10-QPeriod: Q3 FY2023

Motorola Solutions, Inc. Quarterly Report for Q3 Ended Jul 1, 2023

Filed August 3, 2023For Securities:MSI

Summary

Motorola Solutions, Inc. (MSI) reported strong financial performance for the second quarter and first half of 2023, demonstrating significant year-over-year growth in net sales and operating earnings. Net sales increased by 12% in Q2 and 13% in the first half, reaching $2.4 billion and $4.6 billion, respectively. This growth was driven by robust performance across both the Products and Systems Integration and Software and Services segments, with particular strength in LMR Communications and Video security solutions, especially in North America and internationally. Profitability also saw a substantial improvement, with operating earnings rising by 45% in Q2 and 54% in the first half, leading to improved operating margins. Diluted earnings per share (EPS) also showed a significant increase, reflecting the strong operational execution. The company continues to benefit from its strategic acquisitions and a growing demand for its integrated public safety and enterprise security solutions. Management highlighted gradual improvements in market conditions, particularly concerning supply chain disruptions, and the positive impact of pricing actions to mitigate inflation. MSI also returned significant capital to shareholders through share repurchases and dividends, underscoring its commitment to shareholder value.

Financial Highlights

53 data points
Beta

Revenue

$2.56B

50.1% Gross Margin

Net Income

$464.00M

18.2% Net Margin

EPS (Diluted)

$2.70

Total Assets

$12.44B

Cash & Equivalents

$910.00M

Free Cash Flow

$807.00M

Financial Statements
Beta
Revenue$2.56B
Cost of Revenue$1.28B
Gross Profit$1.28B
R&D Expenses$215.00M
SG&A Expenses$380.00M
Operating Income$639.00M
Interest Expense$60.00M
Net Income$464.00M
EPS (Basic)$2.78
EPS (Diluted)$2.70
Shares Outstanding (Basic)166.70M
Shares Outstanding (Diluted)171.70M

Key Highlights

  • 1Net sales increased by 12% to $2.4 billion in Q2 2023 and by 13% to $4.6 billion in the first half of 2023, driven by strong performance in both Products and Systems Integration and Software and Services segments.
  • 2Operating earnings surged by 45% to $518 million in Q2 2023 and by 54% to $917 million in the first half of 2023, showcasing enhanced profitability.
  • 3Diluted EPS rose to $2.15 in Q2 2023 and $3.76 in the first half of 2023, up from $1.33 and $2.88 respectively in the prior year periods.
  • 4Gross margin improved significantly, reaching 49.5% in Q2 2023 and 48.9% in the first half of 2023, up from 46.3% and 45.8% in the respective prior year periods, indicating better cost management and pricing power.
  • 5The company returned $364 million to shareholders through share repurchases and $296 million in dividends during the first half of 2023.
  • 6Supply chain conditions showed gradual improvement, aiding in meeting demand, and the company implemented pricing actions to offset inflationary pressures.
  • 7Remaining performance obligations (backlog) stood at $9.4 billion as of July 1, 2023, providing good visibility into future revenue.

Frequently Asked Questions

Revenue growth was driven by increases in both the Products and Systems Integration and Software and Services segments. Specifically, LMR Communications and Video security solutions showed strong performance, supported by growth in both North America and international regions. Acquisitions also contributed to the revenue increase.

The company experienced gradual improvement in market conditions, particularly with supply chain disruptions. To mitigate inflationary pressures, Motorola Solutions took pricing actions on its product and service offerings, which are expected to continue to benefit the company. They are also actively managing inventory levels and focusing on improving their supplier network and engineering alternative designs.

Motorola Solutions reported remaining performance obligations (backlog) of $9.4 billion as of July 1, 2023. Of this, $4.8 billion relates to Products and Systems Integration, with $3.0 billion expected to be recognized in the next twelve months. For the Software and Services segment, $4.6 billion is from unsatisfied performance obligations, with $1.6 billion expected to be recognized in the next twelve months. This provides strong visibility into future revenue.

Motorola Solutions is actively returning capital to shareholders through a combination of share repurchases and dividend payments. In the first half of 2023, the company repurchased $364 million of common stock and paid $296 million in dividends. They also have $921 million remaining under their share repurchase program authority.