Otis Worldwide OTIS · USD

Segment Financial DataOur operations are classified into two operating segments: New Equipment and Service. Through the New Equipment segment, we design, manufacture, sell and install a wide range of passenger and freight elevators as well as escalators and moving walkways to customers in the residential, commercial and infrastructure projects. The Service segment provides maintenance and repair services for both our products and those of other manufacturers, and provides modernization services to upgrade elevators and escalators. The operating segments are generally based on the management structure of the Company, as well as how management allocates resources, assesses performance and makes strategic and operational decisions.Segment Information. Otis discloses segment operating profit as its measure of segment performance, reconciled to Net income before income taxes. Segment operating profit excludes certain expenses and income that are not allocated to segments (as described below in "Corporate and Unallocated").Otis' Chief Operating Decision Maker ("CODM") is the Company's Chief Executive Officer. The CODM assesses the performance of each operating segment and allocates resources to those segments based on net sales and segment operating profit. The CODM compares segment operating profit results to prior periods and forecasted amounts to assess performance and to make decisions regarding the allocation of capital and other investments. Discrete asset information for each segment is not presented to, or reviewed by, the CODM.

Income TaxesIncome Before Income Taxes. The sources of income from operations before income taxes are:(dollars in millions)202520242023United States$631 $505 $565 Foreign1,303 1,534 1,466 Net income before income taxes$1,934 $2,039 $2,031 As a result of the TCJA the Company determined it no longer intends to reinvest certain undistributed earnings of its international subsidiaries that have been previously taxed in the U.S. As such, Otis recorded the international taxes associated with the future remittance of these earnings as part of the Separation from UTC. For the remainder of the Company's undistributed international earnings, unless tax effective to repatriate, Otis will continue to permanently reinvest these earnings. It is not practicable to estimate the amount of tax that might be payable on the remaining amounts.On July 4, 2025, the One Big Beautiful Bill Act was enacted, which includes a broad range of tax reform provisions affecting businesses, including extending and modifying certain key Tax Cuts & Jobs Act provisions (both domestic and international). The tax impacts of this legislation do not have a material impact on our Consolidated Financial Statements.Provision for Income Taxes. The income tax expense (benefit) for 2025, 2024 and 2023 consisted of the following components:(dollars in millions)202520242023Current:United States:Federal$128 $74 $82 State56 45 50 Foreign399 217 462 583 336 594 Future:United States:Federal(59)(11)(24)State(16)(1)(5)Foreign(29)(19)(32)(104)(31)(61)Income tax expense$479 $305 $533 Attributable to items (charged) credited to (deficit) equity$(15)$(6)$16 Reconciliation of Effective Income Tax Rate. Differences between effective income tax rates and the statutory U.S. federal income tax rate are as follows: 202520242023(dollars in millions)AmountPercentAmountPercentAmountPercentU.S. Federal Statutory Tax Rate$406 21.0 %$428 21.0 %$427 21.0 %State and Local Income Taxes, Net of Federal Income Tax Effect (1)31 1.6 %35 1.7 %36 1.8 %Foreign Tax Effects:France:Distributable reserve deferred adjustment— — %(37)(1.8)%— — %Other13 0.7 %14 0.7 %10 0.5 %Germany:Statutory tax rate difference between Germany and United States8 0.4 %25 1.2 %7 0.4 %Tax litigation settlement1 0.1 %(247)(12.1)%— — %Other(1)— %— — %2 0.1 %Ireland:Nontaxable interest income(25)(1.3)%(29)(1.4)%(23)(1.1)%Other— — %3 0.2 %8 0.4 %Luxembourg:Nondeductible interest expense49 2.4 %53 2.6 %47 2.3 %Other— — %(4)(0.2)%(5)(0.

Leases ASU 2016-02, Leases (Topic 842) and its related amendments (collectively, "Lease Accounting Standard") establishes a right-of-use ("ROU") model that requires a lessee to record a ROU asset and a lease liability in the Consolidated Balance Sheets for all leases with terms longer than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the Consolidated Statements of Operations.We enter into lease agreements for the use of real estate space, vehicles and certain other equipment under operating and finance leases. We determine if an arrangement contains a lease at inception. Operating leases are included in Operating lease ROU assets, Accrued liabilities, and Operating lease liabilities in our Consolidated Balance Sheets. Finance leases are not considered significant to our Consolidated Balance Sheets or Consolidated Statements of Operations. We apply the practical expedient for short-term leases, whereby a lease ROU asset and liability is not recognized and the expense is recognized in a straight-line basis over the lease term.ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments, and use the implicit rate when readily determinable. We determine our incremental borrowing rate through market sources including relevant industry rates. Our lease ROU assets also include any lease pre-payments and exclude lease incentives. Certain of our leases include variable payments, which may vary based upon changes in facts or circumstances after the start of the lease. We exclude variable payments from lease ROU assets and lease liabilities, to the extent not considered fixed, and instead, expense variable payments as incurred. Variable lease expense and lease expense for short duration contracts is not a material component of lease expense. Our leases generally have remaining lease terms of 1 to 20 years, some of which include options to extend leases.

Business Acquisitions, Dispositions, Goodwill and Intangible AssetsBusiness Acquisitions. Our acquisitions of businesses and intangible assets, net of cash, totaled $109 million, $87 million and $36 million (including debt assumed) in 2025, 2024 and 2023, respectively, and were primarily in our Service segment. Transaction costs incurred were not considered significant.Goodwill. Changes in our Goodwill balances in 2025 were as follows:(dollars in millions)Balance as ofDecember 31, 2024Goodwill ResultingFrom Business CombinationsForeign CurrencyTranslation and OtherBalance as ofDecember 31, 2025New Equipment$277 $— $17 $294 Service1,271 65 65 1,401 Total$1,548 $65 $82 $1,695 Changes in our Goodwill balances in 2024 were as follows:(dollars in millions)Balance as ofDecember 31, 2023Goodwill ResultingFrom Business CombinationsForeign CurrencyTranslation and OtherBalance as of December 31, 2024New Equipment$295 $— $(18)$277 Service1,293 46 (68)1,271 Total$1,588 $46 $(86)$1,548 Intangible Assets. Identifiable intangible assets are comprised of the following:20252024(dollars in millions)Gross AmountAccumulatedAmortizationGross AmountAccumulatedAmortizationAmortized:Purchased service portfolios$2,133 $(1,818)$1,930 $(1,640)Patents, trademarks/trade names19 (16)18 (16)Customer relationships and other61 (43)52 (39)2,213 (1,877)2,000 (1,695)Unamortized:Trademarks and other7 — 6 — Total$2,220 $(1,877)$2,006 $(1,695)Amortization of intangible assets was $62 million in 2025 and 2024, and $67 million in 2023. Excluding the impact of acquisitions, currency translation adjustments and the reclassification of $16 million of intangible assets, net to assets held for sale in 2024, there were no other significant changes in our Intangible Assets during 2025, 2024 and 2023.The estimated future amortization of intangible assets over the next five years is as follows:(dollars in millions)20262027202820292030Future amortization$46 $40 $35 $32 $29 Disposals and Held for Sale Assets and Liabilities. Assets held for sale were $5 million and $38 million as of December 31, 2025 and 2024, respectively. Liabilities held for sale were $9 million as of December 31, 2024. There were no liabilities held for sale as of December 31, 2025. These balances are included in Other current assets and Accrued liabilities in the Consolidated Balance Sheets, respectively.During 2025, we sold one of our non-U.S. subsidiaries, primarily related to the Service segment.

Cybersecurity Risk Management and StrategyThe security of our products, services and corporate network is a key priority for our business. We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats (as defined in Item 106(a) of Regulation S-K). These risks include, among other things, operational risks, intellectual property theft, fraud, extortion, harm to employees, customers, business partners or the riding public, violation of privacy or security laws and other litigation and legal risk, and reputational risks. Otis has taken a risk-based approach to cybersecurity, which considers the sensitivity and volume of the relevant data, the potential effects on third parties and individuals, the needs of our business, and the costs and/or practicality of remediation. Based on this qualitative and quantitative assessment, we determine if identified cybersecurity risks are at an acceptable level, or should be mitigated or transferred. We have implemented cybersecurity policies throughout our operations, including designing and incorporating cybersecurity, as appropriate, into our products and services while they are being developed. Our enterprise risk management ("ERM") process considers cybersecurity threat risks alongside other company risks as part of our overall risk assessment process. Additionally, cybersecurity functional groups incorporate external research and intelligence gathering to keep the organization informed of new and evolving cyber risks.

StockPreferred Stock. There are 125 million shares of $0.01 par value authorized Preferred Stock, of which none were issued or outstanding as of December 31, 2025 or 2024.Common Stock. There are 2.0 billion shares of $0.01 par value Common Stock authorized. As of December 31, 2025 and 2024, 439.4 million and 438.6 million shares of Common Stock were issued, respectively, which includes 49.6 million and 41.0 million shares of treasury stock, respectively.Treasury Stock. As of December 31, 2025, the Company was authorized by the Board of Directors to purchase up to $2.0 billion of Common Stock under a share repurchase program, of which approximately $1.3 billion was remaining at such time. During 2025, 2024 and 2023, the Company repurchased 8.6 million, 10.6 million and 9.6 million shares of Common Stock, respectively, for approximately $800 million, $1.0 billion and $800 million, respectively. Share repurchases in excess of issuances are subject to a 1% excise tax, which is included as part of the cost basis of the shares acquired in Treasury Stock in the Consolidated Balance Sheets as of December 31, 2025 and 2024, as well as within financing activities in the Consolidated Statements of Cash Flows when paid.The Company's share repurchase program does not obligate it to acquire any specific number of shares. Under this program, shares may be purchased on the open market, in privately negotiated transactions, under accelerated share repurchase programs or under plans complying with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended.

GuaranteesThe Company provides service and warranty on its products beyond normal service and warranty policies. The carrying amounts of service and product guarantees were $10 million and $16 million as of December 31, 2025 and 2024, respectively.The Company provides certain financial guarantees to third parties. As of December 31, 2025, Otis has stand-by letters of credit with maximum potential payment totaling $181 million. We accrue costs associated with guarantees when it is probable that a liability has been incurred and the amount can be reasonably estimated. The most likely cost to be incurred is accrued based on an evaluation of currently available facts, and where no amount within a range of estimates is more likely, the minimum is accrued. In accordance with the FASB ASC Topic 460: Guarantees, we record these liabilities at fair value. As of December 31, 2025, Otis has determined there are no estimated costs probable under these guarantees.

InventoriesInventories consisted of the following as of December 31:(dollars in millions)20252024Raw materials and work-in-process$139 $134 Finished goods474 423 Total$613 $557 Raw materials and work-in-process and finished goods are net of valuation write-downs of $84 million and $82 million as of December 31, 2025 and 2024, respectively.