Motorola Solutions Reports Second-Quarter 2021 Financial Results

Motorola Solutions, Inc. (NYSE: MSI) today reported its earnings results for the second quarter of 2021. Click here for a printable news release and financial tables.

“Our Q2 results were outstanding, highlighted by strong double-digit growth in both segments," said Greg Brown, chairman and CEO, Motorola Solutions. “The continued strong demand for our mission-critical technologies is driving our increased expectations for the full year.”

OTHER SELECTED FINANCIAL RESULTS

• Revenue - Sales were $2.0 billion, up 22% from the year-ago quarter driven by growth in both North America and International. Revenue from acquisitions was $47 million and currency tailwinds were $66 million in the quarter. The Products and Systems Integration segment grew 24% driven by growth in land mobile radio (LMR) and video security. The Software and Services segment grew 19%, driven by growth in LMR services, video security and command center software.
• Operating margin - GAAP operating margin was 18.8% of sales, up from 13.5% in the year-ago quarter. Non-GAAP operating margin was 24.4% of sales, up from 22.2% in the year-ago quarter. The increase in both GAAP and non-GAAP operating margins was primarily due to higher sales and improved operating leverage in both segments, including higher costs related to incentive compensation. GAAP operating margin was also positively impacted by lower reorganization charges in the current quarter as compared to the year-ago quarter.
• Taxes - The GAAP effective tax rate was 13.5%, compared to 22.7% in the year-ago quarter, primarily driven by a partial release of a valuation allowance recorded on the U.S. foreign tax credit carryforward. The non-GAAP effective tax rate was 20.5%, compared to 22.8% in the year-ago quarter driven by discrete items, including benefits from stock-based compensation.
• Cash flow - Operating cash flow was $388 million, compared to $209 million in the year-ago quarter. Free cash flow was $326 million, compared to $155 million in the year-ago quarter. Cash flow for the quarter increased primarily due to higher earnings and improved working capital, partially offset by higher cash taxes.
• Capital allocation - During the quarter, the company repurchased $102 million of shares, paid $121 million in cash dividends and incurred $62 million of capital expenditures. Additionally, during the quarter the company issued $850 million of new long-term debt and redeemed $324 million outstanding of its senior notes due 2023. Subsequent to the quarter end, the company acquired Openpath for $297 million, net of cash acquired, and invested $50 million in equity securities of Evolv Technologies.
• Backlog - The company ended the quarter with backlog of $11.2 billion, up 7%, or $741 million, from the year-ago quarter. Products and Systems Integration segment backlog was up 17%, or $484 million. The growth was primarily driven by strong LMR demand in North America and International. Software and Services segment backlog was up 3% or $257 million. The growth was primarily driven by multi-year services and software agreements in North America.

NOTABLE WINS AND ACHIEVEMENTS

Software and Services
$18 million French MOI body-worn camera frame agreement
$15 million license plate recognition software extension with a U.S. customer
$10 million P25 multi-year services extension for the state of Ohio
$10 million P25 maintenance renewal with a U.S. federal customer
Launched CommandCentral suite, public safety’s first cloud-native 911 call to case closure solution
Products and Systems Integration
$37 million P25 upgrade order for the Kentucky State Police
$36 million P25 upgrade for a state in the U.S.
$30 million P25 order for Metro Atlantic Rapid Transit Authority
$29 million P25 devices order for a large U.S. state and local customer
$5 million video security order, the largest single fixed video order for a U.S. federal government customer

BUSINESS OUTLOOK

• Third-quarter 2021 - Motorola Solutions expects revenue growth of approximately 10% compared to the third quarter of 2020. The company expects non-GAAP EPS in the range of $2.09 to $2.14. This assumes current foreign exchange rates, approximately 174 million fully diluted shares, and an effective tax rate of 23% to 24%.
• Full-year 2021 - Motorola Solutions now expects revenue growth of 9.5% to 10%, up from the prior guidance of growth of 8% to 9%, and non-GAAP EPS in the range of $8.88 to $8.98, up from the prior guidance of $8.70 to $8.80. This assumes current foreign exchange rates, approximately 173 million fully diluted shares, and an effective tax rate of approximately 22%.

The company has not quantitatively reconciled its guidance for forward-looking non-GAAP metrics to their most comparable GAAP measures 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.