Chair, Chief Executive Officer and President at Otis Worldwide
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 deliver 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 continued to rollout 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 1 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%, an approximately 4% improvement versus 2022. Additional details on our portfolio growth in 2023 can be found in the appendix, as 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 4 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 of our -- in our mod package offerings continues to drive results. Additionally, the Americas and EMEA drove strong fourth quarter modernization major project bookings. Mod 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 will 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 the 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 cab 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 Tin Yiu Estate. This project for the Hong Kong Housing Authority, a long-standing 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 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 Duolifts.
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 micro -- 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.