Motorola Solutions (MSI) 4 May 232023 Q1 Earnings call transcript

Welcome to the Motorola Solutions First Quarter 2023 Earnings Conference Call. Today’s call is being recorded.

If you have any objections, please disconnect at this time. The presentation material and additional financial tables are posted on the Motorola Solutions Investor Relations website.

In addition, a webcast replay of this call will be available on our website within 2 hours after the conclusion of this call. www.motorolasolutionscom/investor. is address website The [Operator Instructions]

would to Vice your Mr. Yocum, like of I conference. Investor begin introduce President may Relations. Tim you now Mr. Yocum,

with Good Vice Jason President and Q&A. Winkler, earnings and Vice Mahesh President Executive first commentary are afternoon. Vice Jack and Brown, COO; Executive our Jason Molloy, and will CFO; our me Saptharishi, Executive Greg CEO; Greg With results and and will today quarter for and Chairman and Welcome to President CTO. along call. Jack review join XXXX Mahesh

We this noted. of motorolasolutions.com/investor. variety from results, the will on based financial subject results have differ posted and number A expectations an call, the and reconciliations presentation These earnings could to call. during be presentation statements to statements non-GAAP during made otherwise risks and are the that referenced are forward-looking Q&A statements. including news of during forward-looking those Actual These release include for a and at assumptions we current And in materials uncertainties. of your our these reference. portion non-GAAP unless materially GAAP outlook,

Information about any be release in this can the such filings factors cause news update section during report the earnings conference XXXX that the comments to made SEC. in quarterly or and Risk not statements. annual report differences and call and today’s any Factors found our could any other on duty of reports with XX-K in We Form on Form our XX-Q undertake do forward-looking

over that, I Greg. with turn it to And will

for everybody joining Good today. Tim. Thanks, you thank and afternoon us

by We $XXX of above last revenue record up start margins saying inclusive earnings unfavorable with that and of of up our and QX which share record XX% versus to orders, by ending operating we earnings start the was QX me the expanded share XX% million just an QX up year, billion, X% led points, XXX versus let per to basis revenue and had We backlog year. guidance per prior exceptional achieved $XX.X FX. year. First,

Second, our and North in QX revenue double-digit growth all broad-based, regions was strong America performance outstanding in and three segments, both international. technologies both with

safety public raising customers. which driving than our and finally, both both strong based revenue our is and for demand more for remains safety year. ever, enterprise important public our Additionally, robust And year continued the full the start security we’re demand, and enterprise earnings guidance on and to

over results final call I’ll the to some and you back outlook then thoughts. turn take and be for to through and return Jason

quarter headwinds added acquisitions double-digit were of XX.X% and above Thank three the year from XX% Greg. both $XX operating Revenue the all or technologies. were segments, ago quarter. GAAP million. guidance was $XXX during the grew million our and earnings with $XX up XX.X% million, quarter regions for you, growth in FX sales, in in both while

costs, Non-GAAP up ago earnings and operating was operating This spend higher attaining semiconductors of earnings quarter lower in and sales, strong points. increase GAAP XX% from the material year was lower XX.X%, operating non-GAAP up were by inclusive $XXX leverage. basis million, non-GAAP both driven operating year-over-year direct XXX in margin improved and broker

$X.XX GAAP year earnings current the $X.XX, was incentives the The year. in growth by Non-GAAP compared per $XXX driven earnings earnings was last quarter. year, share XX% acquisitions in in share, to primarily by was per rate share in the a per ago up sales $X.XX was million, OpEx versus effective higher offset year. partially margins, strong due and current from $X.XX in year. up last $XX million QX higher higher to and tax

in onetime a million QX a usage The was usage line cash million. of QX flow. and free inventories. of cash flow flow a It to $XX decision to included $XX flow carry also operating and was our IP million higher year. we payment strategic tax cash cash an to completed reflects $X with related of was Turning in our last reorganization cash expectations

expect billion, second we half, to For $XXX cash with included cash be continue of in the cash the last approximately in the flow. share repurchases $X.X capital contributions operating allocation to greater consistent of in million million flow shape $XX The $XXX million for full CapEx. QX year, year’s with dividends, and

in driven earnings to by from SI the were up costs, $XX the year benefit segment pricing prior million or segment, from material availability up higher acquisitions in million versus last our lower and in year, the sales Products inclusive of improved current and improved Currency sales, the flowing results, and Moving Operating the were XX% XX.X% from spend broker headwinds $XX quarter by supply were leverage. X.X% operating actions through. in sales, $XXX and lower million. added revenue of driven year,

system a U.S. achievements a for a QX’s PXX notable Johnson local $XX Some Missouri, health PXX $XX a million the a Wakulla order $XX for in countywide Highway Patrol. include state Kansas a Florida, for device this and for County, large for system $XX PXX devices $XX a customer, million million fixed care order and contract million video Apex County, system million Apex segment and Next

Center from and up the in headwinds was $XX was quarter, XX% and growth Revenue including FX the XX%, and FX. were and year in costs Software acquisitions on XX% year $XX $XXX higher were acquisitions margins down growth earnings XX.X%, video. mix, Command operating Operating million, In and up Services, from X% from in million. million revenue XX.X% last in were last segment versus

comparable down, this by primarily rate. slightly from costs acquisitions, segment operating to higher expect driven full to the For we to be in year, year last margins

a to existing Force, QX to federal an services segment been IDIQ in and services new Air Some long of $XXX notable highlights provide has LMR which award important U.S. combine ours. million customer include this the

over XX-year time the contract. ratably of recorded for million $XX first only the Given quarter backlog to remainder recorded agreement, the backlog expect of the nature we be of and this in

incremental to compared Additionally, we when over included the contribute an of revenue million period service XX-year the previous expect new agreements. services to $XX it

with received million video $XX LMR City the also with for contract a services multiyear system, agency services support renewal fixed Catcher of a services a nationwide agreement a million We and Chicago. $XX federal $X million extension Portugal’s

at XX% regional up in last versus America partially by all on strong North Looking was International billion, XX% million, revenue unfavorable $X.X with three growth in revenue growth results. offset $XXX FX. up technologies. all three technologies, QX QX was year

Sequentially, were Moving down million, billion, $XXX to backlog. across million X% was seasonality the ending in QX. and down or $XXX In backlog versus XX% million a order America. due year, by North or QX all America orders LMR of SI results backlog Ending three million up typical North by by $XXX $XX.X in strong primarily primarily strong million was inclusive record record segment, was of Products demand These backlog driven demand. to last Sequentially, $XXX up unfavorable driven technologies. seasonality was FX. following backlog $XXX of driven backlog a

recognition the down by Airwave. of by the we up announced along to partially backlog services Airwave software in In year, exit $XX adjustment for Services, revenue driven million that ESN $XX with year. was compared FX the revenue million demand $XXX strong last Software Sequentially, for and related contract to multiyear recognition offset and driven unfavorable was and America, million, last by of primarily for backlog contracts North

now our to Turning outlook.

between and weighted to XX%. XX% per assumes This share shares sales be QX XX% $X.XX up and per to approximately non-GAAP with expect $X.XX earnings count rate share. XXX average an approximately effective We of tax million share a of

billion, guidance. and $XX.XX are full $XX.XX shares of $X.X outlook billion both of our year, we EPS assumes expect average from revenue up XX%. range For XX% of increasing per XXX to We share share. to prior up prior our we in million guidance $X.XXX and of an count $XX.XX, and range tax billion the This FX $XX billion year and and headwinds, per our effective earnings approximately $XX.XX to share the expect million a of revenue between now from non-GAAP $X.XX of rate weighted $X.XXX full

to both earnings an tax year share tax year on the from $X.XX which lower comp per rate As represent full headwind the guide. XX.X% in year, of on in tax benefits approximately share and higher I call, mentioned current our last is last UK rate our due combined the increase a

second of for half reflects expectations as guidance is of a half strength of year first business continued the of The XX% the The year. the growth strong half we solutions. full comes our increased the well as the growth double-digit the growth year, revenue last continued top reflection our for in in saw of the and on outlook demand in second which for

the now to I’ll call turn Greg. back

Thanks, Jason.

few thoughts. just end a me Let with

and basis XXX revenue our achieved foremost, our points. is QX driving expectations. quarter solutions business We enterprise prioritize line the expanded very and which customers record safety continuing our ended and top and year. and full to margins ever, backlog had bottom for highest ending the strong. operating by increased First We to are above our our We QX safe, help guidance with public communities remains orders our

two to want I business. recent our in highlight announcements Second, Security Video

our now integrate end-to-end Avigilon Avigilon Ava Alta but and video which streamline solutions particularly while Indigo channels of is Alta cloud-native our healthcare, go-to-market education revenues. half platforms: under of fixed the Openpath, First, represent on-prem we focus, and three and two our is made combine the vertical and suite, Security, Avigilon and decision further consolidating majority Unity. our security suite, vision. Unity to our our help video portfolio, our security This security consolidating government, video those consolidating fixed reinforces in also

mobile video camera camera. broadband location Apex facilitates provide product. our market-leading in-car live body-worn our video our connectivity command streaming software, integration center our in to VXXX including and business, our VXXX-body-worn solution, new video and launched through our is aware tracking with radios Additionally, first our we The that

our of and that The strong. products keep strength our exceptionally start year the safe solutions and strong finally, to demand resiliency underlines our remains the for communities And business.

our that management continued our optimization, previous with to inventory shareholder create drive deployment pricing us with durable sheet and coupled on actions cash and balance flows long-term going Our capital allow we and margin cost focus to forward earlier of took expansion value. continues to the opportunistic strong be modest

And Tim I’ll open with it and that, your to it over turn now for questions. up

Thank ask you, question. a the to remind our line Instructions] Greg. on how please [Operator callers Operator,

The Long from Instructions] with Barclays. is question [Operator first Tim

Your line is open.

if you. here. I Yes, two, Thank could

Jason, benefits tough healthy you I pretty could the commentary you given backlog those First, just hoping mentioned second at but know, a still. comps, around parts just moving give little half, and looking pricing

you. little And the video, the about, a So QX. from opportunities parts schools full also half? RPS a to second rate and second, Could growth what in things opportunities on cross-sell specifically like moving with Jack, that? about little talk in Thank safe in are if more above you it bit talk and we bit see year video are or where that could NDAA and you then good was Greg

Sure, Tim.

the so pricing on So last half. in when up year half, profitability in actions half the year’s to really began we second that in really last that the the show you’ll helped expansion and P&L, implemented those and second growth the is second recall

as position those today, we’re is still supply-constrained So at we environment. a our look comps in XX% that

times We have lead from suppliers. our

opportunities comps demand of continued those the have have. in and actions. We is did with pricing same pricing first QX with the the include to us not ahead for expect half last expectations for in similar benefited year’s QX Where that us grow and particularly we the actions second half

top July, start of actions on So enter we’re pricing those as anniversary-ing growth to still and those. we expect

I what four And verticals, government. do with cross-sell, starting Tim, specific is to would specific highlight

was As context, for a would there to we’ve kind video subsequent to nascent out we approximately business a before, just marker we Government we of this security that it made put business XX%. Avigilon, put when But we year have in acquired attested acquisitions. grow the

government got to think opportunities And expect move that. the high in We we teens. to grow we’ve

attested pleased. out not that but we radio really user, upgrading. call to also won that $XX We only Education are the – been was healthcare, has fact I’d a is video the And an add-on. a systems with secured also the million Specifically, a they’re system. we’re user. school we’ve deal numerous This large-scale hospital they’re of really, beauty

and Unity our is center with a large-scale to systems, there going product access called changer. and systems cloud Avigilon are school ability control, Some Compass of alert we’re the in really seeing integrate on LMR, is radio game into urban software schools. But prime command do acceleration what growth the

secured the think we’ve cross-sell, of to is sure in then power utilities. have I utility. Tim. industrial utilities But part lastly will opportunities substations And a fact all the we talked done namely start their We’ve space, incremental their and incent and sales now. area $XX there, We’ve making to the of the is in go our we the million the utility large-scale of fortify think that’s and highlight DNA into force I about past. as it grids just cross-sell tie that And

Okay, much. very thank you

The line Notter George next the is from with of question Jefferies.

is Your open. line

in in Hi, know did, some XXXX? might last Any guys. mentioned I of I about think related I that I ARPA much. from for last imagine question your projects but what this benefit what the very look orders are Tim Thanks ARPA got ARPA $XXX to you year. But for last million like you guys that or guess year, maybe Thanks. sense? do converted you’ve would year? that expectations think revenue the

Yes.

that’s it, – higher and a that were context, business. in But would year. take to federal actually it’s dollars not deals but X% purpose there’s kind are George, secured, of the I North secured. would America contributed of It’s say, level. in were they put I the orders beneficial our Salesforce. would gone approximately of and that conducive, ARPA, So for it to in to last diminish sole to And it say deals stimulus I I’ve they’ve anytime to looked but

at or we’ve of area we’re before, I think a think the the an in as you said end a a nice not areas we communications of school, mission-critical day, have. when need think about it’s have, to to in prioritization even

it’s the to – it’s So I success. necessarily say generally attributor think but I it’s wouldn’t largest our conducive,

then a just quick Got follow-on. as And Great. it.

supply is or been many inventory through are you mean everyone’s I any supply corrections going sense companies, question Thanks. have or chain, risk customers is there corrections that asking on of now. the you your for chain think, look products forward? think I I inventoring inventory corrections guys been any as

our from strong. customers demand very The remains

those to at a products. in is includes longer a And bit that wait they’d we’re through customers delays Our backlog having like getting position and them level. than backlog that record are working

With the good had Safety, were Public good supply. attain results to able in better quarter bit little QX, LMR, PCR. a a We had we with across a quarter

after demands, the quarter. getting is in customers us the place placed and position backlog both us they demand we’re So they backlog the demand on this also the on fulfilling within

So continue – what remains inventory mitigate inventory been tool. our position, and It’s this second in balance to navigate be us we shift inventory mindful remains challenging to of choppy and I sheet, its to have reduce environment, half. has and supply And our we flow to a utility our serving environment. for if in helped That’s an supply the do environment. important a it expectations cash helpful in tool expectations, but a

you. Thank Great.

[Operator line Morgan The comes question with next Meta the of Instructions] from Stanley. Marshall

open. now is line Your

just that Thanks. just would high just maybe you maybe you an of adoption types introducing helpful. Great. to following on sense then the various get integration And of APX trends that customer adoption And towards be targeted product. NEXT, on they a being of expected? Thanks. the Rave and I a the kind the had update of and were kind end mid-tier of the the mentioned question pieces portfolio then wanted

and Meta. APX with Sure, Maybe start to the Rave. Mahesh will will I speak NEXT,

and we First NEXT. are as happens have future. is point the we it’s foreseeable it’s said line APX before. run of What to we tandem original for in we introduction innings, all, the multiyear And most NEXT for APX have the a important typically in I the out early that think the – APX

original. was point device In XX% revenue QX in fact, that of actually APX out to our

So, strong both we pipeline got coexist and them. for have a of

PXX targeted APX which are recently, to international will of with we kind bear to we starts orders the are just have out units Israel. portfolio million fill high-single bringing the last we we $XXX now is and be introduced radio, introduced and got as But Australia, the have ASP digit N-Series All-in, that new in in increases NEXT. fall, New the since what Zealand well. seeing product, We

as also And receptive other have PCR products areas TETRA, we where well. are have coming mention and to the and of to those I portfolio, would customers focused market parts exciting

the part at growth producing are of are drivers. an that important point also in exciting those products now COVID our we investments we are important and through made So, in targeted an

Rave, And especially bridge see at safety. more with performance. faster for of have traction education, data has for making expectations with also wider are we on initial talked effectively We the as enterprise some we security safety recently, to and the public public and strong we initiatives And to Rave a Rave rate go from allowing that K-XX. about, higher but our in exceeded ed, previously security enterprise bridges undertaken

blueprints two every individuals what XXX facility our examples orders, first, greater that a to very with which XXX bundling see about location. offer of special get will Rave suite. profile. is going worth So, they caller XXX the Rave VESTA need – what This we texting, with information And specific see mentioning assistance, going and respond includes perhaps they be is forward. two-way what can importantly, is new that to our facility so who are that facility to information caller to of when there, responders actually one as VESTA And part info, is

integrating closely security are second our is The with solution. enterprise we more

closer a part into and as alert using as the of that. of detect for Reimagined ability in ability bridge Orchestrate are program, to terms And we Safety ability Rave So, alert full XXX Rave our enabler is the the to key and much appropriate. to bringing

terms education, our along is presence our our in really forward of augmenting path two with with those PSAPs. of together in strength So, taking advantage

Thanks. Great.

comes next Badri Credit Sami with line the from of The question Suisse.

Your open. line now is

business some with questions, of business the first. I of I Alright. had of couple modeling, the start dynamics Thank will you. dynamics. a some

And maybe a and there a the a And of further the deals. so on motion? follow-up. us that you episodic of have characterization these how a more question I then still of if backlog bigger of seeing could is And excluded are lot step expected? impact activity, FX these step we maybe big backlog, right, give you are deals – are obviously your many big then taking with business one So, standard excluded up,

inquiry. Sami, address think your would I I

only We And and but our point profile usual would have to duration. I also deals, the not demand of business. seen big strong type

it was our and to the than record it at similar backlog slightly of While and levels, up our is last better backlog year quarter. duration last is was

So, that year are to the opportunities not better. the slightly growing convert backlog backlog, only we within we have are

that, one expectations up for that’s So, of position. by the the reasons that backlog our with again, it’s going year, driven

in And backlog million. thing, unfavorable is like the of on only we Sami, is By your $XXX the in of the product, even we Force million up have it’s FX other way, about is earlier other when to XX-year logged Air the call, million backlog. a large the a talked point that $XX much $XXX order,

duration it So, composition to I QX. like at backlog and we exit being the record of and addition absolute as the in the levels

Greg, it. targets growth the you Got give could us on guys we breakout of segment. Jason, that. of And new for any revenue video for also, Thank kind XXXX. idea if all Avigilon Also, you the appreciate

growth remain verticals, with in our video even total better And our the Jack which half revenue. mentioned, over that last our approximately call. of of composition consistent for represent power the will some So, of as expectations That’s be XX%.

market-facing our our of positioned we Jack’s around around your Greg’s to the will video. is that’s Unity, So, sell observation and to change And team performing and comments then to portfolio sales that a represent expectations. brands Sami, video is Alta

version, version. buy are cloud in to in it also well. we as We way customers is a move, great but position markets on-prem And most a either are today, positioned which extremely an the sell in

Yes.

marketplace customer to that’s Avigilon school the that got that a power needs and call think I that finalists, phone Sami, the metropolitan specific Avigilon on I Alta I in think has example. were no a They yesterday, for Unity. district. their a great else one can three we two today. of had large-scale meet specific finalists a And the

Great. Thank you much. very

Thank you.

additional Brown, Greg our comments over Officer, will session. I and to closing Mr. the concludes turn Chief floor Chairman remarks. This Executive question-and-answer or for now any

you. QX, environment a proud been has would it closing, I say never the Sure. more record orders, of am QX proud QX, just we was Both think Look, of important. I strong. Look, it exit the the record our what Thank that and really I of we demand I the at QX in and do am execution I like fact day, highlights is great position. our really partners achieved people. backlog. end channel as the that

forward I more ecosystem that safety is of Mahesh key the is private that for this ongoing safety optimistic look momentum. up like team. again, a importantly, in quarter connects critical. Jack to of a building opportunity the the sort from several technology in The about of joining, our I we sell-through are heard I you quarters. to enterprise still chain you enthusiastic as have and about, security, with safety public of front reference the despite verticals. supply And as More challenges you intersection, talked institutions, fact and this now. connecting those security then, proud next am it’s with And and be us. public I couldn’t I appreciate And and

over website of this participation call thank gentlemen, will you ask at the be teleconference. Internet your this for time. please lines and hours. this conclude that you The available address two A today’s disconnect Ladies and www.motorolasolutions.com/investor. We within does replay your is