Company raises full-year revenue and earnings
outlook again
- Sales of $2.6 billion, up 8% versus a year ago
- Software and Services sales up 12%
- Products and Systems Integration sales up 5%
- GAAP earnings per share (EPS) of $2.70, up 66% versus a year
ago
- Non-GAAP EPS* of $3.19, up 6% versus a year ago
- Generated $714 million of operating cash flow, up $326 million
versus a year ago
- Record Q3 ending backlog of $14.3 billion, up 6% versus a year
ago
Motorola Solutions, Inc. (NYSE: MSI) today reported its earnings
results for the third quarter of 2023.
“Q3 was another strong quarter, with record third-quarter
revenue, earnings and cash flow,” said Greg Brown, chairman and CEO
of Motorola Solutions. “Safety and security have never been more
important and we continue to see robust demand which drove our
record Q3 backlog. As a result, we’re again raising our revenue and
earnings expectations for the full year.”
KEY FINANCIAL RESULTS (presented in millions, except per
share data and percentages)
Q3 2023
Q3 2022
% Change
Sales
$2,556
$2,373
8 %
GAAP
Operating Earnings
$639
$373
71 %
% of Sales
25.0 %
15.7 %
EPS
$2.70
$1.63
66 %
Non-GAAP*
Operating Earnings
$741
$676
10 %
% of Sales
29.0 %
28.5 %
EPS
$3.19
$3.00
6 %
Products and Systems Integration
Segment
Sales
$1,612
$1,529
5 %
GAAP Operating Earnings
$364
$303
20 %
% of Sales
22.6 %
19.8 %
Non-GAAP Operating Earnings*
$420
$375
12 %
% of Sales
26.1 %
24.5 %
Software and Services Segment
Sales
$944
$844
12 %
GAAP Operating Earnings
$275
$70
293 %
% of Sales
29.1 %
8.3 %
Non-GAAP Operating Earnings*
$321
$301
7 %
% of Sales
34.0 %
35.7 %
*Non-GAAP financial information excludes
the after-tax impact of approximately $0.49 per diluted share
related to highlighted items, including share-based compensation
expenses and intangible assets amortization expense. Details
regarding these non-GAAP adjustments and the use of non-GAAP
measures are included later in this news release.
OTHER SELECTED FINANCIAL RESULTS
- Revenue - Sales were $2.6 billion, up 8% from the
year-ago quarter driven by growth in North America and
International. Revenue from acquisitions was $19 million and
currency tailwinds were $13 million in the quarter. The Products
and Systems Integration segment grew 5%, driven by growth in land
mobile radio communications ("LMR") and video security and access
control ("Video"). The Software and Services segment grew 12%,
driven by growth in command center, LMR and Video, partially offset
by the revenue deferral for Airwave attributed to the pricing
control in the remedies order as previously noted.
- Operating margin - GAAP operating margin was 25.0% of
sales, up from 15.7% in the year-ago quarter primarily due to the
$147 million fixed asset impairment charge related to the exit from
the Emergency Services Network ("ESN") contract in the U.K.
recorded in the prior year. Non-GAAP operating margin was 29.0% of
sales, up 50 basis points from 28.5% in the year-ago quarter,
driven by higher sales, lower material costs and improved operating
leverage, partially offset by the revenue deferral for Airwave and
mix in the Products and System Integration segment.
- Taxes - The GAAP effective tax rate was 21.5%, up from
15.9% in the year-ago quarter. The non-GAAP effective tax rate was
22.7%, up from 19.7% in the year-ago quarter. The increase in both
the GAAP and non-GAAP tax rate was primarily driven by lower
benefits from stock-based compensation recognized in the current
year.
- Cash flow - Operating cash flow was $714 million,
compared to $388 million in the year-ago quarter and free cash flow
was $649 million compared to $318 million in the year-ago quarter.
Both the operating cash flow and free cash flow for the quarter
increased primarily due to higher earnings, net of non-cash
charges, and improved working capital.
- Capital allocation - During the quarter, the company
repurchased $322 million of shares, paid $147 million in cash
dividends, and incurred $65 million of capital expenditures.
- Backlog - The company ended the quarter with record Q3
backlog of $14.3 billion, up 6% or $764 million from the year-ago
quarter, inclusive of $321 million of favorable currency rates.
Products and Systems Integration segment backlog was up $62
million, or 1%, driven by continued strong demand in North America.
Software and Services segment backlog was up $702 million, or 8%,
inclusive of $294 million of favorable currency rates, driven by
increases in multi-year software and services contracts in North
America, partially offset by revenue recognition for the Airwave
contract.
NOTABLE WINS AND ACHIEVEMENTS
Software and Services
- $23M LMR service agreement for a large European customer
- $23M LMR service agreement for East Bay Regional Communication
Systems
- $20M LMR service agreement for the Los Angeles Police
Department
- $12M command center order for Tarrant County 9-1-1 District,
TX
- $8M body-worn camera order for the Metro Nashville Police
Department
Products and Systems
Integration
- $75M P25 device order for a U.S. federal customer
- $55M P25 system order for a Southeast Asia customer
- $42M P25 device order for the Texas Department of Public
Safety
- $30M P25 device order for a U.S. federal customer
- $20M P25 device order for Indiana State Police
- $3M fixed video expansion order for a U.S. federal
customer
BUSINESS OUTLOOK
- Fourth quarter 2023 - The company expects revenue growth
of approximately 4%, compared to the fourth quarter of 2022. The
company expects non-GAAP EPS in the range of $3.60 to $3.65 per
share. This assumes approximately 171 million fully diluted shares
and a non-GAAP effective tax rate of approximately 24%.
- Full-year 2023 - The company now expects revenue in the
range of $9.930 billion to $9.945 billion, up from its prior
guidance of $9.875 billion to $9.900 billion, and non-GAAP EPS of
between $11.65 and $11.70 per share, up from its prior guidance of
between $11.40 and $11.48 per share. This outlook assumes
approximately $40 million in foreign exchange headwinds,
approximately 172 million fully diluted shares and a non-GAAP
effective tax rate of approximately 23%.
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
CMA UPDATE
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 Services market. This
investigation included Airwave, the company's private mobile radio
communications network that it acquired in 2016. Airwave provides
mission-critical voice and data communications to emergency
services and other agencies in Great Britain.
On April 5, 2023, the CMA issued its final decision which stated
it will impose a prospective price control on Airwave. The company
strongly disagrees with the CMA’s final decision and it filed an
appeal with the Competition Appeal Tribunal (“CAT”) on June 5,
2023. On July 31, 2023, the CMA adopted a remedies order which
implements the price control set out in its final decision;
however, the remedies order has been suspended until the CAT’s
judgment on the company’s appeal. The CAT appeal hearing took place
on August 2 and 3, 2023. Depending on the outcome, further appeals
may occur throughout 2023 and 2024.
Based on the adoption of the remedies order, since August 1,
2023, revenue under the Airwave contract has been deferred and
recognized in accordance with the prospective price control, which
will continue until a successful appeal. The company estimates a
year-over-year reduction in Airwave revenue of approximately $80
million in 2023, driven by the deferral of revenue, offset by
incremental ongoing services and favorable foreign exchange rates.
Meanwhile, the company's backlog continues to remain at original
contract terms until new pricing is final. The company has tested
its Airwave asset group for impairment, noting the assets are
expected to be recoverable.
MACROECONOMIC EVENTS
Since the beginning of the COVID-19 pandemic, the company has
navigated disruptions in its supply chain, in particular challenges
in procuring certain semiconductor components along with diminished
transportation capacity and higher freight costs. During the first
nine months of 2023, the company has experienced gradual
improvement in the market conditions influenced by the effects of
the COVID-19 pandemic and the inflationary cost environment,
particularly with respect to availability of materials in the
semiconductor market. Where appropriate, the company has taken
pricing actions around its product and service offerings to
mitigate its exposure to inflationary pressures and have benefited
from these adjustments during the first nine months of 2023. The
company expects to continue to benefit from such adjustments in the
last quarter of 2023. The company remains focused on improving its
supplier network, engineering alternative designs and working to
reduce supply shortages and effectively manage costs. In addition,
the company continues to actively manage its inventory in an effort
to enable continuity of supply and services to its customers, which
includes diversifying the footprint of its supply chain operations.
The company expects to maintain elevated levels of inventory until
supply conditions stabilize.
CONFERENCE CALL AND WEBCAST Motorola Solutions will host
its quarterly conference call beginning at 4 p.m. U.S. Central Time
(5 p.m. U.S. Eastern Time) on Thursday, November 2. The conference
call will be webcast live at www.motorolasolutions.com/investors/.
An archive of the webcast will be available for a limited period of
time thereafter.
CONSOLIDATED GAAP RESULTS (presented in millions,
except per share data)
A comparison of results from operations is as follows:
Q3 2023
Q3 2022
Net sales
$2,556
$2,373
Gross margin
$1,280
$1,031
Operating earnings
$639
$373
Amounts attributable to Motorola
Solutions, Inc. common stockholders
Net earnings
$464
$279
Diluted EPS
$2.70
$1.63
Weighted average diluted common shares
outstanding
171.7
171.5
USE OF NON-GAAP FINANCIAL INFORMATION
In addition to the results presented in accordance with
accounting principles generally accepted in the U.S. ("GAAP")
included in this news release, Motorola Solutions also has included
non-GAAP measurements of results, including free cash flow,
non-GAAP operating earnings, non-GAAP EPS, non-GAAP operating
margin, non-GAAP tax rate and organic revenue. The company has
provided these non-GAAP measurements to help investors better
understand its core operating performance, enhance comparisons of
core operating performance from period-to-period and allow better
comparisons of its operating performance to that of its
competitors. Among other things, management uses these operating
results, excluding the identified items, to evaluate the
performance of its businesses and to evaluate results relative to
certain incentive compensation targets. Management uses operating
results excluding these items because it believes these
measurements enable it to make better period-to-period evaluations
of the financial performance of its core business operations. The
non-GAAP measurements are intended only as a supplement to the
comparable GAAP measurements and the company compensates for the
limitations inherent in the use of non-GAAP measurements by using
GAAP measures in conjunction with the non-GAAP measurements. As a
result, investors should consider these non-GAAP measurements in
addition to, and not in substitution for or as superior to, GAAP
measurements.
Reconciliations: Details and reconciliations of such non-GAAP
measurements to the corresponding GAAP measurements can be found at
the end of this news release.
Free cash flow: Free cash flow represents net cash provided by
operating activities less capital expenditures. The company
believes that free cash flow is useful to investors as the basis
for comparing its performance and coverage ratios with other
companies in the company's industries, although the company's
measure of free cash flow may not be directly comparable to similar
measures used by other companies. This measure is also used as a
component of incentive compensation.
Organic revenue: Organic revenue reflects net sales calculated
under GAAP excluding net sales from acquired business owned for
less than four full quarters. The company believes organic revenue
provides useful information for evaluating the periodic growth of
the business on a consistent basis and provides for a meaningful
period-to-period comparison and analysis of trends in the
business.
Non-GAAP operating earnings, non-GAAP EPS and non-GAAP operating
margin each excludes highlighted items, including share-based
compensation expenses and intangible assets amortization expense,
as follows:
Highlighted items: The company has excluded the effects of
highlighted items including, but not limited to,
acquisition-related transaction fees, tangible and intangible asset
impairments, reorganization of business charges, certain non-cash
pension adjustments, legal settlements and other contingencies,
gains and losses on investments and businesses, Hytera-related
legal expenses, gains and losses on the extinguishment of debt and
the income tax effects of significant tax matters, from its
non-GAAP operating expenses and net income measurements because the
company believes that these historical items do not reflect
expected future operating earnings or expenses and do not
contribute to a meaningful evaluation of the company's current
operating performance or comparisons to the company's past
operating performance. For the purposes of management's internal
analysis over operating performance, the company uses financial
statements that exclude highlighted items, as these charges do not
contribute to a meaningful evaluation of the company's current
operating performance or comparisons to the company's past
operating performance.
Hytera-Related Legal Expenses: On March 14, 2017, the company
filed a complaint in the U.S. District Court for the Northern
District of Illinois (the “Court”) against Hytera Communications
Corporation Limited of Shenzhen, China; Hytera America, Inc.; and
Hytera Communications America (West), Inc. (collectively,
“Hytera”), alleging trade secret theft and copyright infringement
and seeking, among other things, injunctive relief, compensatory
damages and punitive damages. On February 14, 2020, the company
announced that a jury decided in the company's favor in its trade
secret theft and copyright infringement case. In connection with
this verdict, the jury awarded the company $345.8 million in
compensatory damages and $418.8 million in punitive damages, for a
total of $764.6 million. In a series of post-trial rulings in 2021,
the Court subsequently reduced the judgment to $543.7 million, but
also ordered Hytera to pay the company $51.1 million in
pre-judgment interest and $2.6 million in costs, as well as $34.2
million in attorneys fees. The company continues to seek collection
of the judgment through the ongoing legal process.
On December 17, 2020, the Court held that Hytera must pay the
company a forward-looking reasonable royalty on products that use
the company’s stolen trade secrets, and on December 15, 2021, set
royalty rates for Hytera's sale of relevant products from July 1,
2019 forward. On July 5, 2022, the Court ordered that Hytera pay
into a third-party escrow on July 31, 2022, the royalties owed to
the company based on the sale of relevant products from July 1,
2019 to June 30, 2022. Hytera failed to make the required royalty
payment on July 31, 2022. On August 1, 2022, Hytera filed a motion
to modify or stay the Court’s previous July 5, 2022 royalty order,
which the Court denied on July 11, 2023. On August 3, 2022, the
company filed a motion seeking to hold Hytera in civil contempt for
violating the royalty order by not making the required royalty
payment on July 31, 2022. On August 26, 2023, the Court granted the
company's contempt motion. As a result, on September 1, 2023,
Hytera made a payment of $56 million into the third-party escrow.
In addition to the September 1, 2023 payment of $56 million, Hytera
has made de minimis regular quarterly royalty payments into the
third-party escrow from October 2022 through October 2023. The
aggregate amount paid into escrow will not be recognized until all
contingencies are resolved and such amount is released from
escrow.
On August 2, 2022, Hytera appealed the Court’s July 5, 2022
judgment with the U.S. Court of Appeals for the Seventh Circuit
(the "Court of Appeals").The company filed its cross-appeal on
August 5, 2022. The parties have now submitted all briefs and
responses on Hytera's appeal and the company's cross-appeal. The
Court of Appeals set an oral argument date of December 5, 2023.
Separate from the company's litigation with Hytera, on May 27,
2020, Hytera America, Inc. and Hytera Communications America
(West), Inc. each filed for Chapter 11 bankruptcy protection in the
U.S. Bankruptcy Court for the Central District of California (the
“Bankruptcy Court”). On February 11, 2022, the Court entered an
order to confirm the liquidation plan for the two Hytera entities
and the distributions were made on February 25, 2022 to the
creditors, including $13 million to the company. On December 22,
2022, an additional distribution of $2 million was made to the
Company as well as an assignment of various delinquent accounts
receivable of the bankrupt Hytera entities. The gain for the two
monetary distributions were recorded to Other charges (income).
Management typically considers legal expenses associated with
defending the company's intellectual property as “normal and
recurring” and accordingly, Hytera-related legal expenses were
included in both the company's GAAP and non-GAAP operating income
for fiscal years 2017, 2018 and 2019. The company anticipates
further expenses associated with Hytera-related litigation;
however, as of 2020, the company believes that these expenses are
no longer a part of the “normal and recurring” legal expenses
incurred to operate its business. In addition, as any contingent or
actual gains associated with the Hytera litigation are recognized,
they will be similarly excluded from the company's non-GAAP
operating income, consistent with the company's treatment of the
$15 million of proceeds realized in 2022. The company believes
after the jury award, the presentation of excluding both
Hytera-related legal expenses and gains related to awards better
aligns with how management evaluates the company's ongoing
underlying business performance.
Share-based compensation expenses: The company has excluded
share-based compensation expenses from its non-GAAP operating
expenses and net income measurements. Although share-based
compensation is a key incentive offered to the company’s employees
and the company believes such compensation contributed to the
revenue earned during the periods presented and also believes it
will contribute to the generation of future period revenues, the
company continues to evaluate its performance excluding share-based
compensation expenses primarily because it represents a significant
non-cash expense. Share-based compensation expenses will recur in
future periods.
Intangible assets amortization expense: The company has excluded
intangible assets amortization expense from its non-GAAP operating
expenses and net 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 fourth quarter and full-year of 2023
(including with respect to Airwave revenue); the impact of the
CMA's final decision regarding Airwave (including the appeal of the
final decision to the CAT); and the impact of the COVID-19
pandemic, supply chain constraints and inflation, including the
impact of actions taken by Motorola Solutions in response to such
events, on Motorola Solutions' business and results of operations.
Motorola Solutions cautions the reader that the risks and
uncertainties below, as well as those in Part I Item 1A of Motorola
Solutions' 2022 Annual Report on Form 10-K, Part II, Item 1A of
Motorola Solutions' Quarterly Report on Form 10-Q for the Second
Quarter of 2023 and in its other SEC filings available for free on
the SEC’s website at www.sec.gov and on Motorola Solutions’ website
at www.motorolasolutions.com, could cause Motorola Solutions’
actual results to differ materially from those estimated or
predicted in the forward-looking statements. Many of these risks
and uncertainties cannot be controlled by Motorola Solutions, and
factors that may impact forward-looking statements include, but are
not limited to: (i) the impact, including increased costs and
potential liabilities, associated with changes in laws and
regulations regarding privacy, data protection and information
security; (ii) challenges relating to existing or future
legislation and regulations pertaining to artificial intelligence
(“AI”), AI-enabled products and the use of biometrics and other
video analytics; (iii) the impact of government regulation of radio
frequencies; (iv) audits and regulations and laws applicable to our
U.S. government customer contracts and grants; (v) the impact,
including additional compliance obligations, associated with
existing or future telecommunications-related laws and regulations;
(vi) the evolving state of environmental regulation relating to
climate change, and the physical risks of climate change; (vii)
impact of product regulatory and safety, consumer, worker safety
and environmental laws; (viii) impact of tax matters; (ix) the
continuing and future impact of the COVID-19 pandemic on our
business; (x) impact of elevated inventory levels; (xi) additional
compliance obligations and increased risk, costs and competition
associated with the expansion of our technologies within our
Products and Systems Integration and Software and Services segments
(including, but not limited to, with respect to the CMA's final
decision regarding Airwave and our actions in response to such
decision, including the appeal of the final decision to the CAT);
(xii) the effectiveness of our investments in new products and
technologies; (xiii) the effectiveness of our strategic
acquisitions, including the integrations of such acquired
businesses; (xiv) increased cybersecurity threats, a security
breach or other significant disruption of our IT systems or those
of our outsource partners, suppliers or customers; (xv) our
inability to protect our intellectual property or potential
infringement of intellectual property rights of third parties;
(xvi) our license of the MOTOROLA, MOTO, MOTOROLA SOLUTIONS and the
Stylized M logo and all derivatives and formatives thereof from
Motorola Trademark Holdings, LLC; (xvii) the global nature of our
employees, customers, suppliers and outsource partners; (xviii) our
use of third-parties to develop, design and/or manufacture many of
our components and some of our products, and to perform portions of
our business operations; (xix) the inability of our subcontractors
to perform in a timely and compliant manner or adhere to our Human
Rights Policy; (xx) our inability to purchase at acceptable prices
a sufficient amount of materials, parts, and components, as well as
software and services, to meet the demands of our customers, and
any disruption to our suppliers or significant increase in the
price of supplies; (xxi) risks related to our large, multi-year
system and services contracts (including, but not limited to, with
respect to the ESN and Airwave contracts); (xxii) the inability of
our products to meet our customers’ expectations or regulatory or
industry standards; (xxiii) impact of current global economic and
political conditions in the markets in which we operate (including,
but not limited to inflation); (xxiv) impact of returns on pension
and retirement plan assets and interest rate changes; (xxv)
inability to access the capital markets for financing on acceptable
terms and conditions; (xxvi) inability to attract and retain senior
management and key employees; and (xxvii) the return of capital to
shareholders through dividends and/or repurchasing shares. Motorola
Solutions undertakes no obligation to publicly update any
forward-looking statement or risk factor, whether as a result of
new information, future events or otherwise.
ABOUT MOTOROLA SOLUTIONS
Motorola Solutions is a global leader in public safety and
enterprise security. Our solutions in land mobile radio
communications, video security and command center, bolstered by
managed & support services, create an integrated technology
ecosystem to help make communities safer and businesses stay
productive and secure. At Motorola Solutions, we’re ushering in a
new era in public safety and security. Learn more at
www.motorolasolutions.com.
GAAP-1
Motorola Solutions, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Operations
(In millions, except per share
amounts)
Three Months Ended September 30, 2023
October 1, 2022 Net sales from products
$
1,490
$
1,439
Net sales from services
1,066
934
Net sales
2,556
2,373
Costs of products sales
658
659
Costs of services sales
618
683
Costs of sales
1,276
1,342
Gross margin
1,280
1,031
Selling, general and administrative expenses
380
378
Research and development expenditures
215
197
Other charges
7
20
Intangibles amortization
39
63
Operating earnings
639
373
Other income (expense): Interest expense, net
(53
)
(60
)
Gains (losses) on sales of investments and business, net
(1
)
1
Other, net
7
19
Total other expense
(47
)
(40
)
Net earnings before income taxes
592
333
Income tax expense
127
53
Net earnings
465
280
Less: Earnings attributable to non-controlling interests
1
1
Net earnings attributable to Motorola Solutions, Inc.
$
464
$
279
Earnings per common share: Basic
$
2.78
$
1.67
Diluted
$
2.70
$
1.63
Weighted average common shares
outstanding: Basic
166.7
167.2
Diluted
171.7
171.5
Percentage of Net Sales* Net sales from
products
58.3
%
60.6
%
Net sales from services
41.7
%
39.4
%
Net sales
100.0
%
100.0
%
Costs of products sales
44.2
%
45.8
%
Costs of services sales
58.0
%
73.1
%
Costs of sales
49.9
%
56.6
%
Gross margin
50.1
%
43.4
%
Selling, general and administrative expenses
14.9
%
15.9
%
Research and development expenditures
8.4
%
8.3
%
Other charges
0.3
%
0.8
%
Intangibles amortization
1.5
%
2.7
%
Operating earnings
25.0
%
15.7
%
Other income (expense): Interest expense, net
(2.1
)%
(2.5
)%
Gains (losses) on sales of investments and business, net
-
%
-
%
Other, net
0.3
%
0.8
%
Total other expense
(1.8
)%
(1.7
)%
Net earnings before income taxes
23.2
%
14.0
%
Income tax expense
5.0
%
2.2
%
Net earnings
18.2
%
11.8
%
Less: Earnings attributable to non-controlling interests
-
%
-
%
Net earnings attributable to Motorola Solutions, Inc.
18.2
%
11.8
%
* Percentages may not add up due to rounding
GAAP-2
Motorola Solutions, Inc. and Subsidiaries Condensed
Consolidated Statements of Operations (In millions, except
per share amounts) Nine Months Ended September
30, 2023 October 1, 2022 Net sales from products
$
4,063
$
3,697
Net sales from services
3,066
2,708
Net sales
7,129
6,405
Costs of products sales
1,867
1,844
Costs of services sales
1,747
1,683
Costs of sales
3,614
3,527
Gross margin
3,515
2,878
Selling, general and administrative expenses
1,138
1,069
Research and development expenditures
640
577
Other charges
44
68
Intangibles amortization
137
194
Operating earnings
1,556
970
Other income (expense): Interest expense, net
(164
)
(171
)
Gains (losses) on sales of investments and businesses, net
-
3
Other, net
46
50
Total other expense
(118
)
(118
)
Net earnings before income taxes
1,438
852
Income tax expense
321
75
Net earnings
1,117
777
Less: Earnings attributable to non-controlling interests
4
3
Net earnings attributable to Motorola Solutions, Inc.
$
1,113
$
774
Earnings per common share: Basic
$
6.66
$
4.62
Diluted
$
6.46
$
4.50
Weighted average common shares
outstanding: Basic
167.2
167.5
Diluted
172.2
171.9
Percentage of Net Sales* Net sales from
products
57.0
%
57.7
%
Net sales from services
43.0
%
42.3
%
Net sales
100.0
%
100.0
%
Costs of products sales
46.0
%
49.9
%
Costs of services sales
57.0
%
62.1
%
Costs of sales
50.7
%
55.1
%
Gross margin
49.3
%
44.9
%
Selling, general and administrative expenses
16.0
%
16.7
%
Research and development expenditures
9.0
%
9.0
%
Other charges
0.6
%
1.1
%
Intangibles amortization
1.9
%
3.0
%
Operating earnings
21.8
%
15.1
%
Other income (expense): Interest expense, net
(2.3
)%
(2.7
)%
Gains (losses) on sales of investments and businesses, net
-
%
-
%
Other, net
0.6
%
0.8
%
Total other expense
(1.7
)%
(1.8
)%
Net earnings before income taxes
20.2
%
13.3
%
Income tax expense (benefit)
4.5
%
1.2
%
Net earnings
15.7
%
12.1
%
Less: Earnings attributable to non-controlling interests
0.1
%
-
%
Net earnings attributable to Motorola Solutions, Inc.
15.6
%
12.1
%
* Percentages may not add up due to rounding
GAAP-3
Motorola Solutions, Inc. and Subsidiaries Condensed
Consolidated Balance Sheets (In millions)
September 30, 2023 December 31, 2022 Assets Cash and
cash equivalents
$
910
$
1,325
Accounts receivable, net
1,667
1,518
Contract assets
1,092
974
Inventories, net
959
1,055
Other current assets
404
383
Total current assets
5,032
5,255
Property, plant and equipment, net
931
927
Operating lease assets
453
485
Investments
142
147
Deferred income taxes
1,047
1,036
Goodwill
3,278
3,312
Intangible assets, net
1,217
1,342
Other assets
336
310
Total assets
$
12,436
$
12,814
Liabilities and Stockholders' Equity Current portion of long-term
debt
$
1,313
$
1
Accounts payable
722
1,062
Contract liabilities
1,898
1,859
Accrued liabilities
1,355
1,638
Total current liabilities
5,288
4,560
Long-term debt
4,704
6,013
Operating lease liabilities
368
419
Other liabilities
1,700
1,691
Total Motorola Solutions, Inc. stockholders’ equity
362
116
Non-controlling interests
14
15
Total liabilities and stockholders’ equity
$
12,436
$
12,814
GAAP-4 Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (In
millions) Three Months Ended September 30,
2023 October 1, 2022 Operating Net earnings
$
465
$
280
Adjustments to reconcile Net earnings to Net cash provided by
operating activities: Depreciation and amortization
86
108
Non-cash other charges
12
1
Loss on ESN fixed asset impairment
-
147
Share-based compensation expenses
52
45
Losses (gains) on sales of investments and businesses, net
1
(1
)
Changes in assets and liabilities, net of effects of acquisitions,
dispositions, and foreign currency translation adjustments:
Accounts receivable
(164
)
(101
)
Inventories
58
(83
)
Other current assets and contract assets
(111
)
(24
)
Accounts payable, accrued liabilities and contract liabilities
217
116
Other assets and liabilities
(20
)
(9
)
Deferred income taxes
118
(91
)
Net cash provided by operating activities
714
388
Investing Acquisitions and investments, net
(2
)
(19
)
Proceeds from sales of investments and businesses, net
6
27
Capital expenditures
(65
)
(70
)
Net cash used for investing activities
(61
)
(62
)
Financing Issuances of common stock
40
86
Purchases of common stock
(306
)
(94
)
Payments of dividends
(147
)
(132
)
Payments of dividends to non-controlling interests
(1
)
-
Net cash used for financing activities
(414
)
(140
)
Effect of exchange rate changes on total cash and cash equivalents
(39
)
(81
)
Net increase in total cash and cash equivalents
200
105
Cash and cash equivalents, beginning of period
710
717
Cash and cash equivalents, end of period
$
910
$
822
GAAP-5 Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (In
millions) Nine Months Ended September 30,
2023 October 1, 2022 Operating Net earnings
$
1,117
$
777
Adjustments to reconcile Net earnings to Net cash provided by
operating activities: Depreciation and amortization
271
331
Non-cash other charges
8
20
Loss on ESN fixed asset impairment
-
147
Share-based compensation expenses
160
126
Gain on sales of investments and businesses, net
-
(3
)
Loss from the extinguishment of long-term debt
-
6
Changes in assets and liabilities, net of effects of acquisitions,
dispositions, and foreign currency translation adjustments:
Accounts receivable
(154
)
5
Inventories
94
(360
)
Other current assets and contract assets
(140
)
(38
)
Accounts payable, accrued liabilities and contract liabilities
(534
)
(183
)
Other assets and liabilities
(21
)
(66
)
Deferred income taxes
(2
)
(212
)
Net cash provided by operating activities
799
550
Investing Acquisitions and investments, net
(12
)
(590
)
Proceeds from sales of investments and businesses, net
12
38
Capital expenditures
(172
)
(183
)
Net cash used for investing activities
(172
)
(735
)
Financing Net proceeds from issuance of debt
-
595
Repayments of debt
(1
)
(283
)
Issuances of common stock
76
137
Purchases of common stock
(670
)
(749
)
Payments of dividends
(443
)
(398
)
Payments of dividends to non-controlling interests
(5
)
(6
)
Net cash used for financing activities
(1,043
)
(704
)
Effect of exchange rate changes on total cash and cash equivalents
1
(163
)
Net decrease in total cash and cash equivalents
(415
)
(1,052
)
Cash and cash equivalents, beginning of period
1,325
1,874
Cash and cash equivalents, end of period
$
910
$
822
Non-GAAP-1
Motorola Solutions, Inc. and Subsidiaries Reconciliation
of Net Cash Provided by Operating Activities to Free Cash Flow
(In millions) Three Months Ended
Nine Months Ended September 30, 2023
October 1, 2022 September 30, 2023 October 1,
2022 Net cash provided by operating activities
$
714
$
388
$
799
$
550
Capital expenditures
(65
)
(70
)
(172
)
(183
)
Free cash flow
$
649
$
318
$
627
$
367
Non-GAAP-2
Motorola Solutions, Inc. and Subsidiaries Reconciliation
of Net Earnings Attributable to MSI to Non-GAAP Net Earnings
Attributable to MSI (In millions) Three Months
Ended Nine Months Ended Statement Line
September 30, 2023 October 1, 2022 September 30,
2023 October 1, 2022 Net earnings attributable to MSI
$
464
$
279
$
1,113
$
774
Non-GAAP adjustments before income taxes: Share-based compensation
expenses Cost of sales, SG&A and R&D
$
52
$
45
$
160
$
126
Intangible assets amortization expense Intangibles amortization
39
63
137
194
Investment impairments Other (income) expense
7
-
16
1
Fair value adjustments to equity investments Other (income) expense
7
5
(12
)
35
Reorganization of business charges Cost of sales and Other charges
(income)
6
14
22
31
Hytera-related legal expenses SG&A
3
15
13
25
Acquisition-related transaction fees Other charges (income)
1
2
3
16
Legal settlements Other charges (Income)
1
12
1
23
Gains (losses) on sales of investments (Gain) or loss on sales of
investments and businesses, net
1
(1
)
-
(3
)
Environmental reserve expense Other charges (income)
-
-
15
-
Operating lease asset impairments Other charges (income)
-
4
4
16
Fixed asset impairments Other charges (income)
-
1
3
12
Adjustments to uncertain tax positions Interest income, net
-
1
-
(1
)
Loss on ESN fixed asset impairment Cost of sales
-
147
-
147
Loss from extinguishment of long-term debt Other (income) expense
-
-
-
6
Gain on Hytera legal settlement Other charges (income)
-
-
-
(13
)
Gain on TETRA Ireland equity method investment Other (income)
expense
-
-
-
(21
)
Total Non-GAAP adjustments before income taxes
$
117
$
308
$
362
$
594
Income tax expense on Non-GAAP adjustments
34
73
86
206
Total Non-GAAP adjustments after income taxes
83
235
276
388
Non-GAAP Net earnings attributable to MSI
$
547
$
514
$
1,389
$
1,162
Non-GAAP-3
Motorola Solutions, Inc. and Subsidiaries Reconciliations
of Operating Earnings to Non-GAAP Operating Earnings and Operating
Margin to Non-GAAP Operating Margin (In millions)
Three Months Ended
September 30, 2023
October 1, 2022
Products and
Systems Integration
Software and
Services
Total
Products and
Systems Integration
Software
and Services
Total
Net sales
$
1,612
$
944
$
2,556
$
1,529
$
844
$
2,373
Operating earnings ("OE")
364
275
639
303
70
373
Above OE non-GAAP adjustments: Share-based compensation expenses
38
14
52
33
12
45
Intangible assets amortization expense
9
30
39
15
48
63
Reorganization of business charges
5
1
6
3
11
14
Hytera-related legal expenses
3
-
3
15
-
15
Legal settlements
1
-
1
3
9
12
Acquisition-related transaction fees
-
1
1
1
1
2
Operating lease asset impairments
-
-
-
2
2
4
Fixed asset impairments
-
-
-
-
1
1
Loss on ESN fixed asset impairment
-
-
-
-
147
147
Total above-OE non-GAAP adjustments
56
46
102
72
231
303
Operating earnings after non-GAAP adjustments
$
420
$
321
$
741
$
375
$
301
$
676
Operating earnings as a percentage of net sales - GAAP
22.6
%
29.1
%
25.0
%
19.8
%
8.3
%
15.7
%
Operating earnings as a percentage of net sales - after non-GAAP
adjustments
26.1
%
34.0
%
29.0
%
24.5
%
35.7
%
28.5
%
Non-GAAP-4
Motorola Solutions, Inc. and Subsidiaries Reconciliations
of Operating Earnings to Non-GAAP Operating Earnings and Operating
Margin to Non-GAAP Operating Margin (In millions)
Nine Months Ended
September 30, 2023
October 1, 2022
Products and
Systems Integration
Software and
Services
Total
Products and
Systems Integration
Software and
Services
Total
Net sales
$
4,352
$
2,777
$
7,129
$
3,918
$
2,487
$
6,405
Operating earnings ("OE")
752
804
1,556
460
510
970
Above OE non-GAAP adjustments: Share-based compensation expenses
116
44
160
92
34
126
Intangible assets amortization expense
32
105
137
45
149
194
Reorganization of business charges
22
-
22
17
14
31
Environmental reserve expense
10
5
15
-
-
-
Hytera-related legal expenses
13
-
13
25
-
25
Operating lease asset impairments
3
1
4
13
3
16
Acquisition-related transaction fees
-
3
3
8
8
16
Fixed asset impairments
2
1
3
9
3
12
Legal settlements
1
-
1
3
20
23
Loss on ESN fixed asset impairment
-
-
-
-
147
147
Gain on Hytera legal settlement
-
-
-
(13
)
-
(13
)
Total above-OE non-GAAP adjustments
199
159
358
199
378
577
Operating earnings after non-GAAP adjustments
$
951
$
963
$
1,914
$
659
$
888
$
1,547
Operating earnings as a percentage of net sales - GAAP
17.3
%
29.0
%
21.8
%
11.7
%
20.5
%
15.1
%
Operating earnings as a percentage of net sales - after non-GAAP
adjustments
21.9
%
34.7
%
26.8
%
16.8
%
35.7
%
24.2
%
Non-GAAP-5 Motorola Solutions, Inc. and Subsidiaries
Reconciliation of Revenue to Non-GAAP Organic Revenue (In
millions) Three Months Ended September
30, 2023 October 1, 2022 % Change Net sales
$
2,556
$
2,373
8
%
Non-GAAP adjustments: Sales from acquisitions
20
1
Organic revenue
$
2,536
$
2,372
7
%
Nine Months Ended September 30,
2023 October 1, 2022 % Change Net sales
$
7,129
$
6,405
11
%
Non-GAAP adjustments: Sales from acquisitions
87
6
Organic revenue
$
7,042
$
6,399
10
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231102645797/en/
MEDIA CONTACT Alexandra Reynolds Motorola Solutions +1
312-965-3968 Alexandra.Reynolds@motorolasolutions.com
INVESTOR CONTACT Tim Yocum Motorola Solutions +1
847-576-6899 Tim.Yocum@motorolasolutions.com
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