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Otis Worldwide CEO on earnings, elevator modernization

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Judy Marks, President and CEO at Otis Worldwide Corp., joins Yahoo Finance Live to discuss the company's quarterly earnings and break down the future of elevators and escalators.

Video Transcript

[MUSIC PLAYING]

- It was a good quarter for elevator and escalator giant Otis Worldwide. The company's first-quarter earnings easily beat analysts' estimates thanks to double-digit sales gains in the Americas and Asia. Otis also lifted its full-year sales and earnings outlooks.

Judy Marks is president and CEO of Otis Worldwide and joins us now. Judy, good to see you this morning. I think a lot of folks would be surprised to see this type of quarter from Otis, considering many people have not been in the office for over a year. Help us understand why you put up these gains.

JUDY MARKS: Sure. Thanks for having me, Brian. Good to see you. Listen, we are-- we just had an outstanding quarter. It built off the strength of our long-term strategy, showed the resilience of our business, and also our commitment to creating shareholder value. Orders were up 18% in new equipment, which means people are ordering new elevators. Construction is back, both in the Americas, in EMEA, and in Asia, specifically China.

We had margin expansion in both our new equipment and our service segment. And it's our service business-- over. Most people don't realize we maintain 2.1 million elevators, the largest portfolio of any company. And over half, well over half of those, are residential. So we've kept the world safe and moving throughout COVID. Our colleagues were resilient, and our results show it.

But I think what's most exciting this quarter is the return of new equipment. Orders were up. Our backlog is up, which means we've got lots of work ahead of us. And cities will be back. They will be vibrant again. It's an exciting time.

- Judy, who is-- who is ordering new elevators right now?

JUDY MARKS: Well, there's a combination. We get orders from developers, general contractors. But half of the market segment is in China. And as you can imagine, China had a quick snap back second quarter of last year. But the results this year were better than just to compare. We had significant double-digit growth across multiple segments.

We grew in the tier one and tier two cities, which showed the strength of our strategy, adding a lot of agents and distributors last year since we became independent. We also grew with a lot of the key developers.

And, you know, Brian, in the US, the Architects Billing Index, which is a leading indicator, in March was the highest since 2007. So for those folks who are looking around cities in the US, construction is back. New developments are-- in both-- commercial. And you can feel the pace of the economy.

- Judy, it's Julie here. Talk to me also about timeline. You know, you're talking about the cities across the US that we're-- construction-wise we're getting back. What can we then extrapolate out to when people are going to be back in offices, when we might get back to similar levels, if not exactly the same levels, where we were pre-pandemic, at least through the prism of what you're seeing?

And where are those people going to be? Are they going to be in suburban offices? Are they going to be in those tier two cities that you're talking about?

JUDY MARKS: Well, Julie, for us, the good news is whether they're in suburban offices or high rises, they all have a need for vertical lift and for elevators and in some cases escalators. So for us, the market looks very positive with growth this year.

We believe the office will be not only back. It may look a little different. It may be configured different now for more health concerns. But people will return. By 2050, 70% of the population of this world will be living in cities. Urbanization is real, and it will continue to bounce back.

People need a separate place. They need separation. They need a place to develop and share culture, collaboration, innovation. And we're starting to see that. As Otis, we have a proxy. We get to see this happening everywhere in the world. And we can tell you everywhere where people want to get back, they're making plans. And we'll see that as we go through the second half of '21. We believe, you know, people will be back.

- Judy, talk a little bit about some of the changes you have or are thinking about making, have been requested to make in terms of what elevators need to have in terms of filtration or body count on the elevator, let people how many people are on there. The way that getting to-- getting from, I guess, the lobby of our office up to our office on the ninth floor and the process that that looked like pre-COVID and what conversations you guys have had about what it might look like after and sort of the requests you've had along those lines.

JUDY MARKS: Myles, we've been talking to customers throughout the world. And what the future of the elevator industry and buildings is all about being connected. That connection is going to happen digitally. It's going to happen electronically. And it's going to allow for smarter elevators to have better dispatch systems, to have the ability to be touchless.

We already have innovated. Innovation's so core to our strategy. We've innovated health solutions that allow for gesture technology, voice technology, but just as importantly, for your iPhone or Android device-- so that you don't have to touch the buttons.

We commissioned a study with Purdue University in 2020, again, as a thought leader, to find out, how does air get ventilated in elevators? And the ventilation-- if you ride an elevator, you have less risk exposure than if you do going to the grocery store or dining outside. There's tremendous ventilation.

It's required by code in elevators, again, in case you get entrapped. You need to have air flow. It's just not as visible as people could see today. It will become more visible. We have lots of customers who are interested in air purification fans.

But the future of the elevated is, connected, is getting people where they need to be safer, healthier, and quicker.

- That's exciting stuff. I look forward to riding one of those eventually when I do go back to the office. Judy Marks, president and CEO of Otis Worldwide, good to see you this morning.