Company raises full-year revenue and earnings
outlook following strong Q1 results
- Sales of $2.4 billion, up 10% versus a year ago
- Products and Systems Integration sales up 14%
- Software and Services sales up 4%; up 12%1 excluding U.K. Home
Office sales
- GAAP earnings per share (EPS) of ($0.23), inclusive of a
($3.42)2 loss due to settlement accounting for the Silver Lake
convertible debt
- Non-GAAP EPS3 of $2.81, up 27% versus a year ago
- Record Q1 operating cash flow of $382 million, up $390 million
versus a year ago
- Record ending backlog of $14.4 billion, up 2% versus a year
ago
- Credit ratings upgraded to BBB by S&P and Fitch; issued
$1.3 billion in long-term debt and settled Silver Lake convertible
debt in cash
- Acquired Silent Sentinel, a provider of specialized, long-range
cameras
Motorola Solutions, Inc. (NYSE: MSI) today reported its earnings
results for the first quarter of 2024.
“Q1 was an outstanding quarter, with record Q1 revenue in both
segments and record Q1 cash flow,” said Greg Brown, chairman and
CEO, Motorola Solutions. “Our continued robust backlog and strong
balance sheet position us well going forward. As a result, we’re
raising both our revenue and earnings expectations for the full
year.”
KEY FINANCIAL RESULTS (presented in millions, except per
share data and percentages)
Q1 2024
Q1 2023
% Change
Sales
$2,389
$2,171
10 %
GAAP
Operating Earnings
$519
$399
30 %
% of Sales
21.7 %
18.4 %
EPS
($0.23)
$1.61
(114) %
Non-GAAP3
Operating Earnings
$638
$532
20 %
% of Sales
26.7 %
24.5 %
EPS
$2.81
$2.22
27 %
Products and Systems Integration
Segment
Sales
$1,490
$1,303
14 %
GAAP Operating Earnings
$310
$176
76 %
% of Sales
20.8 %
13.5 %
Non-GAAP Operating Earnings3
$370
$246
50 %
% of Sales
24.8 %
18.9 %
Software and Services Segment
Sales
$899
$868
4 %
GAAP Operating Earnings
$209
$223
(6) %
% of Sales
23.2 %
25.7 %
Non-GAAP Operating Earnings3
$268
$286
(6) %
% of Sales
29.8 %
32.9 %
1Details regarding this non-GAAP measure
and the use of non-GAAP measures are included later in this news
release.
2A $3.42 pre-tax non-operating loss on the
extinguishment of the Silver Lake convertible debt recorded during
Q1 2024 is calculated as the loss of $585 million divided by
dilutive shares of 171.3 million, which represents the dilutive
share count that the company would have reported in the quarter if
not for the loss due to this transaction.
3Non-GAAP financial information excludes
the after-tax impact of approximately $3.04 per diluted share
related to highlighted items, including the loss from the
extinguishment of Silver Lake convertible debt, share-based
compensation expense and intangible assets amortization expense.
Details regarding these non-GAAP adjustments and the use of
non-GAAP measures are included later in this news release.
OTHER SELECTED FINANCIAL RESULTS
- Revenue - Sales were $2.4 billion, up 10% from the
year-ago quarter driven by growth in North America and
International. Revenue from acquisitions was $10 million and
currency tailwinds were $1 million in the quarter. The Products and
Systems Integration segment grew 14%, driven by growth in land
mobile radio communications ("LMR") and video security and access
control ("Video"). The Software and Services segment grew 4%,
driven by growth in Video and Command Center, partially offset by
lower revenue in the U.K. related to the CMA's decision to
implement a prospective price control on Airwave (the "Charge
Control") and our exit from the Emergency Services Network ("ESN")
contract.
- Operating margin - GAAP operating margin was 21.7% of
sales, up from 18.4% in the year-ago quarter. Non-GAAP operating
margin was 26.7% of sales, up 220 basis points from 24.5% in the
year-ago quarter. The increase in both GAAP and Non-GAAP operating
margin was driven by higher sales, favorable mix and improved
operating leverage, partially offset by the Charge Control.
- Taxes - The GAAP effective tax rate during the quarter
was 57.8%, driven by the non deductible loss on the extinguishment
of Silver Lake convertible debt, offset by utilization of foreign
tax credit carryovers. This compares to a tax rate of 22.1% in the
year-ago quarter. The non-GAAP effective tax rate was 22.1%,
compared to 21.9% in the year-ago quarter.
- Cash flow - Operating cash flow was $382 million,
compared to a usage of $8 million in the year-ago quarter and free
cash flow was $336 million compared to a usage of $62 million in
the year-ago quarter. Both the operating cash flow and free cash
flow for the quarter increased primarily due to improved working
capital and higher earnings, net of non-cash charges.
- Capital allocation - During the quarter, the company
paid $163 million in cash dividends, incurred $46 million of
capital expenditures and repurchased $39 million of common stock.
Additionally, the company settled the Silver Lake convertible debt
for $1.59 billion in cash, inclusive of the conversion premium,
resulting in an overall reduction in the company's diluted share
count and eliminating any further share dilution related to the
note. The company received credit rating upgrades to BBB from both
S&P and Fitch, issued $1.3 billion in long-term debt during the
quarter, and closed the acquisition of Silent Sentinel, a provider
of specialized long-range cameras, for $37 million, net of cash
acquired.
- Backlog - The company ended the quarter with record
backlog of $14.4 billion, up 2% or $331 million from the year-ago
quarter. Products and Systems Integration segment backlog was down
$74 million, or 2%, driven primarily by unfavorable foreign
exchange rates. Software and Services segment backlog was up $404
million, or 4%, driven by increases in multi-year software and
services contracts in both regions.
NOTABLE WINS AND ACHIEVEMENTS
Software and Services
- $25M LMR services order for Douglas County, Colorado
- $25M LMR services order for U.K. Department of Health
- $18M Command Center order for San Francisco
- $14M LMR services order for Lithuania
- $11M LMR services order for São Paulo State Police, Brazil
Products and Systems
Integration
- $22M P25 device order for large U.S. customer
- $16M LMR order for an international customer
- $13M LMR order for State of Tennessee
- $13M mobile video order for North Carolina State Highway
Patrol
BUSINESS OUTLOOK
- Second quarter 2024 - The company expects revenue growth
between 7% and 8% compared to the second quarter of 2023. The
company expects non-GAAP EPS in the range of $2.97 to $3.02 per
share. This assumes approximately 170 million fully diluted shares
and a non-GAAP effective tax rate of approximately 24%.
- Full-year 2024 - The company now expects revenue growth
of approximately 7%, up from its prior guidance of approximately
6%, and non-GAAP EPS of between $12.98 and $13.08 per share, up
from its prior guidance of between $12.62 and $12.72 per share.
This outlook assumes approximately $30 million of foreign exchange
headwinds, a fully diluted share count between 170 million and 171
million shares and a non-GAAP effective tax rate between 23% and
24%.
The company has not quantitatively reconciled its guidance for
forward-looking non-GAAP metrics to their most comparable GAAP
measures because the company does not provide specific guidance for
the various reconciling items as certain items that impact these
measures have not occurred, are out of the company’s control, or
cannot be reasonably predicted. Accordingly, a reconciliation to
the most comparable GAAP financial metric is not available without
unreasonable effort. Please note that the unavailable reconciling
items could significantly impact the company’s results.
RECENT EVENTS
U.K. HOME OFFICE UPDATE
In October 2021, the Competition and Markets Authority ("CMA")
opened a market investigation into the Mobile Radio Network
Services market. This investigation included Airwave, the company's
private mobile radio communications network that it acquired in
2016. Airwave provides mission-critical voice and data
communications to emergency services and other agencies in Great
Britain.
In 2023, the CMA imposed a legal order on Airwave which
implemented the Charge Control. After the Competition Appeal
Tribunal ("CAT") dismissed the company's appeal of the CMA's final
decision on December 22, 2023, the company filed an application
with the United Kingdom Court of Appeal on February 13, 2024,
requesting that it hear the company's appeal of the CAT judgment;
the Court of Appeal has not yet responded to this request. Since
August 1, 2023, revenue under the Airwave contract has been
recognized in accordance with the Charge Control, and will continue
to be unless the United Kingdom Court of Appeal were to reverse the
CAT's judgment and overturn the Charge Control.
On March 13, 2024, the company received a notice of contract
extension (the “Deferred National Shutdown Notice”) from the U.K.
Home Office. The Deferred National Shutdown Notice extends the
“national shutdown target date” of the Airwave service from
December 31, 2026 to December 31, 2029, at the Charge Control
rates.
The company's backlog for Airwave services contracted with the
U.K. Home Office through December 31, 2026 was previously reduced
by $777 million to align with the Charge Control. In the first
quarter of 2024, as a result of the U.K. Home Office's notice of a
contract extension pursuant to their Deferred National Shutdown
Notice, the company has recorded additional backlog of $748 million
to reflect the incremental three years of services. On April 11,
2024, the company filed proceedings in the U.K. High Court
challenging the decision of the U.K. Home Office to issue the
Deferred National Shutdown Notice as being in breach of applicable
U.K. procurement and public law. The backlog related to the
incremental years of service contemplated in the Deferred National
Shutdown Notice could change depending on the outcome of the
proceedings.
CONFERENCE CALL AND WEBCAST Motorola Solutions will host
its quarterly conference call beginning at 4 p.m. U.S. Central Time
(5 p.m. U.S. Eastern Time) on Thursday, May 2. The conference call
will be webcast live at www.motorolasolutions.com/investor. An
archive of the webcast will be available for a limited period of
time thereafter.
CONSOLIDATED GAAP RESULTS (presented in millions, except
per share data)
A comparison of results from operations is as follows:
Q1 2024
Q1 2023
Net sales
$2,389
$2,171
Gross margin
$1,192
$1,046
Operating earnings
$519
$399
Amounts attributable to Motorola
Solutions, Inc. common stockholders
Net earnings
($39)
$278
Diluted EPS
($0.23)
$1.61
Weighted average diluted common shares
outstanding
166.3
172.6
USE OF NON-GAAP FINANCIAL INFORMATION
In addition to the results presented in accordance with
accounting principles generally accepted in the U.S. ("GAAP")
included in this news release, Motorola Solutions also has included
non-GAAP measurements of results, including free cash flow,
non-GAAP operating earnings, non-GAAP EPS, non-GAAP operating
margin, non-GAAP tax rate, organic revenue and net sales adjusted
for the U.K. Home Office. The company has provided these non-GAAP
measurements to help investors better understand its core operating
performance, enhance comparisons of core operating performance from
period-to-period and allow better comparisons of its operating
performance to that of its competitors. Among other things,
management uses these operating results, excluding the identified
items, to evaluate the performance of its businesses and to
evaluate results relative to certain incentive compensation
targets. Management uses operating results excluding these items
because it believes these measurements enable it to make better
period-to-period evaluations of the financial performance of its
core business operations. The non-GAAP measurements are intended
only as a supplement to the comparable GAAP measurements and the
company compensates for the limitations inherent in the use of
non-GAAP measurements by using GAAP measures in conjunction with
the non-GAAP measurements. As a result, investors should consider
these non-GAAP measurements in addition to, and not in substitution
for or as superior to, GAAP measurements.
Reconciliations: Details and reconciliations of such non-GAAP
measurements to the corresponding GAAP measurements can be found at
the end of this news release.
Free cash flow: Free cash flow represents net cash provided by
operating activities less capital expenditures. The company
believes that free cash flow is useful to investors as the basis
for comparing its performance and coverage ratios with other
companies in the company's industries, although the company's
measure of free cash flow may not be directly comparable to similar
measures used by other companies. This measure is also used as a
component of incentive compensation.
Organic revenue: Organic revenue reflects net sales calculated
under GAAP excluding net sales from acquired business owned for
less than four full quarters. The company believes organic revenue
provides useful information for evaluating the periodic growth of
the business on a consistent basis and provides for a meaningful
period-to-period comparison and analysis of trends in the
business.
Net sales adjusted for the U.K. Home Office or Net sales
excluding U.K. Home Office sales: Net sales adjusted for the U.K.
Home Office reflects net sales calculated under GAAP excluding net
sales related to the U.K. Home Office. The company believes that
net sales excluding the U.K. Home Office improves period-to-period
comparability related to the Charge Control implemented as of
August 1, 2023 and the company's exit from the ESN contract as of
December 31, 2023.
Non-GAAP operating earnings, non-GAAP EPS and non-GAAP operating
margin each excludes highlighted items, including share-based
compensation expenses and intangible assets amortization expense,
as follows:
Highlighted items: The company has excluded the effects of
highlighted items including, but not limited to,
acquisition-related transaction fees, tangible and intangible asset
impairments, reorganization of business charges, certain non-cash
pension adjustments, legal settlements and other contingencies,
gains and losses on investments and businesses, Hytera-related
legal expenses, gains and losses on the extinguishment of debt and
the income tax effects of significant tax matters, from its
non-GAAP operating expenses and net income measurements because the
company believes that these historical items do not reflect
expected future operating earnings or expenses and do not
contribute to a meaningful evaluation of the company's current
operating performance or comparisons to the company's past
operating performance. For the purposes of management's internal
analysis over operating performance, the company uses financial
statements that exclude highlighted items, as these charges do not
contribute to a meaningful evaluation of the company's current
operating performance or comparisons to the company's past
operating performance.
Hytera-Related Legal Expenses: On March 14, 2017, the company
filed a complaint in the U.S. District Court for the Northern
District of Illinois (the “Court”) against Hytera Communications
Corporation Limited of Shenzhen, China; Hytera America, Inc.; and
Hytera Communications America (West), Inc. (collectively,
“Hytera”), alleging trade secret theft and copyright infringement
and seeking, among other things, injunctive relief, compensatory
damages and punitive damages. On February 14, 2020, the company
announced that a jury decided in the company's favor in its trade
secret theft and copyright infringement case. In connection with
this verdict, the jury awarded the company $345.8 million in
compensatory damages and $418.8 million in punitive damages, for a
total of $764.6 million. In a series of post-trial rulings in 2021,
the Court subsequently reduced the judgment to $543.7 million, but
also ordered Hytera to pay the company $51.1 million in
pre-judgment interest and $2.6 million in costs, as well as $34.2
million in attorneys fees. The company continues to seek collection
of the judgment through the ongoing legal process.
On December 17, 2020, the Court held that Hytera must pay the
company a forward-looking reasonable royalty on products that use
the company’s stolen trade secrets, and on December 15, 2021, set
royalty rates for Hytera's sale of relevant products from July 1,
2019 forward. On July 5, 2022, the Court ordered that Hytera pay
into a third-party escrow on July 31, 2022, the royalties owed to
the company based on the sale of relevant products from July 1,
2019 to June 30, 2022. Hytera failed to make the required royalty
payment on July 31, 2022. On August 1, 2022, Hytera filed a motion
to modify or stay the Court’s previous July 5, 2022 royalty order,
which the Court denied on July 11, 2023. On August 3, 2022, the
company filed a motion seeking to hold Hytera in civil contempt for
violating the royalty order by not making the required royalty
payment on July 31, 2022. On August 26, 2023, the Court granted the
company's contempt motion. As a result, on September 1, 2023,
Hytera made a payment of $56 million into the third-party escrow.
In addition to the September 1, 2023 payment of $56 million, Hytera
has made de minimis regular quarterly royalty payments into the
third-party escrow from October 2022 through April 2024. The
aggregate amount paid into escrow will not be recognized until all
contingencies are resolved and such amount is released from
escrow.
Following the February 14, 2020 verdict and judgment in the
company's favor, Hytera subsequently filed several notices to the
U.S. Court of Appeals for the Seventh Circuit (the "Court of
Appeals"), including a notice of appeal filed on August 2, 2022
which appealed the orders related to the jury's verdict as well as
the Court's royalty order. The company filed its cross-appeal on
August 5, 2022. The Court of Appeals heard oral arguments on the
parties' appeals on December 5, 2023.
In the first quarter of 2024, the parties have been engaged in
competing litigation in the Court and a court in Shenzhen, China
(originally filed by Hytera in June 2022 and not served upon the
company until November 2023) related to the possible continued use
by Hytera of the company’s trade secrets in Hytera’s currently
shipping products. In March 2024, the Court ordered Hytera to take
affirmative steps to withdraw its competing litigation. Hytera did
not comply with the Court's order and, accordingly, the Court
issued an order against Hytera for contempt sanctions on April 2,
2024, which included a worldwide sales injunction of all Hytera
radio products. On April 16, 2024, the Court of Appeals granted
Hytera's motion for an emergency stay of the contempt sanctions, to
allow the Court of Appeals to review the lower Court's various
orders related to the contempt sanctions.
Management typically considers legal expenses associated with
defending the company's intellectual property as “normal and
recurring” and accordingly, Hytera-related legal expenses were
included in both the company's GAAP and non-GAAP operating income
for fiscal years 2017, 2018 and 2019. The company anticipates
further expenses associated with Hytera-related litigation;
however, as of 2020, the company believes that these expenses are
no longer a part of the “normal and recurring” legal expenses
incurred to operate its business. In addition, as any contingent or
actual gains associated with the Hytera litigation are recognized,
they will be similarly excluded from the company's non-GAAP
operating income, consistent with the company's treatment of the
$15 million of proceeds realized in 2022. The company believes
after the jury award, the presentation of excluding both
Hytera-related legal expenses and gains related to awards better
aligns with how management evaluates the company's ongoing
underlying business performance.
Share-based compensation expenses: The company has excluded
share-based compensation expenses from its non-GAAP operating
expenses and net income measurements. Although share-based
compensation is a key incentive offered to the company’s employees
and the company believes such compensation contributed to the
revenue earned during the periods presented and also believes it
will contribute to the generation of future period revenues, the
company continues to evaluate its performance excluding share-based
compensation expenses primarily because it represents a significant
non-cash expense. Share-based compensation expenses will recur in
future periods.
Intangible assets amortization expense: The company has excluded
intangible assets amortization expense from its non-GAAP operating
expenses and net income measurements primarily because it
represents a non-cash expense and because the company evaluates its
performance excluding intangible assets amortization expense.
Amortization of intangible assets is consistent in amount and
frequency but is significantly affected by the timing and size of
the company’s acquisitions. Investors should note that the use of
intangible assets contributed to the company’s revenues earned
during the periods presented and will contribute to the company’s
future period revenues as well. Intangible assets amortization
expense will recur in future periods.
FORWARD LOOKING STATEMENTS
This news release contains "forward-looking statements" within
the meaning of applicable federal securities law. These statements
are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 and generally include
words such as “believes,” “expects,” “intends,” “anticipates,”
“estimates” and similar expressions. The company can give no
assurance that any actual or future results or events discussed in
these statements will be achieved. Any forward-looking statements
represent the company’s views only as of today and should not be
relied upon as representing the company’s views as of any
subsequent date. Readers are cautioned that such forward- looking
statements are subject to a variety of risks and uncertainties that
could cause the company’s actual results to differ materially from
the statements contained in this release. Such forward-looking
statements include, but are not limited to, Motorola Solutions’
financial outlook for the second quarter and full-year of 2024; the
impact of the CMA's final decision and Charge Control regarding
Airwave (including the company's actions in response); and the
impact of the company's proceedings in the U.K. High Court relating
to the Deferred National Shutdown Notice. Motorola Solutions
cautions the reader that the risks and uncertainties below, as well
as those in Part I Item 1A of Motorola Solutions' 2023 Annual
Report on Form 10-K and in its other SEC filings available for free
on the SEC’s website at www.sec.gov and on Motorola Solutions’
website at www.motorolasolutions.com, could cause Motorola
Solutions’ actual results to differ materially from those estimated
or predicted in the forward-looking statements. Many of these risks
and uncertainties cannot be controlled by Motorola Solutions, and
factors that may impact forward-looking statements include, but are
not limited to: (i) the impact, including increased costs and
potential liabilities, associated with changes in laws and
regulations regarding privacy, data protection, information
security and cybersecurity; (ii) challenges relating to existing or
future legislation and regulations pertaining to artificial
intelligence (“AI”), AI-enabled products and the use of biometrics
and other video analytics; (iii) the impact of government
regulation of radio frequencies; (iv) audits and regulations and
laws applicable to our U.S. government customer contracts and
grants; (v) the impact, including increased costs and additional
compliance obligations, associated with existing or future
telecommunications-related laws and regulations; (vi) the evolving
state of environmental regulation relating to climate change, and
the physical risks of climate change; (vii) impact of product
regulatory and safety, consumer, worker safety and environmental
laws; (viii) impact of tax matters; (ix) increased areas of risk,
increased competition and additional compliance obligations
associated with the expansion of our technologies within our
Products and Systems Integration and Software and Services
segments; (x) the effectiveness of our investments in new products
and technologies; (xi) impact of catastrophic events on our
business or our customers' or suppliers' business; (xii) social,
ethical and competitive risks relating to the use of AI in our
products and services; (xiii) the effectiveness of our strategic
acquisitions, including the integrations of such acquired
businesses; (xiv) increased cybersecurity threats, a security
breach or other significant disruption of our IT systems or those
of our outsource partners, suppliers or customers; (xv) our
inability to protect our intellectual property or potential
infringement of intellectual property rights of third parties;
(xvi) risks relating to intellectual property licenses and
intellectual property indemnities in our customer and supplier
contracts; (xvii) our license of the MOTOROLA, MOTO, MOTOROLA
SOLUTIONS and the Stylized M logo and all derivatives and
formatives thereof from Motorola Trademark Holdings, LLC; (xviii)
our inability to purchase at acceptable prices a sufficient amount
of materials, parts, and components, as well as software and
services, to meet the demands of our customers, and any disruption
to our suppliers or significant increase in the price of supplies;
(xix) risks related to our large, multi-year system and services
contracts (including, but not limited to, with respect to the
Airwave contract); (xx) the global nature of our employees,
customers, suppliers and outsource partners; (xxi) our use of
third-parties to develop, design and/or manufacture many of our
components and some of our products, and to perform portions of our
business operations; (xxii) inability of our subcontractors to
perform in a timely and compliant manner or adhere to our Human
Rights Policy; (xxiii) inability of our products to meet our
customers’ expectations or regulatory or industry standards; (xxiv)
increasing scrutiny and evolving expectations from investors,
customers, lawmakers, regulators and other stakeholders regarding
environmental, social and governance-related practices and
disclosures; (xxv) inability to attract and retain senior
management and key employees; (xxvi) impact of current global
economic and political conditions in the markets in which we
operate; (xxvii) impact of returns on pension and retirement plan
assets and interest rate changes; (xxviii) inability to access the
capital markets for financing on acceptable terms and conditions;
(xix) exposure to exchange rate fluctuations on cross-border
transactions and the translation of local currency results into
U.S. dollars; and (xxx) the return of capital to shareholders
through dividends and/or repurchasing shares. Motorola Solutions
undertakes no obligation to publicly update any forward-looking
statement or risk factor, whether as a result of new information,
future events or otherwise.
ABOUT MOTOROLA SOLUTIONS
Motorola Solutions is solving for safer. We build and connect
technologies to help protect people, property and places. Our
solutions enable the collaboration between public safety agencies
and enterprises that’s critical for a proactive approach to safety
and security. Learn more about how we’re solving for safer
communities, safer schools, safer hospitals, safer businesses –
safer everywhere – at www.motorolasolutions.com.
GAAP-1 Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (In
millions, except per share amounts) Three Months
Ended March 30, 2024 April 1, 2023 Net sales from
products
$
1,405
$
1,224
Net sales from services
984
947
Net sales
2,389
2,171
Costs of products sales
600
576
Costs of services sales
597
549
Costs of sales
1,197
1,125
Gross margin
1,192
1,046
Selling, general and administrative expenses
397
368
Research and development expenditures
218
210
Other charges
19
14
Intangibles amortization
39
55
Operating earnings
519
399
Other income (expense): Interest expense, net
(44
)
(54
)
Gain on sales of investment and businesses, net
-
1
Other, net
(565
)
12
Total other expense
(609
)
(41
)
Earnings (loss) before income taxes
(90
)
358
Income tax expense (benefit)
(52
)
79
Net earnings (loss)
(38
)
279
Less: Earnings attributable to noncontrolling interests
1
1
Net earnings (loss) attributable to Motorola Solutions, Inc.
$
(39
)
$
278
Earnings (loss) per common share:
Basic
$
(0.23
)
$
1.66
Diluted
$
(0.23
)
$
1.61
Weighted average common shares
outstanding: Basic
166.3
167.4
Diluted
166.3
172.6
Percentage of Net Sales* Net sales from products
58.8
%
56.4
%
Net sales from services
41.2
%
43.6
%
Net sales
100.0
%
100.0
%
Costs of products sales
42.7
%
47.1
%
Costs of services sales
60.7
%
58.0
%
Costs of sales
50.1
%
51.8
%
Gross margin
49.9
%
48.2
%
Selling, general and administrative expenses
16.6
%
17.0
%
Research and development expenditures
9.1
%
9.7
%
Other charges
0.8
%
0.6
%
Intangibles amortization
1.6
%
2.5
%
Operating earnings
21.7
%
18.4
%
Other income (expense): Interest expense, net
(1.8
)%
(2.5
)%
Gain on sales of investments and businesses, net
-
%
-
%
Other, net
(23.7
)%
0.6
%
Total other expense
(25.5
)%
(1.9
)%
Earnings (loss) before income taxes
(3.8
)%
16.5
%
Income tax expense (benefit)
(2.2
)%
3.6
%
Net earnings (loss)
(1.6
)%
12.9
%
Less: Earnings attributable to noncontrolling interests
-
%
-
%
Net earnings (loss) attributable to Motorola Solutions, Inc.
(1.6
)%
12.8
%
* Percentages may not add up due to rounding
GAAP-2
Motorola Solutions, Inc. and Subsidiaries Condensed
Consolidated Balance Sheets (In millions)
March 30, 2024 December 31, 2023 Assets Cash and cash
equivalents
$
1,512
$
1,705
Accounts receivable, net
1,592
1,710
Contract assets
1,127
1,102
Inventories, net
840
827
Other current assets
450
357
Current assets held for disposition
-
24
Total current assets
5,521
5,725
Property, plant and equipment, net
957
964
Operating lease assets
534
495
Investments
141
143
Deferred income taxes
1,244
1,062
Goodwill
3,410
3,401
Intangible assets, net
1,232
1,255
Other assets
287
274
Non-current assets held for disposition
-
17
Total assets
$
13,326
$
13,336
Liabilities and Stockholders' Equity Current portion of long-term
debt
$
313
$
1,313
Accounts payable
822
881
Contract liabilities
1,890
2,037
Accrued liabilities
1,601
1,504
Current liabilities held for disposition
-
1
Total current liabilities
4,626
5,736
Long-term debt
5,994
4,705
Operating lease liabilities
447
407
Other liabilities
1,722
1,741
Non-current liabilities held for disposition
-
8
Total Motorola Solutions, Inc. stockholders’ equity
521
724
Non-controlling interests
16
15
Total liabilities and stockholders’ equity
$
13,326
$
13,336
GAAP-3 Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (In
millions) Three Months Ended March 30,
2024 April 1, 2023 Operating Net earnings (loss)
$
(38
)
$
279
Adjustments to reconcile Net earnings (loss) to Net cash provided
by (used for) operating activities: Depreciation and amortization
83
98
Non-cash other charges
3
7
Share-based compensation expenses
56
55
Gain on sales of investments and businesses, net
-
(1
)
Loss from the extinguishment of Silver Lake Convertible Debt
585
-
Changes in assets and liabilities, net of effects of acquisitions,
dispositions, and foreign currency translation adjustments:
Accounts receivable
113
179
Inventories
(7
)
(26
)
Other current assets and contract assets
(123
)
(40
)
Accounts payable, accrued liabilities and contract liabilities
(90
)
(536
)
Other assets and liabilities
(19
)
(5
)
Deferred income taxes
(181
)
(18
)
Net cash provided by (used for) operating activities
382
(8
)
Investing Acquisitions and investments, net
(37
)
(4
)
Proceeds from sales of investments and businesses, net
36
5
Capital expenditures
(46
)
(54
)
Net cash used for investing activities
(47
)
(53
)
Financing Repayment of debt
(1,593
)
-
Net proceeds from issuance of debt
1,288
-
Issuances of common stock
(5
)
26
Purchases of common stock
(39
)
(140
)
Payment of dividends
(163
)
(148
)
Payments of dividends to non-controlling interests
-
(1
)
Net cash used for financing activities
(512
)
(263
)
Effect of exchange rate changes on total cash and cash equivalents
(16
)
21
Net decrease in cash and cash equivalents
(193
)
(303
)
Cash and cash equivalents, beginning of period
1,705
1,325
Cash and cash equivalents, end of period
$
1,512
$
1,022
Non-GAAP-1 Motorola Solutions, Inc. and Subsidiaries
Reconciliation of Net Cash Provided by Operating Activities to
Free Cash Flow (In millions) Three
Months Ended March 30, 2024 April 1, 2023
Net cash provided by (used for) operating activities
$
382
$
(8
)
Capital expenditures
(46
)
(54
)
Free cash flow
$
336
$
(62
)
Non-GAAP-2 Motorola Solutions, Inc. and Subsidiaries
Reconciliation of Net Earnings Attributable to MSI to Non-GAAP
Net Earnings Attributable to MSI (In millions)
Three Months Ended Statement Line March 30,
2024 April 1, 2023 Net earnings (loss) attributable to
MSI
$
(39
)
$
278
Non-GAAP adjustments before income taxes: Loss from the
extinguishment of Silver Lake Convertible Debt Other (income)
expense
$
585
$
-
Share-based compensation expenses Cost of sales, SG&A and
R&D
56
55
Intangible assets amortization expense Intangibles amortization
39
55
Reorganization of business charges Cost of sales and Other charges
(income)
10
13
Legal settlements Other charges (income)
6
-
Acquisition-related transaction fees Other charges (income)
4
2
Investment impairments Other (income) expense
3
6
Operating lease asset impairments Other charges (income)
3
3
Fair value adjustments to equity investments Other (income) expense
2
(3
)
Hytera-related legal expenses SG&A
1
3
Adjustments to uncertain tax positions Interest income, net
1
-
Fixed asset impairments Other charges (income)
-
2
Gain on sales of investments (Gain) or loss on sales of investments
and businesses, net
-
(1
)
Total Non-GAAP adjustments before income taxes
$
710
$
135
Income tax expense on Non-GAAP adjustments
189
29
Total Non-GAAP adjustments after income taxes
521
106
Non-GAAP Net earnings attributable to MSI
$
482
$
384
Calculation of Non-GAAP Tax Rate (In millions)
Three Months Ended March 30, 2024 April 1,
2023 Net earnings (loss) before income taxes
$
(90
)
$
358
Total Non-GAAP adjustments before income taxes*
710
135
Non-GAAP Net earnings before income taxes
620
493
Income tax expense (benefit)
(52
)
79
Income tax expense on Non-GAAP adjustments**
189
29
Total Non-GAAP Income tax expense
$
137
$
108
Non-GAAP Tax rate
22.1
%
21.9
%
*See reconciliation on Non-GAAP-2 table above for detail on
Non-GAAP adjustments before income taxes **Income tax impact of
highlighted items
Reconciliation of Earnings Per Share to
Non-GAAP Earnings Per Share* Three Months Ended
Statement Line March 30, 2024 April 1, 2023
Net earnings (loss) attributable to MSI
$
(0.23
)
$
1.61
Adjust for dilution**
-
-
Diluted gains (loss) attributable to MSI
$
(0.23
)
$
1.61
Non-GAAP adjustments before income taxes: Loss from the
extinguishment of Silver Lake convertible debt Other (income)
expense
$
3.42
$
-
Share-based compensation expenses Cost of sales, SG&A and
R&D
0.32
0.32
Intangible assets amortization expense Intangibles amortization
0.23
0.32
Reorganization of business charges Cost of sales and Other charges
(income)
0.05
0.08
Legal settlements Other charges (income)
0.03
-
Acquisition-related transaction fees Other charges (income)
0.02
0.01
Investment impairments Other (income) expense
0.02
0.03
Operating lease asset impairments Other charges (income)
0.02
0.02
Fair value adjustments to equity investments Other (income) expense
0.01
(0.02
)
Hytera-related legal expenses SG&A
0.01
0.02
Adjustments to uncertain tax positions Interest income, net
0.01
-
Fixed asset impairments Other charges (income)
-
0.01
Gain on sales of investments (Gain) or loss on sales of investments
and businesses, net
-
(0.01
)
Total Non-GAAP adjustments before income taxes
$
4.14
$
0.78
Income tax expense on Non-GAAP adjustments
1.10
0.17
Total Non-GAAP adjustments after income taxes
3.04
0.61
Non-GAAP Net earnings attributable to MSI
$
2.81
$
2.22
GAAP Diluted Weighted Average Common Shares
166.3
172.6
Adjusted for dilutive shares outstanding**
5.0
-
Non-GAAP Diluted Weighted Average Common Shares
171.3
172.6
*Indicates Non-GAAP Diluted EPS ** Under U.S. GAAP, the
accounting for a net loss from continuing operations results in the
presentation of diluted earnings per share equal to basic earnings
per share, as any increase in basic shares would be anti-dilutive
to earnings per share. As a result of the highlighted items
identified during Q1 2024, the Company reported a net loss from
continuing operations for the three months ended March 30, 2024
within our GAAP Condensed Consolidated Statement of Operations,
while reporting earnings on a non-GAAP basis over the same periods.
An adjustment is reflected to correct for the dilution of 5 million
dilutive shares outstanding in Q1 2024.
Non-GAAP-3
Motorola Solutions, Inc. and Subsidiaries Reconciliations
of Operating Earnings to Non-GAAP Operating Earnings and Operating
Margin to Non-GAAP Operating Margin (In millions)
Three Months Ended March 30, 2024 April 1,
2023 Products andSystems Integration Software
andServices Total Products andSystems Integration
Software andServices Total Net sales
$
1,490
$
899
$
2,389
$
1,303
$
868
$
2,171
Operating earnings ("OE")
$
310
$
209
$
519
$
176
$
223
$
399
Above OE non-GAAP adjustments: Share-based compensation expenses
39
17
56
40
15
55
Intangible assets amortization expense
9
30
39
13
42
55
Reorganization of business charges
8
2
10
11
2
13
Legal settlements
1
5
6
-
-
-
Acquisition-related transaction fees
-
4
4
-
2
2
Operating lease asset impairments
2
1
3
2
1
3
Hytera-related legal expenses
1
-
1
3
-
3
Fixed asset impairments
-
-
-
1
1
2
Total above-OE non-GAAP adjustments
60
59
119
70
63
133
Operating earnings after non-GAAP adjustments
$
370
$
268
$
638
$
246
$
286
$
532
Operating earnings as a percentage of net sales - GAAP
20.8
%
23.2
%
21.7
%
13.5
%
25.7
%
18.4
%
Operating earnings as a percentage of net sales - after non-GAAP
adjustments
24.8
%
29.8
%
26.7
%
18.9
%
32.9
%
24.5
%
Non-GAAP-4 Motorola Solutions, Inc. and Subsidiaries
Reconciliation of Revenue to Non-GAAP Organic Revenue (In
millions) Three Months Ended March 30,
2024 April 1, 2023 % Change Net sales
$
2,389
$
2,171
10
%
Non-GAAP adjustments: Sales from acquisitions
10
-
Organic revenue
$
2,379
$
2,171
10
%
Non-GAAP-5 Motorola Solutions, Inc. and Subsidiaries
Reconciliation of Net Sales to Net Sales Adjusted for the U.K.
Home Office (In millions) Three Months
Ended March 30, 2024 April 1, 2023 %
Change Software and Services net sales
$
899
$
868
4
%
U.K. Home Office net sales
(101
)
(156
)
Software and Services net sales adjusted for the U.K. Home
Office
$
798
$
712
12
%
Net sales
$
2,389
$
2,171
10
%
U.K. Home Office net sales
(101
)
(156
)
Net sales adjusted for the U.K. Home Office
$
2,288
$
2,015
14
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240502883672/en/
MEDIA CONTACT Alexandra Reynolds Motorola Solutions +1
312-965-3968 Alexandra.Reynolds@motorolasolutions.com
INVESTOR CONTACT Tim Yocum Motorola Solutions +1
847-576-6899 Tim.Yocum@motorolasolutions.com
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