OTIS 10-K & 10-Q changes, risk factors and insider trading

Our business, financial condition, operating results and cash flows may be adversely affected by changes in global economic conditions, including levels of consumer and business confidence, commodity prices, raw material and energy costs, supply chain issues, trade policies,policies (including tariffs and trade barriers,barriers), foreign currency exchange rates, interest rates, labor costs, levels of government spending and deficits, actual or anticipated default on sovereign debt, political conditions, including in connection with the new administration's policies and prioritiesconditions in the U.S. or otherwise, regulatory changes and other challenges that could affect the global economy. In addition, the current global economic environment has resulted, and may continue to result, in increased levels of commodity, materials and wage inflation. These various global economic conditions have affected and may continue to affect our business in a number of ways as discussed in more detail in this Item 1A and elsewhere in this Form 10-K. More particularly, a slowdown in building and remodeling activity, whether due to remote work or otherwise, or decreased public spending on infrastructure projects could adversely affect our financial performance.

The occurrence of one or more unexpected events, including war (see discussion below regarding ongoing conflicts), acts of terrorism or violence, civil unrest, pandemics, fires, tornadoes, hurricanes, earthquakes, floods and other forms of natural disasters or severe weather, whether as a result of climate change or otherwise, in the United States or in other countries in which we operate or in which our suppliers are located could adversely affect our operations and financial performance. Natural disasters, pandemics, equipment failures, prolonged power outages or other unexpected events could result in physical damage to and complete or partial closure of one or more of our manufacturing facilities or temporary or long-term disruption in the supply of component products from some local,of national and internationalour suppliers, disruption and delay in the transport of our products to customers or limit our access to building sites and to install our products or perform our services. Existing insurance coverage may not provide protection for all of the costs that may arise from such events. The impacts of these unexpected events are difficult to predict, but could result in higher costs or delays in our operations and/or adversely affect economic conditions in the regions where we operate and our financial performance.

Our international operations subject us to risks associated with government policies on international trade and investments and risks associatedin withgeneral and particularly in China.

Our international sales and operations are subject to risks associated with changes in local government laws, regulations and policies, including those related to investments and limitations on foreign ownership of businesses, taxation, foreign exchange controls, capital controls, local manufacturing, product content or supplier requirements, employment regulations and the repatriation of earnings. Government policies on international trade and investments such as import quotas, capital controls, punitive taxes or tariffs or similar trade barriers, whether imposed by individual governments or regional trade blocs, can affect demand for our products and services, impact the competitive position of our products or services, or encumber our ability to manufacture or sell products in certain countries. TheInternational implementationtransactions also involve increased financial and legal risks due to differing legal systems and customs in foreign countries, which could result in increased costs, risk of more restrictive trade policies, including the imposition of further tariffs in connection with the new administration in the U.S. and retaliatory tariffs in response thereto,fines or thepenalties renegotiationas ofwell existingas tradereputational agreements with the U.S. or countries where we sell large quantities of products and services, procure materials incorporated into our products, manufacture products or recruit and employ employees (see discussion on China below), could have a material adverse effect on our business, results of operations and financial condition, including our ability to recruit and retain employees or deploy certain employees to the geographies where their skills are best utilized.harm. Our international sales and operations are also sensitive to changes in foreign nations’ priorities, including government budgets, as well as to political and economic instability. International transactions may involve increased financial and legal risks due to differing legal systems and customs in foreign countries.

China is currently the largest end market for sales of new equipment in our industry, with our New Equipment net sales in China representing approximately one fourthfifth of our global New Equipment net sales and over half of our global New Equipment unit volume and a growing part of our Service segment. Changes to market and economic conditions in China, including credit conditions for our customers, or an escalation of trade conflicts between the U.S. and China, have recently impacted and may continue to impact our ability to maintain New Equipment net sales in China at rates consistent with prior years.years as well as future growth of our Service segment. Additionally, the escalation of trade conflicts between the U.S. and China could further impact economic conditions in the U.S. and China. Furthermore, as is the case in many countries where we operate, the legal and regulatory changes in China,China could impose significantadditional regulatory and legal requirements, including requirements uniquethat tocould increase costs in China inand/or order to maintainrestrict access to Chinese marketsmarkets, andwhich could negatively impact our overall financial performance.

Our international sales and operations are subject to risks associated with geopolitical conflicts.conflicts, Theincluding the ongoing conflicts between Russia and Ukraine and instability in the Middle EastEast. Geopolitical conflicts, including threats related thereto, have resulted in worldwide geopolitical and macroeconomic uncertainty, and we cannot predict how the conflicts will evolve or the timing thereof. If thesecurrent geopolitical conflicts continue for a significant time or further expand to other countries and depending on the ultimate outcomes of these conflicts, which remain uncertain, they or new geopolitical conflicts could have additional adverse effects on macroeconomic conditions, including but not limited to, increased costs, constraints on the availability of commodities, supply chain disruptions and decreased business spending. Furthermore, continuation of the conflicts could give rise to disruptions to our or our business partners’ global technology infrastructure, including through cyberattack or cyber-intrusion; adverse changes in international trade policies and relations; regulatory enforcement; our ability to implement and execute our business strategy; terrorist activities; our exposure to foreign currency fluctuations; and constraints, volatility, or disruption in the capital markets, any of which could have a material adverse effect on our business, results of operations, cash flows and financial condition. See Item 7 "Business Overview" in this Form 10-K for more information regarding the sale of our business in Russia.

We design, manufacture, install and service products that incorporate advanced technologies; the introduction of new products and technologiestechnologies, including artificial intelligence, involves risks, and we may not realize the degree or timing of benefits initially anticipated.

We seek to grow our business through the design, development, production, sale and support of innovative products that incorporate advanced technologies. The product and service needs of our customers change and evolve regularly, and we invest substantial amounts in research and development efforts to pursue advancements in technologies, products and services. Our ability to realize the anticipated benefits of our technological advancements, such as the development and execution of advanced digitaltechnologies, technologiesincluding artificial intelligence ("AI"), for the benefit of our New Equipment or Service segment or the development of new products depends on a variety of factors, including meeting development, production, certification and regulatory approval schedules; execution of internal and external performance plans; availability of supplier and internally produced parts and materials; performance of suppliers and subcontractors; hiring and training of qualified personnel; employee adoption of new technologies; achieving cost and production efficiencies; validation of innovative technologies; our ability to maintain new products at the Service levels and costs anticipated; and customer interest in new technologies and products and acceptance of products we manufacture or that incorporate technologies we develop.

Our research and development efforts may not result in innovative products or services that incorporate new technologies for our New Equipment and Service segments, or products or services being developed on a timely basis or that meet the needs of our customers as effectively as competitive offerings. In addition, the markets for our products or services, or products that incorporate our technologies, may not develop or grow as we anticipate. We or our customers, suppliers or subcontractors may encounter difficulties in developing and producing new products and services, and may not realize the degree or timing of benefits initially anticipated or may otherwise suffer significant adverse financial consequences. Due to the design complexity of our products, we may experience delays in completing the development and introduction of new products. Any delays could result in increased development costs or divert resources from other projects. If we are unable to successfully develop and timely introduce new products, services and technologies, our competitors may develop competing technologies that gain market acceptance in advance of or instead of our products or services. The possibility also exists that our competitors might develop new technology or offeringsservices that might cause our existing technology and offerings to become obsolete, which could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.

In order to operate more efficiently and cost effectively, we have and may continue to adjust employment, optimize our footprint or undertake other restructuring or transformation activities, including in connection with UpLift and our China business, and related reorganization, transformation and outsourcing activitiesactivities, andas change management.applicable. These activities are complex and may involve or require significant changes to our operations. If we do not successfully manage restructuring and other transformation activities, expected efficiencies and benefits might be delayed or not realized, and our operations and business could be disrupted. Risks associated with these actions and other workforce management issues include unfavorable political responses, unforeseen delays in the implementation of anticipated workforce reductions, additional unexpected costs, challenges in change management, adverse effects on employee morale and capacity, and the failure to meet operational targets due to the loss of employees or work stoppages,stoppages or transitioning work to third parties, any of which may impair our ability to achieve anticipated cost reductions, otherwise harm our business or have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.

We depend on the skills, institutional knowledge, working relationships, and continued services and contributions of key personnel, including our leadership team, engineers, field professionals, and others at all levels of the company. In addition, our ability to achieve our operating and strategic goals depends on our ability to identify, hire, train and retain qualified individuals. We compete with other companies both within and outside of our industry for talented personnel in a highly competitive labor market, and we may lose key personnel or fail to attract othersufficient skilled personnel and incur additional labor costs. Any such losses, failures or increased costs could have material adverse effects on our results of operations, financial condition and cash flows.

We seek to grow through strategic acquisitionsacquisitions, including of the interests in certain ventures and entities which we do not already wholly own, in addition to internal growth. Our due diligence reviews in connection with our acquisitions may not identify all of the material issues necessary to accurately estimate the cost and potential loss contingencies of a particular transaction, including potential exposure to regulatory sanctions resulting from an acquisition target’s previous activities. For example, we may incur unanticipated costs, expenses or other liabilities as a result of an acquisition target’s violation of applicable laws, such as anti-corruption, antitrust, anti-collusion, environmental or income tax laws. We also may incur unanticipated costs or expenses, including post-closing asset impairment charges, as well as expenses associated with eliminating duplicate facilities, litigation and other liabilities. We may incur unexpected costs associated with labor law, tax or pension matters or to bring acquired assets up to our operating standards. We may encounter difficulties in integrating acquired businesses with our operations, applying our internal controls to these acquired businesses or in managing strategic investments. In addition, accounting requirements relating to business combinations, including the requirement to expense certain acquisition costs as incurred, may cause us to incur greater earnings volatility and generally lower earnings during periods in which we acquire new businesses.

In certain regions, we operate our business through joint venture relationships or non-wholly owned subsidiaries, including: Otis Electric Elevator Company Limited and Otis Elevator (China) Investment Limited in China. A significant downturn or deterioration in the business or financial condition of a joint venture partner could affect our results of operations in a particular period. Our joint ventures may experience labor strikes, diminished liquidity or credit unavailability, weak demand for products, delays in the launch of new products or other difficulties in their businesses. Changes in local government laws, regulations and policies, including those related to investments and limitations on foreign ownership of businesses, could adversely impact our ability to participate in and operate our joint ventures, or could result in changes to the ownership structure or allocation of rights in our joint ventures. If we are not successful in maintaining our joint ventures and other strategic partnerships, our financial condition, results of operations and cash flows may be adversely affected.

As a global business, we are subject to complex laws and regulations in the U.S. and other countries in which we operate. Those laws and regulations may be interpreted in different ways. They may also change from time to time, as may related interpretations and other guidance. Changes in laws or regulations could result in higher expenses or changes to business operations that could impact our ability to sell our products and services or sell them at expected profit levels. Uncertainty relating to those laws or regulations may also affect how we operate, structure our investmentsinvestments, structure our contracts and comply with the terms of these contracts and/or enforce our rights.rights thereunder.

In addition, we are subject to the U.S. Foreign Corrupt Practices Act (the "FCPA") and other anti-corruption laws that generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business. The FCPA applies to companies, individual directors, officers, employees and agents. Under certain anti-corruption laws, companies also may be held liable for the actions of partners or representatives. Certain of our customer relationships are with governmental entities and are, therefore, subject to the FCPA and other anti-corruption laws. Despite meaningful measures that we undertake to seek to ensure lawful conduct, which include training and internal controls, we may not always be able to prevent our employees, partners, joint ventures, agents or distributors from violating the FCPA or other anti-corruption laws. Changes in these laws or their interpretation, administration and/or enforcement may also occur over time. As a result, we could be subject to criminal and civil penalties, disgorgement, changes or enhancements to our compliance measures that could increase our costs, decrease our access to certain sales channels, personnel changes or other remedial actions.

Violations of the FCPA, antitrust or other anti-corruption or anti-collusion laws, government contract laws, or allegations of such violations, could disrupt our operations, cause reputational harm, involve significant management distraction and result in a material adverse effect on our competitive position, results of operations, cash flows or financial condition.

We also must comply with various laws and regulations relating to the export of products, services and technology from the U.S. and other countries having jurisdiction over our operations. In the U.S., these laws include, among others, the Export Administration Regulations administered by the Department of Commerce and embargoes and sanctions regulations administered by the Department of the Treasury. In addition, U.S. foreign policy may restrict or prohibit business dealings with certain individuals, entities or countries; changes in these prohibitions can happen suddenly and could result in a material adverse effect on our operations. See discussion of other risks associated with our international business, including changes in trade policies, discussed above and elsewhere in this Form 10-K.

We are impacted by evolving stakeholder interest in public company performance, disclosure,sustainability and goal-setting with respect to ESGresponsibility matters.

We havereport increased reporting ofon our ESG programssustainability and performance,responsibility projects and programs, as required by applicable law and voluntarily,voluntarily. andOur have established and announced goals and other objectives related to ESG matters. These goal statementsstrategies reflect our currentfocus planson projects and aspirationsprograms that tie to business performance allowing us to adapt to evolving market needs and arepursue notnew guaranteesopportunities in alignment with our business strategies. Nonetheless, there is no certainty that wethese projects and programs will bedeliver ablethe todesired achieve them.outcomes. Our ability to achievedeliver anyon goalour orsustainability objective,and includingresponsibility with respect to ESG initiatives,initiatives is subject to numerous risks, many of which are outside of our control. Examples of such risks include: (1) the availability and cost of low- or non-carbon-based energy sources and technologies, (2) third-party coordination and alignment over which we do not have control and which may be unpredictable, (3) evolving regulatory requirements affecting ESGsustainability or responsibility related standards or disclosures, (4) the availability of suppliers that can meet our sustainability, inclusion and othersustainability-related standards, and (5) our ability to recruit, develop, and retain talent in our labor markets. In addition, standards for tracking and reporting on ESGsustainability-related matters have not been harmonized and continue to evolve. Our processes and controls for reporting of ESGsustainability and responsibility matters have been enhanced but may not always comply with evolving and disparate standards for identifying, measuring, and reporting ESG metrics globally, our interpretation of reporting standards may differ from those of others, and such standards may change over time, any of which could result in significant revisions to our performance metrics, goalsclimate-related targets or reported progress in achieving such goalstargets and increased compliance costs and risks.

If our ESGsustainability and responsibility practices do not meet evolving regulations, investor or other stakeholder expectations and standards, then our reputation, our ability to attract or retain employees, and our attractiveness as an investment, supplier, or business partner could be negatively impacted, or could result in litigation. We may also be subject to penalties for non-compliance under applicable laws. In addition, our failure or perceived failure to pursue or fulfill our goals,climate-related targets, and objectivestargets within the timelines we announce, or at all, could have similar negative impacts.

We collect, store, have access to and otherwise process certain company and third-party confidential or sensitive data that may be subject to data privacy and cybersecurity laws, regulations or customer-imposed controls, including proprietary business information, personal data and other information. We also develop products that may in certain cases collect, store, have access to, and otherwise process certain personally identifiable or confidential data of our customers who purchase and use such products either separately or as a part of another product or system or by way of access to our websites or social media accounts. Although we seek to protect such data and design our products to enable our customers to use them while complying with applicable data privacy and cybersecurity laws and/or customer-imposed controls, we have experienced cyberattacks. While these attacks have not to our knowledge had a material adverse impact on the Company to date, our internal systems and products may be vulnerable to further cyberattacks, security breaches, theft, programming errors or employee errors, which could lead to the compromise of confidential and sensitive data, unauthorized access, use, disclosure, modification or destruction of information, improper use of our systems, software solutions or networks, defective products, production downtimes and/or operational disruptions in violation of applicable law and/or contractual obligations. A significant actual or perceived risk of theft, loss, fraudulent use or misuse of customer, employee or other data, whether by us, our suppliers, distributors, customers or other third parties, as a result of employee error or malfeasance, or as a result of the compromise of software, security and other products we incorporate into our products, as well as non-compliance with applicable industry standards or our contractual or other legal obligations or privacy and information security policies regarding such data, could result in costs, fines, litigation or regulatory actions, or could lead customers to select products and services of our competitors. In addition, any such event could harm our reputation, cause unfavorable publicity or otherwise adversely affect certain potential customers’ perceptions of the security and reliability of our services as well as our credibility and reputation, which could result in lost sales. Because of the global nature of our business, both our internal systems and products must comply with the applicable laws, regulations and standards in a number of jurisdictions, which continue to evolve and in certain cases, include provisions that are unclear. Government enforcement actions, including due to geopolitical concerns, and violations of data privacy and cybersecurity laws could be costly or interrupt our business operations. Any of the foregoing factors could result in reputational damage or civil or governmental proceedings,proceedings and/or substantial monetary damages or fines, which could result in a material adverse effect on our competitive position, results of operations, cash flows or financial condition. As global standards and regulations relating to AI increase and change, they could result in additional costs, regulatory scrutiny, legal liability and reputational harm, including if we fail to comply with such standards and regulations. Additionally, misuse of sensitive data used in AI models may lead to privacy violations or non-compliance with data protection laws.

We rely on a combination of patents, trademarks, copyrights, trade secrets, nondisclosure agreements, customer and supplier agreements, license agreements, non-competerestrictive agreements,covenants, information technology security systems, internal controls and compliance systems and other measures to protect our intellectual property. We also rely on nondisclosure agreements, information technology security systems and other measures to protect certain customer and supplier information and intellectual property that we have in our possession or to which we have access. Our efforts to protect such intellectual property and proprietary rights may not be sufficient. We cannot be sure that our pending patent applications will result in the issuance of patents to us, that patents issued to or licensed by us in the past or in the future will not be challenged or circumvented by competitors or that these patents will be found to be valid or sufficiently broad to preclude our competitors from introducing technologies similar to those covered by our patents and patent applications. Our ability to protect and enforce our intellectual property rights also may be limited. In addition, we may be the target of competitor or other third-party patent enforcement actions seeking substantial monetary damages or seeking to prevent the sale and marketing of certain of our products or services. Our competitive position also may be adversely impacted by limitations on our ability to obtain possession of, and ownership or necessary licenses concerning, data important to the development or provision of our products or service offerings, or by limitations on our ability to restrict the use by others of data related to our products or services. Any of these events or factors could subject us to judgments, penalties and significant litigation costs or temporarily or permanently disrupt our sales and marketing of the affected products or services and could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.

We are the world’s leading elevator and escalator manufacturing, installationinstallation, service and servicemodernization company. Our Company is organized into two segments, New Equipment and Service. Through our New Equipment segment, we design, manufacture, sell and install a wide range of passenger and freight elevators, as well as escalators and moving walkways for residential and commercial buildings and infrastructure projects. Our New Equipment customers include real-estate and building developers and general contractors who develop and/or design buildings for residential, commercial, retail or mixed-use activity. We sell our New Equipment directly to customers, as well as through agents and distributors.

Through our Service segment, we perform maintenance and repair services for both our own products and those of other manufacturers and provide modernization services to upgrade elevators and escalators. Maintenance services include inspections to ensure code compliance, preventive maintenance offerings and other customized maintenance offerings tailored to meet customer needs, as well as repair services to address equipment and component wear and tear and breakdowns. Modernization services enhance equipment operation and improve building functionality. Modernization offerings can range from relatively simple upgrades of interior finishes and aesthetics to complex upgrades of larger components and sub-systems.sub-systems, including the machine, ropes or belts, safety systems and the entire car or escalator. Our typical Service customers include building owners, facility managers, housing associations and government agencies that operate buildings where elevators and escalators are installed.

We serve our customers through a global network of employees.colleagues. These include sales personnel, field technicians with separate skills in performing installation and service, as well as engineers driving our continued product development and innovation. We function under a centralized operating model whereby we pursue a global strategy set around New Equipment and Service because we seek to grow our maintenance portfolio, in part, through the conversion of new elevator and escalator installations into service contracts. Accordingly, we benefit from an integrated global strategy, which sets priorities and establishes accountability across the full product lifecycle.

Announced in July 2023, UpLift is a program with the goal of transforming our operating model. UpLift includes the standardization of our processes and improvement of our supply chain procurement, among other aspects of the program, as well as organizational changes which result in restructuring actions. We expect UpLift to generate approximately $200 million inThe annual run-rate savings generated by theUpLift secondare halfapproximately $200 million. As of 2025, withtotal restructuring and other incremental costs to complete the transformation ("UpLift transformation costs") ofare approximately $300 million, including trailing restructuring costs expected in 2026 of $18 million.

The Company generated approximately $70 million of pre-tax savings in each of 2025 and 2024, including run-rate savings of approximately $200 million and $120 million, respectively, driven by our simplified operating structure, optimized organizational spans and layers, and reduced digital technology costs. These savings are primarily reflected in Selling, general and administrative expenses.

In August 2024, we received a favorable ruling regarding a German tax litigation. As a result, we recorded income tax benefits of approximately $185 million and related interest income of approximately $200 million, which are included in Income tax expense (benefit), net and Interest expense (income), net, respectively, in the Consolidated Statements of Operations for 2024. Additionally, pursuant to the Tax Matters Agreement ("TMA") with RTX Corporation ("RTX", our former parent), the Company recorded indemnification expense of $194 million for amounts due to RTX resulting from the outcome of the German tax litigation. This expense is included in Other expenseincome (incomeexpense), net in the Consolidated Statements of Operations for 2024.

For further details, refer to "Note 1514: Income Taxes" and "Note 2120: ContingenciesContingent Liabilities" to the Consolidated Financial Statements in Item 8 in this Form 10-K.

Global macroeconomic conditions have impacted, and continue to impact, aspects of the Company's operations and overall financial performance. These macroeconomic conditions include, among others, inflationary pressures, high interest rates andrates, tighter credit conditions.conditions and changes in global trade policies including higher tariffs in the U.S. and other countries. These macroeconomic trends could continue to impact our business, including impacts to overall financial performance in 2025,2026, as a result of the following, among other things:

WeOther than the impact from new tariffs currently in effect of approximately $20 million during 2025 and a similar impact anticipated in 2026, we currently do not expect any significant impact to our capital and financial resources from these macroeconomic conditions, including to our overall liquidity position based on our available cash and cash equivalents and our access to credit facilities and the capital markets.

The ongoing conflict between Russia and Ukraine has resulted in worldwide geopolitical and macroeconomic uncertainty, including volatile commodity markets, foreign exchange fluctuations, supply chain disruptions, increased risk of cybersecurity incidents, reputational risk, increased operating costs (including fuel and other input costs), environmental, health and safety risks related to securing and maintaining facilities, additional sanctions and other regulations (including restrictions on the transfer of funds to and from Russia). As discussed below, weWe do not have operations in Russia.

There have been no, and we do not expect there to be in the near term, material impacts on our business, financial condition or results of operations as a result of compliance with legislation or regulatory rules regarding climate change, from the known physical effects of climate change or as a result of implementing our ESGsustainability-related initiatives.initiatives Increasedor regulationfrom andtransitional otherrisks such as increased regulations or customer shifting preference toward low carbon products, as determined under our climate scenarios. Other climate change concerns, however, could subject us to additional costs and restrictions, and we are not able to predict how such regulations or concerns would affect our business, operations or financial results. For a discussion of risks associated with ESGsustainability-related matters, see Item 1A in this Form 10-K.

For a discussion of Otis’ ESGclimate goals,near-term science-based targets, see the discussion under "Environmental, SocialSustainability and Governance ("ESG")Responsibility" in Item 1 in this Form 10-K.

The Organic volume increasewas of 1.4%flat for 2024 was2025 driven by an increase in organic sales of 6.8%5% in Service, offset by a decrease of (6.47)% in New Equipment.

The Organic volume increase of 5.6%1% for 20232024 was driven by an increase in organic sales of 7.7%7% in ServiceService, andoffset 2.6%by a decrease of (6)% in New Equipment.

The organicOrganic increasevolume decrease of (1)% in total cost of products and services sold in 20242025 and 2023, werewas primarily driven by the organic sales changes noted above. Productivity and lower commodity prices, primarily steel, werewas partially offset by the impact of tariffs and inflationary pressures, including annual wage increases and higher Service-related materiallabor costs.

Research and development was relatively flat in 20242025 compared to 20232024 and 2022.2023. Research and development includes product development and innovation, including fordigital IoTfeatures, enhancements to current elevator and developingescalator systems, and the next generationdevelopment of connectedthe elevatorsnext-generation and escalators.products.

Selling, general and administrative expenses as a percentage of Net sales increased 70 basis points in 2025 compared to 2024, and decreased 30 basis points in 2024 compared to 2023, and increased 40 basis points in 2023 compared to 2022.2023.

The approved UpLift restructuring actions are expected to generate approximately $80$103 million in annual recurring savings by the end of 2025, primarily in Selling, general and administrative expenses, and of which approximately $84 million and $39 million waswere realized during 2025 and 2024, respectively, including $50 million of incremental savings compared to 2024.

For additional discussion of restructuring and transformation costs, see "Note 1615: Restructuring and Transformation Costs" to the Consolidated Financial Statements in Item 8 in this Form 10-K.

The change in Other income (expense), net of $(257)$130 million in 20242025 compared to 2023,2024, was primarily driven by lower Separation-related adjustments of $177$107 million, UpLiftgains transformationon costssales of $65assets of $29 million, $18 million oflower impairment loss related to net assets held for sale,sale of $8 million and favorable foreign currency mark-to marketmark-to-market adjustments, and non-recurring litigation-related settlement costs, including $18 million in the second quarter of 2024, partially offset by otherhigher reserveUpLift adjustments.transformation costs of $4 million.

The change in Other income (expense), net of $(5257) million in 20232024 compared to 20222023, was primarily driven by Separation-related adjustments of $177 million, UpLift transformation costs of $16$65 million, $18 million of impairment loss related to net assets held for sale, foreign currency mark-to-market adjustments, and non-recurring litigation-related settlement costs, including $18 million in the absencesecond quarter of the settlement of certain legal matters in 2022,2024, partially offset by theother impactreserve of foreign currency mark-to-market adjustments and the absence of the loss on the sale of our Russia business and related charges when compared to 2022.adjustments.

For additional discussion of the Separation-related adjustments, litigation-relatedLitigation-related settlement costs and heldHeld for sale impairment, see "Note 2221: Segment Financial Data" to the Consolidated Financial Statements in Item 8 in this Form 10-K. For additional discussion of UpLift transformation costs, see "Note 1615: Restructuring and Transformation Costs" to the Consolidated Financial Statements in Item 8 in this Form 10-K.

For additional discussion of borrowings, see "Note 98: Borrowings and Lines of Credit" to the Consolidated Financial Statements in Item 8 in this Form 10-K. For additional discussion of German tax litigation, see "Note 2120: ContingenciesContingent Liabilities" and "Note 2221: Segment Financial Data" to the Consolidated Financial Statements in Item 8 in this Form 10-K.

The 2024 effective tax rate is lower than the 2023 effective tax rate and the statutory U.S. rate primarily due to recognition of estimated tax benefits arising as a result offrom the resolution of the German tax litigation and the reduction of a deferred tax liability related to the mitigation of future repatriation costs.

The 2023 and 2022 effective tax ratesrate areis higher than the statutory U.S. rate primarily due to higher international tax rates as compared to the lower U.S. federal statutory rate.

For additional discussion of income taxes and the effective income tax rate, see "Note 1514: Income Taxes" to the Consolidated Financial Statements in Item 8 in this Form 10-K.

Noncontrolling interest in subsidiaries' earnings were relatively flatdecreased in 20242025 in comparison to 2023.2024, primarily driven by lower net income from non-wholly owned subsidiaries. Other than our acquisition of the noncontrolling shares of ourOtis subsidiary in JapanElectric during the secondfourth quarter of 2024,2025, ownership interest in the underlying non-wholly owned subsidiaries has remained generally consistent year-over-year. See "Note 1: Business Overview" to the Consolidated Financial Statements in Item 8 in this Form 10-K for further discussion of the noncontrolling interest acquisition.

Noncontrolling interest in subsidiaries' earnings decreasedwere relatively flat in 20232024 in comparison to 20222023. primarilyOther driventhan byour Otis'acquisition increaseof tothe fullnoncontrolling ownershipshares of our subsidiary in OtisJapan Mobility (formerly Zardoya Otis) induring the second quarter of 2022,2024, asownership wellinterest asin impactsthe of foreign exchange, partially offset by higher net income fromunderlying non-wholly owned subsidiaries.subsidiaries Forhas detailsremained ongenerally theconsistent resultsyear-over-year. of the Tender Offer and purchases of shares of Otis Mobility not previously owned by the Company, seeSee "Note 1: Business Overview" to the Consolidated Financial Statements in Item 8 in this Form 10-K.10-K for further discussion of the noncontrolling interest acquisition.

The organic sales decrease of (6.46)% was driven by a greater than 20% decline in China, partially offset by mid single-digit organic sales growth in Americas and Asia Pacific and low single-digit organic sales growth in EMEA.

The Service segment performs maintenance and repair services for both our products and those of other manufacturers and provides modernization services to upgrade elevators and escalators. Maintenance services include inspections to ensure code compliance, preventive maintenance offerings and other customized maintenance offerings tailored to meet customer needs, as well as repair services that address equipment and component wear and tear, and breakdowns. Modernization services enhance equipment operation and improve building functionality. Modernization offerings can range from relatively simple upgrades of interior finishes and aesthetics, to complex upgrades of larger components and sub-systems.sub-systems, including the machine, ropes or belts, safety systems and the entire car or escalator. Our typical Service customers include building owners, facility managers, housing associations and government agencies that operate buildings where elevators and escalators are installed.

In August 2024, we received a favorable ruling regarding a German tax litigation. Pursuant to the Tax Matters Agreement ("TMA") with United Technologies Corporation ("UTC"), our former parent, subsequently renamed RTX Corporation ("RTX"), and based on the facts and contractual provisions, additional information received from RTX and indemnity payments during 2025, the Company estimated the amount payable to RTX as a result of the outcome of the German tax litigation to be $56 million as of December 31, 2025. Based on indemnity payments made to RTX and adjustments to the indemnity payable in the quartersix months ended MarchJune 31,30, 2026, the Company now estimates the remaining amount payable to RTX to be $55 million,million. resultingThe adjustments to the indemnity payable resulted in indemnification expense of $5 million for the six months ended June 30, 2026 compared to $6 million and $52$58 million for the quartersquarter and six months ended MarchJune 31, 2026 and30, 2025, respectively. There was no indemnification expense in the quarter ended June 30, 2026. This indemnification expense is included in Other income (expense), net in the Condensed Consolidated Statements of Operations for the quarters and six months ended MarchJune 31,30, 2026 and 2025. This estimate could further change due to the parties' continuing dispute concerning the scope of the final indemnity amount, which will be resolved pursuant to the procedures set forth in the TMA.

Global macroeconomic conditions have impacted, and continue to impact, aspects of the Company's operations and overall financial performance during the quarters and six months ended MarchJune 31,30, 2026 and 2025. These macroeconomic conditions include, among others, geopolitical conflicts, inflationary pressures, high interest rates, tighter credit conditions and changes in global trade policies including higher tariffs in the U.S. and other countries. These macroeconomic trends could continue to impact our business, including impacts to overall financial performance during the remainder of 2026, as a result of the following, among other things:

We cannot predict how the events described above will evolve. Depending on the ultimate outcomes of these conflicts, which remain uncertain, they could heighten certain risks disclosed in Item 1A. "Risk Factors" in our 2025 Form 10-K, includingincluding, but not limited to, adverse effects on macroeconomic conditions, including increased inflation, constraints on the availability of commodities, supply chain disruption and decreased business spending; cyber-incidents; disruptions to our or our business partners’ global technology infrastructure, including through cyber-attack or cyber-intrusion; adverse changes in international trade policies and relations; claims, litigation and regulatory enforcement; our ability to implement and execute our business strategy; terrorist activities; our exposure to foreign currency fluctuations; reputational risk; and constraints, volatility, or disruption in the capital markets, any of which could have a material adverse effect on our business, results of operations, cash flows and financial condition.

The factors contributing to the total percentage change year-over-year in total Net sales for the quarter and six months ended MarchJune 31,30, 2026 are as follows:

The Organic volume increase of 1%6% for the quarter ended MarchJune 31,30, 2026 was driven by an increase of 5%9% in Service, partially offset by a decrease of (51)% in New Equipment. The Organic volume increase of 4% for the six months ended June 30, 2026 was driven by an increase of 7% in Service, partially offset by a decrease of (3)% in New Equipment.

The factors contributing to the percentage change year-over-year for the quarter and six months ended MarchJune 31,30, 2026 in total cost of products and services sold are as follows:

The Organic volume for total cost of products and services sold increased 2%7% and 4% for the quarter and six months ended MarchJune 31,30, 2026, respectively, primarily driven by the organic sales changes noted above and the impacts of higher labor costs including the impact of ongoing costs to support operational execution and productivity, and higher material costs, partially offset by productivity.costs.

Gross margin percentage increaseddecreased 40(90) basis points and (20) basis points for the quarter and six months ended MarchJune 31,30, 2026, respectively, when compared to the same periodperiods in 2025, due to the cost increases described above, partially offset by an increase in Service sales and decrease in New Equipment sales and the benefits from productivity, partially offset by the cost increases described above.sales.

Research and development was relatively flat for the quarter and six months ended MarchJune 31,30, 2026, when compared to the same periodperiods in 2025.

Selling, general and administrative expenses increased $46$21 million and $67 million for the quarter and six months ended MarchJune 31,30, 2026, respectively, when compared to the same periodperiods in 2025, driven by annual wage increases, higher costs resulting from organizational initiatives, costs to support ongoing operational execution and the impacts from foreign exchange, partially offset by savings resulting from restructuring actions and lower restructuring costs.

Selling, general and administrative expenses as a percentage of Net sales increaseddecreased (40) basis points and was flat for the quarter and six months ended MarchJune 31,30, 2026, respectively, when compared to the same periodperiods in 2025.

Other restructuring costs were $7$18 million for the quartersix months ended MarchJune 31,30, 2026 and included $4$14 million of costs related to 2026 actions and $3$4 million of costs related to 2025 actions.

Most of the expected charges will require cash payments, which we have funded and expect to continue to fund with cash generated from operations. The table below presents approximate cash outflows related to the restructuring actions during the quartersix months ended MarchJune 31,30, 2026, and the expected cash payments to complete the actions announced:

The approved UpLift restructuring actions generated approximately $103 million in annual recurring savings at the end of 2025, primarily in Selling, general and administrative expenses, and of which approximately $25$51 million was realized during the quartersix months ended MarchJune 31,30, 2026, including $6$12 million of incremental savings compared to the same period in 2025.

For other restructuring actions, we generally expect to achieve annual recurring savings within the two-year period subsequent to initiating the actions, including $7$24 million for the 2026 actions and $38 million for the 2025 actions, of which approximately 25% relates to Cost of products and services sold and 75% relates to Selling, general and administrative expenses. Approximately $9$20 million of savings was realized for the 2026 and 2025 actions during the quartersix months ended MarchJune 31,30, 2026.

In January 2025, we announced the reorganization of our operations in China. Among other aspects, this reorganization will resultresulted in restructuring actions of approximately $30 million. These actions primarily included severance-related costs, and these actions were substantially completed as of December 31, 2025. Amounts related to the reorganization of operations in China are included within Other restructuring.

The change in Other income (expense), net of $94$3 million for the quarter ended MarchJune 31,30, 2026 compared to the same period in 2025, was partially driven by lowerthe Separation-relatedunfavorable impacts of foreign currency mark-to-market adjustments ofand $47other million.adjustments. The change iswas also impacted by the absence of prior period items including,including; $23$18 million of UpLift transformation costs, $21$9 million of non-recurringSeparation-related litigation-related settlement costs, $10 million of impairment loss related to net assets held for sale,adjustments, and the gain on the sale of fixed assets.assets of $7 million.

The changes in Interest expense (income), net ofwere flat and $14 million for the quarter and six months ended MarchJune 31,30, 2026, respectively, compared to the same periodperiods in 2025, were primarily driven by lower interest income and higher interest expense related to the $700 million unsecured, unsubordinated debt issued in May 2026 and the $500 million unsecured, unsubordinated debt issued in September 2025, partially offset by lower interest expense related to the repayment of the $1.3 billion unsecured, unsubordinated debt in April 2025. The quarter ended June 30, 2026 also benefited from higher interest income.

The average interest rate on our long-term debt for the quarters ended MarchJune 31,30, 2026 and 2025 was 3.0%3.1% and 2.7%,2.8%, respectively. For additional discussion of borrowings, see Note 6 to the Condensed Consolidated Financial Statements.

The decrease in the effective tax rate for the quarter and six months ended MarchJune 31,30, 2026, compared to the same periodperiods in 2025, is primarily due to the reduction in a deferred tax liability related to the mitigation of future repatriation costs recorded in the quarter ended June 30, 2026. In addition, the decrease in the effective tax rate for the six months ended June 30, 2026, is due to the absence of the impact of the increase in our estimated nondeductible TMA indemnity obligation payable to RTX recorded in the quarter ended March 31, 2025.

Noncontrolling interest in subsidiaries' earnings was flatdecreased for the quarter and six months ended MarchJune 31,30, 2026 compared to the same periodperiods in 2025.2025 primarily due to lower net income from non-wholly owned subsidiaries. Other than our acquisition of the noncontrolling shares of Otis Electric Elevator Company Limited during the fourth quarter of 2025,2025 and the acquisition of majority ownership of a French company in April 2026, ownership interest in the underlying non-wholly owned subsidiaries has remained generally consistent year-over-year.

Net income attributable to Otis Worldwide Corporation increased for the quarter and six months ended MarchJune 31,30, 2026, compared to the same periodperiods in 2025, due to higher operating profit (including the impact of foreign exchange rates) and a lower effective tax rate, partially offset by higher interest expense.expense in the six months ended June 30, 2026.

Summary performance for our operating segments, reconciled to total operating profit, for the quarters ended MarchJune 31,30, 2026 and 2025 was as follows:

Summary performance for New Equipment for the quarters and six months ended MarchJune 31,30, 2026 and 2025 was as follows:

Summary analysis of the Net sales change for New Equipment for the quarter and six months ended MarchJune 31,30, 2026 compared with the same periodperiods in 2025 was as follows:

The organic sales decrease of (51)% was primarily driven by a greaterhigh than (20)%teens decline in China,China and mid single-digit decline in Asia Pacific and low single-digit decline in Americas, partiallyEMEA, offset by approximately 10% growth in Americas and low single-digit growth in EMEA.Asia Pacific.

New Equipment operating profit decreased $(28) million.million Thedriven by the impacts of lower volume, unfavorable price, regional and product mix and higher costs resulting from organizational initiatives were partially offset by productivity.initiatives. Operating margin decreased (240220) basis points.

Summary performance for Service for the quarters and six months ended MarchJune 31,30, 2026 and 2025 was as follows:

Summary analysis of Service Net sales change for the quarter and six months ended MarchJune 31,30, 2026 compared with the same periodperiods in 2025 was as follows:

Service operating profit increased $19$21 million including foreign exchange tailwinds of $29$5 million. Higher volume and improved pricing were more thanpartially offset by higher costs resulting from organizational initiatives, higher labor costs including the impact of ongoing costs to support ongoing operational execution,execution and productivity, higher labor and material costs, and mix. Operating margin decreased (160170) basis points.

As of MarchJune 31,30, 2026, we had cash and cash equivalents of $834$813 million, of which approximately 83%73% was held by the Company's foreign subsidiaries. We manage our worldwide cash requirements by reviewing available funds among the many subsidiaries through which we conduct our business and the cost-effectiveness with which those funds can be accessed. On occasion, we are required to maintain cash deposits with certain banks with respect to contractual obligations related to acquisitions and divestitures or other legal obligations. As of MarchJune 31,30, 2026 and December 31, 2025, the amount of such restricted cash was $10$36 million and $9 million, respectively.

From time-to-time we may need to access the capital markets to obtain financing. We may incur indebtedness or issue equity as needed. Although we believe that the arrangements in place as of MarchJune 31,30, 2026 permit us to finance our operations on acceptable terms and conditions, our access to, and the availability of, financing on acceptable terms and conditions in the future could be impacted by many factors, including (1) our credit ratings or absence of a credit rating, (2) the liquidity of the overall capital markets and (3) the current state of the economy, including tighter credit conditions. There can be no assurance that we will continue to have access to the capital markets on terms acceptable to us.

As of MarchJune 31,30, 2026, we had a revolving credit agreement with various banks providing for a $1.5 billion unsecured, unsubordinated five-year revolving credit facility. As of MarchJune 31,30, 2026, there were no borrowings under the revolving credit agreement. The undrawn portion of the revolving credit agreement serves as a backstop for the issuance of commercial paper.

As of MarchJune 31,30, 2026, there waswere $35 million inno borrowings outstanding under the Company'sour $1.5 billion commercial paper program, consisting of €30 million of Euro denominated commercial paper.program. For additional discussion of borrowings, see Note 6 to the Condensed Consolidated Financial Statements.

On March 16, 2026, the Companywe repaid the Japanese Yen denominated 0.370% notes due in 2026, upon maturity, using cash on hand.

On January 16, 2025, our Board of Directors approved a share repurchase program for up to $2.0 billion of Common Stock, of which approximately $900$500 million was remaining as of MarchJune 31,30, 2026.

The year-over-year increase in net cash provided by operating activities was primarily driven by higher net income and changes to working capital balances during the periods, including a larger inflow in Contract assets and liabilities, current, in the quartersix months ended MarchJune 31,30, 2026 compared to the same period in 2025, due to the timing of billings on contracts compared to the progression on current contracts, a decrease in Other current assets in the quarter ended March 31, 2026 compared to an increase in the same period in 2025, due to the refunds received in 2026 from the German tax litigation, and a smaller decrease in Accounts payable in the quartersix months ended MarchJune 31,30, 2026 compared to the same period in 2025, due to the timing of payments to suppliers, partially offset by a decrease in Accrued Liabilities in the quarter ended March 31, 2026 compared to an increase in the same period in 2025, due to payments on the indemnity obligation to RTX and restructuring liabilities, and a larger increase in Accounts receivable, net, in the quartersix months ended MarchJune 31,30, 2026 compared to the same period in 2025, due to timing of billings and collections.collections and a decrease in Accrued liabilities in the six months ended June 30, 2026 compared to an increase in the same period in 2025, due to the timing of payments of restructuring and the timing of tax payments and the related income tax expense. Additionally, UpLift-related net payments were approximately $12$25 million in the quartersix months ended MarchJune 31,30, 2026, compared to $30$52 million in the quartersame endedperiod March 31,in 2025. Separation-related payments were approximately $6$63 million in the quartersix months ended MarchJune 31,30, 2026.2026, Therecompared wereto no$72 Separation-related paymentsmillion in the quartersame endedperiod March 31,in 2025.

During the quartersix months ended MarchJune 31,30, 2026, net cash provided by operating activities was $413$680 million. The primary drivers of the inflow related to $353$802 million of net income, changes in Contract assets and liabilities, net,current, due to the timing of billings on contracts compared to the progression on current contracts, and a decrease in Other current assets due to refunds received in 2026 from the German tax litigation were partially offset by an increase in Accounts receivable, net, due to the timing of billings and collections, aan decreaseincrease in AccountsInventories payableprimarily due to higher production inventory levels related to the timing of paymentsdeliveries to suppliersconstruction sites and a decrease in Accrued liabilities due to timingSeparation-related of payments, including employee-related benefits, interest and income taxes.payments. For additional discussion of the German tax litigation, see Note 1 and Note 15 to the Condensed Consolidated Financial Statements.

During the quartersix months ended MarchJune 31,30, 2025, net cash provided by operating activities was $190$405 million. Net income of $256$679 million includes $52$58 million of indemnification expense resulting from the outcome of the German tax litigation, $21 million of litigation-related settlement costs and $10 million of impairment loss related to net assets held for sale, none of which resulted in cash flow activity during the quartersix months ended MarchJune 31,30, 2025. Net income and thean changeincrease in ContractAccrued assets and liabilities, net,liabilities due to the timing of billingspayments onof contractsemployee-related comparedbenefits toand the progressiontiming onof currenttax contracts,payments and the related income tax expense were also partially offset by a decrease in Accounts payablepayable, due to the timing of payments to suppliers and an increase in Accounts receivable, net, due to the timing of billings and collections. For additional discussionsdiscussion of the German tax litigation, see Note 1 and Note 15 to the Condensed Consolidated Financial Statements.

During the quartersix months ended MarchJune 31,30, 2025,2026, net cash used in investing activities was $161$316 million. The primary drivers of the outflow related to $34 million of capital expenditures, $36$193 million of acquisitions of businesses and intangible assetsassets, $84 million purchase of short-term investments and $93$77 million of capital expenditures, partially offset by $35 million of net cash paymentsreceipts from the settlement of derivative instruments. For additional discussion of acquisitions of businesses and intangible assets, see Note 5 to the Condensed Consolidated Financial Statements.

During the quartersix months ended MarchJune 31,30, 2026, net cash used in financing activities was $694$621 million. The primary drivers of the outflow were repurchases of our Common Stock of $400$807 million, dividends paid on our Common Stock of $163$330 million and repayments of long-term debt of $135 million. These were partially offset by the net proceeds from short-termthe borrowingslong-term debt issuance of $29$700 million.