Company Achieves Record Q4 and Full-Year Sales
and Earnings Per Share
- Sales of $2.8 billion, up 5% from Q4 in the prior year; up 10%
for full year
- Products and Systems Integration sales grew 4% in Q4; up 9% for
full year
- Software and Services sales grew 7% in Q4; up 10% for full
year
- Generated $1.2 billion of operating cash flow in Q4; $2.0
billion for full year, up 12%
- GAAP Q4 earnings per share (EPS) of $3.47, up 1%; $9.93 for
full year, up 25%
- Non-GAAP Q4 EPS* of $3.90, up 8% versus a year ago; $11.95 for
full year, up 15%
- Ending backlog of $14.3 billion, inclusive of record Products
and Systems Integration backlog
- Announced $2.0 billion increase to the share repurchase
authorization
- Acquired IPVideo, creator of the HALO Smart Sensor
Motorola Solutions, Inc. (NYSE: MSI) today reported its earnings
results for the fourth quarter and full year of 2023.
“2023 was an exceptional year, with record sales, earnings and
operating cash flow,” said Greg Brown, Chairman and CEO of Motorola
Solutions. “The strong growth we achieved reflects the continued
robust demand for our safety and security solutions that help
protect people, property and places. The momentum of our business
is strong and I’m very pleased with our position for another year
of revenue and earnings growth in 2024.”
KEY FINANCIAL RESULTS (presented in millions, except per
share data and percentages)
Fourth Quarter
Full Year
Q4 2023
Q4 2022
% Change
2023
2022
% Change
Sales
$2,848
$2,706
5 %
$9,978
$9,112
10 %
GAAP
Operating Earnings
$738
$692
7 %
$2,294
$1,661
38 %
% of Sales
25.9 %
25.6 %
23.0 %
18.2 %
EPS
$3.47
$3.43
1 %
$9.93
$7.93
25 %
Non-GAAP*
Operating Earnings
$870
$822
6 %
$2,784
$2,368
18 %
% of Sales
30.5 %
30.4 %
27.9 %
26.0 %
EPS
$3.90
$3.60
8 %
$11.95
$10.36
15 %
Products and Systems Integration
Segment
Sales
$1,890
$1,810
4 %
$6,242
$5,728
9 %
GAAP Operating Earnings
$492
$454
8 %
$1,244
$913
36 %
% of Sales
26.0 %
25.1 %
19.9 %
15.9 %
Non-GAAP Operating Earnings*
$567
$514
10 %
$1,518
$1,172
30 %
% of Sales
30.0 %
28.4 %
24.3 %
20.5 %
Software and Services Segment
Sales
$958
$896
7 %
$3,736
$3,384
10 %
GAAP Operating Earnings
$246
$238
3 %
$1,050
$748
40 %
% of Sales
25.7 %
26.6 %
28.1 %
22.1 %
Non-GAAP Operating Earnings*
$303
$308
(2) %
$1,266
$1,196
6 %
% of Sales
31.6 %
34.4 %
33.9 %
35.3 %
*Non-GAAP financial information excludes the after-tax impact of
approximately $0.43 for Q4 and $2.02 for FY 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 SELECT FOURTH-QUARTER FINANCIAL RESULTS
- Revenue - Fourth-quarter sales were $2.8 billion, up 5%
from the year-ago quarter driven by growth in North America and
International. Revenue from acquisitions was $17 million and the
impact of favorable foreign currency rates was $16 million. The
Products and Systems Integration segment grew 4% due to growth in
land mobile radio (LMR) and video security and access control
(Video). The Software and Services segment grew 7% driven by growth
in Video, command center and LMR, inclusive of the reduction in
Airwave revenue related to the pricing control in the United
Kingdom’s Competition and Markets Authority’s (the “CMA”) remedies
order.
- Operating margin - GAAP operating margin was 25.9% of
sales, up from 25.6% in the year-ago quarter. Non-GAAP operating
margin was 30.5% of sales, up from 30.4% in the year-ago quarter.
The increase in both GAAP and non-GAAP operating margin was
primarily driven by higher sales and lower direct material costs,
partially offset by the revenue reduction for Airwave.
- Taxes - The GAAP effective tax rate was 15.7%, up from
11.0% in the year-ago quarter driven primarily by higher benefits
in the prior year related to a partial release of a valuation
allowance recorded on the U.S. foreign tax credits carryforward.
The non-GAAP effective tax rate was 20.3%, down from 21.2% in the
year-ago quarter, driven by higher benefits from stock-based
compensation in the current year.
- Cash flow - Operating and free cash flow were both $1.2
billion during the quarter driven by higher earnings and partially
offset by higher cash taxes.
- Capital allocation - During the quarter, the company
paid $146 million in dividends, repurchased $117 million of its
common stock and incurred $81 million in capital expenditures.
Additionally, the company closed the acquisition of IPVideo,
creator of the HALO Smart Sensor, for $170 million in cash, net of
cash acquired.
OTHER SELECT FULL-YEAR FINANCIAL RESULTS
- Revenue - Full-year sales were $10.0 billion, up 10%
driven by growth in North America and International. The Products
and Systems Integration segment grew 9% driven by higher sales of
LMR and Video. The Software and Services segment grew 10% driven by
growth in LMR services, command center and Video, partially offset
by the revenue reduction for Airwave. Revenue from acquisitions was
$98 million and the impact of unfavorable foreign currency rates
was $38 million.
- Operating margin - For the full year, GAAP operating
margin was 23.0% of sales, compared to 18.2% for the prior year.
The increase was primarily driven by lower direct material costs,
higher sales, the $147 million fixed asset impairment charge
related to the exit from the Emergency Services Network ("ESN")
services contract in the U.K. recorded in the prior year and lower
intangible amortization expense in the current year, partially
offset by the revenue reduction for Airwave. Non-GAAP operating
margin was 27.9% of sales, up from 26.0% in the prior year, driven
by lower direct material costs, higher sales and improved operating
leverage, partially offset by the revenue reduction for Airwave,
higher employee incentives, higher expenses associated with
acquired businesses and mix.
- Taxes - The 2023 GAAP effective tax rate was 20.1%, up
from 9.8% in the prior year driven primarily by a discrete deferred
tax benefit recognized in 2022 as a result of an intra-group
transfer of certain intellectual property rights. In addition, the
company generated higher benefits in the prior year from a partial
release of the valuation allowance recorded on the U.S. foreign tax
credit carryforward and higher stock-based compensation. The
non-GAAP effective tax rate was 21.9%, up from 20.1% in the
previous year, primarily driven by lower benefits from stock-based
compensation in the current year.
- Cash flow - The company generated $2.0 billion in
operating cash flow, up 12% versus the prior year. Free cash flow
was $1.8 billion, up 14% versus the prior year. The increase in
both operating and free cash flow was primarily driven by higher
earnings generated in the current year partially offset by higher
cash taxes.
- Capital allocation - In 2023, the company repurchased
$804 million of its common stock at an average price of $278.56 per
share and paid $589 million in dividends. Additionally, the company
closed the acquisition of IPVideo, creator of the HALO Smart
Sensor, for $170 million in cash, net of cash acquired.
- Backlog - The company ended the year with backlog of
$14.3 billion, down $88 million from the prior year. Products and
Systems Integrations segment backlog was up 2% or $93 million
driven by continued strong demand in North America. Software and
Services segment backlog was down 2% or $181 million, driven by the
reduction related to the Airwave price control and revenue
recognition for Airwave and ESN, partially offset by growth in
multi-year software and services contracts in both North America
and International and $113 million of favorable foreign currency
rates.
NOTABLE WINS & ACHIEVEMENTS IN Q4
Software and Services
- $330M+ LMR managed services renewal through 2034 for Denmark’s
nationwide public safety communications network
- $48M command center order for the City of Chicago Office of
Public Safety Administration
- $20M LMR service agreement for Spokane Regional Emergency
Communications, WA
- $19M mobile video order for a U.S. customer
- $10M command center order for the City and County of San
Francisco, CA
Products and Systems
Integration
- $90M P25 system and devices order for a U.S. customer
- $67M P25 device order for Emergency Services Telecommunications
Authority (ESTA) in Australia
- $57M P25 APX NEXT devices order for U.S. customer
- $38M P25 system order for the State of Arizona Department of
Public Safety
- $31M TETRA system order for a European customer
- $13M fixed video order for an International customer
BUSINESS OUTLOOK
- First-quarter 2024 - The company expects revenue growth
of approximately 8% compared to the first quarter of 2023. The
company expects non-GAAP earnings per share in the range of $2.50
to $2.55 per share. This assumes approximately 172 million fully
diluted shares and a non-GAAP effective tax rate of approximately
23%.
- Full-year 2024 - The company expects revenue growth of
approximately 6% and non-GAAP earnings per share in the range of
$12.62 to $12.72 per share. This assumes approximately 171 million
fully diluted shares and a non-GAAP effective tax rate between 23%
and 24%.
The company has not quantitatively reconciled its guidance for
forward-looking non-GAAP measurements in this news release to their
most comparable GAAP measurements 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
measurement 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 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.
In early 2023 the CMA issued its final decision which stated it
will impose a prospective price control on Airwave. The company
strongly disagreed with the CMA’s final decision and it filed an
appeal with the Competition Appeal Tribunal ("CAT"). On July 31,
2023, the CMA adopted a remedies order which implemented the price
control set out in its final decision, which was suspended until
the CAT dismissed the company's appeal on December 22, 2023. The
company has until February 14, 2024 to file an application with the
United Kingdom Court of Appeal requesting that it hear the
company's appeal.
Based on the adoption of the remedies order, since August 1,
2023, revenue under the Airwave contract has been recognized in
accordance with the prospective price control. As the company's
appeal to the CAT has been dismissed, revenue will continue to be
recognized according to the remedies order published by the CMA,
unless the United Kingdom Court of Appeal were to reverse the
remedies order. The company's backlog for Airwave services
contracted with the United Kingdom Home Office through 2026,
inclusive of the five month period beginning August 1, 2023, was
reduced by $777 million to align with the remedies order as of
December 31, 2023.
MACROECONOMIC EVENTS
During fiscal year 2023, the company operated under market
conditions influenced by events such as those discussed below. For
a further discussion of the risks the company encounters in its
business, please refer to Part I. Item 1A. “Risk Factors” in the
company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2022 and Part II. Item 1A. “Risk Factors” in the
company’s Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 2023.
In 2023, the company experienced improved conditions with
respect to availability of materials in the semiconductor market.
The company reduced its inventory carrying levels as compared to
2022 in response to the improved supply conditions. The company
continues to remain 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 by diversifying the
footprint of its supply chain operations, including by finalizing a
strategic agreement relating to the company's video manufacturing
operations during the first quarter of 2024, and maintaining
increased levels of inventory in targeted areas to support
increased demand and customer requirements.
CONFERENCE CALL AND WEBCAST Motorola Solutions will host
its quarterly conference call beginning at 4 p.m. U.S. Central
Standard Time (5 p.m. U.S. Eastern Standard Time) on Thursday,
February 8. The conference call will be webcast live with audio and
slides 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:
Fourth Quarter
Full Year
2023
2022
2023
2022
Net sales
$2,848
$2,706
$9,978
$9,112
Gross margin
1,455
1,351
4,970
4,229
Operating earnings
738
692
2,294
1,661
Amounts attributable to Motorola
Solutions, Inc. common stockholders
Net earnings
595
589
1,709
1,363
Diluted EPS from continuing operations
$3.47
$3.43
$9.93
$7.93
Weighted average diluted common shares
outstanding
171.5
171.9
172.1
171.9
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 operating performance to that of its competitors.
Among other things, management uses these operating results,
excluding the identified items, to evaluate 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 quarterly royalty payments into the third-party
escrow from October 2022 through January 2024. The aggregate amount
paid into escrow will not be recognized until all contingencies are
resolved and such amount is released from escrow.
Following the February 14, 2020 verdict and judgment in the
company's favor, Hytera subsequently filed several notices of
appeal to the U.S. Court of Appeals for the Seventh Circuit (the
"Court of Appeals"), including a notice of appeal filed on August
2, 2022 which appealed the orders related to the jury's verdict as
well as the Court's royalty order. The company filed its
cross-appeal on August 5, 2022. The Court of Appeals heard oral
arguments on the parties' appeals on 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 a distribution of $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 gains for
the two monetary distributions were recorded to Other charges
(income) in the company’s Consolidated Statements of
Operations.
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
approximately $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 expense 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 expense primarily because it represents a significant
non-cash expense. Share-based compensation expense 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 earnings 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 first quarter and full-year of 2024; and
the impact of the CMA’s remedies order regarding Airwave (including
the company's actions in response). 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’ 2023 Third Quarter
Report on Form 10-Q, 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/investors, 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, information
security and cybersecurity; (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 increased costs and 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) increased areas of risk,
increased competition and additional compliance obligations
associated with the expansion of our technologies within our
Products and Systems Integration and Software and Services
segments; (x) the effectiveness of our investments in new products
and technologies; (xi) impact of catastrophic events on our
business or our customers' or suppliers' business; (xii) social,
ethical and competitive risks relating to the use of AI in our
products and services; (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) risks relating to intellectual property licenses and
intellectual property indemnities in our customer and supplier
contracts; (xvii) our license of the MOTOROLA, MOTO, MOTOROLA
SOLUTIONS and the Stylized M logo and all derivatives and
formatives thereof from Motorola Trademark Holdings, LLC; (xviii)
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;
(xix) risks related to our large, multi-year system and services
contracts (including, but not limited to, with respect to the ESN
and Airwave contracts); (xx) the global nature of our employees,
customers, suppliers and outsource partners; (xxi) 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; (xxii) the inability of our subcontractors to
perform in a timely and compliant manner or adhere to our Human
Rights Policy; (xxiii) the inability of our products to meet our
customers’ expectations or regulatory or industry standards; (xxiv)
increasing scrutiny and evolving expectations from investors,
customers, lawmakers, regulators and other stakeholders regarding
environmental, social and governance-related practices and
disclosures; (xxv) inability to attract and retain senior
management and key employees; (xxvi) impact of current global
economic and political conditions in the markets in which we
operate (including, but not limited to, inflation); (xxvii) impact
of returns on pension and retirement plan assets and interest rate
changes; (xxviii) inability to access the capital markets for
financing on acceptable terms and conditions; (xxix) exposure to
exchange rate fluctuations on cross-border transactions and the
translation of local currency results into U.S. dollars; and (xxx)
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 solving for safer. We build and connect
technologies to help protect people, property and places. Our
solutions enable the collaboration between public safety agencies
and enterprises that’s critical for a proactive approach to safety
and security. Learn more about how we’re solving for safer
communities, safer schools, safer hospitals, safer businesses –
safer everywhere – 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 December 31, 2023 December 31, 2022 Net
sales from products
$
1,750
$
1,671
Net sales from services
1,098
1,035
Net sales
2,848
2,706
Costs of products sales
724
751
Costs of services sales
669
604
Costs of sales
1,393
1,355
Gross margin
1,455
1,351
Selling, general and administrative expenses
424
381
Research and development expenditures
218
201
Other charges
35
14
Intangibles amortization
40
63
Operating earnings
738
692
Other income (expense): Interest expense, net
(52
)
(54
)
Other, net
21
25
Total other expense
(31
)
(29
)
Net earnings before income taxes
707
663
Income tax expense
111
73
Net earnings
596
590
Less: Earnings attributable to noncontrolling interests
1
1
Net earnings attributable to Motorola Solutions, Inc.
$
595
$
589
Earnings per common share: Basic
$
3.58
$
3.52
Diluted
$
3.47
$
3.43
Weighted average common shares
outstanding: Basic
166.1
167.4
Diluted
171.5
171.9
Percentage of Net Sales* Net sales from products
61.4
%
61.8
%
Net sales from services
38.6
%
38.2
%
Net sales
100.0
%
100.0
%
Costs of products sales
41.4
%
44.9
%
Costs of services sales
60.9
%
58.4
%
Costs of sales
48.9
%
50.1
%
Gross margin
51.1
%
49.9
%
Selling, general and administrative expenses
14.9
%
14.1
%
Research and development expenditures
7.7
%
7.4
%
Other charges
1.2
%
0.5
%
Intangibles amortization
1.4
%
2.3
%
Operating earnings
25.9
%
25.6
%
Other income (expense): Interest expense, net
(1.8
)%
(2.0
)%
Other, net
0.7
%
0.9
%
Total other expense
(1.1
)%
(1.1
)%
Net earnings before income taxes
24.8
%
24.5
%
Income tax expense
3.9
%
2.7
%
Net earnings
20.9
%
21.8
%
Less: Earnings attributable to noncontrolling interests
-
%
-
%
Net earnings attributable to Motorola Solutions, Inc.
20.9
%
21.8
%
* Percentages may not add up due to rounding
GAAP-2
Motorola Solutions, Inc. and Subsidiaries Consolidated
Statements of Operations (In millions, except per share
amounts) Years Ended December 31, 2023
December 31, 2022 December 31, 2021 Net sales from
products
$
5,814
$
5,368
$
4,606
Net sales from services
4,164
3,744
3,565
Net sales
9,978
9,112
8,171
Costs of products sales
2,591
2,595
2,104
Costs of services sales
2,417
2,288
2,027
Costs of sales
5,008
4,883
4,131
Gross margin
4,970
4,229
4,040
Selling, general and administrative expenses
1,561
1,450
1,353
Research and development expenditures
858
779
734
Other charges
80
82
50
Intangibles amortization
177
257
236
Operating earnings
2,294
1,661
1,667
Other income (expense): Interest expense, net
(216
)
(226
)
(208
)
Gains on sales of investments and businesses, net
-
3
1
Other, net
68
77
92
Total other expense
(148
)
(146
)
(115
)
Net earnings before income taxes
2,146
1,515
1,552
Income tax expense
432
148
302
Net earnings
1,714
1,367
1,250
Less: Earnings attributable to noncontrolling interests
5
4
5
Net earnings attributable to Motorola Solutions, Inc.
$
1,709
$
1,363
$
1,245
Earnings per common share: Basic
$
10.23
$
8.14
$
7.36
Diluted
$
9.93
$
7.93
$
7.17
Weighted average common shares
outstanding: Basic
167.0
167.5
169.2
Diluted
172.1
171.9
173.6
Percentage of Net Sales* Net sales from products
58.3
%
58.9
%
56.4
%
Net sales from services
41.7
%
41.1
%
43.6
%
Net sales
100.0
%
100.0
%
100.0
%
Costs of products sales
44.6
%
48.3
%
45.7
%
Costs of services sales
58.0
%
61.1
%
56.9
%
Costs of sales
50.2
%
53.6
%
50.6
%
Gross margin
49.8
%
46.4
%
49.4
%
Selling, general and administrative expenses
15.6
%
15.9
%
16.6
%
Research and development expenditures
8.6
%
8.5
%
9.0
%
Other charges
0.8
%
0.9
%
0.6
%
Intangibles amortization
1.8
%
2.8
%
2.9
%
Operating earnings
23.0
%
18.2
%
20.4
%
Other income (expense): Interest expense, net
(2.2
)%
(2.5
)%
(2.5
)%
Gains on sales of investments and businesses, net
-
%
-
%
-
%
Other, net
0.7
%
0.8
%
1.1
%
Total other expense
(1.5
)%
(1.6
)%
(1.4
)%
Net earnings before income taxes
21.5
%
16.6
%
19.0
%
Income tax expense
4.3
%
1.6
%
3.7
%
Net earnings
17.2
%
15.0
%
15.3
%
Less: Earnings attributable to noncontrolling interests
0.1
%
-
%
0.1
%
Net earnings attributable to Motorola Solutions, Inc.
17.1
%
15.0
%
15.2
%
* Percentages may not add up due to rounding
GAAP-3
Motorola Solutions, Inc. and Subsidiaries Condensed
Consolidated Balance Sheets (In millions)
December 31, 2023 December 31, 2022 Assets Cash and
cash equivalents
$
1,705
$
1,325
Accounts receivable, net
1,710
1,518
Contract assets
1,102
974
Inventories, net
827
1,055
Other current assets
357
383
Current assets held for disposition
24
-
Total current assets
5,725
5,255
Property, plant and equipment, net
964
927
Operating lease assets
495
485
Investments
143
147
Deferred income taxes
1,062
1,036
Goodwill
3,401
3,312
Intangible assets, net
1,255
1,342
Other assets
274
310
Non-current assets held for disposition
17
-
Total assets
$
13,336
$
12,814
Liabilities and Stockholders' Equity (Deficit) Current portion of
long-term debt
$
1,313
$
1
Accounts payable
881
1,062
Contract liabilities
2,037
1,859
Accrued liabilities
1,504
1,638
Current liabilities held for disposition
1
-
Total current liabilities
5,736
4,560
Long-term debt
4,705
6,013
Operating lease liabilities
407
419
Other liabilities
1,741
1,691
Non-current liabilities held for disposition
8
-
Total Motorola Solutions, Inc. stockholders’ equity
724
116
Non-controlling interests
15
15
Total liabilities and stockholders’ equity
$
13,336
$
12,814
GAAP-4 Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (In
millions) Three Months Ended December 31,
2023 December 31, 2022 Operating Net earnings
$
596
$
590
Adjustments to reconcile Net earnings to Net cash provided by
operating activities: Depreciation and amortization
85
109
Non-cash other charges
6
4
Exit of video manufacturing operations
24
-
Share-based compensation expenses
52
46
Changes in assets and liabilities, net of effects of acquisitions,
dispositions, and foreign currency translation adjustments:
Accounts receivable
(26
)
(117
)
Inventories
106
118
Other current assets and contract assets
58
37
Accounts payable, accrued liabilities and contract liabilities
390
634
Other assets and liabilities
(18
)
(26
)
Deferred income taxes
(28
)
(122
)
Net cash provided by operating activities
1,245
1,273
Investing Acquisitions and investments, net
(168
)
(587
)
Proceeds from sales of investments
7
8
Capital expenditures
(81
)
(73
)
Net cash used for investing activities
(242
)
(652
)
Financing Repayment of debt
-
(2
)
Issuances of common stock
28
19
Purchases of common stock
(134
)
(87
)
Payment of dividends
(146
)
(132
)
Net cash used for financing activities
(252
)
(202
)
Effect of exchange rate changes on cash and cash equivalents
44
84
Net increase in cash and cash equivalents
795
503
Cash and cash equivalents, beginning of period
910
822
Cash and cash equivalents, end of period
$
1,705
$
1,325
GAAP-5 Motorola Solutions, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (In millions)
Years Ended December 31, 2023 December 31,
2022 December 31, 2021 Operating Net earnings
$
1,714
$
1,367
$
1,250
Adjustments to reconcile Net earnings to Net cash provided by
operating activities: Depreciation and amortization
356
440
438
Non-cash other charges
14
23
3
Exit of video manufacturing operations
24
-
-
Loss on ESN fixed asset impairment
-
147
-
Share-based compensation expenses
212
172
129
Gains on sales of investments and businesses, net
-
(3
)
(1
)
Losses from the extinguishment of long-term debt
-
6
18
Changes in assets and liabilities, net of effects of acquisitions,
dispositions, and foreign currency translation adjustments:
Accounts receivable
(180
)
(112
)
3
Inventories
200
(242
)
(284
)
Other current assets and contract assets
(82
)
(1
)
(205
)
Accounts payable, accrued liabilities and contract liabilities
(144
)
451
578
Other assets and liabilities
(38
)
(91
)
(126
)
Deferred income taxes
(32
)
(334
)
34
Net cash provided by operating activities
2,044
1,823
1,837
Investing Acquisitions and investments, net
(180
)
(1,177
)
(521
)
Proceeds from sales of investments
19
46
16
Capital expenditures
(253
)
(256
)
(243
)
Proceeds from sales of property, plant and equipment
-
-
6
Net cash used for investing activities
(414
)
(1,387
)
(742
)
Financing Net proceeds from issuance of debt
-
595
844
Repayment of debt
(1
)
(285
)
(353
)
Revolving credit facility renewal fees
-
-
(7
)
Issuances of common stock
104
156
102
Purchases of common stock
(804
)
(836
)
(528
)
Payment of dividends
(589
)
(530
)
(482
)
Payment of dividends to noncontrolling interests
(5
)
(6
)
(5
)
Net cash used for financing activities
(1,295
)
(906
)
(429
)
Effect of exchange rate changes on cash and cash equivalents
45
(79
)
(46
)
Net increase (decrease) in total cash and cash equivalents
380
(549
)
620
Cash and cash equivalents, beginning of period
1,325
1,874
1,254
Cash and cash equivalents, end of period
$
1,705
$
1,325
$
1,874
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 Years Ended December 31, 2023
December 31, 2022 December 31, 2023 December 31,
2022 Net cash provided by operating activities
$
1,245
$
1,273
$
2,044
$
1,823
Capital expenditures
(81
)
(73
)
(253
)
(256
)
Free cash flow
$
1,164
$
1,200
$
1,791
$
1,567
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 Years Ended Statement Line
December 31, 2023 December 31, 2022 December 31,
2023 December 31, 2022 Net earnings attributable to MSI
$
595
$
589
$
1,709
$
1,363
Non-GAAP adjustments before income taxes: Share-based compensation
expenses Cost of sales, SG&A and R&D
$
52
$
46
$
212
$
172
Intangible assets amortization expense Intangibles amortization
40
63
177
257
Reorganization of business charges Cost of sales and Other charges
(income)
7
5
29
36
Exit of video manufacturing operations Other charges (income)
24
-
24
-
Investment impairments Other (income) expense
-
-
16
1
Environmental reserve expense Other charges (income)
-
-
15
-
Hytera-related legal expenses SG&A
-
3
13
28
Acquisition-related transaction fees Other charges (income)
4
7
7
23
Operating lease asset impairments Other charges (income)
2
8
6
24
Legal settlements Other charges (Income)
3
-
4
23
Fixed asset impairments Other charges (income)
-
-
3
12
Loss on ESN fixed asset impairment Cost of sales
-
-
-
147
Loss from the extinguishment of long-term debt Other (income)
expense
-
-
-
6
Adjustments to uncertain tax positions Interest income, net
-
(2
)
-
(3
)
Gain on sales of investments (Gain) or loss on sales of investments
and businesses, net
-
-
-
(3
)
Gain on Hytera legal settlement Other charges (income)
-
(2
)
-
(15
)
Gain on TETRA Ireland equity method investment Other (income)
expense
-
-
-
(21
)
Fair value adjustments to equity investments Other (income) expense
-
(5
)
(13
)
30
Total Non-GAAP adjustments before income taxes
$
132
$
123
$
493
$
717
Income tax expense on Non-GAAP adjustments
59
94
145
300
Total Non-GAAP adjustments after income taxes
73
29
348
417
Non-GAAP Net earnings attributable to MSI
$
668
$
618
$
2,057
$
1,780
Calculation of Non-GAAP Tax Rate (In millions)
Three Months Ended Years Ended December 31,
2023 December 31, 2022 December 31, 2023
December 31, 2022 Net earnings before income taxes
$
707
$
663
$
2,146
$
1,515
Total Non-GAAP adjustments before income taxes*
132
123
493
717
Non-GAAP Net earnings before income taxes
839
786
2,639
2,232
Income tax expense
111
73
432
148
Income tax expense on Non-GAAP adjustments**
59
94
145
300
Total Non-GAAP Income tax expense
170
167
577
448
Non-GAAP Tax rate
20.3
%
21.2
%
21.9
%
20.1
%
*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
Years Ended Statement Line December 31, 2023
December 31, 2022 December 31, 2023 December 31,
2022 Net earnings attributable to MSI
$
3.47
$
3.43
$
9.93
$
7.93
Non-GAAP adjustments before income taxes: Share-based compensation
expenses Cost of sales, SG&A and R&D
$
0.30
$
0.27
$
1.23
$
1.00
Intangible assets amortization expense Intangibles amortization
0.24
0.36
1.03
1.50
Reorganization of business charges Cost of sales and Other charges
(income)
0.04
0.03
0.17
0.21
Exit of video manufacturing operations Other charges (income)
0.14
-
0.14
-
Investment impairments Other (income) expense
-
-
0.09
0.01
Environmental reserve expense Other charges (income)
-
-
0.09
-
Hytera-related legal expenses SG&A
-
0.02
0.08
0.16
Acquisition-related transaction fees Other charges (income)
0.02
0.04
0.04
0.13
Operating lease asset impairments Other charges (income)
0.01
0.05
0.03
0.14
Legal settlements Other charges (Income)
0.02
-
0.02
0.14
Fixed asset impairments Other charges (income)
-
-
0.02
0.07
Loss on ESN fixed asset impairment Cost of sales
-
-
-
0.86
Loss from the extinguishment of long-term debt Other (income)
expense
-
-
-
0.03
Adjustments to uncertain tax positions Interest income, net
-
(0.01
)
-
(0.02
)
Gain on sales of investments (Gain) or loss on sales of investments
and businesses, net
-
-
-
(0.02
)
Gain on Hytera legal settlement Other charges (income)
-
(0.01
)
-
(0.09
)
Gain on TETRA Ireland equity method investment Other (income)
expense
-
-
-
(0.12
)
Fair value adjustments to equity investments Other (income) expense
-
(0.03
)
(0.08
)
0.18
Total Non-GAAP adjustments before income taxes
$
0.77
$
0.72
$
2.86
$
4.18
Income tax expense on Non-GAAP adjustments
0.34
0.55
0.84
1.75
Total Non-GAAP adjustments after income taxes
0.43
0.17
2.02
2.43
Non-GAAP Net earnings attributable to MSI
$
3.90
$
3.60
$
11.95
$
10.36
Diluted Weighted Average Common Shares
171.5
171.9
172.1
171.9
*Indicates Non-GAAP Diluted EPS
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 December 31, 2023 December 31,
2022 Products and Systems Integration Software and
Services Total Products and Systems Integration
Software and Services Total Net sales
$
1,890
$
958
$
2,848
$
1,810
$
896
$
2,706
Operating earnings
$
492
$
246
$
738
$
454
$
238
$
692
Above OE non-GAAP adjustments: Share-based compensation expenses
38
14
52
34
12
46
Intangible assets amortization expense
9
31
40
15
48
63
Exit of video manufacturing operations
17
7
24
-
-
-
Reorganization of business charges
6
1
7
4
1
5
Acquisition-related transaction fees
2
2
4
1
6
7
Legal settlements
2
1
3
-
-
-
Operating lease asset impairments
1
1
2
5
3
8
Hytera-related legal expenses
-
-
-
3
-
3
Gain on Hytera legal settlement
-
-
-
(2
)
-
(2
)
Total above-OE non-GAAP adjustments
75
57
132
60
70
130
Operating earnings after non-GAAP adjustments
$
567
$
303
$
870
$
514
$
308
$
822
Operating earnings as a percentage of net sales - GAAP
26.0
%
25.7
%
25.9
%
25.1
%
26.6
%
25.6
%
Operating earnings as a percentage of net sales - after non-GAAP
adjustments
30.0
%
31.6
%
30.5
%
28.4
%
34.4
%
30.4
%
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) Years Ended December 31,
2023 December 31, 2022 Products and Systems
Integration Software and Services Total
Products and Systems Integration Software and
Services Total Net sales
$
6,242
$
3,736
$
9,978
$
5,728
$
3,384
$
9,112
Operating earnings
$
1,244
$
1,050
$
2,294
$
913
$
748
$
1,661
Above OE non-GAAP adjustments: Share-based compensation expenses
154
58
212
126
46
172
Intangible assets amortization expense
41
136
177
60
197
257
Reorganization of business charges
28
1
29
21
15
36
Exit of video manufacturing operations
17
7
24
-
-
-
Environmental reserve expense
10
5
15
-
-
-
Hytera-related legal expenses
13
-
13
28
-
28
Acquisition-related transaction fees
2
5
7
9
14
23
Operating lease asset impairments
4
2
6
18
6
24
Legal settlements
3
1
4
3
20
23
Fixed asset impairments
2
1
3
9
3
12
Loss on ESN fixed asset impairment
-
-
-
-
147
147
Gain on Hytera legal settlement
-
-
-
(15
)
-
(15
)
Total above-OE non-GAAP adjustments
274
216
490
259
448
707
Operating earnings after non-GAAP adjustments
$
1,518
$
1,266
$
2,784
$
1,172
$
1,196
$
2,368
Operating earnings as a percentage of net sales - GAAP
19.9
%
28.1
%
23.0
%
15.9
%
22.1
%
18.2
%
Operating earnings as a percentage of net sales - after non-GAAP
adjustments
24.3
%
33.9
%
27.9
%
20.5
%
35.3
%
26.0
%
Non-GAAP-5 Motorola Solutions, Inc. and Subsidiaries
Reconciliation of Revenue to Non-GAAP Organic Revenue (In
millions) Three Months Ended December
31, 2023 December 31, 2022 % Change Net sales
$
2,848
$
2,706
5
%
Non-GAAP adjustments: Sales from acquisitions
20
3
Organic revenue
$
2,828
$
2,703
5
%
Years Ended December 31, 2023
December 31, 2022 % Change Net sales
$
9,978
$
9,112
10
%
Non-GAAP adjustments: Sales from acquisitions
107
9
Organic revenue
$
9,871
$
9,103
8
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240208347229/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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