Otis Worldwide Corporation
Q1 2020 Earnings Call Transcript

Published: 7 May 2020

[Operator:]

Good morning, and welcome to Otis' First Quarter 2020 Earnings Conference Call. This call is being carried live on the Internet and recorded for replay. Presentation materials are available for download from Otis website at www.otis.com. I'll now turn the call over to Stacy Laszewski, Vice President of FP&A and Investor Relations.

[Stacy Laszewski:]

Thank you, Angela, and good morning to everyone. Welcome to Otis' First Quarter 2020 Earnings Call. On the call with me today are Judy Marks, President and Chief Executive Officer; and Rahul Ghai, Executive Vice President and Chief Financial Officer.

[Judith Marks:]

Thank you, Stacy, and good morning, everyone. We hope that everyone listening across all of our stakeholders is safe and well. We're glad that you could join us today on Otis' first earnings call post-spin, another important milestone for us in this new era as an independent company. Before I discuss our first quarter results and Otis' outlook, let me share some insights into our people, our business, our management through this crisis and more importantly, our commitment to our long-term strategy and values. Employee health and safety, a core value, is first and paramount to us. I am proud of our 69,000 colleagues who are supporting our customers and the riding public during these unprecedented times. Elevator maintenance and repair was deemed an essential service in most countries and cities. And we continue to service the largest global maintenance portfolio, including elevators in hospitals, critical infrastructure and residential buildings, and we're doing this while prioritizing and paying utmost attention to ensure the health and safety of our workforce around the world, allowing many employees to work from home and providing the proper PPE and guidelines for safe and hygienic working conditions for our colleagues in the field and our manufacturing operations. Early in Q1, we made critical decisions to ensure business continuity, and this helped us navigate the COVID-19 impacts, first in China and many countries throughout the world. Today, all 14 of our principal factories are open. Our supply chain team has done an excellent job locally and globally in minimizing disruptions to our factories and our field sites while meeting customer demands. Our decision to air ship critical parts early during this outbreak has enabled us to protect the supply chain, and we're confident that Otis factories around the world are ready to manufacture at full capacity as soon as job site demand resumes and businesses start to return to normal. During this time, we've extended support to our vendors where necessary, providing advances to limit supply disruptions.

[Rahul Ghai:]

Thank you, Judy, and good morning, everyone. Starting with Q1 results on Slide 5. Net sales were $3 billion, down 4.4%, with slightly less than half of the decline coming from organic sales and the vast from the impact of foreign exchange and net divestitures in 2019. Strong organic sales growth of 3.3% in the service segment was more than offset by a 9.8% decline in new equipment due in part to COVID-19. Adjusted operating profit was up approximately 4% or $17 million and up $27 million at constant currency. Operating profit growth at constant currency was driven by approximately $45 million of operational improvement from higher service volume, strong material and service productivity, lower SG&A and transactional foreign exchange favorability. This was partially offset by the impact of COVID-19 that reduced operating profit by an estimated $17 million due to lower volume and underabsorption of costs. Adjusted operating profit margin expanded 120 basis points to 15.2%, with margin expansion in both new equipment and service segments. R&D as a percentage of sales was flat versus prior year, and adjusted SG&A expense improved by about $30 million in the quarter. Adjusted EPS was down $0.02 as the $0.04 improvement from operating profit and lower net interest cost was more than offset by $0.06 of headwind from tax due to an unfavorable year-over-year compare in the quarter and higher noncontrolling interest costs. Moving to Slide 6. New equipment orders grew 5.6% at constant currency, excluding China, and were flat overall for Otis. New equipment orders grew double digits in the Americas; mid-single digits in Europe and the Middle East; and declined low teens in Asia, including China. This strong order growth was delivered in a global market that was down mid-single digits excluding China and down mid-teens globally as the China market declined an estimated 20% in Q1.

[Judith Marks:]

Thanks, Rahul. A great start to the year. And while the pace of recovery is not known yet, Q1 results illustrate that we are on track to support our investment thesis and long-term strategy. We're confident that Otis will endure and succeed despite today's current challenges. And I want to close by reminding you of the strong fundamentals behind this fantastic business. This is truly an iconic brand in this large industry, where we have been the leader. Over the medium term, we expect sustainable growth and global share gain and new equipment to continue to expand on our leading 2 million unit service portfolio, the heart of our recurring business model, where we'll continue to focus on margin expansion through productivity. And in these difficult times, we're going to continue to invest for growth, maintaining a sustainable level of R&D and capital expenditures to ensure that when we all return to our normal lives, we are still at the forefront of technology, driving digital innovations, providing new solutions for our customers and empowering our field professionals with tools to make them more effective. You have our commitment that we'll use our robust cash generation in excess of 100% of net income to create shareholder value, and you saw that with our dividend announcement yesterday. With that, I'd like Angela to open up the line for questions.

[Operator:]

. Our first question is from the line of Jeff Sprague with Vertical Research.

[Jeffrey Sprague:]

Congrats on a great start out of the gate. A couple from me, if I could, please. First, Judy or Rahul, could you comment a little bit more on what you're seeing on pricing and the potential pressure on bad debt? And is the pricing comment essentially a new equipment issue? Or are you seeing that across the service business also?

[Rahul Ghai:]

All right, Jeff. So pricing, actually, we had a good start to the year. I mean, as I mentioned in my prepared remarks, the new equipment - the booked margin actually expanded. We saw that, and it was pretty strong across the globe with small - slight pressure in Asia. But outside of that, it was fairly good. So really, really good start to the year. In America, where we saw some pricing last year, the pricing was stable this year. Europe, we saw good pricing. And the same thing - even in China, where the markets were down, we were - our booked margins actually went up a little bit. So good start to the year on the new equipment side. And same thing on service pricing as well. And the service pricing held up really well in Q1. And we gained a little bit of price in Q1, and we implemented our regularly scheduled price increases that we had planned. Having said that, I mean, the situation in Q2 is different, and we're working with our customers in the hardest-hit sectors in hospitality, in retail, et cetera, that Judy mentioned a little bit in her prepared comments. These sectors make up about less than 10% of our service installed base. And - but these are temporary concessions and therefore, a very specific period of time, and we do not expect any long-term impact from these. Also, most of our customers do understand that we do have fixed costs like our Otis call center, and we need to maintain and address service issues and - even when the buildings are only partially occupied. So that is why the concession requests have been very limited, and we've addressed each one of them individually. But as we gave guidance, we obviously factored in that these concession requests might increase. Again, as I said, we have not seen a lot of these. There have been a few and - which we've addressed them at one at a time. But in our guidance, we've assumed some impact and - especially at the higher end of the range. And same thing on new equipment. We've assumed that there is a little bit of pricing pressure in the back end of the year, especially on the new orders. Now most of that will not impact this year. But on the service pricing, the concessions that we're talking about will come through our results this year. So that's what we've kind of guided to. Same thing on the bad debt. The results were okay in Q1. There was not a lot of incremental P&L expense. We did take not a lot of incremental P&L expense in Q1, but we have factored some in our outlook at the back end of the year.

[Judith Marks:]

Yes. Jeff, this is Judy. The long-term relationships we have with these customers are that we're there for them when times are challenging as well. And as Rahul said, the hospitality retail segment is just under 10% for us. I really was pleased, China price/mix up for the seventh straight quarter. So new equipment, again, although it was up - booked margin was up everywhere. China, again, delivering, especially in a COVID quarter. And then on our service pricing, our revenue per unit was up as well for another quarter. So those indications, again, strong performance in Q1, and we're going to continue to watch price in Q2 through 4.

[Jeffrey Sprague:]

Great. And maybe just an unrelated second question just on tax. With a little bit more time under your belt, do you have a kind of better idea of what the - maybe the 2 or 3 year trajectory of the tax rate might be?

[Rahul Ghai:]

Again, it's early days, Jeff, right? Overall, we feel that we're making progress. I mean our last year tax rate was 34%. We guided to 33% on Investor Day. Now we are at 32%. And the improvement that you're seeing between Investor Day and now is coming from reduction in the taxes that we have to pay on repatriation of cash. If you recall at Investor Day, we had mentioned that we had about 2 to 3 points of tax headwind because we needed to pay tax when we repatriate cash into the U.S. And that, we've been able to work on certain projects to reduce that, and we are taking incremental actions in early 2021 to maybe take some of our dollar-denominated debt and convert that into euro-denominated debt. So we're taking incremental actions. And beyond that, we are working on several initiatives to structure our business better and to reduce the tax that we pay on high-tax jurisdictions. We'll keep updating you as we learn more, but we are in early stages. But I'm confident that rate is going to come down over time.

[Operator:]

And your next question is from the line of Julian Mitchell with Barclays.

[Julian Mitchell:]

And actually, congrats on getting a tricky first quarter out of the way. Maybe one thing that might be helpful is when we're thinking about the recovery slope is just a bit more color on the end market split, Judy, if you'd be willing to provide that. Understood that hospitality and retail is sub-10%, but perhaps if you could flesh out maybe some of the other splits. Or if not, at least give us some context as to how your split might differ from the one that KONE provided a couple of weeks ago just directionally.

[Judith Marks:]

Sure, Julian. So the residential market, which obviously is not single-family homes, the residential market is north of 50% for us in both of our segments, and that tracks the industry overall. That's really where the strength has been coming from and the usage has been coming from that we've been seeing the demand as well on repair is in the residential segment. Other than that, we really don't break these out below that. But as you can imagine, we are talking to a lot of customers as they do rebound and more importantly, reopen and come off pause as to how they want their buildings to be utilized, especially in the office and commercial space, whether that's malls or more importantly, office buildings. So we've got lots of requests to help with limited spacing. We've gotten helps - requests to help with additional products. But I think what it does is it reinforces our Compass product, our destination dispatch product, which does allow touch-free utilization as well as improved utilization of elevators. So it's early days to see where - when the recovery happens and how the world reopens, but we're in significant dialogue with lots of our customers across all segments on that.

[Julian Mitchell:]

And then maybe just a follow-up question for Rahul on the free cash flow. Maybe just help us understand that free cash flow pressure in the first quarter and how quickly the free cash flow recovers. And also, I guess, I was a bit confused, because if I look at the material, I think you have about $975 million of free cash flow guide at the midpoint. I guess excluding NCI, about $890 million of adjusted net income at the midpoint. So it's maybe about a 110% conversion on adjusted net. But I think the conversion you present is versus GAAP net income. So just wanted to check that. And does that mean that GAAP net income and adjusted net income are broadly similar for the year even with that big delta in Q1?

[Rahul Ghai:]

Yes. Let's start with Q1 cash, Julian. So we feel we had a good start to the year despite the COVID-19 situation. So in our Q1 cash, we pulled forward about $70 million of tax payments from Q2 through Q4, and that was primarily due to the spin. So that's in our Q1 results. Again, Judy had it in the prepared remarks. Also, we did extend support to our vendors, especially in China. And you see that our payables were down about $200 million from December to March. So - and part of this decline was to support getting our supply chain up and ready in China, and this cash flow impact should get mitigated between Q2 and Q3. But despite the impact that we saw in China, our working capital actually came down by about $30 million in the quarter, and then we had about $47 million of separation costs. So overall, we feel that we had a very strong performance operationally given the pull forward of tax payments, the impact that we saw in China given the support that we had to extend to our vendors and then the separation costs. So working capital coming down. So overall, we feel really good about how our business performed on cash given the overall environment. Now what you will see - and going back to your second question on how this kind of translates into the rest of the year. Now Q2 is going to be a little bit challenging in Europe and China - Europe and the U.S. China is going to recover, but we will see some pressure in Q2 in Europe and the U.S. And then - so our cash flow will be a little bit more skewed towards Q3 and Q4 than it typically is, but you would expect that given the overall macroeconomic environment. But we feel good about our guidance. I think we've done - we've taken good steps to offset and mitigate some of the impact that is coming through from the drop in net income from our previous guide to this guide. I mean if you look at the guide-to-guide on our net income, probably down at the midpoint at AFX, about $150 million. And we've mitigated that through lower Capex. We've reduced our interest cost. There are some tax payments that we try to manage, some of that coming through the CARES Act. But we try to put all that in and yet drive $975 million of cash as kind of the midpoint. So it's - we feel good about our back-end recovery in cash flow. Now on the conversion question, you're right, Julian. It is about 110% on our reported net income basis. But the guide that we provided to - includes some of the cash that will outflow on the separation costs, the PSA payments that you'll have to make to UTC. So we factored that in. And some of the restructuring that we've taken - the restructuring has actually gone up year-over-year as well. So that reflects some of the impact on that. So adjusting for some of the onetime expenses we will have, the number is between $110 million to $120 million. And we've excluded any noncash onetimers. Like the asset write-off that we had in Q1, we've excluded that from the calculation. So it is purely on the GAAP net income adjusting for any noncash charges that we will have. So that's the guide. That's the range, $110 million to $120 million. And as adjusted net income, which we'll speak to, that's at 110% at the midpoint.

[Operator:]

And your next question is from the line of Steve Tusa with JPMorgan.

[Steve Tusa:]

Just to clarify, that $70 million tax payment is kind of part of the - is that part of the separation and you're including that in the $975 million?

[Rahul Ghai:]

No. It's not part of the separation, Steve. It is - it got pulled forward into Q1 because of sort of spin related - consequences of spin. Let me put it that way. So that's what - we're working on some things. It's complicated. But the reality is no impact to full year. It got pulled forward into Q1 due to the spin. So that's it.

[Steve Tusa:]

Right. So I guess, like your cash tax rate is kind of consistent this year with what you would expect going forward is the point absent any of the moves you're going to make strategically on your GAAP tax rate.

[Rahul Ghai:]

For full year, it will have no impact to our cash taxes. Right. So that's right.

[Steve Tusa:]

Right. Right. So it won't be a tailwind next year is your point?

[Rahul Ghai:]

No. It won't be a tailwind next year.

[Steve Tusa:]

Got it. Okay. That makes sense. When you talked about the pricing dynamics, so you kind of bounced back and forth between services and new equipment. How should we think about that breakout? Is there a heavier weighting to one or the other? I mean you talked about kind of helping some customers out. That seems like it would be more of a services dynamic. Maybe you could just, like, flesh out if there's more of a weighting to one or the other.

[Judith Marks:]

Yes. So in terms of the concessions we've made, those are 4 services mainly in the hospitality industry mainly in the U.S., Steve, just so you understand. Our China team was able to really work through this very rapidly. And obviously, these are long-term partnerships, and we're being a responsive partner and supplier. But as we look at booked margin on the service side, it was up fairly significantly, mainly in EMEA and China. And then it was up more significantly than the new equipment booked margin was up. But the new equipment book margin, obviously, it drives our $16.5 billion backlog fairly substantively over the ensuing 24 months. So any time we can get that booked margin up on orders, be it in China or anywhere else in the world, it's a nice rolling tailwind for us as we look into the next year's sales.

[Steve Tusa:]

Okay. Got it. And then one just last question on the second quarter. If you look back to last year, pretty punchy number for new equipment margins. You had pretty significant, I think, mix kind of tailwind. Maybe that was China flowing through. So the year-over-year comp there looks kind of tough. Maybe if you could just give us some kind of sequential color on - to kind of calibrate everybody for what's coming here in the second quarter, acknowledging that things will kind of bounce back or bounce around in the second half. Are we - from an EPS perspective, could we be down as much as kind of 30% to 40% sequentially 1Q to 2Q?

[Rahul Ghai:]

Yes. So we don't want to comment on specific numbers, Steve, but you're right. And Q2 is probably going to be our toughest quarter, without a doubt. I mean you see what's happened in April, and we've seen some recovery in May, obviously, as things begin to open up. But April was a really tough month for us, and you saw that - some of the data that we put out there. So we do expect a fairly sharp decline in organic revenue year-over-year, and it's going to be more so on the new equipment side for - and then less on the service - and then the service is going to be mainly on modernization and repair. But the new equipment side is going to be impacted substantially in Q2. So that is what we are expecting. So you're right in terms of modeling. Obviously, we had a good start to the year. Q2 should kind of maybe kind of offset some of that, and then we see recovery in - on the new equipment side starting to happen in the back half of the year.

[Judith Marks:]

So Steve, let me...

[Steve Tusa:]

Yes. So new equipment margins will be down quarter-to-quarter? Or can you hold those flat?

[Rahul Ghai:]

New equipment margins could be down quarter-to-quarter. We're not going to give specific guidance, but yes, they could give what we're seeing. And it all depends on - the reason we're hesitating, Steve, a little bit is it all depends on how the recovery is in June. If we're coming out of the gate - if the job sites begin to open up and we are able to get quickly to work and we resume activity, it could be a little bit better. So that's where we're hesitating because it just is the near-term outlook is kind of not very clear at this point. So that's where we're kind of hedging ourselves a little bit.

[Judith Marks:]

Yes. And Steve, we really are watching open - how job sites - the pace at which job sites are opening very carefully. And we're monitoring it almost on a daily basis in the regions. But when you look at a company - a country that was in lockdown like Italy, the job sites are now almost 35% open. In Spain, they're almost 90% open. And so we're really seeing the construction part of the new - which is the main element of new equipment, obviously, other than the manufacturing is the installation and construction piece. It's that speed of recovery that we're trying to watch and calibrate and monitor for 2Q.

[Operator:]

And your next question is from the line of Carter Copeland with Melius Research.

[Carter Copeland:]

And welcome to the independent world and your first conference call. It's a great set of results.

[Judith Marks:]

Thanks, Carter.

[Carter Copeland:]

Just a couple of quick ones. One, Rahul, I wondered if you could give us a little bit more color on the cost-out actions and how much of that is temporary, things like furloughs versus anything that might be run rate as we look further into the future. And then one for Judy. Just wondering about the impact of this whole thing and the change that it may bring on the competitive landscape on the service side just given your scale benefits versus ISPs. I mean I would assume you can bring much more to bear in terms of service performance and reliability. I just wondered if you might give us some thoughts on that.

[Rahul Ghai:]

Yes. So obviously, as you would expect, that at the midpoint of $300 million of cost takeout actions that we have planned for, it's a combination of both. I mean it's a combination of structural actions. It's also a lot of the short-term actions that we're taking, which Judy mentioned, including furlough, merit deferral. So it's a combination of the two and if you see our restructuring numbers, we upped that to $70 million to $80 million. We spent about $50 million to $60 million last year. So it's incrementally higher. We are looking at our structural cost at a very, very hard way, looking at where duplication of work is happening, pulling that out. So we are taking a lot of hard restructuring actions, as you would expect us do. So that's a piece of the cost takeout. But a lot of these actions may have a more limited impact in 2020 and probably help us in 2021 more than they help us in 2020. In 2020, a lot of the benefit that you will see come through is going to be from the short-term actions that we are taking. So that includes merit deferrals. That includes furloughs and executive pay reductions, all the things that you would expect us to do. And we're going to watch this thing very carefully, and it depends on whether - how it translates into 2021, depends on how the revenue comes back. And our goal will be to ensure that we take enough structural cost out to mitigate the impact of any onetime headwind that we will get from these actions that we're taking.

[Judith Marks:]

And let me address your second question, Carter, on impact to service. We've looked back and modeled the global financial crisis to understand what transpired there. And for those of you that covered Otis as part of UTC back then, you'll recall we had a 10 percentage point, not just 10 basis points, 10 percentage point higher ROS than our local nearest competitors. The two biggest differences that we're seeing coming with COVID-19 right now in 2020 are the precipitous building closures, which are having an impact, not just on the construction side but on our access for repairs, especially discretionary repairs. We did not see this during the global financial crisis. And the other key element is there's no oversupply right now of the skilled technicians and field professionals, which we did have back in the global financial crisis. So we have worked extremely hard to maintain - we have 40,000 service - field professionals, 33,000 service to make sure that, working with our workers' councils, our unions, that we have retained and are engaged with our field workforce because this is a labor business, and they're the strength of our company to drive all of our servicing globally. We have the liquidity as well, which some of the ISPs won't have. So we see the dynamic changing. We've started a recapture campaign while our sales forces are mainly working from home to be able to grow our portfolio and to get some of our customers back, who may have left us for ISPs over the years. And then we have sustained our investment in our Otis ONE IoT offering so that we'll continue to have both technological as well as transparent and predictive information to be able to provide service in a more productive way and a better way for our customers. So I actually see service coming out of this once we get through the discretionary delays. I don't think they're a demand issue. It's really a delay issue. And once we get through those, we see service having the potential to accelerate.

[Operator:]

And your next question is from the line of Cai von Rumohr with Cowen.

[Cai von Rumohr:]

Terrific. So you mentioned the 60% of your base, resi and retail hospitality. What's the other 40%? How is it split between infrastructure, hospitals and commercial office? And are you seeing any weakness there, specifically commercial office?

[Judith Marks:]

Yes. Cai, this is Judy. We don't disclose the segments that way - the end markets that way. I can tell you, our infrastructure business is continuing. Obviously, it's a broad-based business, great success in China as well as the rest of the world. But obviously, linkage to what's happening in the aviation market because not only do we support metros and rail and stadiums, we also obviously support airports. All that maintenance work is continuing in our service business, but there are several large bids that are still underway for airport modernization that we think is going to be demand delay as well. But again, we don't break those out specifically.

[Cai von Rumohr:]

Great. And then a second one on the concessions. I mean given that you're the strongest service population in the Americas, where there have been requests for concessions in the hospitality section and retail, are you seeing that trend getting worse? And what does that imply for service margins in the second quarter relative to the first?

[Rahul Ghai:]

The trends are not getting worse, Cai. We did, as you would expect, that we've been working with our customers to make concessions where they're applicable, where the industries are hurting. Judy said we do believe in long-standing relationships with customers. So we have to react and share some of the pain that they are suffering. So that was where we came out, and we made certain concessions that are tied and limited to a certain price - certain time period. So that's where we worked. Now it's not getting worse. You will see some impact from that in Q2, and some of that may spill over into Q3 depending on when those concessions started. But it's for a very, very limited period of time, and it's going to be spread between Q2 and Q3.

[Operator:]

And your final question is from the line of Nigel Coe with Wolfe Research.

[Nigel Coe:]

Last question so I better make this a good one. So look, turning to the profit bridge, the - that COVID-19 bucket, the $260 million to $515 million buckets, I mean, obviously, that includes price, bad debts and absorption and of course, volumes. But when you think about the raw volumes, decremental margins we should expect for new equipment and for service, how do we think about that? I mean how does that break out between the 2 segments?

[Rahul Ghai:]

So the way I would think about this, Nigel - and the question - your question is always good, right? So it doesn't matter whether it's the last one or the first one. So in terms - so if you look at our disclosures that we have made, our contribution margin on new equipment averages between, depending on the quarter, about 17% to 18%, right? So that's our overall contribution on new equipment. And the service side, it's obviously higher. And so we - overall, if you look across the entire business, that averages out about 25%, 26% contribution margin. But then there is some underabsorption of cost when the revenue decline is as sharp as what we're seeing this year, especially on the service side because the fact is in service, we primarily use our own technicians to service the elevators and modernize those elevators. So that's where we see some incremental pressure because of underabsorption of cost. So that's what we've kind of modeled in that bucket. It's that contribution margin, plus there's an incremental impact from underabsorption of cost. Now we are working to offset that and you see some of that on the - in the green bucket. As we spoke about, we have taken actions wherever we could to reduce the underabsorption through - whether it's through restructuring actions or through furlough. So we are taking actions to reduce the underabsorption. So we kind of - one is on the left, the other one is in the middle of the page. So that's what that is. So overall, you should think about 25% of our contribution margin plus an additional impact from underabsorption.

[Nigel Coe:]

Great. That's good information. And then just a couple of quick ones here. So the outlook for the service outlook, the low to mid-single-digit declines, you've given some great regional flavor there. But should we expect that most of that, if not all of it, lands in 2Q? Or are you assuming that there could be some declines in 3Q as well?

[Judith Marks:]

Yes. I think it depends, Nigel, on whether we're going to see the high end or the low end. So on the high end, we think the majority of it is in Q2, but it will continue for the repairs depending on how the - our access to buildings are. And then obviously, on the low end, we do see, again, that whole - second half of the year being far more challenged and rolling out throughout the whole year.

[Nigel Coe:]

Great. And then just a quick one on NCI. A bit stronger than expected, certainly in light of what's China - the performance in China in 1Q. So just wondering what drove that higher.

[Rahul Ghai:]

In Q1, Nigel? Is that the question?

[Nigel Coe:]

In Q1, yes.

[Rahul Ghai:]

Q1, yes. Our profit with some of the JVs that we had in Spain and China was better. And we did better year-over-year in some of those businesses, and that drove a higher JV - payment to our JV partners.

[Nigel Coe:]

So China JV income was actually higher year-over-year?

[Rahul Ghai:]

Again, we don't talk about China specifically. But between China and Spain, that makes up about 75% of our overall income, and that's what's driving our incremental expense on NCI in Q1. But our China business did very, very well despite the challenges on volume.

[Nigel Coe:]

Got it. Okay. And congratulations on getting the ship launched.

[Operator:]

Thank you. I am showing no further questions at this time. I will now turn the call back to Judy Marks for closing remarks.

[Judith Marks:]

Well, thanks again for joining the call this morning. During these uncertain times, we remain focused on executing our strategy, managing risks and driving value for Otis shareholders. I want to thank our colleagues for their dedication as well as those on the front-line fighting COVID-19. Please stay safe and well, and we hope to hear from you all soon. Thank you.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and have a wonderful day. You may all disconnect.