Motorola Solutions Reports Second-Quarter 2024 Financial Results
Company again raises full-year revenue and earnings outlook following strong Q2 results
-
Sales of
$2.6 billion , up 9% versus a year ago- Products and Systems Integration sales up 15%
-
Software and Services sales flat; up 11%1 excluding
U.K. Home Office sales
-
GAAP earnings per share ("EPS") of
$2.60 , up 21% versus a year ago -
Non-GAAP EPS2 of
$3.24 , up 22% versus a year ago -
Operating cash flow of
$180 million , up$87 million versus a year ago -
Subsequent to quarter end, invested
$223 million for acquisitions in Video and Command Center
“Our second quarter was excellent, with strong growth in all three technologies and record Q2 sales and operating earnings,” said
KEY FINANCIAL RESULTS (presented in millions, except per share data and percentages)
|
Q2 2024 |
|
Q2 2023 |
% Change |
Sales |
|
|
|
9 % |
GAAP |
|
|
|
|
Operating Earnings |
|
|
|
24 % |
% of Sales |
24.5 % |
|
21.6 % |
|
EPS |
|
|
|
21 % |
Non-GAAP |
|
|
|
|
Operating Earnings |
|
|
|
18 % |
% of Sales |
28.8 % |
|
26.7 % |
|
EPS |
|
|
|
22 % |
Products and Systems Integration Segment |
|
|
|
|
Sales |
|
|
|
15 % |
GAAP Operating Earnings |
|
|
|
79 % |
% of Sales |
22.9 % |
|
14.8 % |
|
Non-GAAP Operating Earnings |
|
|
|
56 % |
% of Sales |
26.8 % |
|
19.8 % |
|
Software and Services Segment |
|
|
|
|
Sales |
|
|
|
— % |
GAAP Operating Earnings |
|
|
|
(13 )% |
% of Sales |
27.3 % |
|
31.7 % |
|
Non-GAAP Operating Earnings |
|
|
|
(12 )% |
% of Sales |
32.3 % |
|
36.9 % |
|
1 Details regarding this non-GAAP measure and the use of non-GAAP measures are included later in this news release. |
||||
2 Non-GAAP financial information excludes the after-tax impact of approximately |
OTHER SELECTED FINANCIAL RESULTS
-
Revenue - Sales were
$2.6 billion , up 9% from the year-ago quarter driven by growth inNorth America , partially offset by lower revenue in theU.K. related to the Competition and Markets Authority's ("CMA") decision to implement a prospective price control on Airwave (the "Airwave Charge Control") and the exit from the Emergency Services Network ("ESN") contract. Revenue from acquisitions was$13 million and currency headwinds were$5 million in the quarter. The Products and Systems Integration segment grew 15%, driven by growth inLand Mobile Radio Communications ("LMR") and Video Security and Access Control ("Video"). The Software and Services segment was flat, due to the impact of the Airwave Charge Control and the exit from ESN. Excluding theU.K. Home Office , Software and Services grew 11% with growth in all three technologies.
- Operating margin -GAAP operating margin was 24.5% of sales, up from 21.6% in the year-ago quarter. Non-GAAP operating margin was 28.8% of sales, up 210 basis points from 26.7% in the year-ago quarter. The increases in both GAAP and Non-GAAP operating margins was driven by higher sales, favorable mix and improved operating leverage, partially offset by the Airwave Charge Control.
- Taxes - The GAAP effective tax rate during the quarter was 23.3%, down slightly from 23.4% in the year-ago quarter. The non-GAAP effective tax rate was 23.6%, up from 22.9% in the year-ago quarter primarily driven by lower benefits from share-based compensation recognized in the current quarter.
-
Cash flow -Operating cash flow was
$180 million , compared to$93 million in the year-ago quarter and free cash flow was$112 million , up from$40 million in the year-ago quarter. Both the operating cash flow and free cash flow for the quarter increased due to higher earnings in the current year, net of non-cash charges, partially offset by higher employee incentive costs and higher cash taxes.
-
Capital allocation -During the quarter, the company paid
$163 million in cash dividends, repurchased$71 million of common stock and incurred$68 million of capital expenditures. Subsequent to quarter end, the company acquired a global provider of critical event management software for$91 million , expanding its Command Center offerings. Additionally, subsequent to quarter end, the company acquired a provider of vehicle location and management solutions for the financial services vertical within Video for$132 million .
-
Backlog -The company ended the quarter with backlog of
$14.0 billion , down 2% or$318 million from the year-ago quarter. Excluding theU.K. Home Office , total backlog was up from the year-ago quarter. Products and Systems Integration segment backlog was down$482 million , or 10%, driven primarily by strong LMR shipments. Software and Services segment backlog was up$164 million , or 2%, driven by strong demand in all three technologies, partially offset by the revenue recognition for theU.K. Home Office .
NOTABLE WINS AND ACHIEVEMENTS
Software and Services
-
$19M LMR services order for the Victorian State Government,Australia -
$18M LMR services order for aU.S. federal customer -
$16M mobile video award with Police Scotland -
$12M Command Center order for theLas Vegas Metro Police Department -
$11M LMR services order forAmerican Airlines
Products and Systems Integration
-
$32M P25 system and device order for theCity of Naperville, IL -
$19M P25 system upgrade forWashington County, VA -
$18M P25 system order for aU.S. federal customer -
$17M P25 device order for aU.S. customer -
$8M fixed video order for a largeU.S. state and local customer -
$6M fixed video order forNewark Public Schools
BUSINESS OUTLOOK
-
Third quarter 2024 - The company expects revenue growth between 7% and 8% compared to the third quarter of 2023. The company expects non-GAAP EPS in the range of
$3.32 to$3.37 per share. This assumes approximately 170 million fully diluted shares and a non-GAAP effective tax rate of approximately 24%. -
Full-year 2024 - The company now expects revenue growth of approximately 8%, up from its prior guidance of approximately 7%, and non-GAAP EPS of between
$13.22 and$13.30 per share, up from its prior guidance of between$12.98 and$13.08 per share. This outlook assumes a fully diluted share count of approximately 171 million shares and a non-GAAP effective tax rate of approximately 23.5%.
The company has not quantitatively reconciled its guidance for forward-looking non-GAAP metrics to their most comparable GAAP measures because the company does not provide specific guidance for the various reconciling items as certain items that impact these measures have not occurred, are out of the company’s control, or cannot be reasonably predicted. Accordingly, a reconciliation to the most comparable GAAP financial metric is not available without unreasonable effort. Please note that the unavailable reconciling items could significantly impact the company’s results.
RECENT EVENTS
U.K. HOME OFFICE UPDATE
In
In 2023, the CMA imposed a legal order on Airwave which implemented the Airwave Charge Control. After the
On
The company's backlog for Airwave services contracted with the
CONFERENCE CALL AND WEBCAST
CONSOLIDATED GAAP RESULTS (presented in millions, except per share data)
A comparison of results from operations is as follows:
|
Q2 2024 |
Q2 2023 |
Net sales |
|
|
Gross margin |
|
|
Operating earnings |
|
|
Amounts attributable to |
|
|
Net earnings |
|
|
Diluted EPS |
|
|
Weighted average diluted common shares outstanding |
170.3 |
172.6 |
USE OF NON-GAAP FINANCIAL INFORMATION
In addition to the results presented in accordance with accounting principles generally accepted in the
Reconciliations: Details and reconciliations of such non-GAAP measurements to the corresponding GAAP measurements can be found at the end of this news release.
Free cash flow: Free cash flow represents net cash provided by operating activities less capital expenditures. The company believes that free cash flow is useful to investors as the basis for comparing its performance and coverage ratios with other companies in the company's industries, although the company's measure of free cash flow may not be directly comparable to similar measures used by other companies. This measure is also used as a component of incentive compensation.
Organic revenue: Organic revenue reflects net sales calculated under GAAP excluding net sales from acquired business owned for less than four full quarters. The company believes organic revenue provides useful information for evaluating the periodic growth of the business on a consistent basis and provides for a meaningful period-to-period comparison and analysis of trends in the business.
Net sales adjusted for the
Non-GAAP operating earnings, non-GAAP EPS and non-GAAP operating margin each excludes highlighted items, including share-based compensation expenses and intangible assets amortization expense, as follows:
Highlighted items: The company has excluded the effects of highlighted items including, but not limited to, acquisition-related transaction fees, tangible and intangible asset impairments, reorganization of business charges, certain non-cash pension adjustments, legal settlements and other contingencies, gains and losses on investments and businesses, Hytera-related legal expenses, gains and losses on the extinguishment of debt and the income tax effects of significant tax matters, from its non-GAAP operating expenses and net income measurements because the company believes that these historical items do not reflect expected future operating earnings or expenses and do not contribute to a meaningful evaluation of the company's current operating performance or comparisons to the company's past operating performance. For the purposes of management's internal analysis over operating performance, the company uses financial statements that exclude highlighted items, as these charges do not contribute to a meaningful evaluation of the company's current operating performance or comparisons to the company's past operating performance.
Hytera-Related Legal Expenses: On
On
Following the
In the first half of 2024, the parties engaged in competing litigation in the District Court and a court in
Management typically considers legal expenses associated with defending the company's intellectual property as “normal and recurring” and accordingly, Hytera-related legal expenses were included in both the company's GAAP and non-GAAP operating income for fiscal years 2017, 2018 and 2019. The company anticipates further expenses associated with Hytera-related litigation; however, as of 2020, the company believes that these expenses are no longer a part of the “normal and recurring” legal expenses incurred to operate its business. In addition, as any contingent or actual gains associated with the Hytera litigation are recognized, they will be similarly excluded from the company's non-GAAP operating income, consistent with the company's treatment of the
Share-based compensation expenses: The company has excluded share-based compensation expenses from its non-GAAP operating expenses and net income measurements. Although share-based compensation is a key incentive offered to the company’s employees and the company believes such compensation contributed to the revenue earned during the periods presented and also believes it will contribute to the generation of future period revenues, the company continues to evaluate its performance excluding share-based compensation expenses primarily because it represents a significant non-cash expense. Share-based compensation expenses will recur in future periods.
Intangible assets amortization expense: The company has excluded intangible assets amortization expense from its non-GAAP operating expenses and net income measurements primarily because it represents a non-cash expense and because the company evaluates its performance excluding intangible assets amortization expense. Amortization of intangible assets is consistent in amount and frequency but is significantly affected by the timing and size of the company’s acquisitions. Investors should note that the use of intangible assets contributed to the company’s revenues earned during the periods presented and will contribute to the company’s future period revenues as well. Intangible assets amortization expense will recur in future periods.
FORWARD LOOKING STATEMENTS
This news release contains "forward-looking statements" within the meaning of applicable federal securities law. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and generally include words such as “believes,” “expects,” “intends,” “anticipates,” “estimates” and similar expressions. The company can give no assurance that any actual or future results or events discussed in these statements will be achieved. Any forward-looking statements represent the company’s views only as of today and should not be relied upon as representing the company’s views as of any subsequent date. Readers are cautioned that such forward- looking statements are subject to a variety of risks and uncertainties that could cause the company’s actual results to differ materially from the statements contained in this release. Such forward-looking statements include, but are not limited to, Motorola Solutions’ financial outlook for the third quarter and full-year of 2024; the impact of the CMA's final decision and the Airwave Charge Control (including the company's actions in response); and the impact of the company's proceedings in the
ABOUT
GAAP-1 | ||||||
|
||||||
Condensed Consolidated Statements of Operations | ||||||
(In millions, except per share amounts) | ||||||
Three Months Ended | ||||||
|
|
|||||
Net sales from products |
$ |
1,563 |
|
$ |
1,349 |
|
Net sales from services |
|
1,065 |
|
|
1,054 |
|
Net sales |
|
2,628 |
|
|
2,403 |
|
Costs of products sales |
|
653 |
|
|
636 |
|
Costs of services sales |
|
636 |
|
|
578 |
|
Costs of sales |
|
1,289 |
|
|
1,214 |
|
Gross margin |
|
1,339 |
|
|
1,189 |
|
Selling, general and administrative expenses |
|
430 |
|
|
390 |
|
Research and development expenditures |
|
220 |
|
|
215 |
|
Other charges |
|
9 |
|
|
23 |
|
Intangibles amortization |
|
36 |
|
|
43 |
|
Operating earnings |
|
644 |
|
|
518 |
|
Other income (expense): | ||||||
Interest expense, net |
|
(69 |
) |
|
(57 |
) |
Other, net |
|
5 |
|
|
26 |
|
Total other expense |
|
(64 |
) |
|
(31 |
) |
Net earnings before income taxes |
|
580 |
|
|
487 |
|
Income tax expense |
|
135 |
|
|
114 |
|
Net earnings |
|
445 |
|
|
373 |
|
Less: Earnings attributable to non-controlling interests |
|
2 |
|
|
2 |
|
Net earnings attributable to |
|
443 |
|
|
371 |
|
Earnings per common share: | ||||||
Basic |
$ |
2.65 |
|
$ |
2.21 |
|
Diluted |
$ |
2.60 |
|
$ |
2.15 |
|
Weighted average common shares outstanding: | ||||||
Basic |
|
166.9 |
|
|
167.5 |
|
Diluted |
|
170.3 |
|
|
172.6 |
|
Percentage of |
||||||
Net sales from products |
|
59.5 |
% |
|
56.1 |
% |
Net sales from services |
|
40.5 |
% |
|
43.9 |
% |
Net sales |
|
100.0 |
% |
|
100.0 |
% |
Costs of products sales |
|
41.8 |
% |
|
47.1 |
% |
Costs of services sales |
|
59.7 |
% |
|
54.8 |
% |
Costs of sales |
|
49.0 |
% |
|
50.5 |
% |
Gross margin |
|
51.0 |
% |
|
49.5 |
% |
Selling, general and administrative expenses |
|
16.4 |
% |
|
16.2 |
% |
Research and development expenditures |
|
8.4 |
% |
|
8.9 |
% |
Other charges |
|
0.3 |
% |
|
1.0 |
% |
Intangibles amortization |
|
1.4 |
% |
|
1.8 |
% |
Operating earnings |
|
24.5 |
% |
|
21.6 |
% |
Other income (expense): | ||||||
Interest expense, net |
|
(2.6 |
)% |
|
(2.4 |
)% |
Gain on sales of investments and businesses, net |
|
— |
% |
|
— |
% |
Other, net |
|
0.2 |
% |
|
1.1 |
% |
Total other expense |
|
(2.4 |
)% |
|
(1.3 |
)% |
Net earnings before income taxes |
|
22.1 |
% |
|
20.3 |
% |
Income tax expense |
|
5.1 |
% |
|
4.7 |
% |
Net earnings |
|
16.9 |
% |
|
15.5 |
% |
Less: Earnings attributable to non-controlling interests |
|
0.1 |
% |
|
0.1 |
% |
Net earnings attributable to |
|
16.8 |
% |
|
15.4 |
% |
* Percentages may not add up due to rounding |
GAAP-2 | ||||||
|
||||||
Condensed Consolidated Statements of Operations |
||||||
(In millions, except per share amounts) |
||||||
Six Months Ended | ||||||
|
|
|||||
Net sales from products |
$ |
2,968 |
|
$ |
2,573 |
|
Net sales from services |
|
2,049 |
|
|
2,001 |
|
Net sales |
|
5,017 |
|
|
4,574 |
|
Costs of products sales |
|
1,252 |
|
|
1,209 |
|
Costs of services sales |
|
1,234 |
|
|
1,130 |
|
Costs of sales |
|
2,486 |
|
|
2,339 |
|
Gross margin |
|
2,531 |
|
|
2,235 |
|
Selling, general and administrative expenses |
|
827 |
|
|
757 |
|
Research and development expenditures |
|
437 |
|
|
426 |
|
Other charges |
|
28 |
|
|
37 |
|
Intangibles amortization |
|
76 |
|
|
98 |
|
Operating earnings |
|
1,163 |
|
|
917 |
|
Other income (expense): | ||||||
Interest expense, net |
|
(113 |
) |
|
(111 |
) |
Gain on sales of investments and businesses, net |
|
— |
|
|
1 |
|
Other, net |
|
(560 |
) |
|
39 |
|
Total other expense |
|
(673 |
) |
|
(71 |
) |
Net earnings before income taxes |
|
490 |
|
|
846 |
|
Income tax expense |
|
83 |
|
|
194 |
|
Net earnings |
|
407 |
|
|
652 |
|
Less: Earnings attributable to non-controlling interests |
|
3 |
|
|
3 |
|
Net earnings attributable to |
$ |
404 |
|
$ |
649 |
|
Earnings per common share: | ||||||
Basic |
$ |
2.43 |
|
$ |
3.88 |
|
Diluted |
$ |
2.37 |
|
$ |
3.76 |
|
Weighted average common shares outstanding: | ||||||
Basic |
|
166.5 |
|
|
167.4 |
|
Diluted |
|
170.3 |
|
|
172.5 |
|
Percentage of |
||||||
Net sales from products |
|
59.2 |
% |
|
56.3 |
% |
Net sales from services |
|
40.8 |
% |
|
43.7 |
% |
Net sales |
|
100.0 |
% |
|
100.0 |
% |
Costs of products sales |
|
42.2 |
% |
|
47.0 |
% |
Costs of services sales |
|
60.2 |
% |
|
56.5 |
% |
Costs of sales |
|
49.6 |
% |
|
51.1 |
% |
Gross margin |
|
50.4 |
% |
|
48.9 |
% |
Selling, general and administrative expenses |
|
16.5 |
% |
|
16.6 |
% |
Research and development expenditures |
|
8.7 |
% |
|
9.3 |
% |
Other charges |
|
0.6 |
% |
|
0.8 |
% |
Intangibles amortization |
|
1.5 |
% |
|
2.1 |
% |
Operating earnings |
|
23.2 |
% |
|
20.0 |
% |
Other income (expense): | ||||||
Interest expense, net |
|
(2.3 |
)% |
|
(2.4 |
)% |
Gain on sales of investments and businesses, net |
|
— |
% |
|
— |
% |
Other, net |
|
(11.2 |
)% |
|
0.9 |
% |
Total other expense |
|
(13.4 |
)% |
|
(1.6 |
)% |
Net earnings before income taxes |
|
9.8 |
% |
|
18.5 |
% |
Income tax expense |
|
1.7 |
% |
|
4.2 |
% |
Net earnings |
|
8.1 |
% |
|
14.3 |
% |
Less: Earnings attributable to non-controlling interests |
|
0.1 |
% |
|
0.1 |
% |
Net earnings attributable to |
|
8.0 |
% |
|
14.2 |
% |
* Percentages may not add up due to rounding |
GAAP-3 | ||||
|
||||
Condensed Consolidated Balance Sheets | ||||
(In millions) | ||||
|
|
|||
Assets | ||||
Cash and cash equivalents |
$ |
1,381 |
$ |
1,705 |
Accounts receivable, net |
|
1,762 |
|
1,710 |
Contract assets |
|
1,210 |
|
1,102 |
Inventories, net |
|
803 |
|
827 |
Other current assets |
|
415 |
|
357 |
Current assets held for disposition |
|
— |
|
24 |
Total current assets |
|
5,571 |
|
5,725 |
Property, plant and equipment, net |
|
987 |
|
964 |
Operating lease assets |
|
527 |
|
495 |
Investments |
|
127 |
|
143 |
Deferred income taxes |
|
1,225 |
|
1,062 |
|
|
3,400 |
|
3,401 |
Intangible assets, net |
|
1,208 |
|
1,255 |
Other assets |
|
300 |
|
274 |
Non-current assets held for disposition |
|
— |
|
17 |
Total assets |
$ |
13,345 |
$ |
13,336 |
Liabilities and Stockholders' Equity | ||||
Current portion of long-term debt |
$ |
565 |
$ |
1,313 |
Accounts payable |
|
861 |
|
881 |
Contract liabilities |
|
1,852 |
|
2,037 |
Accrued liabilities |
|
1,366 |
|
1,504 |
Current liabilities held for disposition |
|
— |
|
1 |
Total current liabilities |
|
4,644 |
|
5,736 |
Long-term debt |
|
5,743 |
|
4,705 |
Operating lease liabilities |
|
421 |
|
407 |
Other liabilities |
|
1,720 |
|
1,741 |
Non-current liabilities held for disposition |
|
— |
|
8 |
|
|
802 |
|
724 |
Non-controlling interests |
|
15 |
|
15 |
Total liabilities and stockholders’ equity |
$ |
13,345 |
$ |
13,336 |
GAAP-4 | ||||||
|
||||||
Condensed Consolidated Statements of Cash Flows | ||||||
(In millions) | ||||||
Three Months Ended | ||||||
|
|
|||||
Operating | ||||||
Net earnings |
$ |
445 |
|
$ |
373 |
|
Adjustments to reconcile Net earnings to Net cash provided by operating activities: | ||||||
Depreciation and amortization |
|
83 |
|
|
87 |
|
Non-cash other charges (income) |
|
12 |
|
|
(11 |
) |
Share-based compensation expenses |
|
63 |
|
|
53 |
|
Changes in assets and liabilities, net of effects of acquisitions, dispositions, and foreign currency translation adjustments: | ||||||
Accounts receivable |
|
(170 |
) |
|
(169 |
) |
Inventories |
|
36 |
|
|
62 |
|
Other current assets and contract assets |
|
(60 |
) |
|
11 |
|
Accounts payable, accrued liabilities and contract liabilities |
|
(241 |
) |
|
(215 |
) |
Other assets and liabilities |
|
1 |
|
|
6 |
|
Deferred income taxes |
|
11 |
|
|
(104 |
) |
Net cash provided by operating activities |
|
180 |
|
|
93 |
|
Investing | ||||||
Acquisitions and investments, net |
|
(5 |
) |
|
(6 |
) |
Proceeds from sales of investments and businesses, net |
|
2 |
|
|
1 |
|
Capital expenditures |
|
(68 |
) |
|
(53 |
) |
Net cash used for investing activities |
|
(71 |
) |
|
(58 |
) |
Financing | ||||||
Repayments of debt |
|
— |
|
|
(1 |
) |
Issuances of common stock |
|
6 |
|
|
10 |
|
Purchases of common stock |
|
(71 |
) |
|
(224 |
) |
Payments of dividends |
|
(163 |
) |
|
(148 |
) |
Payments of dividends to non-controlling interests |
|
(3 |
) |
|
(3 |
) |
Net cash used for financing activities |
|
(231 |
) |
|
(366 |
) |
Effect of exchange rate changes on total cash and cash equivalents |
|
(9 |
) |
|
19 |
|
Net decrease in total cash and cash equivalents |
|
(131 |
) |
|
(312 |
) |
Cash and cash equivalents, beginning of period |
|
1,512 |
|
|
1,022 |
|
Cash and cash equivalents, end of period |
$ |
1,381 |
|
$ |
710 |
|
GAAP-5 | ||||||
|
||||||
Condensed Consolidated Statements of Cash Flows | ||||||
(In millions) | ||||||
Six Months Ended | ||||||
|
|
|||||
Operating | ||||||
Net earnings |
$ |
407 |
|
$ |
652 |
|
Adjustments to reconcile Net earnings to Net cash provided by operating activities: | ||||||
Depreciation and amortization |
|
166 |
|
|
185 |
|
Non-cash other charges (income) |
|
15 |
|
|
(4 |
) |
Share-based compensation expenses |
|
119 |
|
|
108 |
|
Gain on sales of investments and businesses, net |
|
— |
|
|
(1 |
) |
Loss from the extinguishment of Silver Lake Convertible Debt (Note 5) |
|
585 |
|
|
— |
|
Changes in assets and liabilities, net of effects of acquisitions, dispositions, and foreign currency translation adjustments: | ||||||
Accounts receivable |
|
(57 |
) |
|
10 |
|
Inventories |
|
29 |
|
|
36 |
|
Other current assets and contract assets |
|
(183 |
) |
|
(29 |
) |
Accounts payable, accrued liabilities and contract liabilities |
|
(331 |
) |
|
(751 |
) |
Other assets and liabilities |
|
(18 |
) |
|
(1 |
) |
Deferred income taxes |
|
(170 |
) |
|
(120 |
) |
Net cash provided by operating activities |
|
562 |
|
|
85 |
|
Investing | ||||||
Acquisitions and investments, net |
|
(42 |
) |
|
(10 |
) |
Proceeds from sales of investments and businesses, net |
|
38 |
|
|
6 |
|
Capital expenditures |
|
(114 |
) |
|
(107 |
) |
Net cash used for investing activities |
|
(118 |
) |
|
(111 |
) |
Financing | ||||||
Net proceeds from issuance of debt |
|
1,288 |
|
|
— |
|
Repayments of debt |
|
(1,593 |
) |
|
(1 |
) |
Issuances of common stock |
|
1 |
|
|
36 |
|
Purchases of common stock |
|
(110 |
) |
|
(364 |
) |
Payments of dividends |
|
(326 |
) |
|
(296 |
) |
Payments of dividends to non-controlling interests |
|
(3 |
) |
|
(4 |
) |
Net cash used for financing activities |
|
(743 |
) |
|
(629 |
) |
Effect of exchange rate changes on total cash and cash equivalents |
|
(25 |
) |
|
40 |
|
Net decrease in total cash and cash equivalents |
|
(324 |
) |
|
(615 |
) |
Cash and cash equivalents, beginning of period |
|
1,705 |
|
|
1,325 |
|
Cash and cash equivalents, end of period |
$ |
1,381 |
|
$ |
710 |
|
Non-GAAP-1 |
|||||||||||||
|
|||||||||||||
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow | |||||||||||||
(In millions) | |||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
|
|
|
|
||||||||||
Net cash provided by operating activities |
$ |
180 |
|
$ |
93 |
|
$ |
562 |
|
$ |
85 |
|
|
Capital expenditures |
|
(68 |
) |
|
(53 |
) |
|
(114 |
) |
|
(107 |
) |
|
Free cash flow |
$ |
112 |
|
$ |
40 |
|
$ |
448 |
|
$ |
(22 |
) |
Non-GAAP-2 |
|||||||||||||||
|
|||||||||||||||
Reconciliation of Net Earnings Attributable to MSI to Non-GAAP Net Earnings Attributable to MSI | |||||||||||||||
(In millions) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
Statement Line |
|
|
|
|
|||||||||||
Net earnings attributable to MSI |
$ |
443 |
|
$ |
371 |
|
$ |
404 |
|
$ |
649 |
|
|||
Non-GAAP adjustments before income taxes: | |||||||||||||||
Share-based compensation expenses | Cost of sales, SG&A and R&D |
|
63 |
|
|
53 |
|
|
119 |
|
|
108 |
|
||
Intangible assets amortization expense | Intangibles amortization |
|
36 |
|
|
43 |
|
|
76 |
|
|
98 |
|
||
Assessments of uncertain tax positions | Interest income, net, Other (income) expense |
|
20 |
|
|
— |
|
|
21 |
|
|
— |
|
||
Fair value adjustments to equity investments | Other (income) expense |
|
11 |
|
|
(16 |
) |
|
13 |
|
|
(19 |
) |
||
Hytera-related legal expenses | SG&A |
|
6 |
|
|
7 |
|
|
7 |
|
|
10 |
|
||
Reorganization of business charges | Cost of sales and Other charges (income) |
|
4 |
|
|
3 |
|
|
14 |
|
|
16 |
|
||
Acquisition-related transaction fees | Other charges (income) |
|
4 |
|
|
— |
|
|
7 |
|
|
2 |
|
||
Operating lease asset impairments | Other charges (income) |
|
1 |
|
|
1 |
|
|
4 |
|
|
4 |
|
||
Loss from the extinguishment of Silver Lake Convertible Debt | Other (income) expense |
|
— |
|
|
— |
|
|
585 |
|
|
— |
|
||
Legal settlements | Other charges (income) |
|
— |
|
|
— |
|
|
6 |
|
|
— |
|
||
Investment impairments | Other (income) expense |
|
— |
|
|
3 |
|
|
3 |
|
|
9 |
|
||
Environmental reserve expense | Other charges (income) |
|
— |
|
|
15 |
|
|
— |
|
|
15 |
|
||
Fixed asset impairments | Other charges (income) |
|
— |
|
|
1 |
|
|
— |
|
|
3 |
|
||
Gain on sales of investments | (Gain) or loss on sales of investments and businesses, net |
|
— |
|
|
— |
|
|
— |
|
|
(1 |
) |
||
Total Non-GAAP adjustments before income taxes |
$ |
145 |
|
$ |
110 |
|
$ |
855 |
|
$ |
245 |
|
|||
Income tax expense on Non-GAAP adjustments |
|
36 |
|
|
23 |
|
|
225 |
|
|
52 |
|
|||
Total Non-GAAP adjustments after income taxes |
|
109 |
|
|
87 |
|
|
630 |
|
|
193 |
|
|||
Non-GAAP Net earnings attributable to MSI |
$ |
552 |
|
$ |
458 |
|
$ |
1,034 |
|
$ |
842 |
|
|||
*Income tax expense on Non-GAAP adjustments is inclusive of |
|||||||||||||||
Calculation of Non-GAAP Tax Rate | |||||||||||||||
(In millions) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
|
|
|
|
||||||||||||
Net earnings before income taxes |
$ |
580 |
|
$ |
487 |
|
$ |
490 |
|
$ |
846 |
|
|||
Total Non-GAAP adjustments before income taxes* |
|
145 |
|
|
110 |
|
|
855 |
|
|
245 |
|
|||
Non-GAAP Net earnings before income taxes |
|
725 |
|
|
597 |
|
$ |
1,345 |
|
$ |
1,091 |
|
|||
Income tax expense |
|
135 |
|
|
114 |
|
|
83 |
|
|
194 |
|
|||
Income tax expense on Non-GAAP adjustments** |
|
36 |
|
|
23 |
|
|
225 |
|
|
52 |
|
|||
Total Non-GAAP Income tax expense |
|
171 |
|
|
137 |
|
|
308 |
|
|
246 |
|
|||
Non-GAAP Tax rate |
|
23.6 |
% |
|
22.9 |
% |
|
22.9 |
% |
|
22.5 |
% |
|||
*See reconciliation on Non-GAAP-2 table above for detail on Non-GAAP adjustments before income taxes | |||||||||||||||
**Income tax impact of highlighted items | |||||||||||||||
Reconciliation of Earnings Per Share to Non-GAAP Earnings Per Share* | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
Statement Line |
|
|
|
|
|||||||||||
Net earnings attributable to MSI |
$ |
2.60 |
|
$ |
2.15 |
|
$ |
2.37 |
|
$ |
3.76 |
|
|||
Non-GAAP adjustments before income taxes: | |||||||||||||||
Share-based compensation expenses | Cost of sales, SG&A and R&D |
|
0.37 |
|
|
0.30 |
|
|
0.70 |
|
|
0.63 |
|
||
Intangible assets amortization expense | Intangibles amortization |
|
0.21 |
|
|
0.24 |
|
|
0.44 |
|
|
0.57 |
|
||
Assessments of uncertain tax positions | Interest income, net, Other (income) expense |
|
0.12 |
|
|
— |
|
|
0.12 |
|
|
— |
|
||
Fair value adjustments to equity investments | Other (income) expense |
|
0.06 |
|
|
(0.09 |
) |
|
0.08 |
|
|
(0.11 |
) |
||
Hytera-related legal expenses | SG&A |
|
0.04 |
|
|
0.04 |
|
|
0.04 |
|
|
0.06 |
|
||
Reorganization of business charges | Cost of sales and Other charges (income) |
|
0.02 |
|
|
0.02 |
|
|
0.08 |
|
|
0.09 |
|
||
Acquisition-related transaction fees | Other charges (income) |
|
0.02 |
|
|
— |
|
|
0.04 |
|
|
0.01 |
|
||
Operating lease asset impairments | Other charges (income) |
|
0.01 |
|
|
0.01 |
|
|
0.02 |
|
|
0.02 |
|
||
Loss from the extinguishment of Silver Lake Convertible Debt | Other (income) expense |
|
— |
|
|
— |
|
|
3.43 |
|
|
— |
|
||
Legal settlements | Other charges (income) |
|
— |
|
|
— |
|
|
0.04 |
|
|
— |
|
||
Investment impairments | Other (income) expense |
|
— |
|
|
0.02 |
|
|
0.02 |
|
|
0.05 |
|
||
Environmental reserve expense | Other charges (income) |
|
— |
|
|
0.09 |
|
|
— |
|
|
0.09 |
|
||
Fixed asset impairments | Other charges (income) |
|
— |
|
|
0.01 |
|
|
— |
|
|
0.02 |
|
||
Gain on sales of investments | (Gain) or loss on sales of investments and businesses, net |
|
— |
|
|
— |
|
|
— |
|
|
(0.01 |
) |
||
Total Non-GAAP adjustments before income taxes |
$ |
0.85 |
|
$ |
0.64 |
|
$ |
5.01 |
|
$ |
1.42 |
|
|||
Income tax expense on Non-GAAP adjustments |
|
0.21 |
|
|
0.14 |
|
|
1.33 |
|
|
0.30 |
|
|||
Total Non-GAAP adjustments after income taxes |
|
0.64 |
|
|
0.50 |
|
|
3.68 |
|
|
1.12 |
|
|||
Non-GAAP Net earnings attributable to MSI |
$ |
3.24 |
|
$ |
2.65 |
|
$ |
6.05 |
|
$ |
4.88 |
|
|||
GAAP Diluted Weighted Average Common Shares |
|
170.3 |
|
|
172.6 |
|
|
170.3 |
|
|
172.5 |
|
|||
Adjusted for dilutive shares outstanding** |
|
— |
|
|
— |
|
|
0.5 |
|
|
— |
|
|||
Non-GAAP Diluted Weighted Average Common Shares |
|
170.3 |
|
|
172.6 |
|
|
170.8 |
|
|
172.5 |
|
|||
*Indicates Non-GAAP Diluted EPS | |||||||||||||||
** Under |
Non-GAAP-3 |
|||||||||||||||||||
|
|||||||||||||||||||
Reconciliations of Operating Earnings to Non-GAAP Operating Earnings and Operating Margin to Non-GAAP Operating Margin | |||||||||||||||||||
(In millions) | |||||||||||||||||||
Three Months Ended | |||||||||||||||||||
|
|
||||||||||||||||||
Products and Systems Integration |
Software and Services |
Total |
Products and Systems Integration |
Software and Services |
Total | ||||||||||||||
Net sales |
$ |
1,658 |
|
$ |
970 |
|
$ |
2,628 |
|
$ |
1,437 |
|
$ |
966 |
|
$ |
2,403 |
|
|
Operating earnings ("OE") |
|
379 |
|
|
265 |
|
|
644 |
|
|
212 |
|
|
306 |
|
|
518 |
|
|
Above OE non-GAAP adjustments: | |||||||||||||||||||
Share-based compensation expenses |
|
44 |
|
|
19 |
|
|
63 |
|
|
38 |
|
|
15 |
|
|
53 |
|
|
Intangible assets amortization expense |
|
8 |
|
|
28 |
|
|
36 |
|
|
10 |
|
|
33 |
|
|
43 |
|
|
Hytera-related legal expenses |
|
6 |
|
|
— |
|
|
6 |
|
|
7 |
|
|
— |
|
|
7 |
|
|
Reorganization of business charges |
|
6 |
|
|
(2 |
) |
|
4 |
|
|
6 |
|
|
(3 |
) |
|
3 |
|
|
Acquisition-related transaction fees |
|
1 |
|
|
3 |
|
|
4 |
|
|
— |
|
|
— |
|
|
— |
|
|
Operating lease asset impairments |
|
1 |
|
|
— |
|
|
1 |
|
|
1 |
|
|
— |
|
|
1 |
|
|
Environmental reserve expense |
|
— |
|
|
— |
|
|
— |
|
|
10 |
|
|
5 |
|
|
15 |
|
|
Fixed asset impairments |
|
— |
|
|
— |
|
|
— |
|
|
1 |
|
|
— |
|
|
1 |
|
|
Total above-OE non-GAAP adjustments |
|
66 |
|
|
48 |
|
|
114 |
|
|
73 |
|
|
50 |
|
|
123 |
|
|
Operating earnings after non-GAAP adjustments |
$ |
445 |
|
$ |
313 |
|
$ |
758 |
|
$ |
285 |
|
$ |
356 |
|
$ |
641 |
|
|
Operating earnings as a percentage of net sales - GAAP |
|
22.9 |
% |
|
27.3 |
% |
|
24.5 |
% |
|
14.8 |
% |
|
31.7 |
% |
|
21.6 |
% |
|
Operating earnings as a percentage of net sales - after non-GAAP adjustments |
|
26.8 |
% |
|
32.3 |
% |
|
28.8 |
% |
|
19.8 |
% |
|
36.9 |
% |
|
26.7 |
% |
Non-GAAP-4 |
|||||||||||||||||||
|
|||||||||||||||||||
Reconciliations of Operating Earnings to Non-GAAP Operating Earnings and Operating Margin to Non-GAAP Operating Margin | |||||||||||||||||||
(In millions) | |||||||||||||||||||
Six Months Ended | |||||||||||||||||||
|
|
||||||||||||||||||
Products and Systems Integration |
Software and Services |
Total |
Products and Systems Integration |
Software and Services |
Total | ||||||||||||||
Net sales |
$ |
3,149 |
|
$ |
1,868 |
|
$ |
5,017 |
|
$ |
2,740 |
|
$ |
1,834 |
|
$ |
4,574 |
|
|
Operating earnings ("OE") |
|
689 |
|
|
474 |
|
|
1163 |
|
|
388 |
|
|
529 |
|
|
917 |
|
|
Above OE non-GAAP adjustments: | |||||||||||||||||||
Share-based compensation expenses |
|
83 |
|
|
36 |
|
|
119 |
|
|
78 |
|
|
30 |
|
|
108 |
|
|
Intangible assets amortization expense |
|
17 |
|
|
59 |
|
|
76 |
|
|
23 |
|
|
75 |
|
|
98 |
|
|
Reorganization of business charges |
|
14 |
|
|
— |
|
|
14 |
|
|
17 |
|
|
(1 |
) |
|
16 |
|
|
Hytera-related legal expenses |
|
7 |
|
|
— |
|
|
7 |
|
|
10 |
|
|
— |
|
|
10 |
|
|
Acquisition-related transaction fees |
|
1 |
|
|
6 |
|
|
7 |
|
|
— |
|
|
2 |
|
|
2 |
|
|
Legal settlements |
|
1 |
|
|
5 |
|
|
6 |
|
|
— |
|
|
— |
|
|
— |
|
|
Operating lease asset impairments |
|
3 |
|
|
1 |
|
|
4 |
|
|
3 |
|
|
1 |
|
|
4 |
|
|
Environmental reserve expense |
|
— |
|
|
— |
|
|
— |
|
|
10 |
|
|
5 |
|
|
15 |
|
|
Fixed asset impairments |
|
— |
|
|
— |
|
|
— |
|
|
2 |
|
|
1 |
|
|
3 |
|
|
Total above-OE non-GAAP adjustments |
|
126 |
|
|
107 |
|
|
233 |
|
|
143 |
|
|
113 |
|
|
256 |
|
|
Operating earnings after non-GAAP adjustments |
$ |
815 |
|
$ |
581 |
|
$ |
1,396 |
|
$ |
531 |
|
$ |
642 |
|
$ |
1,173 |
|
|
Operating earnings as a percentage of net sales - GAAP |
|
21.9 |
% |
|
25.4 |
% |
|
23.2 |
% |
|
14.2 |
% |
|
28.8 |
% |
|
20.0 |
% |
|
Operating earnings as a percentage of net sales - after non-GAAP adjustments |
|
25.9 |
% |
|
31.1 |
% |
|
27.8 |
% |
|
19.4 |
% |
|
35.0 |
% |
|
25.6 |
% |
Non-GAAP-5 |
||||||||
|
||||||||
Reconciliation of Revenue to Non-GAAP Organic Revenue | ||||||||
(In millions) | ||||||||
Three Months Ended | ||||||||
|
|
% Change | ||||||
Net sales |
$ |
2,628 |
$ |
2,403 |
9 |
% |
||
Non-GAAP adjustments: | ||||||||
Sales from acquisitions |
|
13 |
|
— |
||||
Organic revenue |
$ |
2,615 |
$ |
2,403 |
9 |
% |
||
Six Months Ended | ||||||||
|
|
% Change | ||||||
Net sales |
$ |
5,017 |
$ |
4,574 |
10 |
% |
||
Non-GAAP adjustments: | ||||||||
Sales from acquisitions |
|
22 |
|
— |
||||
Organic revenue |
$ |
4,995 |
$ |
4,574 |
9 |
% |
Non-GAAP-6 |
|||||||||||||||||||
|
|||||||||||||||||||
Reconciliation of |
|||||||||||||||||||
(In millions) | |||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||
|
|
% Change |
|
|
% Change | ||||||||||||||
Software and Services net sales |
$ |
970 |
|
$ |
966 |
|
— |
% |
$ |
1,868 |
|
$ |
1,834 |
|
2 |
% |
|||
|
|
(93 |
) |
|
(177 |
) |
|
(195 |
) |
|
(333 |
) |
|||||||
Software and Services net sales adjusted for the |
$ |
877 |
|
$ |
789 |
|
11 |
% |
$ |
1,673 |
|
$ |
1,501 |
|
11 |
% |
|||
Net sales |
$ |
2,628 |
|
$ |
2,403 |
|
9 |
% |
$ |
5,017 |
|
$ |
4,574 |
|
10 |
% |
|||
|
|
(93 |
) |
|
(177 |
) |
|
(195 |
) |
|
(333 |
) |
|||||||
Net sales adjusted for the |
$ |
2,535 |
|
$ |
2,226 |
|
14 |
% |
$ |
4,822 |
|
$ |
4,241 |
|
14 |
% |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240801182225/en/
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