2025-02-13

Motorola Solutions Reports Record Sales, Operating Earnings and Cash Flow

Source: The Critical Communications Review | Gert Jan Wolf editor

Motorola Solutions, Inc. (NYSE: MSI) today reported its earnings results for the fourth quarter and full year of 2024.

“2024 marked another exceptional year for the company, with record sales, operating earnings and cash flow,” said Greg Brown, chairman and CEO, Motorola Solutions. “Strong demand for our safety and security solutions, together with our record backlog, positions us well for another year of strong growth.”

 

  • Sales of $3.0 billion, up 6% from Q4 in the prior year; up 8% for full year
  • Products and Systems Integration sales grew 3% in Q4; up 10% for full year
  • Software and Services sales grew 11% in Q4; up 5% for full year
  • Generated $1.1 billion of operating cash flow in Q4; $2.4 billion for full year, up 17%
  • GAAP Q4 earnings per share (EPS) of $3.56, up 3%; $9.23 for full year, down 7%
  • Non-GAAP Q4 EPS* of $4.04, up 4% versus a year ago; $13.84 for full year, up 16%
  • Record ending backlog of $14.7 billion, up 3% from a year ago
  • Subsequent to quarter end, entered into a definitive agreement to acquire Theatro, a maker of
  • AI and voice-powered communication and digital workflow software for frontline workers

OTHER SELECT FOURTH-QUARTER FINANCIAL RESULTS

  • Revenue - Fourth-quarter sales were $3.0 billion, up 6% from the year-ago quarter driven by growth in North America. Revenue from acquisitions was $37 million and the impact of favorable foreign currency rates was $6 million. The Products and Systems Integration segment grew 3% with growth in land mobile radio ("LMR") and video security and access control ("Video"). The Software and Services segment grew 11% driven by growth in all three technologies.
  • Operating margin - GAAP operating margin was 27.0% of sales, up from 25.9% in the year-ago quarter, driven primarily by a recovery related to the Hytera litigation. Non-GAAP operating margin was 30.4% of sales, down from 30.5% in the year-ago quarter driven by acquisitions, offset by higher sales, favorable mix and lower direct material costs.
  • Taxes - The GAAP effective tax rate was 22.2%, up from 15.7% in the year-ago quarter driven primarily by a partial release of a valuation allowance recorded on the U.S. foreign tax credits carryforward in the prior year. The non-GAAP effective tax rate was 22.0%, up from 20.3% in the year-ago quarter, driven by higher U.S. income generated in the current year.
  • Cash flow - Operating cash flow was $1.1 billion during the quarter, compared with $1.2 billion in the year-ago quarter and free cash flow was $1.0 billion in the quarter, compared with $1.2 billion in the year-ago quarter. Both the operating cash flow and free cash flow for the quarter decreased primarily due to changes in working capital and higher tax and interest payments in the current quarter.
  • Capital allocation - During the quarter, the company paid $164 million in dividends, repurchased $103 million of its common stock and incurred $87 million in capital expenditures. Additionally, the company closed the acquisition of 3tc Software, an international provider of Command Center software solutions, for $22 million, net of cash acquired.

OTHER SELECT FULL-YEAR FINANCIAL RESULTS

  • Revenue - Full-year sales were $10.8 billion, up 8% driven by growth in North America, partially offset by lower revenue from the U.K. Home Office related to the Airwave Charge Control and the exit from the Emergency Services Network ("ESN") contract. Revenue from acquisitions was $95 million and the impact of unfavorable foreign currency rates was $2 million. The Products and Systems Integration segment increased 10% driven by growth in LMR and Video. The Software and Services segment increased 5% driven by growth in Video and Command Center, partially offset by the revenue reduction for the U.K. Home Office. Excluding the U.K. Home Office, Software and Services grew 13% with growth in all three technologies.
  • Operating margin - For the full year, GAAP operating margin was 24.8% of sales, compared to 23.0% for the prior year and non-GAAP operating margin was 29.0% of sales, up from 27.9% in the prior year. The increase in both GAAP and non-GAAP operating margin was driven by higher sales, favorable mix and lower direct material costs, partially offset by the Airwave Charge Control, higher employee incentives and higher expenses associated with acquired businesses in the current year.
  • Taxes - The 2024 GAAP effective tax rate was 19.8%, compared with 20.1% in the prior year and the non-GAAP effective tax rate was 22.0%, up from 21.9% in the previous year.
  • Cash flow - The company generated record operating cash flow of $2.4 billion, up 17% versus the prior year, and record free cash flow of $2.1 billion, up 19% versus the prior year. The increase in both operating and free cash flow was primarily driven by higher earnings, net of non-cash charges, generated in the current year.
  • Capital allocation - In 2024, the company paid $654 million in dividends, closed four acquisitions for $282 million, net of cash acquired, and repurchased $244 million of its common stock at an average price of $396.69 per share. The company also settled the Silver Lake convertible debt at $319.54 per share for $1.59 billion in cash, inclusive of the conversion premium, and settled $313 million of senior notes that were due within the year. Additionally, the company received credit rating upgrades to BBB from both S&P and Fitch and issued $1.3 billion in long-term debt.
  • Backlog - The company ended the year with record backlog of $14.7 billion, up $438 million from the prior year, inclusive of $226 million of unfavorable foreign currency rates. Products and Systems Integrations segment backlog was down 17% or $858 million driven by strong LMR shipments. Software and Services segment backlog was up 14%, or $1.3 billion, driven by strong demand in all three technologies, partially offset by $195 million of unfavorable foreign currency rates.

NOTABLE WINS & ACHIEVEMENTS IN Q4

Software and Services

$329M ten-year services renewal for Melbourne, Australia's LMR network
$160M five-year LMR services renewal for Norway’s nationwide public safety network
$68M LMR services order for a U.S. state and local customer
$40M Command Center order from the Scottish Fire Service
$16M fixed video order for the São Paulo State Government, Brazil

Products and Systems Integration

$53M P25 device order for a U.S. state and local customer
$52M P25 system and device order for a Canadian customer
$36M P25 device order for Broward Sheriff’s Office, FL
$33M P25 system order from the Kentucky State Police
$32M P25 device order for City of Phoenix Police & Fire
$16M fixed video order for Duke Energy

BUSINESS OUTLOOK

First-quarter 2025 - The company expects revenue growth between 5.0% and 5.5% compared to the first quarter of 2024. The company expects non-GAAP EPS in the range of $2.98 to $3.03 per share. This assumes approximately $25 million in foreign exchange headwinds, 171 million fully diluted shares and a non-GAAP effective tax rate of approximately 21.0%.
Full-year 2025 - The company expects revenue growth of approximately 5.5% and non-GAAP EPS in the range of $14.64 to $14.74 per share. This assumes approximately $120 million in foreign exchange headwinds, 171 million fully diluted shares and a non-GAAP effective tax rate of approximately 23.0%.

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.

 

U.K. HOME OFFICE UPDATE

In October 2021, the Competition Markets Authority ("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 2023, the CMA imposed a legal order on Airwave which implemented a prospective price control on Airwave (the "Airwave Charge Control"). After the Competition Appeal Tribunal ("CAT") dismissed the company's appeal of the CMA's final decision, the company appealed the CAT's judgment to the United Kingdom Court of Appeal. On January 30, 2025, the United Kingdom Court of Appeal denied the company's application for permission to appeal the CAT's judgment. Since August 1, 2023, revenue under the Airwave contract has been, and will continue to be, recognized in accordance with the Airwave Charge Control.

On March 13, 2024, the company received a notice of contract extension (the “Deferred National Shutdown Notice”) from the U.K. Home Office. The Deferred National Shutdown Notice extends the “national shutdown target date” of the Airwave service from December 31, 2026 to December 31, 2029, at the Airwave Charge Control rates. The company's backlog for Airwave services contracted with the U.K. Home Office through December 31, 2026 was previously reduced by $777 million to align with the Airwave Charge Control. In 2024, as a result of the U.K. Home Office's notice of a contract extension pursuant to their Deferred National Shutdown Notice, the company has recorded additional backlog of $748 million to reflect the incremental three years of services. On April 11, 2024, the company filed proceedings in the U.K. High Court challenging the decision of the U.K. Home Office to issue the Deferred National Shutdown Notice as being in breach of applicable U.K. procurement and public law. The hearing on this matter has been set to commence on April 22, 2025. The backlog related to the incremental years of service contemplated in the Deferred National Shutdown Notice could change depending on the outcome of the proceedings.

On December 5, 2024, a proposed class representative filed a claim with the CAT to bring collective proceedings against us, alleging that users of Airwave services during the period January 1, 2020 through July 31, 2023 suffered financial harm as a result of the pricing in effect during such time (the "Collective Proceeding"). The initial stage of the Collective Proceeding will involve "Certification" of the claim by the CAT, which we expect to be heard in 2025.

More details of the report can be found here.