Company raises full-year revenue and earnings
outlook on strong Q2 results
- Sales of $2.1 billion, up 9% versus a year ago
- Products and Systems Integration sales up 7%
- Software and Services sales up 11%
- GAAP earnings per share (EPS) of $1.33
- Non-GAAP EPS* of $2.07
- Record Q2 ending backlog of $13.4 billion, up 19% versus a year
ago
- Closed the acquisitions of Calipsa, a leader in cloud-native
advanced video analytics, and Videotec, a global provider of
ruggedized video security solutions
Motorola Solutions, Inc. (NYSE: MSI) today
reported its earnings results for the second quarter of 2022.
“Q2 was exceptional across the board, with record second-quarter
revenue,” said Greg Brown, chairman and CEO of Motorola Solutions.
“Our Q2 record-ending backlog and continued strong operational
execution are driving our increased expectations for the full
year.”
KEY FINANCIAL RESULTS (presented in millions, except per
share data and percentages)
Q2 2022
Q2 2021
% Change
Sales
$
2,140
$
1,971
9
%
GAAP
Operating Earnings
$
358
$
370
(3
)%
% of Sales
16.7
%
18.8
%
EPS
$
1.33
$
1.69
(21
)%
Non-GAAP*
Operating Earnings
$
497
$
482
3
%
% of Sales
23.2
%
24.4
%
EPS
$
2.07
$
2.07
—
%
Products and Systems Integration
Segment
Sales
$
1,285
$
1,198
7
%
GAAP Operating Earnings
$
118
$
139
(15
)%
% of Sales
9.2
%
11.6
%
Non-GAAP Operating Earnings*
$
188
$
194
(3
)%
% of Sales
14.6
%
16.2
%
Software and Services Segment
Sales
$
855
$
773
11
%
GAAP Operating Earnings
$
240
$
231
4
%
% of Sales
28.1
%
29.9
%
Non-GAAP Operating Earnings*
$
309
$
288
7
%
% of Sales
36.1
%
37.2
%
*Non-GAAP financial information excludes
the after-tax impact of approximately $0.74 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 $2.1 billion, up 9% from the
year-ago quarter driven by growth in North America. Revenue from
acquisitions was $34 million and currency headwinds were $44
million in the quarter. The Products and Systems Integration
segment grew 7%,driven by growth in land mobile radio (LMR) and
video security and access control (video). The Software and
Services segment grew 11%, driven by growth in video, command
center software and LMR services.
- Operating margin - GAAP operating margin was 16.7% of
sales, down from 18.8% in the year-ago quarter. Non-GAAP operating
margin was 23.2% of sales, down from 24.4% 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.
- Taxes - The GAAP effective tax rate was 23.7%, up from
13.5% in the year-ago quarter, primarily driven by a partial
release of a valuation allowance recorded on the U.S. foreign tax
credit carryforward in the second quarter of 2021. The non-GAAP
effective tax rate was 22.3%, up from 20.5% in the year-ago
quarter, driven primarily by lower benefits from discrete items in
the current quarter.
- Cash flow - Operating cash flow was $10 million,
compared to $388 million in the year-ago quarter. Free cash flow
was a usage of $49 million, compared to $326 million of free cash
flow generated 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, higher employee incentives and higher
cash taxes in the current quarter.
- Capital allocation - During the quarter, the company
repurchased $162 million of shares, paid $132 million in cash
dividends and incurred $59 million of capital expenditures.
Additionally, the company closed the acquisitions of Calipsa for
$40 million and Videotec for $22 million, each net of cash
acquired. The company also issued $600 million of long-term debt
during the quarter and used a portion of the proceeds to retire
$275 million of outstanding senior notes.
- Backlog - The company ended the quarter with record Q2
backlog of $13.4 billion, up 19% or $2.2 billion from the year-ago
quarter, inclusive of $496 million of unfavorable currency.
Products and Systems Integration segment backlog was up 30%, or
$986 million. The growth was primarily driven by strong LMR and
video demand. Software and Services segment backlog was up 15% or
$1.2 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, partially offset by $436
million of unfavorable currency.
NOTABLE WINS AND ACHIEVEMENTS
Software and Services
- $43M managed services renewal for the state of South
Australia
- $35M command center software orders for a large U.S. city
- $35M services agreement with the state of Mississippi
- $14M command center software order for Los Angeles Police
Department
- $11M command center software order for Frederick County,
MD
- $8M body-worn camera order for the city of Detroit, MI police
department
Products and Systems
Integration
- $32M P25 order for a state of California agency
- $27M P25 upgrade order for Dutchess County, NY
- $26M P25 and LTE order for an International customer
- $22M P25 upgrade order for the Georgia Department of
Corrections
- $15M TETRA order for a customer in Argentina
- $9M fixed video order for a customer in the healthcare
vertical
- $8M fixed video order for a large retail customer
BUSINESS OUTLOOK
- Third quarter 2022 - The company expects revenue growth
of approximately 10%, compared to the third quarter of 2021. The
company expects non-GAAP EPS in the range of $2.85 to $2.90 per
share. This assumes approximately $60 million in foreign exchange
headwinds, approximately 172 million fully diluted shares, and an
effective tax rate of approximately 20%.
- Full-year 2022 - The company now expects revenue growth
of approximately 8%, up from its prior guidance of approximately 7%
and non-GAAP EPS between $10.03 and $10.13 per share, up from its
prior guidance of between $9.80 and $9.95 per share. This outlook
assumes approximately $170 million in foreign exchange headwinds,
approximately 172 million fully diluted shares and an effective tax
rate of 21% to 21.5%.
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 second 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
During the first quarter of 2022, in response to Russia's
invasion of Ukraine, 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 half of 2022, the
company indirectly experienced impacts from the Russia-Ukraine
conflict (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 and Part II, Item 1A, "Risk Factors" in the
company's Quarterly Report on Form 10-Q for the fiscal quarter
ended April 2, 2022.
COVID-19, Supply Chain Disruptions &
Inflationary Cost Environment
As the company progressed throughout the first half of 2022, its
supply chain has been impacted by global issues related to the
effects of the COVID-19 pandemic, the Russia-Ukraine conflict and
the inflationary cost environment, particularly with respect to
materials in the semiconductor market, including part shortages,
increased freight costs, diminished transportation capacity 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. Since the latter part
of the fourth quarter of 2021, cost increases have been 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
throughout 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 which continue to disrupt the semiconductor supply market.
Accordingly, in the first half 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.
In order to combat rising inflation in the U.S., the Federal
Reserve has raised interest rates multiple times since the
beginning of 2022. The increase in U.S. dollar interest rates and
overall market conditions have led to significant strengthening of
the U.S. dollar against other global currencies in 2022. The strong
U.S. dollar reduced the impact of cash generated from the company's
foreign operations during the first half of 2022, driven by
revenues and costs that are denominated in foreign currencies,
which has impacted, and which the company expects to continue to
impact, its operating cash flows and net earnings throughout
2022.
Although the macroeconomic environment continued to introduce
challenges in the first half 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 impact to operating margin will be limited
throughout 2022. While the company is encouraged by strong backlog
and growth in its Products and Systems Integration segment in the
first half of 2022, which the company expects to continue to grow
for the remainder of 2022, supply constraints continue to impact
the 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 taken
pricing actions around 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
half 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, August 4. 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:
Q2 2022
Q2 2021
Net sales
$
2,140
$
1,971
Gross margin
$
990
$
952
Operating earnings
$
358
$
370
Amounts attributable to Motorola
Solutions, Inc. common stockholders
Net earnings
$
228
$
293
Diluted EPS
$
1.33
$
1.69
Weighted average diluted common shares
outstanding
170.9
173.1
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, 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. 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. 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 3, 2022, the company filed a motion
seeking to hold Hytera in civil contempt for not making the royalty
payment.
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, which the Court granted on January 8,
2021, reducing 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
October 15, 2021, the Court granted the company’s request for $34.2
million in attorneys’ fees against Hytera.
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 July 5, 2022, the Court
denied both motions due to ongoing appeals in the case.
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 third quarter and full-year of 2022, and
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 or others 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, Part II, Item
1A of Motorola Solutions' Quarterly Report on Form 10-Q for the
First Quarter of 2022 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 and 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
July 2, 2022
July 3, 2021
Net sales from products
$
1,212
$
1,094
Net sales from services
928
877
Net sales
2,140
1,971
Costs of products sales
637
511
Costs of services sales
513
508
Costs of sales
1,150
1,019
Gross margin
990
952
Selling, general and administrative expenses
356
331
Research and development expenditures
191
181
Other charges
20
12
Intangibles amortization
65
58
Operating earnings
358
370
Other income (expense): Interest expense, net
(56
)
(44
)
Other, net
(2
)
14
Total other expense
(58
)
(30
)
Net earnings before income taxes
300
340
Income tax expense
71
46
Net earnings
229
294
Less: Earnings attributable to non-controlling interests
1
1
Net earnings attributable to Motorola Solutions, Inc.
$
228
$
293
Earnings per common share: Basic
$
1.36
$
1.73
Diluted
$
1.33
$
1.69
Weighted average common shares
outstanding: Basic
167.2
169.6
Diluted
170.9
173.1
Percentage of Net
Sales*
Net sales from products
56.6
%
55.5
%
Net sales from services
43.4
%
44.5
%
Net sales
100.0
%
100.0
%
Costs of products sales
52.6
%
46.7
%
Costs of services sales
55.3
%
57.9
%
Costs of sales
53.7
%
51.7
%
Gross margin
46.3
%
48.3
%
Selling, general and administrative expenses
16.6
%
16.8
%
Research and development expenditures
8.9
%
9.2
%
Other charges
0.9
%
0.6
%
Intangibles amortization
3.0
%
2.9
%
Operating earnings
16.7
%
18.8
%
Other income (expense): Interest expense, net
(2.6
)%
(2.2
)%
Other, net
(0.1
)%
0.7
%
Total other expense
(2.7
)%
(1.5
)%
Net earnings before income taxes
14.0
%
17.3
%
Income tax expense
3.3
%
2.3
%
Net earnings
10.7
%
14.9
%
Less: Earnings attributable to non-controlling interests
-
%
0.1
%
Net earnings attributable to Motorola Solutions, Inc.
10.7
%
14.9
%
* Percentages may not add up due to rounding
GAAP-2
Motorola Solutions, Inc. and Subsidiaries Condensed
Consolidated Statements of Operations (In millions, except
per share amounts)
Six Months Ended
July 2, 2022
July 3, 2021
Net sales from products
$
2,258
$
2,027
Net sales from services
1,774
1,717
Net sales
4,032
3,744
Costs of products sales
1,185
952
Costs of services sales
1,001
980
Costs of sales
2,186
1,932
Gross margin
1,846
1,812
Selling, general and administrative expenses
692
633
Research and development expenditures
380
361
Other charges
46
34
Intangibles amortization
131
116
Operating earnings
597
668
Other income (expense): Interest expense, net
(112
)
(98
)
Gain on sales of investments and businesses, net
2
-
Other, net
33
60
Total other expense
(77
)
(38
)
Net earnings before income taxes
520
630
Income tax expense
23
90
Net earnings
497
540
Less: Earnings attributable to non-controlling interests
2
3
Net earnings attributable to Motorola Solutions, Inc.
$
495
$
537
Earnings per common share: Basic
$
2.95
$
3.17
Diluted
$
2.88
$
3.10
Weighted average common shares
outstanding: Basic
167.6
169.4
Diluted
172.0
173.1
Percentage of Net
Sales*
Net sales from products
56.0
%
54.1
%
Net sales from services
44.0
%
45.9
%
Net sales
100.0
%
100.0
%
Costs of products sales
52.5
%
47.0
%
Costs of services sales
56.4
%
57.1
%
Costs of sales
54.2
%
51.6
%
Gross margin
45.8
%
48.4
%
Selling, general and administrative expenses
17.2
%
16.9
%
Research and development expenditures
9.4
%
9.6
%
Other charges
1.1
%
0.9
%
Intangibles amortization
3.2
%
3.1
%
Operating earnings
14.8
%
17.8
%
Other income (expense): Interest expense, net
(2.8
)%
(2.6
)%
Gain on sales of investments and businesses, net
-
%
-
%
Other, net
0.8
%
1.6
%
Total other expense
(1.9
)%
(1.0
)%
Net earnings before income taxes
12.9
%
16.8
%
Income tax expense (benefit)
0.6
%
2.4
%
Net earnings
12.3
%
14.4
%
Less: Earnings attributable to non-controlling interests
-
%
0.1
%
Net earnings attributable to Motorola Solutions, Inc.
12.3
%
14.3
%
* Percentages may not add up due to rounding
GAAP-3
Motorola Solutions, Inc. and Subsidiaries Condensed
Consolidated Balance Sheets (In millions)
July 2, 2022
December 31, 2021
Assets Cash and cash equivalents
$
717
$
1,874
Accounts receivable, net
1,284
1,386
Contract assets
1,045
1,105
Inventories, net
1,071
788
Other current assets
294
259
Total current assets
4,411
5,412
Property, plant and equipment, net
1,039
1,042
Operating lease assets
366
382
Investments
162
209
Deferred income taxes
1,004
916
Goodwill
2,873
2,565
Intangible assets, net
1,255
1,105
Other assets
562
558
Total assets
$
11,672
$
12,189
Liabilities and Stockholders' Equity (Deficit) Current portion of
long-term debt
$
2
$
5
Accounts payable
919
851
Contract liabilities
1,556
1,650
Accrued liabilities
1,324
1,557
Total current liabilities
3,801
4,063
Long-term debt
6,011
5,688
Operating lease liabilities
308
313
Other liabilities
1,982
2,148
Total Motorola Solutions, Inc. stockholders’ equity (deficit)
(443
)
(40
)
Non-controlling interests
13
17
Total liabilities and stockholders’ equity (deficit)
$
11,672
$
12,189
GAAP-4 Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (In
millions)
Three Months Ended
July 2, 2022
July 3, 2021
Operating Net earnings
$
229
$
294
Adjustments to reconcile Net earnings to Net cash provided by
operating activities: Depreciation and amortization
112
110
Non-cash other charges (income)
17
(17
)
Share-based compensation expenses
44
31
Loss from the extinguishment of long-term debt
6
18
Changes in assets and liabilities, net of effects of acquisitions,
dispositions, and foreign currency translation adjustments:
Accounts receivable
(142
)
(77
)
Inventories
(115
)
(29
)
Other current assets and contract assets
(61
)
(14
)
Accounts payable, accrued liabilities and contract liabilities
(111
)
128
Other assets and liabilities
(27
)
(32
)
Deferred income taxes
58
(24
)
Net cash provided by operating activities
10
388
Investing Acquisitions and investments, net
(59
)
(7
)
Proceeds from sales of investments and businesses, net
2
1
Capital expenditures
(59
)
(62
)
Proceeds from sale of property, plant and equipment
-
6
Net cash used for investing activities
(116
)
(62
)
Financing Repayments of debt
(281
)
(345
)
Net proceeds from issuance of debt
595
844
Issuances of common stock
(1
)
15
Purchases of common stock
(162
)
(102
)
Payments of dividends
(132
)
(121
)
Payments of dividends to non-controlling interests
(6
)
(5
)
Net cash provided by financing activities
13
286
Effect of exchange rate changes on total cash and cash equivalents
(68
)
(11
)
Net increase (decrease) in total cash and cash equivalents
(161
)
601
Cash and cash equivalents, beginning of period
878
1,320
Cash and cash equivalents, end of period
$
717
$
1,921
GAAP-5 Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (In
millions)
Six Months Ended
July 2, 2022
July 3, 2021
Operating Net earnings
$
497
$
540
Adjustments to reconcile Net earnings to Net cash provided by
operating activities: Depreciation and amortization
223
220
Non-cash other charges (income)
19
(24
)
Share-based compensation expenses
81
60
Gain on sales of investments and businesses, net
(2
)
-
Loss from the extinguishment of long-term debt
6
18
Changes in assets and liabilities, net of effects of acquisitions,
dispositions, and foreign currency translation adjustments:
Accounts receivable
106
221
Inventories
(277
)
(53
)
Other current assets and contract assets
(14
)
134
Accounts payable, accrued liabilities and contract liabilities
(299
)
(298
)
Other assets and liabilities
(57
)
(37
)
Deferred income taxes
(121
)
(23
)
Net cash provided by operating activities
162
758
Investing Acquisitions and investments, net
(571
)
(9
)
Proceeds from sales of investments and businesses, net
11
3
Capital expenditures
(113
)
(114
)
Proceeds from sales of property, plant and equipment
-
6
Net cash used for investing activities
(673
)
(114
)
Financing Net proceeds from issuance of debt
595
844
Repayments of debt
(283
)
(348
)
Revolving credit facility renewal fees
-
(7
)
Issuances of common stock
51
60
Purchases of common stock
(655
)
(272
)
Payments of dividends
(266
)
(242
)
Payments of dividends to non-controlling interests
(6
)
(5
)
Net cash provided by (used for) financing activities
(564
)
30
Effect of exchange rate changes on total cash and cash equivalents
(82
)
(7
)
Net increase (decrease) in total cash and cash equivalents
(1,157
)
667
Cash and cash equivalents, beginning of period
1,874
1,254
Cash and cash equivalents, end of period
$
717
$
1,921
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
Six Months Ended
July 2, 2022
July 3, 2021
July 2, 2022
July 3, 2021
Net cash provided by operating activities
$
10
$
388
$
162
$
758
Capital expenditures
(59
)
(62
)
(113
)
(114
)
Free cash flow
$
(49
)
$
326
$
49
$
644
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
Six Months Ended
Statement Line
July 2, 2022
July 3, 2021
July 2, 2022
July 3, 2021
Net earnings attributable to MSI
$
228
$
293
$
495
$
537
Non-GAAP adjustments before income taxes: Intangible assets
amortization expense Intangibles amortization
$
65
$
58
$
131
$
116
Share-based compensation expenses Cost of sales, SG&A and
R&D
44
31
81
60
Fair value adjustments to equity investments Other (income) expense
12
(8
)
30
(13
)
Hytera-related legal expenses SG&A
8
8
10
10
Fixed asset impairments Other charges (income)
8
-
11
-
Reorganization of business charges Cost of sales and Other charges
(income)
7
9
17
25
Loss from extinguishment of long-term debt Other (income) expense
6
18
6
18
Acquisition-related transaction fees Other charges (income)
4
3
14
4
Operating lease asset impairments Other charges (income)
3
-
12
7
Legal Settlements Other charges (Income)
-
3
11
3
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
-
(9
)
(2
)
(10
)
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
$
157
$
113
$
286
$
220
Income tax expense on Non-GAAP adjustments
31
47
133
74
Total Non-GAAP adjustments after income taxes
126
66
153
146
Non-GAAP Net earnings attributable to MSI
$
354
$
359
$
648
$
683
Calculation of Non-GAAP Tax Rate (In
millions)
Three Months Ended
Six Months Ended
July 2, 2022
July 3, 2021
July 2, 2022
July 3, 2021
Net earnings before income taxes
$
300
$
340
$
520
$
630
Total Non-GAAP adjustments before income taxes*
157
113
286
220
Non-GAAP Net earnings before income taxes
457
453
806
850
Income tax expense
71
46
23
90
Income tax expense on Non-GAAP adjustments**
31
47
133
74
Total Non-GAAP Income tax expense
102
93
156
164
Non-GAAP Tax rate
22.3
%
20.5
%
19.4
%
19.3
%
*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
Six Months Ended
Statement Line July 2, 2022
July 3, 2021
July 2, 2022
July 3, 2021
Net earnings attributable to MSI
$
1.33
$
1.69
$
2.88
$
3.10
Non-GAAP adjustments before income taxes: Intangible assets
amortization expense Intangibles amortization
$
0.38
$
0.34
$
0.76
$
0.67
Share-based compensation expenses Cost of sales, SG&A and
R&D
0.25
0.18
0.46
0.35
Fair value adjustments to equity investments Other (income) expense
0.07
(0.05
)
0.17
(0.07
)
Hytera-related legal expenses SG&A
0.05
0.05
0.06
0.06
Fixed asset impairments Other charges (income)
0.05
-
0.06
-
Reorganization of business charges Cost of sales and Other charges
(income)
0.04
0.05
0.10
0.14
Loss from extinguishment of long-term debt Other (income) expense
0.04
0.09
0.04
0.09
Acquisition-related transaction fees Other charges (income)
0.02
0.02
0.08
0.03
Operating lease asset impairments Other charges (income)
0.02
-
0.07
0.04
Legal Settlements Other charges (Income)
-
0.02
0.06
0.02
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
-
(0.05
)
(0.01
)
(0.06
)
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
$
0.92
$
0.65
$
1.66
$
1.27
Income tax expense on Non-GAAP adjustments
0.18
0.27
0.77
0.43
Total Non-GAAP adjustments after income taxes
0.74
0.38
0.89
0.84
Non-GAAP Net earnings attributable to MSI
$
2.07
$
2.07
$
3.77
$
3.94
Diluted Weighted Average Common Shares
170.9
173.1
172.0
173.1
*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
July 2, 2022
July 3, 2021
Products and Systems
Integration
Software and Services
Total
Products and Systems
Integration
Software and Services
Total
Net sales
$
1,285
$
855
$
2,140
$
1,198
$
773
$
1,971
Operating earnings ("OE")
118
240
358
139
231
370
Above OE non-GAAP adjustments: Intangible assets amortization
expense
15
50
65
13
45
58
Share-based compensation expenses
32
12
44
24
7
31
Hytera-related legal expenses
8
-
8
8
-
8
Fixed asset impairments
6
2
8
-
-
-
Reorganization of business charges
6
1
7
7
2
9
Acquisition-related transaction fees
1
3
4
1
2
3
Operating lease asset impairments
2
1
3
-
-
-
Legal settlements
-
-
-
2
1
3
Total above-OE non-GAAP adjustments
70
69
139
55
57
112
Operating earnings after non-GAAP adjustments
$
188
$
309
$
497
$
194
$
288
$
482
Operating earnings as a percentage of net sales - GAAP
9.2
%
28.1
%
16.7
%
11.6
%
29.9
%
18.8
%
Operating earnings as a percentage of net sales - after non-GAAP
adjustments
14.6
%
36.1
%
23.2
%
16.2
%
37.2
%
24.4
%
Non-GAAP-4
Motorola Solutions, Inc. and Subsidiaries Reconciliations
of Operating Earnings to Non-GAAP Operating Earnings and Operating
Margin to Non-GAAP Operating Margin (In millions)
Six Months Ended
July 2, 2022
July 3, 2021
Products and Systems
Integration
Software and Services
Total
Products and Systems
Integration
Software and Services
Total
Net sales
$
2,388
$
1,644
$
4,032
$
2,213
$
1,531
$
3,744
Operating earnings ("OE")
157
440
597
216
452
668
Above OE non-GAAP adjustments: Intangible assets amortization
expense
30
101
131
26
90
116
Share-based compensation expenses
59
22
81
46
14
60
Reorganization of business charges
14
3
17
19
6
25
Acquisition-related transaction fees
7
7
14
1
3
4
Operating lease asset impairments
11
1
12
5
2
7
Fixed asset impairments
9
2
11
-
-
-
Legal settlements
-
11
11
2
1
3
Hytera-related legal expenses
10
-
10
10
-
10
Gain on Hytera legal settlement
(13
)
-
(13
)
-
-
-
Total above-OE non-GAAP adjustments
127
147
274
109
116
225
Operating earnings after non-GAAP adjustments
$
284
$
587
$
871
$
325
$
568
$
893
Operating earnings as a percentage of net sales - GAAP
6.6
%
26.8
%
14.8
%
9.8
%
29.5
%
17.8
%
Operating earnings as a percentage of net sales - after non-GAAP
adjustments
11.9
%
35.7
%
21.6
%
14.7
%
37.1
%
23.8
%
Non-GAAP-5 Motorola Solutions, Inc. and Subsidiaries
Reconciliation of Revenue to Non-GAAP Organic Revenue (In
millions)
Three Months Ended
July 2, 2022
July 3, 2021
% Change
Net sales
$
2,140
$
1,971
9
%
Non-GAAP adjustments: Sales from acquisitions
34
-
Organic revenue
$
2,106
$
1,971
7
%
Six Months Ended
July 2, 2022
July 3, 2021
% Change
Net sales
$
4,032
$
3,744
8
%
Non-GAAP adjustments: Sales from acquisitions
51
-
Organic revenue
$
3,981
$
3,744
6
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220804005793/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
Motorola Solutions (NYSE:MSI)
Historical Stock Chart
From Mar 2024 to Apr 2024
Motorola Solutions (NYSE:MSI)
Historical Stock Chart
From Apr 2023 to Apr 2024