Company achieves record Q1 orders, sales, and
ending backlog
- Sales of $1.9 billion, up 7% versus a year ago
- Products and Systems Integration sales up 9%
- Software and Services sales up 4%
- GAAP earnings per share (EPS) of $1.54
- Non-GAAP EPS* of $1.70
- Record Q1 ending backlog of $13.4 billion, up 19% versus a year
ago
- Repurchased $493 million of shares
- Closed the acquisitions of Ava Security, a global provider of
cloud-native video security and analytics, and TETRA Ireland, the
country's National Digital Radio Service provider
Motorola Solutions, Inc. (NYSE: MSI) today reported its earnings
results for the first quarter of 2022.
“I’m pleased with our strong start to the year, highlighted by
robust growth in video security,” said Greg Brown, chairman and
CEO, Motorola Solutions. “Record first-quarter orders, sales and
ending backlog position us well for continued growth in 2022, while
we continue to navigate a challenging macroeconomic and supply
chain environment.”
KEY FINANCIAL RESULTS (presented in millions, except per
share data and percentages)
Q1 2022
Q1 2021
% Change
Sales
$
1,892
$
1,773
7
%
GAAP
Operating Earnings
$
239
$
298
(20
) %
% of Sales
12.6
%
16.8
%
EPS
$
1.54
$
1.41
9
%
Non-GAAP*
Operating Earnings
$
374
$
411
(9
) %
% of Sales
19.8
%
23.2
%
EPS
$
1.70
$
1.87
(9
) %
Products and Systems Integration
Segment
Sales
$
1,103
$
1,015
9
%
GAAP Operating Earnings
$
39
$
77
(49
) %
% of Sales
3.5
%
7.6
%
Non-GAAP Operating Earnings*
$
96
$
131
(27
) %
% of Sales
8.7
%
12.9
%
Software and Services Segment
Sales
$
789
$
758
4
%
GAAP Operating Earnings
$
200
$
221
(10
) %
% of Sales
25.3
%
29.1
%
Non-GAAP Operating Earnings*
$
278
$
280
(1
) %
% of Sales
35.2
%
36.9
%
*Non-GAAP financial information excludes
the after-tax impact of approximately $0.16 per diluted share
related to highlighted items, including share-based compensation
expenses 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 $1.9 billion, up 7% from the
year-ago quarter driven by growth in North America. Revenue from
acquisitions was $17 million and currency headwinds were $18
million in the quarter. The Products and Systems Integration
segment grew 9% driven by growth in land mobile radio (LMR) and
video security. The Software and Services segment grew 4%, driven
by growth in video security and command center software.
- Operating margin - GAAP operating margin was 12.6% of
sales, down from 16.8% in the year-ago quarter. Non-GAAP operating
margin was 19.8% of sales, down from 23.2% in the year-ago quarter.
The decrease in both GAAP and non-GAAP operating margins was
primarily due to the impact of higher direct material costs for
semiconductors which were highlighted last quarter and higher
operating expenses for acquisitions, partially offset by higher
sales related to better than expected supply in LMR.
- Taxes - The GAAP effective tax rate was (22.4)%, down
from 15.1% in the year-ago quarter, primarily due to a discrete
deferred tax benefit as a result of the taxable reorganization of
our intellectual property in the current quarter. The non-GAAP
effective tax rate was 15.2%, down from 17.7% in the year-ago
quarter, driven primarily by the benefit of higher export sales and
higher stock-based compensation in the current quarter.
- Cash flow - Operating cash flow was $152 million,
compared to $370 million in the year-ago quarter. Free cash flow
was $98 million, compared to $318 million in the year-ago quarter.
Both the operating cash flow and free cash flow for the quarter
decreased primarily due to an increase in inventory.
- Capital allocation - During the quarter, the company
repurchased $493 million of shares, paid $134 million in cash
dividends and incurred $54 million of capital expenditures.
Additionally, the company closed the acquisitions of Ava Security
for $387 million and TETRA Ireland for $120 million, each net of
cash acquired. Subsequent to quarter end, the company acquired
Calipsa, a leader in cloud-based advanced video analytics for $40
million, and Videotec, a global provider of pan-tilt-zoom and
explosion proof cameras for $22M, each net of cash acquired.
- Backlog - The company ended the quarter with record Q1
backlog of $13.4 billion, up 19% or $2.1 billion, from the year-ago
quarter. Products and Systems Integration segment backlog was up
26%, or $852 million. The growth was primarily driven by strong LMR
and video security demand. Software and Services segment backlog
was up 16% or $1.3 billion, driven by the extension of the Airwave
contract in the fourth quarter of 2021 and an increase in
multi-year software and services contracts in North America.
NOTABLE WINS AND ACHIEVEMENTS
Software and Services
- $27M command center software order for a customer in LATAM
- $20M of U.S. Federal multi-year service orders
- $8M command center software record management order for the
City of Phoenix, AZ
- $8M services agreement with the City of Chicago, IL
- 28% growth in video security and access control software
- Subsequent to quarter end, launched the Public Safety Threat
Alliance, a cybersecurity information sharing and intelligence hub
for the public safety community
Products and Systems
Integration
- $60M+ nationwide P25 order for Taiwan National Police
Agency
- $20M P25 upgrade order for Los Angeles Unified School
District
- $14M TETRA upgrade order for Israel Railways
- $11M P25 expansion for a large U.S. customer
- $5M video security order for a large U.S. public school
system
BUSINESS OUTLOOK
- Second-quarter 2022 - The company expects revenue growth
of 4% to 5% compared to the second quarter of 2021. The company
expects non-GAAP EPS in the range of $1.83 to $1.88 per share. This
assumes $50 million in foreign exchange headwinds, 173 million
fully diluted shares, and an effective tax rate of 22% to 23%.
- Full-year 2022 - The company is maintaining its prior
guidance of 7% revenue growth and non-GAAP EPS guidance of between
$9.80 and $9.95 per share. This outlook assumes $170 million in
foreign exchange headwinds, an increase of $110 million from the
prior guidance. It also assumes 173 million fully diluted shares
and an effective tax rate of 21% to 21.5%. The company expects
pricing actions, targeted cost reductions, and a favorable mix for
LMR products to result in higher operating margins in the second
half of the year.
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.
MACROECONOMIC EVENTS
Recent macroeconomic events impacting the company are discussed
below. During the first quarter of 2022, the company continued to
operate under challenging market conditions, influenced by events
such as the Russia-Ukraine conflict, the continuing impact of the
COVID-19 pandemic, disruption to the company's supply chain and the
inflationary cost environment.
Russia-Ukraine Conflict
In February 2022, Russia's invasion of Ukraine prompted the
United States, the European Union and other countries to impose
economic sanctions on Russia. During the first quarter of 2022, the
company suspended all sales, provision of services and shipments of
its products to Russia and Belarus. Russia, Ukraine and Belarus do
not constitute a material portion of the company's business. For
the year ended December 31, 2021, the company's net sales in Russia
and Belarus were less than $25 million. While the company does not
anticipate that the current posture of the Russia-Ukraine conflict
will materially and adversely affect its results of operations, the
conflict is still ongoing and future impacts are difficult to
estimate. An escalation of the conflict's current scope or
expansion of the conflict's economic disruption could materially
and adversely affect the company and its operations. During the
first quarter of 2022, the company indirectly experienced impacts
from the Russia-Ukraine conflict within its supply chain (as
further described below). The conflict has and may continue to have
a significant impact on the global macroeconomic and geopolitical
environments, including increased volatility in capital and
commodity markets, rapid changes to regulatory conditions
(including the use of sanctions), supply chain and operational
challenges for multinational corporations, inflationary pressures
and an increased risk of cybersecurity incidents. For a more
complete discussion of the risks the company encounters in its
business, please refer to Part I, Item 1A, "Risk Factors" in the
company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2021.
COVID-19, Supply Chain Disruptions &
Inflationary Cost Environment
The COVID-19 pandemic continues to be dynamic, and near-term
challenges across the economy remain. The health and safety of the
company's employees remains its top priority, and the company
continues to work to mitigate the impact of COVID-19 on its
employees, customers, communities, liquidity and financial
position.
As the company progressed throughout the first quarter of 2022,
its supply chain has been increasingly impacted by global issues
related to the effects of the COVID-19 pandemic and the
inflationary cost environment, particularly with respect to
materials in the semiconductor market, including part shortages,
increased freight costs, diminished transportation capacity
(including indirectly as a result of the Russia-Ukraine conflict)
and labor constraints. This has resulted in disruptions in the
company's supply chain, as well as difficulties and delays in
procuring certain semiconductor components. During the latter part
of the fourth quarter of 2021 and continuing into the first quarter
of 2022, cost increases were driven by elevated lead times and
increased material costs, in particular the need to purchase
semiconductor components from alternative sources, including
brokers. The company anticipates increased costs to procure
materials within the semiconductor market to continue through the
first half of 2022. Further, the company anticipates the broader
impact of inflationary pressures and increased material and supply
chain costs and disruptions to continue throughout 2022. The
company is closely monitoring its supply chain, including impacts
from manufacturing lockdowns related to the spread of COVID-19 in
China during the first quarter of 2022 which continue to disrupt
the semiconductor supply market. Accordingly, in the first quarter
of 2022 the company focused on improving its supplier network,
engineering alternative designs and working to reduce supply
shortages. The company is actively managing its inventory in an
effort to minimize supply chain disruptions and enable continuity
of supply and services to its customers, and it expects to maintain
elevated levels of inventory until supply constraints have been
remediated.
Although the macroeconomic environment continued to introduce
challenges in the first quarter of 2022, the company is encouraged
by customer demand for its products and services. Specifically, in
the Software and Services segment, with the largely recurring
nature of the business and the strong backlog position, the company
continues to expect that the impacts on net sales and operating
margin will be limited throughout 2022. Within the Products and
Systems Integration segment, while the company is encouraged by
strong LMR backlog and the resiliency of the Video Security and
Access Control technology that experienced growth in the first
quarter of 2022 and which the company expects to continue to grow
for the remainder of 2022, supply constraints continue to impact
the LMR business and the company expects demand for its products
will continue to out-pace its ability to obtain semiconductor
component supply throughout 2022. Where appropriate, the company
has established pricing adjustments to its product and service
offerings to mitigate its exposure to inflationary pressures on its
businesses and expects to benefit from these adjustments in the
second half of 2022. Further, demand continues to be supported with
ongoing sources of government funding. In March 2021, the President
of the United States signed into law the American Rescue Plan Act
of 2021 ("ARPA"), which is intended to provide economic stimulus,
specifically additional funding to state and local governments,
education and healthcare, as well as other funding relief
provisions, in order to address the impact of the COVID-19
pandemic. The company experienced the positive impact of the ARPA
funding on its business and results of operations during the first
quarter of 2022 and anticipates that the ARPA will continue to have
a positive impact throughout the remainder of 2022.
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 12. 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 2022
Q1 2021
Net sales
$
1,892
$
1,773
Gross margin
$
857
$
860
Operating earnings
$
239
$
298
Amounts attributable to Motorola
Solutions, Inc. common stockholders
Net earnings
$
267
$
244
Diluted EPS
$
1.54
$
1.41
Weighted average diluted common shares
outstanding
173.1
173.2
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 and organic revenue. 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.
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, 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. The Court denied Hytera’s motion for a new
trial on October 20, 2020. On December 17, 2020, the Court denied
the company’s motion for a permanent injunction, finding instead
that Hytera must pay the company a forward-looking reasonable
royalty on products that use the company’s stolen trade secrets. As
the parties were unable to agree on a reasonable royalty rate, the
Court entered an order favorable to the company on December 15,
2021, and, consistent with the company's requests, set royalty
rates for Hytera's sale of relevant products from July 1, 2019
forward. The Court also ordered the parties to jointly file by
February 22, 2022, a proposed royalty agreement for the Court's
review and approval. Because the parties could not concur on the
royalty agreement, they each filed supporting papers for their
proposed draft agreements, and on April 12, 2022, the Court issued
a ruling generally favorable to the company on the critical aspects
of the royalty agreement. On April 19, 2022, the parties filed an
agreed royalty agreement that incorporates the findings of the
Court's ruling.
In response to the Court's decision to award the company $764.6
million in compensatory and punitive damages, Hytera motioned for
certain equitable relief. On January 8, 2021, the Court granted
Hytera’s motion for certain equitable relief and reduced the $764.6
million judgment award to $543.7 million. That same day, the Court
also granted the company’s motion for pre-judgment interest. On
August 10, 2021, the Court ruled that Hytera must pay the company
$51.1 million in pre-judgment interest and $2.6 million in costs.
On March 25, 2021, the Court entered rulings favorable to the
company with respect to several of the company's post-trial
motions, including the company's motion for attorneys' fees and its
motion to require Hytera to turn over certain assets in
satisfaction of the company’s judgment award. On September 7, 2021,
Hytera filed a notice of appeal of the Court’s judgment with the
U.S. Court of Appeals for the Seventh Circuit (the "Court of
Appeals"). The parties have briefed a jurisdictional issue raised
by the Court of Appeals in response to Hytera's notice of appeal
and await the Court's determination. On September 29, 2021, the
company filed two additional motions with the Court, requesting the
Court to reconsider its order denying the Company’s request for an
injunction, and requesting that the Court enforce its ruling
requiring Hytera to turn over certain assets in satisfaction of the
company's judgment award, or, in the alternative, hold Hytera in
contempt. On October 15, 2021, the Court granted the company’s
request for $34.2 million in attorneys’ fees against Hytera.
Separate from the company's litigation with Hytera, on May 27,
2020, Hytera America, Inc. and Hytera Communications America
(West), Inc. each filed for Chapter 11 bankruptcy protection in the
U.S. Bankruptcy Court for the Central District of California (the
“Bankruptcy Court”). The company filed motions in the Bankruptcy
Court to dismiss the bankruptcy proceedings in July 2020. On
January 22, 2021, the Bankruptcy Court entered an agreed order,
allowing a partial sale of Hytera's U.S. assets in the bankruptcy
proceedings. The proposed sale does not include Hytera inventory
accused of including the company’s intellectual property. On
February 11, 2022, the Court entered an order to confirm the
liquidation plan for the two Hytera entities and the distributions
were made on February 25, 2022 to the creditors, including $13
million to the company. The gain was recorded to Other charges
(income).
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
$13 million of proceeds realized in Q1 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 earnings 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 2022, the
impact of the COVID-19 pandemic, supply chain constraints, the
Russia-Ukraine conflict, inflation and the ARPA, including the
impact of actions taken by the company in response to such events,
on Motorola Solutions' business and results of operations. Motorola
Solutions cautions the reader that the risks and uncertainties
below, as well as those in Part I Item 1A of Motorola Solutions'
2021 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 and information security; (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 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) the continuing and future
impact of the COVID-19 pandemic on our business; (x) additional
compliance obligations and increased risk and competition
associated with the expansion of our technologies within our
Products and Systems Integration and Software and Services
segments; (xi) the effectiveness of our investments in new products
and technologies; (xii) the effectiveness of our strategic
acquisitions, including the integrations of such acquired
businesses; (xiii) increased cybersecurity threats, a security
breach or other significant disruption of our IT systems or those
of our outsource partners, suppliers or customers; (xiv) our
inability to protect our intellectual property or potential
infringement of intellectual property rights of third parties; (xv)
our license of the MOTOROLA, MOTO, MOTOROLA SOLUTIONS and the
Stylized M logo and all derivatives and formatives thereof from
Motorola Trademark Holdings, LLC; (xvi) the global nature of our
employees, customers, suppliers and outsource partners; (xvii) 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; (xviii) the inability of our
subcontractors to perform in a timely and compliant manner or
adhere to our Human Rights Policy; (xix) 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; (xx) risks related
to our large, multi-year system and services contracts; (xxi) the
inability of our products to meet our customers’ expectations or
regulatory or industry standards; (xxii) impact of current global
economic and political conditions in the markets in which we
operate (including the Russia-Ukraine conflict and inflation);
(xxiii) impact of returns on pension and retirement plan assets and
interest rate changes; (xxiv) inability to access the capital
markets for financing on acceptable terms and conditions; (xxv)
inability to attract and retain senior management and key
employees; (xxvi) impact of the ARPA on our business; and (xxvii)
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 a global leader in public safety and
enterprise security. Our solutions in land mobile radio
communications, video security & access control and command
center software, bolstered by managed & support services,
create an integrated technology ecosystem to help make communities
safer and businesses stay productive and secure. At Motorola
Solutions, we’re ushering in a new era in public safety and
security. Learn more 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 April 2, 2022 April 3, 2021 Net sales from
products
$
1,046
$
926
Net sales from services
846
847
Net sales
1,892
1,773
Costs of products sales
548
438
Costs of services sales
487
475
Costs of sales
1,035
913
Gross margin
857
860
Selling, general and administrative expenses
338
303
Research and development expenditures
188
180
Other charges
26
21
Intangibles amortization
66
58
Operating earnings
239
298
Other income (expense): Interest expense, net
(56
)
(54
)
Gain on sales of investments and businesses, net
2
-
Other, net
34
45
Total other expense
(20
)
(9
)
Net earnings before income taxes
219
289
Income tax expense (benefit)
(49
)
44
Net earnings
268
245
Less: Earnings attributable to non-controlling interests
1
1
Net earnings attributable to Motorola Solutions, Inc.
$
267
$
244
Earnings per common share: Basic
$
1.59
$
1.44
Diluted
$
1.54
$
1.41
Weighted average common shares
outstanding: Basic
168.0
169.3
Diluted
173.1
173.2
Percentage of Net Sales* Net sales from
products
55.3
%
52.2
%
Net sales from services
44.7
%
47.8
%
Net sales
100.0
%
100.0
%
Costs of products sales
52.4
%
47.3
%
Costs of services sales
57.6
%
56.1
%
Costs of sales
54.7
%
51.5
%
Gross margin
45.3
%
48.5
%
Selling, general and administrative expenses
17.9
%
17.1
%
Research and development expenditures
9.9
%
10.2
%
Other charges
1.4
%
1.2
%
Intangibles amortization
3.5
%
3.3
%
Operating earnings
12.6
%
16.8
%
Other income (expense): Interest expense, net
(3.0
)%
(3.0
)%
Gain on sales of investments and businesses, net
0.1
%
-
%
Other, net
1.8
%
2.5
%
Total other expense
(1.1
)%
(0.5
)%
Net earnings before income taxes
11.6
%
16.3
%
Income tax expense (benefit)
(2.6
)%
2.5
%
Net earnings
14.2
%
13.8
%
Less: Earnings attributable to non-controlling interests
0.1
%
-
%
Net earnings attributable to Motorola Solutions, Inc.
14.1
%
13.8
%
* Percentages may not add up due to rounding
GAAP-2
Motorola Solutions, Inc. and Subsidiaries Condensed
Consolidated Balance Sheets (In millions)
April 2, 2022 December 31, 2021 Assets Cash and cash
equivalents
$
878
$
1,874
Accounts receivable, net
1,151
1,386
Contract assets
999
1,105
Inventories, net
952
788
Other current assets
300
259
Total current assets
4,280
5,412
Property, plant and equipment, net
1,080
1,042
Operating lease assets
387
382
Investments
183
209
Deferred income taxes
999
916
Goodwill
2,864
2,565
Intangible assets, net
1,304
1,105
Other assets
552
558
Total assets
$
11,649
$
12,189
Liabilities and Stockholders' Equity (Deficit) Current portion of
long-term debt
$
4
$
5
Accounts payable
827
851
Contract liabilities
1,590
1,650
Accrued liabilities
1,465
1,557
Total current liabilities
3,886
4,063
Long-term debt
5,689
5,688
Operating lease liabilities
320
313
Other liabilities
2,052
2,148
Total Motorola Solutions, Inc. stockholders’ equity (deficit)
(316
)
(40
)
Non-controlling interests
18
17
Total liabilities and stockholders’ equity (deficit)
$
11,649
$
12,189
GAAP-3
Motorola Solutions, Inc. and Subsidiaries Condensed
Consolidated Statements of Cash Flows (In millions)
Three Months Ended April 2, 2022 April 3,
2021 Operating Net earnings
$
268
$
245
Adjustments to reconcile Net earnings to Net cash provided by
operating activities: Depreciation and amortization
111
110
Non-cash other charges (income)
2
(7
)
Share-based compensation expenses
37
29
Gain on sales of investments and businesses, net
(2
)
-
Changes in assets and liabilities, net of effects of acquisitions,
dispositions, and foreign currency translation adjustments:
Accounts receivable
248
298
Inventories
(162
)
(24
)
Other current assets and contract assets
47
149
Accounts payable, accrued liabilities, and contract liabilities
(188
)
(426
)
Other assets and liabilities
(30
)
(5
)
Deferred income taxes
(179
)
1
Net cash provided by operating activities
152
370
Investing Acquisitions and investments, net
(512
)
(2
)
Proceeds from sales of investments and businesses, net
9
2
Capital expenditures
(54
)
(52
)
Net cash used for investing activities
(557
)
(52
)
Financing Repayments of debt
(2
)
(3
)
Revolving credit facility renewal fees
-
(7
)
Issuances of common stock
52
45
Purchases of common stock
(493
)
(170
)
Payments of dividends
(134
)
(121
)
Net cash used for financing activities
(577
)
(256
)
Effect of exchange rate changes on total cash and cash equivalents
(14
)
4
Net increase (decrease) in total cash and cash equivalents
(996
)
66
Cash and cash equivalents, beginning of period
1,874
1,254
Cash and cash equivalents, end of period
$
878
$
1,320
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 April 2, 2022
April 3, 2021 Net cash provided by operating activities
$
152
$
370
Capital expenditures
(54
)
(52
)
Free cash flow
$
98
$
318
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 April 2,
2022 April 3, 2021 Net earnings attributable to MSI
$
267
$
244
Non-GAAP adjustments before income taxes: Intangible assets
amortization expense Intangibles amortization
$
66
$
58
Share-based compensation expenses Cost of sales, SG&A and
R&D
37
29
Fair value adjustments to equity investments Other (income) expense
18
(5
)
Legal settlements Other charges (income)
11
-
Acquisition-related transaction fees Other charges (income)
10
1
Reorganization of business charges Cost of sales and Other charges
(income)
10
16
Operating lease asset impairments Other charges (income)
9
7
Fixed asset impairments Other charges (income)
3
-
Hytera-related legal expenses SG&A
2
2
Investment impairments Other (income) expense
1
-
Gain on sales of investments (Gain) or loss on sales of investments
and businesses, net
(2
)
-
Adjustments to uncertain tax positions Interest income, net
(2
)
(1
)
Gain on Hytera legal settlement Other charges (income)
(13
)
-
Gain on TETRA Ireland equity method investment Other (income)
expense
(21
)
-
Total Non-GAAP adjustments before income taxes
$
129
$
107
Income tax expense on Non-GAAP adjustments
102
27
Total Non-GAAP adjustments after income taxes
27
80
Non-GAAP Net earnings attributable to MSI
$
294
$
324
Calculation of Non-GAAP Tax Rate (In
millions) Three Months Ended April 2, 2022
April 3, 2021 Net earnings before income taxes
$
219
$
289
Total Non-GAAP adjustments before income taxes*
129
107
Non-GAAP Net earnings before income taxes
348
396
Income tax expense (benefit)
(49
)
44
Income tax expense on Non-GAAP adjustments**
102
27
Total Non-GAAP Income tax expense
53
71
Non-GAAP Tax rate
15.2
%
17.7
%
*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 April 2, 2022 April 3,
2021 Net earnings attributable to MSI
$
1.54
$
1.41
Non-GAAP adjustments before income taxes: Intangible assets
amortization expense Intangibles amortization
$
0.38
$
0.33
Share-based compensation expenses Cost of sales, SG&A and
R&D
0.21
0.17
Fair value adjustments to equity investments Other (income) expense
0.10
(0.02
)
Legal settlements Other charges (income)
0.06
-
Acquisition-related transaction fees Other charges (income)
0.06
0.01
Reorganization of business charges Cost of sales and Other charges
(income)
0.06
0.09
Operating lease asset impairments Other charges (income)
0.05
0.04
Fixed asset impairments Other charges (income)
0.02
-
Hytera-related legal expenses SG&A
0.01
0.01
Investment impairments Other (income) expense
0.01
-
Gain on sales of investments (Gain) or loss on sales of investments
and businesses, net
(0.01
)
-
Adjustments to uncertain tax positions Interest income, net
(0.01
)
(0.01
)
Gain on Hytera legal settlement Other charges (income)
(0.07
)
-
Gain on TETRA Ireland equity method investment Other (income)
expense
(0.12
)
-
Total Non-GAAP adjustments before income taxes
$
0.75
$
0.62
Income tax expense (income) on Non-GAAP adjustments
0.59
0.16
Total Non-GAAP adjustments after income taxes
0.16
0.46
Non-GAAP Net earnings attributable to MSI
$
1.70
$
1.87
Diluted Weighted Average Common Shares
173.1
173.2
*Indicates Non-GAAP Diluted EPS
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 April 2, 2022 April 3, 2021
Products and Systems Integration Software and
Services Total Products and Systems Integration
Software and Services Total Net sales
$
1,103
$
789
$
1,892
$
1,015
$
758
$
1,773
Operating earnings ("OE")
39
200
239
77
221
298
Above OE non-GAAP adjustments: Intangible assets amortization
expense
15
51
66
13
45
58
Share-based compensation expenses
27
10
37
22
7
29
Legal settlements
-
11
11
-
-
-
Acquisition-related transaction fees
6
4
10
-
1
1
Reorganization of business charges
8
2
10
12
4
16
Operating lease asset impairment
9
-
9
5
2
7
Fixed asset impairment
3
-
3
-
-
-
Hytera-related legal expenses
2
-
2
2
-
2
Gain on Hytera legal settlement
(13
)
-
(13
)
-
-
-
Total above-OE non-GAAP adjustments
57
78
135
54
59
113
Operating earnings after non-GAAP adjustments
$
96
$
278
$
374
$
131
$
280
$
411
Operating earnings as a percentage of net sales - GAAP
3.5
%
25.3
%
12.6
%
7.6
%
29.1
%
16.8
%
Operating earnings as a percentage of net sales - after non-GAAP
adjustments
8.7
%
35.2
%
19.8
%
12.9
%
36.9
%
23.2
%
Non-GAAP-4 Motorola Solutions, Inc. and Subsidiaries
Reconciliation of Revenue to Non-GAAP Organic Revenue (In
millions) Three Months Ended April 2,
2022 April 3, 2021 % Change Net sales
$
1,892
$
1,773
7
%
Non-GAAP adjustments: Sales from acquisitions
17
-
Organic revenue
$
1,875
$
1,773
6
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220512005906/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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