Motorola Solutions Reports First-Quarter 2025 Financial Results

Motorola Solutions, Inc. (NYSE: MSI) today reported its earnings results for the first quarter of 2025.

"Q1 was an excellent start to the year, with record first-quarter sales, operating earnings and cash flow,” said Greg Brown, chairman and CEO, Motorola Solutions. “Our customers are continuing to prioritize investments in safety and security, which is driving our continued expectations for strong revenue, earnings and cash flow growth for the year.”

OTHER SELECTED FINANCIAL RESULTS

• Revenue - Sales were $2.5 billion, up 6% from the year-ago quarter driven by growth in North America, partially offset by a decline internationally due to foreign currency headwinds and lower Ukraine revenue. Revenue from acquisitions was $32 million and foreign currency headwinds were $25 million in the quarter. The Products and Systems Integration segment grew 4%, driven by growth in Land Mobile Radio Communications ("LMR"). The Software and Services segment grew 9%, driven by growth in Video Security and Access Control ("Video"), LMR services and Command Center.
• Operating margin - GAAP operating margin was 23.0% of sales, up from 21.7% in the year-ago quarter. Non-GAAP operating margin was 28.3% of sales, up 160 basis points from 26.7% in the year-ago quarter. The increase in both GAAP and non-GAAP operating margins was driven by higher sales, favorable mix and lower direct material costs, partially offset by acquisitions.
• Taxes - The GAAP effective tax rate during the quarter was 21.0%, down from 57.8% in the year-ago quarter driven by a non-deductible loss on the extinguishment of the Silver Lake convertible debt in the prior year. The non-GAAP effective tax rate was 21.1%, down from 22.1% in the year-ago quarter primarily due to higher benefits from share-based compensation recognized in the current quarter.
• Cash flow - Operating cash flow was $510 million, compared to $382 million in the year-ago quarter and free cash flow was $473 million, up from $336 million in the year-ago quarter. Both the operating cash flow and free cash flow for the quarter increased primarily due to higher earnings and working capital improvements.
• Capital allocation - During the quarter, the company repurchased $325 million of common stock, paid $182 million in cash dividends and incurred $37 million of capital expenditures. Additionally, the company closed two acquisitions in Command Center; RapidDeploy, a cloud-native NG 911 solution provider, and Theatro, a maker of AI and voice-powered communication and digital workflow software for frontline workers, for a combined $414 million, net of cash acquired.    
• Backlog - The company ended the quarter with backlog of $14.1 billion, down 2% or $306 million from the year-ago quarter. Products and Systems Integration segment backlog was down $1.0 billion, or 22%, driven primarily by strong LMR shipments. Software and Services segment backlog was up $732 million, or 8%, driven by strong demand across all three technologies, partially offset by revenue recognition from the U.K. Home Office.

NOTABLE WINS AND ACHIEVEMENTS

Software and Services

$19M LMR managed services extension for an international customer
$18M LMR services renewal for a U.S. utility customer
$9M fixed video services contract renewal for the City of Chicago
$7M Command Center order for a U.S. federal customer
$5M Command Center order for Denver's Public Transport
Products and Systems Integration

$19M TETRA award for a customer in Germany
$10M fixed video order for Duke Energy
$10M P25 system order for a customer in North Africa
$10M P25 device order for a U.S. state and local customer
$7M P25 device order for Aurora, CO
 

BUSINESS OUTLOOK

Second quarter 2025 - The company expects revenue growth of approximately 4% compared to the second quarter of 2024 and non-GAAP EPS in the range of $3.32 to $3.37 per share. This assumes approximately 170 million of fully diluted shares and a non-GAAP effective tax rate of approximately 23.5%.
Full-year 2025 - The company is maintaining its prior guidance of approximately 5.5% revenue growth and non-GAAP EPS between $14.64 and $14.74 per share. This outlook assumes approximately $40 million in foreign exchange headwinds, 170 million of fully diluted shares and a non-GAAP effective tax rate of approximately 23.0%.
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

MACROECONOMIC ENVIRONMENT UPDATE

Beginning in February 2025, the United States implemented significant global tariffs on imports, contributing to a global trade landscape subject to changing import/export regulations, tariffs, trade barriers and trade disputes. As a result, the company sees growing volatility and uncertainty around the global supply chain.

The company engages with global suppliers across a diverse network of locations around the world. The company continues to work with our global supply base to mitigate its exposure to the risks to global reciprocal (and sectoral) tariffs that have developed, and which may continue to develop, in order to ensure supply continues at levels in order to meet the company's current customer demand. As a result of the dynamic environment, the company expects increased costs on materials and components in 2025, which the company currently expects to substantially mitigate.

U.K. HOME OFFICE UPDATE

Beginning August 1, 2023, the United Kingdom's Competition Markets Authority ("CMA") imposed a legal order which implemented a prospective price control on Airwave (the "Airwave Charge Control"), the company's private mobile radio communications network that provides mission-critical voice and data communications to emergency services and other agencies in Great Britain. The company's appeal of the implementation of the Charge Control to the United Kingdom's Court of Appeal was unsuccessful and the company has no further right to appeal to the United Kingdom Courts. Since August 1, 2023, revenue under the Airwave contract has been, and will continue to be, recognized in accordance with the Airwave Charge Control.

In 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 Airwave Charge Control rates and is fully reflected in the company's reported backlog. In 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. During the first quarter of 2025, these proceedings were discontinued.

On December 12, 2024, a proposed class representative filed a claim with the Competition Appeal Tribunal ("CAT") to bring collective proceedings against the company, alleging that users of Airwave services during the period January 1, 2020 through July 31, 2023 suffered financial harm as a result of the pricing in effect during such time (the "Collective Proceeding"). The initial stage of the Collective Proceeding will involve potential "Certification" of the claim by the CAT, which the company expects to be heard in September 2025.