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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Motorola Solutions Inc | NYSE:MSI | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 370.47 | 0 | 12:00:13 |
Company raises full-year revenue and earnings outlook following strong Q1 results
Motorola Solutions, Inc. (NYSE: MSI) today reported its earnings results for the first quarter of 2024.
“Q1 was an outstanding quarter, with record Q1 revenue in both segments and record Q1 cash flow,” said Greg Brown, chairman and CEO, Motorola Solutions. “Our continued robust backlog and strong balance sheet position us well going forward. As a result, we’re raising both our revenue and earnings expectations for the full year.”
KEY FINANCIAL RESULTS (presented in millions, except per share data and percentages)
Q1 2024
Q1 2023
% Change
Sales
$2,389
$2,171
10 %
GAAP
Operating Earnings
$519
$399
30 %
% of Sales
21.7 %
18.4 %
EPS
($0.23)
$1.61
(114) %
Non-GAAP3
Operating Earnings
$638
$532
20 %
% of Sales
26.7 %
24.5 %
EPS
$2.81
$2.22
27 %
Products and Systems Integration Segment
Sales
$1,490
$1,303
14 %
GAAP Operating Earnings
$310
$176
76 %
% of Sales
20.8 %
13.5 %
Non-GAAP Operating Earnings3
$370
$246
50 %
% of Sales
24.8 %
18.9 %
Software and Services Segment
Sales
$899
$868
4 %
GAAP Operating Earnings
$209
$223
(6) %
% of Sales
23.2 %
25.7 %
Non-GAAP Operating Earnings3
$268
$286
(6) %
% of Sales
29.8 %
32.9 %
1Details regarding this non-GAAP measure and the use of non-GAAP measures are included later in this news release.
2A $3.42 pre-tax non-operating loss on the extinguishment of the Silver Lake convertible debt recorded during Q1 2024 is calculated as the loss of $585 million divided by dilutive shares of 171.3 million, which represents the dilutive share count that the company would have reported in the quarter if not for the loss due to this transaction.
3Non-GAAP financial information excludes the after-tax impact of approximately $3.04 per diluted share related to highlighted items, including the loss from the extinguishment of Silver Lake convertible debt, share-based compensation expense 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 SELECTED FINANCIAL RESULTS
NOTABLE WINS AND ACHIEVEMENTS
Software and Services
Products and Systems Integration
BUSINESS OUTLOOK
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.
RECENT EVENTS
U.K. HOME OFFICE UPDATE
In October 2021, the Competition and Markets Authority ("CMA") 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 the Charge Control. After the Competition Appeal Tribunal ("CAT") dismissed the company's appeal of the CMA's final decision on December 22, 2023, the company filed an application with the United Kingdom Court of Appeal on February 13, 2024, requesting that it hear the company's appeal of the CAT judgment; the Court of Appeal has not yet responded to this request. Since August 1, 2023, revenue under the Airwave contract has been recognized in accordance with the Charge Control, and will continue to be unless the United Kingdom Court of Appeal were to reverse the CAT's judgment and overturn the 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 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 Charge Control. In the first quarter of 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 backlog related to the incremental years of service contemplated in the Deferred National Shutdown Notice could change depending on the outcome of the proceedings.
CONFERENCE CALL AND WEBCAST Motorola Solutions will host its quarterly conference call beginning at 4 p.m. U.S. Central Time (5 p.m. U.S. Eastern Time) on Thursday, May 2. The conference call will be webcast live at www.motorolasolutions.com/investor. 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:
Q1 2024
Q1 2023
Net sales
$2,389
$2,171
Gross margin
$1,192
$1,046
Operating earnings
$519
$399
Amounts attributable to Motorola Solutions, Inc. common stockholders
Net earnings
($39)
$278
Diluted EPS
($0.23)
$1.61
Weighted average diluted common shares outstanding
166.3
172.6
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, organic revenue and net sales adjusted for the U.K. Home Office. 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 its operating performance to that of its competitors. Among other things, management uses these operating results, excluding the identified items, to evaluate the 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.
Net sales adjusted for the U.K. Home Office or Net sales excluding U.K. Home Office sales: Net sales adjusted for the U.K. Home Office reflects net sales calculated under GAAP excluding net sales related to the U.K. Home Office. The company believes that net sales excluding the U.K. Home Office improves period-to-period comparability related to the Charge Control implemented as of August 1, 2023 and the company's exit from the ESN contract as of December 31, 2023.
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 regular quarterly royalty payments into the third-party escrow from October 2022 through April 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 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.
In the first quarter of 2024, the parties have been engaged in competing litigation in the Court and a court in Shenzhen, China (originally filed by Hytera in June 2022 and not served upon the company until November 2023) related to the possible continued use by Hytera of the company’s trade secrets in Hytera’s currently shipping products. In March 2024, the Court ordered Hytera to take affirmative steps to withdraw its competing litigation. Hytera did not comply with the Court's order and, accordingly, the Court issued an order against Hytera for contempt sanctions on April 2, 2024, which included a worldwide sales injunction of all Hytera radio products. On April 16, 2024, the Court of Appeals granted Hytera's motion for an emergency stay of the contempt sanctions, to allow the Court of Appeals to review the lower Court's various orders related to the contempt sanctions.
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 $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 expenses 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 expenses primarily because it represents a significant non-cash expense. Share-based compensation expenses 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 income 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. Investors should note that the use of intangible assets contributed to the company’s revenues earned during the periods presented and will contribute to the company’s future period revenues as well. Intangible assets amortization expense will recur in future periods.
FORWARD LOOKING STATEMENTS
This news release contains "forward-looking statements" within the meaning of applicable federal securities law. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and generally include words such as “believes,” “expects,” “intends,” “anticipates,” “estimates” and similar expressions. The company can give no assurance that any actual or future results or events discussed in these statements will be achieved. Any forward-looking statements represent the company’s views only as of today and should not be relied upon as representing the company’s views as of any subsequent date. Readers are cautioned that such forward- looking statements are subject to a variety of risks and uncertainties that could cause the company’s actual results to differ materially from the statements contained in this release. Such forward-looking statements include, but are not limited to, Motorola Solutions’ financial outlook for the second quarter and full-year of 2024; the impact of the CMA's final decision and Charge Control regarding Airwave (including the company's actions in response); and the impact of the company's proceedings in the U.K. High Court relating to the Deferred National Shutdown Notice. Motorola Solutions cautions the reader that the risks and uncertainties below, as well as those in Part I Item 1A of Motorola Solutions' 2023 Annual Report on Form 10-K and in its other SEC filings available for free on the SEC’s website at www.sec.gov and on Motorola Solutions’ website at www.motorolasolutions.com, could cause Motorola Solutions’ actual results to differ materially from those estimated or predicted in the forward-looking statements. Many of these risks and uncertainties cannot be controlled by Motorola Solutions, and factors that may impact forward-looking statements include, but are not limited to: (i) the impact, including increased costs and potential liabilities, associated with changes in laws and regulations regarding privacy, data protection, information security and cybersecurity; (ii) challenges relating to existing or future legislation and regulations pertaining to artificial intelligence (“AI”), AI-enabled products and the use of biometrics and other video analytics; (iii) the impact of government regulation of radio frequencies; (iv) audits and regulations and laws applicable to our U.S. government customer contracts and grants; (v) the impact, including increased costs and additional compliance obligations, associated with existing or future telecommunications-related laws and regulations; (vi) the evolving state of environmental regulation relating to climate change, and the physical risks of climate change; (vii) impact of product regulatory and safety, consumer, worker safety and environmental laws; (viii) impact of tax matters; (ix) increased areas of risk, increased competition and additional compliance obligations associated with the expansion of our technologies within our Products and Systems Integration and Software and Services segments; (x) the effectiveness of our investments in new products and technologies; (xi) impact of catastrophic events on our business or our customers' or suppliers' business; (xii) social, ethical and competitive risks relating to the use of AI in our products and services; (xiii) the effectiveness of our strategic acquisitions, including the integrations of such acquired businesses; (xiv) increased cybersecurity threats, a security breach or other significant disruption of our IT systems or those of our outsource partners, suppliers or customers; (xv) our inability to protect our intellectual property or potential infringement of intellectual property rights of third parties; (xvi) risks relating to intellectual property licenses and intellectual property indemnities in our customer and supplier contracts; (xvii) our license of the MOTOROLA, MOTO, MOTOROLA SOLUTIONS and the Stylized M logo and all derivatives and formatives thereof from Motorola Trademark Holdings, LLC; (xviii) our inability to purchase at acceptable prices a sufficient amount of materials, parts, and components, as well as software and services, to meet the demands of our customers, and any disruption to our suppliers or significant increase in the price of supplies; (xix) risks related to our large, multi-year system and services contracts (including, but not limited to, with respect to the Airwave contract); (xx) the global nature of our employees, customers, suppliers and outsource partners; (xxi) our use of third-parties to develop, design and/or manufacture many of our components and some of our products, and to perform portions of our business operations; (xxii) inability of our subcontractors to perform in a timely and compliant manner or adhere to our Human Rights Policy; (xxiii) inability of our products to meet our customers’ expectations or regulatory or industry standards; (xxiv) increasing scrutiny and evolving expectations from investors, customers, lawmakers, regulators and other stakeholders regarding environmental, social and governance-related practices and disclosures; (xxv) inability to attract and retain senior management and key employees; (xxvi) impact of current global economic and political conditions in the markets in which we operate; (xxvii) impact of returns on pension and retirement plan assets and interest rate changes; (xxviii) inability to access the capital markets for financing on acceptable terms and conditions; (xix) exposure to exchange rate fluctuations on cross-border transactions and the translation of local currency results into U.S. dollars; and (xxx) the return of capital to shareholders through dividends and/or repurchasing shares. Motorola Solutions undertakes no obligation to publicly update any forward-looking statement or risk factor, whether as a result of new information, future events or otherwise.
ABOUT MOTOROLA SOLUTIONS
Motorola Solutions is solving for safer. We build and connect technologies to help protect people, property and places. Our solutions enable the collaboration between public safety agencies and enterprises that’s critical for a proactive approach to safety and security. Learn more about how we’re solving for safer communities, safer schools, safer hospitals, safer businesses – safer everywhere – at www.motorolasolutions.com.
GAAP-1 Motorola Solutions, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (In millions, except per share amounts) Three Months Ended March 30, 2024 April 1, 2023 Net sales from products$
1,405
$
1,224
Net sales from services
984
947
Net sales
2,389
2,171
Costs of products sales
600
576
Costs of services sales
597
549
Costs of sales
1,197
1,125
Gross margin
1,192
1,046
Selling, general and administrative expenses
397
368
Research and development expenditures
218
210
Other charges
19
14
Intangibles amortization
39
55
Operating earnings
519
399
Other income (expense): Interest expense, net
(44
)
(54
)
Gain on sales of investment and businesses, net
-
1
Other, net
(565
)
12
Total other expense
(609
)
(41
)
Earnings (loss) before income taxes
(90
)
358
Income tax expense (benefit)
(52
)
79
Net earnings (loss)
(38
)
279
Less: Earnings attributable to noncontrolling interests
1
1
Net earnings (loss) attributable to Motorola Solutions, Inc.
$
(39
)
$
278
Earnings (loss) per common share: Basic
$
(0.23
)
$
1.66
Diluted
$
(0.23
)
$
1.61
Weighted average common shares outstanding: Basic
166.3
167.4
Diluted
166.3
172.6
Percentage of Net Sales* Net sales from products
58.8
%
56.4
%
Net sales from services
41.2
%
43.6
%
Net sales
100.0
%
100.0
%
Costs of products sales
42.7
%
47.1
%
Costs of services sales
60.7
%
58.0
%
Costs of sales
50.1
%
51.8
%
Gross margin
49.9
%
48.2
%
Selling, general and administrative expenses
16.6
%
17.0
%
Research and development expenditures
9.1
%
9.7
%
Other charges
0.8
%
0.6
%
Intangibles amortization
1.6
%
2.5
%
Operating earnings
21.7
%
18.4
%
Other income (expense): Interest expense, net
(1.8
)%
(2.5
)%
Gain on sales of investments and businesses, net
-
%
-
%
Other, net
(23.7
)%
0.6
%
Total other expense
(25.5
)%
(1.9
)%
Earnings (loss) before income taxes
(3.8
)%
16.5
%
Income tax expense (benefit)
(2.2
)%
3.6
%
Net earnings (loss)
(1.6
)%
12.9
%
Less: Earnings attributable to noncontrolling interests
-
%
-
%
Net earnings (loss) attributable to Motorola Solutions, Inc.
(1.6
)%
12.8
%
* Percentages may not add up due to rounding GAAP-2 Motorola Solutions, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (In millions) March 30, 2024 December 31, 2023 Assets Cash and cash equivalents$
1,512
$
1,705
Accounts receivable, net
1,592
1,710
Contract assets
1,127
1,102
Inventories, net
840
827
Other current assets
450
357
Current assets held for disposition
-
24
Total current assets
5,521
5,725
Property, plant and equipment, net
957
964
Operating lease assets
534
495
Investments
141
143
Deferred income taxes
1,244
1,062
Goodwill
3,410
3,401
Intangible assets, net
1,232
1,255
Other assets
287
274
Non-current assets held for disposition
-
17
Total assets$
13,326
$
13,336
Liabilities and Stockholders' Equity Current portion of long-term debt$
313
$
1,313
Accounts payable
822
881
Contract liabilities
1,890
2,037
Accrued liabilities
1,601
1,504
Current liabilities held for disposition
-
1
Total current liabilities
4,626
5,736
Long-term debt
5,994
4,705
Operating lease liabilities
447
407
Other liabilities
1,722
1,741
Non-current liabilities held for disposition
-
8
Total Motorola Solutions, Inc. stockholders’ equity
521
724
Non-controlling interests
16
15
Total liabilities and stockholders’ equity$
13,326
$
13,336
GAAP-3 Motorola Solutions, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (In millions) Three Months Ended March 30, 2024 April 1, 2023 Operating Net earnings (loss)$
(38
)
$
279
Adjustments to reconcile Net earnings (loss) to Net cash provided by (used for) operating activities: Depreciation and amortization
83
98
Non-cash other charges
3
7
Share-based compensation expenses
56
55
Gain on sales of investments and businesses, net
-
(1
)
Loss from the extinguishment of Silver Lake Convertible Debt
585
-
Changes in assets and liabilities, net of effects of acquisitions, dispositions, and foreign currency translation adjustments: Accounts receivable
113
179
Inventories
(7
)
(26
)
Other current assets and contract assets
(123
)
(40
)
Accounts payable, accrued liabilities and contract liabilities
(90
)
(536
)
Other assets and liabilities
(19
)
(5
)
Deferred income taxes
(181
)
(18
)
Net cash provided by (used for) operating activities
382
(8
)
Investing Acquisitions and investments, net
(37
)
(4
)
Proceeds from sales of investments and businesses, net
36
5
Capital expenditures
(46
)
(54
)
Net cash used for investing activities
(47
)
(53
)
Financing Repayment of debt
(1,593
)
-
Net proceeds from issuance of debt
1,288
-
Issuances of common stock
(5
)
26
Purchases of common stock
(39
)
(140
)
Payment of dividends
(163
)
(148
)
Payments of dividends to non-controlling interests
-
(1
)
Net cash used for financing activities
(512
)
(263
)
Effect of exchange rate changes on total cash and cash equivalents
(16
)
21
Net decrease in cash and cash equivalents
(193
)
(303
)
Cash and cash equivalents, beginning of period
1,705
1,325
Cash and cash equivalents, end of period
$
1,512
$
1,022
Non-GAAP-1 Motorola Solutions, Inc. and Subsidiaries Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow (In millions) Three Months Ended March 30, 2024 April 1, 2023 Net cash provided by (used for) operating activities
$
382
$
(8
)
Capital expenditures
(46
)
(54
)
Free cash flow$
336
$
(62
)
Non-GAAP-2 Motorola Solutions, Inc. and Subsidiaries Reconciliation of Net Earnings Attributable to MSI to Non-GAAP Net Earnings Attributable to MSI (In millions) Three Months Ended Statement Line March 30, 2024 April 1, 2023 Net earnings (loss) attributable to MSI$
(39
)
$
278
Non-GAAP adjustments before income taxes: Loss from the extinguishment of Silver Lake Convertible Debt Other (income) expense
$
585
$
-
Share-based compensation expenses Cost of sales, SG&A and R&D
56
55
Intangible assets amortization expense Intangibles amortization
39
55
Reorganization of business charges Cost of sales and Other charges (income)
10
13
Legal settlements Other charges (income)
6
-
Acquisition-related transaction fees Other charges (income)
4
2
Investment impairments Other (income) expense
3
6
Operating lease asset impairments Other charges (income)
3
3
Fair value adjustments to equity investments Other (income) expense
2
(3
)
Hytera-related legal expenses SG&A
1
3
Adjustments to uncertain tax positions Interest income, net
1
-
Fixed asset impairments Other charges (income)
-
2
Gain on sales of investments (Gain) or loss on sales of investments and businesses, net
-
(1
)
Total Non-GAAP adjustments before income taxes$
710
$
135
Income tax expense on Non-GAAP adjustments
189
29
Total Non-GAAP adjustments after income taxes
521
106
Non-GAAP Net earnings attributable to MSI
$
482
$
384
Calculation of Non-GAAP Tax Rate (In millions) Three Months Ended March 30, 2024 April 1, 2023 Net earnings (loss) before income taxes
$
(90
)
$
358
Total Non-GAAP adjustments before income taxes*
710
135
Non-GAAP Net earnings before income taxes
620
493
Income tax expense (benefit)
(52
)
79
Income tax expense on Non-GAAP adjustments**
189
29
Total Non-GAAP Income tax expense
$
137
$
108
Non-GAAP Tax rate
22.1
%
21.9
%
*See reconciliation on Non-GAAP-2 table above for detail on Non-GAAP adjustments before income taxes **Income tax impact of highlighted items Reconciliation of Earnings Per Share to Non-GAAP Earnings Per Share* Three Months Ended Statement Line March 30, 2024 April 1, 2023 Net earnings (loss) attributable to MSI$
(0.23
)
$
1.61
Adjust for dilution**
-
-
Diluted gains (loss) attributable to MSI
$
(0.23
)
$
1.61
Non-GAAP adjustments before income taxes: Loss from the extinguishment of Silver Lake convertible debt Other (income) expense
$
3.42
$
-
Share-based compensation expenses Cost of sales, SG&A and R&D
0.32
0.32
Intangible assets amortization expense Intangibles amortization
0.23
0.32
Reorganization of business charges Cost of sales and Other charges (income)
0.05
0.08
Legal settlements Other charges (income)
0.03
-
Acquisition-related transaction fees Other charges (income)
0.02
0.01
Investment impairments Other (income) expense
0.02
0.03
Operating lease asset impairments Other charges (income)
0.02
0.02
Fair value adjustments to equity investments Other (income) expense
0.01
(0.02
)
Hytera-related legal expenses SG&A
0.01
0.02
Adjustments to uncertain tax positions Interest income, net
0.01
-
Fixed asset impairments Other charges (income)
-
0.01
Gain on sales of investments (Gain) or loss on sales of investments and businesses, net
-
(0.01
)
Total Non-GAAP adjustments before income taxes$
4.14
$
0.78
Income tax expense on Non-GAAP adjustments
1.10
0.17
Total Non-GAAP adjustments after income taxes
3.04
0.61
Non-GAAP Net earnings attributable to MSI
$
2.81
$
2.22
GAAP Diluted Weighted Average Common Shares
166.3
172.6
Adjusted for dilutive shares outstanding**
5.0
-
Non-GAAP Diluted Weighted Average Common Shares
171.3
172.6
*Indicates Non-GAAP Diluted EPS ** Under U.S. GAAP, the accounting for a net loss from continuing operations results in the presentation of diluted earnings per share equal to basic earnings per share, as any increase in basic shares would be anti-dilutive to earnings per share. As a result of the highlighted items identified during Q1 2024, the Company reported a net loss from continuing operations for the three months ended March 30, 2024 within our GAAP Condensed Consolidated Statement of Operations, while reporting earnings on a non-GAAP basis over the same periods. An adjustment is reflected to correct for the dilution of 5 million dilutive shares outstanding in Q1 2024. Non-GAAP-3 Motorola Solutions, Inc. and Subsidiaries Reconciliations of Operating Earnings to Non-GAAP Operating Earnings and Operating Margin to Non-GAAP Operating Margin (In millions) Three Months Ended March 30, 2024 April 1, 2023 Products andSystems Integration Software andServices Total Products andSystems Integration Software andServices Total Net sales
$
1,490
$
899
$
2,389
$
1,303
$
868
$
2,171
Operating earnings ("OE")
$
310
$
209
$
519
$
176
$
223
$
399
Above OE non-GAAP adjustments: Share-based compensation expenses
39
17
56
40
15
55
Intangible assets amortization expense
9
30
39
13
42
55
Reorganization of business charges
8
2
10
11
2
13
Legal settlements
1
5
6
-
-
-
Acquisition-related transaction fees
-
4
4
-
2
2
Operating lease asset impairments
2
1
3
2
1
3
Hytera-related legal expenses
1
-
1
3
-
3
Fixed asset impairments
-
-
-
1
1
2
Total above-OE non-GAAP adjustments
60
59
119
70
63
133
Operating earnings after non-GAAP adjustments
$
370
$
268
$
638
$
246
$
286
$
532
Operating earnings as a percentage of net sales - GAAP
20.8
%
23.2
%
21.7
%
13.5
%
25.7
%
18.4
%
Operating earnings as a percentage of net sales - after non-GAAP adjustments
24.8
%
29.8
%
26.7
%
18.9
%
32.9
%
24.5
%
Non-GAAP-4 Motorola Solutions, Inc. and Subsidiaries Reconciliation of Revenue to Non-GAAP Organic Revenue (In millions) Three Months Ended March 30, 2024 April 1, 2023 % Change Net sales$
2,389
$
2,171
10
%
Non-GAAP adjustments: Sales from acquisitions
10
-
Organic revenue$
2,379
$
2,171
10
%
Non-GAAP-5 Motorola Solutions, Inc. and Subsidiaries Reconciliation of Net Sales to Net Sales Adjusted for the U.K. Home Office (In millions) Three Months Ended March 30, 2024 April 1, 2023 % Change Software and Services net sales$
899
$
868
4
%
U.K. Home Office net sales
(101
)
(156
)
Software and Services net sales adjusted for the U.K. Home Office$
798
$
712
12
%
Net sales$
2,389
$
2,171
10
%
U.K. Home Office net sales
(101
)
(156
)
Net sales adjusted for the U.K. Home Office$
2,288
$
2,015
14
%
View source version on businesswire.com: https://www.businesswire.com/news/home/20240502883672/en/
MEDIA CONTACT Alexandra Reynolds Motorola Solutions +1 312-965-3968 Alexandra.Reynolds@motorolasolutions.com
INVESTOR CONTACT Tim Yocum Motorola Solutions +1 847-576-6899 Tim.Yocum@motorolasolutions.com
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