Motorola Solutions (MSI) 10-K2021 FY Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-K

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of July 2, 2021 (the last business day of the registrant’s most recently completed second quarter) was approximately $33.2 billion.

Portions of the registrant’s definitive Proxy Statement to be delivered to stockholders in connection with its Annual Meeting of Shareholders to be held on May 17, 2022 (the "Proxy Statement"), are incorporated by reference into Part III of this Annual Report on Form 10-K (this "Form 10-K").

Throughout this Form 10-K we “incorporate by reference” certain information in parts of other documents filed with the Securities and Exchange Commission (the “SEC”). The SEC allows us to disclose important information by referring to it in that manner. Please refer to such information.

“Motorola Solutions” (which may be referred to as the “Company,” “we,” “us,” or “our”) means Motorola Solutions, Inc. or Motorola Solutions, Inc. and its subsidiaries, or one of our segments, as the context requires. MOTOROLA, MOTO, MOTOROLA SOLUTIONS and the Stylized M Logo, as well as iDEN are trademarks or registered trademarks of Motorola Trademark Holdings, LLC and are used under license.

Forward-Looking Statements

Statements in this Form 10-K which are not historical in nature are 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,” “aims,” “estimates” and similar expressions. We can give no assurance that any future results or events discussed in these statements will be achieved. Any forward-looking statements represent our views only as of today and should not be relied upon as representing our 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 our actual results to differ materially from the statements contained in this Form 10-K. Some of these risks and uncertainties include, but are not limited to, those discussed in “Part I. Item 1A. Risk Factors” of this Form 10-K and those described elsewhere in this Form 10-K or in our other SEC filings. Forward-looking statements include, but are not limited to, statements under the following headings: (1) “Business,” about: (a) industry growth and demand, including opportunities resulting from such growth, (b) future product development and the demand for, growth related to, and benefits of, new products, (c) growth of sales with existing customers, (d) customer spending and requests for vendor financing, (e) the impact of our strategy and focus areas, (f) the impact from the loss of key customers, (g) competitive position and our ability to maintain a leadership position in our core products, (h) increased competition, (i) our practice of subcontracting work to other companies to fulfill customer needs, (j) the continuing and future impact of the COVID-19 pandemic on our business, (k) the impact of recent acquisitions on our business, (l) the impact of existing and future regulatory matters (including with respect to climate change) on our business, (m) the impact from the allocation and regulation of spectrum, particularly with respect to broadband spectrum, (n) the firmness of each segment's backlog, (o) the competitiveness of the patent portfolio, (p) the impact of research and development, (q) the availability and costs of materials and components, energy supplies and labor, (r) the seasonality of the business, (s) our human capital management strategy and philosophy, and (t) our capital deployment model; (2) “Legal Proceedings,” about the ultimate disposition of pending legal matters and timing; (3) “Management's Discussion and Analysis of Financial Condition and Results of Operations,” about: (a) the continuing and future impact of COVID-19 on our business, (b) the availability and costs of materials, components and labor, (c) the impact of global economic and political conditions on our business, (d) the impact of acquisitions on our business, (e) the impact of existing and future laws, regulations, international treaties and industry standards relating to climate change on our business, (f) market growth/contraction, demand, spending and resulting opportunities, (g) industry growth and demand, including opportunities resulting from such growth, (h) future product development and demand for, growth related to, and benefits of, new products, (i) the impact of foreign exchange rate fluctuations, (j) our continued ability to reduce our operating expenses, (k) expected improvements in operating leverage and operating margins, (l) the growth of sales opportunities in our LMR Communications, Video Security and Access Control and Command Center Software technologies, (m) the return of capital to shareholders through dividends and/or repurchasing shares, (n) our ability to invest in capital expenditures and research and development, (o) the success of our business strategy and portfolio, (p) future payments, charges, use of accruals and expected cost-saving and profitability benefits associated with our reorganization of business programs and employee separation costs, (q) our ability and cost to repatriate funds, (r) future cash contributions to pension plans or retiree health benefit plans, (s) the liquidity of our investments, (t) our ability and cost to access the capital markets, (u) our ability to borrow and the amount available under our credit facilities, (v) our ability and cost to obtain performance bonds, (w) adequacy of internal resources to fund expected working capital and capital expenditure measurements, (x) expected payments pursuant to commitments under agreements and other obligations in the short-term and long-term, (y) the ability to meet minimum purchase obligations, (z) our ability to sell accounts receivable and the terms and amounts of such sales, (aa) the outcome and effect of ongoing and future legal proceedings, (bb) the impact of the loss of key customers, (cc) the expected effective tax rate and deductibility of certain items, and (dd) the impact of the adoption of accounting pronouncements on our financial results; and (4) “Quantitative and Qualitative Disclosures about Market Risk,” about: (a) the impact of foreign currency exchange risks, (b) the impact of interest rate risk, (c) future hedging activity and expectations of the Company, and (d) the ability of counterparties to financial instruments to perform their obligations.

Overview

Motorola Solutions is a global leader in public safety and enterprise security. Our technologies in Land Mobile Radio Communications ("LMR" or "LMR Communications"), Video Security and Access Control and Command Center Software, bolstered by managed and support services, create an integrated technology ecosystem to help make communities safer and businesses stay productive and secure. We serve more than 100,000 public safety and commercial customers in over 100 countries, providing “purpose-built” solutions designed for their unique needs, and we have a rich heritage of innovation focusing on advancing global safety for more than 90 years.

We are incorporated under the laws of the State of Delaware as the successor to an Illinois corporation, Motorola, Inc., organized in 1928. We changed our name from Motorola, Inc. to Motorola Solutions, Inc. on January 4, 2011. Our principal executive offices are located at 500 W. Monroe St., Chicago, Illinois 60661.

The Company has invested across these three technologies, evolving the Company’s LMR focus to purposefully integrate software, video security and access control solutions for public safety and enterprise customers globally.

Our strategy is to generate value through the integration of each technology into our ecosystem, uniting voice, software, video security, access control and analytics to interoperate. While each technology individually strives to make users safer and more productive, we believe we can enable better outcomes for individuals, businesses and agencies when we unite these technologies as one connected system. With our technology ecosystem, our goal is to help remove silos between systems, unify data, streamline workflows, simplify management and support evolving technologies. Across all three technologies, we offer cloud-based solutions, cybersecurity services and managed and support services.

An example of our integrated technology ecosystem in action is when our municipal governmental agency customers leverage communications, video security, analytics and cloud-based software to understand what is happening across their cities, which we believe helps to improve community collaboration and overall safety. Video security and access control solutions help users identify and understand events, find lost people and protect property. Command center software informs and assists emergency response by unifying data across the 911 workflow, including call handling, dispatch, video analytics, field reporting, records, evidence and community input. Voice and data communications connect law enforcement, fire and emergency medical services from different agencies and jurisdictions in an effort to improve coordination and collaboration. The end-to-end integration of these technologies assists agencies in detecting, analyzing, communicating and responding to incidents.

The principal products within each segment, by technology, are described below:

In 2021, the segment’s net sales were $5.0 billion, representing 62% of our consolidated net sales.    

Our LMR Communications technology includes infrastructure and devices for LMR, public safety Long Term Evolution (“LTE”) and enterprise-grade private LTE. We are a global leader in the two-way radio category, including Project 25 (“P25”), Terrestrial Trunked Radio (“TETRA”) and Digital Mobile Radio (“DMR”), as well as other PCR solutions. We also deliver LTE solutions for public safety, government and commercial users, including infrastructure and devices operating in 700 MHz, 900 MHz and Citizens’ Broadband Radio Service (“CBRS”) frequencies. Primary sources of revenue for this technology come from selling devices and building telecommunications networks, including infrastructure, installation and integration with our customers’ technology environments.

Our technology enables voice and multimedia collaborations across different two-way radio, WiFi or public LTE and private broadband networks. We believe that first responders continue to trust LMR communications because they are purpose-built and designed for reliability, availability, security and resiliency to withstand the most challenging conditions. By adding broadband data capabilities to our two-way radios, we strive to provide our customers with greater functionality and multimedia access to the information and data they need in their workflows. Examples include application services such as GPS location to better protect lone workers, job dispatch to share information and over-the-air programming to optimize device uptime.

The LMR technology within the Products and Systems Integration segment represented 84% of the net sales of the total segment in 2021.

Our Video Security and Access Control technology includes video management infrastructure, AI-powered security cameras including fixed and mobile (body-worn and in-vehicle) and access control solutions. We deploy video security and access control solutions to thousands of government and commercial customers around the world including school campuses, transportation systems, healthcare centers, public venues, utilities, prisons, factories, casinos, airports, financial institutions, government facilities, state and local law enforcement agencies and retailers. Organizations such as these utilize video security

Our view is that government and public safety customers in particular are increasingly turning to video security technologies, including fixed street cameras, in-vehicle cameras and body-worn cameras, to increase visibility, accountability and safety for citizens, communities and first responders alike. Additionally, our view is that government, public safety agencies and businesses are increasingly turning to scalable, cloud-based multi-factor authentication access control to make their facilities more secure.

Since 2018, we have developed our video security and access control business through investments in research and development and through acquisitions, directly contributing to our growth strategy to serve as a leader in end-to-end video security solutions. These activities have supported the expansion of our portfolio, which started with fixed video, access control and AI-enabled analytics solutions and has evolved to include mobile video (body-worn and in-vehicle cameras) for both public safety and commercial markets, a broader range of fixed video security technologies, business analytics and cloud-based access control solutions.

The Video Security and Access Control technology within the Products and Systems Integration segment represented 16% of the net sales of the total segment in 2021.

In 2021, the segment’s net sales were $3.1 billion, representing 38% of our consolidated net sales.

LMR Communications services include support and managed services, which offer a broad continuum of support for our customers. Support services include repair and replacement, technical support and preventative maintenance, and more advanced offerings such as system monitoring, software updates and cybersecurity services. Managed services range from partial to full operational support of customer-owned or Motorola Solutions-owned networks. Our customers’ systems often have multi-year or multi-decade lifespans that help drive demand for software upgrades, device and infrastructure refresh opportunities, as well as additional services to monitor, manage, maintain and secure these complex networks and solutions. We strive to deliver services to our customers that help improve performance across their systems, devices and applications for greater safety and productivity.

Given the mission-critical nature of our customers’ operational environments, we aim to design the LMR networks they rely on for availability, security and resiliency, as well as to keep pace with technological advancements. We have a comprehensive approach to system upgrades that addresses hardware, software and implementation services. As new system releases become available, we work with our customers to upgrade software, hardware, or both, with respect to site controllers, comparators, routers, LAN switches, servers, dispatch consoles, logging equipment, network management terminals, network security devices such as firewalls and intrusion detection sensors, and more, on-site or remotely.

The LMR technology within the Software and Services segment represented 70% of the net sales of the total segment in 2021.

Video Security and Access Control software includes video management software, decision and digital evidence management software and advanced vehicle location data analysis software, including license plate recognition. Our software is designed to complement video hardware systems, serving as an ecosystem that provides end-to-end video security to strive to keep people, property and assets safe.

Our video network management software is embedded with artificial intelligence (“AI”)-enabled analytics to deliver operational insights to our customers by bringing attention to important events within their video footage. Given the volume of video footage, we believe this is critical to monitor and manage to deliver meaningful, action-oriented insights.

For example, AI-enabled analytics can detect unusual behavior such as a person at a facility out of hours, locate a missing child at a theme park with Appearance Search, flag a denylisted vehicle at a school through license plate recognition, or send an alert through access control if doors are propped open at a hospital.

Video Security and Access Control services include our video-as-a-service offering for law enforcement, simplifying procurement by bundling hardware and software into a single subscription. Body-worn cameras and in-car video systems can be paired with either on-premises or cloud-based digital evidence management software and complementary command center software products. Additionally, Avigilon fixed video systems connected to Avigilon Cloud Services (“ACS”) provide our customers with the ability to securely access video across their sites from a remote/central monitoring location and more easily integrate with their other systems.

The Video Security and Access Control technology within the Software and Services segment represented 13% of the net sales of the total segment in 2021.

Our Command Center Software suite, CommandCentral, consists of native cloud and on-premises solutions that support the complex process of the public safety workflow from "911 call to case closure." The moment a citizen dials 911, an array of roles are involved in coordinating response and post-incident management, such as dispatchers who route calls to police, fire

CommandCentral software supports these roles through the three phases of incident response: incident awareness, incident management and post-incident resolution. Incident awareness software includes community engagement applications for tip submissions, crime mapping and evidence submission, and 911 call-handling software (including multimedia) and next-generation core services for 911 call routing. Incident management software includes computer aided dispatch (“CAD”) for dispatch and coordinating first response, situational awareness software that shows a single, real-time view of video feeds and other alerts on a map, and field response and reporting to help frontline personnel collaborate, manage incident activity and file reports from the field. Post-incident resolution software includes centralized records and evidence management for record-keeping and judicial sharing, analytics including license plate recognition, and jail and inmate management to streamline the process and enable secure inter-agency information sharing.

As the public safety market continues to evolve toward software offerings that more efficiently run their operations, reduce response times and increase officer availability, we have focused on providing cloud-based software-as-a service (“SaaS”) with ancillary implementation and managed services in addition to on-premises solutions. Our CommandCentral suite, hosted in Microsoft Azure Government, includes call handling, CAD, field reporting, records, evidence, investigations and jail in an integrated cloud-based offering. We believe that cloud deployment delivers agencies key benefits, including faster deployment, increased security, rapid scaling in the event of an emergency and a secure investment that keeps pace as technology advances. In addition to this native cloud suite, we offer a hybrid solution that delivers a migration path from on-premises software solutions to cloud-connected capabilities.

Another area of public safety evolution is increasing adoption of Next Generation 911 Core Services (“NGCS”), a group of products and services needed to create infrastructure connectivity in order to process a 911 call using Next Generation (“NG”) technology. The NG infrastructure is an Emergency Service IP Network ("ESInet"), which can carry voice, data and multimedia. ESInet enables 911 call takers at public safety answering points to respond to text, video and data. Our NGCS can be offered as a managed service and includes call routing, ESInet, location services, Geographic Information Services, cybersecurity and our continuous network and security operations center dedicated to public safety. We believe that our solution is differentiated through its integration with our CommandCentral software suite to simplify the agency’s workflow and ensure better incident management and real-time intelligence.

Additional Command Center Software includes interoperability software that ensures communication is not limited by coverage area, network technology or device type. Our solutions, including Kodiak, WAVE PTX and CriticalConnect, enable interoperability among devices across multiple networks. For example, a two-way radio network can connect with an LTE network making it possible for individuals to communicate securely and more easily across technologies.

The Command Center Software technology within the Software and Services segment represented 17% of the net sales of the total segment in 2021.

We serve government agencies, state and local public safety agencies, as well as commercial and industrial customers. Our customer base is fragmented and widespread when considering the many levels of governmental and first-responder decision-makers that procure and use our products and services. Serving this global customer base spanning federal, state, county, province, territory, municipal, and departmental independent bodies, along with our commercial and industrial customers, requires a significant go-to-market investment.

Our sales model includes both direct sales by our in-house sales force, which tends to focus on our largest accounts, and sales through our channel partner program. Our trained channel partners include independent dealers, distributors and software vendors around the world. The dealers and distributors each have their own sales organizations that complement and extend the reach of our sales force. The independent software vendors offer customized applications that meet specific needs of the customers we serve.

Our largest customers are the U.S. government (through multiple contracts with its various branches and agencies, including the armed services) and the Home Office of the United Kingdom, each representing approximately 8% of our consolidated net sales in 2021. The loss of these customers could have a material adverse effect on our revenue and earnings over several quarters as many of our contracts with these governments are long-term in nature. All contracts with the U.S. government, and certain other government agencies within the U.S., are subject to cancellation at the customer’s convenience. For a discussion of risks related to government contracting requirements, please refer to “Part I. Item 1A. Risk Factors” in this Form 10-K.

Payment terms with our customers vary worldwide. Generally, contractual payment terms range from 30 to 45 days from the invoice date within North America and typically do not exceed 90 days from the invoice date in regions outside of North America. A portion of our contracts include implementation milestones, such as delivery, installation, and system acceptance, which generally take 30 to 180 days to complete. Invoicing the customer is dependent on completion of the milestones. We generally do not grant extended payment terms. As required for competitive reasons, we may provide long-term financing in connection with equipment purchases. Financing may cover all or a portion of the purchase price. Refer to “Part I. Item 1A. Risk Factors” in this Form 10-K for a discussion of risks related to requests by customers to provide vendor financing.

Generally, our contracts do not include a right of return, other than for standard warranty provisions. Due to customer purchasing patterns and the cyclical nature of the markets we serve, our sales tend to be somewhat higher in the second half of the year, with the fourth quarter being the highest.

We operate in highly competitive markets that are sensitive to technological advances. Competitive factors in these markets include product quality and reliability, technological capabilities, cost-effectiveness and industry experience. In operating in these competitive markets, we have broadened how we work with our customers, expanding from our global LMR installed base to integrate Video Security and Access Control and Command Center Software. For example, our Command Center Software suite can integrate our customers’ LMR systems to provide unified voice and data information throughout the critical 911 workflow. Adding Video Security and Access Control enables multimedia collaboration and offers visibility for police officers within the command center and in the field. The interplay of technologies, guided by our deep knowledge of the public safety workflow, delivers customers one connected system to unify their voice, data and video communication streams.

We experience widespread competition from a growing number of existing and new competitors, including large system integrators and manufacturers of private and public wireless network equipment and devices. As demand for fully integrated voice, data, broadband systems and video security solutions continues to grow, we may face additional competition from public telecommunications carriers and telecommunications equipment providers to small video solutions startups.

As we continue to evolve our services strategy, we may subcontract work to other companies to fulfill customer needs in geographical areas that we do not have coverage for or for additional services that we do not provide. For a description of risks related to our use of the services of subcontractors, refer to “Part I. Item 1A. Risk Factors” of this Form 10-K.

Our major competitors within our LMR, Video Security and Access Control and Command Center Software technologies include the following companies:

In response to the COVID-19 pandemic, there continues to be a broad number of governmental and commercial actions that are being taken to limit the spread of the virus, including social distancing measures, stay-at-home orders, travel restrictions, business shutdowns and slowdowns. Although the COVID-19 pandemic continues to be dynamic and impacting the overall economy, introducing new challenges in 2021, we are encouraged by customer demand for our products and services. However, the COVID-19 pandemic may continue to have an impact on our financial condition, results of operations and liquidity in 2022. See “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K for a discussion regarding the impact of the COVID-19 pandemic on our financial results, and “Part I. Item 1A. Risk Factors” of this Form 10-K for a discussion of the risks and uncertainties associated with the COVID-19 pandemic.

Our backlog includes orders that have been received and are believed to be firm. As of December 31, 2021 and December 31, 2020, our backlog was as follows:

During the year ended December 31, 2021, $1.7 billion of backlog was added to the Software and Services segment as a result of a contract extension with our customer, the Home Office of the United Kingdom, for an additional four years of service under our contracts for provision of the Airwave Land Mobile Radio network to the UK emergency services. The contract extension was accounted for within backlog as it meets our definition of a firm customer commitment. Refer to "Part 1. Item 1A. Risk Factors" of this Form 10-K for a discussion of the risks and uncertainties associated with the United Kingdom's Competition and Markets Authority's market investigation into the Mobile Radio Network for the Police and Emergency Services.

Approximately 55% of the Products and Systems Integration segment backlog and 23% of the Software and Services segment backlog is expected to be recognized as revenue during 2022. The firmness of such orders is subject to future events that may cause the amount recognized to change.

We prioritize investments in R&D to expand and improve our products through both new product introductions and continuous enhancements to our core products. Our R&D programs are focused on the development of: LMR Communications, Video Security and Access Control and Command Center Software.

R&D expenditures were $734 million in 2021, $686 million in 2020 and $687 million in 2019. As of December 31, 2021, we had approximately 8,000 employees engaged in R&D activities. In addition, we engage in R&D activities with joint development and manufacturing partners and outsource certain activities to engineering firms to further supplement our internal spend.

Patent protection is an important aspect of our operations. We have a portfolio of U.S. and foreign utility and design patents relating to our products, systems and technologies, including developments in radio frequency technology and circuits, wireless network technologies, over-the-air protocols, mission-critical communications, software and services, video security and access control and next-generation public safety. We also file new patent applications with the U.S. Patent and Trademark Office and foreign patent offices.

We license some of our patents to third-parties, but licensing is not a significant source of revenue for our business. We are also licensed to use certain patents owned by others. Royalty and licensing fees vary from year-to-year and are subject to the terms of the agreements and sales volumes of the products subject to the license. Motorola Solutions has a royalty-free license under all of the patents and patent applications assigned to Motorola Mobility at the time of the separation of the two businesses in 2011.

We actively participate in the development of standards for interoperable, mission-critical digital two-way radio systems. Our patents are used in standards in which our products and services are based. We offer standards-based licenses to those patents on fair, reasonable and non-discriminatory terms.

We believe that our patent portfolio will continue to provide us with a competitive advantage in our core product areas as well as provide leverage in the development of future technologies. While we are not dependent upon a single patent or even a few patents, we do have patents that protect features and functionality of our products and services. While these patents are important, our success also depends upon our extensive know-how, innovative culture, technological leadership and distribution channels. We do not rely solely on patents or other intellectual property rights to protect or establish our market position; however, we will enforce our intellectual property rights when it is necessary to protect our innovation, or in some cases where attempts to negotiate mutually-agreeable licenses are not successful.

We seek to obtain patents, copyright registrations, and trademark registrations to protect our proprietary positions whenever possible and wherever practical. As of December 31, 2021, we owned approximately 6,430 granted patents in the U.S. and foreign countries. As of December 31, 2021, we had approximately 1,000 U.S. and foreign patent applications pending. Foreign patents and patent applications are mostly counterparts of our U.S. patents. During 2021, we were granted approximately 485 patents in the U.S. and in foreign countries.

We no longer own certain logos and other trademarks, trade names and service marks, including MOTOROLA, MOTO, MOTOROLA SOLUTIONS and the Stylized M logo and all derivatives thereof (“Motorola Marks”) and, since 2010, we have licensed the Motorola Marks from Motorola Trademark Holdings, LLC. which is currently owned by Motorola Mobility. For a description of the risks we face related to intellectual property, refer to “Part I. Item 1A. Risk Factors” in this Form 10-K.

Our practice is to carry reasonable amounts of inventory to meet customers' delivery requirements. In 2021, we have increased our carrying levels of inventory in response to the effects of the COVID-19 pandemic. We provide custom products that require the stocking of inventories and a large variety of piece parts and replacement parts in order to meet delivery and warranty requirements. To the extent supplier product life cycles are shorter than ours, stocking of lifetime buy inventories is required to meet long-term warranty and contractual requirements. In addition, replacement parts are stocked for delivery on customer demand within a short delivery cycle.

Availability of required materials and components is generally dependable; however, particularly within the semiconductor market, fluctuations in supply and market demand in 2021 have caused selective shortages and increased costs driven by the need to purchase semiconductor components from alternative sources, including brokers, during the latter part of the fourth quarter of 2021. We anticipate increased costs to procure materials within the semiconductor market to continue into the first half

Natural gas, electricity and, to a lesser extent, oil are the primary sources of energy for our manufacturing operations. Each of these resources is currently in adequate supply for our operations. The cost to operate our facilities and freight costs are dependent on world oil prices and external third-party logistics rates for inbound and outbound air lanes. Freight costs have also been impacted by disruptions in transportation related to the COVID-19 pandemic. Labor is generally available in reasonable proximity to our manufacturing facilities and the manufacturing facilities of our largest outsourced manufacturing suppliers. Difficulties in obtaining any of the aforementioned resources, or significant cost increases, could affect our financial results.

Some of our operations use substances regulated under various federal, state, local and international laws governing the environment and worker health and safety, including those governing the discharge of pollutants into the ground, air and water, the management and disposal of hazardous substances and wastes, and the cleanup of contaminated sites, as well as relating to the protection of the environment. Certain products of ours are subject to various federal, state, local and international laws governing chemical substances in electronic products. Compliance with these U.S. federal, state and local and international laws did not have a material effect on our capital expenditures or competitive position in 2019 through 2021.

Our operations and supply chain are expected to become increasingly subject to federal, state, local and foreign laws, regulations and international treaties and industry standards relating to climate change. For example, in October 2021 the U.K.’s Cabinet Office began requiring companies bidding on contracts with the U.K. government that have a value of over £5m per year to have carbon reduction plans that contain a commitment to achieving net zero emissions by 2050 for U.K. operations. This requirement applies to our operations in the U.K. Although Motorola Solutions UK Ltd. and Airwave Solutions Ltd., our subsidiaries, each committed to achieving net zero emissions by 2050 for its U.K. operations, this requirement and any similar future requirements and other increased regulation of climate change concerns could subject us to additional costs and restrictions, impact our competitive position or require us to make certain changes to our manufacturing practices and/or product designs.

Radio spectrum is required to provide wireless voice, data and video communications service. The allocation of spectrum is regulated in the U.S. and other countries and limited spectrum is allocated to wireless services and specifically to public safety users. We manufacture and market products and provide services in spectrum bands already allocated by regulatory bodies. These include voice and data infrastructure, mobile radios and portable or hand-held devices. Consequently, our results could be positively or negatively affected by the rules and regulations adopted by regulatory agencies. Our products operate both on licensed and unlicensed spectrum. The availability of additional radio spectrum may provide new business opportunities. Conversely, the loss of available radio spectrum may result in the loss of business opportunities. Regulatory changes in current spectrum bands (e.g., the sharing of previously dedicated or other spectrum) may also provide opportunities or may require modifications to some of our products so they can continue to be manufactured and marketed.

The U.S. federal government and many state and local governments have adopted or are considering laws or regulations governing the use of artificial intelligence and biometrics, including facial recognition and license plate recognition technology, primarily based on concerns about privacy or bias. (References to privacy-related legislation or laws in this document encompass all of these technologies.) Similar laws and regulations are being considered in some jurisdictions outside the U.S., including the European Union. Based on growing demands for broadband, regulators continue to consider repurposing narrowband spectrum to broadband. There are calls for more stringent health and safety requirements for occupational equipment for public safety and commercial users. Attention in the U.S. on supply chain vulnerabilities related to country of origin and national security continues. Our entrance into new service offerings could present new or additional regulatory burdens and compliance issues. For example, as part of our expanding portfolio of technologies, we are now a provider of certain products and services that include regulated telecommunications. For a description of the risks we face related to regulatory matters, refer to “Part 1. Item 1A. Risk Factors” of this Form 10-K.

We have a "people first" philosophy. Our employees are our driving force, drawn from all segments of our global society to make a difference for our customers.

As of December 31, 2021, we employed approximately 18,700 people globally with 53% in the North America region and 47% in the International region. Of our total global employees, 42% were employed in engineering. We believe a diverse, equitable and inclusive workplace is one where our employees feel that their unique opinions, cultures and abilities contribute to their personal success, as well as our company’s success.

We believe the next big idea can come from anyone, anywhere, at any time. We invest in our employees’ development and training at all levels, challenging them to develop and grow skills to imagine new opportunities that will keep making a difference to public safety and enterprise security. Employees have access to a wide variety of technical, functional and professional skills learning resources, including virtual, self-directed courses and on-the-job learning opportunities.

We strive for business growth by creating a supportive, fair and equitable environment where employees feel engaged, connected to our business and invested in the collective success of our customers and communities. Our human resources team works with leaders within each business function to perform annual talent reviews to assess the performance of every team member and identify the best development opportunities. This comprehensive process fosters growth across our company by focusing on our high-potential talent and the rigor of succession plan development for our most critical roles. As part of our compensation philosophy, we strive to offer and maintain market competitive wages, incentives, and benefits for our employees to attract and retain talent, and we review our rewards programs each year in an effort to ensure they are competitive with local market practices in the industries and countries where we operate. More specifically, our total rewards package for our global employees includes broad-based stock grants and bonuses, an employee stock purchase plan, healthcare, wellness and retirement benefits (including a financial wellness coaching program for our U.S. employees), paid parental and family leave, commuter benefits, paid time off (including flexible time off for U.S. exempt employees), flexible work options and other assistance and support for employees going through life-changing events.

We remain focused on recruiting diverse candidates by incorporating best practices into our hiring and creating partnerships with diversity organizations. In 2021, under the leadership of our chief diversity officer, we collaborated with our employees to develop and promote an internal diversity, equity and inclusion ("DEI") strategy that aims to foster a culture of inclusion. Our DEI programs include development programs for high-potential female leaders, an unconscious bias curriculum and DEI training for our global workforce. Also in 2021, we added "inclusive" as one of our six corporate values, directed Motorola Solutions Foundation charitable grants to benefit underserved groups and highlighted diversity considerations in the design, testing, marketing, sales and communications of our products and solutions. We also launched our Motorola Solutions DEI website which describes our DEI focus areas, values and supplier diversity. Our DEI website can be accessed at www.motorolasolutions.com/en_us/about/diversity-equity-inclusion.html.

The safety of our employees is also a priority, and we are committed to striving to provide a safe and injury-free workplace by using our global environmental, health and safety (“EHS”) management system to ensure program and reporting consistency at all of our sites. Our general approach includes assessing risks and identifying controls through the use of our comprehensive job hazard and risk assessment tool. Throughout the COVID-19 pandemic, one of our priorities has remained protecting the health and safety of our employees. Refer to “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K for details regarding our response to COVID-19, including with respect to our employee health and safety measures.

Additional information regarding how our purpose and ethics informs our approach to corporate responsibility can be found in our 2020 Corporate Responsibility Report, which is available on our website at https://www.motorolasolutions.com/en_us/about/company-overview/esg.html. The information contained on or accessible through our corporate website, including but not limited to our DEI website listed above and our 2020 Corporate Responsibility Report, is not incorporated by reference into and is not a part of this Form 10-K.

None.

The European Union (“E.U.”) adopted the General Data Protection Regulation (“GDPR”) which took effect on May 25, 2018, harmonizing data protection laws across the E.U. The GDPR strengthens individual privacy rights and enhances data protection obligations for processors and controllers of personal data. This includes expanded disclosures about how personal information is to be used, limitations on retention of information and mandatory data breach notification requirements. Noncompliance with the GDPR can trigger significant fines. Following GDPR enactment, other countries have also implemented similar privacy laws.

Also, U.S. federal, state and other foreign governments and agencies have adopted or are considering adopting laws and regulations regarding the collection, storage, use, processing and disclosure of personal data. State governments within the U.S. are starting to enact their own versions of “GDPR-like” privacy legislation, which will create additional compliance challenges, risk, and administrative burden, such as the California Consumer Privacy Act (“CCPA”), which went into effect on January 1, 2020; the Virginia Consumer Data Protection Act, which will go into effect in January 2023; and the Colorado Privacy Act, which will go into effect in July 2023. In addition, California voters passed by ballot initiative the California Privacy Rights Act in November 2020 (which will fully take effect in January 2023), which expands the CCPA. Even though comprehensive U.S. federal privacy legislation is being discussed seriously by lawmakers and other stakeholders, it is possible that a one-size fits all compliance program may be difficult to achieve and manage globally.

Because the interpretation and application of privacy and data protection laws are complex and still uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing practices or the features of our products, software and services. Cloud-based solutions may be subject to further regulation, including data localization requirements and other restrictions concerning international transfer of data, the operational and cost impact of which cannot be fully known at this time.

Any failure or perceived failure by us, our business partners, or third-party service providers to comply with GDPR, CCPA, other related privacy and security-related or data protection laws, regulations and standards, or the privacy commitments in contracts could result in proceedings against us by governmental entities or others and significant fines, which could have a material adverse effect on our business and operating results and harm our reputation.

Current or future privacy-related legislation and governmental regulations pertaining to AI, AI-enabled products and the use of biometrics or other video analytics may affect how our business is conducted or expose us to unfavorable developments resulting from changes in the regulatory landscape. For example, laws such as the Biometric Information Privacy Act in Illinois have restricted the collection, use and storage of biometric information and provide a private right of action of persons who are aggrieved by violations of the act. Such legislation and regulations have exposed us to, and we expect that they will continue to expose us to, regulatory and litigation risks. Legislation and governmental regulations related to AI and the use of biometrics and other video analytics may also influence our current and prospective customers’ activities, as well as their expectations and needs in relation to our products and services. Compliance with these laws and regulations may be onerous and expensive, and may be inconsistent from jurisdiction to jurisdiction, further increasing the cost of compliance and the risk of liability. It is also not clear how existing and future laws and regulations governing issues such as AI, AI-enabled products, biometrics and other video analytics apply or will be enforced with respect to the products and services we sell. Any such increase in costs or increased risk of liability as a result of changes in these laws and regulations or in their interpretation could individually or in the aggregate make our products and services that use AI technologies, biometrics or other video analytics less attractive to our customers, cause us to change or limit our business practices or affect our financial condition and operating results.

We are increasingly building AI into many of our offerings. We envision a future in which AI operating in our products and services will help our public safety and private sector customers build safer communities with stronger communication platforms.

Radio spectrum is required to provide wireless voice, data, and video communications service. The allocation of frequencies is regulated in the U.S. and other countries and limited spectrum is allocated to wireless services, including commercial and public safety users. The global demand for wireless communications has grown exponentially, and spurred competition for access among various networks and users. In response, regulators are reassessing the allocations of spectrum among users, including public safety users, and considering whether to change the allocation of certain bands from narrowband to broadband use, or to require sharing of spectrum bands. Our results could be positively or negatively affected by the rules and regulations adopted by regulators. Our products operate both on licensed and unlicensed spectrum. The availability of additional radio spectrum may provide new business opportunities. Conversely, the loss of available radio spectrum may result in the loss of business opportunities. Regulatory changes in current spectrum bands (e.g., the sharing of previously dedicated or other spectrum) may also provide opportunities or may require modifications to some of our products so they can continue to be manufactured and marketed. Opportunities in the public safety broadband market may also be impacted by the First Responder Network Authority (“FirstNet”) which was authorized by Congress to develop, build, and operate a nationwide broadband network for first responders.

Our U.S. government business is subject to specific procurement regulations with numerous compliance requirements. These requirements, although customary in government contracting in the U.S., increase our performance and compliance costs. These costs may increase in the future, thereby reducing our margins, which could have an adverse effect on our financial condition. Failure to comply with these regulations or other compliance requirements could lead to suspension or debarment from U.S. government contracting or subcontracting for a period of time. Among the causes for debarment are violations of various laws or policies, including those related to procurement integrity, export control, U.S. government security regulations, employment practices, protection of criminal justice data, protection of the environment, accuracy of records, proper recording of costs, foreign corruption, Trade Agreements Act, Buy America Act, and the False Claims Act.

Generally, in the U.S., government contracts and grants are subject to oversight audits by government representatives. Such audits could result in adjustments to our contracts. For contracts covered by the Cost Accounting Standards, any costs found to be improperly allocated to a specific contract may not be allowed, and such costs already reimbursed may have to be refunded. Future audits and adjustments, if required, may materially reduce our revenues or profits upon completion and final negotiation of audits. Negative audit findings could also result in investigations, termination of a contract or grant, forfeiture of profits or reimbursements, suspension of payments, fines and suspension or prohibition from doing business with the U.S. government. All contracts with the U.S. government can be terminated for convenience by the government at any time.

As part of our expanding portfolio of technologies, we are now a provider of certain products and services that include telecommunications, including selective routing services for 911 calls. As such, we are subject to certain existing or potential Federal Communications Commission (“FCC”) and state regulations relating to telecommunications, including some licensing, service reliability, consumer protection and regulatory fee requirements. If we do not comply with FCC and state rules and regulations, we could be subject to enforcement actions, fines, loss of licenses and possibly restrictions on our ability to operate or offer certain of our products or services. Any enforcement action, which may be a public process, could damage our reputation, erode customer trust, subject us to substantial fines and penalties, or cause us to restructure our product or service offerings, which could adversely affect our business, results of operations and financial condition.

Additionally, we are subject to telecommunications laws and regulations in certain foreign countries where we offer products and services that include telecommunications. For example, we are registered to provide telecommunications connectivity with our WAVE PTX push-to-talk offerings in certain countries in the European Union. Local laws and regulations, and the interpretation of such laws and regulations, differ significantly among the jurisdictions in which we provide these products and services. In some countries, certain services that we offer are not considered to be regulated telecommunications services, while in other countries they are subject to telecommunications regulations, including registration with the local telecommunications governing authority, which increases the level of scrutiny and potential for enforcement by regulators as well as our cost of doing business internationally. Further, enforcement and interpretations of the laws and regulations in some countries can be unpredictable and subject to the informal views of government officials. Future applicable legislative, regulatory or judicial actions could increase the cost and complexity of compliance and expose us to liability. Failure to comply with these regulations could subject us to additional compliance obligations or liabilities, which could adversely affect our business, results of operations and financial condition.

Increased public awareness and worldwide focus on climate change issues has led to legislative and regulatory efforts to limit greenhouse gas emissions, and may result in more international, federal or regional requirements or industry standards to reduce or mitigate global warming. Additionally, legislative and regulatory efforts have focused on carbon taxes in certain areas where we operate. As a result, we may become subject to new or strengthened regulations, legislation or other governmental requirements or industry standards, and we anticipate that we will see increased demand to meet voluntary criteria related to reduction or elimination of certain constituents from products and increasing energy efficiency. For example, in October 2021 the U.K.’s Cabinet Office began requiring companies bidding on contracts with the U.K. government that have a value of over £5m per year to have carbon reduction plans that contain a commitment to achieving net zero emissions by 2050 for U.K. operations. This requirement applies to our operations in the U.K. Although Motorola Solutions UK Ltd. and Airwave Solutions Ltd., our U.K. subsidiaries, each committed to achieving net zero emissions by 2050 for such entities' U.K. operations, this requirement and any similar future requirements may impact our business operations or competitive position. This requirement and other increased regulation of climate change concerns could subject us to additional costs and restrictions and require us to make certain changes to our manufacturing practices and/or product designs, which could negatively impact our business, results of operations, financial condition and competitive position.

In addition, the physical risks of climate change (such as extreme weather conditions or rising sea levels) may impact the availability and cost of materials and natural resources, sources and supply of energy, product demand and manufacturing and could increase insurance and other operating costs. Many of our facilities around the world (and the operations of our suppliers) are in locations that may be impacted by the physical risks of climate change, and we face the risk of losses incurred as a result of physical damage to our facilities or those of our suppliers, such as loss or spoilage of inventory and business interruption caused by such events.

Our operations and the products we manufacture are subject to a wide range of product regulatory and safety, consumer, worker safety and environmental product compliance and remediation laws. Compliance with such existing or future laws could subject us to future costs or liabilities, impact our production capabilities, constrict our ability to sell, expand or acquire facilities, restrict what products and services we can offer, and generally impact our financial performance. Some of these laws are environmental and relate to the use, disposal, cleanup of, and exposure to certain substances. For example, in the U.S., laws often require parties to fund remedial studies or actions regardless of fault and oftentimes in response to action or omissions that were legal at the time they occurred. We continue to incur disposal costs and have ongoing remediation obligations. Changes to environmental laws or our discovery of additional obligations under these laws could have a negative impact on our financial performance.

Laws focused on: (i) the energy efficiency of electronic products and accessories, (ii) recycling of both electronic products and packaging, (iii) reducing or eliminating certain hazardous substances in electronic products, (iv) the use and transportation of batteries, and (v) debt collection and other consumer finance matters continue to expand significantly. Laws pertaining to accessibility features of electronic products, standardization of connectors and power supplies, the use and transportation of lithium-ion batteries and other aspects of our products are also proliferating. There are also demanding and rapidly changing laws around the globe related to issues such as product safety, radio interference, radio frequency radiation exposure, medical related functionality, use of products with video functionality, and consumer and social mandates pertaining to use of wireless or electronic equipment. These laws, and changes to these laws, could have a substantial impact on whether we can offer certain products, solutions and services, on product costs, and on what capabilities and characteristics our products or services can or must include, which could negatively impact our business, results of operations, financial condition and competitive position.

We are subject to income taxes in the U.S. and numerous foreign tax jurisdictions. Our provision for income taxes and cash tax liability may be negatively impacted by: (i) changes in the mix of earnings taxable in jurisdictions with different statutory tax rates, (ii) changes in tax laws and accounting principles, (iii) changes in the valuation of our deferred tax assets and liabilities, (iv) failure to meet commitments under tax incentive agreements, (v) discovery of new information during the course of tax return preparation, (vi) increases in non-deductible expenses, or (vii) repatriating cash held abroad.

Tax audits may also negatively impact our business, financial condition and results of operations. We are subject to continued examination of our income tax returns, and tax authorities may disagree with our tax positions and assess additional tax. We regularly evaluate the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. Outcomes from these continuing examinations may have a negative impact on our future financial condition and operating results.

Certain tax policy efforts, including the Organization for Economic Co-operation and Development’s Base Erosion and Profit Shifting Project, the European Commission’s state aid investigations, and other initiatives could have an adverse effect on the taxation of international businesses. Furthermore, many of the countries where we are subject to taxes, including the U.S., are independently evaluating their tax policy and we may see significant changes in legislation and regulations concerning taxation. Certain countries have already enacted legislation which could affect international businesses, and other countries have

Our business operations, and the operations of our customers and suppliers, are subject to interruption by natural disasters, flooding, fire, power shortages, the widespread outbreak of infectious diseases and pandemics, such as the continuing COVID-19 pandemic, terrorist acts or the outbreak or escalation of armed hostilities, and other events beyond our control. Any of these events could impair our ability to manage our business and/or cause disruption of economic activity, which could have an adverse effect on our business, results of operations, financial position, cash flows and stock price.

In particular, the COVID-19 pandemic has caused significant disruption to the global economy, including in all of the regions in which we, our suppliers, customers and business partners do business and in which our employees are located. The COVID-19 pandemic and efforts to manage it, including those by governmental authorities, have had, and could continue to have, significant impacts on global markets. While the duration and severity of those impacts on our business continue to be uncertain, they have had, and could continue to have, an adverse effect on our business, financial position, cash flows and stock price in many ways, including, but not limited to, the following:

The process of developing new video security and software products and enhancing existing products is complex, costly and uncertain, and any failure by us to anticipate customers' changing needs, emerging technological trends and development costs accurately could significantly harm our market share, results of operations and financial condition. Any failure to accurately

We may face increasing competition from traditional system integrators, the defense industry, commercial software companies, and commercial telecommunication carriers as services contracts become larger and more complicated. Expansion will bring us into contact with new regulatory requirements and restrictions, such as data security or data residency/localization obligations, with which we will have to comply and may increase the costs of doing business, reduce margins and delay or limit the range of new solutions and services which we will be able to offer. We may be required to agree to specific performance metrics that meet the customer's requirements for network security, availability, reliability, maintenance and support and, in some cases, if these performance metrics are not met we may not be paid.

Additionally, as our portfolio of products increases, we may be subject to additional compliance obligations and liabilities for our business. For example, in October 2021, the United Kingdom’s Competition and Markets Authority (the “CMA”) announced that it had opened a market investigation into the Mobile Radio Network for the Police and Emergency Services. This investigation affects Airwave, our private mobile radio communications network that we acquired in 2016. Airwave provides mission-critical voice and data communications to public service agencies in Great Britain. The market investigation by the CMA may result in additional compliance obligations for our business.

The markets for certain products of ours are characterized by changing technologies and evolving industry standards and customer preferences. For example, the software industry is characterized by rapidly changing customer preferences in favor of digital capabilities, including public and private cloud solutions. In some cases, it is unclear what specific technology will be adopted in the market or what delivery model will prevail. In addition, new technologies such as voice over LTE and 5G or push-to-talk clients over LTE and 5G could reduce sales of our traditional products. The shift to smart public safety and the prevalence of data in our customer use cases results in our competing in a more fragmented marketplace. In addition, new technologies and new competitors continue to enter our markets at a faster pace than we have experienced in the past, resulting in increased competition from non-traditional suppliers, including public carriers, telecom equipment providers, consumer device manufacturers and software and video security companies. New products and services are expensive to develop and bring to market and additional complexities are added when this process is outsourced as we have done in certain cases or as we increase our reliance on third-party content and technology. Our success depends, in substantial part, on the timely and successful introduction of new products and services, upgrades and enhancements of current products to comply with emerging industry standards, laws and regulations, including country specific proprietary technology requirements, and to address competing technological and product developments carried out by our competitors. Developing new technologies to compete in a specific market may not be financially viable, resulting in our inability to compete in that market. The research and development of new, technologically-advanced products and services is a complex and uncertain process requiring high levels of innovation and investment, as well as the accurate anticipation of technology and market trends. Many of our products and services are complex and we may experience delays in completing development and introducing new products or technologies in the future. We may focus our resources on technologies that do not become widely accepted or are not commercially viable or involve compliance obligations with additional areas of regulatory requirements.

In order to position ourselves to take advantage of growth opportunities or to meet other strategic needs such as product or technology gaps, we have made, and expect to continue to make, strategic acquisitions that involve significant risks and uncertainties. These risks and uncertainties include: (i) inability to realize our business plan with respect to the acquired businesses, (ii) the difficulty or inability in integrating newly-acquired businesses and operations in an efficient and effective manner, including ensuring proper integration of acquired businesses’ legal and regulatory compliance programs, information technology systems and financial reporting and internal control systems, (iii) challenges in integrating acquired businesses to create the operating platform for public safety, (iv) the challenges in achieving strategic objectives, cost savings and other benefits from acquisitions, (v) the risk that our contractual relationships or the markets served do not evolve as anticipated and that the technologies acquired do not prove to be those needed to be successful in those markets, (vi) the potential loss of key employees of the acquired businesses, (vii) the risk of diverting the attention of senior management from our operations, (viii) the risks of entering new markets in which we have limited experience, and (ix) future impairments of goodwill. In particular, failure to achieve targeted cost and revenue synergies could negatively impact our business performance.

Certain acquisition candidates in the industries in which we participate may carry higher relative valuations (based on revenues, earnings, cash flow, or other relevant multiples) than we do. This is particularly evident in recurring revenue businesses, software businesses and certain services businesses. Acquiring a business that has a higher relative valuation than Motorola Solutions may be dilutive to our earnings. In addition, we may not pursue opportunities that are highly dilutive to near-term earnings.

Key employees of acquired businesses may receive substantial value in connection with a transaction in the form of cash payments for their ownership interest, particularly in the case of founders and other shareholder employees, or as a result of change-in-control agreements, acceleration of stock options and the lifting of restrictions on other equity-based compensation

We rely extensively on our information systems to manage our business operations. All information technology systems are potentially vulnerable to damage, unauthorized access or interruption from a variety of sources, including but not limited to, cyberattack, cyber intrusion, computer viruses, security breach, ransomware, energy blackouts, natural disasters and severe weather conditions, terrorism, sabotage, war, insider trading, human error and computer and telecommunication failures. Similar to many other companies, we are consistently subject to attempts to compromise our information technology systems from both internal and external sources. As a provider of mission-critical communications systems for customers in critical infrastructure sectors of the U.S. and globally, including systems that we operate and maintain for certain customers of ours or as a software-based service, we face additional risk as a target of sophisticated attacks aimed at compromising both our company’s and our customers’ sensitive information and intellectual property. This risk is heightened because these systems may contain sensitive governmental information or personally identifiable or other protected information. As a result of the continuing COVID-19 pandemic, a large portion of our office workers continue to work from home, which may also increase our vulnerability to cyber and other information technology risks. Additionally, the sophistication of these threats continues to grow and the complexity and scale of the systems to be protected continues to increase. In an effort to protect against such attacks, we maintain insurance related to cybersecurity risks and employ a number of countermeasures and security controls, including training, audits, and utilization of commercial information security threat sharing networks. If we fail to effectively manage our investment in cybersecurity, our business, products, and services could suffer from the resulting weaknesses in our infrastructure, systems or controls.

Further, our company outsources certain business operations, including, but not limited to IT, network connectivity, HR information systems, manufacturing, repair, distribution and engineering services. We are dependent, in certain instances, upon our outsourced business partners, suppliers, and customers to adequately protect our IT systems and those IT systems that we manage for our customers, including the hosts of our cloud infrastructure on top of which our cloud-based solutions are built, as well as the network connectivity upon which some of our services are built. Some of our customers are exploring broadband solutions that use public carrier networks on which our solutions would operate. We do not have direct oversight or influence over how public carrier networks manage the security, quality, or resiliency of their networks, and because they are an attractive high value target due to their role in critical infrastructure, they expose customers to an elevated risk over our private networks. In addition, we maintain certain networked equipment at customer locations and are reliant on those customers to protect and maintain that equipment.

A cyberattack or other significant disruption involving our IT systems or those of our outsource partners, suppliers or our customers could result in substantial costs to repair or replace our IT systems or the loss of critical data and interruptions or delays in our ability to perform critical functions. Such disruption may also result in the unauthorized release of proprietary, confidential or sensitive information of us or our customers, or the disruption of services provided to customers and essential for their mission. Such unauthorized access to, or release of, information or disruption of services could: (i) allow others to unfairly compete with us, (ii) compromise safety or security, given the mission-critical nature of our customers’ systems, (iii) subject us to claims for breach of contract, tort, and other civil claims without adequate indemnification from our suppliers, and (iv) damage our reputation. Our potential liability related to such claims by customers or third-parties described above may not be contractually capped nor fully covered by our insurance. We could face regulatory penalties, enforcement actions, remediation obligations and/or private litigation by parties whose data is improperly disclosed or misused. The continued global trend to enforce data sovereignty and negate legitimate cross border data flows increases the risk that we, directly or through some third party service provider, may inappropriately transfer personal data. Any or all of the foregoing could have a negative impact on our business, financial condition, results of operations, and cash flow.

Our intellectual property rights protect our innovations and technology, and they may also generate income under license agreements. We attempt to protect our proprietary technology with intellectual property in the form of patents, copyrights, trademarks, trade secret laws, confidentiality agreements and other methods. We also generally restrict access to and distribution of our proprietary information. Despite these precautions, it may be possible for a third-party to obtain and use our proprietary information or develop similar technology independently. As we expand our business, including through acquisitions, and compete with new competitors in new markets, the breadth and strength of our intellectual property portfolio in those new markets may not be as developed as in our longer-standing businesses. This may expose us to a heightened risk of litigation and other challenges from competitors in these new markets. In addition, effective patent, copyright, trademark and trade secret protection may be unavailable or limited in certain foreign countries. Unauthorized use of our intellectual property rights by third-parties and the cost of any litigation necessary to enforce our intellectual property rights could have a negative impact on our financial results and competitive position.

Additionally, because our products are comprised of complex technology, we are often involved in or impacted by assertions, including both requests for licenses and litigation, regarding third-party patents and other intellectual property rights. Third-parties have asserted, and in the future may assert, intellectual property infringement claims against us and against our customers and suppliers. Many of these assertions are brought by non-practicing entities whose principal business model is to secure patent licensing-based revenue from product manufacturing companies. The patent holders often make broad and sweeping claims regarding the applicability of their patents to our products and services, seeking a percentage of sales as licenses fees, seeking injunctions to pressure us into taking a license, or a combination thereof. Defending claims may be expensive and divert the time and efforts of our management and employees. Third-parties may also seek broad injunctive relief, which could limit our ability to sell our products in the U.S. or elsewhere with intellectual property subject to the claims. If we do not succeed in any such litigation, we could be required to expend significant resources to pay damages, develop non-infringing products or to obtain licenses to the intellectual property that is the subject of such litigation, each of which could have a negative impact on our financial results. Such licenses, if available at all, may not be available to us on commercially reasonable terms. In some cases, we might be forced to stop delivering certain products if we or our customer or supplier are subject to a final injunction.

We obtain some technology from suppliers through the purchase of components or licensing of software, and we attempt to negotiate favorable intellectual property indemnities with our suppliers for infringement of third-party intellectual property rights. With respect to such indemnities, we may not be successful in our negotiations, a supplier's indemnity may not fully protect us or cover all damages and losses suffered by us and our customers due to the infringing products, or a supplier may not choose to obtain a third-party license or modify or replace its products with non-infringing products which would otherwise mitigate such damages and losses. Such situations may subject us to unexpected liabilities or unfavorable conditions. Further, we may not be able to participate in intellectual property litigation involving a supplier and may not be able to influence any ultimate resolution or outcome that may negatively impact our sales or operations if a court enters an injunction that enjoins the supplier's products or if the International Trade Commission issues an exclusionary order that blocks our products from importation into the U.S. Intellectual property disputes involving our suppliers have resulted in our involvement in International Trade Commission proceedings from time to time. These proceedings are costly and entail the risk that we will be subjected to a ban on the importation of our products into the U.S. solely as a result of our use of a supplier's components.

In addition, our customers increasingly demand that we indemnify them broadly from all damages and losses resulting from intellectual property litigation against them. These demands may stem from non-practicing entities that engage in patent enforcement and litigation, sometimes seeking royalties and litigation judgments in proportion to the value of the use of our products, rather than in proportion to the cost of our products. Such demands can amount to many times the selling price of our products.

Further, competitors may be able to negotiate significantly more favorable terms for intellectual property than we are able to, which puts them at a competitive advantage. Moreover, with respect to our internally developed proprietary software, we may be harmed if we are forced to make publicly available, under the relevant open-source licenses, some of that proprietary software as a result of either our use of open-source software code or the use of third-party software that contains open-source code.

In 2010, we secured a worldwide, perpetual and royalty-free license from MTH to use the Motorola Marks as part of our corporate name and in connection with the manufacture, sale, and marketing of our current products and services. The license of the Motorola Marks is important to us because of the reputation of the Motorola brand for our products and services. There are risks associated with both Motorola Mobility and us using the Motorola Marks and our loss of ownership of the Motorola Marks. As both we and Motorola Mobility use the Motorola Marks, confusion could arise in the market, including customer confusion regarding the products offered by and the actions of the two companies. Also, any negative publicity associated with either company in the future could adversely affect the public image of the other.

Motorola Mobility was acquired by Lenovo in 2014, which resulted in Lenovo having effective control over the Motorola Marks. Our risks under the license could increase if Lenovo expands its use of the Motorola Marks, or if our products and those of Lenovo converge. In addition, because our license of the Motorola Marks is limited to products and services within our specified fields of use, we are not permitted to use the Motorola Marks in other fields of use without the approval of Motorola Mobility. As we continue to expand our business into any other fields of use, we either must do so with a brand other than the Motorola brand, which could take considerable time and expense, or assume the risk that our expanded fields don’t meet the definition of permitted fields of use under our license, which could result in loss of our rights to use the Motorola Marks.

We could lose our rights to use the Motorola Marks if we do not comply with the terms of the license agreement. Such a loss could negatively affect our business, results of operations and financial condition. Furthermore, MTH has certain rights to

Neither Motorola Mobility nor Lenovo are prohibited from selling the Motorola Marks. In the event of a liquidation by Lenovo or the then-owner of the Motorola Marks, it is possible that a bankruptcy court would either (i) permit the Motorola Marks to be assigned to a third-party whose interests may be incompatible with ours, thereby potentially making the license arrangement difficult to administer and increasing the costs and risks of sharing the Motorola Marks, or (ii) refuse to uphold the license or certain of its terms, which could negatively affect our business, results of operations and financial condition.

Our customers and suppliers are located throughout the world. In 2021, 32% of our revenue was generated outside of North America. In addition, 47% of our employees were employed outside of North America in 2021. Most of our suppliers' operations are outside the U.S.

A significant amount of manufacturing and research and development of our products, as well as administrative and sales facilities, takes place outside of the U.S. If the operations in these facilities is disrupted, our business, financial condition, results of operation, and cash flows could be negatively impacted.

Because of these sizable sales and operations outside of the U.S., we have more complexity in our operations and are exposed to a unique set of global risks that could negatively impact our business, financial condition, results of operations, and cash flows, including but not limited to: (i) currency fluctuations, including but not limited to increased pressure to agree to established currency conversion rates and cost of living adjustments as a result of foreign currency fluctuations, (ii) import/export regulations, tariffs, trade barriers and trade disputes, customs classifications and certifications, including but not limited to changes in classifications or errors or omissions related to such classifications and certifications, (iii) compliance with and changes in U.S. and non-U.S. laws or regulations related to antitrust, anti-corruption (such as the Foreign Corrupt Practices Act and the U.K. Bribery Act), trade, labor and employment, environmental, health and safety, technical standards, consumer protection, intellectual property and data privacy, (iv) tax issues, such as tax law changes, variations in tax laws from country to country and as compared to the U.S., obligations under tax incentive agreements, and difficulties in securing local country approvals for cash repatriations, (v) reduced financial flexibility given that a significant percentage of our cash and cash equivalents is currently held outside of the U.S., (vi) challenges in collecting accounts receivable, (vii) cultural and language differences, (viii) instability in economic or political conditions, including inflation, recession and actual or anticipated military or political conflicts and terrorism, (ix) natural disasters, (x) public health issues or outbreaks or pandemics, such as the continuing COVID-19 pandemic, and (xi) litigation in foreign court systems and foreign enforcement or administrative proceedings.

Additionally, the benefits we receive under various agreements we have entered into with non-U.S. governments and agencies relate to our operations and/or sales in such foreign jurisdictions. If our operations or sales are not at levels originally anticipated, we may be at risk of having to reimburse benefits already granted, which could increase our cost of doing business in such foreign jurisdictions.

We rely on third-parties to develop, design and/or manufacture many of our components and some of our products (including software), and to assist in performing certain IT, network connectivity, HR information systems, manufacturing, repair, distribution and engineering services. As we outsource more of such operations we are not able to directly control these activities. We could have difficulties fulfilling our orders and our sales and profits could decline if: (i) we are not able to engage such third-parties with the capabilities or capacities required by our business, (ii) such third-parties lack our desired level of performance or service, lack sufficient quality control or fail to deliver quality components, products, services or software on time and at reasonable prices, (iii) there are significant changes in the financial or business condition of such third-parties, (iv) our third-party providers fail to comply with legal or regulatory requirements, (v) we have difficulties transitioning operations to such third-parties, or (vi) such third-parties are disrupted by external events, such as natural disasters or other significant disruptions (including COVID-related impacts as described above, extreme weather conditions related to climate change, acts of terrorism, cyberattacks and labor disputes).

Our reliance on third-parties could also result in reputational damage in certain instances. For example, our supply chain is complex and if our suppliers are unable to verify that components and parts provided to us are free of defined “conflict minerals” originating from the Democratic Republic of Congo (“DRC”) or an adjoining country, then we may be required to publicly disclose that we are not currently able to determine if the products we manufactured are DRC conflict-free, which could harm our reputation.

We engage subcontractors, including third-party integrators, on many of our contracts and as we expand our solutions and services business, our use of subcontractors has and will continue to increase. Our subcontractors may further subcontract performance and may supply third-party products and software from a number of smaller companies. In addition, it is our policy to require our subcontractors and other third-parties with whom we work to operate in compliance with applicable laws, rules and regulations, including our Human Rights Policy (and, in addition, for our suppliers to comply with our Supplier Code of Conduct).

We may have disputes with our subcontractors, including disputes regarding the quality and timeliness of work performed by the subcontractor or its subcontractors and the functionality, warranty and indemnities of products, software and services supplied by our subcontractor. We are not always successful in passing down customer requirements to our subcontractors or a customer may otherwise look to us to cover a loss or damage, and thus in some cases may be required to absorb contractual risks from our customers without corresponding back-to-back coverage from our subcontractor. Our subcontractors may not be able to acquire or maintain the quality of the materials, components, subsystems and services they supply, or secure preferred warranty and indemnity coverage from their suppliers which might result in greater product returns, service problems, warranty claims and costs and regulatory compliance issues. Further, one of our subcontractors or other third-parties subject to our Human Rights Policy could fail to comply with such policies or with applicable law or may engage in unethical business practices. Any of the foregoing could cause orders to be canceled, relationships to be terminated or our reputation to be damaged, which could harm our business, financial condition and results of operations.

Our ability to meet customers' demands depends, in part, on our ability to timely obtain an adequate delivery of quality materials, parts, and components, as well as software and services, from our suppliers. If demand for our products or services increases from our current expectations or if suppliers are unable to meet our demand for other reasons, including as a result of natural disasters, financial issues or other factors, we could experience an interruption in supply or a significant increase in the price of supply. We have experienced shortages in the past that have negatively impacted our results of operations and may experience such shortages in the future. For example, as we progressed through 2021, our supply chain has been increasingly impacted by global issues related to the effects of the COVID-19 pandemic, particularly with respect to the semiconductor market. This has resulted in increased costs driven by delivery delays and the need to purchase semiconductor components from alternative sources, including brokers, during the latter part of the fourth quarter of 2021 as described further below. We attempted, and continue to attempt, to mitigate such supply disruptions by closely monitoring our supply chain; by maintaining an active dialogue, and in some cases developing plans, with key suppliers; and by having our engineering teams work to modify certain products in order to maximize the continuity of supply. We expect reduced supply of these materials in the semiconductor market and the related mitigation efforts described above to continue throughout 2022, which may impact our ability to meet customer demand and negatively impact our results of operations.

Our suppliers may significantly and quickly increase their prices in response to increases in costs of raw materials that they use to manufacture their parts or components. As a result, we may not be able to increase our prices commensurately with our increased costs, which could negatively impact our results of operations or financial condition. In addition, certain supplies, including for some of our critical components, software and services solutions, are available only from a single source or limited sources and we may not be able to diversify sources in a timely manner. Where certain supplies are not available from our direct suppliers, we may be required to move to an alternative source or source certain items through the open market, which involves significantly increased prices that are difficult to forecast or predict. For example, we have been required to take these steps in certain instances in connection with the impact on the semiconductor market described above. Each of these factors may impact our ability to meet customer demand and could negatively impact our results of operations or financial condition.

We enter into large, multi-year system and services contracts with municipal, state, and nationwide government and commercial customers. In some cases, we may not be the prime contractor and may be dependent on other third-parties such as commercial carriers or systems integrators. Our entry into these contracts exposes us to risks, including among others: (i) technological risks, (ii) risk of defaults by third-parties on whom we are relying for products or services as part of our offering or who are the prime contractors, (iii) financial risks, including the estimates inherent in projecting costs associated with large, long-term contracts, the impact of currency fluctuations, inflation, and the related impact on operating results, (iv) cybersecurity risk, especially in managed services contracts with public safety and commercial customers that process data, and (v) political risk, especially related to the contracts with government customers. In addition, multi-year awards from governmental customers may often only receive partial funding initially and may typically be cancellable on short notice with limited penalties. Recovery of front-loaded capital expenditures in long-term managed services contracts is dependent on the continued viability of such

Some of the products we sell may have quality issues resulting from the design or manufacture of the product, or from the software used in the product. Sometimes, these issues may be caused by components we purchase from other manufacturers or suppliers. Often these issues are identified prior to the shipment of the products and may cause delays in shipping products to customers, or even the cancellation of orders by customers. Sometimes, we discover quality issues in the products after they have been shipped to our customers, requiring us to resolve such issues in a timely manner that is the least disruptive to our customers, particularly in light of the mission-critical nature of our communications products. Such pre-shipment and post-shipment quality issues can have legal, financial and reputational ramifications, including: (i) delays in the recognition of revenue, loss of revenue or future orders, (ii) customer-imposed penalties for failure to meet contractual requirements, (iii) increased costs associated with repairing or replacing products, and (iv) a negative impact on our goodwill and brand name reputation. In some cases, if the quality issue affects the product's performance, safety or regulatory compliance, then such a “defective” product may need to be “stop-shipped” or recalled. Depending on the nature of the quality issue and the number of products in the field, it could cause us to incur substantial recall or corrective field action costs, in addition to the costs associated with the potential loss of future orders and the damage to our goodwill or brand reputation. In addition, we may be required, under certain customer contracts, to pay damages for failed performance that might exceed the revenue that we receive from the contracts. Recalls and field actions involving regulatory non-compliance could also result in fines and additional costs. Recalls and field actions could result in third-party litigation by persons or companies alleging harm or economic damage as a result of the use of the products.

In addition, privacy advocacy groups and other technology and industry groups have established or may establish various new or different self-regulatory standards that may place additional obligations on us. Our customers may expect us to meet voluntary certifications or adhere to other standards established by third-parties. If we are unable to maintain these certifications or meet these standards, it could reduce demand for our products and adversely affect our business.

Global economic and political conditions, including impacts from the continuing COVID-19 pandemic, continue to be challenging for many of our government and commercial markets, as economic growth in many countries and emerging markets has remained low or declined, currency fluctuations have impacted profitability, credit markets have remained tight for certain counterparties of ours and some of our customers are dependent on government grants to fund purchases of our products and services.

In addition, conflicts in the Middle East and elsewhere have created many economic and political uncertainties that continue to impact worldwide markets. The length of time these adverse economic and political conditions may persist is unknown. These political uncertainties and conflicts include new or increased tariffs and potential trade wars, threats to national security vulnerabilities linked to country of origin (in response to which the U.S. implemented prohibitions on, via the National Defense Authorization Act for Fiscal Year 2019, the use of federal funds to purchase and/or use telecommunications equipment and services and video surveillance equipment and services from Chinese vendors), and the United Kingdom’s decision to voluntarily exit the European Union on January 31, 2020 (commonly referred to as “Brexit”).

These global economic and political conditions have impacted and could continue to impact our business, financial condition, results of operations, and cash flows in a number of ways, including:

We have large underfunded pension obligations, in part resulting from the fact that we retained almost all of the U.S. pension liabilities and a major portion of our non-U.S. pension liabilities following our past divestitures, including the distribution

From time to time we access the capital markets to obtain financing. Our access to the capital markets and the bank loan markets at acceptable terms and conditions are impacted by many factors, including: (i) our credit ratings, (ii) the condition of the overall capital markets, (iii) strength and credit availability in the banking markets, and (iv) the state of the global economy. In addition, we frequently access the credit markets to obtain performance bonds, bid bonds, standby letters of credit and surety bonds, as well as to hedge foreign exchange risk and sell receivables. Furthermore, we may not be able to refinance our existing indebtedness (i) on commercially reasonable terms, (ii) on terms, including with respect to interest rates, as favorable as our current debt, or (iii) at all. We may not continue to have access to the capital markets or bank credit markets on terms acceptable to us and if we are unable to repay or refinance our debt, we cannot guarantee that we will be able to generate enough cash flows from operations or that we will be able to obtain enough capital to service our debt, fund our planned capital expenditures or pay future dividends.

We are rated investment grade by all three national rating agencies. Any downward changes by the rating agencies to our credit rating may negatively impact the value and liquidity of both our debt and equity securities. Under certain circumstances, an increase in the interest rate payable by us under our revolving credit facility, if any amounts are borrowed under such facility, could negatively affect our operating cash flows. In addition, a downgrade in our credit ratings could limit our ability to: (i) access the capital markets or bank credit markets, (ii) issue commercial paper (iii) provide performance bonds, bid bonds, standby letters of credit and surety bonds, (iv) hedge foreign exchange risk, (v) fund our foreign affiliates, (vi) sell receivables, and (vii) obtain favorable trade terms with suppliers. In addition, we may avoid taking actions that would otherwise benefit us or our stockholders, such as engaging in certain acquisitions or engaging in stock repurchases, that would negatively impact our credit rating.

The performance of our CEO, senior management and other key employees such as engineers and other key technical employees is critical to our success. If we are unable to retain talented, highly-qualified senior management, engineers and other key employees or attract them when needed, it could negatively impact our business.

We rely on the experience of our senior management, most of whom have been with the Company for many years and as a result have specific knowledge relating to us and our industry that is difficult to replace and competition for management with experience in the communications industry is intense. A loss of the CEO, a member of senior management, or an engineer or other key employee particularly to a competitor, could also place us at a competitive disadvantage. In addition, we face increased demands for technical personnel in areas such as software development, which is an area of particularly high demand for skilled employees. We believe that our future success depends in large part on our continued ability to hire, assimilate, retain and leverage the skills of qualified engineers and other highly-skilled personnel needed to develop successful new products or services. In particular, competition for experienced software and cloud computing infrastructure engineers is intense. Our efforts to attract, develop, integrate and retain highly skilled employees with appropriate qualifications may be compounded by intensified restrictions on travel (including during the continuing COVID-19 pandemic), immigration, or the availability of work visas. Further, if we fail to adequately plan for the succession of our CEO, senior management and other key employees, our business could be negatively impacted.

As of February 7, 2022, the material properties that we used in connection with our business, serving all segments, are as follows:

In addition to the matter referenced below, we are subject to legal proceedings and claims that have not been fully resolved and which have arisen in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, liquidity or results of operations. However, an unfavorable resolution could have a material adverse effect on our consolidated financial position, liquidity or results of operations in the periods in which the matters are ultimately resolved, or in the periods in which more information is obtained that changes management's opinion of the ultimate disposition.

The following are the persons who are the executive officers of the Company, their ages, and current titles as of February 16, 2022 and the positions they have held during the last five years with the Company or as otherwise noted:

Gregory Q. Brown; age 61; Chairman and Chief Executive Officer since May 3, 2011.

Mark S. Hacker; age 50; Executive Vice President, General Counsel and Chief Administrative Officer since January 21, 2015.

John P. "Jack" Molloy; age 50; Executive Vice President and Chief Operating Officer since November 18, 2021; Executive Vice President, Products and Sales from August 2018 to November 2021; Executive Vice President, Worldwide Sales and Services from July 2017 to August 2018; and Executive Vice President, Worldwide Sales from January 2016 to July 2017.

Rajan S. Naik; age 50; Senior Vice President, Strategy and Ventures, since December 2017; and Corporate Vice President, Chief Strategy Officer from March 2016 to December 2017.

Daniel G. Pekofske; age 45; Corporate Vice President and Chief Accounting Officer since September 10, 2018; and Vice President and Treasurer from January 2016 to September 2018.

Mahesh Saptharishi; age 44; Executive Vice President and Chief Technology Officer since November 18, 2021; Senior Vice President, Software Enterprise and Mobile Video, and Chief Technology Officer from June 2021 to November 2021; Chief Technology Officer & Senior Vice President, Software Enterprise from April 2021 to June 2021; Senior Vice President, Chief Technology Officer from February 2019 to April 2021; and Chief Technology Officer, Senior Vice President of Avigilon from

Jason J. Winkler; age 47; Executive Vice President and Chief Financial Officer since July 1, 2020; Senior Vice President, Finance from September 2018 to June 2020; and Corporate Vice President, Finance, Global Sales & Services from February 2016 to September 2018.

Cynthia M. Yazdi; age 57; Senior Vice President, Communications & Brand since February 2, 2022; Senior Vice President, Chief of Staff, Communications & Brand and Motorola Solutions Foundation from November 2021 to February 2022; Senior Vice President, Chief of Staff, Marketing and Communications and Motorola Solutions Foundation from August 2018 to November 2021; Corporate Vice President, Chief of Staff to the Chairman and CEO, Global Marketing and Communications from February 2018 to August 2018; and Vice President, Chief of Staff, Global Marketing and Communications from September 2016 to February 2018.

The above executive officers will serve as executive officers of the Company until the regular meeting of the Board of Directors in May 2022 or until their respective successors are elected. There is no family relationship between any of the executive officers listed above.

During 2021, we declared regular quarterly dividends of $0.71 per share of our common stock for each of the first three quarters of fiscal 2021, and $0.79 per share of our common stock for the fourth quarter of fiscal 2021. While we expect to continue to pay comparable regular quarterly dividends in 2022, any future dividend payments will be at the discretion of our Board of Directors and will depend upon our profits, financial requirements and other factors, including legal restrictions on the payment of dividends, general business conditions and such other factors as our Board of Directors deems relevant.

On October 29, 2021, the Company issued 2,814 shares of common stock in connection with the acquisition of Envysion to certain former shareholders of Envysion. The stock was issued for an aggregate grant-date fair value of $1 million that will be expensed over an average service period of one year. Additionally, on December 16, 2021, the Company issued 13,007 shares of common stock in connection with the acquisition of 911 Datamaster to certain former equityholders of 911 Datamaster. The stock was issued for an aggregate grant-date fair value of $3 million that will be expensed over an average service period of two years. The foregoing transactions did not involve any underwriters, any underwriting discounts or commissions, or any public offerings. The shares with respect to both transactions were issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, in privately negotiated transactions not involving any public offerings or solicitations.

Issuer Purchases of Equity Securities

The following table provides information with respect to acquisitions by the Company of shares of its common stock during the quarter ended December 31, 2021.

Performance Graph

The following graph compares the five-year cumulative total shareholder returns of Motorola Solutions, Inc., the S&P 500 Index and the S&P Communications Equipment Index.

This graph assumes $100 was invested in the stock or the indices on December 31, 2016 and reflects the reinvestment of dividends.

The following is a discussion and analysis of our financial position as of December 31, 2021 and 2020 and results of operations and cash flows for each of the three years in the period ended December 31, 2021. This commentary should be read in conjunction with our consolidated financial statements and the notes thereto appearing under “Item 8: Financial Statements and Supplementary Data.”

Our Business

Motorola Solutions is a global leader in mission-critical communications and analytics. Our technologies in Land Mobile Radio Communications ("LMR" or "LMR Communications"), Video Security and Access Control and Command Center Software, bolstered by managed and support services, make communities safer and help businesses stay productive and secure. We serve more than 100,000 public safety and commercial customers in over 100 countries, providing “purpose-built” solutions designed for their unique needs, and we have a rich heritage of innovation focusing on advancing global safety for more than 90 years.

We manage our business organizationally through two segments: “Products and Systems Integration” and “Software and Services.” Within these segments, the Company has principal product lines that also follow our three major technologies: LMR Communications, Video Security and Access Control and Command Center Software. In January 2022 we renamed one of our three major products and services technologies from LMR Mission Critical Communications to LMR Communications in an effort to more succinctly brand our LMR technology. This change was to the name of the technology only and no financial information was reclassified from previous periods.

The Company has invested across these three technologies, evolving the Company’s LMR focus to purposefully integrate software, video security and access control solutions for public safety and enterprise customers globally.

Our strategy is to generate value through the integration of each technology into our ecosystem, uniting voice, software, video security, access control and analytics to interoperate. While each technology individually strives to make users safer and more productive, we believe we can enable better outcomes for individuals, businesses and agencies when we unite these technologies as one connected system. With our technology ecosystem, our goal is to help remove silos between systems, unify data, streamline workflows, simplify management and support evolving technologies. Across all three technologies, we offer cloud-based solutions, cybersecurity services and managed and support services.

An example of our integrated technology ecosystem in action is when our municipal governmental agency customers leverage communications, video security, analytics and cloud-based software to understand what is happening across their cities, which we believe helps to improve community collaboration and overall safety. Video Security and Access Control solutions help users identify and understand events, find lost people and protect property. Command Center Software informs and assists emergency response by unifying data across the 911 workflow, including call handling, dispatch, video analytics, field reporting, records, evidence and community input. Voice and data communications connect law enforcement, fire and emergency medical services from different agencies and jurisdictions in an effort to improve coordination and collaboration. The end-to-end integration of these technologies assists agencies in detecting, analyzing, communicating and responding to incidents.

The principal products within each segment, by technology, are described below:

In 2021, the segment’s net sales were $5.0 billion, representing 62% of our consolidated net sales.

Our LMR Communications technology includes infrastructure and devices for LMR, public safety Long Term Evolution (“LTE”) and enterprise-grade private LTE. We are a global leader in the two-way radio category, including Project 25 (“P25”), Terrestrial Trunked Radio (“TETRA”) and Digital Mobile Radio (“DMR”), as well as other PCR solutions. We also deliver LTE solutions for public safety, government and commercial users, including infrastructure and devices operating in 700 MHz, 900 MHz and Citizens’ Broadband Radio Service (“CBRS”) frequencies. Primary sources of revenue for this technology come from selling devices and building telecommunications networks, including infrastructure, installation and integration with our customers’ technology environments.

Our technology enables voice and multimedia collaborations across different two-way radio, WiFi or public LTE and private broadband networks. We believe that first responders continue to trust LMR communications because they are purpose-built and designed for reliability, availability, security and resiliency to withstand the most challenging conditions. By adding broadband data capabilities to our two-way radios, we strive to provide our customers with greater functionality and multimedia access to the information and data they need in their workflows. Examples include application services such as GPS location to better protect lone workers, job dispatch to share information and over-the-air programming to optimize device uptime.

Our Video Security and Access Control technology includes video management infrastructure, AI-powered security cameras including fixed and mobile (body-worn and in-vehicle) and access control solutions. We deploy video security and access control solutions to thousands of government and commercial customers around the world including school campuses, transportation systems, healthcare centers, public venues, utilities, prisons, factories, casinos, airports, financial institutions, government facilities, state and local law enforcement agencies and retailers. Organizations such as these utilize video security and access control to enable continuous monitoring that can improve situational awareness, verify critical events or incidents in real-time and provide data to investigate an event or incident after it happens.

Our view is that government and public safety customers in particular are increasingly turning to video security technologies, including fixed street cameras, in-vehicle cameras and body-worn cameras, to increase visibility, accountability and safety for citizens, communities and first responders alike. Additionally, our view is that government, public safety agencies and businesses are increasingly turning to scalable, cloud-based multi-factor authentication access control to make their facilities more secure.

Since 2018, we have developed our video security and access control business through investments in research and development and through acquisitions, directly contributing to our growth strategy to serve as a leader in end-to-end video security solutions. These activities have supported the expansion of our portfolio, which started with fixed video, access control and AI-enabled analytics solutions and has evolved to include mobile video (body-worn and in-vehicle cameras) for both public safety and commercial markets, a broader range of fixed video security technologies, business analytics and cloud-based access control solutions.

In 2021, the segment’s net sales were $3.1 billion, representing 38% of our consolidated net sales.

LMR Communications services include support and managed services, which offer a broad continuum of support for our customers. Support services include repair and replacement, technical support and preventative maintenance, and more advanced offerings such as system monitoring, software updates and cybersecurity services. Managed services range from partial to full operational support of customer-owned or Motorola Solutions-owned networks. Our customers’ systems often have multi-year or multi-decade lifespans that help drive demand for software upgrades, device and infrastructure refresh opportunities, as well as additional services to monitor, manage, maintain and secure these complex networks and solutions. We strive to deliver services to our customers that help improve performance across their systems, devices and applications for greater safety and productivity.

Given the mission-critical nature of our customers’ operational environments, we aim to design the LMR networks they rely on for availability, security and resiliency, as well as to keep pace with technological advancements. We have a comprehensive approach to system upgrades that addresses hardware, software and implementation services. As new system releases become available, we work with our customers to upgrade software, hardware, or both, with respect to site controllers, comparators, routers, LAN switches, servers, dispatch consoles, logging equipment, network management terminals, network security devices such as firewalls and intrusion detection sensors, and more, on-site or remotely.

Video Security and Access Control software includes video management software, decision and digital evidence management software and advanced vehicle location data analysis software, including license plate recognition. Our software is designed to complement video hardware systems, serving as an ecosystem that provides end-to-end video security to strive to keep people, property and assets safe.

Our video network management software is embedded with artificial intelligence (“AI”)-enabled analytics to deliver operational insights to our customers by bringing attention to important events within their video footage. Given the volume of video footage, we believe this is critical to monitor and manage to deliver meaningful, action-oriented insights.

For example, AI-enabled analytics can detect unusual behavior such as a person at a facility out of hours, locate a missing child at a theme park with Appearance Search, flag a denylisted vehicle at a school through license plate recognition, or send an alert through access control if doors are propped open at a hospital.

Video Security and Access Control services include our video-as-a-service offering for law enforcement, simplifying procurement by bundling hardware and software into a single subscription. Body-worn cameras and in-car video systems can be paired with either on-premises or cloud-based digital evidence management software and complementary command center software products. Additionally, Avigilon fixed video systems connected to Avigilon Cloud Services (“ACS”) provide our customers with the ability to securely access video across their sites from a remote central monitoring location and more easily integrate with their other systems.

Our Command Center Software suite, CommandCentral, consists of native cloud and on-premises solutions that support the complex process of the public safety workflow from "911 call to case closure." The moment a citizen dials 911, an array of roles are involved in coordinating response and post-incident management, such as dispatchers who route calls to police, fire and emergency medical services, first responders in the field, intelligence analysts who manage real-time operations, records specialists who preserve the integrity of information and evidence, crime analysts who identify patterns and accelerate investigations, and corrections officers who oversee jail and inmate management.

CommandCentral software supports these roles through the three phases of incident response: incident awareness, incident management and post-incident resolution. Incident awareness software includes community engagement applications for tip submissions, crime mapping and evidence submission, and 911 call-handling software (including multimedia) and next-generation core services for 911 call routing. Incident management software includes computer aided dispatch (“CAD”) for dispatch and coordinating first response, situational awareness software that shows a single, real-time view of video feeds and other alerts on a map, and field response and reporting to help frontline personnel collaborate, manage incident activity and file reports from the field. Post-incident resolution software includes centralized records and evidence management for record-keeping and judicial sharing, analytics including license plate recognition, and jail and inmate management to streamline the process and enable secure inter-agency information sharing.

As the public safety market continues to evolve toward software offerings that more efficiently run their operations, reduce response times and increase officer availability, we have focused on providing cloud-based software-as-a service (“SaaS”) with ancillary implementation and managed services in addition to on-premises solutions. Our CommandCentral suite, hosted in Microsoft Azure Government, includes call handling, CAD, field reporting, records, evidence, investigations and jail in an integrated cloud-based offering. We believe that cloud deployment delivers agencies key benefits, including faster deployment, increased security, rapid scaling in the event of an emergency and a secure investment that keeps pace as technology advances. In addition to this native cloud suite, we offer a hybrid solution that delivers a migration path from on-premises software solutions to cloud-connected capabilities.

Another area of public safety evolution is increasing adoption of Next Generation 911 Core Services (“NGCS”), a group of products and services needed to create infrastructure connectivity in order to process a 911 call using Next Generation (“NG”) technology. The NG infrastructure is an Emergency Service IP Network ("ESInet"), which can carry voice, data and multimedia. ESInet enables 911 call takers at public safety answering points to respond to text, video and data. Our NGCS can be offered as a managed service and includes call routing, ESInet, location services, Geographic Information Services, cybersecurity and our continuous network and security operations center dedicated to public safety. We believe that our solution is differentiated through its integration with our CommandCentral software suite to simplify the agency’s workflow and ensure better incident management and real-time intelligence.

Additional Command Center Software includes interoperability software that ensures communication is not limited by coverage area, network technology or device type. Our solutions, including Kodiak, WAVE PTX and CriticalConnect, enable interoperability among devices across multiple networks. For example, a two-way radio network can connect with an LTE network making it possible for individuals to communicate securely and more easily across technologies.

In response to the COVID-19 pandemic, there have been a broad number of governmental and commercial actions taken to limit the spread of the virus, including social distancing measures, stay-at-home orders, travel restrictions, business shutdowns and slowdowns. The COVID-19 pandemic continues to be dynamic, and near-term challenges across the economy remain. Although vaccines are now being distributed and administered across many parts of the world, new variants of the virus have emerged and may continue to emerge that have continued to create uncertainty regarding the impact of COVID-19. In particular, the recent acceleration of the "omicron variant" of the virus and the highly contagious “delta variant” of the virus have caused recent surges of COVID-19 cases in the U.S. and other countries around the world. We continue to adhere to applicable governmental and commercial restrictions and to work to mitigate the impact of COVID-19 on our employees, customers, communities, liquidity and financial position.

We continue to abide by a number of measures in an effort to protect the health and well-being of our employees and customers, including encouraging office workers to work remotely, reducing employee travel, withdrawing from certain industry events, increasing the frequency of cleaning services, encouraging face coverings, and using thermal scanning. We have allowed essential business travel; however, we continue to carefully assess conditions on a geographical basis to determine when employees can safely return to our offices. We also facilitated the process for our employees in certain locations to receive the COVID-19 vaccine, as vaccines are distributed and administered throughout the U.S. and the global community.

As conditions continue to fluctuate around the world, with both vaccine administration and the rates of new variants of COVID-19 (particularly the omicron and delta variants) rising in certain regions, governments and organizations have responded by adjusting their restrictions and guidelines accordingly. The health and safety of our employees remains our top priority, and we continue to monitor the daily evolution of the pandemic, including the spread of the omicron and delta variants. As of the date of this filing, we are following the U.S. Centers for Disease Control and Prevention guidance and state and local restrictions with respect to our U.S. employees, as well as guidance from corresponding international authorities with respect to our non-U.S. employees.

Additionally, in September 2021, the President of the United States signed a series of executive orders, and related guidance was issued that, together, required certain employers to implement COVID-19 precautions, including mandatory COVID-19 vaccines for employees (subject to medical and religious exemptions). As a federal contractor, we were required to implement a mandatory vaccine policy. In January 2022, in response to various legal challenges to these orders, we suspended our requirement that our U.S. employees (subject to the exemptions described above) be vaccinated by February 9, 2022. We continue to evaluate our internal policy and the potential impact of the executive orders and legal responses to such executive orders on our business.

As we progressed through 2021, our supply chain has been increasingly impacted by global issues related to the effects of the COVID-19 pandemic, 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 our supply chain, as well as difficulties and delays in procuring certain semiconductor components. During the latter part of the fourth quarter of 2021, costs increased driven by delivery delays and the need to purchase semiconductor components from alternative sources, including brokers. We anticipate increased costs to procure materials within the semiconductor market to continue into the first half of 2022. We are closely monitoring our supply chain and have maintained an active dialogue, and in some cases developed plans, with key suppliers in an effort to mitigate supply chain risks or otherwise minimize the impact from those risks. We will continue to actively manage our supply chain in an effort to prevent major delays in selling our products and services.

Although the COVID-19 pandemic continued to introduce challenges throughout 2021, we are encouraged by customer demand for our products and services. Specifically, in our Software and Services segment, with the largely recurring nature of the business and our strong backlog position, we continue to expect that the impacts on net sales and operating margin will be limited throughout 2022. Within the Products and Systems Integration segment, while we are encouraged by strong LMR backlog and the resiliency of the Video Security and Access Control technology that experienced growth in 2021, supply constraints continue to impact our LMR business and we expect demand for our products will continue to out-pace our ability to obtain

We believe our existing balances of cash and cash equivalents, along with other short-term liquidity arrangements, will continue to be sufficient to satisfy our liquidity requirements associated with our existing operations. We were in compliance with all applicable covenants in the 2021 unsecured revolving credit facility as of December 31, 2021. Additionally, we have no bond maturities until 2024. We continue to assess our operating expenses and identify cost-reducing initiatives, including lower travel costs, contractor spend and reducing our real estate footprint.

Lastly, we evaluated whether there were any impairment indicators as of December 31, 2021, which included a review of our receivables and contract assets, inventory, right-of-use lease assets, long-lived assets, investments, goodwill and intangible assets. As of the end of the fourth quarter of 2021, we concluded our assets were fairly stated and recoverable.

For further information, please see “Part I. Item 1. Business” and “Part I. Item 1A. Risk Factors” in this Form 10-K. The Company’s current expectations described above are forward-looking statements and our actual results may differ.

Climate Change

We expect that our operations and supply chain will become increasingly subject to federal, state, local and foreign laws, regulations and international treaties and industry standards relating to climate change. For example, in October 2021 the U.K.’s Cabinet Office began requiring companies bidding on contracts with the U.K. government that have a value of over £5m per year to have carbon reduction plans that contain a commitment to achieving net zero emissions by 2050 for U.K. operations. This requirement applies to our operations in the U.K. Although Motorola Solutions UK Ltd. and Airwave Solutions Ltd., our U.K. subsidiaries, each committed to achieving net zero emissions by 2050 for such entities' U.K. operations, this requirement and any similar future requirements and other increased regulation of climate change concerns could subject us to additional costs and restrictions, impact our competitive position or require us to make certain changes to our manufacturing practices and/or product designs.

We expect continued growth within our global LMR installed base as a number of events such as natural disasters and large-scale incidents continue to reinforce the importance of having secure, reliable LMR for public safety. We believe our augmentation of LMR with broadband solutions will also drive growth, as we expect our customers will look to integrate valuable data capabilities. We expect to provide additional services to existing LMR customers as communication networks become more complex, software-centric and data-driven.

As public safety needs continue to evolve, we anticipate growth opportunities within the command center as our Command Center Software suite covers the mission-critical workflow, from 911 intake to case closure and management. We expect increased growth in our integrated software next generation core services and our cloud-based solutions, such as the PremierOne Cloud suite, as well as hybrid cloud solutions that provide a migration path from on-premises software solutions to cloud-connected capabilities.

Within Video Security and Access Control, we expect growth across our portfolio of fixed and mobile security solutions embedded with advanced analytics and access control solutions. We believe drivers include expansion of traditional video sales beyond commercial customers to government and public safety customers. Additionally, we expect customers to continue to embrace analytics that convert video into data and the scalability of the cloud to run their operations, and we also expect continued expansion of offerings such as video-as-a-service and Avigilon Cloud Services.

Finally, we anticipate new opportunities from the investments we are making to integrate our LMR, Video Security and Access Control and Command Center Software technologies into one unified ecosystem. We have made go-to-market and research and development investments in both Video Security and Access Control and our Command Center Software technologies with growth in mind. We have made a number of acquisitions and we see opportunities to continue to rationalize costs within both segments of our business, further driving operating leverage in our businesses. We believe our integrated ecosystem for public and enterprise safety can enable strong collaboration by removing system silos, simplifying management and automating workflows.

We expect our growth within LMR may be limited by supply in 2022. Refer to “COVID-19” set forth in this “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K for a further discussion of our outlook with respect to the continuing impact of COVID-19 on our financial condition, results of operations and cash flows.

*    Amounts attributable to Motorola Solutions, Inc. common shareholders.

**    Percentages may not add due to rounding.

Results of Operations—2021 Compared to 2020

The Products and Systems Integration segment’s net sales represented 62% of our net sales in 2021, compared to 63% in 2020. The Software and Services segment’s net sales represented 38% of our net sales in 2021, compared to 37% in 2020.

Net sales increased by $757 million, or 10%, compared to 2020. The 9% increase in net sales within the Products and Systems Integration segment was driven by a 9% increase in the North America region and an 8% increase in the International region. The 13% increase in the Software and Services segment was driven by a 14% increase in the North America region and a 11% increase in the International region. The increase in net sales included:

Regional results included:

The 9% increase in the Products and Systems Integration segment was driven by the following:

The 13% increase in the Software and Services segment was driven by the following:

Gross margin was 49.4% of net sales in 2021 compared to 48.7% of net sales in 2020. The $432 million increase was driven by:

SG&A expenses increased $60 million, or 5% in 2021 compared to 2020. SG&A expenses were 16.6% of net sales in 2021 compared to 17.4% of net sales in 2020. The increase in SG&A expenses was primarily due to higher employee incentive costs, expenses associated with acquired businesses, higher travel expenses and increased share-based compensation expenses. The overall increase in SG&A expenses was partially offset by lower Hytera-related legal expenses.

R&D expenditures increased $48 million, or 7% in 2021 compared to 2020 primarily due to higher employee incentive costs and higher expenses associated with acquired businesses, partially offset by lower share-based compensation expenses. R&D expenditures were 9.0% of net sales in 2021 and 9.3% of net sales in 2020.

Other charges increased $40 million, or 16% in 2021 compared to 2020 primarily due to the following:

Operating earnings increased $284 million, or 21% in 2021 compared to 2020. The increase in Operating earnings was due to:

The net gains (losses) on sales of investments and businesses were primarily related to the sales of various equity investments.

Net Other income increased $79 million in 2021 compared to 2020 primarily due to:

Income tax expense increased by $81 million in 2021 compared to 2020, for an effective tax rate of 19.5%, which is lower than the current U.S. federal statutory rate of 21% primarily due to:

Our effective tax rate in 2020 was 18.8%, which is lower than the current U.S. federal statutory rate of 21% primarily due to:

The Products and Systems Integration segment’s net sales represented 63% of our net sales in 2020, compared to 68% in 2019. The Software and Services segment’s net sales represented 37% of our net sales in 2020, compared to 32% in 2019.

Net sales decreased by $473 million, or 6% in 2020 compared to 2019. The 13% decline in net sales within the Products and Systems Integration segment was driven by an 11% decline in the North America region and an 18% decline in the International region. The 9% increase in the Software and Services segment was driven by a 12% increase in the North America region and a 4% increase in the International region. The decrease in net sales included:

Regional results include:

The 13% decrease in the Products and Systems Integration segment was driven by the following:

The 9% increase in the Software and Services segment was driven by the following:

Gross margin was 48.7% of net sales in 2020 and 49.8% of net sales in 2019. The $323 million decrease was driven by:

SG&A expenses decreased $110 million, or 8% in 2020 compared to 2019. SG&A expenses were 17.4% of net sales in 2020 compared to 17.8% of net sales in 2019. The decrease in SG&A expenses was primarily due to reduced employee incentive costs, travel expenses, and indirect expenses. The overall reduction in SG&A expenses was partially offset by expenses associated with acquired businesses.

R&D expenditures remained consistent in 2020 compared to 2019. R&D expenditures were 9.3% of net sales in 2020 and 8.7% of net sales in 2019.

Other charges decreased by $14 million in 2020 compared to 2019 primarily due to the following:

Operating earnings decreased $198 million, or 13% in 2020 compared to 2019. The decrease in Operating earnings was due to:

Interest expense, net in 2020 compared to 2019 remained relatively consistent due to a one-time receipt of interest income related to a tax refund and lower interest rates on debt outstanding, offset by lower interest income earned on cash due to lower interest rates.

The net gains (losses) in 2020 and 2019 were primarily related to the sales of various equity investments.

Net Other income (Loss) increased $378 million in 2020 compared to 2019 primarily due to:

Income tax expense increased by $91 million in 2020 compared to 2019, for an effective tax rate of 18.8%, which is lower than the current U.S. federal statutory rate of 21% primarily due to:

Our effective tax rate in 2019 was 13.0%, which is lower than the current U.S. federal statutory rate of 21% primarily related to:

In 2021, we recorded net reorganization of business charges of $32 million relating to the separation of 600 employees, of which 200 were indirect employees and 400 were direct employees. The $32 million of charges included $8 million recorded to Cost of sales and $24 million recorded to Other charges. Included in the aggregate $32 million are charges of $42 million for employee separation costs partially offset by $10 million of reversals for accruals no longer needed.

During 2020, we recorded net reorganization of business charges of $86 million relating to the separation of 1,200 employees, of which 400 were indirect employees and 800 were direct employees. The $86 million of charges included $29 million recorded to Cost of sales and $57 million recorded to Other charges. Included in the aggregate $86 million were charges of $100 million for employee separation costs and $2 million for exit costs, partially offset by $16 million of reversals for accruals no longer needed.

During 2019, we recorded net reorganization of business charges of $57 million relating to the separation of 700 employees, of which 500 were indirect employees and 200 were direct employees. The $57 million of charges included $17 million recorded to Cost of sales and $40 million recorded to Other charges. Included in the aggregate $57 million were charges of $64 million for employee separation costs and $5 million for exit costs, partially offset by $12 million of reversals for accruals no longer needed.

The following table displays the net charges incurred by business segment due to such reorganizations:

Cash payments for employee severance in connection with the reorganization of business plans were $77 million, $85 million, and $63 million in 2021, 2020, and 2019, respectively. The reorganization of business accruals for employee separation costs at December 31, 2021 were $34 million which we expect to pay within one year.

At December 31, 2021, $1.3 billion of our $1.9 billion cash and cash equivalents balance was held in the U.S. and $568 million was held in other countries, with $180 million held in the United Kingdom. Restricted cash was $2 million at December 31, 2021 and December 31, 2020.

In 2021, we repatriated $527 million in cash to the U.S. from international jurisdictions. We routinely repatriate a portion of non-U.S. earnings each year. We have recorded income tax expense for foreign withholding tax and distribution taxes on such earnings and, under current U.S. tax laws, do not expect to incur material incremental U.S. tax on repatriation.

Where appropriate, we may also pursue capital reduction activities; however, such activities can be involved and lengthy. While we regularly repatriate funds, and a portion of offshore funds can be repatriated with minimal adverse financial impact, repatriation of some of these funds may be subject to delay due to local country approvals.

The increase in operating cash flows from 2020 to 2021 was driven by:

The decrease in operating cash flows from 2019 to 2020 was driven by:

The increase in net cash used by investing activities from 2020 to 2021 was primarily due to:

The decrease in net cash used by investing activities from 2019 to 2020 was primarily due to:

The decrease in cash used by financing activities in 2021 compared to cash used by financing activities in 2020 was driven by (also see further discussion in "Debt," "Credit Facilities," "Share Repurchase Program" and "Dividends" in this section below):

The decrease in cash used by financing activities in 2020 compared to cash used by financing activities in 2019 was driven by:

$150 million principal amount for the 3.5% senior notes due 2021 for a total purchase price of $809 million in 2019;

We may choose to sell accounts receivable and long-term receivables to third-parties under one-time arrangements. We may or may not retain the obligation to service the sold accounts receivable and long-term receivables.

The following table summarizes the proceeds received from sales of accounts receivable and long-term receivables for the years ended December 31, 2021, 2020, and 2019:

During the year ended December 31, 2021, we utilized a cost-efficient receivable discounting facility, implemented in 2020, to neutralize the impact of increased payment terms under a renegotiated and extended long-term contract in Europe resulting in accounts receivable sales of $211 million during the year ended December 31, 2021. The proceeds of our receivable sales are included in "Operating Activities" within our Consolidated Statements of Cash Flows.

At December 31, 2021, the Company had retained servicing obligations for $940 million of long-term receivables, compared to $983 million of long-term receivables at December 31, 2020. Servicing obligations are limited to collection activities related to the sales of accounts receivables and long-term receivables.

We had outstanding long-term debt of $5.7 billion and $5.2 billion, including the current portions of $5 million and $12 million, at December 31, 2021 and December 31, 2020, respectively.

In August of 2020, we issued $900 million of 2.30% senior notes due 2030. We recognized net proceeds of $892 million after debt issuance costs and debt discounts. A portion of these proceeds were then used to redeem $552 million in principal amount outstanding of the 3.75% senior notes due 2022 for a redemption price of $582 million, excluding $7 million of accrued interest. The remaining proceeds were used to repurchase $293 million in principal amount outstanding of our long-term debt under a tender offer, for a purchase price of $315 million, excluding $5 million of accrued interest. After accelerating the amortization of debt issuance costs and debt discounts, we recognized a loss of $56 million related to the redemption and the repurchase in Other, net within Other income (expense) in our Consolidated Statements of Operations.

In May of 2021, we issued $850 million of 2.75% senior notes due 2031. We recognized net proceeds of $844 million after debt issuance costs. A portion of these proceeds was then used to redeem $324 million in principal amount of our outstanding long-term debt for a purchase price of $341 million, excluding $3 million of accrued interest. After accelerating the amortization of debt issuance costs, we recognized a loss of $18 million related to the redemption in Other, net within Other income (expense) in our Consolidated Statements of Operations.

We have an unsecured commercial paper program, backed by the revolving credit facility described below, under which we may issue unsecured commercial paper notes up to a maximum aggregate principal amount of $2.2 billion outstanding at any one time. At maturity, the notes are paid back in full including the interest component. The notes are not redeemable prior to maturity. As of December 31, 2021, we had no outstanding debt under the commercial paper program.

Through a series of actions, including approval in May 2021 to increase the authorized amount by $2.0 billion, the Board of Directors has authorized an aggregate share repurchase amount of up to $16.0 billion of our outstanding shares of common stock (the “share repurchase program”). The share repurchase program does not have an expiration date. As of December 31, 2021, we used approximately $13.9 billion of the share repurchase authority, including transaction costs, to repurchase shares, leaving approximately $2.1 billion of authority available for future repurchases.

Our share repurchases, including transaction costs, for 2021, 2020, and 2019 are summarized as follows:

We paid cash dividends to holders of our common stock of $482 million in 2021, $436 million in 2020, and $379 million in 2019. On January 14, 2022, we paid an additional $134 million in cash dividends to holders of our common stock.

We believe that we have adequate internal resources available to generate adequate amounts of cash to meet our expected working capital, capital expenditure and cash requirements for the next twelve months and the foreseeable future, as supported by the level of cash and cash equivalents in the U.S., the ability to repatriate funds from foreign jurisdictions, cash provided by operations, as well as liquidity provided by our commercial paper program backed by the 2021 Motorola Solutions Credit Agreement.

We do not anticipate a material decrease to net future cash flows generated from operations. We expect to use our available cash, investments, and debt facilities to support and invest in our business. This includes investing in our existing products and technologies, seeking new acquisition opportunities related to our strategic growth initiatives and returning cash to shareholders through common stock cash dividend payments (subject to the discretion of our Board of Directors) and share repurchases. Refer to “COVID-19” in this section of the Form 10-K for a discussion of the impact of COVID-19 on our liquidity, as well as "Part I. Item 1A. Risk Factors" for further discussion regarding access to the capital markets.

Material Cash Requirements from Contractual and Other Obligations

Summarized in the table and text below are our short-term (within the next twelve months) and long-term material cash requirements as of December 31, 2021, which we expect to fund with a combination of operating cash flows, existing cash balances or, as needed, borrowings under new or existing debt:

This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period.

Management bases its estimates and judgments on historical experience, current economic and industry conditions and on various other factors that are believed to be reasonable under the circumstances. This forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes that the following discussion addresses the Company’s most critical accounting policies and estimates, which are those that are most important to the portrayal of the Company’s financial condition and results of operations and require management’s most difficult, subjective and complex judgments.

We enter into arrangements which consist of multiple promises to our customers. We evaluate whether the promised goods and services are distinct or a series of distinct goods or services. Where contracts contain multiple performance obligations, we generally allocate the total estimated consideration to each performance obligation based on applying an estimated selling price (“ESP”) as our best estimate of standalone selling price. We determine ESP by: (i) collecting all reasonably available data points including sales, cost and margin analyses of the product or services, and other inputs based on our normal pricing and discounting practices, (ii) making any reasonably required adjustments to the data based on market and Company-specific factors, and (iii) stratifying the data points, when appropriate, based on major product or service, type of customer, geographic market, and sales volume.

We account for certain system contracts on an over-time basis, electing an input method of estimated costs as a measure of performance completed. The selection of the measurement of progress using estimated costs was based on a thorough consideration of alternatives of various output and input measures, including contract milestones and labor hours. However, we have determined that other input and output measures are not an appropriate measure of progress as they do not accurately align with the transfer of control on our customized systems. The selection of costs incurred as a measure of progress aligns the transfer of control to the overall production of the customized system.

For system contracts accounted for over time using estimated costs as a measure of performance completed, we rely on estimates around the total estimated costs to complete the contract (“Estimated Costs at Completion”). Total Estimated Costs at Completion include direct labor, material and subcontracting costs. Due to the nature of the efforts required to be performed to meet the underlying performance obligation, determining Estimated Costs at Completion may be complex and subject to many variables. We have a standard and disciplined quarterly process in which management reviews the progress and performance of open contracts in order to determine the best estimate of Estimated Costs at Completion. As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion, the project schedule, identified risks and opportunities, and the related changes in estimates of costs. The risks and opportunities include management’s judgment about the ability and cost to achieve the project schedule, technical requirements, and other contract requirements. Management must make assumptions and estimates regarding labor productivity and availability, the complexity of work to be performed, the availability and cost of materials, and performance by subcontractors, among other variables. Based on this analysis, any quarterly adjustment to net sales, cost of sales, and the related impact to operating income are recorded as necessary in the period they become known. When estimates of total costs to be incurred on a contract exceed estimates of total revenue to be earned, a provision for the entire loss on the contract is recorded in the period in which the loss is determined.

Our benefit obligations and net periodic pension costs (benefits) associated with our domestic noncontributory pension plans (“U.S. Pension Benefit Plans”), our foreign noncontributory pension plans (“Non-U.S. Plans”), as well as our domestic postretirement health care plan (“Postretirement Health Care Benefits”), are determined using actuarial assumptions. The assumptions are based on management’s best estimates, after consulting with outside investment advisors and actuaries.

Accounting methodologies use an attribution approach that generally spreads the effects of individual events over the service lives of the participants in the plan, or estimated average lifetime when almost all of the plan participants are considered "inactive." Examples of “events” are plan amendments and changes in actuarial assumptions such as discount rate, expected long-term rate of return on plan assets, and rate of compensation increases.

There are various assumptions used in calculating the net periodic costs (benefits) and related benefit obligations. One of these assumptions is the expected long-term rate of return on plan assets. The required use of the expected long-term rate of return on plan assets may result in recognized pension income that is greater or less than the actual returns of those plan assets in any given year. Over time, however, the expected long-term returns are designed to approximate the actual long-term returns. We use a five-year, market-related asset value method of recognizing asset related gains and losses.

We use long-term historical actual return experience with consideration of the expected investment mix of the plans’ assets, as well as future estimates of long-term investment returns, to develop our expected rate of return assumption used in calculating the net periodic pension cost (benefit) and the net postretirement health care benefit. Our investment return assumption for the U.S. Pension Benefit Plans was 6.75% in 2021 and 6.85% in 2020. Our investment return assumption for the Postretirement Health Care Benefits Plan was 6.75% in 2021 and 6.90% in 2020. Our weighted average investment return assumption for the Non-U.S. Plans was 4.54% in 2021 and 4.66% in 2020. For the U.S. Pension Benefit Plans, a 25 bps increase in expected return on plan assets would result in $9 million of additional net periodic pension cost and a 25 bps decrease would result in a $9 million benefit to net periodic pension cost. The impact of a similar increase or decrease on the Non-U.S. Plans and the Postretirement Health Care Benefits plan would be de minimis.

A second key assumption is the discount rate. The discount rate assumptions used for the U.S. Pension Benefit Plans, the Non-U.S. Plans and the Postretirement Health Care Benefits Plan reflect, at December 31 of each year, the prevailing market rates for high-quality, fixed-income debt instruments that, if the obligation was settled at the measurement date, would provide the necessary future cash flows to pay the benefit obligation when due. Our discount rates for measuring our U.S. Pension Benefit Plan obligations were 2.98% and 2.63% at December 31, 2021 and 2020, respectively. Our weighted average discount rates for measuring our Non-U.S. Plans were 1.82% and 1.24% at December 31, 2021 and 2020, respectively. Our discount rates for measuring the Postretirement Health Care Benefits Plan obligation were 2.78% and 2.39% at December 31, 2021 and 2020, respectively.

A change in our discount rate on the Postretirement Health Care Benefits Plan would be de minimis. The effects of a change in the discount rate on the projected benefit obligation for both the U.S. and Non-U.S. Pension Benefit Plans are as follows:

Under relevant accounting rules, when almost all of the plan participants are considered inactive, the amortization period for certain unrecognized losses changes from the average remaining service period to the average remaining lifetime of the participant. As such, depending on the specific plan, we amortize gains and losses over periods ranging from nine to thirty years. Prior service costs are being amortized over periods ranging from two to thirty years. Benefits under all pension plans are valued based on the projected unit credit cost method.

We assess the recorded amount of goodwill for recovery on an annual basis in the fourth quarter of each fiscal year. Goodwill is assessed more frequently if an event occurs or circumstances change that would indicate it is more-likely-than-not that the fair value of a reporting unit is below its carrying amount. We continually assess whether any such events and circumstances have occurred, which requires a significant amount of judgment. Such events and circumstances may include: (i) adverse changes in macroeconomic conditions, (ii) adverse changes in the industry or market in which we transact, (iii) changes in cost factors negatively impacting earnings and cash flows, (iv) negative or declining overall financial performance, (v) events affecting the carrying value or composition of a reporting unit, or (vi) a sustained decrease in share price, among others. Any such adverse event or change in circumstances could have a significant impact on the recoverability of goodwill and could have a material impact on our consolidated financial statements.

The goodwill impairment assessment is performed at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment (referred to as a “component”). A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available and segment management regularly reviews the operating results of that component. When two or more components of an operating segment have similar economic characteristics, the components are aggregated and deemed a single reporting unit. An operating segment is deemed to be a reporting unit if all of its components are similar, if none of its components is a reporting unit, or if the segment comprises only a single component. Based on this guidance, we have determined that our Products and Systems Integration and Software and Services segments are comprised of three and two reporting units, respectively. The Company performed a qualitative assessment to determine whether it was more-likely-than-not that the fair value of each reporting unit was less than its carrying amount for the fiscal years 2021, 2020, and 2019. In performing this qualitative assessment we assessed relevant events and circumstances including macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, changes in enterprise value, and entity-specific events. For fiscal years 2021, 2020, and 2019, we concluded it was more-likely-than-not that the fair value of each reporting unit exceeded its carrying value.

We use the asset and liability method of accounting for income taxes. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current year. In addition, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. Management makes assumptions, judgments and estimates to determine our current and deferred tax provision and also the deferred tax assets and liabilities. We evaluate our deferred tax assets quarterly to determine if adjustments to our valuation allowance are required based on the consideration of all available positive and negative evidence.

Our assumptions, judgments and estimates for computing the income tax provision takes into account current tax laws, our interpretation of current tax law and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. We believe such estimates to be reasonable; however, the final determination of certain audits could significantly impact the amounts provided for income taxes in our financial statements.

See “Note 1: Summary of Significant Accounting Policies” to our consolidated financial statements in “Part II. Item 8: Financial Statements and Supplementary Data” of this Form 10-K.

Our exposure to market risk for changes in interest rates relates primarily to our long-term debt as interest rate fluctuations impact the fair value of our long-term debt. As of December 31, 2021, we had $5.7 billion of long-term debt, including the current portion, which is primarily priced at long-term, fixed interest rates. A hypothetical 10% decrease in interest rates as of the end of 2021 would have increased the fair value of our debt by approximately $60 million at December 31, 2021. See "Note 5: Debt and Credit Facilities" to the consolidated financial statements included in “Part II. Item 8: Financial Statements and Supplementary Data” of this Form 10-K for more information on our long-term debt.

Our strategy related to foreign exchange exposure management is to offset the gains or losses on the financial instruments against losses or gains on the underlying operational cash flows, net investments or monetary assets and liabilities based on our assessment of risk. We enter into derivative contracts for some of our non-functional currency cash, receivables, and payables, which are primarily denominated in major currencies that can be traded on open markets. Our policy permits us to use forward contracts and options to hedge these currency exposures. In addition, we enter into derivative contracts for some forecasted transactions or net investments in some of our overseas entities, which are designated as part of a hedging relationship if it is determined that the transaction qualifies for hedge accounting under the provisions of the authoritative accounting guidance for derivative instruments and hedging activities. A portion of our exposure is from currencies that are not traded in liquid markets and these are addressed, to the extent reasonably possible, by managing net asset positions, product pricing and component sourcing.

Foreign exchange financial instruments that are subject to the effects of currency fluctuations, which may affect reported earnings, include derivative financial instruments and other monetary assets and liabilities denominated in a currency other than the functional currency of the legal entity holding the instrument. Currently, our derivative financial instruments consist primarily of currency forward contracts. Other monetary assets and liabilities denominated in a currency other than the functional currency of the legal entity consist primarily of cash, cash equivalents, accounts payable and accounts receivable. Assuming the amounts of the outstanding foreign exchange contracts represent our underlying foreign exchange risk related to monetary assets and liabilities, a hypothetical unfavorable 10% movement in the foreign exchange rates at December 31, 2021 would reduce the value of those monetary assets and liabilities by approximately $59 million. Our market risk calculation represents an estimate of reasonably possible net losses that would be recognized assuming hypothetical 10% movements in future currency market pricing and is not necessarily indicative of actual results, which may or may not occur. It does not represent the maximum possible loss or any expected loss that may occur, since actual future gains and losses will differ from those estimated, based upon, among other things, actual fluctuation in market rates, operating exposures, and the timing thereof. We believe, however, that any such loss incurred would be offset by the effects of market rate movements on the respective underlying derivative financial instruments transactions.

Opinions on the Financial Statements and Internal Control over Financial Reporting

Basis for Opinions

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated

financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition - Estimated Costs to Complete System Contracts

As described in Note 1 to the consolidated financial statements, $1.9 billion of the Company’s total revenues for the year ended December 31, 2021 was generated from System contracts. The Company recognizes revenue on a significant portion of System contracts on an over-time basis, electing an input method of estimated costs as a measure of performance completed. For contracts accounted for over-time using estimated costs as a measure of performance completed, the Company relies on estimates of the total estimated costs to complete the contract (“Estimated Costs at Completion”). Total Estimated Costs at Completion include direct labor, material and subcontracting costs. Due to the nature of the efforts required to meet the underlying performance obligation, determining Estimated Costs at Completion may be complex and subject to many variables. As disclosed by management, management reviews the progress and performance of open contracts in order to determine the best estimate of Estimated Costs at Completion. As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion, the project schedule, identified risks and opportunities, and the related changes in estimates of costs. The risks and opportunities include management’s judgments about the ability and the cost to achieve the project schedule, technical requirements, and other contract requirements.

The principal considerations for our determination that performing procedures relating to the Estimated Costs at Completion for System contracts is a critical audit matter are the significant judgments by management when developing the Estimated Costs at Completion, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures to evaluate management’s estimates related to management’s judgments about the cost to achieve the project schedule, technical requirements, and other contract requirements.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the determination of Estimated Costs at Completion. These procedures also included, among others, evaluating and testing management’s process for determining the Estimated Costs at Completion for a sample of contracts. Management’s process for determining the Estimated Costs at Completion was evaluated for reasonableness by (i) performing a comparison of the originally estimated and actual costs incurred on completed contracts; (ii) evaluating the timely identification of circumstances that may warrant a modification to Estimated Costs at Completion; and (iii) analyzing contracts and project schedules that support those estimates.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

February 16, 2022

We have served as the Company’s auditor since 2018.

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.