MSI
$164.81
Motorola Solutions
($.33)
(.20%)
Earnings Details
3rd Quarter September 2019
Wednesday, October 30, 2019 4:10:00 PM
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Summary

Motorola Solutions Beats but Guides Lower

Motorola Solutions (MSI) reported 3rd Quarter September 2019 earnings of $2.04 per share on revenue of $2.0 billion. The consensus earnings estimate was $1.96 per share on revenue of $2.0 billion. The Earnings Whisper number was $1.99 per share. Revenue grew 7.1% on a year-over-year basis.

The company said it expects fourth quarter earnings of $2.75 to $2.80 per share. The current consensus earnings estimate is $2.85 per share for the quarter ending December 31, 2019.

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
$2.04
Earnings Whisper
$1.99
Consensus Estimate
$1.96
Reported Revenue
$1.99 Bil
Revenue Estimate
$1.99 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Motorola Solutions Reports Third-Quarter 2019 Financial Results

Company raises full-year earnings outlook

  • Revenue of $2.0 billion, up 7% from a year ago
  • GAAP earnings per share (EPS) of $1.51, up 6%
  • Non-GAAP EPS* of $2.04, up 5%
  • Backlog of $11.0 billion, up $1.6 billion or 17% from a year ago
  • Generated $525 million of operating cash flow, up 55%

CHICAGO--(BUSINESS WIRE)--Motorola Solutions, Inc. (NYSE: MSI) today reported its earnings results for the third quarter of 2019. Click here for a printable news release and financial tables.

"Q3 was another excellent quarter of revenue growth and cash generation," said Greg Brown, chairman and CEO of Motorola Solutions. “Our ending backlog and continued strong business performance position us well to finish the year with record sales, earnings and cash flow.”

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

 

Q3 2019

Q3 2018

% Change

Sales

$1,994

 

$1,862

 

7%

GAAP

 

 

 

Operating Earnings

$413

$294

40%

% of Sales

20.7%

15.8%

 

EPS

$1.51

$1.43

6%

Non-GAAP*

 

 

 

Operating Earnings

$509

$452

13%

% of Sales

25.5%

24.3%

 

EPS

$2.04

$1.94

5%

Products and Systems Integration Segment

 

 

 

Sales

$1,349

$1,288

5%

GAAP Operating Earnings

$258

$183

41%

% of Sales

19.1%

14.2%

 

Non-GAAP Operating Earnings*

$300

$276

9%

% of Sales

22.2%

21.4%

 

Services and Software Segment

 

 

 

Sales

$645

$574

12%

GAAP Operating Earnings

$155

$111

40%

% of Sales

24.0%

19.3%

 

Non-GAAP Operating Earnings*

$209

$176

19%

% of Sales

32.4%

30.7%

 

*Non-GAAP financial information excludes the after-tax impact of approximately $0.53 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 $2.0 billion, up $132 million, or 7% from the year-ago quarter, driven by growth in the Americas. Revenue from acquisitions was $58 million, and currency headwinds were $21 million in the quarter. The Products and Systems Integration segment grew 5%, and the Services and Software segment grew 12%. Both segments were driven by growth in the Americas, partially offset by unfavorable currency rates.
  • Operating margin - GAAP operating margin was 20.7% of sales, up from 15.8% in the year-ago quarter. The improvement was primarily due to higher sales and gross margin in the current year, as well as costs related to an increase to an existing environmental reserve booked in the prior year, partially offset by higher operating expenses related to acquisitions. Non-GAAP operating margin was 25.5% of sales, up from 24.3% in the year-ago quarter due to higher sales and gross margin, partially offset by higher operating expenses related to acquisitions.
  • Taxes- The GAAP effective tax rate was 23%, compared with 8% in the year-ago quarter. The non-GAAP effective tax rate was 23% compared with 18% in the year-ago quarter. Both the GAAP and non-GAAP tax rates were higher in the current year due to the recognition of favorable return-to- provision adjustments in the prior year.
  • Cash flow - Operating cash flow was $525 million, compared with $338 million in the year-ago quarter. Free cash flow was $465 million, compared with $292 million in the year-ago quarter. Cash flow for the quarter increased year over year primarily due to improved working capital, a settlement payment in the prior year related to a legacy business, and higher earnings.
  • Capital allocation - During the quarter, the company paid $271 million in cash and equity to acquire WatchGuard Inc., paid $94 million in cash dividends, and incurred $60 million of capital expenditures. Additionally, we extended our strategic partnership with Silver Lake with a new $1 billion five-year convertible note. In exchange, we settled the outstanding $800 million note with 5.5 million shares and $1.1 billion in cash, of which $600 million was paid subsequent to quarter-end. The transaction resulted in an overall reduction to our diluted share count in the quarter. The company also paid off the $400 million term loan used to acquire Avigilon.
  • Backlog- The company ended the quarter with backlog of $11.0 billion, up $1.6 billion from the year-ago quarter. Services and Software backlog was up 26% or $1.6 billion due to growth in EMEA and the Americas. Products and Systems Integration segment backlog was down 1% or $39 million primarily due to two large system deployments in the Middle East and Africa in the prior year, partially offset by growth in the Americas.

NOTABLE WINS

Services and Software

  • $78 million P25 multi-year service contract with State of Michigan, extending service through 2029
  • $58 million P25 multi-year statewide service contract in North America
  • $11 million command center software suite contract with Glendale, Arizona
  • $4 million for a 911 system in Bogota, Colombia

Products and Systems Integration

  • The largest Canadian P25 award in history serving the province of Ontario
  • $27 million in video security wins in education
  • $16 million P25 order from Lee County, Florida
  • Several large awards in mobile and in-car video including $13 million for city of Nashville, Tennessee and $4 million for the Michigan State Police
  • $3 million in fixed video security wins for government customers

BUSINESS OUTLOOK

  • Fourth-quarter 2019 - Motorola Solutions expects revenue growth of 5% to 5.5% compared with the fourth quarter of 2018. The company expects non-GAAP earnings per share in the range of $2.75 to $2.80. This assumes current foreign exchange rates, approximately 176 million fully diluted shares and an effective tax rate of approximately 25%.
  • Full-year 2019 - The company now expects revenue growth of 7.25% to 7.5%. The company now expects non-GAAP earnings per share in the range of $7.77 to $7.82, up from the prior guidance of $7.67 to $7.77. This assumes current foreign exchange rates, approximately 176 million fully diluted shares and an effective tax rate of approximately 23.5%.

CONFERENCE CALL AND WEBCAST Motorola Solutions will host its quarterly conference call beginning at 4 p.m. U.S. Central Daylight Time (5 p.m. U.S. Eastern Daylight Time) on Wednesday, Oct. 30. 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:

 

Q3 2019

Q3 2018

Net sales

$1,994

$1,862

Gross margin

1,007

901

Operating earnings

413

294

Amounts attributable to Motorola Solutions, Inc. common stockholders

 

 

Net earnings

267

247

Diluted EPS

$1.51

$1.43

Weighted average diluted common shares outstanding

176.4

172.6

HIGHLIGHTED ITEMS AND SHARE-BASED COMPENSATION EXPENSE

The table below includes highlighted items, share-based compensation expense and intangible amortization for the third quarter of 2019.

(per diluted common share)

Q3 2019

 

 

GAAP Earnings

$1.51

Highlighted Items:

 

Intangibles amortization expense

0.22

 

Share-based compensation expense

0.13

 

Reorganization of business charges

0.08

 

Fair value adjustments to equity investments

0.08

 

Loss from the extinguishment of long-term debt

0.03

 

Investment impairments

0.02

 

Acquisition-related transaction fees

0.01

 

Gain from the extinguishment of 2.00% senior convertible notes

(0.02

)

Gain on legal settlement

(0.02

)

 

 

Non-GAAP Diluted EPS

$2.04

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, 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.

Share-based compensation expense: 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.

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 fourth quarter and full year of 2019. Motorola Solutions cautions the reader that the risk factors below, as well as those on pages 9 through 21 in Item 1A of Motorola Solutions’ 2018 Annual Report on Form 10-K 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; and (viii) the company’s ability to access the capital markets on acceptable terms and conditions; (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. Our technology platforms in communications, command center software, video security solutions and managed and 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. ©2019 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
September 28, 2019September 29, 2018
Net sales from products

$

1,196

 

$

1,151

 

Net sales from services

 

798

 

 

711

 

Net sales

 

1,994

 

 

1,862

 

Costs of products sales

 

501

 

 

516

 

Costs of services sales

 

486

 

 

445

 

Costs of sales

 

987

 

 

961

 

Gross margin

 

1007

 

 

901

 

Selling, general and administrative expenses

 

359

 

 

323

 

Research and development expenditures

 

172

 

 

158

 

Other charges

 

11

 

 

80

 

Intangibles amortization

 

52

 

 

46

 

Operating earnings

 

413

 

 

294

 

Other income (expense):
Interest expense, net

 

(54

)

 

(59

)

Gains on sales of investments and businesses, net

 

-

 

 

6

 

Other, net

 

(11

)

 

29

 

Total other expense

 

(65

)

 

(24

)

Net earnings before income taxes

 

348

 

 

270

 

Income tax expense

 

80

 

 

22

 

Net earnings

 

268

 

 

248

 

Less: Earnings attributable to non-controlling interests

 

1

 

 

1

 

Net earnings attributable to Motorola Solutions, Inc.

$

267

 

$

247

 

Earnings per common share:
Basic

$

1.60

 

$

1.52

 

Diluted

$

1.51

 

$

1.43

 

Weighted average common shares outstanding:
Basic

 

166.7

 

 

162.6

 

Diluted

 

176.4

 

 

172.6

 

 
Percentage of Net Sales*
Net sales from products

 

60.0

%

 

61.8

%

Net sales from services

 

40.0

%

 

38.2

%

Net sales

 

100.0

%

 

100.0

%

Costs of products sales

 

41.9

%

 

44.8

%

Costs of services sales

 

60.9

%

 

62.6

%

Costs of sales

 

49.5

%

 

51.6

%

Gross margin

 

50.5

%

 

48.4

%

Selling, general and administrative expenses

 

18.0

%

 

17.3

%

Research and development expenditures

 

8.6

%

 

8.5

%

Other charges

 

0.6

%

 

4.3

%

Intangibles amortization

 

2.6

%

 

2.5

%

Operating earnings

 

20.7

%

 

15.8

%

Other income (expense):
Interest expense, net

 

(2.7

)%

 

(3.2

)%

Gains on sales of investments and businesses, net

-

%

0.3

%

Other, net

 

(0.6

)%

 

1.6

%

Total other expense

 

(3.3

)%

 

(1.3

)%

Net earnings before income taxes

 

17.4

%

 

14.5

%

Income tax expense

 

4.0

%

 

1.2

%

Net earnings

 

13.4

%

 

13.3

%

Less: Earnings attributable to non-controlling interests

 

0.1

%

 

0.1

%

Net earnings attributable to Motorola Solutions, Inc.

 

13.4

%

 

13.3

%

* Percentages may not add up due to rounding
GAAP-2
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In millions, except per share amounts)
 
Nine Months Ended
September 28, 2019September 29, 2018
Net sales from products

$

3,260

 

$

2,993

 

Net sales from services

 

2,251

 

 

2,096

 

Net sales

 

5,511

 

 

5,089

 

Costs of products sales

 

1,435

 

 

1,383

 

Costs of services sales

 

1,365

 

 

1,314

 

Costs of sales

 

2,800

 

 

2,697

 

Gross margin

 

2,711

 

 

2,392

 

Selling, general and administrative expenses

 

1035

 

 

918

 

Research and development expenditures

 

505

 

 

472

 

Other charges

 

26

 

 

123

 

Intangibles amortization

 

154

 

 

140

 

Operating earnings

 

991

 

 

739

 

Other income (expense):
Interest expense, net

 

(165

)

 

(163

)

Gains on sales of investments and businesses, net

 

4

 

 

16

 

Other, net

 

(22

)

 

45

 

Total other expense

 

(183

)

 

(102

)

Net earnings before income taxes

 

808

 

 

637

 

Income tax expense

 

180

 

 

91

 

Net earnings

 

628

 

 

546

 

Less: Earnings attributable to non-controlling interests

 

3

 

 

2

 

Net earnings attributable to Motorola Solutions, Inc.

$

625

 

$

544

 

Earnings per common share:
Basic

$

3.78

 

$

3.36

 

Diluted

$

3.56

 

$

3.17

 

Weighted average common shares outstanding:
Basic

 

165.3

 

 

162.0

 

Diluted

 

175.7

 

 

171.6

 

 
Percentage of Net Sales*
Net sales from products

 

59.2

%

 

58.8

%

Net sales from services

 

40.8

%

 

41.2

%

Net sales

 

100.0

%

 

100.0

%

Costs of products sales

 

44.0

%

 

46.2

%

Costs of services sales

 

60.6

%

 

62.7

%

Costs of sales

 

50.8

%

 

53.0

%

Gross margin

 

49.2

%

 

47.0

%

Selling, general and administrative expenses

 

18.8

%

 

18.0

%

Research and development expenditures

 

9.2

%

 

9.3

%

Other charges

 

0.5

%

 

2.4

%

Intangibles amortization

 

2.8

%

 

2.8

%

Operating earnings

 

18.0

%

 

14.5

%

Other income (expense):
Interest expense, net

 

(3.0

)%

 

(3.2

)%

Gains on sales of investments and businesses, net

 

0.1

%

 

0.3

%

Other, net

 

(0.4

)%

 

0.9

%

Total other expense

 

(3.3

)%

 

(2.0

)%

Net earnings before income taxes

 

14.7

%

 

12.5

%

Income tax expense

 

3.3

%

 

1.8

%

Net earnings

 

11.4

%

 

10.7

%

Less: Earnings attributable to non-controlling interests

0.1

%

-

%

Net earnings attributable to Motorola Solutions, Inc.

 

11.3

%

 

10.7

%

* Percentages may not add up due to rounding

 

GAAP-3
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In millions)

 

 

September 28, 2019December 31, 2018

Assets

Cash and cash equivalents

$

1138

 

$

1,246

 

Restricted cash

 

2

 

 

11

 

Total cash and cash equivalents

 

1140

 

 

1,257

 

Accounts receivable, net

 

1295

 

 

1293

 

Contract assets

 

921

 

 

1012

 

Inventories, net

 

460

 

 

356

 

Other current assets

 

338

 

 

354

 

Total current assets

 

4,154

 

 

4,272

 

 

Property, plant and equipment, net

 

963

 

 

895

 

Operating lease assets

 

561

 

 

-

 

Investments

 

159

 

 

169

 

Deferred income taxes

 

866

 

 

985

 

Goodwill

 

2,006

 

 

1514

 

Intangible Assets

 

1,331

 

 

1230

 

Other assets

 

333

 

 

344

 

Total assets

$

10,373

 

$

9,409

 

 

Liabilities and Stockholders' Equity

Current portion of long-term debt

$

617

 

$

31

 

Accounts payable

 

557

 

 

592

 

Contract liabilities

 

1,223

 

 

1263

 

Accrued liabilities

 

1,259

 

 

1,210

 

Total current liabilities

 

3,656

 

 

3,096

 

 

Long-term debt

 

5,112

 

 

5,289

 

Operating lease liabilities

 

499

 

 

-

 

Other liabilities

 

2,190

 

 

2,300

 

 

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

 

(1,101

)

 

(1,293

)

 

Non-controlling interests

 

17

 

 

17

 

 

Total liabilities and stockholders’ equity

$

10,373

 

$

9,409

 

 

GAAP-4
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In millions)
 
Three Months Ended
September 28, 2019September 29, 2018
Operating
Net earnings attributable to Motorola Solutions, Inc.

$

267

 

$

247

 

Earnings attributable to non-controlling interests

 

1

 

 

1

 

Net earnings

 

268

 

 

248

 

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

 

99

 

 

89

 

Non-cash other (income) charges

 

22

 

 

50

 

Share-based compensation expense

 

30

 

 

19

 

Gain on sales of investments and businesses, net

 

-

 

 

(6

)

Losses from the extinguishment of long term debt

 

7

 

 

-

 

Gain from the extinguishment of 2.00% senior convertible notes

 

(4

)

 

(6

)

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

 

(80

)

 

(20

)

Inventories

 

(27

)

 

24

 

Other current assets and contract assets

 

(24

)

 

(180

)

Accounts payable, accrued liabilities, and contract liabilities

 

202

 

 

170

 

Other assets and liabilities

 

8

 

 

(38

)

Deferred income taxes

 

24

 

 

(12

)

Net cash provided by operating activities

 

525

 

 

338

 

Investing
Acquisitions and investments, net

 

(252

)

 

(5

)

Proceeds from sales of investments and businesses, net

 

-

 

 

11

 

Capital expenditures

 

(60

)

 

(46

)

Net cash used for investing activities

 

(312

)

 

(40

)

Financing
Repayment of debt

 

(770

)

 

(215

)

Net proceeds from the issuances of debt

 

1159

 

 

-

 

Issuances of common stock

 

12

 

 

80

 

Payments of dividends

 

(94

)

 

(84

)

Settlements of conversion premium on 2.00% senior convertible notes

 

(326

)

 

(169

)

Net cash used for financing activities

 

(19

)

 

(388

)

 
Effect of exchange rate changes on total cash and cash equivalents

 

(18

)

 

-

 

Net increase (decrease) in total cash and cash equivalents

 

176

 

 

(90

)

Total cash and cash equivalents, beginning of period

 

964

 

 

941

 

Total cash and cash equivalents, end of period

$

1140

 

$

851

 

 
Financial Ratios:
Free cash flow*

$

465

 

$

292

 

 
*Free cash flow = Net cash provided by (used for) operating activities - Capital expenditures
GAAP-5
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In millions)
 
Nine Months Ended
September 28, 2019September 29, 2018
Operating
Net earnings attributable to Motorola Solutions, Inc.

$

625

 

$

544

 

Earnings attributable to non-controlling interests

 

3

 

 

2

 

Net earnings

 

628

 

 

546

 

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

 

290

 

 

267

 

Non-cash other charges

 

27

 

 

56

 

Share-based compensation expense

 

87

 

 

53

 

Gains on sales of investments and businesses, net

 

(4

)

 

(16

)

Losses from the extinguishment of long term debt

 

50

 

 

-

 

Gain from the extinguishment of 2.00% senior convertible notes

 

(4

)

 

(6

)

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

 

30

 

 

186

 

Inventories

 

(88

)

 

61

 

Other current assets and contract assets

 

104

 

 

(137

)

Accounts payable, accrued liabilities, and contract liabilities

 

(143

)

 

(170

)

Other assets and liabilities

 

10

 

 

(596

)

Deferred income taxes

 

41

 

 

19

 

Net cash provided by operating activities

 

1,028

 

 

263

 

Investing
Acquisitions and investments, net

 

(623

)

 

(1158

)

Proceeds from sales of investments and businesses, net

 

10

 

 

90

 

Capital expenditures

 

(189

)

 

(128

)

Net cash used for investing activities

 

(802

)

 

(1196

)

Financing
Repayment of debt

 

(1435

)

 

(412

)

Net proceeds from the issuances of debt

 

1,804

 

 

1295

 

Issuances of common stock

 

82

 

 

139

 

Purchases of common stock

 

(170

)

 

(66

)

Payments of dividends

 

(281

)

 

(252

)

Payments of dividends to non-controlling interests

 

(3

)

 

(1

)

Settlements of conversion premium on 2.00% senior convertible notes

 

(326

)

 

(169

)

Net cash provided by (used for) financing activities

 

(329

)

 

534

 

 
Effect of exchange rate changes on total cash and cash equivalents

 

(14

)

 

(18

)

Net decrease in total cash and cash equivalents

 

(117

)

 

(417

)

Total cash and cash equivalents, beginning of period

 

1,257

 

 

1,268

 

Total cash and cash equivalents, end of period

$

1,140

 

$

851

 

 
Financial Ratios:
Free cash flow*

$

839

 

$

135

 

 
*Free cash flow = Net cash provided by (used for) operating activities - Capital expenditures

GAAP-6

Motorola Solutions, Inc. and Subsidiaries
Segment Information
(In millions)
 
Net Sales
 
Three Months Ended
 
September 28, 2019September 29, 2018% Change
Products and Systems Integration

$

1,349

 

$

1,288

 

5

%

Services and Software

 

645

 

 

574

 

12

%

Total Motorola Solutions

$

1,994

 

$

1,862

 

7

%

 
Nine Months Ended
 
September 28, 2019September 29, 2018% Change
Products and Systems Integration

$

3,656

 

$

3,429

 

7

%

Services and Software

 

1,855

 

 

1,660

 

12

%

Total Motorola Solutions

$

5,511

 

$

5,089

 

8

%

 
 
Operating Earnings
 
Three Months Ended
 
September 28, 2019September 29, 2018% Change
Products and Systems Integration

$

258

 

$

183

 

41

%

Services and Software

 

155

 

 

111

 

40

%

Total Motorola Solutions

$

413

 

$

294

 

40

%

 
Nine Months Ended
 
September 28, 2019September 29, 2018% Change
Products and Systems Integration

$

568

 

$

449

 

27

%

Services and Software

 

423

 

 

290

 

46

%

Total Motorola Solutions

$

991

 

$

739

 

34

%

 
 
Operating Earnings %
 
Three Months Ended
 
September 28, 2019September 29, 2018
Products and Systems Integration

 

19.1

%

 

14.2

%

Services and Software

 

24.0

%

 

19.3

%

Total Motorola Solutions

 

20.7

%

 

15.8

%

 
Nine Months Ended
 
September 28, 2019September 29, 2018
Products and Systems Integration

 

15.5

%

 

13.1

%

Services and Software

 

22.8

%

 

17.5

%

Total Motorola Solutions

 

18.0

%

 

14.5

%

 

Non-GAAP-1

Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Adjustments (Intangibles Amortization Expense, Share-Based Compensation Expense and Highlighted Items)
(In millions)
Q1 2019
 
Non-GAAP AdjustmentsStatement LinePBT
(Inc)/Exp
Tax
Inc/(Exp)
PAT
(Inc)/Exp
EPS impact
 
Intangibles amortization expenseIntangibles amortization

$

50

 

$

11

 

$

39

 

$

0.23

 

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

 

27

 

 

6

 

 

21

 

 

0.12

 

Investment impairmentsInvestment impairments

 

8

 

 

2

 

 

6

 

 

0.04

 

Reorganization of business chargesCost of sales and Other charges

 

8

 

 

2

 

 

6

 

 

0.04

 

Acquisition-related transaction feesOther charges

 

2

 

 

-

 

 

2

 

 

0.01

 

Fair value adjustments to equity investmentsOther expense

 

1

 

 

-

 

 

1

 

 

0.01

 

Release of uncertain tax positionsIncome tax expense

 

-

 

 

1

 

 

(1

)

 

(0.01

)

Legal settlementOther charges

 

(1

)

 

-

 

 

(1

)

 

(0.01

)

Sale of investments(Gain) or loss on sales of investments and businesses, net

 

(1

)

 

-

 

 

(1

)

 

(0.01

)

 
Total impact on Net earnings

$

94

 

$

22

 

$

72

 

$

0.42

 

 
Q2 2019
 
Non-GAAP AdjustmentsStatement LinePBT
(Inc)/Exp
Tax
Inc/(Exp)
PAT
(Inc)/Exp
EPS impact
 
Intangibles amortization expenseIntangibles amortization

$

52

 

$

11

 

$

41

 

$

0.23

 

Loss from the extinguishment of long-term debtOther expense

 

43

 

 

11

 

 

32

 

 

0.18

 

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

 

30

 

 

7

 

 

23

 

 

0.13

 

Reorganization of business chargesCost of sales and Other charges

 

12

 

 

3

 

 

9

 

 

0.05

 

Investment impairmentsInvestment impairments

 

3

 

 

1

 

 

2

 

 

0.01

 

Legal settlementsOther charges

 

1

 

 

-

 

 

1

 

 

0.01

 

Sale of a business(Gain) or loss on sales of investments and businesses, net

 

(3

)

 

(1

)

 

(2

)

 

(0.01

)

Release of uncertain tax positionsOther income, Income tax expense

 

(4

)

 

(1

)

 

(3

)

 

(0.02

)

Fair value adjustments to equity investmentsOther income

 

(16

)

 

(4

)

 

(12

)

 

(0.07

)

 
Total impact on Net earnings

$

118

 

$

27

 

$

91

 

$

0.51

 

 
Q3 2019
 
Non-GAAP AdjustmentsStatement LinePBT (Inc)/ExpTax Inc/(Exp)PAT (Inc)/ExpEPS impact
 
Intangibles amortization expenseIntangibles amortization

$

52

 

$

12

 

$

40

 

$

0.22

 

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

 

30

 

 

7

 

 

23

 

 

0.13

 

Reorganization of business chargesCost of sales and Other charges

 

18

 

 

4

 

 

14

 

 

0.08

 

Fair value adjustments to equity investmentsOther income

 

18

 

 

4

 

 

14

 

 

0.08

 

Loss from the extinguishment of long-term debtOther expense

 

7

 

 

2

 

 

5

 

 

0.03

 

Investment impairmentsOther expense

 

5

 

 

1

 

 

4

 

 

0.02

 

Acquisition-related transaction feesOther charges

 

1

 

 

-

 

 

1

 

 

0.01

 

Gain from the extinguishment of 2.00% senior convertible notesOther income

 

(4

)

 

(1

)

 

(3

)

 

(0.02

)

Gain on legal settlementOther charges

 

(5

)

 

(1

)

 

(4

)

$

(0.02

)

 
Total impact on Net earnings

 

122

 

 

28

 

 

94

 

$

0.53

 

 

Non-GAAP-2

Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Segment Information
(In millions)
 
Net Sales
 
Three Months Ended
 
September 28, 2019September 29, 2018% Change
Products and Systems Integration

$

1,349

 

$

1,288

 

5

%

Services and Software

 

645

 

 

574

 

12

%

Total Motorola Solutions

$

1,994

 

$

1,862

 

7

%

 
Nine Months Ended
 
September 28, 2019September 29, 2018% Change
Products and Systems Integration

$

3,656

 

$

3,429

 

7

%

Services and Software

 

1,855

 

 

1,660

 

12

%

Total Motorola Solutions

$

5,511

 

$

5,089

 

8

%

 
 
Non-GAAP Operating Earnings
 
Three Months Ended
 
September 28, 2019September 29, 2018% Change
Products and Systems Integration

$

300

 

$

276

 

9

%

Services and Software

 

209

 

 

176

 

19

%

Total Motorola Solutions

$

509

 

$

452

 

13

%

 
Nine Months Ended
 
September 28, 2019September 29, 2018% Change
Products and Systems Integration

$

689

 

$

627

 

10

%

Services and Software

 

580

 

 

463

 

25

%

Total Motorola Solutions

$

1,269

 

$

1090

 

16

%

 
 
Non-GAAP Operating Earnings %
 
Three Months Ended
 
September 28, 2019September 29, 2018
Products and Systems Integration

 

22.2

%

 

21.4

%

Services and Software

 

32.4

%

 

30.7

%

Total Motorola Solutions

 

25.5

%

 

24.3

%

 
Nine Months Ended
 
September 28, 2019September 29, 2018
Products and Systems Integration

 

18.8

%

 

18.3

%

Services and Software

 

31.3

%

 

27.9

%

Total Motorola Solutions

 

23.0

%

 

21.4

%

 
Non-GAAP-3
Motorola Solutions, Inc. and Subsidiaries
Operating Earnings after Non-GAAP Adjustments
(In millions)
Q1 2019
 

TOTAL

Products and
Systems Integration

Services and
Software

Net sales

$

1,657

 

$

1069

 

$

588

 

Operating earnings ("OE")

$

229

 

$

108

 

$

121

 

 
Above-OE non-GAAP adjustments:
Share-based compensation expense

 

27

 

 

21

 

 

6

 

Reorganization of business charges

 

8

 

 

7

 

 

1

 

Intangibles amortization expense

 

50

 

 

11

 

 

39

 

Acquisition-related transaction fees

 

2

 

 

1

 

 

1

 

Legal settlement

 

(1

)

 

(1

)

 

-

 

Total above-OE non-GAAP adjustments

 

86

 

 

39

 

 

47

 

 
Operating earnings after non-GAAP adjustments

$

315

 

$

147

 

$

168

 

 
Operating earnings as a percentage of net sales - GAAP

 

13.8

%

 

10.1

%

 

20.6

%

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

 

19.0

%

 

13.8

%

 

28.6

%

 
Q2 2019
 

TOTAL

Products and
Systems Integration

Services and
Software

Net sales

$

1,860

 

$

1,238

 

$

622

 

Operating earnings ("OE")

$

349

 

$

201

 

$

148

 

 
Above-OE non-GAAP adjustments:
Share-based compensation expense

 

30

 

 

19

 

 

11

 

Reorganization of business charges

 

12

 

 

9

 

 

3

 

Intangibles amortization expense

 

52

 

 

12

 

 

40

 

Legal settlements

 

1

 

 

1

 

 

-

 

Total above-OE non-GAAP adjustments

 

95

 

 

41

 

 

54

 

 
Operating earnings after non-GAAP adjustments

$

444

 

$

242

 

$

202

 

 
Operating earnings as a percentage of net sales - GAAP

 

18.8

%

 

16.2

%

 

23.8

%

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

 

23.9

%

 

19.5

%

 

32.5

%

 
Q3 2019
 
TOTALProducts and
Systems Integration
Services and
Software
Net sales

$

1,994

 

$

1,349

 

$

645

 

Operating earnings ("OE")

$

413

 

$

258

 

$

155

 

 
Above-OE non-GAAP adjustments:
Share-based compensation expense

 

30

 

 

20

 

 

10

 

Reorganization of business charges

 

18

 

 

14

 

 

4

 

Intangibles amortization expense

 

52

 

 

12

 

 

40

 

Gain on legal settlement

 

(5

)

 

(5

)

 

-

 

Acquisition-related transaction fees

 

1

 

 

1

 

 

-

 

Total above-OE non-GAAP adjustments

 

96

 

 

42

 

 

54

 

 
Operating earnings after non-GAAP adjustments

$

509

 

$

300

 

$

209

 

 
Operating earnings as a percentage of net sales - GAAP

 

20.7

%

 

19.1

%

 

24.0

%

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

 

25.5

%

 

22.2

%

 

32.4

%

 
Non-GAAP-4
Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Organic Revenue
(In millions)
 
Total Motorola Solutions
 
Three Months Ended
 
September 28, 2019September 29, 2018% Change
Net sales

$

1,994

 

$

1,862

 

7

%

 
Non-GAAP adjustments:
Sales from acquisitions

 

(58

)

 

-

 

Organic revenue

 

1,936

 

 

1,862

 

4

%

 
Nine Months Ended
 
September 28, 2019September 29, 2018% Change
Net sales

$

5,511

 

$

5,089

 

8

%

 
Non-GAAP adjustments:
Sales from acquisitions

 

(256

)

 

(29

)

Organic revenue

 

5,255

 

 

5,060

 

4

%

 

 

MEDIA CONTACT
Kate Dyer
Motorola Solutions
+1 224-374-3124
Kate.Dyer@motorolasolutions.com

INVESTOR CONTACT
Tim Yocum
Motorola Solutions
+1 847-576-6899
Tim.Yocum@motorolasolutions.com

Source: Motorola Solutions, Inc.