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 non-GAAP organic revenue growth 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.
Details of the above items and reconciliations of the non-GAAP measurements to the corresponding GAAP measurements can be found at the end of this press release.
The company has not quantitatively reconciled its guidance for non-GAAP metrics to their most comparable GAAP measure 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.
BUSINESS RISKS
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 2020. Motorola Solutions cautions the reader that the risk factors below, as well as those on pages 10 through 22 in Item 1A of Motorola Solutions’ 2019 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: (1) the economic outlook for the government communications industry; (2) the impact of foreign currency fluctuations on the company; (3) the level of demand for the company's products; (4) the company's ability to refresh existing and introduce new products and technologies in a timely manner; (5) exposure under large systems and managed services contracts, including risks related to the fact that certain customers require that the company build, own and operate their systems, often over a multi-year period; (6) negative impact on the company's business from global economic and political conditions, which may include: (i) continued deferment or cancellation of purchase orders by customers; (ii) the inability of customers to obtain financing for purchases of the company's products; (iii) increased demand to provide vendor financing to customers; (iv) increased financial pressures on third-party dealers, distributors and retailers; (v) the viability of the company's suppliers that may no longer have access to necessary financing; (vi) counterparty failures negatively impacting the company’s financial position; (vii) changes in the value of investments held by the company's pension plan and other defined benefit plans, which could impact future required or voluntary pension contributions; (viii) the company’s ability to access the capital markets on acceptable terms and conditions; and (ix) the ongoing COVID-19 pandemic and governmental and societal responses thereto; (7) the impact of a security breach or other significant disruption in the company’s IT systems, those of its partners or suppliers or those it sells to or operates or maintains for its customers; (8) the outcome of ongoing and future tax matters; (9) the company's ability to purchase sufficient materials, parts and components to meet customer demand, particularly in light of global economic conditions and reductions in the company’s purchasing power; (10) risks related to dependence on certain key suppliers, subcontractors, third-party distributors and other representatives; (11) the impact on the company's performance and financial results from strategic acquisitions or divestitures; (12) risks related to the company's manufacturing and business operations in foreign countries; (13) the creditworthiness of the company's customers and distributors, particularly purchasers of large infrastructure systems; (14) the ownership of certain logos, trademarks, trade names and service marks including “MOTOROLA” by Motorola Mobility Holdings, Inc.; (15) variability in income received from licensing the company's intellectual property to others, as well as expenses incurred when the company licenses intellectual property from others; (16) unexpected liabilities or expenses, including unfavorable outcomes to any pending or future litigation or regulatory or similar proceedings; (17) the impact of the percentage of cash and cash equivalents held outside of the United States; (18) the ability of the company to pay future dividends due to possible adverse market conditions or adverse impacts on the company’s cash flow; (19) the ability of the company to complete acquisitions or repurchase shares under its repurchase program due to possible adverse market conditions or adverse impacts on the company’s cash flow; (20) the impact of changes in governmental policies, laws or regulations; (21) negative consequences from the company's use of third party vendors for various activities, including certain manufacturing operations, information technology and administrative functions; and (22) the company’s ability to settle the par value of its 1.75% senior convertible notes in cash. 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 a global leader in mission-critical communications and analytics. Our technology platforms in mission-critical communications, command center software and video security & analytics, bolstered by managed & support services, make cities safer and help communities and businesses thrive. At Motorola Solutions, we are ushering in a new era in public safety and security. Learn more at www.motorolasolutions.com.
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. ©2020 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 | ||||||
March 28, 2020 | March 30, 2019 | |||||
Net sales from products | $ |
884 |
$ |
945 |
||
Net sales from services |
|
771 |
|
712 |
||
Net sales |
|
1,655 |
|
1,657 |
||
Costs of products sales |
|
397 |
|
444 |
||
Costs of services sales |
|
471 |
|
440 |
||
Costs of sales |
|
868 |
|
884 |
||
Gross margin |
|
787 |
|
773 |
||
Selling, general and administrative expenses |
|
341 |
|
327 |
||
Research and development expenditures |
|
168 |
|
162 |
||
Other charges (income) |
|
(34) |
|
5 |
||
Intangibles amortization |
|
53 |
|
50 |
||
Operating earnings |
|
259 |
|
229 |
||
Other income (expense): | ||||||
Interest expense, net |
|
(52) |
|
(55) |
||
Gains on sales of investments and businesses, net |
|
- |
|
1 |
||
Other, net |
|
17 |
|
10 |
||
Total other expense |
|
(35) |
|
(44) |
||
Net earnings before income taxes |
|
224 |
|
185 |
||
Income tax expense |
|
26 |
|
33 |
||
Net earnings |
|
198 |
|
152 |
||
Less: Earnings attributable to non-controlling interests |
|
1 |
|
1 |
||
Net earnings attributable to Motorola Solutions, Inc. | $ |
197 |
$ |
151 |
||
Earnings per common share: | ||||||
Basic | $ |
1.15 |
$ |
0.92 |
||
Diluted | $ |
1.12 |
$ |
0.86 |
||
Weighted average common shares outstanding: | ||||||
Basic |
|
170.6 |
|
164.0 |
||
Diluted |
|
175.9 |
|
174.6 |
||
Percentage of Net Sales* | ||||||
Net sales from products |
|
53.4 % |
|
57.0 % |
||
Net sales from services |
|
46.6 % |
|
43.0 % |
||
Net sales |
|
100.0 % |
|
100.0 % |
||
Costs of products sales |
|
44.9 % |
|
47.0 % |
||
Costs of services sales |
|
61.1 % |
|
61.8 % |
||
Costs of sales |
|
52.4 % |
|
53.3 % |
||
Gross margin |
|
47.6 % |
|
46.7 % |
||
Selling, general and administrative expenses |
|
20.6 % |
|
19.7 % |
||
Research and development expenditures |
|
10.2 % |
|
9.8 % |
||
Other charges (income) |
|
(2.1)% |
|
0.3 % |
||
Intangibles amortization |
|
3.2 % |
|
3.0 % |
||
Operating earnings |
|
15.6 % |
|
13.8 % |
||
Other income (expense): | ||||||
Interest expense, net |
|
(3.1)% |
|
(3.3)% |
||
Gains on sales of investments and businesses, net | - % | - % | ||||
Other, net |
|
1.0 % |
|
0.6 % |
||
Total other expense |
|
(2.1)% |
|
(2.7)% |
||
Net earnings before income taxes |
|
13.5 % |
|
11.2 % |
||
Income tax expense |
|
1.6 % |
|
2.0 % |
||
Net earnings |
|
12.0 % |
|
9.2 % |
||
Less: Earnings attributable to non-controlling interests |
|
0.1 % |
- % | |||
Net earnings attributable to Motorola Solutions, Inc. |
|
11.9 % |
|
9.1 % |
||
* Percentages may not add up due to rounding |
GAAP-2 |
||||||
Motorola Solutions, Inc. and Subsidiaries | ||||||
Condensed Consolidated Balance Sheets | ||||||
(In millions) | ||||||
March 28, 2020 |
December 31, 2019 | |||||
Assets |
||||||
Cash and cash equivalents |
$ |
1,672 |
$ |
1,001 |
||
Accounts receivable, net |
|
1,122 |
|
1,412 |
||
Contract assets |
|
958 |
|
1,046 |
||
Inventories, net |
|
442 |
|
447 |
||
Other current assets |
|
287 |
|
272 |
||
Total current assets |
|
4,481 |
|
4,178 |
||
Property, plant and equipment, net |
|
932 |
|
992 |
||
Operating lease assets |
|
521 |
|
554 |
||
Investments |
|
154 |
|
159 |
||
Deferred income taxes |
|
918 |
|
943 |
||
Goodwill |
|
2,075 |
|
2,067 |
||
Intangible assets, net |
|
1,242 |
|
1,327 |
||
Other assets |
|
393 |
|
422 |
||
Total assets |
$ |
10,716 |
$ |
10,642 |
||
|
||||||
Liabilities and Stockholders' Equity (Deficit) |
||||||
Current portion of long-term debt |
$ |
814 |
$ |
16 |
||
Accounts payable |
|
531 |
|
618 |
||
Contract liabilities |
|
1,278 |
|
1,449 |
||
Accrued liabilities |
|
1,256 |
|
1,356 |
||
Total current liabilities |
|
3,879 |
|
3,439 |
||
|
||||||
Long-term debt |
|
5,111 |
|
5,113 |
||
Operating lease liabilities |
|
458 |
|
497 |
||
Other liabilities |
|
2,198 |
|
2,276 |
||
Total Motorola Solutions, Inc. stockholders’ equity (deficit) |
|
(948) |
|
(700) |
||
Non-controlling interests |
|
18 |
|
17 |
||
Total liabilities and stockholders’ equity (deficit) |
$ |
10,716 |
$ |
10,642 |
GAAP-3 |
||||||
Motorola Solutions, Inc. and Subsidiaries | ||||||
Condensed Consolidated Statements of Cash Flows | ||||||
(In millions) | ||||||
Three Months Ended | ||||||
March 28, 2020 | March 30, 2019 | |||||
Operating | ||||||
Net earnings attributable to Motorola Solutions, Inc. | $ |
197 |
$ |
151 |
||
Earnings attributable to non-controlling interests |
|
1 |
|
1 |
||
Net earnings |
|
198 |
|
152 |
||
Adjustments to reconcile Net earnings to Net cash provided by operating activities: | ||||||
Depreciation and amortization |
|
99 |
|
95 |
||
Non-cash other (income) charges |
|
(51) |
|
10 |
||
Share-based compensation expenses |
|
38 |
|
27 |
||
Gain on sales of investments and businesses, net |
|
- |
|
(1) |
||
Changes in assets and liabilities, net of effects of acquisitions, dispositions, and foreign currency translation adjustments: | ||||||
Accounts receivable |
|
275 |
|
168 |
||
Inventories |
|
2 |
|
(63) |
||
Other current assets and contract assets |
|
48 |
|
136 |
||
Accounts payable, accrued liabilities, and contract liabilities |
|
(301) |
|
(261) |
||
Other assets and liabilities |
|
(4) |
|
(6) |
||
Deferred income taxes |
|
4 |
|
(6) |
||
Net cash provided by operating activities |
|
308 |
|
251 |
||
Investing | ||||||
Acquisitions and investments, net |
|
(36) |
|
(368) |
||
Proceeds from sales of investments and businesses, net |
|
2 |
|
2 |
||
Capital expenditures |
|
(48) |
|
(66) |
||
Proceeds from sales of property, plant and equipment |
|
56 |
|
- |
||
Net cash used for investing activities |
|
(26) |
|
(432) |
||
Financing | ||||||
Repayments of debt |
|
(4) |
|
(8) |
||
Net proceeds from revolver draw |
|
800 |
|
- |
||
Issuances of common stock |
|
5 |
|
45 |
||
Purchases of common stock |
|
(253) |
|
(145) |
||
Payments of dividends |
|
(109) |
|
(93) |
||
Net cash provided by (used for) financing activities |
|
439 |
|
(201) |
||
Effect of exchange rate changes on total cash and cash equivalents |
|
(50) |
|
22 |
||
Net increase (decrease) in total cash and cash equivalents |
|
671 |
|
(360) |
||
Cash and cash equivalents, beginning of period |
|
1,001 |
|
1,257 |
||
Cash and cash equivalents, end of period | $ |
1,672 |
$ |
897 |
||
Financial Ratios: | ||||||
Free cash flow* | $ |
260 |
$ |
185 |
||
*Free cash flow = Net cash provided by operating activities - Capital expenditures |
GAAP-4 |
||||||||
Motorola Solutions, Inc. and Subsidiaries | ||||||||
Segment Information | ||||||||
(In millions) | ||||||||
Net Sales | ||||||||
Three Months Ended | ||||||||
March 28, 2020 | March 30, 2019 | % Change | ||||||
Products and Systems Integration | $ |
993 |
$ |
1,069 |
(7)% |
|||
Software and Services |
|
662 |
|
588 |
13 % |
|||
Total Motorola Solutions | $ |
1,655 |
$ |
1,657 |
- % | |||
Operating Earnings | ||||||||
Three Months Ended | ||||||||
March 28, 2020 | March 30, 2019 | % Change | ||||||
Products and Systems Integration | $ |
92 |
$ |
108 |
(15)% |
|||
Software and Services |
|
167 |
|
121 |
38 % |
|||
Total Motorola Solutions | $ |
259 |
$ |
229 |
13 % |
|||
Operating Earnings % | ||||||||
Three Months Ended | ||||||||
March 28, 2020 | March 30, 2019 | |||||||
Products and Systems Integration |
|
9.3 % |
|
10.1 % |
||||
Software and Services |
|
25.2 % |
|
20.6 % |
||||
Total Motorola Solutions |
|
15.6 % |
|
13.8 % |
Non-GAAP-1 |
||||||||||||||
Motorola Solutions, Inc. and Subsidiaries | ||||||||||||||
Non-GAAP Adjustments (Intangibles Amortization Expense, Share-Based Compensation Expenses and Highlighted Items) | ||||||||||||||
(In millions) | ||||||||||||||
Q1 2020 | ||||||||||||||
Non-GAAP Adjustments | Statement Line | PBT
(Inc)/Exp |
Tax
Inc/(Exp) |
PAT
(Inc)/Exp |
EPS impact | |||||||||
Intangibles amortization expense | Intangibles amortization | $ |
53 |
$ |
13 |
$ |
40 |
$ |
0.23 |
|||||
Share-based compensation expenses | Cost of sales, SG&A and R&D |
|
38 |
|
9 |
|
29 |
|
0.17 |
|||||
Hytera-related legal expenses | SG&A |
|
25 |
|
6 |
|
19 |
|
0.11 |
|||||
Reorganization of business charges | Cost of sales and Other charges (income) |
|
18 |
|
4 |
|
14 |
|
0.08 |
|||||
Acquisition-related transaction fees | Other charges (income) |
|
2 |
|
- |
|
2 |
|
0.01 |
|||||
Legal settlements | Other charges (income) |
|
2 |
|
- |
|
2 |
|
0.01 |
|||||
Fair value adjustments to equity investments | Other expense |
|
(1) |
|
- |
|
(1) |
|
(0.01) |
|||||
Release of uncertain tax positions | Other income, Income tax expense |
|
- |
|
1 |
|
(1) |
|
(0.01) |
|||||
Gain on sale of property, plant, and equipment | Other charges (income) |
|
(50) |
|
(12) |
|
(38) |
|
(0.22) |
|||||
Total impact on Net earnings | $ |
87 |
$ |
21 |
$ |
66 |
$ |
0.37 |
Non-GAAP-2 |
||||||||
Motorola Solutions, Inc. and Subsidiaries | ||||||||
Non-GAAP Segment Information | ||||||||
(In millions) | ||||||||
Net Sales | ||||||||
Three Months Ended | ||||||||
March 28, 2020 | March 30, 2019 | % Change | ||||||
Products and Systems Integration | $ |
993 |
$ |
1,069 |
(7)% |
|||
Software and Services |
|
662 |
|
588 |
13 % |
|||
Total Motorola Solutions | $ |
1,655 |
$ |
1,657 |
- % | |||
Non-GAAP Operating Earnings | ||||||||
Three Months Ended | ||||||||
March 28, 2020 | March 30, 2019 | % Change | ||||||
Products and Systems Integration | $ |
123 |
$ |
147 |
(16)% |
|||
Software and Services |
|
224 |
|
168 |
33 % |
|||
Total Motorola Solutions | $ |
347 |
$ |
315 |
10 % |
|||
Non-GAAP Operating Earnings % | ||||||||
Three Months Ended | ||||||||
March 28, 2020 | March 30, 2019 | |||||||
Products and Systems Integration |
|
12.4 % |
|
13.8 % |
||||
Software and Services |
|
33.8 % |
|
28.6 % |
||||
Total Motorola Solutions |
|
21.0 % |
|
19.0 % |
||||
Non-GAAP-3 | |||||||||
Motorola Solutions, Inc. and Subsidiaries | |||||||||
Operating Earnings after Non-GAAP Adjustments | |||||||||
(In millions) | |||||||||
Q1 2020 | |||||||||
TOTAL | Products and
Systems Integration |
Software and
Services |
|||||||
Net sales | $ |
1,655 |
$ |
993 |
$ |
662 |
|||
Operating earnings ("OE") | $ |
259 |
$ |
92 |
$ |
167 |
|||
Above-OE non-GAAP adjustments: | |||||||||
Intangibles amortization expense |
|
53 |
|
12 |
|
41 |
|||
Share-based compensation expenses |
|
38 |
|
27 |
|
11 |
|||
Hytera-related legal expenses |
|
25 |
|
25 |
|
- |
|||
Reorganization of business charges |
|
18 |
|
14 |
|
4 |
|||
Acquisition-related transaction fees |
|
2 |
|
1 |
|
1 |
|||
Legal settlements |
|
2 |
|
2 |
|
- |
|||
Gain on sale of property, plant, and equipment |
|
(50) |
|
(50) |
|
- |
|||
Total above-OE non-GAAP adjustments |
|
88 |
|
31 |
|
57 |
|||
Operating earnings after non-GAAP adjustments | $ |
347 |
$ |
123 |
$ |
224 |
|||
Operating earnings as a percentage of net sales - GAAP |
|
15.6 % |
|
9.3 % |
|
25.2 % |
|||
Operating earnings as a percentage of net sales - after non-GAAP adjustments |
|
21.0 % |
|
12.4 % |
|
33.8 % |
|||
Non-GAAP-4 |
||||||
Motorola Solutions, Inc. and Subsidiaries | ||||||
Non-GAAP Organic Revenue | ||||||
(In millions) | ||||||
Total Motorola Solutions | ||||||
Three Months Ended | ||||||
March 28, 2020 | March 30, 2019 | % Change | ||||
Net sales | $ 1,655 |
$ 1,657 |
- % | |||
Non-GAAP adjustments: | ||||||
Sales from acquisitions | 51 |
3 |
||||
Organic revenue | 1,604 |
1,654 |
(3)% |