01—Abstract
Summary
Summary of the 10-K filed February 2, 2024. Cited figures are marked; the original filing is the authoritative source.
Otis Worldwide Corporation's 2023 Form 10-K reports net sales of $14.21 billiona, up from $13.69 billion in 2022, with organic volume growth of 5.6%.
Operating profit rose to $2.19 billionb from $2.03 billion, and net income attributable to Otis Worldwide Corporation increased to $1.41 billion from $1.25 billion. Diluted earnings per share were $3.39, compared with $2.96 in 2022. Service remained the larger segment at $8.40 billion of net sales (59%) and $1.97 billion of segment operating profit, while New Equipment net sales were $5.81 billion with flat operating profit of $358 million.
Cash flow from operations was $1.63 billionc, and capital expenditures were $138 million. The company returned capital through $800 million of share repurchases and $539 million of common stock dividends. Total debt was $6.90 billion and cash and cash equivalents were $1.27 billion at year-end.
The company announced its UpLift operating model transformation in July 2023, which it expects to generate approximately $150 milliond in annual savings by mid-year 2025, with transformation costs of roughly the same amount over that period. In 2023 UpLift costs totaled $41 million.
The filing also flags ongoing risks from the Russia-Ukraine and Israel-Hamas conflicts, U.S.-China trade tensions, and a German tax dispute in which the German Federal Tax Court is expected to rule on an appeal in 2024. Remaining performance obligations were approximately $18.0 billion at year-end, with about 90% expected to be recognized as sales over the following 24 months.
02—Key points
Key Highlights
- Net sales rose 3.8% to $14.21 billion, driven by 5.6% organic volume growth, with Service sales up 7.4% to $8.40 billion.
- Operating profit increased to $2.19 billion from $2.03 billion, and gross margin percentage improved to 29.5% from 28.6%.
- Diluted EPS was $3.39 versus $2.96 in 2022; net income attributable to Otis Worldwide Corporation was $1.41 billion.
- New Equipment net sales declined 0.9% to $5.81 billion and segment operating profit was flat at $358 million, while Service operating profit grew $183 million to $1.97 billion.
- Operating cash flow was $1.63 billion; the company repurchased $800 million of common stock and paid $539 million in dividends.
- UpLift transformation program announced July 2023 targets approximately $150 million in annual savings by mid-year 2025; 2023 UpLift costs totaled $41 million.
- Remaining performance obligations of approximately $18.0 billion at year-end, with about 90% expected to convert to sales over the next 24 months.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 2, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $14.21B$13.69B | +3.8% |
| R&D Expenses | $144.00M$150.00M | −4.0% |
| SG&A Expenses | $1.88B$1.76B | +6.9% |
| Operating Expenses | $12.04B$11.68B | +3.1% |
| Operating Income | $2.19B$2.03B | +7.5% |
| Interest Expense | $155.00M$140.00M | +10.7% |
| Net Income | $1.41B$1.25B | +12.2% |
| EPS (Basic) | $3.42$2.98 | +14.8% |
| EPS (Diluted) | $3.39$2.96 | +14.5% |
| Shares Outstanding (Basic) | 411.40M420.00M | −2.0% |
| Shares Outstanding (Diluted) | 414.60M423.00M | −2.0% |
05—Questions
Frequently Asked Questions
How did Otis's core segments perform in 2023?
Service net sales grew 7.4% to $8.40 billion, with segment operating profit rising to $1.97 billion and a 23.5% operating margin. New Equipment net sales fell slightly to $5.81 billion, and its operating profit was flat at $358 million, with a 6.2% operating margin.
What is UpLift and what does it cost?
UpLift, announced in July 2023, is a program to transform Otis's operating model through process standardization, supply chain procurement improvements and restructuring actions. The company expects approximately $150 million in annual savings by mid-year 2025, with transformation costs of about the same amount over that period. UpLift costs in 2023 were $41 million, including $25 million of restructuring and $16 million of transformation costs.
How much debt does Otis carry and how is it managed?
Total debt was $6.90 billion at December 31, 2023, versus $6.77 billion a year earlier. The company issued $750 million of 5.25% notes due 2028 in August 2023 and repaid commercial paper and a €500 million note. It has a $1.5 billion revolving credit facility, which was undrawn at year-end, and an investment-grade credit rating from Moody's and S&P.
What are the main risks flagged in the filing?
The filing highlights exposure to international operations (about 72% of 2023 net sales), with China representing roughly one third of New Equipment net sales. It also cites risks from the Russia-Ukraine and Israel-Hamas conflicts, U.S.-China trade tensions, raw material and supply chain constraints, and a German tax matter in which the German Federal Tax Court is expected to rule on an appeal in 2024.
How much did Otis return to shareholders in 2023?
Otis repurchased $800 million of Common Stock and paid $539 million in dividends on Common Stock during 2023. Cash dividends declared were $1.31 per common share. At year-end, approximately $1.2 billion remained under the $2.0 billion share repurchase program authorized in December 2022.
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