10-QPeriod: Q2 FY2019

Motorola Solutions, Inc. Quarterly Report for Q2 Ended Jun 29, 2019

Filed August 2, 2019For Securities:MSI

Summary

Motorola Solutions, Inc. (MSI) reported a strong second quarter and first half of 2019, demonstrating robust revenue growth and improved profitability. For the second quarter of 2019, net sales increased by 6% to $1.86 billion, and net earnings attributable to Motorola Solutions, Inc. rose to $207 million ($1.18 per diluted share) from $180 million ($1.05 per diluted share) in the prior year. The company's performance was primarily driven by growth in the Americas across both its Products and Systems Integration, and Services and Software segments. The first half of 2019 also showed significant improvement, with net sales up 9% to $3.52 billion and net earnings attributable to Motorola Solutions, Inc. increasing to $358 million ($2.04 per diluted share) from $297 million ($1.73 per diluted share) in the first half of 2018. The company successfully integrated recent acquisitions, including VaaS and Avtec, contributing positively to revenue and operating earnings. MSI also highlighted its strong operating cash flow, which improved significantly year-over-year, and continued commitment to returning capital to shareholders through dividends and share repurchases.

Financial Highlights

55 data points
Beta

Revenue

$1.86B

50.1% Gross Margin

Net Income

$207.00M

11.1% Net Margin

EPS (Diluted)

$1.18

Total Assets

$9.97B

Cash & Equivalents

$964.00M

Free Cash Flow

$251.00M

Financial Statements
Beta
Revenue$1.86B
Cost of Revenue$929.00M
Gross Profit$931.00M
R&D Expenses$170.00M
SG&A Expenses$351.00M
Operating Income$349.00M
Interest Expense$59.00M
Net Income$207.00M
EPS (Basic)$1.25
EPS (Diluted)$1.18
Shares Outstanding (Basic)164.90M
Shares Outstanding (Diluted)176.10M

Key Highlights

  • 1Net sales for Q2 2019 increased by 6% to $1.86 billion, and for the first half of 2019 increased by 9% to $3.52 billion, driven by growth in the Americas.
  • 2Net earnings attributable to MSI increased by 15% to $207 million ($1.18 per diluted share) in Q2 2019, and by 21% to $358 million ($2.04 per diluted share) in the first half of 2019.
  • 3The Products and Systems Integration segment saw a 4% increase in net sales in Q2 and an 8% increase in the first half, while the Services and Software segment grew by 9% in Q2 and 11% in the first half.
  • 4Gross margin improved significantly to 50.1% in Q2 2019 (from 46.7% in Q2 2018) and to 48.5% in the first half of 2019 (from 46.2% in the first half of 2018), indicating enhanced profitability.
  • 5Operating cash flow for the first half of 2019 showed a substantial improvement, increasing to $502 million from a negative $75 million in the same period of 2018.
  • 6The company repurchased $170 million of common stock and paid $187 million in dividends in the first half of 2019, demonstrating a commitment to shareholder returns.
  • 7Motorola Solutions completed several strategic acquisitions in late 2018 and early 2019 (VaaS, Avtec, Avigilon, Plant Holdings), which are beginning to contribute to revenue and segment growth.

Frequently Asked Questions

Revenue growth was primarily driven by the Americas region, with contributions from both the Products and Systems Integration segment (up 4% in Q2) and the Services and Software segment (up 9% in Q2). The growth was also bolstered by recent acquisitions, specifically VaaS and Avtec, as well as strong demand for Devices, including LMR and video cameras.

Profitability improved significantly. Gross margin expanded to 50.1% in Q2 2019 from 46.7% in Q2 2018, reflecting favorable product mix and acquisition contributions. Operating earnings increased by 28% in Q2 2019 to $349 million. Net earnings attributable to Motorola Solutions, Inc. also saw a substantial increase to $207 million ($1.18 per diluted share) in Q2 2019 from $180 million ($1.05 per diluted share) in Q2 2018.

The company's financial health appears strong, with a significant increase in operating cash flow to $502 million for the first half of 2019, a substantial improvement from -$75 million in the prior year's first half. This was partly due to a large pension contribution made in 2018. The company maintains a $2.2 billion revolving credit facility and had no borrowings outstanding as of June 29, 2019, indicating good liquidity.

The company had $5.3 billion in long-term debt as of June 29, 2019. In May 2019, they issued $650 million in senior notes and used the proceeds to repurchase $614 million of outstanding debt, resulting in a $43 million loss on extinguishment. They also have $800 million in convertible notes maturing in September 2020. The company was in compliance with its financial covenants for its revolving credit facility.