Good morning, and welcome to Otis' Fourth Quarter 2023 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 it over to Michael Rednor, Vice President of Investor Relations. Michael, you may begin.

Thank you, Krista. Welcome to Otis' fourth quarter 2023 earnings conference call. On the call with me today are Judy Marks, Chair, CEO, and President; and Anurag Maheshwari, Executive Vice President and CFO. Please note, except where otherwise noted, the company will speak to results from continuing operations, excluding restructuring and significant non-recurring items. A reconciliation of these measures can be found in the appendix of the webcast. We also remind listeners that the presentation contains forward-looking statements, which are subject to risks and uncertainties. Otis' SEC filings, including our Form 10-K and quarterly reports on Form 10-Q provide details on important factors that could cause actual results to differ materially. Now, I'd like to turn the call over to Judy.

Thank you, Mike, and thank you everyone for joining us. We hope everyone listening is safe and well. We delivered a strong fourth quarter to cap off strong full-year performance. We enter 2024 with confidence in our service-driven business model, remaining focused on our strategic pillars, including delivering modernization value, which we added as our fifth strategic imperative last year, while driving operational excellence. We achieved these results with the hard work of our colleagues around the globe. So I want to thank each of you for your hard work, commitment to our customers, and demonstration of our Otis absolutes. Starting on Slide 3, we achieved full year organic sales growth in all regions with total Otis organic sales growth of 5.6% driven by service, which grew 7.7%. We grew our industry-leading maintenance portfolio by a record high of 4.2% for the year, and it now stands at about 2.3 million units, a new milestone for our company. We delivered strong low-teens adjusted EPS growth for the year, including mid-teens growth in the fourth quarter. Modernization orders were up 16.8% for the year, including low-teens growth in the fourth quarter. Our modernization backlog is up 15%. New equipment orders in Q4 increased 2.9%, and our new equipment backlog increased 2% for 2023. In 2023, we achieved approximately 50 basis points of new equipment share gain. Heading into 2024, as our backlogs have continued to grow, we have good visibility on our new equipment sales, despite the uncertain macro environment, and we expect strong sales growth in our modernization business. We generated approximately $1.5 billion in adjusted free cash flow, allowing us to return approximately $1.35 billion of cash to shareholders through dividends and share repurchases. Additionally, earlier in 2023, we began executing initiatives related to our customer-centric uplift program focused on gaining scale across our global organization to unlock synergies, standardizing our processes to generate efficiencies, and optimizing our supplier and indirect spend. Our streamlining and transformation efforts are on track to achieve $150 million of run rate savings in mid-2025, as we previously indicated. To summarize, 2023 was characterized by solid organic sales growth, adjusted operating profit margin expansion, and nearly 12% EPS growth outperforming our medium-term guidance. We are well-positioned as we enter 2024, as we focus on executing our growing new equipment and modernization backlogs with greater than 4% maintenance unit growth, supporting sales growth in our maintenance and repair business. We also made meaningful progress toward our 13 ESG goals in 2023, emphasizing the alignment of our absolutes of safety, ethics, and quality with our business strategy. Importantly, in early November, we announced our commitment to setting near-term science-based greenhouse gas reduction targets, which have been formally submitted to the science-based targets initiative for evaluation. Turning to our orders performance on Slide 4. New equipment orders returned to growth in the quarter up 2.9% with quarter-over-quarter acceleration in all regions. Orders were down 3.9% for the year, as mid-teens growth in Asia Pacific and low-single-digit growth in EMEA were offset by declines in China and the Americas. Overall, globally, new equipment units were down approximately 8% to roughly 850,000 units in 2023. Despite these macro challenges, we were able to achieve about 50 basis points of new equipment share gain on top of the nearly 3-point increase between 2020 and 2022, and we were able to grow our new equipment backlog, which was up 2%. We continue to innovate to better serve our customers and drive growth across our business. For example, we continue to roll out our digitally connected elevator platforms, launching the Gen3 Core in North America, and expanding the deployment of Gen360 to China. In addition, we launched the Gen3 Mod plus a package of upgrades to support our modernization business in the Americas, which also includes connectivity to our Otis ONE IoT platform. R&D and strategic investments remained relatively stable at about 1.4% as a percent of sales for the year, reflecting our ability to invest and innovate efficiently. We strengthened our number one position globally, accelerating our portfolio growth to over 4% for a second year in a row. We demonstrated the power of geographic diversification within our business with double-digit portfolio growth in China, mid-single-digit growth in Asia Pacific, and low-single-digit growth in the Americas and EMEA. Globally, our recaptures offset our cancellations for the second consecutive year, leading to conversions as the portfolio growth driver in line with our strategy. China conversion rate continues to improve, currently standing at about 51% and approximately 4% improvement versus 2022. Additional details on our portfolio growth in 2023 can be found in the appendix. Accelerating our portfolio growth is an essential component of our long-term strategy and top-line growth algorithm. At year-end 2023, we have 900,000 connected units of which 500,000 use our Otis ONE IoT solution. Our service sales force performed well throughout the year with like-for-like maintenance pricing of four points, helping to mitigate labor cost headwinds within the business. Our fifth strategic pillar of delivering modernization value is performing. Modernization orders were up 16.8% driven by double-digit growth in Asia, particularly in Korea, as the strength in our Mod package offerings continues to drive results. Additionally, the Americas and EMEA drove strong fourth quarter modernization major project bookings. Our modernization backlog is up 15% versus the prior year, giving us good line of sight for strong growth in 2024. We continue to win many exciting projects based on our innovation, ability to deliver, and the trust our customers have in us. As we build, service and modernize our customers' elevators and escalators, we build loyalty and value with increasing recurring revenue streams. For new equipment in China, Otis is building on decades of close cooperation with the nation's metro providers to help expand urban transport and city development. We'll provide 237 escalators and elevators for line 15 of the Chongqing Metro in West China, while incorporating Otis ONE on these units. Otis has a long history with Chongqing Metro, which carries more than 4 million passengers daily across rugged terrain on a network that is famous for its ingenious design and engineering. In San Francisco, Otis was awarded a comprehensive modernization of all 16 elevator units at 560 Mission Street. The project includes the installation of custom cabin interiors and our Compass 360 destination dispatch system. In addition, Otis has been awarded the maintenance contract for the 31-story commercial office building, extending our relationship with Commonwealth Partners and contributing to our service recaptures in the quarter. In Hong Kong, we are honored to have been selected for a modernization project at Chin, Iowa State. This project for the Hong Kong Housing Authority, a longstanding customer, includes the modernization of 18 elevators, which will all be maintained by Otis upon completion. The new units will use gearless machines with energy-efficient drives to meet the project's environmentally conscious requirements. In Dubai, Otis will modernize 42 elevators and eight escalators at the Burj Khalifa. We take pride in being the original equipment manufacturer and maintenance provider of the world's tallest building since its opening. Emaar Properties has trusted us with the upgrade of their controllers and drives and providing the latest technology for this iconic building. In addition, the contract extends our service agreement for another 10 years. And last, also in EMEA, for nearly 130 years, visitors have taken Otis elevators to the top of the Eiffel Tower, where we're delivering a multi-year modernization of this iconic tower's two duo lifts. Turning to the fourth quarter results on Slide 5. For the fourth quarter, reported sales of $3.6 billion were up 5.3%. Organic sales grew for the 13th consecutive quarter and were up 3.8%, with high-single-digit growth in service while new equipment was roughly flat in the face of the macro challenges, notably in China. Adjusted operating profit, excluding a $9 million foreign exchange tailwind increased $52 million with profit growth in both segments. Adjusted EPS grew 16% or $0.12 in the quarter. We ended the year with fourth quarter adjusted free cash flow of $573 million, allowing us to finish the year strong at approximately $1.5 billion. With that, I'll turn it over to Anurag to walk through our 2023 results in more detail.

Thank you, Judy. Starting with segment sales performance on Slide 6. Otis fourth quarter new equipment sales were $1.5 billion with organic sales roughly flat driven by high-single-digit growth in Asia Pacific, offsetting mid-single-digit declines in China. Americas and EMEA were up low-single-digits and roughly flat respectively. For service, we delivered another strong quarter of organic sales growth at 6.8% with strong performance across all lines of business and regions. Maintenance and repair sales were up 6.8%, and Mod sales were up 7%, including the third consecutive quarter of double-digit growth in Asia. For the full year, new equipment sales were $5.8 billion, and organic sales grew 2.6% with solid growth in all regions outside of China. New equipment pricing was up low-single-digits globally with Asia Pacific up low-single-digits, the Americas up mid-single-digits, and EMEA high-single-digits. Although the pricing environment in China remains challenging, we remain price-cost neutral in the region from a continued focus on price discipline and material productivity. Service sales were $8.4 billion with 7.7% organic growth and all lines of business showing high-single-digit growth, including another year of outstanding performance and repair marking a three-year CAGR in the low-teens. Maintenance pricing, excluding the impact of mix in churn, came in about as expected up roughly four points for the year. Turning to segment operating profit performance on Slide 7. Starting with new equipment, we delivered our best margin expansion for the year in the fourth quarter, up 120 basis points. Adjusted operating profit excluding $3 million of FX headwind was up $20 million as strong productivity, pricing, and commodity tailwinds were partially offset by unfavorable regional and product mix, alongside higher SG&A expense. Turning to Service. Fourth quarter adjusted operating profit, excluding $13 million of FX tailwind was up $33 million as higher volumes, favorable maintenance pricing, and productivity were partially offset by annual wage increases and higher material costs. For the past 16 consecutive quarters, we have delivered consistent service margin expansion. And for the second consecutive year, we expanded margin by 50 basis points exiting the year at a 24% rate. For the full year, overall operating profit was up $166 million at constant currency, and margin expanded 30 basis points. Despite the weakness in China, we were able to achieve $26 million of new equipment profit growth at constant currency as pricing, productivity, and growth in all other regions more than offset unfavorable mix. This performance was better than anticipated and put us at the midpoint of our initial full-year guidance for operating profit growth at constant currency as we overcame the weaker macro backdrop experienced during the year. Service operating profit increased $178 million at constant currency, supported by strong volume, pricing, and productivity. Since then, we have increased service margins by 240 basis points. Slide 8 lays out the full year '23 adjusted EPS bridge. Adjusted EPS in the year grew $0.37, driven by $0.29 of solid operational performance. Accretion from the Zardoya transaction, share repurchases of $800 million and optimization of a tax rate by 40 basis points drove an additional $0.12, which more than offset $0.04 of foreign exchange headwinds. Additionally, we closed out 2023 with notable adjusted free cash flow of $573 million in the quarter, up more than 30% versus the prior year driven by higher net income and favorable working capital. In addition to the growth in down payments from increased new equipment orders in the quarter, the team continued to manage working capital well. As a result, we achieved our annual guidance generating approximately $1.5 billion of adjusted free cash flow. If we were to look back to the beginning of '23, we initially guided that we would achieve low to mid-single-digit sales growth, 20 to 30 basis points of operating profit margin expansion and approximately 8% EPS growth. Due to our operational performance, continued penetration of repair sales on a growing maintenance base robust pricing and productivity, we were able to outperform all these metrics despite an uncertain macro environment and grew adjusted EPS by approximately 12%, all while returning approximately $1.35 billion to the shareholders. With a strong end to the year on new equipment orders and solid modernization order activity throughout '23, we further expanded both our new equipment and modernization backlog, which will support us in '24 and beyond. I'll now turn it back to Judy to discuss our 2024 outlook.

Starting on Slide 9 with the market outlook. In the Americas market in 2023, the market was down low-teens as double-digit decline in North America was partially offset by low-single-digit growth in Latin America. In EMEA, Western and Central Europe were the primary drivers, leading to a market that was down high-single-digits. In Asia, the market was down mid-single-digits, with a solid year in Asia Pacific, up low-single-digits but the performance masked by the downturn in China, which we estimate was down just north of 10%. In 2024, the global new equipment market is expected to be down low to mid-single-digits in units with markets in the Americas and EMEA down low-single-digits and markets in Asia down low to mid-single-digits driven by China. While new equipment market dynamics remain fluid, the long-term fundamentals of the industry are well-supported by the service-driven growth model. In 2024, the global installed base is expected to grow at a similar rate to that of 2023 at around mid-single-digits and reach approximately 22.5 million units. In the Americas and EMEA, we expect low-single-digit growth. And in Asia, we're expecting mid-single-digit growth driven by China. Overall, we expect service to be the growth driver for the industry, and we expect the same for our business. With this as the industry backdrop, for Otis, we expect net sales of $14.5 billion to $14.8 billion, growing 3% to 5% organically or 2% to 4% at actual currency. Adjusted operating profit is expected to be between $2.4 billion and $2.45 billion, up $125 million to $175 million at actual currency or $150 million to $190 million, excluding foreign exchange headwinds. We expect adjusted EPS in the range of $3.80 to $3.90, up 7% to 10% or nearly $0.25 at the midpoint versus the prior year. Finally, we expect adjusted free cash flow of approximately $1.6 billion. With our commitment to a disciplined capital allocation strategy, we expect to repurchase approximately $800 million in shares in 2024, as we look to grow our dividend payout and pursue our typical $50 million to $100 million of bolt-on M&A. With that, let me hand it back to Anurag to outline the 2024 segment outlook in more detail.

Starting on Slide 10 for the new equipment outlook. We have good line of sight for new equipment sales due to our backlog coverage, which extends out to over a year of sales. This, in combination with the share gain initiatives and incremental pricing actions we have taken over the past few years position us relatively well for 2024. As a result, we anticipate new equipment organic sales to be flattish with Americas and EMEA up low-single-digits and Asia Pacific up mid-single-digits with mid-single-digit declines in China. We expect new equipment profit margin to be flat to up 10 basis points with roughly steady volume and tailwinds from pricing, productivity, commodities, and the benefits from uplift offset by unfavorable regional and project mix alongside higher SG&A expense. Driving strong material and installation productivity and faster backlog conversion will remain a priority. Turning to Slide 11 for the service outlook. Starting with sales, we expect another solid year in service and anticipate organic sales growth of 6% to 7%. Maintenance and repair organic sales are expected to be up 5.5% to 6.5%, driven by the significant additions to our maintenance portfolio and approximately 1 point of net pricing after adjusting for mix and churn. Mid-single-digit repair growth will also contribute through both our traditional and digital channels, although at a more moderate pace than what we saw in '23. For modernization, we anticipate organic sales growth of about 8% as we execute on a solid backlog, which similar to new equipment, extends out over a year and ended the year up in the mid-teens. Our strategy of standardizing products and driving more supply chain and factory optimization will enable us to accelerate sales growth above the 7% achieved in '23. This also has the added benefit of helping to drive modernization margin expansion. Turning to service profit. We expect roughly 50 basis points of margin expansion, continued strong volume, price, productivity and uplift are all expected to more than offset annual wage inflation and higher SG&A similar to '23. Now turning to Slide 12. We began executing Project Uplift initiatives in the second half of '23 as we leverage enterprise scale, optimize our indirect and supply chain spend and improve and standardize our processes. We are on track to achieve our targeted savings of $150 million with $80 million of run rate savings anticipated by year-end 2024, and $150 million in run rate savings by mid-'25. Out of the $150 million in total savings to be realized, nearly half will come from leveraging enterprise scale, roughly 25% from indirect and supply chain optimization, and the rest from process improvements and standardization. We continue to analyze and execute on the opportunities and estimate 70% of the savings will be in the service segment with the remaining split between new equipment and corporate. Moving to the '24 EPS bridge on Slide 13. Our guidance for adjusted EPS is $3.80 to $3.90 driven by approximately $0.30 of operating profit growth at the midpoint, reflecting organic sales growth of 3% to 5%, with approximately 50 basis points of margin expansion. Below the line, we expect to offset $0.03 to $0.04 of foreign exchange and increased interest expense headwinds with continued optimization of our tax rate and the benefit of approximately $800 million in share repurchases supported by $1.6 billion in adjusted free cash flow. Looking at the EPS cadence for the year, we expect the $0.30 of EPS growth to be fairly level-loaded between the first and the second half, while in the first half, we expect the first quarter EPS growth to be a couple of cents lighter than the second quarter. A little bit more color on the first quarter metrics, starting with orders. We faced a difficult compare versus the first quarter of last year where we grew more than 7%. So we expect new equipment orders to be down roughly 10%, while portfolio and modernization orders growth should remain strong. As for sales and profit, sales growth will be roughly 3%, and total company operating profit margins should expand over 50 basis points to 16% plus, both led by service. Below the line, headwinds from higher interest costs and a tax rate roughly in line with the prior year due to timing will be offset by lower share count. All in, this should lead to $0.06 to $0.07 of EPS growth driven primarily by operational performance. Overall, our outlook reflects another year of performance led by consistent service business. We remain focused on continuing to mitigate macro challenges and further driving shareholder value. With that, I will request Krista to please open the line for questions.

Your first question comes from the line of Nigel Coe from Wolfe Research.

So a solid outlook for 2024, I think you mentioned Anurag, 1% price for new equipment. I know we've had some weakness in China. So just wondering if there's any sort of significant SKUs across the geographies that you called out there. And maybe again, excuse me if I missed it, but what would you expect the service pricing this year?

Let me clarify, the 1% that I spoke in my prepared comments was on maintenance pricing. So what we'll see is we'll see adjusted for mix and churn. So we'll see about 3% on a like-for-like basis and just for that. On the new equipment side, clearly, we've seen good price increases in '23 in America, EMEA and AP. Some of that will continue over in '24 new equipment. But China does have price pressure as we saw in '23, but it's a deflationary economy, so we expect it to be price-cost neutral.

Okay. But no evidence of pricing deflation outside of China?

No, Nigel, none at all.

And then just on the uplift savings. Obviously, we're starting to see those coming through in '24. Where do these land mainly this year? I mean, what would you say more new equipment or services? And I'm just curious if we're seeing any kind of upward trajectory on the modernization margins? I know that's an initiative that you're focused on. Just wondering if we're going to see some of that coming through in '24?

Yes, Nigel, let me talk to the uplift in '23. We pretty much saw it across the board, again, early days but pretty pleased with the savings we've seen and more importantly, the trajectory of where we're going with the process work with the organizational model and really changing how we work to be more customer-focused. Anurag, I'll let you touch on Mod margins.

Yes. On the Mod margins, as we said a few months ago that we expect it to be at par with new equipment in a few months and then started going up, and we see that trajectory pretty good. We'll give a little bit more color on the Investor Day in a couple of weeks, but that is on the right trend. And for the uplift savings, I think the cadence, what I outlined in the prepared comments, 70% in service, and the rest between new equipment and corporate, that should be for this year as well. So we're going to exit the year at $80 million and in the year of $40 million with similar cadence across that.

Your next question comes from the line of Guatam Khanna from TD Cowen.

I was wondering if you could quantify the net savings from uplift and how we should think about that this year and next this year?

The $40 million represents net savings that are impacting our profit and loss statement positively. In 2024, we expect to see an increase in our operating profit at constant currency by around $170 million, with about $140 million of that coming from price adjustments. This includes a bit from our service segment and new equipment. Although commodity tailwinds are slightly less than those in 2023, they remain beneficial. The $40 million uplift is fully translating to our profit and loss statement. So when we combine these figures, our price adjustments account for approximately $140 million, and the remaining growth will be driven by volume, adjusted for product mix. The $40 million uplift is entirely reflected in our financial results.

Regarding your earlier comment about China and the new equipment market, it seems you're not referring to price erosion due to competition, but rather if there are other factors at play. Could you elaborate on what's happening with new equipment pricing?

It's a highly competitive market that remains weak, with a decline of over 10% this year. We are very focused on achieving continued productivity savings, and in this deflationary environment, we are also seeing costs decrease, which helps us maintain a price-cost balance. In China, we are utilizing new equipment while carefully managing the quality of the orders we take and their impact on our backlog margin, even as the market has experienced a 10% drop this quarter. Sally and the team performed admirably, resulting in a 5% drop in orders; however, we have consistently gained market share over the years. Our overall business in China made a significant contribution this year, with year-over-year profit growth. We have successfully executed our strategy focusing on new equipment with key accounts and enhancing our sales coverage, while also prioritizing the growth of our service business. Our service sales have grown in the mid-teens percentage, now accounting for 25% of our China sales, an increase from the mid-teens a few years ago. This past quarter, we achieved 20% growth in both units and value for our service offerings, continuing this trend. Thus, we are balancing new equipment with a growing service segment.

Your next question comes from the line of Julian Mitchell from Barclays.

I just wanted to clarify perhaps on the new equipment outlook. You've got the Slide 9, I think, the market down in every region and globally for the year. How are you thinking about the backlog trending sort of as we move through the year? Because I guess, last year, you had the backlog up new equipment, even with the orders down. So you had a sort of a book-to-bill, I guess, over 1x in '23 in new equipment. So just trying to understand in 2024, how are we thinking about the sort of backlog progression there and the implied book-to-bill?

Yes. The backlog is currently at 2%, and we are very satisfied with the strong new equipment orders driven by the Americas and EMEA in the fourth quarter. The Americas saw a 6% increase, while EMEA grew by 11%. Most regions are entering with robust backlog levels, except for China, where the backlog has decreased by mid-single digits as we head into 2024. This solid backlog provides us visibility across most regions, giving us confidence that we can maintain our position, along with a projected 50 basis points gain in new equipment market share. Anurag, I'll hand it over to you to explain how the year will unfold.

Yes. Thanks, Judy. Yes. So as you said, Julian, our book-to-bill was more than 1x in ‘23. We expect that to be similar in '24 because orders are quite higher than our new equipment revenue. So as we go through the course of the year, we do expect to finish even if we perform in line with our market outlook and don't even increase share, we should end the year at a backlog flattish to be slightly higher. Clearly, the comps are tough for us in the first quarter in terms of new equipment orders, but then they get easier for us in the second and third quarters. So you will see a little bit of generation quarter-by-quarter, but we are confident that given this market outlook, if it stays the way we should remain in the year with a flattish or slightly higher backlog.

And then maybe just 1 for Judy on particularly sort of North America and EMEA, how you're seeing that market right now in terms of sort of verticals and how customers are behaving in new equipment? Are you seeing particular weakness in office versus multifamily? Are you seeing projects being delayed or are existing projects going ahead as planned and it's the new projects that maybe it's just taking longer for customers to sign off? Any sort of color on that North America and Europe, please?

Sure, Julian. Let me begin with North America. Our team is actively working on building long-term customer relationships, which has allowed us to increase our order book and backlog. However, it's important to note that the new equipment market in North America ended last year at its lowest point since the global financial crisis, yet we still gained market share, delivered results, and raised our prices. Our performance in North America is strong, though no segments are particularly robust. Multifamily is currently the weakest segment due to several years of rapid growth. Ranking them, infrastructure is the strongest, and we have seen considerable success with major projects, which will allow us to continue growing. Overall, none of the segments are strong in North America this year, but Otis will benefit from our investment in the low-rise market. We launched our Gen3 Core product, and since 80% of the North American market consists of buildings with 2 to 6 stories, we are still observing active bids and a promising pipeline for Gen3 Core. This leads us to believe that we have a mid-single-digit backlog in North America, providing us with a clear view for revenue over the next 12 to 18 months. In Europe, Southern Europe remains strong, particularly in Spain, where activity is sustained. Central Northern Europe, however, is weaker, with infrastructure leading the way. In Europe, residential projects are performing better than in North America. Observations of the ground conditions, including the German economy, suggest that 2024 will resemble 2023 in terms of segment performance in Europe.

Your next question comes from the line of Miguel Borrega from BNP Paribas Exane.

The first question is regarding China and the competitive environment there. As I mentioned, the market is still weak. However, have you noticed increased pricing pressure over the past quarter? One of your competitors reported significant market share gains in Q4. I would like to hear your insights on any developments beyond what we've observed so far.

Sure. Performance can differ from quarter to quarter due to various comparisons, but overall for 2023, we believe we have gained market share in China despite the market declining by more than 10%. Our performance was down about 5% or even in the low single digits for the year. To provide more context, we performed better in the first half of the year compared to the second half, but we consistently manage volume and share against profitability. We appropriately balance these factors while sustaining momentum in our share growth. Our order value has decreased in the mid-single digits, and we've discussed all year long how deflation has affected the market. However, we have successfully offset the price decline through improved productivity. In terms of our strategy in China, we have brought on more agents and distributors, which has improved our geographic and vertical coverage, and we continue to innovate and invest in our products. Over the past year, we've released several new products in China, including an upgraded escalator model, the OH8000, and Gen360. This will provide us an advantage this year due to our technology and expanded sales channels. Overall, we have increased our bookings in China by nearly 20% since pre-spin, while the market has declined by 10% to 15% in the same timeframe. Our strategy is effective, and our team is actively focused on this. Although our backlog is down in the mid-single digits, the quality and profitability of our backlog remain strong, and we are not compromising volume for these metrics.

And then my second question, if you can talk a little bit about modernization. You mentioned backlog is up 15%. What is driving that growth exactly? And how should we think about it from here, 2024 and 2025? And then on the margin of modernization, you mentioned that par with new equipment, I think one of your peers stated that margins are even higher than maintenance. Where do you think the different slides? And would you see those margins in modernization growing ahead of the other segments for you in the next few years?

Yes, I'll discuss the market and the margins. The margins differ by region in terms of modernization, but the modernization market is performing well across all areas. This growth is primarily due to the need for refurbishment, stemming from aging equipment linked to construction cycles from over 20 years ago. We are experiencing a natural growth phase, with year-over-year increases in modernization. I'm pleased with the backlog, which has risen for the sixth consecutive quarter, with orders up over 10%. Asia Pacific, especially Korea, has been a standout, and we have a strong modernization product in China, where our orders are growing significantly in double digits, even though they are starting from a smaller base. In the Americas and EMEA, we saw significant contributions from major projects to modernization orders in the fourth quarter, and we anticipate this trend will continue. Regarding margins, as Anurag mentioned, we expect to soon surpass the margins for new equipment. However, margins for modernization vary by geography. The market is influenced by a combination of aging equipment, safety regulations, and demand generation. I'm proud of our team for their efforts; when parts become obsolete, our sales teams and mechanics ensure our customers are informed about what they need to keep their elevators updated and ready for the future. I'm excited about modernization and our organized approach to it, as we have made it a fifth strategic priority. We are developing modernization kits to streamline the process, which will allow us to produce them more like new equipment manufactured in a factory, leading to better margin expansion.

Yes. Just to add to that, Miguel, I mean, I can't speak about the others, but for us, we're clearly seeing the trajectory on margins pick up. And there's no reason why it should be much higher than equipment. And as we standardize our products, optimize the supply chain, do better on the go-to-market strategy, we see that inching up. And as I said, we'll talk more about it in the next couple of weeks. But clearly, the margin should be outpaced new equipment margins.

We have no further questions in our queue at this time. I will now turn the call back over to Judy Marks for closing remarks.

Thank you, Krista. 2023 proved to be another strong year for Otis as we focused on our strategic imperatives to drive value for all stakeholders. We head into 2024 supported by the strength of our service-driven customer-centric business model and remain excited to share our 2024 successes with all of you. We look forward to you joining us at our Investor Day at the New York Stock Exchange on February 15. Please stay safe and well. Thank you.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.