MSI
$157.27
Motorola Solutions
$4.70
3.08%
Earnings Details
2nd Quarter June 2020
Thursday, August 6, 2020 4:10:00 PM
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Summary

Motorola Solutions Beats

Motorola Solutions (MSI) reported 2nd Quarter June 2020 earnings of $1.44 per share on revenue of $1.6 billion. The consensus earnings estimate was $1.18 per share on revenue of $1.6 billion. The Earnings Whisper number was $1.27 per share. Revenue fell 13.0% compared to the same quarter a year ago.

The company said it expects third quarter non-GAAP earnings of $1.72 to $1.78 per share on revenue of $1.81 billion to $1.83 billion. The current consensus earnings estimate is $1.75 per share on revenue of $1.81 billion for the quarter ending September 30, 2020. The company also said it expects 2020 earnings of $7.40 to $7.52 per share on revenue of approximately $7.34 billion. The current consensus earnings estimate is $7.34 per share on revenue of $7.27 billion for the year ending December 31, 2020.

Motorola Solutions Inc designs, manufactures and sells communications infrastructure, devices, system software and applications, and provide services associated with their use. Its products include bar code scanners, mobile computers, & among others.

Results
Reported Earnings
$1.44
Earnings Whisper
$1.27
Consensus Estimate
$1.18
Reported Revenue
$1.62 Bil
Revenue Estimate
$1.57 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Motorola Solutions Reports Second-Quarter 2020 Financial Results

  • Revenue of $1.6 billion, down 13% versus a year ago
  • Software and Services segment grew 5% and expanded operating margins by 260 bps
  • GAAP earnings per share (EPS) of $0.78
  • Non-GAAP EPS* of $1.39
  • Generated $209 million of operating cash flow and $155 million of free cash flow
  • Subsequent to quarter end, acquired Pelco Inc., a global provider of video security solutions for $110 million

CHICAGO--(BUSINESS WIRE)--Motorola Solutions, Inc. (NYSE: MSI) today reported its earnings results for the second quarter of 2020. Click here for a printable news release and financial tables.

“I’m proud of our solid execution in Q2, led by software & services, in the face of this global pandemic. And, I'm even more impressed with our employees' resilience and unwavering commitment to our customers and to our business,” said Greg Brown, chairman and CEO, Motorola Solutions. “Demand for video security, software & services and increased customer engagements are driving our expectations for improvement in the second half of the year.”

KEY FINANCIAL RESULTS (presented in millions, except per share data and percentages)

 

Q2 2020

Q2 2019

% Change

Sales

$1,618

$1,860

(13)%

GAAP

 

 

 

Operating Earnings

$218

$349

(38)%

% of Sales

13.5 %

18.8%

 

EPS

$0.78

$1.18

(34)%

Non-GAAP*

 

 

 

Operating Earnings

$359

$444

(19)%

% of Sales

22.2 %

23.9%

 

EPS

$1.39

$1.69

(18)%

Products and Systems Integration Segment

 

 

 

Sales

$968

$1,238

(22)%

GAAP Operating Earnings

$49

$201

(76)%

% of Sales

5.1 %

16.2%

 

Non-GAAP Operating Earnings*

$131

$242

(46)%

% of Sales

13.5 %

19.5%

 

Software and Services Segment

 

 

 

Sales

$650

$622

5%

GAAP Operating Earnings

$169

$148

14%

% of Sales

26.0 %

23.8%

 

Non-GAAP Operating Earnings*

$228

$202

13%

% of Sales

35.1 %

32.5%

 

*Non-GAAP financial information excludes the after-tax impact of approximately $0.61 per diluted share related to share-based compensation, intangible assets amortization expense and highlighted items. Details on 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 $1.6 billion, down 13% from the year-ago quarter driven by declines in North America and International. Revenue from acquisitions was $40 million, and currency headwinds were $30 million in the quarter. The Products and Systems Integration segment declined 22% primarily due to lower sales of professional and commercial radio (PCR) and public safety LMR products. The Software and Services segment grew 5%, driven by growth in North America services and software.
  • Operating margin - GAAP operating margin was 13.5% of sales, down from 18.8% in the year-ago quarter primarily due to lower sales in the Products and System Integration segment, partially offset by higher sales and gross margin in the Software and Services segment. Non-GAAP operating margin was 22.2% of sales, down from 23.9% in the year-ago quarter primarily due to lower sales in the Products and System Integration segment, partially offset by higher sales and gross margin in the Software and Services segment.
  • Taxes - The GAAP effective tax rate was 23%, compared with 24% in the year-ago quarter. The non-GAAP effective tax rate was 23%, compared with 24% in the year-ago quarter. Both the GAAP and non-GAAP tax rates were lower in the current quarter primarily due to higher research and development credits.
  • Cash flow - Operating cash flow was $209 million, compared with $251 million in the year-ago quarter. Free cash flow was $155 million, compared with $188 million in the year-ago quarter. Cash flow for the quarter decreased due to lower sales and net income, partially offset by improved working capital.
  • Capital allocation - During the quarter, the company paid $109 million in cash dividends, repurchased $83 million of shares, used $65 million for acquisitions, and incurred $54 million of capital expenditures. Additionally, the company repaid $500 million of its revolving credit facility borrowing, of which $300 million was repaid during the quarter and $200 million was repaid subsequently. The remaining outstanding amount of the facility borrowing was $300 million as of Aug. 6, 2020.
  • Backlog - The company ended the quarter with backlog of $10.5 billion, down $376 million from the year-ago quarter, inclusive of $126 million of unfavorable currency adjustments. Software and Services segment backlog was down 2% or $148 million, inclusive of $116 million of unfavorable currency rates. The decline was primarily related to revenue recognized for the Airwave and ESN contracts, partially offset by growth in North America. Products and Systems Integration segment backlog was down 7% or $228 million, inclusive of $10 million of unfavorable currency adjustments, driven by large International deployments and lower orders due to the delay in sales engagements from COVID-19.

NOTABLE WINS AND ACHIEVEMENTS

Software and Services

  • $37 million P25 multi-year services contract with the State of Louisiana
  • $26 million Next Generation 911 services contract with the State of Utah
  • $10 million P25 statewide multi-year services contract in North America
  • $8 million multi-year computer aided dispatch contract with Baltimore County

Products and Systems Integration

  • $24 million P25 order for State of Alaska
  • $20 million P25 order for Newton County, Georgia
  • $17 million P25 order for State of South Dakota
  • Launched the V300 continuous-operation body-worn camera
  • Closed acquisition of IndigoVision in Q2 and subsequent to quarter end announced the acquisition of Pelco Inc.

BUSINESS OUTLOOK

  • Third-quarter 2020 - Motorola Solutions expects revenue decline of (9%) to (8%) compared with the third quarter of 2019. The company expects non-GAAP earnings per share in the range of $1.72 to $1.78. This assumes current foreign exchange rates, approximately 174 million fully diluted shares, and an effective tax rate of approximately 23%.
  • Full-year 2020 - Motorola Solutions expects revenue decline of approximately (7%) and non-GAAP earnings per share in the range of $7.40 to $7.52. This assumes current foreign exchange rates, approximately 175 million fully diluted shares, and an effective tax rate of 21% to 22%.

COVID-19

In response to the evolving COVID-19 pandemic, the company continues to adhere to its plans to keep its employees and customers healthy and safe, as well as ensuring continued operations and business continuity. Safety measures during this outbreak include having the vast majority of employees work remotely, suspending employee travel, withdrawing from certain industry events, increasing cleaning services, encouraging face coverings and using thermal scanning. The company continues to ensure customer continuity by fulfilling several emergency orders, completing remote software maintenance where possible, and continuing to service mission-critical networks on-site as needed to ensure seamless operations. In addition, our supply chain partners remain supportive and continue to do their part to ensure that service levels to the company and its customers remain fulfilled.

The sales teams’ engagement with customers, both virtual and in-person, has improved throughout the second quarter. The expectation is for improvement to continue throughout the second half of 2020. Additionally, the company’s engineering teams have adapted its solutions offerings to equip customers with the latest technology in the fight to protect their workplace from the spread of COVID-19. Specifically, in the video security business, the company has adapted its software and hardware offerings to provide analytics for occupancy counting, face mask detection and thermal detection capabilities.

The company has also taken actions in a number of areas to reduce its operating expenses, mostly driven by lower variable compensation, travel costs, contractor spend and reduced real estate footprint to limit the negative effect on operating margins for the year despite the expected reduction of revenue.

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, Aug. 6. The conference call will be webcast live at www.motorolasolutions.com/investor.

CONSOLIDATED GAAP RESULTS (presented in millions, except per share data)

A comparison of results from operations is as follows:

 

Q2 2020

Q2 2019

Net sales

$1,618

$1,860

Gross margin

766

931

Operating earnings

218

349

Amounts attributable to Motorola Solutions, Inc. common stockholders

 

 

Net earnings

135

207

Diluted EPS

$0.78

$1.18

Weighted average diluted common shares outstanding

173.6

176.1

HIGHLIGHTED ITEMS

The table below includes highlighted items, share-based compensation expenses and intangible amortization for the second quarter of 2020.

(per diluted common share)

Q2 2020

 

 

GAAP Earnings

$0.78

Highlighted Items:

 

Intangibles amortization expense

0.22

Reorganization of business charges

0.18

Share-based compensation expenses

0.14

Legal settlements

0.03

Hytera-related legal expenses

0.02

Fixed asset impairment

0.02

Acquisition-related transaction fees

0.01

Release of uncertain tax positions

0.01

Fair value adjustments to equity investments

(0.02)

Non-GAAP Diluted EPS

$1.39

USE OF NON-GAAP FINANCIAL INFORMATION

In addition to the GAAP results included in this presentation, Motorola Solutions also has included non-GAAP measurements of results. 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 its competitors. Among other things, management uses these operating results, excluding the identified items, to evaluate performance of the businesses and to evaluate results relative to certain incentive compensation targets. Management uses operating results excluding these items because it believes this measurement enables it to make better period-to-period evaluations of the financial performance of 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, measurements of financial performance prepared in accordance with generally accepted accounting principles.

Highlighted items: The company has excluded the effects of highlighted items including, but not limited to, acquisition-related transaction costs, tangible and intangible asset impairments, restructuring charges, certain non-cash pension adjustments, legal settlements and other contingencies, gains and losses on investments and businesses, Hytera-related legal expenses, 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 February 14, 2020, we announced that a jury in the U.S. District Court for the Northern District of Illinois decided in our favor in our trade secret theft and copyright infringement case against Hytera Communications Corporation Limited of Shenzhen, China; Hytera America, Inc.; and Hytera Communications America (West), Inc. (collectively, “Hytera”). In connection with this verdict, the jury awarded Motorola Solutions $345.8 million in compensatory damages and $418.8 million in punitive damages, for a total of $764.6 million. In the first quarter of 2020, we revised our definition of non-GAAP operating income to exclude the impact of Hytera-related legal expenses. The $5 million of Hytera-related legal expense incurred in the second quarter of 2020 reflects costs primarily associated with this jury trial. During the second quarter of 2020, Hytera filed a motion for a new trial and Hytera America, Inc. and Hytera Communications America (West) both filed for chapter 11 bankruptcy protection. Subsequent to quarter end, the company filed motions to dismiss the bankruptcy proceedings. Given our inability to predict the timing and outcome of these motions, together with the uncertainty of our ability to ultimately collect amounts awarded, at this time we have not recognized in our financial statements any gain related to the Hytera litigation.

Management typically considers legal expenses associated with defending our intellectual property as “normal and recurring” and accordingly, Hytera-related legal expenses were included in both our GAAP and non-GAAP operating income for fiscal years 2017, 2018 and 2019. We anticipate further expenses associated with Hytera-related litigation; however, we believe that these expenses are no longer a part of the “normal and recurring” legal expenses incurred to operate our business. In addition, if any contingent or actual gain associated with the Hytera litigation is recognized in the future, it will be similarly excluded from our non-GAAP operating income. We believe after the jury award, the presentation of excluding both Hytera-related legal expenses and gains related to awards better aligns with how management evaluates our ongoing underlying business performance.

For comparative purposes, $6 million, or $0.03 of earnings per share, net of tax, of Hytera-related legal expense was included in our second quarter 2019 Non-GAAP operating earnings.

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 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.

Free cash flow: Free cash flow represents operating cash flow less capital expenditures. We believe that free cash flow is also useful to investors as the basis for comparing our performance and coverage ratios with other companies in our industries, although our measure of free cash flow may not be directly comparable to similar measures used by other companies.

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 non-GAAP organic revenue growth 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.

Details of the above items and reconciliations of the non-GAAP measurements to the corresponding GAAP measurements can be found at the end of this press release.

The company has not quantitatively reconciled its guidance for non-GAAP metrics to their most comparable GAAP measure 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.

BUSINESS RISKS

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 2020. Motorola Solutions cautions the reader that the risk factors below, as well as those on pages 10 through 22 in Item 1A of Motorola Solutions’ 2019 Annual Report on Form 10-K, on page 34 of Motorola Solutions’ 2020 first quarterly 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, 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: (1) the economic outlook for the government communications industry; (2) the impact of foreign currency fluctuations on the company; (3) the level of demand for the company's products; (4) the company's ability to refresh existing and introduce new products and technologies in a timely manner; (5) exposure under large systems and managed services contracts, including risks related to the fact that certain customers require that the company build, own and operate their systems, often over a multi-year period; (6) negative impact on the company's business from global economic and political conditions, which may include: (i) continued deferment or cancellation of purchase orders by customers; (ii) the inability of customers to obtain financing for purchases of the company's products; (iii) increased demand to provide vendor financing to customers; (iv) increased financial pressures on third-party dealers, distributors and retailers; (v) the viability of the company's suppliers that may no longer have access to necessary financing; (vi) counterparty failures negatively impacting the company’s financial position; (vii) changes in the value of investments held by the company's pension plan and other defined benefit plans, which could impact future required or voluntary pension contributions; (viii) the company’s ability to access the capital markets on acceptable terms and conditions; and (ix) the ongoing COVID-19 pandemic and governmental and societal responses thereto; (7) the impact of a security breach or other significant disruption in the company’s IT systems, those of its partners or suppliers or those it sells to or operates or maintains for its customers; (8) the outcome of ongoing and future tax matters; (9) the company's ability to purchase sufficient materials, parts and components to meet customer demand, particularly in light of global economic conditions and reductions in the company’s purchasing power; (10) risks related to dependence on certain key suppliers, subcontractors, third-party distributors and other representatives; (11) the impact on the company's performance and financial results from strategic acquisitions or divestitures; (12) risks related to the company's manufacturing and business operations in foreign countries; (13) the creditworthiness of the company's customers and distributors, particularly purchasers of large infrastructure systems; (14) the ownership of certain logos, trademarks, trade names and service marks including “MOTOROLA” by Motorola Mobility Holdings, Inc.; (15) variability in income received from licensing the company's intellectual property to others, as well as expenses incurred when the company licenses intellectual property from others; (16) unexpected liabilities or expenses, including unfavorable outcomes to any pending or future litigation or regulatory or similar proceedings; (17) the impact of the percentage of cash and cash equivalents held outside of the United States; (18) the ability of the company to pay future dividends due to possible adverse market conditions or adverse impacts on the company’s cash flow; (19) the ability of the company to complete acquisitions or repurchase shares under its repurchase program due to possible adverse market conditions or adverse impacts on the company’s cash flow; (20) the impact of changes in governmental policies, laws or regulations; (21) negative consequences from the company's use of third party vendors for various activities, including certain manufacturing operations, information technology and administrative functions; and (22) the company’s ability to settle the par value of its 1.75% senior convertible notes in cash. 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 mission-critical communications and analytics. Our technology platforms in mission-critical communications, command center software and video security & analytics, bolstered by managed & support services, make cities safer and help communities and businesses thrive. At Motorola Solutions, we are ushering in a new era in public safety and security. Learn more at www.motorolasolutions.com.

MOTOROLA, MOTOROLA SOLUTIONS and the Stylized M Logo are trademarks or registered trademarks of Motorola Trademark Holdings, LLC and are used under license. All other trademarks are the property of their respective owners. ©2020 Motorola Solutions, Inc. All rights reserved.

GAAP-1
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In millions, except per share amounts)
 
Three Months Ended
June 27, 2020June 29, 2019
Net sales from products

$

877

 

$

1,118

 

Net sales from services

 

741

 

 

742

 

Net sales

 

1,618

 

 

1,860

 

Costs of products sales

 

413

 

 

490

 

Costs of services sales

 

439

 

 

439

 

Costs of sales

 

852

 

 

929

 

Gross margin

 

766

 

 

931

 

Selling, general and administrative expenses

 

297

 

 

351

 

Research and development expenditures

 

161

 

 

170

 

Other charges

 

39

 

 

9

 

Intangibles amortization

 

51

 

 

52

 

Operating earnings

 

218

 

 

349

 

Other income (expense):
Interest expense, net

 

(58

)

 

(56

)

Gains on sales of investments and businesses, net

 

-

 

 

3

 

Other, net

 

16

 

 

(21

)

Total other expense

 

(42

)

 

(74

)

Net earnings before income taxes

 

176

 

 

275

 

Income tax expense

 

40

 

 

67

 

Net earnings

 

136

 

 

208

 

Less: Earnings attributable to non-controlling interests

 

1

 

 

1

 

Net earnings attributable to Motorola Solutions, Inc.

$

135

 

$

207

 

Earnings per common share:
Basic

$

0.79

 

$

1.25

 

Diluted

$

0.78

 

$

1.18

 

Weighted average common shares outstanding:
Basic

 

170.0

 

 

164.9

 

Diluted

 

173.6

 

 

176.1

 

 
Percentage of Net Sales*
Net sales from products

 

54.2

%

 

60.1

%

Net sales from services

 

45.8

%

 

39.9

%

Net sales

 

100.0

%

 

100.0

%

Costs of products sales

 

47.1

%

 

43.8

%

Costs of services sales

 

59.2

%

 

59.2

%

Costs of sales

 

52.7

%

 

49.9

%

Gross margin

 

47.3

%

 

50.1

%

Selling, general and administrative expenses

 

18.4

%

 

18.9

%

Research and development expenditures

 

10.0

%

 

9.1

%

Other charges

 

2.4

%

 

0.5

%

Intangibles amortization

 

3.2

%

 

2.8

%

Operating earnings

 

13.5

%

 

18.8

%

Other income (expense):
Interest expense, net

 

(3.6

)%

 

(3.0

)%

Gains on sales of investments and businesses, net

 

-

%

 

0.2

%

Other, net

 

1.0

%

 

(1.1

)%

Total other expense

 

(2.6

)%

 

(4.0

)%

Net earnings before income taxes

 

10.9

%

 

14.8

%

Income tax expense

 

2.5

%

 

3.6

%

Net earnings

 

8.4

%

 

11.2

%

Less: Earnings attributable to non-controlling interests

 

0.1

%

 

0.1

%

Net earnings attributable to Motorola Solutions, Inc.

 

8.3

%

 

11.1

%

* 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)
 
Six Months Ended
June 27, 2020June 29, 2019
Net sales from products

$

1,764

 

$

2,063

 

Net sales from services

 

1,509

 

 

1,454

 

Net sales

 

3,273

 

 

3,517

 

 
Costs of products sales

 

812

 

 

934

 

Costs of services sales

 

908

 

 

879

 

Costs of sales

 

1,720

 

 

1,813

 

 
Gross margin

 

1,553

 

 

1,704

 

 
Selling, general and administrative expenses

 

638

 

 

676

 

Research and development expenditures

 

330

 

 

333

 

Other charges

 

5

 

 

14

 

Intangibles amortization

 

104

 

 

102

 

Operating earnings

 

476

 

 

579

 

 
Other income (expense):
Interest expense, net

 

(109

)

 

(111

)

Gains on sales of investments and businesses, net

 

-

 

 

4

 

Other, net

 

34

 

 

(12

)

Total other expense

 

(75

)

 

(119

)

Net earnings before income taxes

 

401

 

 

460

 

Income tax expense

 

67

 

 

100

 

Net earnings

 

334

 

 

360

 

Less: Earnings attributable to non-controlling interests

 

2

 

 

2

 

Net earnings attributable to Motorola Solutions, Inc.

$

332

 

$

358

 

Earnings per common share:
Basic

$

1.95

 

$

2.18

 

Diluted

$

1.90

 

$

2.04

 

Weighted average common shares outstanding:
Basic

 

170.3

 

 

164.4

 

Diluted

 

174.8

 

 

175.3

 

 
Percentage of Net Sales*
Net sales from products

 

53.9

%

 

58.7

%

Net sales from services

 

46.1

%

 

41.3

%

Net sales

 

100.0

%

 

100.0

%

Costs of products sales

 

46.0

%

 

45.3

%

Costs of services sales

 

60.2

%

 

60.5

%

Costs of sales

 

52.6

%

 

51.5

%

Gross margin

 

47.4

%

 

48.5

%

Selling, general and administrative expenses

 

19.5

%

 

19.2

%

Research and development expenditures

 

10.1

%

 

9.5

%

Other charges

 

0.2

%

 

0.4

%

Intangibles amortization

 

3.2

%

 

2.9

%

Operating earnings

 

14.5

%

 

16.5

%

Other income (expense):
Interest expense, net

 

(3.3

)%

 

(3.2

)%

Gains on sales of investments and businesses, net

 

-

%

 

0.1

%

Other, net

 

1.0

%

 

(0.3

)%

Total other expense

 

(2.3

)%

 

(3.4

)%

Net earnings before income taxes

 

12.3

%

 

13.1

%

Income tax expense

 

2.0

%

 

2.8

%

Net earnings

 

10.2

%

 

10.2

%

Less: Earnings attributable to non-controlling interests

 

0.1

%

 

0.1

%

Net earnings attributable to Motorola Solutions, Inc.

 

10.1

%

 

10.2

%

* Percentages may not add up due to rounding
 
GAAP-3
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In millions)
 
June 27, 2020December 31, 2019

Assets

Cash and cash equivalents

$

1,341

 

$

1,001

 

Accounts receivable, net

 

1,134

 

 

1,412

 

Contract assets

 

937

 

 

1046

 

Inventories, net

 

449

 

 

447

 

Other current assets

 

225

 

 

272

 

Total current assets

 

4,086

 

 

4,178

 

 

Property, plant and equipment, net

 

965

 

 

992

 

Operating lease assets

 

462

 

 

554

 

Investments

 

157

 

 

159

 

Deferred income taxes

 

922

 

 

943

 

Goodwill

 

2,123

 

 

2,067

 

Intangible assets, net

 

1,242

 

 

1,327

 

Other assets

 

417

 

 

422

 

Total assets

$

10,374

 

$

10,642

 

 

Liabilities and Stockholders' Equity (Deficit)

Current portion of long-term debt

$

517

 

$

16

 

Accounts payable

 

498

 

 

618

 

Contract liabilities

 

1,294

 

 

1,449

 

Accrued liabilities

 

1,171

 

 

1,356

 

Total current liabilities

 

3,480

 

 

3,439

 

Long-term debt

 

5,111

 

 

5,113

 

Operating lease liabilities

 

385

 

 

497

 

Other liabilities

 

2,213

 

 

2,276

 

Total Motorola Solutions, Inc. stockholders’ equity (deficit)

 

(830

)

 

(700

)

Non-controlling interests

 

15

 

 

17

 

Total liabilities and stockholders’ equity (deficit)

$

10,374

 

$

10,642

 

 
 
GAAP-4
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In millions)
 
Three Months Ended
June 27, 2020June 29, 2019
Operating
Net earnings attributable to Motorola Solutions, Inc.

$

135

 

$

207

 

Earnings attributable to non-controlling interests

 

1

 

 

1

 

Net earnings

 

136

 

 

208

 

Adjustments to reconcile Net earnings to Net cash provided by operating activities:
Depreciation and amortization

 

98

 

 

96

 

Non-cash other (income) charges

 

11

 

 

(6

)

Share-based compensation expenses

 

31

 

 

30

 

Gain on sales of investments and businesses, net

 

-

 

 

(3

)

Losses from the extinguishment of long term debt

 

-

 

 

43

 

Changes in assets and liabilities, net of effects of acquisitions, dispositions, and foreign currency translation adjustments:
Accounts receivable

 

11

 

 

(58

)

Inventories

 

1

 

 

2

 

Other current assets and contract assets

 

88

 

 

(8

)

Accounts payable, accrued liabilities, and contract liabilities

 

(153

)

 

(84

)

Other assets and liabilities

 

(11

)

 

8

 

Deferred income taxes

 

(3

)

 

23

 

Net cash provided by operating activities

 

209

 

 

251

 

Investing
Acquisitions and investments, net

 

(65

)

 

(3

)

Proceeds from sales of investments and businesses, net

 

4

 

 

8

 

Capital expenditures

 

(54

)

 

(63

)

Net cash used for investing activities

 

(115

)

 

(58

)

Financing
Repayments of debt

 

(4

)

 

(658

)

Repayment of revolver draw

 

(300

)

 

-

 

Net proceeds from issuance of debt

 

-

 

 

645

 

Issuances of common stock

 

44

 

 

25

 

Purchases of common stock

 

(83

)

 

(25

)

Payments of dividends

 

(109

)

 

(94

)

Payments of dividends to non-controlling interests

 

(4

)

 

(3

)

Net cash used for financing activities

 

(456

)

 

(110

)

Effect of exchange rate changes on total cash and cash equivalents

 

31

 

 

(16

)

Net increase (decrease) in total cash and cash equivalents

 

(331

)

 

67

 

Cash and cash equivalents, beginning of period

 

1672

 

 

897

 

Cash and cash equivalents, end of period

$

1341

 

$

964

 

 
Financial Ratios:
Free cash flow*

$

155

 

$

188

 

 
*Free cash flow = Net cash provided by operating activities - Capital expenditures
 
GAAP-5
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In millions)
 
Six Months Ended
June 27, 2020June 29, 2019
Operating
Net earnings attributable to Motorola Solutions, Inc.

$

332

 

$

358

 

Earnings attributable to non-controlling interests

 

2

 

 

2

 

Net earnings

 

334

 

 

360

 

Adjustments to reconcile Net earnings to Net cash provided by operating activities:
Depreciation and amortization

 

197

 

 

191

 

Non-cash other charges (income)

 

(40

)

 

4

 

Share-based compensation expenses

 

69

 

 

57

 

Gain on sales of investments and businesses, net

 

-

 

 

(4

)

Losses from the extinguishment of long term debt

 

-

 

 

43

 

Changes in assets and liabilities, net of effects of acquisitions, dispositions, and foreign currency translation adjustments:
Accounts receivable

 

286

 

 

110

 

Inventories

 

3

 

 

(61

)

Other current assets and contract assets

 

136

 

 

128

 

Accounts payable, accrued liabilities, and contract liabilities

 

(454

)

 

(345

)

Other assets and liabilities

 

(15

)

 

2

 

Deferred income taxes

 

1

 

 

17

 

Net cash provided by operating activities

 

517

 

 

502

 

Investing
Acquisitions and investments, net

 

(102

)

 

(371

)

Proceeds from sales of investments and businesses, net

 

7

 

 

10

 

Capital expenditures

 

(102

)

 

(129

)

Proceeds from sales of property, plant and equipment

 

56

 

 

-

 

Net cash used for investing activities

 

(141

)

 

(490

)

Financing
Net proceeds from issuance of debt

 

-

 

 

645

 

Repayments of debt

 

(8

)

 

(666

)

Net proceeds from revolver draw

 

800

 

 

-

 

Repayment of revolver draw

 

(300

)

 

-

 

Issuances of common stock

 

49

 

 

70

 

Purchases of common stock

 

(336

)

 

(170

)

Payments of dividends

 

(218

)

 

(187

)

Payments of dividends to non-controlling interests

 

(4

)

 

(3

)

Net cash used for financing activities

 

(17

)

 

(311

)

Effect of exchange rate changes on total cash and cash equivalents

 

(19

)

 

6

 

Net increase (decrease) in total cash and cash equivalents

 

340

 

 

(293

)

Cash and cash equivalents, beginning of period

 

1,001

 

 

1,257

 

Cash and cash equivalents, end of period

$

1341

 

$

964

 

 
Financial Ratios:
Free cash flow*

$

415

 

$

373

 

 
*Free cash flow = Net cash provided by operating activities - Capital expenditures
 
GAAP-6
Motorola Solutions, Inc. and Subsidiaries
Segment Information
(In millions)
 
Net Sales
 
Three Months Ended
 
June 27, 2020June 29, 2019% Change
Products and Systems Integration

$

968

 

$

1,238

 

(22

)%

Software and Services

 

650

 

 

622

 

5

%

Total Motorola Solutions

$

1,618

 

$

1,860

 

(13

)%

 
Six Months Ended
 
June 27, 2020June 29, 2019% Change
Products and Systems Integration

$

1,961

 

$

2,307

 

(15

)%

Software and Services

 

1,312

 

 

1,210

 

8

%

Total Motorola Solutions

$

3,273

 

$

3,517

 

(7

)%

 
Operating Earnings
 
Three Months Ended
 
June 27, 2020June 29, 2019% Change
Products and Systems Integration

$

49

 

$

201

 

(76

)%

Software and Services

 

169

 

 

148

 

14

%

Total Motorola Solutions

$

218

 

$

349

 

(38

)%

 
Six Months Ended
 
June 27, 2020June 29, 2019% Change
Products and Systems Integration

$

141

 

$

310

 

(55

)%

Software and Services

 

335

 

 

269

 

25

%

Total Motorola Solutions

$

476

 

$

579

 

(18

)%

 
Operating Earnings %
 
Three Months Ended
 
June 27, 2020June 29, 2019
Products and Systems Integration

 

5.1

%

 

16.2

%

Software and Services

 

26.0

%

 

23.8

%

Total Motorola Solutions

 

13.5

%

 

18.8

%

 
Six Months Ended
 
June 27, 2020June 29, 2019
Products and Systems Integration

 

7.2

%

 

13.4

%

Software and Services

 

25.5

%

 

22.2

%

Total Motorola Solutions

 

14.5

%

 

16.5

%

 
Non-GAAP-1
Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Adjustments (Intangibles Amortization Expense, Share-Based Compensation Expense and Highlighted Items)

(In millions)

Q1 2020
 
Non-GAAP AdjustmentsStatement LinePBT
(Inc)/Exp
Tax
Inc/(Exp)
PAT
(Inc)/Exp
EPS impact
 
Intangibles amortization expenseIntangibles amortization

$

53

 

$

13

 

$

40

 

$

0.23

 

Share-based compensation expensesCost of sales, SG&A and R&D

 

38

 

 

9

 

 

29

 

 

0.17

 

Hytera-related legal expensesSG&A

 

25

 

 

6

 

 

19

 

 

0.11

 

Reorganization of business chargesCost of sales and Other charges (income)

 

18

 

 

4

 

 

14

 

 

0.08

 

Acquisition-related transaction feesOther charges (income)

 

2

 

 

-

 

 

2

 

 

0.01

 

Legal settlementsOther charges (income)

 

2

 

 

-

 

 

2

 

 

0.01

 

Fair value adjustments to equity investmentsOther income

 

(1

)

 

-

 

 

(1

)

 

(0.01

)

Release of uncertain tax positionsIncome tax expense

 

-

 

 

1

 

 

(1

)

 

(0.01

)

Gain on sale of property, plant, and equipmentOther charges (income)

 

(50

)

 

(12

)

 

(38

)

 

(0.22

)

Total impact on Net earnings

$

87

 

$

21

 

$

66

 

$

0.37

 

 
Q1 2020
 
Non-GAAP AdjustmentsStatement LinePBT
(Inc)/Exp
Tax
Inc/(Exp)
PAT
(Inc)/Exp
EPS impact
 
Intangibles amortization expenseIntangibles amortization

$

51

 

$

12

 

$

39

 

$

0.22

 

Reorganization of business chargesCost of sales and Other charges (income)

 

41

 

 

10

 

 

31

 

 

0.18

 

Share-based compensation expensesCost of sales, SG&A and R&D

 

31

 

 

7

 

 

24

 

 

0.14

 

Legal settlementsOther charges (income)

 

7

 

 

2

 

 

5

 

 

0.03

 

Hytera-related legal expensesSG&A

 

5

 

 

1

 

 

4

 

 

0.02

 

Fixed asset impairmentOther charges (income)

 

5

 

 

1

 

 

4

 

 

0.02

 

Acquisition-related transaction feesOther charges (income)

 

1

 

 

-

 

 

1

 

 

0.01

 

Release of uncertain tax positionsIncome tax expense

 

-

 

 

(1

)

 

1

 

 

0.01

 

Fair value adjustments to equity investmentsOther income

 

(4

)

 

(1

)

 

(3

)

 

(0.02

)

Total impact on Net earnings

$

137

 

$

31

 

$

106

 

$

0.61

 

 
Non-GAAP-2
Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Segment Information
(In millions)
 
Net Sales
 
Three Months Ended
 
June 27, 2020June 29, 2019% Change
Products and Systems Integration

$

968

 

$

1,238

 

(22

)%

Software and Services

 

650

 

 

622

 

5

%

Total Motorola Solutions

$

1,618

 

$

1,860

 

(13

)%

 
Six Months Ended
 
June 27, 2020June 29, 2019% Change
Products and Systems Integration

$

1,961

 

$

2,307

 

(15

)%

Software and Services

 

1,312

 

 

1,210

 

8

%

Total Motorola Solutions

$

3,273

 

$

3,517

 

(7

)%

 
 
Non-GAAP Operating Earnings
 
Three Months Ended
 
June 27, 2020June 29, 2019% Change
Products and Systems Integration

$

131

 

$

242

 

(46

)%

Software and Services

 

228

 

 

202

 

13

%

Total Motorola Solutions

$

359

 

$

444

 

(19

)%

 
Six Months Ended
 
June 27, 2020June 29, 2019% Change
Products and Systems Integration

$

253

 

$

389

 

(35

)%

Software and Services

 

452

 

 

370

 

22

%

Total Motorola Solutions

$

705

 

$

759

 

(7

)%

 
 
Non-GAAP Operating Earnings %
 
Three Months Ended
 
June 27, 2020June 29, 2019
Products and Systems Integration

 

13.5

%

 

19.5

%

Software and Services

 

35.1

%

 

32.5

%

Total Motorola Solutions

 

22.2

%

 

23.9

%

 
Six Months Ended
 
June 27, 2020June 29, 2019
Products and Systems Integration

 

12.9

%

 

16.9

%

Software and Services

 

34.5

%

 

30.6

%

Total Motorola Solutions

 

21.5

%

 

21.6

%

 
Non-GAAP-3
Motorola Solutions, Inc. and Subsidiaries
Operating Earnings after Non-GAAP Adjustments
(In millions)
Q1 2020
 
TOTALProducts and Systems
Integration
Software and Services
Net sales

$

1,655

 

$

993

 

$

662

 

Operating earnings ("OE")

$

259

 

$

92

 

$

167

 

 
Above-OE non-GAAP adjustments:
Intangibles amortization expense

 

53

 

 

12

 

 

41

 

Share-based compensation expenses

 

38

 

 

27

 

 

11

 

Hytera-related legal expenses

 

25

 

 

25

 

 

-

 

Reorganization of business charges

 

18

 

 

14

 

 

4

 

Acquisition-related transaction fees

 

2

 

 

1

 

 

1

 

Legal settlements

 

2

 

 

2

 

 

-

 

Gain on sale of property, plant, and equipment

 

(50

)

 

(50

)

 

-

 

Total above-OE non-GAAP adjustments

 

88

 

 

31

 

 

57

 

Operating earnings after non-GAAP adjustments

$

347

 

$

123

 

$

224

 

 
Operating earnings as a percentage of net sales - GAAP

 

15.6

%

 

9.3

%

 

25.2

%

Operating earnings as a percentage of net sales - after non-GAAP adjustments

 

21.0

%

 

12.4

%

 

33.8

%

 
Q2 2020
 
TOTALProducts and Systems
Integration
Software and Services
Net sales

$

1,618

 

$

968

 

$

650

 

Operating earnings ("OE")

$

218

 

$

49

 

$

169

 

Above-OE non-GAAP adjustments:
Intangibles amortization expense

 

51

 

 

12

 

 

39

 

Reorganization of business charges

 

41

 

 

33

 

 

8

 

Share-based compensation expenses

 

31

 

 

22

 

 

9

 

Legal settlements

 

7

 

 

7

 

 

-

 

Hytera-related legal expenses

 

5

 

 

5

 

 

-

 

Fixed asset impairment

 

5

 

 

3

 

 

2

 

Acquisition-related transaction fees

 

1

 

 

-

 

 

1

 

Total above-OE non-GAAP adjustments

 

141

 

 

82

 

 

59

 

Operating earnings after non-GAAP adjustments

$

359

 

$

131

 

$

228

 

 
Operating earnings as a percentage of net sales - GAAP

 

13.5

%

 

5.1

%

 

26.0

%

Operating earnings as a percentage of net sales - after non-GAAP adjustments

 

22.2

%

 

13.5

%

 

35.1

%

 
 
Non-GAAP-4
Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Organic Revenue
(In millions)
 
Total Motorola Solutions
 
Three Months Ended
 
June 27, 2020June 29, 2019% Change
Net sales

$

1,618

$

1,860

(13

)%

Non-GAAP adjustments:
Sales from acquisitions

 

40

 

-

Organic revenue

$

1,578

$

1,860

(15

)%

 
 
Total Motorola Solutions
 
Six Months Ended
 
June 27, 2020June 29, 2019% Change
Net sales

$

3,273

$

3,517

(7

)%

Non-GAAP adjustments:
Sales from acquisitions

 

91

 

3

Organic revenue

$

3,182

$

3,514

(9

)%

 

 

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

Source: Motorola Solutions, Inc.