10-QPeriod: Q1 FY2020

Motorola Solutions, Inc. Quarterly Report for Q1 Ended Mar 28, 2020

Filed May 8, 2020For Securities:MSI

Summary

Motorola Solutions, Inc. (MSI) reported steady net sales of $1.66 billion for the first quarter of 2020, flat year-over-year. However, the company demonstrated improved profitability with net earnings attributable to the company increasing to $197 million ($1.12 per diluted share) from $151 million ($0.86 per diluted share) in the prior year's quarter. This growth was driven by a strong performance in the Software and Services segment, which saw a 13% increase in net sales and significant operating margin expansion, offsetting a 7% decline in the Products and Systems Integration segment. The company also managed its expenses effectively, with operating earnings rising to $259 million. Despite the overall solid financial results, the report was filed in May 2020, reflecting the early impact of the COVID-19 pandemic. Management highlighted the uncertainty and potential impacts on the Products and Systems Integration segment, particularly in commercial radio, while expecting resilience in the Software and Services segment. The company proactively bolstered its liquidity by drawing $800 million from its revolving credit facility as a precautionary measure. Management affirmed its commitment to returning capital to shareholders through share repurchases ($253 million) and dividends ($109 million).

Financial Highlights

55 data points
Beta

Revenue

$1.66B

47.6% Gross Margin

Net Income

$197.00M

11.9% Net Margin

EPS (Diluted)

$1.12

Total Assets

$10.72B

Cash & Equivalents

$1.67B

Free Cash Flow

$308.00M

Financial Statements
Beta
Revenue$1.66B
Cost of Revenue$868.00M
Gross Profit$787.00M
R&D Expenses$168.00M
SG&A Expenses$341.00M
Operating Income$259.00M
Interest Expense$55.00M
Net Income$197.00M
EPS (Basic)$1.15
EPS (Diluted)$1.12
Shares Outstanding (Basic)170.60M
Shares Outstanding (Diluted)175.90M

Key Highlights

  • 1Net sales remained flat at $1.66 billion, with a 13% increase in Software and Services offsetting a 7% decrease in Products and Systems Integration.
  • 2Net earnings attributable to Motorola Solutions, Inc. rose to $197 million ($1.12 per diluted share) from $151 million ($0.86 per diluted share) in the prior year quarter.
  • 3Operating earnings increased by 13% to $259 million, indicating improved profitability.
  • 4The company proactively drew $800 million from its revolving credit facility to enhance liquidity amidst COVID-19 uncertainty.
  • 5Share repurchases totaled $253 million and dividends paid amounted to $109 million during the quarter, demonstrating a commitment to shareholder returns.
  • 6The company recorded $18 million in reorganization charges related to employee separation, impacting the Products and Systems Integration segment more significantly.
  • 7A significant gain of $50 million was recognized from the sale of a European manufacturing facility, positively impacting 'Other charges'.

Frequently Asked Questions

The report was filed in May 2020, reflecting the early stages of the pandemic. Management noted potential impacts on the Products and Systems Integration segment, particularly commercial radio, due to reduced demand and delays with state and local customers. Conversely, the Software and Services segment was expected to be more resilient due to its recurring nature and strong backlog. The company took proactive measures, including drawing $800 million from its credit facility, to ensure liquidity and business continuity.

The Products and Systems Integration segment experienced a 7% decrease in net sales, largely due to lower demand for PCR Devices. In contrast, the Software and Services segment showed robust growth, with a 13% increase in net sales, driven by maintenance, managed services, video security, and command center software. This segment also saw significant operating margin expansion, contributing positively to overall company profitability.

The company demonstrated strong operating cash flow of $308 million, an increase from the prior year. During the quarter, Motorola Solutions repurchased $253 million of its common stock and paid $109 million in dividends, underscoring its commitment to returning capital to shareholders. The company also maintained a healthy available repurchase authority of $1.0 billion.

Motorola Solutions announced a jury verdict in its favor in a trade secret theft and copyright infringement case against Hytera Communications Corporation Limited, awarding $764.6 million in damages. Hytera subsequently filed a motion for a new trial. While the financial impact of this verdict is still developing, it represents a significant legal development for the company. The report also noted $15 million in additional Hytera-related legal expenses impacting operating earnings in the Products and Systems Integration segment.