Good morning, and welcome to Otis' Second Quarter 2024 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, Investor Relations.

Thank you, Mike, and good morning, afternoon and evening, everyone. Thank you for joining us. I hope all are safe and well. I'd like to welcome Cristina Mendez, who is joining us this morning on our earnings call. Cristina is an experienced executive, who's been leading our finance team as CFO in the EMEA region for the past 2.5 years, while also leading our global finance transformation under our uplift program. I look forward to my partnership with Cristina to drive growth, operational execution and value for our customers, colleagues and shareholders. I want to also take this opportunity to thank Anurag for his leadership and for all his contributions to our company, our services growth and in championing our long-term strategy. Now for earnings, starting with Q2 highlights on Slide 3. Otis delivered a solid second quarter in the face of current economic challenges within China as the Service segment continued to drive strong performance. Service organic sales grew mid-single digits. Overall adjusted profit margin expanded by 110 basis points, and adjusted EPS grew 15%, marking our fourth consecutive quarter of 10% or greater adjusted EPS growth. With Service as our primary growth driver, we have set ourselves up well for the future by delivering maintenance portfolio growth of 4.2%, and building our modernization backlog by 17% in the quarter. As a result of our steady business execution and capital allocation strategies, we generated $353 million in adjusted free cash flow and returned $300 million to shareholders through share repurchases in the quarter, taking year-to-date repurchases to $600 million. In June, we published our 2023 ESG report, outlining our progress towards our 13 ESG goals, explaining how this progress advances our business strategy while driving value for stakeholders. Importantly, this report includes a detailed description of our Scope 1, 2 and 3 greenhouse gas emission reduction goals. And we've continued to make progress towards our goals in 2024, including recently receiving ISO 45001 certification, the international standard that specifies the requirements and good practices for effective occupational health and safety management systems at our factory in Sao Bernardo, Brazil. Moving to our orders performance on Slide 4. New Equipment orders were down 11% in the second quarter. High-single digit growth in EMEA, driven by mid-teens growth in the Middle East and low to mid-single digit growth in Asia-Pacific was more than offset by a mid-teens decline in the Americas and a double-digit decline in China. Our New Equipment backlog at constant currency was down 3% versus the prior year. In the Americas, we are seeing the impact of elevated interest rates on our new equipment orders. In China, economic softness severely impacted our new equipment orders while orders grew in both Asia-Pacific due to continued strength in the region, and EMEA as our investment in product and coverage continues to perform well. In our Services segment, progress continued to pace with portfolio growth above 4% for the seventh consecutive quarter, along with 14% modernization orders growth and continued growth in our modernization backlog, which increased 17% at constant currency. We had several exciting customer highlights in the second quarter, thanks to the dedication of our colleagues across all of our regions. In India, at the heart of the city of Delhi, Otis will install 12 SkyRise units at the iconic Unity The Amaryllis Versace. Designed by Versace Home, this luxury development is one of the tallest residential buildings in Delhi. We continue to perform well in the Infrastructure segment as evidenced by our next three major project highlights. In the United States, Otis is supporting the expansion of Terminal 3 West at San Francisco International Airport. As part of this project, Otis will install 15 new Gen 3 elevators and 13 Link escalators while modernizing two elevators. SFO served more than 50 million passengers in 2023 and these upgrades will increase overall passenger capacity and international access. In Germany, we are installing eight escalators for our long established customer, the City of Stuttgart will dismantle the non-Otis escalators that are currently in use and install our heavy traffic public escalators at four metro stations in the city center. In China, we've continued our more than 30-year relationship with the Shanghai Metro, booking several contracts in the quarter that total more than 475 units, including 311 escalators and moving walks for Line 23; 32 elevators and 115 escalators for the new Chongqing Line and 19 elevators for an extension of Line 12. Turning to Q2 results on Slide 5. Otis delivered net sales of $3.6 billion with organic sales down 1%. Adjusted operating profit excluding a $15 million foreign exchange headwind was up $38 million, driven by the Service segment. Adjusted EPS grew approximately 15% or $0.14 in the quarter driven by strong operational performance and improvement in our tax rate, benefits from minority interest and a lower share count offset headwinds from foreign exchange translation and an increase in interest expense. With that, I'll turn it over to Anurag to walk through our results in more detail.

Thank you, Judy. Starting with Q2 segment sales performance on Slide 6. Total organic sales were down 1% in the quarter, driven by new equipment, which was down 9% compared to the prior year. APAC grew approximately 10%, driven by strong performances in Southeast Asia and India, while the Americas grew low-single digits. EMEA experienced a low-single digit decline due to continued weakness in Central Europe, while China declined double-digits, largely due to the deterioration in market conditions. New Equipment pricing was strong outside of China, up low to mid-single digits. China remains under intense price pressure. And although pricing in China was down year-over-year, it came in approximately flat sequentially, while the cost environment remains deflationary. Service sales were $2.2 billion with organic sales growth of 5.1%, marking over three years of mid-single digit or greater growth in every quarter. We grew in all regions and all lines of business, including approximately 5% in maintenance and repair as a result of strong portfolio growth, solid repair volumes and maintenance pricing, which was up 3.5 points excluding the impact of mix and churn. Driven by continued double-digit growth in Asia-Pacific, MOD organic sales increased about 6% in the quarter and 8% in the first half. Turning to Q2 segment operating performance on Slide 7. New Equipment operating profit of $110 million was down $6 million at constant currency, mainly due to the impacts of lower volume and mix headwinds. Pricing outside of China, productivity, including benefits from uplift and commodity tailwinds largely offset the volume and mix impacts netting to improved margins of 30 basis points to 7.7%, ahead of our expectation. Service operating profit of $538 million increased $51 million at constant currency as drop through on higher volume, favorable pricing and productivity, including benefits from uplift more than offset annual wage inflation. This led to margin expansion of 110 basis points in the quarter. Our focus on cost control, alongside the ramp of uplift initiatives drove lower SG&A absolute dollars, while improving our adjusted SG&A as a percent of sales by 30 basis points year-over-year. For the first half, despite an inflationary environment, our SG&A dollars reduced by approximately $30 million and improved by 30 basis points as a percent of sales. We are very pleased with our progress and uplift across the three levers we've outlined with benefits ramping quicker than anticipated. Our streamlined functional structure is yielding productivity benefits while allowing us to leverage our global scale to drive cost savings, especially with our digital technology operations and other indirect spend. With solid Service performance and while navigating a challenging New Equipment environment, we expanded overall operating profit margins by 110 basis points and grew adjusted EPS $0.14 or 15%. Shifting to cash. Despite lower New Equipment orders, we generated $353 million of free cash flow in the second quarter and we expect to largely reverse the working capital build by year end. Overall, we had a very strong first half performance overcoming weakness in the China market. We grew organic sales 1.2%, led by performance in the Americas, EMEA and Asia Pacific, which were up mid-single digits as well as strength in our Service segment. This growth in conjunction with good traction on uplift, productivity, pricing and commodity tailwinds helped us expand margins by 100 basis points and grow EPS 13% positioning us well for the second half. Let me now turn it back to Judy to discuss our 2024 outlook.

Now on Slide 8. Before turning to our updated 2024 financial outlook, let me briefly update you on our industry outlook. For the New Equipment market, our expectations for the Americas and EMEA remain unchanged, down low-single digits in units. We now expect Asia to be down high-single digits in units versus the prior outlook of down mid-single digits, driven by weakness in China. There is no change to our outlook for Asia Pacific as the region has continued to perform well. We're revising China to be down 10% to down 15% as activity is weaker than we previously expected. While New Equipment markets remain under pressure, we continue to see strength in the service market, with low single-digit growth in the Americas and EMEA, and mid-single digit growth in Asia. The global installed base is expected to grow mid-single digits in 2024, adding roughly 1 million units from units that were installed within the last two years and are now rolling off the warranty period. Turning to Otis' 2024 financial outlook. We now expect sales in the range of $14.3 billion to $14.5 billion, with organic sales growth of 1% to 3%. While we see continued strength in the Service business for the remainder of the year, this decrease in organic sales versus our prior outlook is driven by New Equipment, which Anurag will discuss in a moment. Adjusted operating profit is in line with prior expectations still expected to be up $135 million to $175 million at actual currency and up $160 million to $190 million at constant currency. Adjusted EPS is now expected in the range of $3.85 to $3.90, up 9% to 10%, with $0.02 improvement versus the low end of the prior guide, driven by strong operational performance and the benefit from a lower share count. We anticipate adjusted free cash flow to come within a range of $1.5 billion to $1.6 billion. Before handing it back to Anurag to outline the 2024 segment outlook in more detail, let me turn to Slide 9 to provide an update on Project Uplift and our progress to-date. We now anticipate run rate savings of $175 million by mid-2025, as we have made solid progress executing on the program. Two areas where we're seeing additional benefit versus our prior expectations are through further streamlining of our global operating model, and incremental optimization of indirect spend in areas such as digital technology and infrastructure. As we exit 2024, our anticipated in-year savings are now slated to be approximately $60 million with a 2024 exit run rate of approximately $100 million. Overall, program is on track, we're performing well versus our internal benchmarks and timeline, and we look forward to sharing additional updates with you in the coming quarters. Anurag, over to you.

Thank you, Judy. Taking a more detailed look at our outlook and starting with sales on Slide 10. We now expect total organic sales to be up 1% to 3%. Overall, New Equipment organic sales are now expected to be down mid-single digits from market driven decline in China, which we now expect to be down approximately 20%. The outlook for the Americas, EMEA and Asia-Pacific remains unchanged, up mid-single digits combined. Service organic sales are anticipated to grow 6% to 7%, in line with prior guidance. This includes maintenance and repair within a range of 5.5% to 6.5% and for modernization, we anticipate growth of 8% to 9% and solid orders momentum and an expanding backlog provide good line of sight to achieve approximately 10% growth in the second half. Turning to Slide 11. At constant currency, operating profit should grow $160 million to $190 million, unchanged versus prior expectations with improving contributions from service and productivity, including Uplift offsetting New Equipment volume and mix headwinds. In Service, we now expect operating profit margin to expand approximately 75 basis points, an increase of 25 basis point versus the prior guide, driven by solid volumes and even better productivity. For New Equipment, despite the weakness in China, operating profit margin is expected to be roughly flat versus the prior year, a change versus our prior estimate of flat to up 10 basis points. Productivity and pricing are offsetting the added volume and mix impact from a weaker China outlook. We now expect overall adjusted operating profit margin expansion of 80 basis points as a result of Service volume, productivity and pricing tailwinds. This represents a 30 basis point improvement versus our prior outlook. Turning to cash flow. We expect to achieve adjusted free cash flow in the range of $1.5 billion to $1.6 billion, with net income growth, partially offset by changes in working capital. Moving to the 2024 EPS bridge on Slide 12. We have raised the low end of our outlook for adjusted EPS by $0.02 to a range of $3.85 to $3.90. At the midpoint, this is $0.34 of EPS growth versus the prior year, driven by operational performance. At constant currency, we expect approximately $0.32 of operating profit growth, level loaded between the first and the second half. Reductions in the effective tax rate and the lower share count more than offset headwinds from higher interest expense and foreign exchange. In closing, first half results demonstrate our ability to continue performing despite macro headwinds. There is a lot in our control in the second half, and we are focused on growing our portfolio, leveraging our expanding MOD backlog while ramping on the Uplift program and driving productivity throughout the organization. This sets us up well to achieve our full year outlook of approximately 10% EPS growth in line with our medium term guide. With that, Sarah, please open the line for questions.

Thank you. Your first question comes from Jeff Sprague with Vertical Research Partners. Your line is open.

Thank you. Good morning, Judy, Anurag and Cristina.

Good morning, Jeff.

Good morning. I guess, first Anurag, we're going to miss you, but I'm guessing we're not really going to miss you, but do you have anything to say about what your plans are?

There is more to come here. We’re focused on closing the earnings call right now and a smooth transition with Cristina. Thanks for the question, Jeff.

Awesome. Judy, can we drill a little bit more just into China? Obviously, it's kind of readily apparent, things are just challenging there from a macro standpoint. But I think you noted Service was growing mid-single digit in Asia. I don't know if you said China, if you did, I missed it. So maybe just give us a little bit more color on sort of the counteractions you're taking there to kind of support and drive profitability in country?

Yeah. Thanks, Jeff, and great to be with you this morning. Our Service business in China, specifically, units are up high-teens for another quarter. MOD orders are up high-single digit. MOD sales are up double-digit. And we're really pleased with the pivot we've made. And now this is now a multiyear strategy we've been implementing to have a greater focus and yield in China on Service. Almost a third of our revenue now in China is in Service, and that's twice what it was when we spun. Our portfolio has more than doubled and is up again this quarter, as I said, high-teens. So our service strategy is coming up nicely, and we're seeing the acceleration of MOD in China and anticipate that to continue to move double-digit as we look out into the medium term for China. The New Equipment market does remain weak. We called it down 15% for the second quarter after being down 10% in the first quarter. But with what we know on the ground from Sally and the team for the full year, we're saying it's going to be down 10% to 15%. Our team has done a really nice job in being able to manage the cost side in a very competitive market, but that market this year, we're saying for China is going to be between 425,000 and 450,000 units. Again, focused on growing Service, continuing to drive out cost in a deflationary environment, but always balancing price and volume so that we make sure that our backlog remains healthy in China. 425,000 to 450,000 units is still a very nicely sized market, but this is the third year of decreases. And I think our strategy and implementation has pivoted to service to be able to reflect that. It's why we took our guide down in terms of top line revenue now to be organic, 1% to 3%, that is all driven by this New Equipment decline there. But as you could see with our profitability this quarter for the first half, even our profit margin expansion in New Equipment, despite being down several hundred million dollars of revenue, you're seeing the resilience in not just our service driven model, but I think you're seeing again, sustained quarter-after-quarter, year-after-year performance in those items that we control.

Great. Thank you for all that color. Appreciate it. I’ll pass the baton.

Your next question comes from the line of Nigel Coe with Wolfe Research. Your line is open.

Thanks. Good morning, and Anurag, you'll be missed. But again, I'm pretty sure you're going to pop up somewhere soon. Cristina, congratulations on the promotion. So just want to pick up on the baton on the China question. I'm just wondering, is there any change in your strategy, which has been clearly focused on gaining share? And is there now more of a focus on preserving margin there? And I'm just curious on the NCI kind of expense being flat at $100 million, that seems to indicate that China EBIT is actually hold up rather well. So just curious, if there's a change in strategy and that comment on margins?

Let me address the first question and then I'll pass it to Anurag, though we're both eager to answer the second part. Nigel, there is no change in our strategy. What you might not see behind the scenes is how our team has continued to adapt. We're consistently introducing new products and enhancing our order deliveries through our agents and distributors. With about 2,400 agents and distributors, many of them are also adopting modernization. We've broadened their responsibilities to better prepare for a future that will be more focused on modern equipment, regardless of the developments in new equipment. Our strategy remains on course, and we are clear on our direction. We've achieved considerable market share gains in China since the spin-off, but we won't acquire unprofitable units just for the sake of gaining share. I've consistently communicated this approach quarter after quarter, and we will maintain this methodology rather than sacrificing price, which could lead to negative consequences in our backlog. We believe this approach is not only unnecessary but also unwise. Anurag, please address the second part.

Yeah. Thanks, Judy. So Nigel, if you look at the new equipment market in China, it is clearly challenging. And the revenue in the second quarter was down as well double-digit, as we said. Okay. The reason you don't see on the NCI line is because we're able to manage the volume headwind through productivity through growing our Service business. And it's not only all across all the other regions, it's also in China as well. So we do what we can control. So from a margin perspective and a profit perspective, we've been able to preserve it.

Yeah. The last thing I'll add on NCI is our Middle East business has picked up at a very good pace. It's one of several highlights for EMEA, and you see EMEA orders are up, EMEA is strong in revenue, and EMEA is a large modernization opportunity for us, including the Middle East. Outside of China, the majority of our remaining NCI is in the Middle East, Nigel.

Okay, thanks for the information. I have a quick question for Anurag. I want to ensure he answers before leaving. The free cash flow is down to 1.5, 1.6. Is this primarily due to the weakness in new equipment, which has resulted in a headwind for advance deposits from customers? Is that what's happening, or is there something else we need to take into account?

Yeah. Thanks. I think you got it pretty much, but let me give a little bit more color, right? In the first half, we built about $300 million of working capital and primarily due to two reasons. The first reason what you mentioned, New Equipment orders, we typically receive down payments and that auto environment has obviously been challenging for the first half. The second, which I think is the largest driver is that the Service business grew faster than the New Equipment business, and we tend to be cash ahead of New Equipment while we collect in Service after we perform the work. These two other drivers, which got us to build $300 million of working capital. So for the back half of the year, we expect to generate about $825 million in GAAP net income. And if we reverse about $200 million or more in working capital, that will get us closer to the $1.6 billion. We, of course, will look to do better like the same way as we did in the second half of last year and especially on receivables and in the New Equipment orders do a little bit better than expected then this could be a source of upside, and we could get us to about $1.6 billion of free cash.

That’s great. Thank you.

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

Hi. Good morning and congratulations to Anurag and Cristina. Maybe just my first question is really on that New Equipment organic sales outlook sort of globally and then more with a focus on the Americas, I suppose, not so much to China. So the backlog, I think, was down 3% year-on-year in June, your sales are down, I think, in the back half in New Equipment, mid-single digits. But I wondered kind of how much of a lead time now we're getting from that backlog into your revenues for 2025? If I look at the Americas, for example, your TTM orders were down mid-teens in New Equipment, but you're still guiding revenue this year up mid-single. So in something like the Americas, does the confluence of those two things mean 25 sales in New Equipment are almost certainly down a reasonable amount. And then, any sort of broader global color on that?

Sure, Julian. That's a great question and the right analysis. Let me first provide an overview of our New Equipment backlog worldwide, and then I will specifically focus on the Americas. We experienced a 3% decline and our 12-month rolling New Equipment orders are down 7.7%. However, the Americas backlog is up slightly, as is EMEA. Asia-Pacific is up in the mid-teens, but China is down, which is contributing to the overall decline in Asia. Our current outlook for New Equipment suggests we will end 2024 at an overall stable level or slightly down, as we expect a potential decrease in backlog during the second half of the year, which will be influenced by the second half orders for New Equipment. Our visibility on these second half orders appears strong, particularly in the Americas and other regions. We have about an 18-month perspective for the Americas, mostly in North America regarding our backlog performance. As mentioned, the Americas backlog is up slightly. New Equipment sales in the Americas met our expectations in the second quarter with low single-digit year-on-year comparisons, along with significant projects. We expect this to improve in the second half, and we also foresee positive New Equipment orders in that timeframe for the Americas. This is based on our proposal activity and pending awards that have not yet been booked, and we anticipate seeing this reflected in the third quarter.

That's very helpful. Thank you. And then just maybe a more sort of near-term fiddly question, just maybe for Anurag, as we think about that second half outlook, do we just assume kind of sequentially EPS is down both quarters, Q3 and Q4 to a similar degree. Any sort of color on that second half intra-quarter split?

So I'll just start off with the first half, second half, and Cristina can give more color on Q3 as well. So we've done about $1.94 of EPS in the first half and a midpoint of the guidance $3.88, so which implies another $1.94 in the second half, right? So from an operational perspective, it's equal between the first half and the second half. Cristina, give a little bit more color on Q3.

Yeah. Thank you, Anurag. Happy to give you some color on the Q1. So with interest expenses at the current run rate and tax rate growing to 27% in Q3. We would expect roughly EPS flat in the quarter, that would mean that full year EPS will go up $0.34. That is the midpoint of the guide, and that means $0.12 up in the first half, probably flat in Q3 and just over a dime in Q4.

That’s great. Thank you.

Yeah. And Julian, let me just correct myself quickly. The backlog total ex-China is up low-single digit, but the Americas backlog is down.

Your next question comes from the line of Steve Tusa with JPMorgan. Your line is open.

Hey, good morning.

Hi, Steve.

Again, Anurag, thanks for all the help, and congrats on all the promotions there to everybody. Just a question on China. What are you guys seeing price wise there and at what stage does that start to impact backlog margin? And then, is there any risk that market gets to the point where it starts impacting services growth is, you basically just your pipeline there of installs that then come off warranty a couple of years later start to be a headwind to services growth. I know it's still a small part of the global portion, but just those two questions, price and margins and then when it starts to impact services growth?

Let me address pricing and its impact on services, and then I'll let Anurag discuss margins. The competitive landscape in China is challenging, with prices declining by about 10%. However, we are seeing a decrease in costs as well. In this deflationary context, whether related to commodities or our productivity initiatives, we're effectively reducing costs, benefiting from favorable commodity trends, and enhancing productivity. We'll keep a close eye on this, Steve. We've noted that pricing has been competitive in this market for three years now, and I don't expect that to change, but our team is managing costs effectively. Regarding our service portfolio in China, we previously reported having over 400,000 units, and that number has now grown to about 415,000 units, which is encouraging. Much of this growth can be attributed to conversion rates, which are performing well. We're pleased that this figure continues to rise as per our medium-term guidance. Additionally, we are also focusing on recapturing non-Otis units. With 425,000 total units, we're holding a 4% market share, indicating significant opportunities to bring both non-Otis and Otis units back under our management. All these efforts will occur concurrently, and we are optimistic about achieving mid-teens to high-teens growth in our China portfolio over the medium term. We do not anticipate this situation leading to any negative impact on our services. Anurag?

Yeah. Thanks. So as Judy mentioned, right, so one of the biggest drivers for us is going to be on the margin side, volume for sure on Service. If you look at the market over the past three years, it's been down. But the reason our portfolio grew is because of conversion rates improving. And there's still more to come on the conversion rates as it goes around. So I think we feel fairly confident on the volume growth over there. On the cost side, clearly, the earlier question that Nigel asked as well, the reason why the NCI was where it was is because of how we able to maintain our profitability is looking at our cost base. One is we are fortunate in China to be in a deflationary economy in terms of supply chain, so that helps us. But also, we've looked at the footprint that we have, both in terms of the branches in terms of facilities, and we'll continue to take a look at it to kind of bring the cost down. So we feel a combination of volume and productivity. And on the cost side, will help us keep the margins or maybe expand the margins going forward.

Great. Thanks a lot.

Your next question comes from the line of Joe O'Dea with Wells Fargo. Your line is open.

Hi. Good morning. I wanted to ask about the Modernization backlog. And if you could talk about the pricing within that backlog and what kind of line of sight you have to continued margin expansion in MOD, any quantification of that over the next few quarters?

We added Modernization value as a fifth strategic imperative last year to mobilize the company to industrialize our approach to MOD. This shift aimed to improve MOD margins, previously below new equipment levels, to not only meet but exceed those margins. We've achieved this in the last quarter and again this quarter, setting a medium-term goal to raise MOD margins to at least 10%. I am happy with our progress in this area. Orders for MOD continue to perform well, and the company is effectively responding by assembling the right kits to meet growing customer demand. Our backlog has increased by 17%, while orders are up 13.8%, with growth seen across all regions. As we grow orders, it's essential to enhance our conversion rates to sales in Modernization and improve the pace of installations, supported by our new industrialized processes. Although it’s just the beginning, you will see continued improvement. Margins are trending in the right direction, and our MOD strategy remains strong, promising significant growth in Modernization quarter after quarter and year after year in the medium term and beyond.

And then can you just talk to China kind of cycle perspective when you talk about a market 425,000, 450,000 units and down for a few years now. Just kind of any indications you see around where that can go? How you get comfortable with, at least at a volume level, market doesn't get much worse?

It's been three straight years of fluctuating units. We reached a peak of about 650,000 units annually, but we're now expecting to guide between 425,000 and 450,000 for this year, which is a notable decline. However, our team's profitability over these years, especially from our operations in China, has been commendable as they've effectively reduced costs and are consistently searching for improvement in various areas including structural facilities and organization, as mentioned by Anurag. We've managed these changes well while simultaneously expanding our Service business, which will continue to grow. I won't predict a bottom as I'm uncertain about that. The Chinese government has implemented various initiatives to stimulate local financing recently, including reductions in rates by the People's Bank of China. However, we haven't yet seen a shift in consumer or buying sentiment regarding properties. There remains a strong desire among hundreds of millions of Chinese residents to transition from rural to urban areas, a trend that has been in place for the past two decades and is expected to persist. We believe our strategy is well-aligned with this demand, shifting more towards Service and Modernization. Just earlier this week, we had the honor of hosting Premier Li at one of our facilities in TEDA, located in the Tianjin region. It was a proud occasion for us. During his visit, we discussed not only our automation capabilities and Otis's long presence in China, celebrating 40 years this fall, but also urban renewal and modernization efforts. Our focus is on providing energy-efficient solutions, especially given the aging installed base of 10 million units in China, which is creating a substantial demand for modernization that we are well-prepared to address.

That’s great color. Thank you.

Your next question comes from the line of Rob Wertheimer with Melius Research. Your line is open.

Good morning, everybody. This is Justin Pellegrino on for Rob and congratulations to Cristina and Anurag again. Our question is kind of around MODs as well and there's been continued impressive growth. Can you just put that in context of sales effort? Is that more outreach? And I know, Judy, you touched on looking for better conversions? Is it more market awareness of the product? Can you just tell us what's kind of driving that impressive growth? Thanks.

Yeah. I mean one of the clear areas, Justin, is just literally aging equipment and obsolescence and demand. I mean, of the 20 million plus, 22 million units in the installed base, over 7 million are 20 plus years older and many of those 30 plus years older. The largest market for that right now is in EMEA, and we're excited with our offerings there. What makes us different now is, we're getting away from custom MOD and bespoke MOD and industrializing this. And when we introduced our Gen 3 product to the market a year or two ago, we did it with the vision that we would have that offering modular available across the globe, a connected offering that would not just fulfill New Equipment drives whether it’s Gen 360 in EMEA and now China, but Gen 3 globally that we could then also package as a modernization opportunity. So as we brought out these products, the beauty of it is, as we’re educating the New Equipment sales team, we’re educating the MOD sales team. And as our installation crews from New Equipment are more familiar with Gen 3, now they’re doing Gen 3 Mod. So we’re attacking every part of this while attacking the cost side because now we’re buying Gen 3 at scale from our sub-suppliers and the manufacturing elements we do ourselves, and all of it is coming together nicely, which is driving the margins. But from a sales standpoint, we’ve simplified it. We have these relationships with customers. Think about our service portfolio at 2.3 million units, just on our portfolio. We have relationships with these service customers every day. Those are our MOD customers. And when we go on portfolio most of that work we can talk about. We can help them capital plan. We can create if there’s obsolescence. We can be more – it can be more proactive than reactive and all of that is coming together at a time when the demand is growing. So we’re ready for this. And I think you’re seeing – I know you’re seeing those results in MOD and you’re going to continue to see them.

Wonderful. Thank you.

Your next question comes from the line of Nick Houston with RBC Capital Markets. Your line is open.

Yeah. Hi, Judy, Anurag, Cristina. Yeah. Thanks for taking the question. I'd like to ask about the maintenance and repair business, so the 4.9% organic growth, I mean, it's not a bad number overall, but it does look like the slowest growth in quite a few quarters. So I'm just wondering, if you can maybe provide some color about what's going on there and whether it's maybe some of the above trend growth that we've been seeing in the repair business coming off? Thanks.

I think you answered that partly already, Nick. We have experienced double-digit growth in the repair business for three years now. Initially, it was due to the post-COVID recovery, but we have continued to see robust repair growth since then. We anticipate that this growth will continue to rise in the second half of the year. While it has been steady, we have previously indicated that as maintenance increases, repair growth tends to be about one percentage point higher. Thus, if our portfolio grows over 4%, repair should see more than 5% growth. We have been surpassing 10% growth in repairs for nearly three years, so it's reasonable to expect slightly higher single-digit growth for the latter half of the year, which seems like a fair expectation.

The only thing I want to add is that if you look back, last year the second quarter had the highest repair growth. As Judy mentioned, repair is still growing at a strong high-single digit, if not double-digit, in the second half of the year.

Okay. Great.

Yeah. The last thing I'll add on NCI is our Middle East business has picked up at a very good pace. It's one of several highlights for EMEA, and you see EMEA orders are up, EMEA is strong in revenue, and EMEA is a large modernization opportunity for us, including the Middle East. Outside of China, the majority of our remaining NCI is in the Middle East, Nigel.

This concludes the question-and-answer session. I'll turn the call to Judy for closing remarks.

Thank you, Sarah. Our results in the first half reflect the strength of our service-driven business model, as we remain focused on delivering value for our shareholders in the balance of 2024 and beyond. I want to once again thank Anurag and wish him well in his future endeavors, while also expressing my excitement to partner with Cristina as together, we both look forward to meeting with investors and analysts in the near future. Everyone, please stay safe and well. Thank you very much.

This concludes today's conference call. Thank you for joining. You may now disconnect your lines.