Motorola Solutions Reports First Quarter 2023 Financial Results
“Q1 was an exceptional quarter, highlighted by double-digit revenue growth across both segments and all three technologies,” said Greg Brown, chairman and CEO, Motorola Solutions. “Record first-quarter sales, orders and ending backlog positions us very well for continued growth. As a result, we’re raising our revenue and earnings guidance for the full year.”
OTHER SELECTED FINANCIAL RESULTS
Revenue - Sales were $2.2 billion, up 15% from the year-ago quarter driven by growth in North America and International. Revenue from acquisitions was $42 million and currency headwinds were $45 million in the quarter. The Products and Systems Integration segment grew 18%, driven by growth in Land Mobile Radio Communications ("LMR") and Video Security and Access Control ("Video"). The Software and Services segment grew 10%, driven by growth in LMR services, Command Center and Video.
Operating margin - GAAP operating margin was 18.4% of sales, up from 12.6% in the year-ago quarter and Non-GAAP operating margin was 24.5% of sales, up 470 basis points from 19.8% in the year-ago quarter. The increase in both GAAP and Non-GAAP operating margin was driven by higher sales, lower direct material costs and improved operating leverage.
Taxes - The GAAP effective tax rate was 22.1%, up from (22.4)% in the year-ago quarter, primarily due to a discrete deferred tax benefit as a result of the taxable reorganization of intellectual property in the year-ago quarter. The non-GAAP effective tax rate was 21.9%, up from 15.2% in the year-ago quarter, primarily driven by lower benefits from stock-based compensation recognized in the current year.
Cash flow - Operating cash flow was a usage of $8 million, compared to $152 million of operating cash flow generated in the year-ago quarter and free cash flow was a usage of $62M, compared to $98 million of free cash flow generated in the year-ago quarter. Both the operating cash flow and free cash flow for the quarter decreased primarily due to an increase in working capital and higher cash taxes, partially offset by higher earnings, net of non-cash charges.
Capital allocation - During the quarter, the company paid $148 million in cash dividends, repurchased $140 million of shares and incurred $54 million of capital expenditures.
Backlog - The company ended the quarter with record Q1 backlog of $14.1 billion, up 5% or $623 million from the year-ago quarter, inclusive of $372 million of unfavorable currency rates. Products and Systems Integration segment backlog was up $601 million, or 15%. The growth was primarily driven by strong LMR demand. Software and Services segment backlog was up $22 million, driven by an increase in multi-year software and services contracts in North America, partially offset by revenue recognition for the Airwave contract, $329 million of unfavorable currency rates and a reduction related to the exit from the ESN contract.
NOTABLE WINS AND ACHIEVEMENTS
Software and Services
$340M ten-year IDIQ award from the U.S. Air Force to provide LMR services
$21M multi-year support services extension of Portugal's nationwide TETRA system
$10M LMR services agreement with a federal agency
$9M Fixed Video services contract renewal with the City of Chicago
Products and Systems Integration
$27M countywide P25 system for Johnson County, MO
$20M P25 device order for a U.S. state and local customer
$17M P25 system for Wakulla County, FL
$16M Fixed Video contract for a healthcare customer
$15M APX and APX NEXT devices order for the Kansas Highway Patrol
Second quarter 2023 - The company expects revenue growth between 10% and 11%, compared to the second quarter of 2022. The company expects non-GAAP EPS in the range of $2.49 to $2.54 per share. This assumes approximately 173 million fully diluted shares and a non-GAAP effective tax rate of approximately 24%.
Full-year 2023 - The company now expects revenue in the range of $9.725 billion to $9.775 billion, up from its prior guidance of $9.65 billion to $9.7 billion, and non-GAAP EPS of between $11.21 and $11.29 per share, up from its prior guidance of between $11.10 and $11.22 per share. This outlook assumes approximately $25 million in foreign exchange headwinds, approximately 172 million fully diluted shares and a non-GAAP effective tax rate between 23% and 24%.
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.