Otis Worldwide Financial Model
Building Products Company Financials Example (Free Excel Download)
Otis Worldwide is the world's largest manufacturer, installer, and maintainer of elevators, escalators, and moving walkways, moving over 2.5 billion people daily.
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About this model
This model provides a sum-of-the-parts equity valuation and cash flow forecast for Otis Worldwide, enabling an equity analyst to assess how the company's highly profitable, recurring Service business offsets cyclical headwinds in the New Equipment segment (particularly in China).
- Otis Worldwide is the world's largest manufacturer, installer, and maintainer of elevators, escalators, and moving walkways, moving over 2.5 billion people daily.
- Business segments: Service (Maintenance & Repair, Modernisation) contributes approximately 62% of net sales and 87% of operating profit; New Equipment contributes approximately 38% of net sales and 13% of operating profit.
- Key geographies: Global footprint with significant exposure to the Americas, EMEA, and Asia (with China being a critical, albeit currently challenged, market for new equipment).
- Business model type: The "razor and blades" model; the company sells new equipment at lower margins to capture the highly profitable, long-term, asset-light recurring service and maintenance contracts.
- Competitive position: The global market leader with approximately 20% new equipment market share and an industry-leading maintenance portfolio of 2.5 million units. Key competitors include Schindler, KONE, and TK Elevator.
- Recent major events: The ongoing "UpLift" restructuring programme targeting $230 million in run-rate savings by the end of 2025, and strategic bolt-on acquisitions such as Jardine Schindler Lifts Limited in Taiwan.
The downloadable Otis Worldwide financial model includes SEC-sourced historical financials, forecast assumptions, core operating schedules, and valuation outputs in an Excel workbook built for review and scenario analysis.
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Live formulas, no hardcoded values
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All assumptions in one tab
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Statements always balancing
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Distinct schedules for clarity
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Changes flow through the model
Update a key driver and see the impact carry through the forecast, financing, and return outputs. We never use hardcoded numbers in formulas.
Historicals & AssumptionsOtis Worldwide financial modelCompany, Historicals & Assumptions used
Source: SEC EDGAR · values in USD
| Line item | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| Revenue | $14.30B | $13.69B | $14.21B | $14.26B | $14.43B |
| Research and development | $159.0M | $150.0M | $144.0M | $152.0M | $152.0M |
| Operating income | $2.11B | $2.03B | $2.19B | $2.01B | $2.13B |
| Net income | $1.25B | $1.25B | $1.41B | $1.65B | $1.38B |
Forecast assumptions
Defaults used in the downloadable model. Forecast horizon: FY2026–FY2030.
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How to build a detailed financial model for Otis Worldwide
A complete walkthrough of every driver, margin, working-capital input, and capital-allocation assumption used in the downloadable model.
Revenue Deep Dive
New Equipment
- Segment name: New Equipment
- Revenue driver formula: Beginning Backlog + New Orders - Cancellations = Ending Backlog; Revenue = Backlog Conversion Rate x Average Backlog
- Historical growth rate: Low single-digit declines to flat (e.g., -7% in 2025) due to macroeconomic pressures.
- Key growth levers and headwinds: Driven by global urbanisation and new construction starts. Major headwinds include the prolonged downturn in the Chinese property market and high interest rates dampening commercial real estate development.
- Pricing dynamics: Highly competitive, project-based bidding.
- Revenue recognition notes: Recognised over time using the percentage-of-completion method based on costs incurred relative to total estimated costs.
- Seasonality: Q4 is typically the strongest quarter for equipment deliveries and cash collections.
Service
- Segment name: Service (comprising Maintenance & Repair, and Modernisation)
- Revenue driver formula: (Units Under Maintenance x Average Revenue Per Unit) + Modernisation Orders Converted
- Historical growth rate: 5% to 8% organic growth.
- Key growth levers and headwinds: Driven by the ageing global installed base (over 10 million units globally ready for modernisation by 2030) and increasing attachment rates of the Otis ONE IoT connected platform.
- Pricing dynamics: Contractual, inflation-linked price escalators in maintenance contracts provide strong pricing power.
- Revenue recognition notes: Maintenance revenue is recognised straight-line over the contract term; modernisation is recognised over time via percentage-of-completion.
- Seasonality: Relatively stable throughout the year due to the recurring nature of maintenance contracts.
Cost Structure
Variable Costs / COGS
- Line-by-line breakdown: Field labour (mechanics and installers), raw materials (steel, electronics), manufacturing overhead, and logistics.
- Gross margin range: 28% to 31%.
- Key input costs and commodity exposures: Steel, copper, and fuel/logistics costs.
- How COGS scales with revenue: New Equipment COGS scales linearly with volume and commodity prices. Service COGS is highly leveraged to route density (mechanics servicing more elevators in a smaller radius increases margin).
Operating Expenses
- R&D: Approximately 1.0% to 1.5% of revenue, focused on IoT connectivity (Otis ONE) and energy-efficient product designs.
- SG&A: Branch network overhead, sales commissions, IT, and corporate expenses. Typically runs at 12% to 14% of revenue.
- Depreciation & Amortisation: Relatively low (asset-light model), approximately 1.5% of revenue.
- Stock-Based Compensation: Standard corporate levels, not a massive driver compared to tech peers.
- Restructuring / one-time charges: The UpLift programme and China Transformation initiatives incurred approximately $340 million in combined restructuring costs through 2024/2025.
Margin Profile
- Gross margin: ~30%.
- Operating margin: Consolidated adjusted operating margin of 16.5% to 16.9%.
- Segment-level margins: Massive disparity. Service operating margins are 24.5% to 25.5%, while New Equipment operating margins are 3.5% to 5.0%.
- Margin trend: Expanding at the consolidated level due to a favourable mix shift towards the higher-margin Service segment and UpLift cost savings, despite New Equipment margin compression.
Balance Sheet Structure
- Total assets: Approximately $10.6 billion.
- Key asset categories: Accounts receivable, inventory, goodwill, and intangible assets.
- Goodwill & intangibles: Significant portion of assets, stemming from its history under United Technologies (UTC) and subsequent bolt-on acquisitions.
- Working capital profile:
- Days Sales Outstanding (DSO): 50-60 days.
- Days Inventory Outstanding (DIO): 30-40 days.
- Days Payable Outstanding (DPO): 70-85 days.
- Net working capital as % of revenue: Structurally negative.
- Is working capital positive or negative? Negative. Otis receives advance payments and progress billings for New Equipment and upfront annual payments for Service contracts, providing a structural cash flow advantage.
- PP&E: Asset-light. Manufacturing footprint is relatively small compared to revenue scale.
- Right-of-use assets / operating leases: Material due to the extensive global branch network and vehicle fleet for service mechanics.
Capital Expenditure & Investment
- Capex as % of revenue: Approximately 1.0% to 1.2% ($120M to $150M annually).
- Maintenance capex vs. growth capex: Mostly maintenance (tooling, branch upgrades, IT systems).
- Major capex programmes underway or planned: Digitalisation and Otis ONE IoT rollout.
- Capitalised software / development costs: Minimal compared to total revenue.
- M&A pattern: Bolt-on acquirer. Focuses on buying independent service providers to add units to its maintenance portfolio and increase route density.
Debt & Capital Structure
- Total debt: Approximately $7.96 billion.
- Debt/EBITDA ratio: Approximately 3.0x to 3.3x.
- Credit rating: Investment grade (typically BBB/Baa2).
- Key debt instruments: Unsecured notes (e.g., 2026, 2027, 2031 maturities) and a $1.5 billion revolving credit facility.
- Interest rate profile: Predominantly fixed-rate notes.
- Share repurchase programme: Highly active. Repurchased $800 million in 2025 and targets another $800 million in 2026.
- Dividend policy: Payout ratio of approximately 40%, with a 2025 dividend of $1.65 per share.
Cash Flow Characteristics
- Operating cash flow conversion: Consistently >100% of net income due to negative working capital dynamics and low capital intensity.
- Free cash flow margin: Approximately 11% ($1.6 billion FCF on $14.4 billion revenue).
- Major non-cash items that bridge net income to OCF: Depreciation, amortisation, and deferred taxes.
- Working capital cash flow impact: Source of cash when the business grows (due to advances and deferred revenue).
- Capex intensity: Extremely low (asset-light service model).
- Cash tax rate vs. GAAP effective tax rate: Adjusted effective tax rate is approximately 24.8%.
Sheet Structure
- Assumptions: Hardcoded drivers for macroeconomic inputs, segment growth rates, margins, tax rates, and capital allocation.
- Scenarios: Base, Bull, and Bear cases toggling China New Equipment recovery and Service pricing power.
- Segment Build: Revenue and operating profit broken out strictly by "New Equipment" and "Service". Includes portfolio unit count and modernisation backlog.
- Income Statement: Consolidated view from Net Sales down to Net Income and EPS, matching the 10-K format.
- Balance Sheet: Assets, Liabilities, and Equity. Must explicitly break out "Contract assets" and "Contract liabilities" (deferred revenue/advances).
- Cash Flow Statement: Operating, Investing, and Financing cash flows.
- Working Capital Schedule: DSO, DIO, DPO, and the critical deferred revenue build.
- Debt & Interest Schedule: Tranche-by-tranche debt maturity profile and interest expense calculation.
- PPE & Intangibles: Capex, depreciation, and amortisation waterfall.
- Shareholders Equity: Retained earnings, dividend payouts, and share repurchase tracking.
- DCF & Valuation: Unlevered free cash flow build, WACC calculation, terminal value, and implied share price.
Key Financial Relationships
- `Service Revenue = (Beginning Maintenance Units + Net Unit Additions) * Average Revenue Per Unit + Modernisation Revenue`
- `New Equipment Revenue = Beginning NE Backlog * Backlog Conversion Rate + In-Period Orders Converted`
- `Total Net Sales = New Equipment Revenue + Service Revenue`
- `Service Operating Profit = Service Revenue * Service Operating Margin (historically 24.5% - 25.5%)`
- `New Equipment Operating Profit = New Equipment Revenue * New Equipment Operating Margin (historically 3.5% - 5.0%)`
- `Total Segment Operating Profit = Service Operating Profit + New Equipment Operating Profit`
- `Consolidated Adjusted Operating Profit = Total Segment Operating Profit - Unallocated Corporate Expenses`
- `Contract Liabilities (Advances) = Total Net Sales * (Days Advances Outstanding / 365)`
- `Free Cash Flow = Cash Flow from Operations - Capital Expenditures`
- `Ending Shares Outstanding = Beginning Shares Outstanding - (Share Repurchase Amount / Average Share Price)`
Cross-Sheet Dependencies
- The Segment Build is the engine of the model. It feeds Total Net Sales and Segment Operating Profit directly into the Income Statement.
- The Income Statement generates Net Income, which is the starting point for the Cash Flow Statement.
- The Working Capital Schedule calculates the change in Contract Liabilities and Receivables, feeding the Operating Cash Flow section of the Cash Flow Statement.
- The Cash Flow Statement determines the cash available for the Debt & Interest Schedule (debt paydown) and Shareholders Equity (buybacks/dividends).
- Ending balances from the Cash Flow Statement, Working Capital Schedule, and Debt & Interest Schedule flow into the Balance Sheet to ensure it balances.
- The DCF & Valuation pulls NOPAT and D&A from the Income Statement and Capex/Working Capital changes from the Cash Flow Statement.
Sign Convention
- Income Statement: Revenues are positive. Expenses (COGS, SG&A, Interest, Taxes) are negative.
- Balance Sheet: Assets are positive. Liabilities and Equity are positive.
- Cash Flow Statement: Cash inflows are positive. Cash outflows (Capex, dividends, share repurchases, debt repayment) are negative.
- Margins/Ratios: Expressed as positive percentages.
Things Most Likely to Go Wrong
- Misunderstanding the Margin Mix: Applying a consolidated margin assumption will break the model. The builder must model the 25% Service margin and 4.8% New Equipment margin separately, as the mix shift is the primary driver of earnings growth.
- Failing to Model Negative Working Capital: Otis operates with negative working capital. Growth in the business should generate operating cash flow via contract liabilities (customer advances). If the builder models working capital as a use of cash during growth, FCF will be severely understated.
- Ignoring Restructuring Add-Backs: The UpLift programme creates a large gap between GAAP and Adjusted Operating Profit. The model must forecast Adjusted Operating Profit for valuation, while capturing the cash restructuring costs in the cash flow statement.
- Overestimating Capex: Otis is an asset-light service business. Capex should not exceed 1.5% of sales. Defaulting to a standard industrial capex ratio (e.g., 4-5%) will ruin the FCF yield.
- Foreign Exchange Volatility: Otis generates the vast majority of its revenue outside the US. The model should include a constant-currency toggle or explicitly note that historical growth rates are distorted by FX.
- Modernisation vs Maintenance: Modernisation is part of the Service segment but behaves more like New Equipment (project-based). Blending them without understanding the backlog dynamics will lead to inaccurate Service revenue forecasts.
- Share Count Reduction: Otis aggressively buys back stock (~$800M annually). Failing to reduce the share count dynamically will understate EPS growth.
- Tax Rate Anomalies: GAAP tax rates in 2024/2025 were impacted by non-recurring tax benefits in Germany. The builder must use the adjusted effective tax rate of ~24.8%.
Validation Checks
- "Service Operating Margin must remain between 24.5% and 26.0%; flag if outside this band."
- "New Equipment Operating Margin must remain between 3.0% and 6.0%; flag if outside this band."
- "Consolidated Free Cash Flow conversion (FCF / Net Income) should be approximately 1.0x or higher."
- "Capex as a % of Total Net Sales must be between 1.0% and 1.5%."
- "Total Debt / Adjusted EBITDA should remain between 2.5x and 3.5x."
- "Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period."
- "Service segment revenue must account for >60% of Total Net Sales in the forecast period."
- "Dividend payout ratio should remain near the target of 40% of Net Income."
Key Assumptions (Default Values)
| Assumption | Default Value | Unit | Rationale |
|---|---|---|---|
| Service Organic Revenue Growth | 5.5 | % | Midpoint of 2026 management guidance (mid to high single digits). |
| New Equipment Organic Revenue Growth | -1.0 | % | Midpoint of 2026 management guidance (down low single digits to flat). |
| Service Operating Margin | 25.1 | % | Actual reported full-year 2025 Service margin. |
| New Equipment Operating Margin | 4.8 | % | Actual reported full-year 2025 New Equipment margin. |
| Adjusted Effective Tax Rate | 24.8 | % | Management guidance for adjusted effective tax rate. |
| Capex as % of Revenue | 1.1 | % | Based on historical average ($150M on ~$14.4B sales). |
| Annual Share Repurchases | 800 | $ Millions | Management target for 2026, consistent with 2025 actuals. |
| Dividend Payout Ratio | 40.0 | % | Stated management target for capital return. |
| DSO (Days Sales Outstanding) | 55 | Days | Historical average based on AR and revenue. |
| DPO (Days Payable Outstanding) | 75 | Days | Historical average based on AP and COGS. |
| Current Total Debt | 7,956 | $ Millions | Actual reported debt at end of 2025. |
| Diluted Shares Outstanding | 388.7 | Millions | Actual reported share count as of early 2026. |
| WACC | 8.5 | % | Standard discount rate for a large-cap, asset-light industrial with stable cash flows. |
| Terminal Growth Rate | 2.5 | % | Aligns with long-term global GDP and urbanisation trends. |
Data Sources & Benchmarks
- Filings: SEC EDGAR (Otis Worldwide Corp, CIK: 0001781335), Otis Investor Relations website (investorrelations.otis.com).
- Key Peers: Schindler Holding AG (SCHN.SW), KONE Oyj (KNEBV.HE), TK Elevator (private).
- Industry Data: Dodge Construction Network (for commercial real estate starts), China National Bureau of Statistics (for Chinese property completion data).
- Consensus Estimates: FactSet, Bloomberg, or Morningstar for forward EPS and revenue estimates.
Sources
- Otis Worldwide Q4 2025 Earnings Release and Presentation: https://investorrelations.otis.com
- Otis Worldwide 2024/2025 10-K Filings: https://www.sec.gov/edgar/browse/?CIK=1781335
- Macrotrends Otis EBITDA History: https://www.macrotrends.net/stocks/charts/OTIS/otis-worldwide/ebitda
- Seeking Alpha OTIS Analysis: https://seekingalpha.com/article/4667891-otis-worldwide-recent-share-price-weakness-improves-the-long-term-setup
- Trading Economics Otis Debt Profile: https://tradingeconomics.com/otis:us:debt
Do more with the Otis Worldwide model
Frequently asked
What does Otis Worldwide do?+
Otis Worldwide is the global leader in manufacturing, installing, and maintaining elevators, escalators, and moving walkways, serving over 2.5 billion people daily. The company operates through two main segments: Service, which includes maintenance and modernization, and New Equipment.
How does Otis Worldwide generate revenue?+
Otis Worldwide generates revenue primarily through its "razor and blades" business model, where new equipment sales at lower margins lead to highly profitable, long-term service and maintenance contracts. The Service segment contributes approximately 62% of net sales and 87% of operating profit, while New Equipment accounts for the remaining sales and profit.
What is Otis Worldwide's capital expenditure strategy?+
Otis Worldwide maintains an asset-light manufacturing footprint, with capital expenditure typically ranging from 1.0% to 1.2% of revenue annually. This capex is primarily for maintenance, including tooling, branch upgrades, and IT systems, with a focus on digitalization and the Otis ONE IoT rollout.
Why is Otis Worldwide's net working capital negative?+
Otis Worldwide's net working capital is structurally negative, providing a cash flow advantage. This is due to the company receiving advance payments and progress billings for New Equipment, as well as upfront annual payments for its highly profitable Service contracts.
Can I download a financial model for Otis Worldwide?+
Yes, a downloadable Excel financial model for Otis Worldwide is available, providing a sum-of-the-parts equity valuation and cash flow forecast. This model helps analysts assess how the company's profitable Service business balances cyclical challenges in the New Equipment segment.
What are the key segments of Otis Worldwide's business and their profitability?+
Otis Worldwide's business is divided into two segments: Service and New Equipment. The Service segment, encompassing Maintenance & Repair and Modernisation, is highly profitable, contributing approximately 62% of net sales and 87% of operating profit. The New Equipment segment accounts for about 38% of net sales and 13% of operating profit.
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