Otis Worldwide Corp

Strong top-line growth + cash generation (core positive): - Q2 2026 net sales: $3.9B, organic sales +6%. - Service remained the growth engine: organic service sales +9%, supported by modernization +24% organic (highest since Spin), repair +12% organic (best in ~10 quarters), and maintenance +3% organic. - Modernization backlog: +26% YoY at constant currency; modernization orders +9%. - Cash strength: adjusted free cash flow $290M, +19% YoY; enables continued investment + shareholder returns.

Margin pressure and why (bad / key constraint): - Adjusted operating profit margin down 180 bps to 15.2%; service margins down 170 bps to 23.2% YoY. - Management attributed margin pressure to labor/material inflation, mix (more modernization), productivity headwinds from service quality investments, and ramp-up inefficiencies as they scale skilled repair/modernization execution. - Expectation is that these are not permanent: margins should recover sequentially in 2H as productivity improves and initiatives flow through.

Service quality initiative is working on leading indicators, but retention lagged (good + surprising/negative): - They invested $50M total in service excellence + pricing (plan referenced earlier); $15M invested in Q2, on track. - Service quality index improved +7 points in targeted operating territories; early signs are positive. - However, retention recovery is taking longer than expected: overall retention ex China still down in Q2 (but management argues lighthouse territories show much higher retention and quality metrics).