Date of report (Date of earliest event reported): May 2, 2019 | ||
Motorola Solutions, Inc. | ||
(Exact Name of Registrant as Specified in Charter) | ||
DELAWARE | ||
(State or Other Jurisdiction of Incorporation) | ||
1-7221 | 36-1115800 | |
(Commission File Number) | (IRS Employer Identification No.) | |
500 W. Monroe Street Chicago, Illinois | 60661 | |
(Address of Principal Executive Offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (847) 576-5000 | ||
_____________________________ | ||
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit No. | Description |
Press Release by Motorola Solutions, Inc. dated May 2, 2019 announcing financial results for the quarter ended March 30, 2019. |
MOTOROLA SOLUTIONS, INC. (Registrant) | ||||
Dated: May 2, 2019 | By: | /s/ Dan Pekofske | ||
Name: | Dan Pekofske | |||
Title: | Corporate Vice President and Chief Accounting Officer |
Exhibit No. | Description |
99.1 | Press Release by Motorola Solutions, Inc. dated May 2, 2019 announcing financial results for the quarter ended March 30, 2019. |
• | Revenue of $1.7 billion, up 13% from a year ago |
• | Operating cash flow of $251 million, up $751 million* from a year ago |
• | GAAP earnings per share (EPS) of $0.86, up 25% |
• | Non-GAAP EPS** of $1.28, up 16% |
• | Backlog of $10.4 billion, up $781 million from a year ago |
Q1 2019 | Q1 2018 | % Change | ||||
Sales | $1,657 | $1,468 | 13 | % | ||
GAAP | ||||||
Operating Earnings | $229 | $171 | 34 | % | ||
% of Sales | 13.8 | % | 11.6 | % | ||
EPS | $0.86 | $0.69 | 25 | % | ||
Non-GAAP | ||||||
Operating Earnings | $315 | $260 | 21 | % | ||
% of Sales | 19.0 | % | 17.7 | % | ||
EPS | $1.28 | $1.10 | 16 | % | ||
Products and Systems Integration Segment | ||||||
Sales | $1,069 | $952 | 12 | % | ||
GAAP Operating Earnings | $108 | $90 | 20 | % | ||
% of Sales | 10.1 | % | 9.5 | % | ||
Non-GAAP Operating Earnings | $147 | $125 | 18 | % | ||
% of Sales | 13.8 | % | 13.1 | % | ||
Services and Software Segment | ||||||
Sales | $588 | $516 | 14 | % | ||
GAAP Operating Earnings | $121 | $81 | 49 | % | ||
% of Sales | 20.6 | % | 15.7 | % | ||
Non-GAAP Operating Earnings | $168 | $135 | 24 | % | ||
% of Sales | 28.6 | % | 26.2 | % |
• | Revenue - Sales were $1.7 billion, up $189 million, or 13% from the year-ago quarter, driven by growth in the Americas and EMEA. Revenue from acquisitions was $137 million in the quarter. The Products and Systems Integration segment grew 12%, and the Services and Software segment grew 14%. Both segments were driven by growth in the Americas and EMEA. |
• | Operating margin - GAAP operating margin was 13.8% of sales, compared with 11.6% in the year-ago quarter. The improvement was primarily due to higher sales and gross margin, partially offset by higher operating expenses related to acquisitions. Non-GAAP operating margin was 19.0% of sales, compared with 17.7% in the year-ago quarter due to higher sales and gross margin partially offset by higher operating expenses related to acquisitions. |
• | Taxes - The GAAP effective tax rate was 18%, compared with 16% in the year-ago quarter. The non-GAAP effective tax rate was 20% compared with 19% in the year-ago quarter. Rates were favorably impacted by tax benefits on excess share-based compensation. |
• | Cash flow - Operating cash flow was $251 million, compared with $500 million of operating cash outflow in the year-ago quarter. Free cash flow1 was $185 million, compared with $541 million of free cash outflow in the year-ago quarter. Cash flow for the quarter increased due to a $500 million voluntary pension contribution in the prior year, timing of annual incentive payments, higher earnings and improved working capital. |
• | Capital allocation - The company invested $445 million of cash and equity to acquire VaaS International Holdings and $136 million in cash for Avtec, Inc., repurchased $145 million of common stock, paid $93 million in cash dividends and $66 million of capital expenditures. |
• | Backlog - The company ended the quarter with backlog of $10.4 billion, up $781 million from the year-ago quarter. Services and Software was up 14% or $885 million due to growth in EMEA and the Americas. Products and Systems Integration segment backlog was down 3% or $104 million due to large projects in the Middle East and Africa in the prior year, partially offset by growth in the Americas. |
• | $17 million managed services contract with a mining customer in Latin America |
• | $7 million computer-aided dispatch (CAD) and records contract for a large government customer in California |
• | $5 million video services renewal with the Chicago Office of Emergency Management |
• | Selected by North Dakota for a new statewide P25 radio system |
• | $25 million P25 win with New South Wales Telco Authority |
• | $8 million TETRA order for a utility customer in Chile |
• | Second-quarter 2019 - Motorola Solutions expects revenue growth of approximately 4 to 5% compared with the second quarter of 2018. The company expects non-GAAP earnings in the range of $1.55 to $1.60 per share. This assumes current foreign exchange rates, approximately 176 million fully diluted shares and an effective tax rate of approximately 24%. |
• | Full-year 2019 - The company continues to expect revenue growth of approximately 6 to 7% and now expects non-GAAP earnings per share in the range of $7.60 to $7.72, up from the prior guidance of $7.55 to $7.70. This assumes current foreign exchange rates, approximately 176 million fully diluted shares and an effective tax rate of 24 to 25%. |
Q1 2019 | Q1 2018 | |||
Net sales | $1,657 | $1,468 | ||
Gross margin | 773 | 669 | ||
Operating earnings | 229 | 171 | ||
Amounts attributable to Motorola Solutions, Inc. common stockholders | ||||
Net earnings | 151 | 117 | ||
Diluted EPS | $0.86 | $0.69 | ||
Weighted average diluted common shares outstanding | 174.6 | 170.6 |
(per diluted common share) | Q1 2019 | |
GAAP Earnings | $0.86 | |
Highlighted Items: | ||
Share-based compensation expense | 0.12 | |
Reorganization of business charges | 0.04 | |
Intangibles amortization expense | 0.23 | |
Legal settlement | (0.01 | ) |
Fair value adjustments to equity investments | 0.01 | |
Investment impairments | 0.04 | |
Sale of investments | (0.01 | ) |
Acquisition-related transaction fees | 0.01 | |
FIN48 release | (0.01 | ) |
Non-GAAP Diluted EPS | $1.28 |
Three Months Ended | |||||||
March 30, 2019 | March 31, 2018 | ||||||
Net sales from products | $ | 945 | $ | 801 | |||
Net sales from services | 712 | 667 | |||||
Net sales | 1,657 | 1,468 | |||||
Costs of products sales | 444 | 383 | |||||
Costs of services sales | 440 | 416 | |||||
Costs of sales | 884 | 799 | |||||
Gross margin | 773 | 669 | |||||
Selling, general and administrative expenses | 327 | 279 | |||||
Research and development expenditures | 162 | 152 | |||||
Other charges | 5 | 26 | |||||
Intangibles amortization | 50 | 41 | |||||
Operating earnings | 229 | 171 | |||||
Other income (expense): | |||||||
Interest expense, net | (55 | ) | (46 | ) | |||
Gains on sales of investments and businesses, net | 1 | 11 | |||||
Other | 10 | 4 | |||||
Total other expense | (44 | ) | (31 | ) | |||
Net earnings before income taxes | 185 | 140 | |||||
Income tax expense | 33 | 23 | |||||
Net earnings | 152 | 117 | |||||
Less: Earnings attributable to noncontrolling interests | 1 | — | |||||
Net earnings attributable to Motorola Solutions, Inc. | $ | 151 | $ | 117 | |||
Earnings per common share: | |||||||
Basic | $ | 0.92 | $ | 0.73 | |||
Diluted | $ | 0.86 | $ | 0.69 | |||
Weighted average common shares outstanding: | |||||||
Basic | 164.0 | 161.4 | |||||
Diluted | 174.6 | 170.6 |
Percentage of Net Sales* | |||||
Net sales from products | 57.0 | % | 54.6 | % | |
Net sales from services | 43.0 | % | 45.4 | % | |
Net sales | 100.0 | % | 100.0 | % | |
Costs of products sales | 47.0 | % | 47.8 | % | |
Costs of services sales | 61.8 | % | 62.4 | % | |
Costs of sales | 53.3 | % | 54.4 | % | |
Gross margin | 46.7 | % | 45.6 | % | |
Selling, general and administrative expenses | 19.7 | % | 19.0 | % | |
Research and development expenditures | 9.8 | % | 10.4 | % | |
Other charges | 0.3 | % | 1.8 | % | |
Intangibles amortization | 3.0 | % | 2.8 | % | |
Operating earnings | 13.8 | % | 11.6 | % | |
Other income (expense): | |||||
Interest expense, net | (3.3 | )% | (3.1 | )% | |
Gains on sales of investments and businesses, net | — | % | 0.7 | % | |
Other | 0.6 | % | 0.3 | % | |
Total other expense | (2.7 | )% | (2.1 | )% | |
Net earnings before income taxes | 11.2 | % | 9.5 | % | |
Income tax expense | 2.0 | % | 1.6 | % | |
Net earnings | 9.2 | % | 8.0 | % | |
Less: Earnings attributable to noncontrolling interests | — | % | — | % | |
Net earnings attributable to Motorola Solutions, Inc. | 9.1 | % | 8.0 | % | |
* Percentages may not add up due to rounding |
March 30, 2019 | December 31, 2018 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 886 | $ | 1,246 | ||||
Restricted cash | 11 | 11 | ||||||
Total cash and cash equivalents | 897 | 1,257 | ||||||
Accounts receivable, net | 1,150 | 1,293 | ||||||
Contract assets | 878 | 1,012 | ||||||
Inventories, net | 425 | 356 | ||||||
Other current assets | 364 | 354 | ||||||
Total current assets | 3,714 | 4,272 | ||||||
Property, plant and equipment, net | 937 | 895 | ||||||
Operating lease assets | 593 | — | ||||||
Investments | 163 | 169 | ||||||
Deferred income taxes | 953 | 985 | ||||||
Goodwill | 1,860 | 1,514 | ||||||
Intangible assets, net | 1,416 | 1,230 | ||||||
Other assets | 357 | 344 | ||||||
Total assets | $ | 9,993 | $ | 9,409 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current portion of long-term debt | $ | 28 | $ | 31 | ||||
Accounts payable | 558 | 592 | ||||||
Contract liabilities | 1,158 | 1,263 | ||||||
Accrued liabilities | 1,235 | 1,210 | ||||||
Total current liabilities | 2,979 | 3,096 | ||||||
Long-term debt | 5,287 | 5,289 | ||||||
Operating lease liabilities | 553 | — | ||||||
Other liabilities | 2,264 | 2,300 | ||||||
Total Motorola Solutions, Inc. stockholders’ equity (deficit) | (1,108 | ) | (1,293 | ) | ||||
Noncontrolling interests | 18 | 17 | ||||||
Total liabilities and stockholders’ equity | $ | 9,993 | $ | 9,409 | ||||
Three Months Ended | |||||||
March 30, 2019 | March 31, 2018 | ||||||
Operating | |||||||
Net earnings attributable to Motorola Solutions, Inc. | $ | 151 | $ | 117 | |||
Earnings attributable to noncontrolling interests | 1 | — | |||||
Net earnings | 152 | 117 | |||||
Adjustments to reconcile Net earnings to Net cash provided by (used for) operating activities: | |||||||
Depreciation and amortization | 95 | 82 | |||||
Non-cash other charges | 10 | 3 | |||||
Share-based compensation expense | 27 | 17 | |||||
Gains on sales of investments and businesses, net | (1 | ) | (11 | ) | |||
Changes in assets and liabilities, net of effects of acquisitions, dispositions, and foreign currency translation adjustments: | |||||||
Accounts receivable | 168 | 195 | |||||
Inventories | (63 | ) | (9 | ) | |||
Other current assets and contract assets | 136 | 2 | |||||
Accounts payable, accrued liabilities, and contract liabilities | (261 | ) | (350 | ) | |||
Other assets and liabilities | (6 | ) | (553 | ) | |||
Deferred income taxes | (6 | ) | 7 | ||||
Net cash provided by (used for) operating activities | 251 | (500 | ) | ||||
Investing | |||||||
Acquisitions and investments, net | (368 | ) | (1,125 | ) | |||
Proceeds from sales of investments and businesses, net | 2 | 77 | |||||
Capital expenditures | (66 | ) | (41 | ) | |||
Net cash used for investing activities | (432 | ) | (1,089 | ) | |||
Financing | |||||||
Repayment of debt | (8 | ) | (50 | ) | |||
Net proceeds from issuance of debt | — | 1,296 | |||||
Issuance of common stock | 45 | 53 | |||||
Purchases of common stock | (145 | ) | (66 | ) | |||
Payments of dividends | (93 | ) | (84 | ) | |||
Net cash provided by (used for) financing activities | (201 | ) | 1,149 | ||||
Effect of exchange rate changes on cash and cash equivalents | 22 | 30 | |||||
Net decrease in cash and cash equivalents | (360 | ) | (410 | ) | |||
Cash and cash equivalents, beginning of period | 1,257 | 1,268 | |||||
Cash and cash equivalents, end of period | $ | 897 | $ | 858 | |||
Financial Ratios: | |||||||
Free cash flow* | $ | 185 | $ | (541 | ) | ||
*Free cash flow = Net cash provided by (used for) operating activities - Capital expenditures |
Net Sales | ||||||||||
Three Months Ended | ||||||||||
March 30, 2019 | March 31, 2018 | % Change | ||||||||
Products and Systems Integration | $ | 1,069 | $ | 952 | 12 | % | ||||
Services and Software | 588 | 516 | 14 | % | ||||||
Total Motorola Solutions | $ | 1,657 | $ | 1,468 | 13 | % | ||||
Operating Earnings | ||||||||||
Three Months Ended | ||||||||||
March 30, 2019 | March 31, 2018 | % Change | ||||||||
Products and Systems Integration | $ | 108 | $ | 90 | 20 | % | ||||
Services and Software | 121 | 81 | 49 | % | ||||||
Total Motorola Solutions | $ | 229 | $ | 171 | 34 | % | ||||
Operating Earnings % | |||||||
Three Months Ended | |||||||
March 30, 2019 | March 31, 2018 | ||||||
Products and Systems Integration | 10.1 | % | 9.5 | % | |||
Services and Software | 20.6 | % | 15.7 | % | |||
Total Motorola Solutions | 13.8 | % | 11.6 | % | |||
Q1 2019 | ||||||||||||||||||
Non-GAAP Adjustments | Statement Line | PBT (Inc)/Exp | Tax Inc/(Exp) | PAT (Inc)/Exp | EPS impact | |||||||||||||
Share-based compensation expense | Cost of sales, SG&A and R&D | $ | 27 | $ | 6 | $ | 21 | $ | 0.12 | |||||||||
Reorganization of business charges | Cost of sales and Other charges | 8 | 2 | 6 | 0.04 | |||||||||||||
Intangibles amortization expense | Intangibles amortization | 50 | 11 | 39 | 0.23 | |||||||||||||
Legal settlement | Other charges | (1 | ) | — | (1 | ) | (0.01 | ) | ||||||||||
Fair value adjustments to equity investments | Other expense | 1 | — | 1 | 0.01 | |||||||||||||
Investment impairments | Investment impairments | 8 | 2 | 6 | 0.04 | |||||||||||||
Sale of investments | (Gain) or loss on sales of investments and businesses, net | (1 | ) | — | (1 | ) | (0.01 | ) | ||||||||||
Acquisition-related transaction fees | Other charges | 2 | — | 2 | 0.01 | |||||||||||||
FIN48 release | Income tax expense | — | 1 | (1 | ) | (0.01 | ) | |||||||||||
Total impact on Net earnings | $ | 94 | $ | 22 | $ | 72 | $ | 0.42 | ||||||||||
Net Sales | ||||||||||
Three Months Ended | ||||||||||
March 30, 2019 | March 31, 2018 | % Change | ||||||||
Products and Systems Integration | $ | 1,069 | $ | 952 | 12 | % | ||||
Services and Software | 588 | 516 | 14 | % | ||||||
Total Motorola Solutions | $ | 1,657 | $ | 1,468 | 13 | % | ||||
Non-GAAP Operating Earnings | ||||||||||
Three Months Ended | ||||||||||
March 30, 2019 | March 31, 2018 | % Change | ||||||||
Products and Systems Integration | $ | 147 | $ | 125 | 18 | % | ||||
Services and Software | 168 | 135 | 24 | % | ||||||
Total Motorola Solutions | $ | 315 | $ | 260 | 21 | % | ||||
Non-GAAP Operating Earnings % | |||||||
Three Months Ended | |||||||
March 30, 2019 | March 31, 2018 | ||||||
Products and Systems Integration | 13.8 | % | 13.1 | % | |||
Services and Software | 28.6 | % | 26.2 | % | |||
Total Motorola Solutions | 19.0 | % | 17.7 | % | |||
Q1 2019 | ||||||||||||
TOTAL | Products and Systems Integration | Services and Software | ||||||||||
Net sales | $ | 1,657 | $ | 1,069 | $ | 588 | ||||||
Operating earnings ("OE") | $ | 229 | $ | 108 | $ | 121 | ||||||
Above-OE non-GAAP adjustments: | ||||||||||||
Share-based compensation expense | 27 | 21 | 6 | |||||||||
Reorganization of business charges | 8 | 7 | 1 | |||||||||
Intangibles amortization expense | 50 | 11 | 39 | |||||||||
Acquisition-related transaction fees | 2 | 1 | 1 | |||||||||
Legal settlement | (1 | ) | (1 | ) | — | |||||||
Total above-OE non-GAAP adjustments | 86 | 39 | 47 | |||||||||
Operating earnings after non-GAAP adjustments | $ | 315 | $ | 147 | $ | 168 |
Operating earnings as a percentage of net sales - GAAP | 13.8 | % | 10.1 | % | 20.6 | % | |||
Operating earnings as a percentage of net sales - after non-GAAP adjustments | 19.0 | % | 13.8 | % | 28.6 | % |
Total Motorola Solutions | |||||||||||
Three Months Ended | |||||||||||
March 30, 2019 | March 31, 2018 | % Change | |||||||||
Net sales | $ | 1,657 | $ | 1,468 | 13 | % | |||||
Non-GAAP adjustments: | |||||||||||
Acquisitions | (159 | ) | (22 | ) | |||||||
Organic revenue | $ | 1,498 | $ | 1,446 | 4 | % |