Motorola Solutions Reports Fourth-Quarter and Full-Year Financial Results

Company Achieves Record Full-Year Sales, Operating Earnings and Operating Cash Flow

• Sales of $3.0 billion, up 6% from Q4 in the prior year; up 8% for full year
  • Products and Systems Integration sales grew 3% in Q4; up 10% for full year
  • Software and Services sales grew 11% in Q4; up 5% for full year
• Generated $1.1 billion of operating cash flow in Q4; $2.4 billion for full year, up 17%
• GAAP Q4 earnings per share (EPS) of $3.56, up 3%; $9.23 for full year, down 7%
• Non-GAAP Q4 EPS* of $4.04, up 4% versus a year ago; $13.84 for full year, up 16%
• Record ending backlog of $14.7 billion, up 3% from a year ago
• Subsequent to quarter end, entered into a definitive agreement to acquire Theatro, a maker of AI and voice-powered communication and digital workflow software for frontline workers

CHICAGO--(BUSINESS WIRE)--Motorola Solutions, Inc. (NYSE: MSI) today reported its earnings results for the fourth quarter and full year of 2024.

“2024 marked another exceptional year for the company, with record sales, operating earnings and cash flow,” said Greg Brown, chairman and CEO, Motorola Solutions. “Strong demand for our safety and security solutions, together with our record backlog, positions us well for another year of strong growth.”

KEY FINANCIAL RESULTS (presented in millions, except per share data and percentages)

OTHER SELECT FOURTH-QUARTER FINANCIAL RESULTS

• Revenue - Fourth-quarter sales were $3.0 billion, up 6% from the year-ago quarter driven by growth in North America. Revenue from acquisitions was $37 million and the impact of favorable foreign currency rates was $6 million. The Products and Systems Integration segment grew 3% with growth in land mobile radio ("LMR") and video security and access control ("Video"). The Software and Services segment grew 11% driven by growth in all three technologies.
• Operating margin - GAAP operating margin was 27.0% of sales, up from 25.9% in the year-ago quarter, driven primarily by a recovery related to the Hytera litigation. Non-GAAP operating margin was 30.4% of sales, down from 30.5% in the year-ago quarter driven by acquisitions, offset by higher sales, favorable mix and lower direct material costs.
• Taxes - The GAAP effective tax rate was 22.2%, up from 15.7% in the year-ago quarter driven primarily by a partial release of a valuation allowance recorded on the U.S. foreign tax credits carryforward in the prior year. The non-GAAP effective tax rate was 22.0%, up from 20.3% in the year-ago quarter, driven by higher U.S. income generated in the current year.
• Cash flow - Operating cash flow was $1.1 billion during the quarter, compared with $1.2 billion in the year-ago quarter and free cash flow was $1.0 billion in the quarter, compared with $1.2 billion in the year-ago quarter. Both the operating cash flow and free cash flow for the quarter decreased primarily due to changes in working capital and higher tax and interest payments in the current quarter.
• Capital allocation - During the quarter, the company paid $164 million in dividends, repurchased $103 million of its common stock and incurred $87 million in capital expenditures. Additionally, the company closed the acquisition of 3tc Software, an international provider of Command Center software solutions, for $22 million, net of cash acquired.

OTHER SELECT FULL-YEAR FINANCIAL RESULTS

• Revenue - Full-year sales were $10.8 billion, up 8% driven by growth in North America, partially offset by lower revenue from the U.K. Home Office related to the Airwave Charge Control and the exit from the Emergency Services Network ("ESN") contract. Revenue from acquisitions was $95 million and the impact of unfavorable foreign currency rates was $2 million. The Products and Systems Integration segment increased 10% driven by growth in LMR and Video. The Software and Services segment increased 5% driven by growth in Video and Command Center, partially offset by the revenue reduction for the U.K. Home Office. Excluding the U.K. Home Office, Software and Services grew 13% with growth in all three technologies.
• Operating margin - For the full year, GAAP operating margin was 24.8% of sales, compared to 23.0% for the prior year and non-GAAP operating margin was 29.0% of sales, up from 27.9% in the prior year. The increase in both GAAP and non-GAAP operating margin was driven by higher sales, favorable mix and lower direct material costs, partially offset by the Airwave Charge Control, higher employee incentives and higher expenses associated with acquired businesses in the current year.
• Taxes - The 2024 GAAP effective tax rate was 19.8%, compared with 20.1% in the prior year and the non-GAAP effective tax rate was 22.0%, up from 21.9% in the previous year.
• Cash flow - The company generated record operating cash flow of $2.4 billion, up 17% versus the prior year, and record free cash flow of $2.1 billion, up 19% versus the prior year. The increase in both operating and free cash flow was primarily driven by higher earnings, net of non-cash charges, generated in the current year.
• Capital allocation - In 2024, the company paid $654 million in dividends, closed four acquisitions for $282 million, net of cash acquired, and repurchased $244 million of its common stock at an average price of $396.69 per share. The company also settled the Silver Lake convertible debt at $319.54 per share for $1.59 billion in cash, inclusive of the conversion premium, and settled $313 million of senior notes that were due within the year. Additionally, the company received credit rating upgrades to BBB from both S&P and Fitch and issued $1.3 billion in long-term debt.
• Backlog - The company ended the year with record backlog of $14.7 billion, up $438 million from the prior year, inclusive of $226 million of unfavorable foreign currency rates. Products and Systems Integrations segment backlog was down 17% or $858 million driven by strong LMR shipments. Software and Services segment backlog was up 14%, or $1.3 billion, driven by strong demand in all three technologies, partially offset by $195 million of unfavorable foreign currency rates.

NOTABLE WINS & ACHIEVEMENTS IN Q4

Software and Services

• $329M ten-year services renewal for Melbourne, Australia's LMR network
• $160M five-year LMR services renewal for Norway’s nationwide public safety network
• $68M LMR services order for a U.S. state and local customer
• $40M Command Center order from the Scottish Fire Service
• $16M fixed video order for the São Paulo State Government, Brazil

Products and Systems Integration

• $53M P25 device order for a U.S. state and local customer
• $52M P25 system and device order for a Canadian customer
• $36M P25 device order for Broward Sheriff’s Office, FL
• $33M P25 system order from the Kentucky State Police
• $32M P25 device order for City of Phoenix Police & Fire
• $16M fixed video order for Duke Energy

BUSINESS OUTLOOK

• First-quarter 2025 - The company expects revenue growth between 5.0% and 5.5% compared to the first quarter of 2024. The company expects non-GAAP EPS in the range of $2.98 to $3.03 per share. This assumes approximately $25 million in foreign exchange headwinds, 171 million fully diluted shares and a non-GAAP effective tax rate of approximately 21.0%.
• Full-year 2025 - The company expects revenue growth of approximately 5.5% and non-GAAP EPS in the range of $14.64 to $14.74 per share. This assumes approximately $120 million in foreign exchange headwinds, 171 million 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 measurements in this news release to their most comparable GAAP measurements 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 measurement is not available without unreasonable effort. Please note that the unavailable reconciling items could significantly impact the company’s results.

RECENT EVENTS

U.K. HOME OFFICE UPDATE

In October 2021, the Competition Markets Authority ("CMA") announced that it had opened a market investigation into the Mobile Radio Network Services market. This investigation included Airwave, the company’s private mobile radio communications network that it acquired in 2016. Airwave provides mission-critical voice and data communications to emergency services and other agencies in Great Britain.

In 2023, the CMA imposed a legal order on Airwave which implemented a prospective price control on Airwave (the "Airwave Charge Control"). After the Competition Appeal Tribunal ("CAT") dismissed the company's appeal of the CMA's final decision, the company appealed the CAT's judgment to the United Kingdom Court of Appeal. On January 30, 2025, the United Kingdom Court of Appeal denied the company's application for permission to appeal the CAT's judgment. Since August 1, 2023, revenue under the Airwave contract has been, and will continue to be, recognized in accordance with the Airwave Charge Control.

On March 13, 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. The company's backlog for Airwave services contracted with the U.K. Home Office through December 31, 2026 was previously reduced by $777 million to align with the Airwave Charge Control. In 2024, as a result of the U.K. Home Office's notice of a contract extension pursuant to their Deferred National Shutdown Notice, the company has recorded additional backlog of $748 million to reflect the incremental three years of services. On April 11, 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. The hearing on this matter has been set to commence on April 22, 2025. The backlog related to the incremental years of service contemplated in the Deferred National Shutdown Notice could change depending on the outcome of the proceedings.

On December 5, 2024, a proposed class representative filed a claim with the CAT to bring collective proceedings against us, 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 "Certification" of the claim by the CAT, which we expect to be heard in 2025.

CONFERENCE CALL AND WEBCAST Motorola Solutions will host its quarterly conference call beginning at 4 p.m. U.S. Central Standard Time (5 p.m. U.S. Eastern Standard Time) on Thursday, February 13. The conference call will be webcast live with audio and slides at www.motorolasolutions.com/investors. An archive of the webcast will be available for a limited period of time thereafter.

CONSOLIDATED GAAP RESULTS (presented in millions, except per share data)

A comparison of results from operations is as follows:

USE OF NON-GAAP FINANCIAL INFORMATION

In addition to the results presented in accordance with accounting principles generally accepted in the U.S. ("GAAP") included in this news release, Motorola Solutions also has included non-GAAP measurements of results, including free cash flow, non-GAAP operating earnings, non-GAAP EPS, non-GAAP operating margin, non-GAAP net earnings attributable to MSI, non-GAAP tax rate, organic revenue and net sales adjusted for the U.K. Home Office. The company has provided these non-GAAP measurements to help investors better understand its core operating performance, enhance comparisons of core operating performance from period-to-period and allow better comparisons of operating performance to that of its competitors. Among other things, management uses these operating results, excluding the identified items, to evaluate performance of its businesses and to evaluate results relative to certain incentive compensation targets. Management uses operating results excluding these items because it believes these measurements enable it to make better period-to-period evaluations of the financial performance of its core business operations. The non-GAAP measurements are intended only as a supplement to the comparable GAAP measurements and the company compensates for the limitations inherent in the use of non-GAAP measurements by using GAAP measures in conjunction with the non-GAAP measurements. As a result, investors should consider these non-GAAP measurements in addition to, and not in substitution for or as superior to, GAAP measurements.

Reconciliations: Details and reconciliations of such non-GAAP measurements to the corresponding GAAP measurements can be found at the end of this news release.

Free cash flow: Free cash flow represents net cash provided by operating activities less capital expenditures. The company believes that free cash flow is useful to investors as the basis for comparing its performance and coverage ratios with other companies in the company's industries, although the company's measure of free cash flow may not be directly comparable to similar measures used by other companies. This measure is also used as a component of incentive compensation.

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 organic revenue 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.

Net sales adjusted for the U.K. Home Office or Net sales excluding U.K. Home Office sales: Net sales adjusted for the U.K. Home Office reflects net sales calculated under GAAP excluding net sales related to the U.K. Home Office. The company believes that net sales excluding the U.K. Home Office improves period-to-period comparability related to the Airwave Charge Control implemented as of August 1, 2023 and the company's exit from the ESN contract as of December 31, 2023.

Non-GAAP operating earnings, non-GAAP EPS, non-GAAP operating margin and non-GAAP net earnings attributable to MSI each excludes highlighted items, including share-based compensation expenses and intangible assets amortization expense, as follows:

Highlighted items: The company has excluded the effects of highlighted items including, but not limited to, acquisition-related transaction fees, tangible and intangible asset impairments, reorganization of business charges, certain non-cash pension adjustments, legal settlements and other contingencies, gains and losses on investments and businesses, Hytera-related legal expenses, gains and losses on the extinguishment of debt and the income tax effects of significant tax matters, from its non-GAAP operating expenses and net income measurements because the company believes that these historical items do not reflect expected future operating earnings or expenses and do not contribute to a meaningful evaluation of the company's current operating performance or comparisons to the company's past operating performance. For the purposes of management's internal analysis over operating performance, the company uses financial statements that exclude highlighted items, as these charges do not contribute to a meaningful evaluation of the company's current operating performance or comparisons to the company's past operating performance.

Hytera-Related Legal Expenses: On March 14, 2017, the company filed a complaint in the U.S. District Court for the Northern District of Illinois (the “District Court”) against Hytera Communications Corporation Limited of Shenzhen, China; Hytera America, Inc.; and Hytera Communications America (West), Inc. (collectively, “Hytera”), alleging trade secret theft and copyright infringement and seeking, among other things, injunctive relief, compensatory damages, and punitive damages. On February 14, 2020, the company announced that a jury decided in the company's favor in its trade secret theft and copyright infringement case. In connection with this verdict, the jury awarded the company $345.8 million in compensatory damages and $418.8 million in punitive damages, for a total of $764.6 million. In a series of post-trial rulings in 2021, the District Court subsequently reduced the judgment to $543.7 million, but also ordered Hytera to pay the company $51.1 million in pre-judgment interest and $2.6 million in costs, as well as $34.2 million in attorneys' fees. The company continues to seek collection of the judgment through the ongoing legal process.

On December 17, 2020, the District Court held that Hytera must pay the company a forward-looking reasonable royalty on products that use the company’s stolen trade secrets, and on December 15, 2021, set royalty rates for Hytera's sale of relevant products from July 1, 2019 forward. On July 5, 2022, the District Court ordered that Hytera pay into a third-party escrow on July 31, 2022, the royalties owed to the company based on the sale of relevant products from July 1, 2019 to June 30, 2022. Hytera failed to make the required royalty payment on July 31, 2022. On August 1, 2022, Hytera filed a motion to modify or stay the District Court’s previous July 5, 2022 royalty order, which the District Court denied on July 11, 2023. On August 3, 2022, the company filed a motion seeking to hold Hytera in civil contempt for violating the royalty order by not making the required royalty payment on July 31, 2022. On August 26, 2023, the District Court granted the company's contempt motion. As a result, on September 1, 2023, Hytera made a payment of $56 million into the third-party escrow. In addition to the September 1, 2023 payment of $56 million, Hytera has made de minimis quarterly royalty payments into the third-party escrow from October 2022 up through November 2024. Future royalty payments are expected to be paid directly to the company. The aggregate amount paid into escrow of approximately $61 million was released to the company on November 26, 2024 and was recorded as a gain within Other Charges (Income) within the Consolidated Statement of Operations.

Following the February 14, 2020, verdict and judgment in the company's favor, Hytera appealed to the U.S. Court of Appeals for the Seventh Circuit (the "Court of Appeals"), seeking review of the orders related to the jury's verdict as well as the District Court's royalty order. The company filed its cross-appeal on August 5, 2022. The Court of Appeals heard oral arguments on December 5, 2023, and issued its decision on July 2, 2024. The Court of Appeals affirmed the District Court's award of $407.4 million in damages, including exemplary damages, under the Defend Trade Secrets Act. The Court of Appeals also directed the District Court to recalculate and reduce its award of $136.3 million in copyright infringement damages, and instructed the District Court to reconsider its denial of the company's request for an injunction. In all other respects, the Court of Appeals affirmed the judgment of the District Court. On October 4, 2024, the Court of Appeals denied Hytera's motion for rehearing. The case was remanded to the District Court for further action per the Court of Appeals' decision. On January 2, 2025, Hytera filed a petition for writ of certiorari with the Supreme Court of the United States. Acceptance or denial of the petition is discretionary by the Supreme Court.

In 2024, the parties engaged in competing litigation in the District Court and a court in China related to the possible continued use by Hytera of the company’s trade secrets in Hytera’s currently shipping products. On April 2, 2024, the District Court held Hytera in civil contempt, and issued a worldwide sales injunction of certain Hytera products and a daily fine, for Hytera's failure to withdraw its competing litigation in China. On April 16, 2024, the Court of Appeals granted Hytera's motion for an emergency stay of the contempt sanctions, to allow the Court of Appeals to review the District Court's various orders related to the competing litigation and contempt sanctions. The District Court held hearings from August 26-30, 2024, concerning whether Hytera's currently shipping products continue to misuse the company's trade secrets and copyrighted source code. The issue is currently under consideration by the District Court.

On January 13, 2025, Hytera pleaded guilty to one federal felony count of conspiracy to steal the company's trade secrets in a criminal action brought by the U.S. Department of Justice against Hytera and several of its employees in the District Court. Hytera's sentencing has been scheduled for November 6, 2025. Pursuant to the plea agreement reached between Hytera and the government, Hytera's sentence may include a fine to be paid to the government and restitution to be paid to the company in an amount to be determined by the District Court.

Management typically considers legal expenses associated with defending the company's intellectual property as “normal and recurring” and accordingly, Hytera-related legal expenses were included in both the company's GAAP and non-GAAP operating income for fiscal years 2017, 2018 and 2019. The company anticipates further expenses associated with Hytera-related litigation; however, as of 2020, the company believes that these expenses are no longer a part of the “normal and recurring” legal expenses incurred to operate its business.

MEDIA CONTACT
Alexandra Reynolds
Motorola Solutions
+1 312-965-3968
alexandra.reynolds@motorolasolutions.com

INVESTOR CONTACT
Tim Yocum
Motorola Solutions
+1 847-576-6899
Tim.Yocum@motorolasolutions.com