DEFINITIONS

¹ Organic revenue reflects net sales calculated under GAAP excluding net sales from acquired business owned for less than four full quarters and excluding the effects of ASC 606.

² Free cash flow represents operating cash flow less capital expenditures.

ABOUT MOTOROLA SOLUTIONS

Motorola Solutions (NYSE: MSI) creates mission-critical communications solutions, including devices, networks, services, software and video, that help public safety and commercial customers build safer cities and thriving communities. For ongoing news, visit www.motorolasolutions.com/newsroom or subscribe to a news feed.

MOTOROLA, MOTOROLA SOLUTIONS and the Stylized M Logo are trademarks or registered trademarks of Motorola Trademark Holdings, LLC and are used under license. All other trademarks are the property of their respective owners. ©2018 Motorola Solutions, Inc. All rights reserved.

GAAP-1
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In millions, except per share amounts)
		Three Months Ended
		June 30, 2018				July 1, 2017
Net sales from products		$	1,042			$	848
Net sales from services			718				649
Net sales			1,760				1,497
Costs of products sales			485				392
Costs of services sales			453				415
Costs of sales			938				807
Gross margin			822				690
Selling, general and administrative expenses			316				254
Research and development expenditures			162				138
Other charges			18				—
Intangibles amortization			53				37
Operating earnings			273				261
Other income (expense):
Interest expense, net			(58	)			(51	)
Losses on sales of investments and businesses, net			(1	)			(1	)
Other			13				(4	)
Total other expense			(46	)			(56	)
Net earnings before income taxes			227				205
Income tax expense			46				73
Net earnings			181				132
Less: Earnings attributable to noncontrolling interests			1				1
Net earnings attributable to Motorola Solutions, Inc.		$	180			$	131
Earnings per common share:
Basic		$	1.11			$	0.80
Diluted		$	1.05			$	0.78
Weighted average common shares outstanding:
Basic			162.2				163.1
Diluted			171.7				169.0
		Percentage of Net Sales*
Net sales from products			59.2	%			56.6	%
Net sales from services			40.8	%			43.4	%
Net sales			100.0	%			100.0	%
Costs of products sales			46.5	%			46.2	%
Costs of services sales			63.1	%			63.9	%
Costs of sales			53.3	%			53.9	%
Gross margin			46.7	%			46.1	%
Selling, general and administrative expenses			18.0	%			17.0	%
Research and development expenditures			9.2	%			9.2	%
Other charges			1.0	%			—	%
Intangibles amortization			3.0	%			2.5	%
Operating earnings			15.5	%			17.4	%
Other income (expense):
Interest expense, net			(3.3	)%			(3.4	)%
Losses on sales of investments and businesses, net			(0.1	)%			(0.1	)%
Other			0.7	%			(0.3	)%
Total other expense			(2.6	)%			(3.7	)%
Net earnings before income taxes			12.9	%			13.7	%
Income tax expense			2.6	%			4.9	%
Net earnings			10.3	%			8.8	%
Less: Earnings attributable to noncontrolling interests			0.1	%			0.1	%
Net earnings attributable to Motorola Solutions, Inc.			10.2	%			8.8	%
* Percentages may not add up due to rounding

GAAP-2
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In millions, except per share amounts)
		Six Months Ended
		June 30, 2018				July 1, 2017
Net sales from products		$	1,842			$	1,551
Net sales from services			1,385				1,226
Net sales			3,227				2,777
Costs of products sales			867				739
Costs of services sales			869				778
Costs of sales			1,736				1,517
Gross margin			1,491				1,260
Selling, general and administrative expenses			594				500
Research and development expenditures			314				273
Other charges			44				(19	)
Intangibles amortization			94				73
Operating earnings			445				433
Other income (expense):
Interest expense, net			(104	)			(102	)
Gains on sales of investments and businesses, net			10				2
Other			16				(9	)
Total other expense			(78	)			(109	)
Net earnings before income taxes			367				324
Income tax expense			69				114
Net earnings			298				210
Less: Earnings attributable to noncontrolling interests			1				2
Net earnings attributable to Motorola Solutions, Inc.		$	297			$	208
Earnings per common share:
Basic		$	1.83			$	1.27
Diluted		$	1.73			$	1.23
Weighted average common shares outstanding:
Basic			161.7				163.7
Diluted			171.1				169.5
		Percentage of Net Sales*
Net sales from products			57.1	%			55.9	%
Net sales from services			42.9	%			44.1	%
Net sales			100.0	%			100.0	%
Costs of products sales			47.1	%			47.6	%
Costs of services sales			62.7	%			63.5	%
Costs of sales			53.8	%			54.6	%
Gross margin			46.2	%			45.4	%
Selling, general and administrative expenses			18.4	%			18.0	%
Research and development expenditures			9.7	%			9.8	%
Other charges			1.4	%			(0.7	)%
Intangibles amortization			2.9	%			2.6	%
Operating earnings			13.8	%			15.6	%
Other income (expense):
Interest expense, net			(3.2	)%			(3.7	)%
Gains on sales of investments and businesses, net			0.3	%			0.1	%
Other			0.5	%			(0.3	)%
Total other expense			(2.4	)%			(3.9	)%
Net earnings before income taxes			11.4	%			11.7	%
Income tax expense			2.1	%			4.1	%
Net earnings			9.2	%			7.6	%
Less: Earnings attributable to noncontrolling interests			—	%			0.1	%
Net earnings attributable to Motorola Solutions, Inc.			9.2	%			7.5	%
* Percentages may not add up due to rounding

GAAP-3
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In millions)
		June 30, 2018				December 31, 2017
Assets
Cash and cash equivalents		$	878			$	1,205
Restricted cash			63				63
Total cash and cash equivalents			941				1,268
Accounts receivable, net			1,159				1,523
Contract assets			760				—
Inventories, net			391				327
Other current assets			330				832
Total current assets			3,581				3,950
Property, plant and equipment, net			895				856
Investments			172				247
Deferred income taxes			945				1,023
Goodwill			1,528				938
Intangible Assets			1,340				861
Other assets			420				333
Total assets		$	8,881			$	8,208
Liabilities and Stockholders' Equity
Current portion of long-term debt		$	347			$	52
Accounts payable			430				593
Contract liabilities			1,049				—
Accrued liabilities			1,096				2,286
Total current liabilities			2,922				2,931
Long-term debt			5,298				4,419
Other liabilities			2,153				2,585
Total Motorola Solutions, Inc. stockholders’ equity (deficit)			(1,507	)			(1,742	)
Noncontrolling interests			15				15
Total liabilities and stockholders’ equity		$	8,881			$	8,208

GAAP-4
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In millions)
		Three Months Ended
		June 30, 2018				July 1, 2017
Operating
Net earnings attributable to Motorola Solutions, Inc.		$	180			$	131
Earnings attributable to noncontrolling interests			1				1
Net earnings			181				132
Adjustments to reconcile Net earnings to Net cash provided by (used for) operating activities:
Depreciation and amortization			96				86
Non-cash other charges			3				6
Non-U.S. pension settlement loss			—				16
Share-based compensation expense			17				16
Losses on sales of investments and businesses, net			1				1
Changes in assets and liabilities, net of effects of acquisitions, dispositions, and foreign currency translation adjustments:
Accounts receivable, contract assets and contract liabilities			11				(117	)
Inventories			46				(43	)
Other current assets			41				38
Accounts payable and accrued liabilities			10				(33	)
Other assets and liabilities			(5	)			31
Deferred income taxes			24				40
Net cash (used for) provided by operating activities			425				173
Investing
Acquisitions and investments, net			(28	)			(34	)
Proceeds from sales of investments and businesses, net			2				19
Capital expenditures			(41	)			(53	)
Net cash used for investing activities			(67	)			(68	)
Financing
Repayment of debt			(147	)			(5	)
Net proceeds from issuance of debt			(1	)			—
Proceeds from financing through capital leases			—				7
Issuance of common stock			6				6
Purchases of common stock			—				(80	)
Payments of dividends			(84	)			(77	)
Payment of dividend to non-controlling interest			(1	)			(2	)
Net cash used for financing activities			(227	)			(151	)
Effect of exchange rate changes on cash and cash equivalents			(48	)			22
Net increase (decrease) in cash and cash equivalents			83				(24	)
Cash and cash equivalents, beginning of period			858				829
Cash and cash equivalents, end of period		$	941			$	805
Financial Ratios:
Free cash flow*		$	384			$	120
*Free cash flow = Net cash provided by operating activities - Capital Expenditures

GAAP-5
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In millions)
		Six Months Ended
		June 30, 2018				July 1, 2017
Operating
Net earnings attributable to Motorola Solutions, Inc.		$	297			$	208
Earnings attributable to noncontrolling interests			1				2
Net earnings			298				210
Adjustments to reconcile Net earnings to Net cash provided by (used for) operating activities:
Depreciation and amortization			178				166
Non-cash other charges			6				21
Non-U.S. pension settlement loss			—				25
Share-based compensation expense			34				33
Gains on sales of investments and businesses, net			(10	)			(2	)
Changes in assets and liabilities, net of effects of acquisitions, dispositions, and foreign currency translation adjustments:
Accounts receivable, contract assets and contract liabilities			206				251
Inventories			37				(112	)
Other current assets			43				(21	)
Accounts payable and accrued liabilities			(340	)			(340	)
Other assets and liabilities			(558	)			21
Deferred income taxes			31				63
Net cash provided by (used for) operating activities			(75	)			315
Investing
Acquisitions and investments, net			(1,153	)			(140	)
Proceeds from sales of investments and businesses, net			79				72
Capital expenditures			(82	)			(121	)
Net cash used for investing activities			(1,156	)			(189	)
Financing
Repayment of debt			(197	)			(6	)
Net proceeds from issuance of debt			1,295				—
Proceeds from financing through capital leases			—				7
Issuance of common stock			59				28
Purchases of common stock			(66	)			(258	)
Payments of dividends			(168	)			(154	)
Payment of dividend to non-controlling interest			(1	)			(2	)
Net cash provided by (used for) financing activities			922				(385	)
Effect of exchange rate changes on cash and cash equivalents			(18	)			34
Net decrease in cash and cash equivalents			(327	)			(225	)
Cash and cash equivalents, beginning of period			1,268				1,030
Cash and cash equivalents, end of period		$	941			$	805
Financial Ratios:
Free cash flow*		$	(157	)		$	194
*Free cash flow = Net cash provided by operating activities - Capital Expenditures

GAAP-6
Motorola Solutions, Inc. and Subsidiaries
Segment Information
(In millions)
Net Sales
		Three Months Ended
		June 30, 2018				July 1, 2017				% Change
Products and systems integration		$	1,189			$	1,047			14	%
Services and software			571				450			27	%
Total Motorola Solutions		$	1,760			$	1,497			18	%
		Six Months Ended
		June 30, 2018				July 1, 2017				% Change
Products and systems integration		$	2,141			$	1,901			13	%
Services and software			1,086				876			24	%
Total Motorola Solutions		$	3,227			$	2,777			16	%
Operating Earnings
		Three Months Ended
		June 30, 2018				July 1, 2017				% Change
Products and systems integration		$	175			$	190			(8	)%
Services and software			98				71			38	%
Total Motorola Solutions		$	273			$	261			5	%
		Six Months Ended
		June 30, 2018				July 1, 2017				% Change
Products and systems integration		$	265			$	287			(8	)%
Services and software			180				146			23	%
Total Motorola Solutions		$	445			$	433			3	%
Operating Earnings %
		Three Months Ended
		June 30, 2018				July 1, 2017
Products and systems integration			14.7	%			18.1	%
Services and software			17.2	%			15.8	%
Total Motorola Solutions			15.5	%			17.4	%
		Six Months Ended
		June 30, 2018				July 1, 2017
Products and systems integration			12.4	%			15.1	%
Services and software			16.6	%			16.7	%
Total Motorola Solutions			13.8	%			15.6	%

Non-GAAP-1
Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Adjustments (Intangibles Amortization Expense, Share-Based Compensation Expense and Highlighted Items)
Q1 2018
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		$	17			$	4			$	13			$	0.08
Reorganization of business charges		Cost of sales and Other charges			13				3				10				0.06
Intangibles amortization expense		Intangibles amortization			41				8				33				0.19
Loss on legal settlements		Other charges			1				—				1				0.01
Loss on derivative instruments related to Avigilon		Other expense			14				4				10				0.06
Release of FIN 48 reserve		Income tax benefit			—				1				(1	)			(0.01	)
Sale of investments		Sale of Investment or Business (Gain) or Loss			(11	)			(3	)			(8	)			(0.05	)
Acquisition-related transaction fees		Other charges			17				5				12				0.07
Total impact on Net earnings				$	92			$	22			$	70			$	0.41
Q2 2018
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		$	17			$	4			$	13			$	0.08
Reorganization of business charges		Cost of sales and Other charges			25				6				19				0.10
Intangibles amortization expense		Intangibles amortization			53				12				41				0.23
Avigilon purchase accounting adjustment		Cost of sales			10				3				7				0.04
Sale of investments		Sale of Investment or Business (Gain) or Loss			1				—				1				0.01
Loss on foreign currency related to Avigilon purchase		Other expense			1				—				1				0.01
FIN 48 reserve		Income tax expense			—				(1	)			1				0.01
State audit settlement		Income tax benefit			—				12				(12	)			(0.07	)
Total impact on Net earnings				$	107			$	36			$	71			$	0.41

Non-GAAP-2
Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Segment Information
(In millions)
Net Sales
		Three Months Ended
		June 30, 2018				July 1, 2017				% Change
Products and systems integration		$	1,189			$	1,047			14	%
Services and software			571				450			27	%
Total Motorola Solutions		$	1,760			$	1,497			18	%
		Six Months Ended
		June 30, 2018				July 1, 2017				% Change
Products and systems integration		$	2,141			$	1,901			13	%
Services and software			1,086				876			24	%
Total Motorola Solutions		$	3,227			$	2,777			16	%
Non-GAAP Operating Earnings
		Three Months Ended
		June 30, 2018				July 1, 2017				% Change
Products and systems integration		$	226			$	204			11	%
Services and software			152				112			36	%
Total Motorola Solutions		$	378			$	316			20	%
		Six Months Ended
		June 30, 2018				July 1, 2017				% Change
Products and systems integration		$	350			$	306			14	%
Services and software			287				222			29	%
Total Motorola Solutions		$	637			$	528			21	%
Non-GAAP Operating Earnings %
		Three Months Ended
		June 30, 2018				July 1, 2017
Products and systems integration			19.0	%			19.5	%
Services and software			26.6	%			24.9	%
Total Motorola Solutions			21.5	%			21.1	%
		Six Months Ended
		June 30, 2018				July 1, 2017
Products and systems integration			16.3	%			16.1	%
Services and software			26.4	%			25.3	%
Total Motorola Solutions			19.7	%			19.0	%

Non-GAAP-3
Motorola Solutions, Inc. and Subsidiaries
Operating Earnings after Non-GAAP Adjustments
Q1 2018
		TOTAL				Products and Systems Integration				Services and Software
Net sales		$	1,468			$	952			$	516
Operating earnings ("OE")		$	171			$	90			$	81
Above-OE non-GAAP adjustments:
Share-based compensation expense			17				12				5
Reorganization of business charges			13				9				4
Intangibles amortization expense			41				1				40
Acquisition-related transaction fees			17				12				5
Loss on legal settlements			1				1				—
Total above-OE non-GAAP adjustments			89				35				54
Operating earnings after non-GAAP adjustments		$	260			$	125			$	135
Operating earnings as a percentage of net sales - GAAP			11.6	%			9.5	%			15.7	%
Operating earnings as a percentage of net sales - after non-GAAP adjustments			17.7	%			13.1	%			26.2	%
Q2 2018
		TOTAL				Products and Systems Integration				Services and Software
Net sales		$	1,760			$	1,189			$	571
Operating earnings ("OE")		$	273			$	175			$	98
Above-OE non-GAAP adjustments:
Share-based compensation expense			17				12				5
Reorganization of business charges			25				19				6
Intangibles amortization expense			53				10				43
Avigilon purchase accounting adjustment			10				10				—
Total above-OE non-GAAP adjustments			105				51				54
Operating earnings after non-GAAP adjustments		$	378			$	226			$	152
Operating earnings as a percentage of net sales - GAAP			15.5	%			14.7	%			17.2	%
Operating earnings as a percentage of net sales - after non-GAAP adjustments			21.5	%			19.0	%			26.6	%

Non-GAAP-4
Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Organic Revenue
Total Motorola Solutions
		Three Months Ended
		June 30, 2018				July 1, 2017				% Change
Net sales		$	1,760			$	1,497			18	%
Non-GAAP adjustments:
Acquisitions			(154	)			—
ASC 606 impact			(24	)			—
Organic revenue			1,582				1,497			6	%
Less foreign exchange impact			(26	)			—
Organic revenue in constant currency		$	1,556			$	1,497			4	%
		Six Months Ended
		June 30, 2018				July 1, 2017				% Change
Net sales		$	3,227			$	2,777			16	%
Non-GAAP adjustments:
Acquisitions			(206	)			(5	)
ASC 606 impact			(39	)			—
Organic revenue			2,982				2,772			8	%
Less foreign exchange impact			(65	)			—
Organic revenue in constant currency		$	2,917			$	2,772			5	%

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