Motorola Solutions (MSI) 2 May 242024 Q1 Earnings call transcript

Good afternoon, and thank you for holding. Welcome to the Motorola Solutions First Quarter 2024 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.

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

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

Executive today Winkler, Executive Welcome afternoon. Saptharishi, Executive and and Jack Molloy, me Vice President CTO. XXXX Brown, and Chairman Mahesh Earnings Call. First President President Good Greg Quarter and Vice COO; our With to and are Vice CEO; Jason CFO;

Jason will Jack non-GAAP presentation to These and posted for review Greg motorolasolutions.com/investor. with our GAAP earnings commentary, and Q&A. reconciliations results for and and an join at include along news your release Mahesh reference. will materials We've

our duty forward-looking section in the earnings in report release We that such the could statements. update with statements SEC. and noted. number from uncertainties. reports are expectations conference and forward-looking to the These During could that the these call, based this made be we will any Q&A on of any Factors and reference call. do current in results today's non-GAAP variety of presentation unless our in portion comments XX-K statements. during of A outlook, XXXX and the materially forward-looking financial filings statements differ news risks on Actual during those Form are be a can made Risk Information call this about not results, other the during subject and to differences assumptions of otherwise and factors found cause annual undertake including our

over it turn to Greg. I'll that, with And

share few results overall about Jason the us business I'm for going our thanks Thanks, Tim. thoughts and Good joining outlook. through a takes before to and us afternoon, today.

achieved QX $XXX operating generated operating an the basis of share per start flow by growth was of We million. margins cash growth and record XX%, year. QX expanded outstanding XX%, revenue of XXX earnings to First, points

quarter with year. the up finished million also versus of backlog, $XXX $XX.X We billion last

SI including strong segment, margins basis demand Second, was our see outstanding up operating products, Software NEXT performance points charge QX was XXX continue up revenue our ESN exit Products refreshed as of from was to Services we inclusive X%, control In for PCR our and contract. Airwave revenue XX% and and portfolio. the and broad-based. In LMR feature-rich our APX our and increased the

Excluding And our applications our our and Home for and and Services digits, strong increased on our by offerings LMR Security guidance earnings demand, Software Office revenues, to finally, revenues in full based double the for and robust start software revenue driven year. strong continued raising service Center. Command year the Video U.K. and both demand we're continued

to now Jason. the I'll turn call over

the share $XXX share of charge, convertible the loss earnings million the earnings per $X.XX was in nonoperating treatment for LMR related $X.XX driven feature-rich operating year due strong non-GAAP to Non-GAAP basis from a and products of in non-GAAP more $XXX Revenue ago and growth year-over-year favorable X million, margin a Greg. from the Silver XX.X% and pretax XXX our higher invest notes. customers the ago increase control mix GAAP per $XXX earnings the all both offset in resulting operating leverage, Airwave. loss for or operating were year million up XX% GAAP was was points. shift up quarter. was a operating to you, operating in the were XX.X%, The as quarter sales our by by with GAAP in settlement and above quarter Thank strong earnings XX% of guidance improved CMA Lake accounting and a grew XX.X% technologies. U.K. sales, included up charge

which premium, approximately for these the terms. compared and conversion settled to indenture share reflected the entirely a our in cash price negotiated dilution We to favorable notes billion settlement eliminated $X.XX potential of count inclusive

in growth to count. loss primarily recognized for last during strong by updated and we XX% last EPS in convertible was $XX employee interest margins, and $X.XX $XXX driven a quarter. in the result, for a which higher was was QX EPS the lower XXXX. cost As a $X.XX, million diluted higher current According versus settlement and lower up share Non-GAAP sales notes, up acquisitions. were incentives nonoperating accounting year. from year, to OpEx rules million, This the due

working flow. Turning of million, in free record The flow by $XXX $XXX to and of versus up increase in million, year, $XXX was for and $XX $XXX earnings of million of flow million. million share QX improved QX Operating a repurchases. cash $XX cash dividends included cash charges. flow was allocation $XXX strong last and higher was noncash net up cash million driven CapEx capital Capital cash million

acquisition long-range $XXX specialized of net We Sentinel, used we $XX of also the settle Silver provider million Lake to cameras required. and a of closed the conversion of million cash Silent premium cash for

mix XX.X% Moving and leverage. to demand, or mix by segment by higher versus operating of and LMR products. in $XXX shift combined a the year, strong driven earnings up improved favorable were year, driven XX.X% last improved were and sales sales, with Operating XX% Products In up results. in million continued favorable sales, SI, supply prior from availability

wins Highway U.S. this an million for Carolina $XX device and the a video PXX a customer, international $XX include $XX and Tennessee million achievements State LMR segment a million QX for customer, Some order order for Patrol. $XX North a a notable State mobile for million of order in order large

was revenue the to up Services, the in impact XX.X% Operating in were of by sales driven and all due the X technologies. revenues, $XXX Office were down of or Software last earnings XX%, Home S&S million charge U.K. strong of from up excluding year. the the growth last year segment Airwave XX.X% to X% sales compared In control.

margins and increased control, year-over-year, operating and driven the by U.K. Software leverage. of Services Airwave the primarily sales higher Excluding impact charge improved

million million in the this County, $XX Douglas Francisco, order $XX a Lithuania an order of Command Center and in State of services Police Some São for a LMR San services include order for city order notable LMR Department million for an order U.K. a services million services for QX $XX Paulo for Colorado, $XX million LMR Brazil. $XX Health, highlights segment

double Moving video International next Office by last up segments. in the our growth Office double-digit both versus regional $XXX year-over-year Home Home LMR, U.K. revenue, excluding offset revenue lower to strong control million, of International digits XX% results. increased Airwave QX revenue ESN. U.K. charge related $X.X billion, North UK up segments. America revenues was exit with Office and X% in the year in our and on both to was growth QX Home impact

XXXX versus backlog. Ending multiyear last $XX.X driven strong year-over-year reduction $XXX Airwave recognition quarter the year. in to billion, over the to and demand for of $XXX year, related the both of up control record a of booked and charge and Moving revenue million last primarily Software fourth The million Services inclusive increase contracts by backlog is the was for Airwave regions. in ESN

first a for of the the quarter receipt XXXX, to years the extension million Home backlog from X-year of XXXX. XXXX related Office $XXX in Additionally, a through we U.K. notice recorded of

by to and Airwave the QX last the -- due SI down million America million, partially to backlog North unfavorable million, Sequentially, Sequentially, million U.K. the order QX excluding our and that I $XXX primarily compared Office I up offset Products typical $XXX unfavorable was seasonality year. QX segment, down in over favorable backlog was that related Home to the to by to just Our America extension order total was mentioned, seasonality some FX. driven QX was FX. to $XX mentioned. backlog, ending due up $XXX In backlog North notice

by last demand services compared for up contracts multiyear And services both $XXX driven then backlog Software strong year, Services and in was regions. million to and

driven Home by backlog, backlog QX S&S up was to excluding was $XXX compared Airwave, last Sequentially, Our the notice million seasonality. partially the order QX up offset million, to U.K. almost $XXX extension by Office primarily to related year.

outlook. to Turning our

up a X% diluted guidance. And and of both $XX.XX weighted QX per revenue from share. We full X%, rate million with of And now and X%. XXX of per our year, tax approximately with and and from EPS share, share count to between expect expect $XX.XX effective average up $X.XX growth per prior we that, for share. per our $XX.XX approximately guidance the non-GAAP earnings share between and be per This non-GAAP sales of We an of $X.XX assumes approximately up share guidance prior shares are revenue increasing earnings between expect to approximately X% we our $XX.XX XX%.

count between dollar And of It shares a completed $XXX in up we U.S. of last debt the expect finally, effective as million a be XX%. settlement since in we outlook headwind $XX XXX to expense the and an XX% includes and with of year Lake strengthening year assumes now and half. FX addition, diluted now interest year-over-year. QX approximately million full weighted rate tax and average million, result share the full this call, also our $XX primarily Silver million, an second million XXX In to issuance

to a call just the Greg, turning Before balance I sheet-related of back couple items. highlight, want to

$XXX premium mentioned. to cash in Silver for settle Lake used the we million I quarter, notes the that During the

underlying upgraded the the a at and $XXX XX shares, quarter, diluted our share in the reducing repurchased targeted of balance of million our also strength of total ratings S&P during our to and million sheet. Also credit together We Fitch BBB resulting combined count. business both

now used Following at the pay $XXX of convertible the We $XXX which later year. plan the remainder average and is average debt further of billion of coming due $XXX to extending years, all an debt of over XX-year settle off rate $X.X maturity fixed and debt proceeds million the approximately to million issued below issuance the this new upgrades, X use a from our X.X%. we to notes, portion million $X debt, notes billion maturity, X-year of the

turn back to call the now Greg. I'll

close let me few thoughts. Thanks, Jason. with a just And

We backlog going backlog us generated strong was achieved -- operating technologies. QX well Board. We across all record We our operating cash strong margins. QX operating First, X increased forward. flow the revenue growth significantly outstanding in ending positions and

result, for both raising we're year. earnings full a revenue for expectations and our As the

And Lake quarter, a Lake are Greg pleased very partner convertible notes. since investments Board. initial during and that in exceptionally our mutually I'm growth The driving announced remaining in XXXX, our Silver I we how look we great that LMR product I'm meaningful on forward, we've Second, the has with pleased agreed positioned. made settle to as finally, margin Silver well expansion. is been we're revenue Mondre with investment and their the portfolio

revenues our recurring as for a increasing the are services. continued strong demand result Our of

for inorganically adoption Video strong Security well including growth. positions in and Alta offerings, invest We see both our organically of Rave cloud and us and continue Avigilon accelerated sheet to continued Center Command our and balance to

billion billion We ended $X.X of to cash our expect refinanced debt and flow operating a of and rating during for X the quarter received generate with quarter. we $X.X cash, in we portfolio, upgrades credit portion from extended year, still agencies the the

significant deploy forward. of with provides in All continued this how capital us going we flexibility

I'll forward look questions. the over to and now Tim to your turn call

Thank you, Greg.

to would you callers please to Before taking questions, limit as we to a question. how question follow-up X line as begin accommodate like remind remind our X themselves the callers Operator, many participants on and to to ask I'd possible.

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

and there. could The decent the hoping Maybe a be things video, follow-up first in I the on then LMR. just talk would few growth a you about have I'm on quarter. side, video question

cloud the where we impact what on effect First, to movements are that with quarter? and had

very piece, if over percentage And it was second of software Video you're looking a at services looks XX%. the it high business, like the Jason, the

see just -- the we're maybe because follow I'll curious that, an the a bit starting to if this was anomaly just little hardware back follow-up. it Then LMR an I'll Or lower with inflection was So quarter. piece after there?

with pleased Yes. QX. Video, Tim, in on the results

that remain we fixed around good We the increased performance. probably of full it unchanged. in top very talk we convicted the the about and adoption $XX feel and are adoption. informs last That's probably growth know, orders that video XX% headwind for way, in quarter talked seeing but the particular, QX's number both year. by about for million a line the estimated terms to We you the As mobile. and -- Alta And about remains quarter were an XX% cloud did last in strong, Avigilon

a mind, of question, in Tim, software video And faster on part side. it's your the That's within the second growing been you're not And seeing. is than we've right, product trend keep by video Alta, cloud there. have subscription. all Mobile just all our the that is it's of of recorded are our Both around developments software products we there, exciting also complemented VMSs, analytics.

part a very important our that's of and So fast-growing business.

piece. the Now LMR

then yes. And -- maybe second

where you growth above investments of expectations. bearing Greg, would a and about great. just be are other of Can LMR, talk the in talked fruit And there. you lot That it's there? cycle about we on obviously, Just rate kind the

Yes.

look, I demand can't with last think same services. I as of pleased about performance Jack talked be LMR And and continued the this the -- strong quarter. quarter, more it's products the

of of QX to customers feature-rich terms a in more quite indexed lot NEXT, an example, drive In and indexing helped devices APX expansion. as frankly, Tim, margin which revenue and are

But And which I writ PCR, about as we've you been for then whole think but the that's APX well, end, large, about about segment very I'd exceptionally to there devices upgraded. well. to APX portfolio is TETRA and entire growth We we very gone think They're Originals talk APX the talk well. refreshed APX over Radio. actually newer. NEXT, -- go where when the way also high the performing is LMR They've which

In now levels fact, of slightly last grow PCR, up to we off expect record year.

So we're in on I'd game that the lot say Really device refresh a middle with front. on more of pleased run. to still the

a thing out, the pointed Tim top is NEXT on applications. the it's breadth is, strength. are of that only adoption the The driving Greg just the particularly of as APX But add what's I'd portfolio

Programming a in as fleets, SmartConnect extend patrols quarter, those, with what think fashion, ability in QX, and of vis-a-vis ability large and location. X So it's expeditious state large so. Department as the reprogram to on about in more like Smart to the as network secured their the we drives It's the well you Transportation,

customers embrace you've seen too. Jack, a fleet blended

right. Exactly,

have those those fact, all NEXT. X/X In and APX are of X of customers APX Original like

point. Good

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

Congrats of you there you outcome. the the negative financials on guys great. on back there's would guess new saw I'll to court any your in of anything a the I CMA reflect Airwave situation. on? tell terms about adjusted the of us Anything can case, mean, to I and that's going there go know an appeal the But kind what's or situation, the extension strength I here. be contract. the obviously, renewal and going expectations I

Yes. Thanks, George.

Office Airwave. the backlog 'XX, extension the for received recorded U.K. extension the of and we 'XX, So of notice we in years of because March, 'XX from the Home

for Aside to that let's put minute. from a our off disputes, side the

in and mission-critical LMR, I think it of quite this case, the in frankly, longevity confirms Airwave. our criticality belief all particularly durability, along

one So performance in that network how it reaffirms best of the long-standing a need the of the from critical emergency networks technology is, standpoint, world. and that's performing

charge your took rates, still are backlog i.e., worst-case kind To at logged recorded it's the we at the point, scenario, the log of and it control we contesting. is -- which backlog

would of as see Appeals decision. having that, we to the or Appeal position As clarity of And result, a circumstances the to get to that Court said Court -- CMA our that. if of on it May to relates Court U.K. they'll and Appeal, issued final will to Appeal, their the extended appealed accordingly. the the June. We CAT, Competition we to hear the that We appealed Airwave, conditions But the defend defend lost expect will continue that either in we and case. ourselves on We Tribunal.

in trying at a you customers Got that world? other it. of the anywhere Any And just evidence guys quick to there's looking spread any managed with contracts as services follow-up. then reprice else

No. No.

answer is no. in I think ways, very, . the but unique U.K. many very the is

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

on Reynolds for questions. I the taking You've you appreciate got Meta. Jamie

headwind as I relates your it business thinking passed? guys in aid Ukraine. to recent had got I guess, package that a there $XXX think less you highlighted changed the from has million last quarter,

year. the the I'm headwind and this full It's still on updated Ukraine headwind. view $XXX informs year, of of what's about does Our we We remain fronts. raise change on said informing half year exists. that last what both Jack last passed did which in year in million, team way, way, the and that Molloy's We're guide. seasonality the $XXX the remains our Bill billion we that's full Foreign Aid not full referenced the million thrilled time. for on kind By of the terms talk But you primarily view what our about game, year implied By QX we is engaged $XX multiple thrilled. in second the in from guide situation got unchanged our and actively that from

the to contribute year? thinking around a Got quick the what piece as from to this Command business expect Is it. follow-up. And growth the just Center changed of you then

still overall we as I expect full Command the way, record add in XX% ESN category. the Center bucket. Still a might Center technology By for the that the about in revenue was We remember, very Command year. enthusiastic growth way

double have handsome guide digits want So it's the Center other may ESN implied Office. And that just normalized number frankly, the when Home some as look you grown quite QX at higher year, you things for well. going for would U.K. for mention XX% you on. than when a of full normalize for to Command And the

We This our products, attending. just both actually app. largest finished other quite a along for NEXT with few been summit, X,XXX our mobile ever, our customers think, cloud launched summit. over or refreshed on-prem, We new for and launches I VESTA has our responder,

Rave it's exceptionally cloud So customers of XX% see Center expectations. products and connected amazing, other Center traction our well -- cloud Command been a adopting and been doing are and our has now Command than . we beyond greater product

Tindle is Raymond of line Adam the from next James. The question with

start the want Great segment. on Jason. performance first just I for maybe Product to in margins

in how low still going that's chain is QX in from margins if this to segment. supply I'm typically future wondering left quarters? that is for point and much improve benefit versus reflected Just hold know is XXXX and the wondering there. cost pricing I for the in

I are about us we just beyond. as clear cetera. you. Greg, drivers topic in to the of But little important margins And fiscal bit and conceptually very think obvious cost, expanding price less on to know et margins, 'XX The it's is fiscal a 'XX

at if on expansion sort could to you margin do think that and balance with Just the be help Or levers to maybe might you margin conceptual year? more drive of how beyond we're this us growth, continue focus to equation. optimal

Sure.

PPV a costs, broker There's getting of included So $XX I'll the take XX seeing to that QX on days number. year total full $XX path first That's to one. some the of remain in million. ago. the We we lower call we guided million go for that. more that We're to benefit. the

strong We to use at our from need need our as well QX informed as improvements we for supply are the the us direct seeing certainly That's helping the less complemented the part vendors in are continued price get far we demand. by our year, the what the and parts expectations need.

margin costs, So a That terms feature-rich customers margin chain the on on plan continued portfolio. improvement comes benefit adopting point well. to also of talked the about of parts I in to improvements is of with call supply more would the we the lower related us what as for

of up XX and be points. margins we margins about expect in to gross basis do to margins, this slightly, be And also we way, terms year, up now the by -- we expect operating

built disciplined recovering cost the hit contracts living some volume will services As we due increases, that mechanisms levers primarily contracts. be we now, it enjoying mix, we're think we're holistically come services, firm. appropriate have cost and as they a pro on And where come increases making kind surgical price we multiyear sure appropriate think of about the have around into forma that of and which in of basis, we

in thing. million. $XXX indexing it's more price we guide OpEx. about we're actually, investing there's up million and year. and fight million full look That the OpEx we quarter, to and end We're more Hytera U.K. higher ancillary the defend business $XX position, We way, will increase, And Last consider this some business, giving both year, of the continue refresh we device legal that news We're also we'll and you we then you the sales And as our told to well year-on-year. way I have around costs, new video. on the the particularly I the a mobile was By front. it investments about think as around Office of the portfolio good and product incentives video. good commissions, reflective and actually at report probably for fixed to higher the be hopefully Home likely continue which fight in between the on revenue some the with now $XX year

thing on you the I'd And tell know, you OpEx the acquired side, other we Silent as Sentinel.

accretive, we can sheet, strategically compatible, but balance that the it we may but wide it's on and disciplined Given also we that pretty it operationalize because and that, important. because close. And we too. pursue and we if or it acquisitions it's the is operate on aperture integrate do front, It's do culturally synergies financially operationally, expect

We team a growing that team, think, good as an are a I enough. executive is and not built, as company,

the line, to top proud you got share. and on to know at we be operating there's And you margins. when flow the grow margins, cooking cash look got them, got That's to grow to of is firm work operating more we cylinders. know take but all done. you got always you We're grow to You've

and we'll efficiencies. mentioned. legal ecosystem, contract what as But our engineering And a in be we're but tout in obviously, use it safety around and disciplined the the in I customer of know internally in products our relates of love by the it it Jason have the lot into analytics public management mention way, a with that I physical AI. lot I it, companies also use Jack and Generative of [indiscernible] that descriptive didn't internally, AI built and we'll copilot even doing, service to security.

can operating not margin this the able in factored we And we'll declaration to continue we be always think really assets that drive toward that. any promises, of So but I point, at improvement. have where making do I'm and to, aspirationally I isn't think,

since follow-up. if going here. maybe a about was it's here? Okay. sequentially. know I'll million normal down What a quick that be we've got that backlog there's Airwave. about but know billion $XX.X And seasonality I'm I'm Obviously, on asked that includes It Xx that, I a trends. may me I I would on its missing? this worse incremental and kind $XXX that X-parter, you do, do backlog follow-up $XXX to a we correct if concern that get of think typical just unfair And looking Backlog out think million backlog kind do wrong, But tonight. stripping some but a to And than quick strip trends be at to from seasonality. that's of but out, of of seasonal decline in how record

Adam, impact multi-quarter backlog $XXX Office mentioned S&S earlier, backlog basis, Home a -- exclude and it on up $XXX we is over I up I million. if if total million So the is over

'XX, So 'XX, million while the extension to the in of years this 'XX. we $XXX related QX recorded

for 'XX, reduced before to in backlog We and related 'XX. years, the that, implemented pricing also quarter 'XX the the control

So if Home you absolutely they're then a the cancellation, bit core the will, and growing. business Office at is of of a

comments to pause our Officer question-and-answer will questions. to additional or any over now Brown, closing session. we Executive remarks. floor This any Chairman Chief I the and will I turn see a for for Mr. Greg if concludes few seconds additional have

you. Yes. Thank

think of largest had had on to a team, proud and year. public great the First of I had employees partners. the ago, Solutions performance very and we week Motorola and channel in some Summit very quarter in do A significant, highlight, want I customers. significant It great what the attended Solutions It's of security we of event and in X,XXX ecosystem. the can we world good working front. end lots operational well around that demonstrated the proud feedback. thank enterprise I want events foremost, Dallas. the the of and It's Mahesh we do now between was an X them, QX, to the We ever our mentioned safety

Mobile around year. worn executive thought we're partners an partner to to a a relationships forum, channel Security it LMR, had now enterprise. language, common We this significance partner had roof at culture in with ISC looking catalyst was on our common the and -- of items course, February, the first-ever presence X rolled Access Control upsell. highlighted, kind Molloy's getting And Access and in channel mantra Video brought Land that and cross-sell, The which Control, the which joint and under excellent I large body-worn between together need Orlando. end And Video portfolio develop. vernacular, that body is that of West, event our we of had and great writ we're traction Security upselling great on enterprise camera, focus was we broader the of out Radio

of in good lot a So QX. stuff

a backlog, but to opportunity strong excited momentum, raising the and talk the Look, strong be about also great listening, at quarter. thank the actually more funnel of strong for more proud. everybody. sheet end I of we'll day, the is year, balance Thanks and to print in couldn't QX, in a I'm but want our you

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