Company raises full-year earnings outlook
- Sales of $1.9 billion, up 13
percent
- Backlog of $9.5 billion, up $572
million or 6 percent from a year ago
- Generated $338 million of operating
cash flow, up 25 percent
- GAAP earnings per share (EPS) of $1.43,
up 14 percent
- Non-GAAP EPS* of $1.94, up 27
percent
Motorola Solutions, Inc. (NYSE: MSI) today reported its earnings
results for the third quarter of 2018. Click here for a printable
news release and financial tables.
"Q3 was another strong quarter of revenue and earnings growth,”
said Greg Brown, chairman and CEO of Motorola Solutions. “Our
overall business performance, along with our record Q3 backlog,
provides solid momentum moving forward.”
KEY FINANCIAL RESULTS (presented in millions, except per
share data and percentages)
Q3 2018 Q3 2017 % Change
Sales
$1,862 $1,645 13 %
GAAP
Operating Earnings
$294 $347 (15 )% % of Sales
15.8 % 21.1 % EPS
$1.43 $1.25
14 %
Non-GAAP Operating Earnings
$452 $412 10
% % of Sales
24.3 % 25.0 % EPS
$1.94
$1.53 27 %
Products and Systems Integration
Segment Sales
$1,288 $1,174 10 % GAAP Operating Earnings
$183 $266 (31 )% % of Sales
14.2 % 22.7 %
Non-GAAP Operating Earnings
$276 $285 (3 )% % of Sales
21.4 % 24.3 %
Services
and Software Segment Sales
$574 $471 22 % GAAP Operating
Earnings
$111 $81 37 % % of Sales
19.3 % 17.2
% Non-GAAP Operating Earnings
$176 $127 39 % % of Sales
30.7 % 27.0 %
*Non-GAAP financial information excludes the after-tax impact of
approximately $0.51 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 increased $217
million, or 13 percent from the year-ago quarter, driven by growth
in the Americas and EMEA. Approximately $145 million of revenue
growth was related to acquisitions, and $19 million was related to
the adoption of accounting standard ASC 606. The Products and
Systems Integration segment grew 10 percent driven by the Americas
and EMEA. The Services and Software segment grew 22 percent with
growth in all regions.
- Operating margin - GAAP
operating margin was 15.8 percent of sales, compared with 21.1
percent in the year-ago quarter. The decline was primarily due to
higher operating expenses related to acquisitions and an increase
to an existing environmental reserve related to a legacy business,
partially offset by higher gross margins in Services and Software.
Non-GAAP operating margin was 24.3 percent of sales, compared with
25.0 percent in the year-ago quarter due to higher operating
expenses related to acquisitions partially offset by higher sales
and favorable gross margin mix.
- Taxes - The GAAP effective tax
rate was 8 percent, compared with 26 percent in the year-ago
quarter. The Non-GAAP effective tax rate was 18 percent compared
with 30 percent in the year-ago quarter. Both the GAAP and Non-GAAP
tax rates were favorably affected by the recognition of U.S.
federal return to provision adjustments and the tax benefits
related to share-based compensation; however, certain return to
provision benefits that relate to the Tax Cuts and Jobs Act of 2017
were excluded from the Non-GAAP tax rate.
- Cash flow - Operating cash flow
was $338 million, compared with $270 million of operating cash
generated in the year-ago quarter. Free cash flow1 was $292
million, compared with $185 million of free cash flow generated in
the year-ago quarter. Cash flow for the quarter increased on higher
earnings, improved working capital and lower capital
expenditures.
- Capital allocation - The company
paid $84 million in cash dividends. From a debt perspective, the
company repaid the remaining $300 million on the revolving credit
facility ahead of schedule; $200 million was repaid during the
quarter, and $100 million was repaid subsequent to the quarter-end.
The company also repurchased 20% of the Silver Lake convertible
note for $369 million; the $200 million of principal was repaid
with new senior unsecured debt and the $169 million premium was
paid in cash.
- Backlog - The company ended the
quarter with backlog of $9.5 billion, up $572 million from the
year-ago quarter. Products and Systems Integration segment backlog
was up 9 percent or $277 million, and Services and Software was up
5 percent or $295 million. Land mobile radio demand led by the
Americas continues to drive backlog growth.
KEY HIGHLIGHTS
Services and Software wins
- $19 million digital evidence management
solution contract for the city of Las Vegas
- $18 million computer aided dispatch
(CAD) & mobile records contract for Chesterfield County,
Virginia
- $17 million multi-year services
contract for Petrobras (Brazil)
Products and Systems Integration
wins
- $50+ million Tetra system upgrade in
Europe
- $21 million P25 system and device
upgrade for city of Indianapolis and Marion County, Indiana
- $15 million P25 device order for city
of Austin, Texas
- $12 million P25 system order for city
of Augusta, Georgia
BUSINESS OUTLOOK
- Fourth-quarter 2018 - Motorola
Solutions expects revenue growth of approximately 13.5 percent
compared with the fourth quarter of 2017. The company expects
non-GAAP earnings in the range of $2.50 to $2.55 per share. This
assumes current foreign exchange rates, approximately 173 million
fully diluted shares and a 25 percent effective tax rate.
- Full-year 2018 - The
company continues to expect revenue growth of approximately 14.5
percent, and now expects non-GAAP earnings per share in the range
of $7.00 to $7.05, up from the prior guidance of $6.79 to $6.89.
This assumes current foreign exchange rates, approximately 172
million fully diluted shares and a 22.5 percent effective tax
rate.
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 Thursday, Nov.
1. 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 2018
Q3 2017 Net sales
$1,862 $1,645 Gross
margin
901 794 Operating earnings
294 347 Amounts attributable to Motorola Solutions,
Inc. common stockholders Net earnings
247 212 Diluted EPS
$1.43 $1.25 Weighted average diluted common shares
outstanding
172.6 169.0
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 2018.
(per diluted common share)
Q3
2018 GAAP Earnings $1.43
Highlighted Items: Share-based compensation expense $0.08
Reorganization of business charges 0.11 Intangibles amortization
expense 0.21 Avigilon purchase accounting adjustment 0.04 Gain from
the extinguishment of convertible debt (0.03 ) Fair value
adjustments to equity investments (0.03 ) Loss on legal settlement
0.01 Environmental reserve expense 0.25 Sale of investments (0.03 )
Return-to-provision adjustments as related to federal tax reform
(0.10 )
Non-GAAP Diluted EPS
$1.94
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, non-cash
pension adjustments, significant litigation and other
contingencies, significant gains and losses on investments, 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.
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.
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 2018.
Motorola Solutions cautions the reader that the risk factors below,
as well as those on pages 8 through 20 in Item 1A of Motorola
Solutions’ 2017 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 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
DEFINITIONS
1 Free cash flow represents operating cash flow less capital
expenditures.
ABOUT MOTOROLA SOLUTIONS
Motorola Solutions (NYSE: MSI) is a technology company that
provides mission-critical communications, software and video
solutions that help build safer cities and thriving communities.
Public safety and commercial customers globally depend on the
company’s two-way radios, broadband technology, video surveillance
and analytics solutions, services and software to keep them
connected, from extreme to everyday moments. Learn more at
http://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. ©2018 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 29, 2018
September 30, 2017 Net sales from products $ 1,151 $ 989 Net
sales from services 711 656 Net sales
1,862 1,645 Costs of products sales 516 428 Costs of
services sales 445 423 Costs of sales
961 851 Gross margin 901
794 Selling, general and administrative
expenses 323 259 Research and development expenditures 158 141
Other charges 80 8 Intangibles amortization 46
39 Operating earnings 294 347
Other income (expense): Interest expense, net (59 ) (52 )
Gains on sales of investments and businesses, net 6 — Other
29 (9 ) Total other expense (24 ) (61 )
Net earnings before income taxes 270 286 Income tax expense
22 73 Net earnings 248 213 Less:
Earnings attributable to noncontrolling interests 1
1 Net earnings attributable to Motorola Solutions,
Inc. $ 247 $ 212
Earnings per common
share:
Basic $ 1.52 $ 1.30 Diluted $ 1.43 $ 1.25
Weighted average
common shares outstanding:
Basic 162.6 162.3 Diluted 172.6 169.0
Percentage of Net Sales* Net sales from
products 61.8 % 60.1 % Net sales from services 38.2 %
39.9 % Net sales 100.0 % 100.0 % Costs of products sales
44.8 % 43.3 % Costs of services sales 62.6 % 64.5 %
Costs of sales 51.6 % 51.7 % Gross margin 48.4
% 48.3 % Selling, general and administrative expenses
17.3 % 15.7 % Research and development expenditures 8.5 % 8.6 %
Other charges 4.3 % 0.5 % Intangibles amortization 2.5 %
2.4 % Operating earnings 15.8 % 21.1 %
Other income (expense): Interest expense, net (3.2 )% (3.2 )% Gains
on sales of investments and businesses, net 0.3 % — % Other
1.6 % (0.5 )% Total other expense (1.3 )% (3.7
)% Net earnings before income taxes 14.5 % 17.4 % Income tax
expense 1.2 % 4.4 % Net earnings 13.3 % 12.9 %
Less: Earnings attributable to noncontrolling interests 0.1
% 0.1 % Net earnings attributable to Motorola Solutions,
Inc. 13.3 % 12.9 % * 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
29, 2018 September 30, 2017 Net sales from
products $ 2,993 $ 2,540 Net sales from services 2,096
1,883 Net sales 5,089 4,423 Costs of
products sales 1,383 1,167 Costs of services sales 1,314
1,202 Costs of sales 2,697
2,369 Gross margin 2,392 2,054
Selling, general and administrative expenses 918 760
Research and development expenditures 472 413 Other charges 123 (11
) Intangibles amortization 140 111
Operating earnings 739 781 Other
income (expense): Interest expense, net (163 ) (154 ) Gains on
sales of investments and businesses, net 16 3 Other 45
(20 ) Total other expense (102 ) (171 )
Net earnings before income taxes 637 610 Income tax expense
91 188 Net earnings 546 422 Less:
Earnings attributable to noncontrolling interests 2
2 Net earnings attributable to Motorola Solutions,
Inc. $ 544 $ 420
Earnings per common
share:
Basic $ 3.36 $ 2.57 Diluted $ 3.17 $ 2.48
Weighted average
common shares outstanding:
Basic 162.0 163.2 Diluted 171.6 169.3
Percentage of Net Sales* Net sales from
products 58.8 % 57.4 % Net sales from services 41.2 %
42.6 % Net sales 100.0 % 100.0 % Costs of products sales
46.2 % 45.9 % Costs of services sales 62.7 % 63.8 %
Costs of sales 53.0 % 53.6 % Gross margin 47.0
% 46.4 % Selling, general and administrative expenses
18.0 % 17.2 % Research and development expenditures 9.3 % 9.3 %
Other charges 2.4 % (0.2 )% Intangibles amortization 2.8 %
2.5 % Operating earnings 14.5 % 17.7 %
Other income (expense): Interest expense, net (3.2 )% (3.5 )% Gains
on sales of investments and businesses, net 0.3 % 0.1 % Other
0.9 % (0.5 )% Total other expense (2.0 )%
(3.9 )% Net earnings before income taxes 12.5 % 13.8 %
Income tax expense 1.8 % 4.3 % Net earnings
attributable to Motorola Solutions, Inc. 10.7 % 9.5 %
* Percentages may not add up due to rounding
GAAP-3
Motorola Solutions, Inc. and Subsidiaries Condensed
Consolidated Balance Sheets (In millions)
September 29, 2018 December 31, 2017
Assets Cash and cash equivalents $ 839 $ 1,205 Restricted cash
12 63 Total cash and cash equivalents
851 1,268 Accounts receivable, net 1,179 1,523 Contract assets 917
— Inventories, net 367 327 Other current assets 350
832 Total current assets 3,664
3,950 Property, plant and equipment, net 892 856
Investments 176 247 Deferred income taxes 949 1,023 Goodwill 1,541
938 Intangible Assets 1,297 861 Other assets 444
333
Total assets $ 8,963 $ 8,208
Liabilities and Stockholders' Equity Current portion of
long-term debt $ 337 $ 52 Accounts payable 456 593 Contract
liabilities 1,127 — Accrued liabilities 1,168
2,286 Total current liabilities 3,088
2,931 Long-term debt 5,095 4,419 Other liabilities
2,175 2,585 Total Motorola Solutions, Inc. stockholders’
equity (deficit) (1,411 ) (1,742 ) Noncontrolling interests
16 15
Total liabilities and
stockholders’ equity $ 8,963 $ 8,208
GAAP-4 Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (In
millions) Three Months Ended
September 29, 2018 September 30, 2017
Operating Net earnings attributable to Motorola Solutions,
Inc. $ 247 $ 212 Earnings attributable to noncontrolling interests
1 1 Net earnings 248 213 Adjustments to
reconcile Net earnings to Net cash provided by operating
activities: Depreciation and amortization 89 88 Non-cash other
charges 44 8 Non-U.S. pension settlement loss — 21 Share-based
compensation expense 19 16 Gains on sales of investments and
businesses, net (6 ) — Changes in assets and liabilities, net of
effects of acquisitions, dispositions, and foreign currency
translation adjustments: Accounts receivable, contract assets and
contract liabilities (20 ) (152 ) Inventories 24 29 Other current
assets (180 ) (129 ) Accounts payable and accrued liabilities 170
152 Other assets and liabilities (38 ) (12 ) Deferred income taxes
(12 ) 36 Net cash provided by operating
activities 338 270
Investing
Acquisitions and investments, net (5 ) (243 ) Proceeds from sales
of investments and businesses, net 11 102 Capital expenditures
(46 ) (85 ) Net cash used for investing activities
(40 ) (226 )
Financing Repayment of debt (215
) (9 ) Issuance of common stock 80 33 Purchases of common stock —
(100 ) Payments of dividends (84 ) (76 ) Settlement of conversion
premium on convertible debt (169 ) — Net cash
used for financing activities (388 ) (152 )
Effect of exchange rate changes on cash and cash equivalents
— 20 Net decrease in cash and cash
equivalents (90 ) (88 ) Cash and cash equivalents, beginning of
period 941 805 Cash and cash
equivalents, end of period $ 851 $ 717
Financial Ratios: Free cash flow* $ 292 $ 185 *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) Nine
Months Ended September 29, 2018 September 30,
2017 Operating Net earnings attributable to Motorola
Solutions, Inc. $ 544 $ 420 Earnings attributable to noncontrolling
interests 2 2 Net earnings 546 422
Adjustments to reconcile Net earnings to Net cash provided by
operating activities: Depreciation and amortization 267 254
Non-cash other charges 50 29 Non-U.S. pension settlement loss — 46
Share-based compensation expense 53 49 Gains on sales of
investments and businesses, net (16 ) (3 ) Changes in assets and
liabilities, net of effects of acquisitions, dispositions, and
foreign currency translation adjustments: Accounts receivable,
contract assets and contract liabilities 186 81 Inventories 61 (83
) Other current assets (137 ) (142 ) Accounts payable and accrued
liabilities (170 ) (178 ) Other assets and liabilities (596 ) 11
Deferred income taxes 19 99 Net cash
provided by operating activities 263 585
Investing Acquisitions and investments, net (1,158 )
(383 ) Proceeds from sales of investments and businesses, net 90
174 Capital expenditures (128 ) (206 ) Net cash used
for investing activities (1,196 ) (415 )
Financing Repayment of debt (412 ) (15 ) Net proceeds from
issuance of debt 1,295 — Proceeds from financing through capital
leases — 7 Issuance of common stock 139 61 Purchases of common
stock (66 ) (358 ) Payments of dividends (252 ) (230 ) Payments of
dividend to non-controlling interest (1 ) (2 ) Settlement of
conversion premium on convertible debt (169 ) —
Net cash provided by (used for) financing activities
534 (537 ) Effect of exchange rate
changes on cash and cash equivalents (18 ) 54
Net decrease in cash and cash equivalents (417 ) (313 ) Cash and
cash equivalents, beginning of period 1,268
1,030 Cash and cash equivalents, end of period $ 851
$ 717
Financial Ratios: Free cash flow* $ 135
$ 379 *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 September
29, 2018 September 30, 2017 % Change Products and
systems integration $ 1,288 $ 1,174 10 % Services and software
574 471 22 % Total Motorola Solutions $
1,862 $ 1,645 13 %
Nine
Months Ended September 29, 2018
September 30, 2017 % Change Products and systems
integration $ 3,429 $ 3,076 11 % Services and software 1,660
1,347 23 % Total Motorola Solutions $ 5,089
$ 4,423 15 %
Operating Earnings
Three Months Ended
September 29, 2018 September 30, 2017 % Change
Products and systems integration $ 183 $ 266 (31 )% Services and
software 111 81 37 % Total Motorola
Solutions $ 294 $ 347 (15 )%
Nine Months Ended September 29,
2018 September 30, 2017 % Change Products and
systems integration $ 449 $ 553 (19 )% Services and software
290 228 27 % Total Motorola Solutions $ 739
$ 781 (5 )%
Operating Earnings %
Three Months Ended
September 29, 2018 September 30, 2017 Products
and systems integration 14.2 % 22.7 % Services and software 19.3 %
17.2 % Total Motorola Solutions 15.8 % 21.1 %
Nine Months Ended September
29, 2018 September 30, 2017 Products and systems
integration 13.1 % 18.0 % Services and software 17.5 % 16.9 % Total
Motorola Solutions 14.5 % 17.7 %
Non-GAAP-1
Motorola Solutions, Inc. and Subsidiaries Non-GAAP
Adjustments (Intangibles Amortization Expense, Share-Based
Compensation Expense and Highlighted Items) Q1
2018 Non-GAAP
Adjustments Statement Line
PBT
(Inc)/Exp
Tax
Inc/(Exp)
PAT
(Inc)/Exp
EPS impact Share-based compensation expense Cost of
sales, SG&A and R&D $ 17 $ 4 $ 13 $ 0.08 Reorganization of
business charges Cost of sales and Other charges 13 3 10 0.06
Intangibles amortization expense Intangibles amortization 41 8 33
0.19 Loss on legal settlements Other charges 1 — 1 0.01 Loss on
derivative instruments related to Avigilon purchase Other expense
14 4 10 0.06 Release of FIN 48 reserve Income tax expense — 1 (1 )
(0.01 ) Sale of investments (Gain) or Loss on Sales of Investments
and Businesses, net (11 ) (3 ) (8 ) (0.05 ) Acquisition-related
transaction fees Other charges 17 5 12 0.07
Total impact on Net earnings $ 92 $ 22 $ 70 $ 0.41
Q2 2018 Non-GAAP Adjustments Statement
Line
PBT
(Inc)/Exp
Tax
Inc/(Exp)
PAT
(Inc)/Exp
EPS impact Share-based compensation expense Cost of
sales, SG&A and R&D $ 17 $ 4 $ 13 $ 0.08 Reorganization of
business charges Cost of sales and Other charges 25 6 19 0.10
Intangibles amortization expense Intangibles amortization 53 12 41
0.23 Avigilon purchase accounting adjustment Cost of sales 10 3 7
0.04 Sale of investments (Gain) or Loss on Sales of Investments and
Businesses, net 1 — 1 0.01 Loss on foreign currency related to
Avigilon purchase Other expense 1 — 1 0.01 FIN 48 reserve Income
tax expense — (1 ) 1 0.01 State audit settlement Income tax expense
— 12 (12 ) (0.07 ) Total impact on Net
earnings $ 107 $ 36 $ 71 $ 0.41
Q3 2018
Non-GAAP Adjustments Statement Line
PBT
(Inc)/Exp
Tax
Inc/(Exp)
PAT
(Inc)/Exp
EPS impact Share-based compensation expense Cost of
sales, SG&A and R&D $ 19 $ 5 $ 14 $ 0.08 Reorganization of
business charges Cost of sales and Other charges 25 6 19 0.11
Intangibles amortization expense Intangibles amortization 46 10 36
0.21 Avigilon purchase accounting adjustment Cost of sales 9 2 7
0.04 Gain from the extinguishment of convertible debt Other income
(6 ) — (6 ) (0.03 ) Fair value adjustments to equity investments
Other income (7 ) (2 ) (5 ) (0.03 ) Loss on legal settlement Other
charges 2 1 1 0.01 Environmental reserve expense Other charges 57
14 43 0.25 Sale of investments (Gain) or Loss on Sales of
Investments and Businesses, net (6 ) (1 ) (5 ) (0.03 )
Return-to-provision adjustments as related to federal tax reform
Income tax expense — 16 (16 ) (0.10 )
Total impact on Net earnings $ 139 $ 51 $ 88 $ 0.51
Non-GAAP-2 Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Segment Information (In millions)
Net Sales Three Months
Ended September 29, 2018
September 30, 2017 % Change
Products and systems integration
$ 1,288 $ 1,174 10 % Services and software 574
471 22 % Total Motorola Solutions $ 1,862 $ 1,645
13 %
Nine Months Ended
September 29, 2018 September 30, 2017
% Change Products and systems integration $ 3,429 $ 3,076 11
% Services and software 1,660 1,347 23
% Total Motorola Solutions $ 5,089 $ 4,423 15 %
Non-GAAP Operating Earnings
Three Months Ended September
29, 2018 September 30, 2017 % Change Products and
systems integration $ 276 $ 285 (3 )% Services and software
176 127 39 % Total Motorola Solutions $ 452
$ 412 10 %
Nine Months
Ended September 29, 2018
September 30, 2017 % Change Products and systems
integration $ 627 $ 591 6 % Services and software 463
349 33 % Total Motorola Solutions $ 1,090 $
940 16 %
Non-GAAP Operating Earnings %
Three Months Ended
September 29, 2018 September 30, 2017 Products and
systems integration 21.4 % 24.3 % Services and software 30.7 % 27.0
% Total Motorola Solutions 24.3 % 25.0 %
Nine Months Ended September
29, 2018 September 30, 2017 Products and systems
integration 18.3 % 19.2 % Services and software 27.9 % 25.9 % Total
Motorola Solutions 21.4 % 21.3 %
Non-GAAP-3
Motorola Solutions, Inc. and Subsidiaries Operating
Earnings after Non-GAAP Adjustments Q1 2018
TOTAL
Products and
Systems Integration
Services and
Software
Net sales $ 1,468 $ 952 $ 516 Operating earnings ("OE") $
171 $ 90 $ 81 Above-OE non-GAAP
adjustments: Share-based compensation expense 17 12 5
Reorganization of business charges 13 9 4 Intangibles amortization
expense 41 1 40 Acquisition-related transaction fees 17 12 5 Loss
on legal settlements 1 1 —
Total above-OE non-GAAP adjustments 89 35 54
Operating earnings after non-GAAP adjustments
$ 260 $ 125 $ 135
Operating earnings as a percentage of net sales - GAAP 11.6 % 9.5 %
15.7 % Operating earnings as a percentage of net sales - after
non-GAAP adjustments 17.7 % 13.1 % 26.2 %
Q2 2018
TOTAL
Products and
Systems Integration
Services and
Software
Net sales $ 1,760 $ 1,189 $ 571 Operating earnings ("OE") $
273 $ 175 $ 98 Above-OE non-GAAP
adjustments: Share-based compensation expense 17 12 5
Reorganization of business charges 25 19 6 Intangibles amortization
expense 53 10 43 Avigilon purchase accounting adjustment 10
10 — Total above-OE non-GAAP
adjustments 105 51 54 Operating
earnings after non-GAAP adjustments $ 378 $ 226
$ 152 Operating earnings as a
percentage of net sales - GAAP 15.5 % 14.7 % 17.2 % Operating
earnings as a percentage of net sales - after non-GAAP adjustments
21.5 % 19.0 % 26.6 %
Q3 2018
TOTAL
Products and
Systems Integration
Services and
Software
Net sales $ 1,862 $ 1,288 $ 574 Operating earnings ("OE") $
294 $ 183 $ 111 Above-OE non-GAAP
adjustments: Share-based compensation expense 19 13 6
Reorganization of business charges 25 19 6 Intangibles amortization
expense 46 11 35 Avigilon purchase accounting adjustment 9 9 — Loss
on legal settlement 2 1 1 Environmental reserve expense 57
40 17 Total above-OE non-GAAP
adjustments 158 93 65 Operating
earnings after non-GAAP adjustments $ 452 $ 276
$ 176 Operating earnings as a
percentage of net sales - GAAP 15.8 % 14.2 % 19.3 % Operating
earnings as a percentage of net sales - after non-GAAP adjustments
24.3 % 21.4 % 30.7 %
Non-GAAP-4
Motorola Solutions, Inc. and Subsidiaries Non-GAAP
Organic Revenue Total Motorola Solutions
Three Months Ended
September 29, 2018 September 30,
2017 % Change Net sales $ 1,862 $ 1,645
13 % Non-GAAP adjustments: Acquisitions (149 ) (4 )
ASC 606 impact (19 ) — Organic revenue
1,694 1,641 3 % Less foreign exchange impact
9 — Organic revenue in constant
currency $ 1,703 $ 1,641 4 %
Nine Months Ended
September 29, 2018 September 30, 2017 % Change Net
sales $ 5,089 $ 4,423 15 % Non-GAAP
adjustments: Acquisitions (356 ) (9 ) ASC 606 impact (58 )
— Organic revenue 4,675 4,414
6 % Less foreign exchange impact (56 )
— Organic revenue in constant currency $ 4,619
$ 4,414 5 %
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181101006058/en/
MEDIA CONTACTTama McWhinneyMotorola Solutions+1
847-538-1865tama.mcwhinney@motorolasolutions.comorINVESTOR
CONTACTChris KutsorMotorola Solutions+1
847-576-4995chris.kutsor@motorolasolutions.com
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