, our team in China are really accelerated we entered this year as I step back we entered this year, knowing we needed to transform our China business and our team took that on.

The other headwind would be the geographic mix of the growth and we are also focusing on growing in high value markets and also focusing on emotional Fiesty gate at the price out of what do you see them. So with all of these components, we expect maintenance growth to improve going forward and again, the best way to look into these two bundled maintenance and repair.

We did our China transformation, and we're now going to achieve $30 million in savings. We've already achieved 20 million now were going to achieve 30 million that all gets reflected in that cost takeout line and new equipment. So by accelerating that that helped the other thing that helped was just more shipments.

[Analyst]: Okay. I think we'll follow up offline in a bit more detail. Maybe just a quick one on Q4 new equipment margins. Q3 came in a bit better, obviously not great margins, but came in a bit better than we expected. I'm just wondering if the furlough maybe wasn't quite as impactful as expected. The question we're getting is normally Q4 margins would be much lower in new equipment than Q3. That doesn't seem to be what you're signaling, so just maybe talk about that as well.

Okay, I think we'll follow up offline.

Maybe just a quick one on the on the <unk> nuclear margins.

<unk> came in a bit better obviously, not great margins, but came in a bit better than we expected I was just wondering if the furlough maybe wasn't quite as impactful as expected and then the question. We're getting is normally for key margins would be much lower in new equipment than <unk>.

Than we had originally predicted out of our North America factory in Florence. So those are the two reasons that drove the margin expansion yeah on on Q4, Nigel and so we expect our margins to be around 4% Q4 margins are seasonally lower than Q3.

That doesn't seem to be what you're signaling and so just maybe talk about that as well.

Judy Marks: Let me talk to Q3. We had two things really help us on margins in Q3. One, our team in China really accelerated. You know we entered this year, as I step back, we entered this year knowing we needed to transform our China business, and our team took that on. We did our China transformation, and we're now going to achieve $30 million in savings. We've already achieved $20 million now. We're going to achieve $30 million. That all gets reflected in that cost takeout line in new equipment. By accelerating that, that helped. The other thing that helped was just more shipments than we had originally predicted out of our North America factory in Florence. Those are the two reasons that drove the margin expansion.

Let me talk to <unk>. So we we had two things really help us on margins.

We also need to bear in mind that because of that new women segment getting smaller that is much more of a latter lithium mining having said that because of the positive trends, we see in that moderating decline any implement says.

<unk> Q1, our team in China really accelerated we entered this year as I step back we entered this year, knowing we needed to transform our China business and our team took that on we did our China transformation and we're now going to achieve $30 million in savings we've already achieved 20.

We accelerated that savings in China transformation, we are and we are positive on all new equipment margins being around 4% in the quarter. The full year would be approximately 130 basis points down versus previous year.

Now, we're going to achieve 30 million that all gets reflected in that cost takeout line and new equipment. So by accelerating that that helped the other thing that helped was just more shipments than we had originally predicted out of our North America factory in Florence. So those are the two reasons that drove the margin expansion.

Okay very helpful.

Yeah.

The next question comes from Jeff Sprague with vertical research your line is open.

Hey, Thank you good morning, everyone.

Cristina Mendez: Yeah, and on Q4, Nigel, we expect margins to be around 4%. Q4 margins are seasonally lower than Q3, but we also need to bear in mind that because of the new equipment segment getting smaller, there is much more volatility on margins. Having said that, because of the positive trends we see in the moderating decline in new equipment sales, together with the accelerated savings in China transformation, we are positive about new equipment margins being around 4% in the quarter. That full year would be approximately 130 basis points down versus previous year.

I know Q4, Nigel and so we expect margins to be around 4% Q4 <unk>.

Judy Kristina hope you're doing well can we just talk a little bit more about.

Price you noted price continues to be up on the service side.

<unk> are seasonally lower than Q3, but we also need to bear in mind that because of that new women segment getting smaller that is much more volatility on margins, having said that because of the positive trends, we see in that moderating decline any implement says whether we accelerated that savings in China transformation.

I would suspect there is still a meaningful geographic difference China versus rest of the world, but can you give us a little more color on what you're kind of booking on new business today.

Yeah in terms of service pricing like for like pricing increased three points in the quarter. Obviously inflation has has receded somewhat in most of the world.

We are we are positive about all the incremental margins being around 4% in the quarter that full year would be approximately 130 basis points down versus previous year.

But in in mature markets, where most of our service portfolio resides now Jeff.

Yeah, I mean, it was up low single digits. They had a tougher compare because of their ITC program in Spain. So they did have a tougher compare but theyre doing really well and Americas was up mid single digits and Asia Pacific up low single digits.

[Analyst]: Okay, very helpful.

Okay very helpful.

Operator: The next question comes from Jeffrey Sprague with Vertical Research. Your line is open.

The next question comes from Jeff Sprague with vertical research your line is open.

[Analyst]: Hey, thank you. Good morning, everyone. Judy, Cristina, I hope you're doing well. Can we just talk a little bit more about price? You noted price continues to be up on the service side. I would suspect there's still a meaningful geographic difference, China versus the rest of the world, but can you give us a little more color on what you're kind of booking on new business today?

Hey, Thank you good morning, everyone.

In China as you know the the margin drivers are less on price and more on density and everything else I'm mixing churn for service was flat.

Judy Kristina hope you're doing well can we just talk a little bit more about.

You noted price continues to be up on the service side.

I would suspect there is still a meaningful geographic difference China versus rest of the world, but can you give us a little more color on what you're kind of booking on new business today.

Now China service, our team continued to grow our service portfolio in the teens, yet again and our service units that was the 16th straight quarter of teens growth in our China portfolio. We believe we're going to end the year approaching 500000 units of those two and a half.

Judy Marks: Yeah, in terms of service pricing, like-for-like pricing increased 3 points in the quarter. Obviously, inflation has receded somewhat in most of the world. In mature markets, where most of our service portfolio resides now, Jeff, EMEA was up low single digits. They had a tougher compare because of their ITC program in Spain. They did have a tougher compare, but they're doing really well. Americas was up mid-single digits, and Asia-Pacific up low single digits. In China, as you know, the margin drivers are less on price and more on density and everything else. Mix and churn for service was flat. China service, our team continued to grow our service portfolio in the teens yet again, and our service units, that was the 16th straight quarter of teens growth in our China portfolio.

Yeah in terms of service pricing like for like pricing increased three points in the quarter. Obviously inflation has has receded somewhat in most of the world.

5 million units in China. So our service revenue there was up slightly and our China team I would tell you to put it all in perspective, Kristina said maintenance repair I would say add maintenance repair and modernization in China, Our China modernization was up substantively our orders were up.

But in in mature markets, where most of our service portfolio resides now Jeff.

EMEA was up low single digits, they had a tougher compare because of their ITC program in Spain. So they did have a tougher compare but they're doing really well and Americas was up mid single digits and Asia Pacific up low single digits.

150, plus percent in China for modernization when we look at those bonds stimulus orders. We were we were ready earlier. This year, we're going to convert a lot of those to sales we have a tough compare in fourth quarter from last year on those so I wouldn't expect that similar number but the China team has just really brought her.

In China as you know the the margin drivers are less on price and more on density and everything else I'm mixing churn for service was flat now China service. Our team continued to grow our service portfolio in the teens yet again.

Home this modest stimulus to where we do believe we are leading the order value in China amongst all of our peers for the Mod residential bond program.

And our service units that was the 16th straight quarter of teens growth in our China portfolio. We believe we're going to end the year approaching 500000 units of those two and a half million units in China. So our service revenue there was up slightly and our China team I would tell you to put it.

Judy Marks: We believe we're going to end the year approaching 500,000 units of those 2.5 million units in China. Our service revenue there was up slightly. Our China team, I would tell you to put it all in perspective, Cristina said maintenance and repair. I would say add maintenance, repair, and modernization in China. Our China modernization was up substantively. Our orders were up 150+% in China for modernization. When we look at those bond stimulus orders, we were ready earlier this year. We're going to convert a lot of those to sales. We have a tough compare in fourth quarter from last year on those, so I wouldn't expect that similar number. The China team has just really brought home this mod stimulus to where we do believe we are leading the order value in China amongst all of our peers for the mod residential bond program.

Interesting and then on the new equipment side.

Can you kind of do a similar kind of geographic rundown for us on price and I think.

I think Kristina said only pre 2025 backlogs.

All in perspective, Kristina said maintenance repair I would say add maintenance repair and modernization in China, Our China modernization was up substantively. Our orders were up 150 plus percent in China for modernization when we look at those bonds stimulus orders we were.

<unk> not been repriced I wouldn't imagine theres, a whole lot of pre 2025 backlog left but maybe I misunderstood the comment there.

Theres still some pre 2025 backlog left in the U S. So I think when Youre looking at you know will there be some roll some tariff impact in 2026 based on what we know today, a reciprocal and 232 tariffs there will be some.

We were ready earlier this year, we're going to convert a lot of those to sales we have a tough compare in fourth quarter from last year on those so I wouldn't expect that similar number but the China team has just really brought home the smudge stimulus to where we do believe we are leading the order value in China amongst all of our.

It should not be as much as we had this year, but there will be some when we think about new equipment pricing, it's up low single digit outside of China, and obviously, China. The pricing was down roughly 10% in the third quarter and what we have done to really drive back to close to price.

Peers for the Mod residential bond program.

[Analyst]: Interesting. On the new equipment side, can you kind of do a similar kind of geographic rundown for us on price? I think Cristina said only pre-2025 backlog has not been repriced. I wouldn't imagine there's a whole lot of pre-2025 backlog left, but maybe I misunderstood the comment there.

Interesting and then on the new equipment side.

Can you kind of do a similar kind of geographic rundown for us on price and I think.

Cost neutral is use cost out productivity tailwind on commodities and our China transformation program. So all of those have contributed I would tell you strategically we were prepared for this and in the new equipment market in China, Jeff, We're seeing sequential improvement the second half.

I think Kristina said only pre 2025 backlogs.

<unk> not been repriced I wouldn't imagine theres, a whole lot of pre 2025 backlog left but maybe I misunderstood the comment there.

Judy Marks: Yeah, there's still some pre-2025 backlog left in the U.S. I think when you're looking at, you know, will there be some tariff impact in 2026 based on what we know today of reciprocal and 232 tariffs, there will be some. It should not be as much as we had this year, but there will be some. When we think about new equipment pricing, it's up low single digit outside of China. Obviously, China, the pricing was down roughly 10% in the third quarter. What we have done to really drive back to close to price cost neutral is use cost out, productivity, tailwinds on commodities, and our China transformation program. All of those have contributed. I would tell you, strategically, we were prepared for this. In the new equipment market in China, Jeff, we are seeing sequential improvement.

Theres still some pre 2025 backlog left in the U S. So I think when you're looking at you know will there be some roll some tariff impact in 2026 based on what we know today, a reciprocal and $2 32 tariffs there will be some.

We think is going to be down 10% versus down 15% for the first half and our team outperformed that our third quarter or new equipment orders and as you look at the second half, we really expect to be down mid single digits versus second half last year, that's to me that the realtor.

Turn in for Us on stabilization.

Great. Thank you for that.

The next question comes from Steve Tusa with Jpmorgan. Your line is open.

Hey, good morning.

Steve.

Can you I guess you talked about retention is it still getting better sequentially and do you still have a target for year end to be for.

Our retention to be at least up year over year.

Getting better.

Judy Marks: The second half we think is going to be down 10% versus down 15% for the first half. Our team outperformed that. Our third quarter new equipment orders, and as you look at the second half, we really expect to be down mid-single digit versus second half last year. That's to me the real turn-in for us on stabilization.

I think it's very slightly improved when we lose a customer they do a multi year service contract with someone else. So that's why it's so impactful and why we are laser focused on it to make sure that we're completing having the right quality of service completing everything on time.

Being responsive to our customers, but I wouldn't anticipate a step function improvement Steve when we report this after fourth quarter you.

And for us on stabilization.

[Analyst]: Great, thank you for that.

Great. Thank you for that.

Operator: The next question comes from Steve Tusso with JPMorgan Chase. Your line is open.

The next question comes from Steve Tusa with Jpmorgan. Your line is open.

You know we've made the investment now, but it's going to be day to day customer to customer, making sure that anyone who's going to renew we're focused on them and we're making the right investments now to keep them.

[Analyst]: Hey, good morning.

Hey, good morning.

Yeah.

Judy Marks: Steve.

Steve.

Can you I guess you talked about retention is it still getting better sequentially and do you still have a target for year end to be for.

[Analyst]: I guess you know, you talked about retention. Is it still getting better sequentially, and do you still have a target for year-end to be, you know, for retention to be at least up year over year, getting better?

Got it and then just on this services growth for the fourth quarter. It does look like if if repairs going to accelerate.

Our retention to be at least up year over year.

I don't know its like the comp is like on mods, but if you're kind.

Getting better.

Judy Marks: I think it's very slightly improved. You know, when we lose a customer, they do a multi-year service contract with someone else. That's why it's so impactful and why we're laser-focused on it to make sure that we're having the right quality of service, completing everything on time, being responsive to our customers. I wouldn't anticipate a step function improvement, Steve, when we report this after fourth quarter. We've made the investment now, but it's going to be day-to-day, customer to customer, making sure that anyone who's going to renew, we're focused on them, and we're making the right investments now to keep them.

Kind of stable on on the maintenance side that you should see an acceleration in revenue growth in the fourth quarter at services right from six to maybe.

I think it's very slightly improved when we lose a customer they do a multi year service contract with someone else.

So that's why it's so impactful and why we are laser focused on it to make sure that we're completing having the right quality of service completing everything on time being responsive to our customers, but I wouldn't anticipate a step function improvement Steve when we report this after fourth quarter.

Close to seven.

Yeah, it's okay for the fourth quarter, we expect services to be around 6% and you rightly said that he is going to continue accelerating we expect repairs to be 10% or above which by the way is the growth we've had less yet in Q4. So these demonstrates that should be pretty is back on track and kind of normalize on the <unk>.

We've made the investment now, but it's going to be day to day customer to customer, making sure that anyone who is going to renew we're focused on them and we're making the right investments now to keep them.

Other site a lot is going to be 10% versus 14% in Q3. The reason for that is the calendar ization of that bond execution in China last year bond Rojek south out of the subsidized projects, we're very concentrated in Q4 in China between Q4 and more than 100%.

[Analyst]: Got it. Just on this services growth for the fourth quarter, it does look like if repair is going to accelerate, I don't know if the comp is on mods, but if you're kind of stable on the maintenance side, you should see an acceleration in revenue growth in the fourth quarter at services, right, from 6% to maybe, you know, close to 7%?

Got it and then just on this services growth for the fourth quarter.

Does it look like if if repairs going to accelerate.

I don't know its like the comp is like on mods, but if you're.

Revenues there. These yard is more level loaded between Q3 and Q4. So he is going to be 6% for the quarter.

Kind of stable on on the maintenance side that you should see an acceleration in revenue growth in the fourth quarter at services right from six to maybe.

Got it and then just one last nitpick, but if I do you said new equipment was going to be down 150 basis points. I guess was that was that.

Close to seven.

Cristina Mendez: Yeah, Steve, for the fourth quarter, we expect services to be around 6%. You rightly said, repair is going to continue accelerating. We expect repair to be 10% or above, which, by the way, is the growth we had last year in Q4. This demonstrates that repair is back on track and kind of normalized. On the other side, modernization is going to be 10% versus 14% in Q3. The reason for that is the calendarization of the bond execution in China. Last year, bond projects that are the subsidized projects were very concentrated in Q4. China grew in Q4 more than 100% revenues there. This year is more level-loaded between Q3 and Q4. It's going to be 6% for the quarter.

Yeah, it's before the fourth quarter, we expect services to be around 6% and you rightly said that he is going to continue accelerating and we expect that to be 10% or above which by the way is the growth we had less yet in Q4. So these demonstrates that we've heard is back on track and kind of normalize on the other side.

Was that a fourth quarter comment or an annual comment no.

Oh I meant what I said he's on the equipment, Marty and he is going to be 130 basis points down versus prior year for Liberty 30, or 50, 131 30, okay. Great. Okay. All right that makes more sense. Okay got it okay, just making sure I had the numbers right. Thank you so much.

A lot is going to be 10% versus 14% in Q3. The reason for that is the calendar ization of that bond execution in China last year bond projects outside of the subsidized projects. We're very concentrated in Q4 in China in Q4 more than 100% revenues.

Yeah.

The next question comes from Amit Mehrotra with UBS. Your line is open.

Thanks, Operator, hi, everybody I just wanted to ask about service margins and maybe structurally as we think beyond the fourth quarter. Obviously it was nice to see the expansion in the third quarter were up 40 bps year to date.

They're these yet is more level loaded between Q3 and Q4. So he is going to be 6% for the quarter.

It's kind of about that 50 basis point expansion algorithm youll structurally right I'm just thinking about obviously the.

[Analyst]: Got it. Just one last nitpick, but if I do, you said new equipment was going to be down 150 basis points. I guess was that a fourth quarter comment or an annual comment?

Got it and then just one last nitpick, but if I do you said new equipment was going to be down 150 basis points. I guess was that was that.

The net impact of <unk>.

<unk> of higher Mod mix in revenue that seems to be accelerating in 2006, given the order growth.

Was that a fourth quarter comment or an annual comment.

Cristina Mendez: No, an annual comment. What I said is that new equipment margin is going to be 130 basis points down versus prior year, full year.

And then what I said he is on the equipment Marty and he is going to be 130 basis points down versus prior year at 430, 30, or 50 131 30, okay. Great. Okay. All right that makes more sense. Okay got it okay, just making sure I had the numbers right. Thank you so much.

You're obviously, making a lot of investments to that maybe services.

[Analyst]: 30 or 50?

But the density if I'm thinking about that correctly to drive retention higher overtime. So I assume that's a little bit of a headwind I'm just trying to understand as we look beyond 'twenty.

Cristina Mendez: 130.

Judy Marks: 130.

[Analyst]: Okay, great. That makes more sense. Got it. Just making sure I had the numbers right. Thank you so much.

Cristina Mendez: You bet.

You bet.

25 like are those net headwinds to margin expansion.

Operator: The next question comes from Amit Mehrotra with UBS. Your line is open.

The next question comes from Amit Mehrotra with UBS. Your line is open.

Expansion algorithm in service.

Yeah. So we are very pleased with our margin expansion in service in Q3 was 70 basis points 25, 5% in the highest my engraving surveys will have high teens as being the reason for this strength is essentially very good performance in volumes balls report I don't know that my Samsung ramping up.

[Analyst]: Thanks, operator. Hi, everybody. I just wanted to ask about service margins and maybe structurally as we think beyond the fourth quarter. Obviously, it was nice to see the expansion of the third quarter. We're up 40 bps year to date. Is kind of that 50 basis point expansion algorithm still structurally right? I'm just thinking about, obviously, the net impact of higher mod mix and revenue that seems to be accelerating in 2026, given the order growth. You're obviously making a lot of investments that maybe serve as a debit to density, if I'm thinking about that correctly, to drive retention higher over time. I assume that's a little bit of a headwind. I'm just trying to understand as we look beyond, you know, 2025. Are those net headwinds to that margin expansion algorithm in service?

It is kind of that that 50 basis point expansion algorithm youll structurally right I'm just thinking about obviously.

Volumes rise productivity drives absorption also more trumping up in principle is a headwind in my view right. Although we also see more margin rates improving sequentially and we have good line of sight to reach 10%, Marty and ready for a month in the midterm and we see this is.

The net impact of <unk>.

Higher mod mix in revenue that seems to be accelerating in 2006, given the order growth.

You're obviously, making a lot of investments to that maybe serve as a debit to density if I'm thinking about that correctly to drive retention higher overtime. So I assume that's a little bit of a headwind I'm just trying to understand as we look beyond 'twenty.

Sequentially happening quarter after quarter and last but not least on repair. We also have the flow through of a better price. So we see that right off the bat improving because of the price increase we executed in Q2, so with all of these we expect full year margin for service around 25%.

25 like are those net headwinds to margin.

The margin expansion algorithm in service.

Cristina Mendez: Yeah, so we are very pleased with the margin expansion in service in Q3. It was 70 basis points, 25.5% margin, the highest margin rate in service we have had since the spin. The reason for this strength is essentially very good performance in volumes, both repair and modernization ramping up. Volumes drive productivity, drive absorption. Also, mod ramping up in principle is a headwind in margin rate, but we also see mod margin rates improving sequentially. We have a good line of sight to reach 10% margin rate for mod in the midterm, and we see this is sequentially happening quarter after quarter. Last but not least, on repair, we also have the flow-through of a better price. We see the rate of repair improving because of the price increase we executed in Q2.

Yeah. So we are very pleased with our margin expansion in service in Q3 was 70 basis points 25, 5% in the highest margin grading service will have high teens as being the reason for this strength is essentially very good performance in volumes balls repair and modernization of ramping up.

Which is going to be 40 basis points up I'm going for where we are going to be laser focused on growing service contribution in dollar basis, and we have very favorable takeaways for that so one is the volume growth price and we'll have productivity from a rate perspective.

Volumes drives productivity drives absorption also more trumping up in principle is a headwind in my view right. Although we also see more margin rates improving sequentially and we have good line of sight to reach 10% margin rate at four months in the midterm.

What would be a slightly and win and we are also going to calibrate the investments in order to continue growing top line, but the focus is going to be service contribution growth in dollar basis, Yeah, Amit. It's Judy I would also tell you every quarter since spin so 22 quarters to start 2003rd we have increased services.

And we see this is sequentially happening caught quarter after quarter and last but not least on repair. We also have the flow through of a better price. So we see that right off the bat improving because of the price increase we executed in Q2, so with all of these we expect full year margin for service around 12.

Adjusted operating profit dollars and as Kristina said, it's going to be those dollars versus sustained margin rates at the levels. We've shown now going on six years. Those dollars will contribute in terms of profit dollars and they'll contribute in terms of cash as we grow the portfolio.

Cristina Mendez: With all of this, we expect full year margin for service around 25%, which is going to be 40 basis points up. Going forward, we are going to be laser-focused on growing service contribution in dollar basis. We have very favorable tailwinds for that. One is the volume growth. We have price, and we have productivity. From a rate perspective, mod will be slightly a headwind, and we are also going to calibrate investments in order to continue growing top line. The focus is going to be service contribution growth in dollar basis.

<unk>, 5%, which is going to be 40 basis points up I'm going for where we are going to be laser focused on growing service contribution in dollar basis.

Got it Okay. That's helpful. Thank you and just a quick follow up on on China.

And we have very favorable tailwind for that so one is the volume growth with off price and we'll have productivity from a rate perspective mod will be a slightly a headwind and we are also going to calibrate the investments in order to continue growing top line, but the focus is going to be service contribution growth in dollar basis yeah.

You mentioned pricing was still weak in China, but you know some of the data that we look at kind of.

Assumes that shows that it's finding a floor I don't want to get too cute with the data, but when you look at the month to month trends. It feels like it's finding a floor is that is that appropriate or accurate. If you can just comment on what's happening on the pricing side in China in real time.

Judy Marks: Yeah, Amit, it's Judy. I would also tell you every quarter since spin, so 22 quarters to start 23rd, we have increased services adjusted operating profit dollars. As Cristina said, it's going to be those dollars versus sustained margin rates at the levels we've shown now going on six years. Those dollars will contribute in terms of profit dollars, and they'll contribute in terms of cash as we grow the portfolio.

It's Judy I would also tell you every quarter since spin so 22 quarters to start 2003rd we have increased services adjusted operating profit dollars and as Kristina said, it's going to be those dollars versus sustained margin rates at the levels. We've shown now going on six years.

Yes real time, we are seeing stabilization in the second half and it's it's what we predicted in January that we thought the first half would still see a fairly significant decline, but we're seeing that sequential improvement in China in the new equipment market and so we are leader.

Those dollars will contribute in terms of profit dollars and they'll contribute in terms of cash as we grow the portfolio.

<unk> in the infrastructure segment, we're leading in the high rise segment in China.

[Analyst]: Got it. Okay, that's helpful. Thank you. Just a quick follow-up on China. You mentioned pricing was still weak in China, but some of the data that we look at kind of assumes or shows that it's finding a floor. I don't want to get too cute with the data, but when you look at the month-to-month trends, it feels like it's finding a floor. Is that appropriate or accurate? If you can just comment on what's happening on the pricing side in China in real time.

Got it Okay. That's helpful. Thank you and just a quick follow up on China.

And we are we are making sure that the units that we bring into our portfolio are actually that we win in new equipment will be a higher conversion probability for us into the service portfolio as we look at our China business as a whole China, just like last quarter represents 12% of our global revenue.

You mentioned pricing was still weak in China, but some of the data that we look at kind of.

<unk> and its now similarly, 21% of our new equipment revenue for the quarter. Our service business now in China is 40% of our business in China and so this 40 would equate to a few quite a few years ago, 15%. So we have had this focus on conversions on new equip.

Judy Marks: Yeah, real time, we are seeing stabilization in the second half, and it's what we predicted in January, that we thought the first half would still see a fairly significant decline. We are seeing that sequential improvement in China in the new equipment market. You know we are leading in the infrastructure segment. We're leading in the high-rise segment in China. We are making sure that the units that we bring into our portfolio, or actually that we win in new equipment, will be a higher conversion probability for us into the service portfolio. As we look at our China business as a whole, China, just like last quarter, represents 12% of our global revenue, and it's now similarly 21% of our new equipment revenue for the quarter. Our service business now in China is 40% of our business in China.

<unk> driving our service flywheel and China has done a great job to now make US a 60 40 business new equipment to service.

<unk> in the infrastructure.

In terms of revenue and that service business in China is going to continue to grow between portfolio growth, which will drive maintenance and repair and modernization growth, which in China. They tend to modernize with a 15 year point.

Segment, we're leading in the high rise segment in China.

We have all indications that this bond modernization stimulus will continue into 2026.

And as part of the 15th five year plan them.

Some of our interpretation of what's happening there is there's a focus on quality and digital versus involution that we believe that the mod bond will continue potentially after 2026 as well it may look a little different in terms of how much stimulus the government contributes versus the consumer but.

And it's now similarly, 21% of our new equipment revenue for the quarter. Our service business now in China is 40% of our business in China and so this 40 would equate to a few quite a few years ago, 15%. So we have had this focus on conversions on new equipment.

Judy Marks: This 40 would equate to, quite a few years ago, 15%. We have had this focus on conversions, on new equipment driving our service flywheel, and China has done a great job to now make us a 60/40 business, new equipment to service, in terms of revenue. That service business in China is going to continue to grow between portfolio growth, which will drive maintenance and repair, and modernization growth, which in China, they tend to modernize at the 15-year point. We have all indications that this bond modernization stimulus will continue into 2026. As part of the 15th five-year plenum, some of our interpretation of what's happening there is there's a focus on quality and digital versus involution that we believe that the mod bond will continue potentially after 2026 as well.

But we are making sure that we are optimized in bond and in regular modernization in China.

Driving our service flywheel and China has done a great job to now make US a 60 40 business new equipment to service in.

Right. Okay. Thank you very much appreciate it.

The next question comes from Chris Snyder with Morgan Stanley. Your line is open.

Thank you Judy.

Judy you mentioned, it's going to take time to get their retention rate back to where it was and I think you specifically said you have to rebuild some customer trust.

Can you just maybe talk a little bit about why that trust has deteriorated over the last 12 or maybe it's been longer than the any color there would be helpful.

And as part of the 15th five year plan them. Some of our interpretation of what's happening. There is there's a focus on quality and digital versus in dilution that we believe that the mod bond will continue potentially after 2026 as well it may look a little different in terms of how much stimulus the government contributes.

Yeah, Thanks, Chris and it's listen this is something that we own this is mainly about operational execution.

Judy Marks: It may look a little different in terms of how much stimulus the government contributes versus the consumer. We are making sure that we are optimized in bond and in regular modernization in China.

Versus in versus these customers going somewhere else just for price I want to be clear about that but the good news is that something we own and we can control and we can address.

Versus the consumer but.

But we are making sure that we are optimized in bond and in regular modernization in China.

But you know we've gone through some some changes in personnel as you can imagine as we went through our uplift program and some of those were customer facing although most of those were back office. We know that we can become more accurate in everything from invoicing too to that end, we've now focused on.

[Analyst]: Right. Okay, thank you very much. Appreciate it.

Okay. Thank you very much I appreciate it.

Operator: The next question comes from Chris Snyder with Morgan Stanley. Your line is open.

The next question comes from Chris Snyder with Morgan Stanley. Your line is open.

[Analyst]: Thank you. Judy, you mentioned you know it's going to take time to get the retention rate back to where it was. I think you specifically said you have to rebuild some customer trust. I guess, can you just maybe talk a little bit about why that trust has deteriorated over the last 12 or maybe it's been longer than that? Any color there would be helpful.

Thank you Judy.

Judy you mentioned, it's going to take time to get their retention rate back to where it was and I think you specifically said you have to rebuild some customer trust.

And having a GBS partner to help us do that so we're taking actions, we're adding mechanics, Kristina said, we've added pretty comparable numbers of our field professionals. This year and I have to thank our field professionals for the work they do and how they represent our company every day because they are the heart and soul of this company.

Can you just maybe talk a little bit about why that trust has deteriorated over the last 12 or maybe it's been longer than that.

Any color there would be helpful.

Judy Marks: Yeah, thanks, Chris. This is something that we own. This is mainly about operational execution versus these customers going somewhere else just for price. I want to be clear about that. The good news is it's something we own and we can control and we can address. We've gone through some changes in personnel, as you can imagine, as we went through our uplift program. Some of those were customer-facing, although most of those were back office. We know that we can become more accurate in everything from invoicing to that. We've now focused on having a GBS partner to help us do that. We're taking actions. We're adding mechanics. Cristina said we've added pretty comparable numbers of our field professionals this year.

Yeah, Thanks, Chris and it's listen this is something that that we own. This is mainly about operational execution.

So we've added more where perhaps we had gotten into some some ratios where we werent able to deliver the outstanding service that we should and we commit to.

<unk> in versus these customers going somewhere else just for price I want to be clear about that and the good news is it's something we own and we can control and we can address.

So we're making sure we have better coverage some of that is an investment.

But we've gone through some some changes in personnel as you can imagine as we went through our uplift program.

We think that investment is worthwhile because of our service flywheel and we're going to continue to do that in all parts of the globe, but especially in our high value lifetime value countries, where we understand really the value of every service contract and every unit in our portfolio.

And some of those were customer facing although most of those were back office. We know that we can become more accurate in everything from invoicing to do that and we've now focused on AR on having a GBS partner to help us do that so we're taking actions, we're adding mechanics Kristina said we've added.

Thank you I really appreciate that.

If we I guess to follow up.

Pretty comparable numbers of our field professionals this year and I have to think or.

Is a lower retention rate has an impact on the rate of margin expansion in the service business I would imagine that retention is very good incremental business and now if you guys need to go out in the world and win more new work from someone else.

Judy Marks: I have to thank our field professionals for the work they do and how they represent our company every day because they are the heart and soul of this company. We've added more where perhaps we had gotten to some ratios where we weren't able to deliver the outstanding service that we should and we commit to. We're making sure we have better coverage. Some of that is an investment. We think that investment is worthwhile because of our service flywheel. We're going to continue to do that in all parts of the globe, especially in our high-value, lifetime value countries where we understand really the value of every service contract and every unit in our portfolio.

Our field professionals for the work they do and how they represent our company every day because they are the heart and soul of this company. So we've added more where perhaps we had gotten into some some ratios where we werent able to deliver the outstanding service that we should and we commit to so.

Would that be.

Maybe lower incremental margin because there's more costs associated with winning new business rather than retaining business you already have thank you.

We're making sure we have better coverage some of that is an investment.

Chris the best business for US is when we convert a new equipment customer into our portfolio to start and then depending where you are in the world maybe one to four years later or more we want to retain them with another service contract even though during that period, we've got inflationary adjustments, we've got price adjustments and we're servicing the <unk>.

[Analyst]: Thank you. I really appreciate that. If we, I guess, to follow up, is a lower retention rate having an impact on the rate of margin expansion in the service business? I would imagine that retention is very good incremental business. If you guys need to go out in the world and win more new work from someone else, would that be maybe lower incremental margin because there's more costs associated with winning new business rather than retaining business you already have? Thank you.

Thank you I really appreciate that.

Customer. So you are you are absolutely accurate that that's those are the customers we want to retain because of the contribution margin that they drive when we lose them and replace them with what we call our recapture and we share the recapture rates, we'll share those as well in fourth quarter. They are strong but.

I guess to follow up is a lower retention rate have an impact on the rate of margin expansion in the service business I would imagine that retention is very good incremental business and now if you guys need to go.

Obviously to recapture from someone else you have to take it away from them. We don't always just do that with price, though which is your margin comment of why that would be lower it is inherently lower but we add functionality like Otis one and we add other value Differentiators and we bring them back also on a road to modernization and our path.

In the world and win more new work from someone else would that be maybe lower incremental margin because there's more costs associated with winning new business rather than retaining business you already have thank you.

Judy Marks: Chris, the best business for us is when we convert a new equipment customer into our portfolio to start. Then, depending where you are in the world, maybe one to four years later or more, we want to retain them with another service contract, even though during that period, we've got inflationary adjustments, we've got price adjustments, and we're servicing the customer. You are absolutely accurate that those are the customers we want to retain because of the contribution margin that they drive. When we lose them and replace them with what we call a recapture, and we share the recapture rates, we'll share those as well in fourth quarter. They're strong, but obviously, to recapture from someone else, you have to take it away from them. We don't always just do that with price, which is your margin comment of why that would be lower.

There.

So for us the long term value of that makes sense, but there is some some margin headwinds by that loss of retention absolutely.

Thank you Judy really appreciate that.

<unk>. So you are you're absolutely accurate that that's those are the customers we want to retain because of the contribution margin that they drive when we lose them and replace them with what we call our recapture and we share the recapture rates, we'll share those as well in fourth quarter.

The next question comes from Nicole to place with Deutsche Bank. Your line is open.

Yeah. Thanks, Good morning, just a couple of tie ups for me since we've gotten through a lot of questions on the call I guess, maybe first.

If we look out for Q Etfs I think typically you see like about a mid single digit decline if I look back into your history post spend youre embedding something more like 1%. This quarter. So just can we understand what's maybe a little bit better this year than what you've seen in the past.

They are strong, but but obviously to recapture from someone else you have to take it away from them. We don't always just do that with the peso, which is your margin comment of why that would be lower it is inherently lower but we add functionality like Otis one and we add other value Differentiators and we bring them back also on a road to Mark.

Judy Marks: It is inherently lower, but we add functionality like Otis ONE, and we add other value differentiators, and we bring them back also on a road to modernization and a path there. For us, the long-term value of that makes sense, but there are some margin headwinds by that loss of retention. Absolutely.

Hi, Nicole.

On EPS growth, we are planning 11 sense of growth in Q4 vessels nine cents in Q3, and this is essentially coming from operating profit or operating profit performance will improve because of New York women decline offset moderating as we have seen in Q3.

Herniation and a path there so for us the long term value of that makes sense, but there is some some margin headwinds by that loss of retention absolutely.

[Analyst]: Thank you, Judy. Really appreciate that.

Thank you Judy really appreciate that.

Operator: The next question comes from Nicole DeBlaise with Deutsche Bank. Your line is open.

The next question comes from Nicole the blades with Deutsche Bank. Your line is open.

Continuing the trend we saw in Q3 and on the service side is that acceleration off repair. That's also ongoing margin expansion. Although Q4 is typically a lower margin rate quarter from a seasonality perspective, both on the equipment on surveys and we are going to see at M D seasonality, but it will.

[Analyst]: Yeah, thanks. Good morning. Just a couple of tie-ups from me since we've gotten through a lot of questions on the call. I guess maybe first, if we look at Q4 EPS, I think typically you see like about a mid-single digit decline. If I look back into your history post-spin, you're embedding something more like 1% this quarter. Just can we understand what's maybe a little bit better this year than what you've seen in the past?

Yeah. Thanks, Good morning, just a couple of tie ups for me since we've gotten through a lot of questions on the call I guess, maybe first if.

If we look out for Q Etfs I think typically you see about a mid single digit decline if I look back into your history post spin you are embedding something more like 1%. This quarter. So just can we understand what's maybe a little bit better this year than what you've seen in the past.

Very good line of sight to deliver these EPS growth because essentially as I said before is continuing the trend of why do we have executed in Q3.

Thank you Christina Super helpful. And then on the buyback you guys have basically completed your $800 million commitment for the year should we assume that you're done or is there room to maybe execute more buybacks. If you see the opportunity in the fourth quarter.

Cristina Mendez: Hi, Nicole. Yeah, on EPS growth, we are planning $0.11 of growth in Q4 versus $0.09 in Q3. This is essentially coming from operating profit. Operating profit performance will improve because of new equipment decline of sales moderating, as we have seen in Q3. It's continuing the trend we saw in Q3. On the service side, it's an acceleration of repair, plus also ongoing margin expansion. Although Q4 is typically a lower margin rate quarter from a seasonality perspective, both on new equipment and service, we are considering this seasonality. We have a very good line of sight to deliver this EPS growth because essentially, as I said before, it's continuing the trend of what we have executed in Q3.

Hi, Nicole.

P. S growth, we are planning 11 sense of growth in Q4 vessels nine cents in Q3, and this is essentially coming from operating profit operating.

Yeah in terms of capital allocation Nicole you know we are we are sticking with our capital allocation model in general which includes beyond dividends and buybacks also include some M&A activity or M&A activity through the third quarter is up more than most years.

But 18 profit performance will improve because of New York women decline offset by the rating as we have seen in Q3. So it's continuing the trend we saw in Q3 and on the service side is the acceleration of repair. That's also ongoing margin expansion, although Q4 is still.

We've already invested a little over $100 million in M&A as we went through the third quarter. So we've been looking at all different cash usage again. These bolt on M&A is really give us that addition to give us additional maintenance they gave us additional mechanics, they get us additional density.

Clearly a lower margin rate quarter from a seasonality perspective, both on the equipment on surveys and we are considering the seasonality that we have very good line of sight to deliver these EPS growth because essentially as I said before is continuing the trend of why do we have executed in Q3.

[Analyst]: Thank you, Cristina. Super helpful. On the buyback, you guys have basically completed your $800 million commitment for the year. Should we assume that you're done, or is there room to maybe execute more buybacks if you see the opportunity in the fourth quarter?

And they are they are very they are accretive if not in year one by year. Two so they they makes sense for us and now that more has become available we've been using cash deployment to do that so to answer your question specifically we are.

Judy Marks: Yeah, in terms of capital allocation, Nicole, you know we are sticking with our capital allocation model in general, which includes, beyond dividends and buybacks, also some M&A activity. Our M&A activity through the third quarter is up more than most years. We've already invested a little over $100 million in M&A as we went through the third quarter. We've been looking at all different cash usage. These bolt-on M&As really give us that addition. They give us additional maintenance. They give us additional mechanics. They give us additional density. They are very, they are accretive, if not in year one, by year two. They make sense for us. Now that more have become available, we've been using cash deployment to do that. To answer your question specifically, we believe we are through. We still have authority from our board, obviously, in terms of the capacity to do more.

Yeah in terms of capital allocation Nicole.

We believe we are through we still have our authority from our board obviously in terms of the capacity to do more but we were opportunistic Unfortunately, our stock price dropped fairly significantly after two Q earnings and we were opportunistic then to buy more shares back.

Our we are sticking with our capital allocation model in general which includes beyond dividends and buybacks also include some M&A activity or M&A activity through the third quarter is up more than most years.

We've already.

It gives you D that was really helpful I'll pass it on.

Invested a little over $100 million in M&A as we went through the third quarter. So we've been looking at all different cash usage again. These bolt on M&A is really give us that addition to give us additional maintenance they gave us additional.

The next question comes from Julian Mitchell with Barclays. Your line is open.

Hi, good morning.

Just wanted to start with the free cash flow because I guess you've had this trend in Q3 in recent years with the adjusted.

Mechanics, they get us additional density and they are they are very they are accretive if not in year one by year. Two so they make sense for us and now that more has become available we've been using cash deployment to do that.

Operating margins rise year on year, but the free cash flow margin falls. So just wanted an update on <unk>.

Do you think that can turnaround anytime soon and.

To answer your question specifically, we are we believe we are through we still have our authority from our board obviously in terms of the capacity to do more but we were opportunistic Unfortunately, our stock price dropped fairly significantly after <unk> earnings and we were opportunistic then to buy more shares.

Maybe clarify a couple of things on the free cash specifically one would be around.

How do we see the burden from.

Cash restructuring changing from here and also.

Judy Marks: We were opportunistic. Unfortunately, our stock price dropped fairly significantly after Q2 earnings, and we were opportunistic then to buy more shares back.

One did the how the rising modernization affects the free cash flow dynamics of the business if at all.

It's back.

[Analyst]: Thank you, Judy. That was really helpful. I'll pass it on.

Thank you Judy that was really helpful I'll pass it on.

Yeah. So Julian Costello Q3, it was a sequential improvement versus Q2, we deliver $337 million in the last $100 million meant that on Q2 and in terms of conversion rate it was around 81%.

Operator: The next question comes from Julian Mitchell with Barclays. Your line is open.

The next question comes from Julian Mitchell with Barclays. Your line is open.

[Analyst]: Hi, good morning. Just wanted to start with the free cash flow because I guess you've had this trend in Q3 and recent years where the adjusted operating margins rise year on year, but the free cash flow margin falls. Just wanted an update on, you know, do you think that can turn around anytime soon? Maybe clarify a couple of things on the free cash specifically. One would be around, you know, how do we see the burden from cash restructuring changing from here? Also wondered how the rise in modernization affects the free cash flow dynamics of the business, if at all.

Hi, good morning.

Just wanted to start with the free cash flow because I guess you've had this trend in Q3 in recent years, the adjusted operating margins rise year on year, but the free cash flow margin falls. So just wanted an update on <unk>.

This is smarts below the conversion rate, we have historically hot and we are convinced that our business model should be at 100% conversion rate.

Do you think that can turnaround anytime soon.

The reason for these is there working capital bill that relate that to that change on the business mix.

Maybe clarify a couple of things on the free cash specifically one would be around.

You have to date, our new equipment sales have declined $300 million or so service growing to $40 million and as you know New York Women's has a more favorable working capital compared to the service, but all of this is just temporary and we are confident that as Neal Cui meant stabilizes.

How do we see the Bud from.

Cash restructuring changing from here and also.

Wondered how the rise in modernization affects the free cash flow dynamics of the business if at all.

Service continues growing we are going to come back to that rollout 11, so 100% conversion rate in fact for Q4, we are planning cash flow to be around 700 million. That's the same amount of cost we generate that's in Q4 last year, and we have all cities and sickness and that keeps us confident.

Cristina Mendez: Yeah. So Julian, on cash flow, Q3 was a sequential improvement versus Q2. We delivered $337 million. That was $100 million better than Q2. In terms of conversion rate, it was around 81%. This is much below the conversion rate we have historically had. We are convinced that our business model should be at 100% conversion rate. The reason for this is the working capital build-up related to the change of the business mix. Year to date, our new equipment sales have declined $300 million versus service growing $340 million. As you know, new equipment has a more favorable working capital compared to service. All of this is just temporary. We are confident that as new equipment stabilizes and service continues growing, we are going to come back to the regular levels of 100% conversion rate. In fact, for Q4, we are planning cash flow to be around $700 million.

Yeah. So Julian on Costello Q3, it was a sequential improvement versus Q2, we deliver $337 million of lost $100 million meant that on Q2 and in terms of conversion rate was around 81%.

This is smarts below the conversion rate, we have historically hot and we are convinced that our business model should be at 100% conversion rate. The reason for this is that working capital build that relate it to that change obviousness mix, but you have to date, our new equipment sales have declined $300 million.

But we are going to deliver one is the fact that that all of us any equipment turn positive in Q3 were plus 4% and as you well know and we have advances coming from these bookings you also mentioned modernisation and you'll have to tell you right now that may save you on working capital is pretty similar to new equipment is at the end of an easterly.

So savi is growing to $40 million and as you know New York Women's has a more favorable working capital compared to the service.

So on project and we also get advances from those projects and last but not least nuc women's satisfy moderating and there is a component of the transition of our collections activity to a third party have recently outsource these process through to us.

All of these is yes temporary and we are confident that as Neal equipment stabilizes on Saturdays continues growing we're going to come back to that rollout level. So 100% conversion rate in fact for Q4, we are planning cash flow to be around 700 million. That's the same amount of cost we generate.

Third party partner, we have seen.

Our format not at great levels, so far, but we see improving going forward and we are confident that with all of these combustion underwriting the yeah, he's going to be about 90%.

Cristina Mendez: That's the same amount of cash we generated in Q4 last year. We have positive signals that give us the confidence that we are going to deliver. One is the fact that the orders in new equipment turned positive in Q3, were plus 4%. As you well know, we have advances coming from these bookings. You also mentioned modernization, and you are totally right. Modernization working capital is pretty similar to new equipment. It's at the end an installation project. We also get advances from those projects. Last but not least, new equipment sales are moderating. There is a component of the transition of our collections activity to a third party. We have recently outsourced this process to a third-party partner. We have seen a performance not at great levels so far, but we see it improving going forward.

That's in Q4 last year, and we have all cities and sickness and that keeps us confident that we are going to deliver one is the fact that the auditors any equipment turn positive in Q3 were plus 4% and as you well know we have advances coming from these bookings you also mentioned one of them.

By 2026, we should be back to 100%.

That's great. Thanks, Kristina and then just my quick follow up would be on the maintenance portfolio in the service business.

I think based on your comments it looks like China will comprise maybe half almost half of your maintenance portfolio unit expansion in 2025.

My session and you'll have to tell you right now that may save you on working capital is pretty similar to new equipment is at the end of the new installation project and we also get advances from those projects.

And last but not least new equipment sales are moderating.

So just wanted to know if there was any update around the service pricing and service margin dynamics within China. Please.

There is a component of that transition of our collections activity to a third party have recently outsource these process through to a third party partner, we have seen the performance not at great levels, So far, but we see improving going forward and we are confident that with all of them.

Yeah, I don't think you will see China approach half.

The portfolio growth next year, but we'll get back to you on that overtime.

Yeah, we're very pleased with the with the growth we've had but again with this focus on the growth now being able to convert to service.

Cristina Mendez: We are confident that with all of this, conversion rate in the year is going to be above 90%. By 2026, we should be back to 100%.

These combustion operating the yeah, he's going to be above 90% by 2026, we should be back to 100%.

Where we're being a little more disciplined as we go I'm. So.

[Analyst]: That's great. Thanks, Cristina. Just my quick follow-up would be on the maintenance portfolio in the service business. I think based on your comments, it looks like China will comprise maybe half or almost half of your maintenance portfolio unit expansion in 2025. I just wondered if there was any update around the service pricing and service margin dynamics within China, please.

That's great. Thanks, Kristina and then just my quick follow up would be on the maintenance portfolio in the service business.

So I would say that in terms of.

Service pricing again with that discipline comes a little bit more focused on which tier cities. We're going to serve so we're not trying to cover a broader spectrum of countries and if you look at where a lot of the the property.

I think based on your comments it looks like China will comprise maybe half almost half of your maintenance portfolio unit expansion in 2025.

So just wanted to know if there was any update around the service pricing.

Ed.

Sequential improvement is tier one cities are doing the best in the further out you go to tier five and beyond they're not so we do have agents and distributors, who can cover that if they choose but we are you know as part of the China transformation. We've merged our two service brands to make us more efficient and productive.

This margin dynamics within China. Please.

Judy Marks: Yeah, I don't think you will see China approach half of the portfolio growth next year. We'll get back to you on that over time. We're very pleased with the growth we've had. With this focus on the growth now being able to convert to service, we're being a little more disciplined as we go. I would say that. In terms of service pricing, with that discipline comes a little bit more focus on which tier cities we're going to serve. We're not trying to cover the broader spectrum of countries. If you look at where a lot of the property sequential improvement is, tier one cities are doing the best, and the further out you go to tier five and beyond, they're not. We do have agents and distributors who can cover that if they choose.

Yeah, I don't think you will see China approach half of the portfolio growth next year, but we'll get back to you on that overtime.

Yeah, we're very pleased with the with the growth we've had but again with this focus on the growth now being able to convert to service.

So that our service contribution in China continues to improve that'll happen through density and it will happen through US you know with our two brands now being able to to service and have shared routes.

We're being a little more disciplined as we go.

So so I would say that in terms of.

Or even improved coverage, we think we're going to see that improvement come through in 'twenty six as well.

That's great. Thank you.

This concludes the question and answer session I'll now turn to Judy marks for closing remarks.

Thank you Sarah as you've seen our service flywheel is performing this performance momentum is across the board in both segments and all regions with a growing service portfolio approaching two and a half a million units and an accelerating modernization business. We're confident we'll continue to deliver attractive.

Ed.

Judy Marks: As part of the China transformation, we've merged our two service brands to make us more efficient and productive so that our service contribution in China continues to improve. That'll happen through density, and it will happen through us, with our two brands now being able to service and have shared routes or even improved coverage. We think we're going to see that improvement come through in 2026 as well.

And sustainable shareholder value for the remainder of this year and beyond thank you for joining us today stay safe and well.

So that our service contribution in China continues to improve that'll happen through density and it will happen through us with our two brands now being able to to service and have shared routes.

This concludes today's conference. Thank you for joining you may now disconnect.

Yeah.

Or even improved coverage, we think we're going to see that improvement come through in 2006 as well.

[Analyst]: That's great. Thank you.

That's great. Thank you.

Operator: This concludes the question and answer session. I'll now turn to Judy Marks for closing remarks.

This concludes the question and answer session I'll now turn to Judy marks for closing remarks.

Judy Marks: Thank you, Sarah. As you've seen, our service flywheel is performing. This performance momentum is across the board in both segments and all regions. With a growing service portfolio approaching 2.5 million units and an accelerating modernization business, we're confident we'll continue to deliver attractive and sustainable shareholder value for the remainder of this year and beyond. Thank you for joining us today. Stay safe and well.

Thank you Sara as you have seen our service flywheel is performing this performance momentum is across the board in both segments and all regions with a growing service portfolio approaching $2 5 million units and an accelerating modernization business. We're confident we'll continue to deliver attractive.

And sustainable shareholder value for the remainder of this year and beyond thank you for joining us today stay safe and well.

Operator: This concludes today's conference. Thank you for joining. You may now disconnect.

This concludes today's conference. Thank you for joining you may now disconnect.

Okay.

Yeah.

Q3 2025 Otis Worldwide Corp Earnings Call

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