Otis Worldwide Corporation (NYSE:OTIS) Q4 2022 Earnings Call Transcript

Miguel Borrega: Thank you. And then just one last question on free cash flow conversion, I wanted to get your views, not only on 2023, but also a little bit further away. Where do you see this normalizing? Because 2021 was 128%; 2022, 115%, and now you guide between 105% and 115%. Is this basically China contributing less to working capital? And do you see that improving in 2023 with more financing to real estate developers? Maybe if we can get some of your color what’s going on, on the ground in China today? Do you see any improvements there? Thank you very much.

Anurag Maheshwari: Yes. So let me take back, actually, our working capital in China collection is progressing quite well. If you look at this 2022, we finished about 115% of net income, which was quite good. We had a very strong fourth quarter. We came in a little bit lighter was because of the inventory that we built up to make sure that we can support our backlog as we get into 2023. Between receivables and payables, we are pretty much there. So it was more of the inventory build out. Now what we’re guiding at the midpoint for 2023 is 110% of net income. It’s essentially driven by earnings growth with a little bit of a modest offset from capital expenditure as we’re embarking on our Otis ONE strategy. So that takes us to 110% net income. And as we move forward, we should grow our cash with earnings. And that’s what we’ve kind of guided towards. And you should see that normalizing around the 110-ish percent level.

Judy Marks: Yes. And Miguel, I’ll just let me wrap on that. But I mean this is €“ that was our medium-term guide that we gave at the Investor Day in February of last year, and that’s what €“ we beat it in 2022, and we’re staying consistent right now with our guide with the Investor Day. Thank you.

Operator: And I’m currently showing no further questions at this time. I’d like to hand the conference back over to Ms. Marks for any closing remarks.

Judy Marks: Well, thank you, Norma. Our success in 2022, our third year in a row of performing for all stakeholders, demonstrates the strategic resiliency of our business and provides us with confidence as we begin a new year. Supported by strong industry dynamics, we remain committed to our strategic pillars in order to deliver for our customers, shareholders, valued communities and the riding public. We set significant goals for the year ahead, and we look forward to sharing our 2023 success with you. Please stay safe and well. Thank you.

Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.