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    Motorola Solutions Inc (MSI)

    Business Description

    Motorola Solutions is a company that specializes in providing communication and security solutions through its two main segments: "Products and Systems Integration" and "Software and Services" . The company offers a range of products, including Land Mobile Radio Communications, Video Security and Access Control, and Command Center solutions . These products are designed to enhance public safety and professional communications, as well as improve decision-making through integrated voice, video, and data analytics .

    1. Products and Systems Integration - Encompasses Land Mobile Radio Communications, which includes infrastructure, devices, and software for public safety and professional radio communications, significantly contributing to the company's revenue .
      • Land Mobile Radio Communications (LMR) - Provides infrastructure, devices, and software for public safety and professional radio communications.
    2. Software and Services - Offers solutions that unify voice, video, and data analytics to improve decision-making .
      • Video Security and Access Control - Provides cameras, access control, and AI-powered analytics.
      • Command Center - Delivers solutions that unify voice, video, and data analytics to enhance decision-making.

    Q3 2024 Summary

    Initial Price$389.08July 1, 2024
    Final Price$449.08October 1, 2024
    Price Change$60.00
    % Change+15.42%

    What went well

    • MSI expects total backlog to be up from last year's record levels, indicating strong demand across both products and services.
    • Strong state and local budgets are supporting robust demand for MSI's products and services, with prioritization on public safety spending.
    • Actively pursuing M&A opportunities in video, software, and services, exemplified by the acquisition of 3TC, which enhances control room solutions, improves margins, and provides a platform for growth.

    What went wrong

    • Management expressed uncertainty about providing detailed guidance for 2025 growth, particularly regarding the contribution from product backlog, indicating potential challenges in forecasting future revenue.
    • There is potential risk from reduced public sector spending due to political changes, which could impact state and local budgets and affect the company's largely government-dependent revenue streams.
    • The company's reliance on acquisitions, such as the recent purchase of 3TC, may pose integration risks and suggests a need for external growth drivers rather than organic growth.

    Q&A Summary

    1. 2025 Revenue Outlook
      Q: What's your revenue growth outlook for 2025?
      A: We expect revenue growth of 5% to 6% in 2025. Software and Services is projected to grow about twice as fast as Products, driven by strong demand and a robust backlog.

    2. Operating Margins Expansion
      Q: How will operating margins evolve?
      A: We anticipate operating margin expansion, particularly in Software and Services. The PPV relief of $70 million is largely behind us, but we'll have about $20 million tailing into next year, benefiting margins .

    3. Backlog Growth
      Q: What's the outlook on backlog levels?
      A: We now expect total backlog to be up at the end of this year compared to last year's record levels . Product backlog remains healthy at over $4 billion.

    4. Recurring Revenue Growth
      Q: How is recurring revenue evolving?
      A: Recurring revenue is strong, with Software and Services serving as a proxy. We expect S&S to grow about twice as fast as Products in 2025, with continued cloud adoption in video and command center .

    5. Video Business Transition
      Q: How is the shift to cloud impacting video?
      A: The shift to cloud is leading to higher software attachment rates, especially with AI-related cameras like the H6A and ACC8. There's a $40 million headwind in 2024 due to customers moving to cloud, but we view this positively as it reflects accelerated cloud adoption.

    6. Impact of U.S. Election
      Q: What are your expectations after the U.S. election?
      A: We believe the administration's focus on public safety is positive. State and local budgets remain strong, benefiting our business. A more favorable M&A environment is also anticipated.

    7. M&A Outlook
      Q: How do you view the M&A environment?
      A: The M&A environment is attractive, with a robust pipeline primarily in video, software, and services . Our strong balance sheet provides us with dry powder for acquisitions.

    8. APX NEXT and MXP660 Devices
      Q: Can you update on APX NEXT and MXP660 adoption?
      A: About 25% of devices shipped are APX NEXT, indicating a long runway ahead. The MXP660 has been launched internationally, and we expect a pickup in 2025.

    9. Gross Margins Outlook
      Q: What's the outlook for gross margins?
      A: With the $70 million PPV relief behind us, margins remain positive due to favorable mix and new products like APX NEXT.

    10. Federal Business Growth
      Q: How is the federal business performing?
      A: The federal business was around $900 million last year and is growing this year. We've had strong federal wins, with recent large orders not fully reflected in backlog.

    11. Command Center Growth
      Q: How is command center adoption progressing?
      A: We are now #1 in CAD and Records in North America. Over 60% of customers have at least one cloud component, and we expect about 9% growth this year.

    12. U.K. Airwave Update
      Q: What's the status of the U.K. Airwave issue?
      A: A hearing is scheduled next week to challenge the CMA ruling. We expect a decision by the end of the year or early 2025.

    13. Subscription Sales Strategy
      Q: How is the subscription sales strategy going?
      A: We are not forcing everything into subscriptions but see increased cloud adoption in video and command center. APX NEXT devices often come with broadband applications, enhancing recurring revenue.

    14. Acquisition of 3TC
      Q: What does the 3TC acquisition bring?
      A: 3TC provides CAD solutions for U.K. control rooms. Bringing it in-house improves margins and supports growth.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Products and Systems1,3031,4371,6121,896,2421,4901,6581,784
    Software and Services8689669449583,7368999701,006
    - LMR Communications1,6571,7761,9172,1767,5261,8221,9412,088
    - Video3594334534811,726398476500
    - Command Center155194186191726169211202
    Devices--------
    Systems and Systems Integration--------
    Services--------
    Software--------
    - Integration Services--------
    - Lifecycle Support Services--------
    - Managed Services--------
    - Smart Public Safety Solutions--------
    - iDEN Services--------
    Products--------
    Total Revenue2,1712,4032,5562,8489,9782,3892,6282,790
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Americas--------
    EMEA--------
    Asia Pacific--------
    North America1,4921,6411,7832,0166,9321,6931,9172,007
    International6797627738323,046696711783
    - United States----6,559---
    - United Kingdom----769---
    - Canada----373---
    - Other, net of eliminations----2,277---
    Latin America--------
    Middle East--------
    Total Revenue2,1712,4032,5562,8489,9782,3892,6282,790
    KPIs - Metric (Unit)FY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Software and Services Performance Obligations (Billion USD)$4.5$4.6$4.4$4.3-$5.0$4.8$4.9

    Executive Team

    NamePositionStart DateShort Bio
    Gregory Q. BrownChairman and Chief Executive OfficerMay 3, 2011Gregory Q. Brown has been serving as the Chairman and Chief Executive Officer of Motorola Solutions, Inc. since May 3, 2011. He has a thorough knowledge of the company's business, strategy, people, operations, competition, and financial position .
    Karen E. DunningSenior Vice President, Human ResourcesFebruary 1, 2023Karen E. Dunning is the Senior Vice President, Human Resources for Motorola Solutions. She has been with the company since 1985 and has held several leadership positions in strategy, business operations, and engineering throughout her career .
    Katherine MaherCorporate Vice President and Chief Accounting OfficerMarch 14, 2022Katherine Maher is the Corporate Vice President and Chief Accounting Officer at Motorola Solutions, Inc. She has held this position since March 14, 2022. Prior to this role, she served as Vice President and Corporate Controller from November 2021 to March 2022 .
    John P. "Jack" MolloyExecutive Vice President and Chief Operating Officer1994John P. "Jack" Molloy is the Executive Vice President and Chief Operating Officer for Motorola Solutions. He leads the company's worldwide sales and services organization and product development of land mobile radio and video security and access control .
    Rajan S. NaikSenior Vice President, Strategy and Ventures2015Rajan S. Naik is the Senior Vice President, Strategy and Ventures at Motorola Solutions. He is responsible for the corporate strategy organization, mergers and acquisitions, venture capital portfolio, and competitive and market intelligence .
    James A. NiewiaraSenior Vice President, General CounselFebruary 1, 2023James A. Niewiara is the Senior Vice President and General Counsel of Motorola Solutions. He has been with the company since 2008 and has held several leadership roles within the legal department .
    Mahesh SaptharishiExecutive Vice President and Chief Technology Officer2019Mahesh Saptharishi is the Executive Vice President and Chief Technology Officer for Motorola Solutions. He is responsible for the company's public safety software and video security and access control solutions, and he also leads the chief technology office .
    Jason J. WinklerExecutive Vice President and Chief Financial Officer2001Jason J. Winkler is the Executive Vice President and Chief Financial Officer for Motorola Solutions. He is responsible for the company's financial strategy and leads all financial functions, as well as supply chain and information technology .
    Cynthia M. YazdiSenior Vice President, Communications & Brand2000Cynthia M. Yazdi is the Senior Vice President, Communications & Brand for Motorola Solutions. She is responsible for supporting the Chairman and CEO of Motorola Solutions and for global communications and brand for the company .
    Nicole AnasenesDirector, Member of the Audit CommitteeFebruary 21, 2024Nicole Anasenes joined the board of Motorola Solutions, Inc. as a director on February 21, 2024. She also became a member of the Audit Committee on the same date .
    Elizabeth MannDirector, Member of the Audit CommitteeAugust 26, 2024Elizabeth D. Mann joined the Board of Directors of Motorola Solutions, Inc. on August 26, 2024, when the size of the Board was increased from eight to nine members. She also became a member of the Audit Committee on the same date .

    Questions to Ask Management

    1. Given the record gross margins reported this quarter, how should we think about gross margins moving forward, especially considering supply chain normalization and the APX NEXT product cycle?

    2. With the potential for reduced public sector spending following the recent election, how do you anticipate this impacting MSI's core customer base and revenue growth, particularly given your significant exposure to state and local budgets?

    3. Can you elaborate on your M&A strategy moving forward, and whether changes in the administration will affect your capital allocation plans or openness to pursue larger deals that you may have previously been hesitant to undertake?

    4. Considering the drawdown in product backlog due to strong LMR shipments and easing supply chain constraints, how are you expecting the product backlog to trend going forward, and what are the key drivers that will sustain LMR growth rates into next year?

    5. Given that the improved supply chain environment has helped you expand margins this quarter, to what extent can we expect this trend to continue, and are there any risks that could impact operating margins or cash flows in the coming quarters?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateJuly 28, 2011
    End Date/DurationNo expiration date
    Total additional amount$18.0 billion
    Remaining authorization amount$2.3 billion (as of 2024-12-21)
    DetailsThe program allows for the repurchase of up to $18.0 billion of outstanding shares.

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024
    • Guidance:
      • Revenue Growth: Expected full-year revenue growth of 8.25%, up from prior guidance of approximately 8% .
      • Non-GAAP Earnings Per Share (EPS): Expected between $13.63 and $13.68 per share, up from prior guidance of $13.22 to $13.30 per share .
      • Weighted Average Diluted Share Count: Approximately 171 million shares .
      • Effective Tax Rate: Approximately 22.5% .
      • Operating Expenses (OpEx): Approximately $2.4 billion for the full year .
      • Operating Cash Flow: Raised to approximately $2.3 billion, up from previous guide of $2.25 billion .
      • 2025 Revenue Growth: Preliminary guidance for 2025 revenue growth is 5% to 6% .
      • Software and Services Growth: Expected to grow about 2x the rate of Products and SI for 2025 .
      • Operating Margin Expansion: Expected continued operating margin expansion in 2025 .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: Q3 2024 and FY 2024
    • Guidance:
      • Q3 2024 Guidance:
        • Sales Growth: Expected between 7% and 8% .
        • Non-GAAP EPS: Expected between $3.32 and $3.37 per share .
        • Weighted Average Diluted Share Count: Approximately 170 million shares .
        • Effective Tax Rate: 24% .
      • Full Year 2024 Guidance:
        • Revenue Growth: Increased to approximately 8%, up from prior guidance of approximately 7% .
        • Non-GAAP EPS: Expected between $13.22 and $13.30 per share, up from prior guidance of $12.98 to $13.08 per share .
        • Weighted Average Diluted Share Count: Approximately 171 million shares .
        • Effective Tax Rate: Approximately 23.5% .
        • Operating Margin Expansion: Expected to be approximately 100 basis points, up from prior expectation of 75 basis points .
        • Operating Cash Flow: Expected to be $2.25 billion, an increase of $50 million versus prior expectations .
      • Segment-Specific Guidance:
        • Video Segment: Expected growth of approximately 12% for the full year, inclusive of recent M&A activities .
        • Land Mobile Radio (LMR): Expectations increased to mid- to high single-digit growth for the full year .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: Q2 2024 and FY 2024
    • Guidance:
      • Q2 2024 Guidance:
        • Sales Growth: Expected to be up between 7% and 8%.
        • Non-GAAP EPS: Expected to be between $2.97 and $3.02 per share.
        • Weighted Average Diluted Share Count: Approximately 170 million shares.
        • Effective Tax Rate: Approximately 24%.
      • Full Year 2024 Guidance:
        • Revenue Growth: Increased to approximately 7%, up from prior guidance of approximately 6%.
        • Non-GAAP EPS: Expected to be between $12.98 and $13.08 per share, up from prior guidance of $12.62 to $12.72 per share.
        • FX Headwind: Assumed to be $30 million, primarily in the second half.
        • Weighted Average Diluted Share Count: Between 170 million and 171 million shares.
        • Effective Tax Rate: Between 23% and 24%.
        • Interest Expense: Expected to be approximately $240 million, up $25 million year-over-year .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: Q1 2024 and FY 2024
    • Guidance:
      • Q1 2024 Guidance:
        • Sales Growth: Expected to be up approximately 8%.
        • Non-GAAP EPS: Expected to be between $2.50 and $2.55 per share.
        • Weighted Average Diluted Share Count: Approximately 172 million shares.
        • Effective Tax Rate: Approximately 23% .
      • Full Year 2024 Guidance:
        • Revenue Growth: Expected to be approximately 6%.
        • Non-GAAP EPS: Expected to be between $12.62 and $12.72 per share.
        • Weighted Average Diluted Share Count: Approximately 171 million shares.
        • Effective Tax Rate: Between 23% and 24% .
        • Operating Cash Flow: Expected to be $2.2 billion .

    Competitors

    Competitors mentioned in the company's latest 10K filing.

    • Airbus - Competitor in LMR technology
    • BK Technologies - Competitor in LMR technology
    • Hytera - Competitor in LMR technology
    • iCOM - Competitor in LMR technology
    • JVCKenwood Corporation - Competitor in LMR technology
    • L3Harris Technologies - Competitor in LMR technology
    • RCA - Competitor in LMR technology
    • Samsung - Competitor in LMR technology
    • Sepura - Competitor in LMR technology
    • Tait - Competitor in LMR technology
    • Zebra - Competitor in LMR technology
    • Allegion - Competitor in Video technology
    • Assa Abloy - Competitor in Video technology
    • Axis Communications - Competitor in Video technology
    • Axon Enterprise - Competitor in Video and Command Center technologies
    • Brivo - Competitor in Video technology
    • Dahua Technology Company - Competitor in Video technology
    • dormakaba - Competitor in Video technology
    • Genetec - Competitor in Video and Command Center technologies
    • Hanwha Group - Competitor in Video technology
    • Hikvision - Competitor in Video technology
    • Honeywell - Competitor in Video technology
    • Milestone Systems - Competitor in Video technology
    • Spectrum Brands - Competitor in Video technology
    • Verkada - Competitor in Video technology
    • AlertMedia - Competitor in Command Center technology
    • CentralSquare Technologies - Competitor in Command Center technology
    • Comtech Telecommunications - Competitor in Command Center technology
    • Everbridge - Competitor in Command Center technology
    • Fusus - Competitor in Command Center technology
    • Hexagon - Competitor in Command Center technology
    • Intrado - Competitor in Command Center technology
    • Mark43 - Competitor in Command Center technology
    • Omnilert - Competitor in Command Center technology
    • Onsolve - Competitor in Command Center technology
    • Oracle Public Safety - Competitor in Command Center technology
    • Tyler Technologies - Competitor in Command Center technology

    Latest news

    Recent developments and announcements about MSI.

    Financial Reporting

      Auditor Changes

      ·
      May 17, 2018, 12:00 AM

      Motorola Solutions, Inc. (MSI) has changed its auditor.

      • Former Auditor: KPMG LLP
      • New Auditor: PricewaterhouseCoopers LLP (PwC)
      • Effective Date: PwC's appointment is for the fiscal year ending December 31, 2019, and related interim periods. KPMG will continue until the completion of the audit for the fiscal year ending December 31, 2018.
      • Reason for Change: The change was recommended by the Executive Committee and approved by the Audit Committee after a competitive selection process involving the 'Big Four' accounting firms.