Control rooms  |   Narrowband  |   Broadband  |   Critical IoT  |  2023-02-14

Motorola Solutions Claims Outstanding Year, with Record Sales

Source: The Critical Communications Review | Gert Jan Wolf editor

Although the macroeconomic environment continued to introduce challenges during 2022, the company is encouraged by customer demand for the company's products and services.

Motorola Solutions, Inc. (NYSE: MSI) reported its earnings results for the fourth quarter and full year of 2022.

“2022 was an outstanding year, with record sales in both segments and all three technologies,” said Greg Brown, chairman and CEO of Motorola Solutions. “We achieved all-time Q4 records in sales, operating earnings, earnings per share and cash flow, highlighting the strong demand we continue to see for our public safety and enterprise security solutions. Our record backlog and a robust funding environment position us exceptionally well going forward.”

OTHER SELECT FOURTH-QUARTER FINANCIAL RESULTS

  • Revenue - Fourth-quarter sales were $2.7 billion, up 17% from the year-ago quarter driven by growth in North America and International. Revenue from acquisitions was $39 million, and currency headwinds were $87 million. The Products and Systems Integration segment increased 21% due to growth in land mobile radio (LMR) and video security and access control (Video). The Software and Services segment grew 9% driven by growth in LMR services, Video and Command center.
  • Operating margin - GAAP operating margin was 25.6% of sales, up from 23.7% in the year-ago quarter. Non-GAAP operating margin was 30.4% of sales, up from 28.9% in the year-ago quarter. The increase in both GAAP and non-GAAP operating margin was primarily driven by higher sales in both segments and improved operating leverage in the Products and Systems Integration segment.
  • Taxes - The GAAP effective tax rate was 11.0%, down from 22.4% in the year-ago quarter driven primarily by higher benefits in the current year related to a partial release of a valuation allowance recorded on the U.S. foreign tax credits carryforward and higher stock-based compensation. The non-GAAP effective tax rate was 21.2%, compared to 22.3% in the year-ago quarter, driven by higher benefits from stock-based compensation in the current year.
  • Cash flow - Operating cash flow was $1.3 billion, up $570 million compared to the year-ago quarter. Free cash flow was $1.2 billion, up $565 million compared to the year-ago quarter. The increase in both operating and free cash flow was driven by improvements in working capital and higher earnings.
  • Capital allocation - During the quarter, the company paid $132 million in dividends, repurchased $87 million of its common stock and incurred $73 million in capital expenditures. Additionally, the company closed the acquisitions of Rave Mobile Safety and FutureCom Systems Group for $553 million and $30 million, net of cash acquired, respectively.

OTHER SELECT FULL-YEAR FINANCIAL RESULTS

  • Revenue - Full-year sales were $9.1 billion, up 12% driven by growth in North America and International. The Products and Systems Integration segment grew 14% primarily due to higher sales of LMR and Video. The Software and Services segment grew 8% driven by growth in Video, LMR services and Command center. The impact of unfavorable currency rates was $216 million and sales from acquisitions was $121 million.
  • Operating margin - For the full year, GAAP operating margin was 18.2% of sales, compared to 20.4% for the prior year. The decrease was primarily driven by a fixed asset impairment charge of $147 million related to the exit from the Emergency Services Network (ESN) contract in the U.K. and higher stock based compensation in the current year. Non-GAAP operating margin was 26.0% of sales, up from 25.9% in the prior year, driven by higher sales and improved operating leverage, partially offset by higher material costs and expenses from acquisitions.
  • Taxes - The 2022 GAAP effective tax rate was 9.8%, down from 19.5% in the prior year driven primarily by a discrete deferred tax benefit as a result of the taxable reorganization of our intellectual property in the current year, a benefit from a partial release of the valuation allowance recorded on the U.S. foreign tax credit carryforward and the benefit from higher stock based compensation in the current year. The non-GAAP effective tax rate was 20.1%, down from 21.0% in the previous year, primarily driven by the benefit from higher stock based compensation in the current year.
  • Cash flow - The company generated $1.8 billion in operating cash and free cash flow was $1.6 billion in both the current and prior years. Higher earnings generated in the current year were offset by an increase in working capital and higher incentive payments.
  • Capital allocation - In 2022, the company paid $1.2 billion, net of cash acquired, for seven acquisitions, repurchased $836 million of its common stock at an average price of $225 per share and paid $530 million in dividends. The company also issued $600 million of long-term debt and repaid $275 million of outstanding long-term debt.
  • Backlog - The company ended the year with record backlog of $14.3 billion, up $788 million from the prior year. Products and Systems Integrations segment backlog was up 22% or $894 million driven by record LMR product orders. Software and Services segment backlog was down 1% or $106 million, primarily driven by revenue recognition for the Airwave and ESN contracts, $367 million of unfavorable currency rates, and a reduction relating to the exit from the ESN contract, partially offset by growth in multi-year software and services contracts in North America

NOTABLE WINS & ACHIEVEMENTS IN Q4

Software and Services

  • $56M P25 multi-year managed service extension of the Interexport contract for the Chilean National Law Enforcement Police
  • $25M P25 software upgrade agreement renewal for a large U.S. customer
  • $22M NG911 expansion and renewal for Greater Harris County, TX
  • $21M system upgrade and multi-year services renewal for Lane County, OR
  • $15M P25 and command center upgrade agreement extension order for Columbus, GA
  • $15M license plate recognition camera system expansion order for the Illinois State Police

Products and Systems Integration

  • $45M P25 APX NEXT devices order for the city of Houston, TX
  • $39M P25 APX NEXT devices order for a large U.S. customer
  • $30M P25 APX NEXT devices order for the city of Dallas, TX
  • $21M add-on P25 APX NEXT devices order for a large U.S. customer
  • $20M P25 APX NEXT devices and command center order for Kansas City, MO
  • $19M P25 system order for a large international customer
  • $3M fixed video order for Metra Rail

BUSINESS OUTLOOK

  • First-quarter 2023 - The company expects revenue growth between 12% and 13% compared to the first quarter of 2022. The company expects non-GAAP earnings per share in the range of $2.02 to $2.07 per share. This assumes approximately $40 million in foreign exchange headwinds, approximately 172 million fully diluted shares, and an effective tax rate of approximately 23%.
  • Full-year 2023 - The company expects revenue in the range of $9.65 billion to $9.7 billion and non-GAAP earnings per share in the range of $11.10 to $11.22 per share. This assumes approximately $40 million in foreign exchange headwinds, approximately 172 million fully diluted shares and a non-GAAP effective tax rate of 23% to 24%.