Press Release

Motorola Solutions Reports Fourth-Quarter and Full-Year Financial Results

Company Achieves Record Q4 and Full-Year Sales and Earnings Per Share

  • Sales of $2.8 billion, up 5% from Q4 in the prior year; up 10% for full year

    • Products and Systems Integration sales grew 4% in Q4; up 9% for full year
    • Software and Services sales grew 7% in Q4; up 10% for full year
  • Generated $1.2 billion of operating cash flow in Q4; $2.0 billion for full year, up 12%
  • GAAP Q4 earnings per share (EPS) of $3.47, up 1%; $9.93 for full year, up 25%
  • Non-GAAP Q4 EPS* of $3.90, up 8% versus a year ago; $11.95 for full year, up 15%
  • Ending backlog of $14.3 billion, inclusive of record Products and Systems Integration backlog
  • Announced $2.0 billion increase to the share repurchase authorization
  • Acquired IPVideo, creator of the HALO Smart Sensor

CHICAGO–(BUSINESS WIRE)–Motorola Solutions, Inc. (NYSE: MSI) today reported its earnings results for the fourth quarter and full year of 2023.


2023 was an exceptional year, with record sales, earnings and operating cash flow,” said Greg Brown, Chairman and CEO of Motorola Solutions. “The strong growth we achieved reflects the continued robust demand for our safety and security solutions that help protect people, property and places. The momentum of our business is strong and I’m very pleased with our position for another year of revenue and earnings growth in 2024.”

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

 

Fourth Quarter

Full Year

 

Q4 2023

Q4 2022

% Change

2023

2022

% Change

Sales

$2,848

$2,706

5 %

$9,978

$9,112

10 %

GAAP

 

 

 

 

 

 

Operating Earnings

$738

$692

7 %

$2,294

$1,661

38 %

% of Sales

25.9 %

25.6 %

 

23.0 %

18.2 %

 

EPS

$3.47

$3.43

1 %

$9.93

$7.93

25 %

Non-GAAP*

 

 

 

 

 

 

Operating Earnings

$870

$822

6 %

$2,784

$2,368

18 %

% of Sales

30.5 %

30.4 %

 

27.9 %

26.0 %

 

EPS

$3.90

$3.60

8 %

$11.95

$10.36

15 %

Products and Systems Integration Segment

 

 

 

 

 

 

Sales

$1,890

$1,810

4 %

$6,242

$5,728

9 %

GAAP Operating Earnings

$492

$454

8 %

$1,244

$913

36 %

% of Sales

26.0 %

25.1 %

 

19.9 %

15.9 %

 

Non-GAAP Operating Earnings*

$567

$514

10 %

$1,518

$1,172

30 %

% of Sales

30.0 %

28.4 %

 

24.3 %

20.5 %

 

Software and Services Segment

 

 

 

 

 

 

Sales

$958

$896

7 %

$3,736

$3,384

10 %

GAAP Operating Earnings

$246

$238

3 %

$1,050

$748

40 %

% of Sales

25.7 %

26.6 %

 

28.1 %

22.1 %

 

Non-GAAP Operating Earnings*

$303

$308

(2) %

$1,266

$1,196

6 %

% of Sales

31.6 %

34.4 %

 

33.9 %

35.3 %

 

*Non-GAAP financial information excludes the after-tax impact of approximately $0.43 for Q4 and $2.02 for FY per diluted share related to highlighted items, including share-based compensation expenses and intangible assets amortization expense. Details regarding these non-GAAP adjustments and the use of non-GAAP measures are included later in this news release.

OTHER SELECT FOURTH-QUARTER FINANCIAL RESULTS

  • Revenue Fourth-quarter sales were $2.8 billion, up 5% from the year-ago quarter driven by growth in North America and International. Revenue from acquisitions was $17 million and the impact of favorable foreign currency rates was $16 million. The Products and Systems Integration segment grew 4% due to growth in land mobile radio (LMR) and video security and access control (Video). The Software and Services segment grew 7% driven by growth in Video, command center and LMR, inclusive of the reduction in Airwave revenue related to the pricing control in the United Kingdom’s Competition and Markets Authority’s (the “CMA”) remedies order.
  • Operating margin GAAP operating margin was 25.9% of sales, up from 25.6% in the year-ago quarter. Non-GAAP operating margin was 30.5% of sales, up from 30.4% in the year-ago quarter. The increase in both GAAP and non-GAAP operating margin was primarily driven by higher sales and lower direct material costs, partially offset by the revenue reduction for Airwave.
  • Taxes – The GAAP effective tax rate was 15.7%, up from 11.0% in the year-ago quarter driven primarily by higher benefits in the prior year related to a partial release of a valuation allowance recorded on the U.S. foreign tax credits carryforward. The non-GAAP effective tax rate was 20.3%, down from 21.2% in the year-ago quarter, driven by higher benefits from stock-based compensation in the current year.
  • Cash flow Operating and free cash flow were both $1.2 billion during the quarter driven by higher earnings and partially offset by higher cash taxes.
  • Capital allocation During the quarter, the company paid $146 million in dividends, repurchased $117 million of its common stock and incurred $81 million in capital expenditures. Additionally, the company closed the acquisition of IPVideo, creator of the HALO Smart Sensor, for $170 million in cash, net of cash acquired.

OTHER SELECT FULL-YEAR FINANCIAL RESULTS

  • Revenue Full-year sales were $10.0 billion, up 10% driven by growth in North America and International. The Products and Systems Integration segment grew 9% driven by higher sales of LMR and Video. The Software and Services segment grew 10% driven by growth in LMR services, command center and Video, partially offset by the revenue reduction for Airwave. Revenue from acquisitions was $98 million and the impact of unfavorable foreign currency rates was $38 million.
  • Operating margin For the full year, GAAP operating margin was 23.0% of sales, compared to 18.2% for the prior year. The increase was primarily driven by lower direct material costs, higher sales, the $147 million fixed asset impairment charge related to the exit from the Emergency Services Network (“ESN”) services contract in the U.K. recorded in the prior year and lower intangible amortization expense in the current year, partially offset by the revenue reduction for Airwave. Non-GAAP operating margin was 27.9% of sales, up from 26.0% in the prior year, driven by lower direct material costs, higher sales and improved operating leverage, partially offset by the revenue reduction for Airwave, higher employee incentives, higher expenses associated with acquired businesses and mix.
  • Taxes – The 2023 GAAP effective tax rate was 20.1%, up from 9.8% in the prior year driven primarily by a discrete deferred tax benefit recognized in 2022 as a result of an intra-group transfer of certain intellectual property rights. In addition, the company generated higher benefits in the prior year from a partial release of the valuation allowance recorded on the U.S. foreign tax credit carryforward and higher stock-based compensation. The non-GAAP effective tax rate was 21.9%, up from 20.1% in the previous year, primarily driven by lower benefits from stock-based compensation in the current year.
  • Cash flow The company generated $2.0 billion in operating cash flow, up 12% versus the prior year. Free cash flow was $1.8 billion, up 14% versus the prior year. The increase in both operating and free cash flow was primarily driven by higher earnings generated in the current year partially offset by higher cash taxes.
  • Capital allocation In 2023, the company repurchased $804 million of its common stock at an average price of $278.56 per share and paid $589 million in dividends. Additionally, the company closed the acquisition of IPVideo, creator of the HALO Smart Sensor, for $170 million in cash, net of cash acquired.
  • Backlog – The company ended the year with backlog of $14.3 billion, down $88 million from the prior year. Products and Systems Integrations segment backlog was up 2% or $93 million driven by continued strong demand in North America. Software and Services segment backlog was down 2% or $181 million, driven by the reduction related to the Airwave price control and revenue recognition for Airwave and ESN, partially offset by growth in multi-year software and services contracts in both North America and International and $113 million of favorable foreign currency rates.

NOTABLE WINS & ACHIEVEMENTS IN Q4

Software and Services

  • $330M+ LMR managed services renewal through 2034 for Denmark’s nationwide public safety communications network
  • $48M command center order for the City of Chicago Office of Public Safety Administration
  • $20M LMR service agreement for Spokane Regional Emergency Communications, WA
  • $19M mobile video order for a U.S. customer
  • $10M command center order for the City and County of San Francisco, CA

Products and Systems Integration

  • $90M P25 system and devices order for a U.S. customer
  • $67M P25 device order for Emergency Services Telecommunications Authority (ESTA) in Australia
  • $57M P25 APX NEXT devices order for U.S. customer
  • $38M P25 system order for the State of Arizona Department of Public Safety
  • $31M TETRA system order for a European customer
  • $13M fixed video order for an International customer

BUSINESS OUTLOOK

  • First-quarter 2024 – The company expects revenue growth of approximately 8% compared to the first quarter of 2023. The company expects non-GAAP earnings per share in the range of $2.50 to $2.55 per share. This assumes approximately 172 million fully diluted shares and a non-GAAP effective tax rate of approximately 23%.
  • Full-year 2024 – The company expects revenue growth of approximately 6% and non-GAAP earnings per share in the range of $12.62 to $12.72 per share. This assumes approximately 171 million fully diluted shares and a non-GAAP effective tax rate between 23% and 24%.

The company has not quantitatively reconciled its guidance for forward-looking non-GAAP measurements in this news release to their most comparable GAAP measurements because the company does not provide specific guidance for the various reconciling items as certain items that impact these measures have not occurred, are out of the company’s control, or cannot be reasonably predicted. Accordingly, a reconciliation to the most comparable GAAP financial measurement is not available without unreasonable effort. Please note that the unavailable reconciling items could significantly impact the company’s results.

RECENT EVENTS

CMA UPDATE

In October 2021, the CMA announced that it had opened a market investigation into the Mobile Radio Network Services market. This investigation included Airwave, the company’s private mobile radio communications network that it acquired in 2016. Airwave provides mission-critical voice and data communications to emergency services and other agencies in Great Britain.

In early 2023 the CMA issued its final decision which stated it will impose a prospective price control on Airwave. The company strongly disagreed with the CMA’s final decision and it filed an appeal with the Competition Appeal Tribunal (“CAT”). On July 31, 2023, the CMA adopted a remedies order which implemented the price control set out in its final decision, which was suspended until the CAT dismissed the company’s appeal on December 22, 2023. The company has until February 14, 2024 to file an application with the United Kingdom Court of Appeal requesting that it hear the company’s appeal.

Based on the adoption of the remedies order, since August 1, 2023, revenue under the Airwave contract has been recognized in accordance with the prospective price control. As the company’s appeal to the CAT has been dismissed, revenue will continue to be recognized according to the remedies order published by the CMA, unless the United Kingdom Court of Appeal were to reverse the remedies order. The company’s backlog for Airwave services contracted with the United Kingdom Home Office through 2026, inclusive of the five month period beginning August 1, 2023, was reduced by $777 million to align with the remedies order as of December 31, 2023.

MACROECONOMIC EVENTS

During fiscal year 2023, the company operated under market conditions influenced by events such as those discussed below. For a further discussion of the risks the company encounters in its business, please refer to Part I. Item 1A. “Risk Factors” in the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and Part II. Item 1A. “Risk Factors” in the company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2023.

In 2023, the company experienced improved conditions with respect to availability of materials in the semiconductor market. The company reduced its inventory carrying levels as compared to 2022 in response to the improved supply conditions. The company continues to remain focused on improving its supplier network, engineering alternative designs and working to reduce supply shortages and effectively manage costs. In addition, the company continues to actively manage its inventory by diversifying the footprint of its supply chain operations, including by finalizing a strategic agreement relating to the company’s video manufacturing operations during the first quarter of 2024, and maintaining increased levels of inventory in targeted areas to support increased demand and customer requirements.

CONFERENCE CALL AND WEBCAST Motorola Solutions will host its quarterly conference call beginning at 4 p.m. U.S. Central Standard Time (5 p.m. U.S. Eastern Standard Time) on Thursday, February 8. The conference call will be webcast live with audio and slides at www.motorolasolutions.com/investors. An archive of the webcast will be available for a limited period of time thereafter.

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

A comparison of results from operations is as follows:

 

Fourth Quarter

Full Year

 

2023

2022

2023

2022

Net sales

$2,848

$2,706

$9,978

$9,112

Gross margin

1,455

1,351

4,970

4,229

Operating earnings

738

692

2,294

1,661

Amounts attributable to Motorola Solutions, Inc. common stockholders

 

 

 

 

Net earnings

595

589

1,709

1,363

Diluted EPS from continuing operations

$3.47

$3.43

$9.93

$7.93

Weighted average diluted common shares outstanding

171.5

171.9

172.1

171.9

USE OF NON-GAAP FINANCIAL INFORMATION

In addition to the results presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”) included in this news release, Motorola Solutions also has included non-GAAP measurements of results, including free cash flow, non-GAAP operating earnings, non-GAAP EPS, non-GAAP operating margin, non-GAAP tax rate and organic revenue. The company has provided these non-GAAP measurements to help investors better understand its core operating performance, enhance comparisons of core operating performance from period-to-period and allow better comparisons of operating performance to that of its competitors. Among other things, management uses these operating results, excluding the identified items, to evaluate performance of its businesses and to evaluate results relative to certain incentive compensation targets. Management uses operating results excluding these items because it believes these measurements enable it to make better period-to-period evaluations of the financial performance of its core business operations. The non-GAAP measurements are intended only as a supplement to the comparable GAAP measurements and the company compensates for the limitations inherent in the use of non-GAAP measurements by using GAAP measures in conjunction with the non-GAAP measurements. As a result, investors should consider these non-GAAP measurements in addition to, and not in substitution for or as superior to, GAAP measurements.

Reconciliations: Details and reconciliations of such non-GAAP measurements to the corresponding GAAP measurements can be found at the end of this news release.

Free cash flow: Free cash flow represents net cash provided by operating activities less capital expenditures. The company believes that free cash flow is useful to investors as the basis for comparing its performance and coverage ratios with other companies in the company’s industries, although the company’s measure of free cash flow may not be directly comparable to similar measures used by other companies. This measure is also used as a component of incentive compensation.

Organic Revenue: Organic revenue reflects net sales calculated under GAAP excluding net sales from acquired business owned for less than four full quarters. The company believes organic revenue provides useful information for evaluating the periodic growth of the business on a consistent basis and provides for a meaningful period-to-period comparison and analysis of trends in the business.

Non-GAAP operating earnings, non-GAAP EPS and non-GAAP operating margin each excludes highlighted items, including share-based compensation expenses and intangible assets amortization expense, as follows:

Highlighted items: The company has excluded the effects of highlighted items including, but not limited to, acquisition-related transaction fees, tangible and intangible asset impairments, reorganization of business charges, certain non-cash pension adjustments, legal settlements and other contingencies, gains and losses on investments and businesses, Hytera-related legal expenses, gains and losses on the extinguishment of debt and the income tax effects of significant tax matters, from its non-GAAP operating expenses and net income measurements because the company believes that these historical items do not reflect expected future operating earnings or expenses and do not contribute to a meaningful evaluation of the company’s current operating performance or comparisons to the company’s past operating performance. For the purposes of management’s internal analysis over operating performance, the company uses financial statements that exclude highlighted items, as these charges do not contribute to a meaningful evaluation of the company’s current operating performance or comparisons to the company’s past operating performance.

Hytera-Related Legal Expenses: On March 14, 2017, the company filed a complaint in the U.S. District Court for the Northern District of Illinois (the “Court”) against Hytera Communications Corporation Limited of Shenzhen, China; Hytera America, Inc.; and Hytera Communications America (West), Inc. (collectively, “Hytera”), alleging trade secret theft and copyright infringement and seeking, among other things, injunctive relief, compensatory damages, and punitive damages. On February 14, 2020, the company announced that a jury decided in the company’s favor in its trade secret theft and copyright infringement case. In connection with this verdict, the jury awarded the company $345.8 million in compensatory damages and $418.8 million in punitive damages, for a total of $764.6 million. In a series of post-trial rulings in 2021, the Court subsequently reduced the judgment to $543.7 million, but also ordered Hytera to pay the company $51.1 million in pre-judgment interest and $2.6 million in costs, as well as $34.2 million in attorneys’ fees. The company continues to seek collection of the judgment through the ongoing legal process.

On December 17, 2020, the Court held that Hytera must pay the company a forward-looking reasonable royalty on products that use the company’s stolen trade secrets, and on December 15, 2021, set royalty rates for Hytera’s sale of relevant products from July 1, 2019 forward. On July 5, 2022, the Court ordered that Hytera pay into a third-party escrow on July 31, 2022, the royalties owed to the company based on the sale of relevant products from July 1, 2019 to June 30, 2022. Hytera failed to make the required royalty payment on July 31, 2022. On August 1, 2022, Hytera filed a motion to modify or stay the Court’s previous July 5, 2022 royalty order, which the Court denied on July 11, 2023. On August 3, 2022, the company filed a motion seeking to hold Hytera in civil contempt for violating the royalty order by not making the required royalty payment on July 31,2022. On August 26, 2023, the Court granted the company’s contempt motion. As a result, on September 1, 2023, Hytera made a payment of $56 million into the third-party escrow. In addition to the September 1, 2023 payment of $56 million, Hytera has made de minimis quarterly royalty payments into the third-party escrow from October 2022 through January 2024. The aggregate amount paid into escrow will not be recognized until all contingencies are resolved and such amount is released from escrow.

Following the February 14, 2020 verdict and judgment in the company’s favor, Hytera subsequently filed several notices of appeal to the U.S. Court of Appeals for the Seventh Circuit (the “Court of Appeals”), including a notice of appeal filed on August 2, 2022 which appealed the orders related to the jury’s verdict as well as the Court’s royalty order. The company filed its cross-appeal on August 5, 2022. The Court of Appeals heard oral arguments on the parties’ appeals on December 5, 2023.

Separate from the company’s litigation with Hytera, on May 27, 2020, Hytera America, Inc. and Hytera Communications America (West), Inc. each filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Central District of California (the “Bankruptcy Court”). On February 11, 2022, the Court entered an order to confirm the liquidation plan for the two Hytera entities and the distributions were made on February 25, 2022 to the creditors, including a distribution of $13 million to the company. On December 22, 2022, an additional distribution of $2 million was made to the company as well as an assignment of various delinquent accounts receivable of the bankrupt Hytera entities. The gains for the two monetary distributions were recorded to Other charges (income) in the company’s Consolidated Statements of Operations.

Management typically considers legal expenses associated with defending the company’s intellectual property as “normal and recurring” and accordingly, Hytera-related legal expenses were included in both the company’s GAAP and non-GAAP operating income for fiscal years 2017, 2018 and 2019. The company anticipates further expenses associated with Hytera-related litigation; however, as of 2020, the company believes that these expenses are no longer a part of the “normal and recurring” legal expenses incurred to operate its business. In addition, as any contingent or actual gains associated with the Hytera litigation are recognized, they will be similarly excluded from the company’s non-GAAP operating income, consistent with the company’s treatment of the approximately $15 million of proceeds realized in 2022. The company believes after the jury award, the presentation of excluding both Hytera-related legal expenses and gains related to awards better aligns with how management evaluates the company’s ongoing underlying business performance.

Share-based compensation expenses: The company has excluded share-based compensation expense from its non-GAAP operating expenses and net income measurements. Although share-based compensation is a key incentive offered to the company’s employees and the company believes such compensation contributed to the revenue earned during the periods presented and also believes it will contribute to the generation of future period revenues, the company continues to evaluate its performance excluding share-based compensation expense primarily because it represents a significant non-cash expense. Share-based compensation expense will recur in future periods.

Intangible assets amortization expense: The company has excluded intangible assets amortization expense from its non-GAAP operating expenses and net earnings measurements, primarily because it represents a non-cash expense and because the company evaluates its performance excluding intangible assets amortization expense. Amortization of intangible assets is consistent in amount and frequency but is significantly affected by the timing and size of the company’s acquisitions.

Contacts

MEDIA CONTACT
Alexandra Reynolds

Motorola Solutions

+1 312-965-3968

[email protected]

INVESTOR CONTACT
Tim Yocum

Motorola Solutions

+1 847-576-6899

[email protected]

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