Motorola Solutions(MSI) - 2024 Q4 - Annual Results

Financial Performance Overview Full-Year 2024 Financial Results Motorola Solutions reported record full-year 2024, with sales increasing 8% to $10.8 billion, GAAP operating earnings growing 17% to $2.7 billion, Non-GAAP EPS rising 16% to $13.84, and record operating cash flow of $2.4 billion - The company achieved record full-year sales, operating earnings, and cash flow in 2024[1][2] Full-Year 2024 vs. 2023 Performance | Metric | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Sales | $10,817M | $9,978M | 8% | | GAAP Operating Earnings | $2,688M | $2,294M | 17% | | GAAP EPS | $9.23 | $9.93 | (7)% | | Non-GAAP Operating Earnings | $3,142M | $2,784M | 13% | | Non-GAAP EPS | $13.84 | $11.95 | 16% | | Operating Cash Flow | $2,400M | $2,044M | 17% | - Full-year sales growth was driven by North America, partially offset by lower revenue from the U.K. Home Office; excluding the U.K. Home Office, Software and Services grew 13%[7] Fourth Quarter 2024 Financial Results In Q4 2024, Motorola Solutions saw sales grow 6% year-over-year to $3.0 billion, with GAAP EPS increasing 3% to $3.56 and Non-GAAP EPS growing 4% to $4.04 Q4 2024 vs. Q4 2023 Performance | Metric | Q4 2024 | Q4 2023 | % Change | | :--- | :--- | :--- | :--- | | Sales | $3,010M | $2,848M | 6% | | GAAP Operating Earnings | $814M | $738M | 10% | | GAAP EPS | $3.56 | $3.47 | 3% | | Non-GAAP Operating Earnings | $916M | $870M | 5% | | Non-GAAP EPS | $4.04 | $3.90 | 4% | - Q4 sales growth was primarily driven by performance in North America, with revenue from acquisitions contributing $37 million[7] - GAAP operating margin increased to 27.0% from 25.9% in the prior year, mainly due to a recovery related to the Hytera litigation[7] Segment Performance For full year 2024, Products and Systems Integration sales grew 10% and Software and Services sales increased 5%, with Software and Services leading Q4 growth at 11% Products and Systems Integration The Products and Systems Integration segment reported a 10% sales increase for the full year to $6.9 billion, driven by LMR and Video Security, with Q4 sales growing 3% to $1.9 billion Products and Systems Integration Performance | Period | Sales | % Change (YoY) | Non-GAAP Operating Margin | | :--- | :--- | :--- | :--- | | Full Year 2024 | $6,883M | 10% | 28.1% | | Q4 2024 | $1,949M | 3% | 30.5% | - Growth in this segment was driven by Land Mobile Radio (LMR) and Video Security and Access Control (Video)[7] Software and Services The Software and Services segment saw full-year sales grow 5% to $3.9 billion, or 13% excluding the U.K. Home Office impact, with Q4 sales increasing 11% to $1.1 billion Software and Services Performance | Period | Sales | % Change (YoY) | Non-GAAP Operating Margin | | :--- | :--- | :--- | :--- | | Full Year 2024 | $3,934M | 5% | 30.8% | | Q4 2024 | $1,061M | 11% | 30.3% | - Full-year growth was partially offset by revenue reduction from the U.K. Home Office; excluding this impact, the segment grew 13%[7] Backlog and Cash Flow The company ended 2024 with a record backlog of $14.7 billion, up 3%, including a 14% increase in Software and Services backlog, and generated record operating cash flow of $2.4 billion - Ending backlog reached a record $14.7 billion, up 3% year-over-year[4] - Software and Services backlog grew 14% ($1.3 billion), while Products and Systems Integration backlog decreased 17% due to strong LMR shipments[8] Full-Year 2024 Cash Flow (in millions) | Metric | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Operating Cash Flow | $2,391 | $2,044 | 17% | | Free Cash Flow | $2,134 | $1,791 | 19% | Capital Allocation In 2024, Motorola Solutions allocated capital to shareholder returns, strategic growth, and debt management, including $654 million in dividends, $244 million in stock repurchases, and $282 million for acquisitions - In 2024, the company paid $654 million in dividends and repurchased $244 million of its common stock[7] - Completed four acquisitions for $282 million, net of cash acquired[7] - Settled the Silver Lake convertible debt for $1.59 billion in cash and issued $1.3 billion in new long-term debt; the company also received credit rating upgrades to BBB from S&P and Fitch[7][8] Business Outlook First Quarter 2025 Outlook For Q1 2025, Motorola Solutions anticipates revenue growth between 5.0% and 5.5% and Non-GAAP EPS in the range of $2.98 to $3.03 per share Q1 2025 Guidance | Metric | Guidance | | :--- | :--- | | Revenue Growth | 5.0% to 5.5% | | Non-GAAP EPS | $2.98 to $3.03 | - The Q1 outlook assumes approximately $25 million in foreign exchange headwinds and a non-GAAP effective tax rate of about 21.0%[12] Full-Year 2025 Outlook For full year 2025, the company projects revenue growth of approximately 5.5% and expects Non-GAAP EPS to be between $14.64 and $14.74 per share Full-Year 2025 Guidance | Metric | Guidance | | :--- | :--- | | Revenue Growth | Approx. 5.5% | | Non-GAAP EPS | $14.64 to $14.74 | - The full-year outlook assumes approximately $120 million in foreign exchange headwinds and a non-GAAP effective tax rate of about 23.0%[12] Business and Operational Highlights Notable Wins & Achievements in Q4 2024 During Q4, Motorola Solutions secured significant contracts across both segments, including a $329 million LMR services renewal in Melbourne and multiple large P25 system and device orders - Software and Services Wins: - $329 million ten-year LMR services renewal for Melbourne, Australia[12] - $160 million five-year LMR services renewal for Norway's nationwide public safety network[12] - $40 million Command Center order from the Scottish Fire Service[12] - Products and Systems Integration Wins: - $53 million P25 device order for a U.S. state and local customer[12] - $52 million P25 system and device order for a Canadian customer[12] - $36 million P25 device order for Broward Sheriff's Office, FL[12] Strategic Acquisitions The company continued its strategy of targeted acquisitions, agreeing to acquire Theatro post-quarter end and acquiring 3tc Software for $22 million during Q4 to enhance its portfolio - Subsequent to quarter end, the company entered into a definitive agreement to acquire Theatro, a maker of AI and voice-powered communication software[4] - During Q4, the company acquired 3tc Software, an international provider of Command Center software solutions, for $22 million[7] Legal and Regulatory Matters U.K. Home Office Update The legal dispute regarding the Airwave network contract continues, with the U.K. Court of Appeal denying an appeal, the contract extended to December 2029, and the company challenging the extension decision - On January 30, 2025, the U.K. Court of Appeal denied the company's application for permission to appeal the judgment related to the Airwave Charge Control imposed by the Competition Markets Authority (CMA)[14] - The U.K. Home Office extended the Airwave service contract from December 2026 to December 2029, leading the company to record an additional $748 million in backlog[15] - The company has filed proceedings in the U.K. High Court challenging the contract extension, with a hearing set to commence on April 22, 2025[15] Hytera Litigation Update Significant developments occurred in the Hytera litigation, with the U.S. Court of Appeals affirming damages, the company receiving $61 million from escrow, and Hytera pleading guilty to trade secret theft - On November 26, 2024, approximately $61 million in royalty payments held in escrow was released to the company and recorded as a gain[25][30] - The U.S. Court of Appeals affirmed $407.4 million in damages under the Defend Trade Secrets Act, while remanding other parts of the judgment to the District Court for recalculation and reconsideration[26] - On January 13, 2025, Hytera pleaded guilty to one federal felony count of conspiracy to steal the company's trade secrets in a criminal case brought by the U.S. Department of Justice; sentencing is scheduled for November 6, 2025, and may include restitution paid to Motorola Solutions[29] Financial Statements Consolidated Statements of Operations The Consolidated Statements of Operations show an 8% increase in full-year net sales to $10.8 billion, with gross margin improving to 51.0%, but net earnings decreased to $1.58 billion due to debt extinguishment loss Full-Year Income Statement Highlights (in millions) | Line Item | 2024 | 2023 | | :--- | :--- | :--- | | Net Sales | $10,817 | $9,978 | | Gross Margin | $5,512 | $4,970 | | Operating Earnings | $2,688 | $2,294 | | Net Earnings Attributable to MSI | $1,577 | $1,709 | Consolidated Balance Sheets The balance sheet as of December 31, 2024, reflects total assets of $14.6 billion, an increase from $13.3 billion, with cash and equivalents rising to $2.1 billion and long-term debt increasing to $5.7 billion Balance Sheet Highlights (in millions) | Line Item | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $14,595 | $13,336 | | Cash and cash equivalents | $2,102 | $1,705 | | Goodwill | $3,526 | $3,401 | | Long-term debt | $5,675 | $4,705 | | Total stockholders' equity | $1,703 | $724 | Consolidated Statements of Cash Flows For full year 2024, net cash from operating activities increased 17% to $2.4 billion, while investing activities used $507 million and financing activities used $1.4 billion for debt repayments and shareholder returns Full-Year Cash Flow Summary (in millions) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash from operating activities | $2,391 | $2,044 | | Net cash used for investing activities | ($507) | ($414) | | Net cash used for financing activities | ($1,448) | ($1,295) | | Net increase in cash | $397 | $380 | Non-GAAP Financial Measures and Reconciliations Explanation of Non-GAAP Measures Motorola Solutions uses non-GAAP financial measures like non-GAAP operating earnings and free cash flow to help investors understand core operating performance by excluding items such as share-based compensation and legal expenses - The company provides non-GAAP measurements to help investors better understand core operating performance and enhance period-to-period comparisons[18] - Key exclusions from non-GAAP results include share-based compensation expense, intangible assets amortization expense, and highlighted items like acquisition fees and Hytera-related legal expenses[23][31][32] Key Reconciliations The report provides detailed reconciliations of GAAP to non-GAAP figures, showing full-year 2024 GAAP EPS of $9.23 adjusted to Non-GAAP EPS of $13.84, and GAAP operating earnings of $2.7 billion reconciled to $3.1 billion Full-Year 2024 GAAP to Non-GAAP EPS Reconciliation | Description | Amount (per share) | | :--- | :--- | | GAAP EPS | $9.23 | | Loss from extinguishment of debt | $3.42 | | Share-based compensation | $1.42 | | Intangible assets amortization | $0.89 | | Other adjustments (net) | $0.88 | | Total Non-GAAP adjustments | $4.61 | | Non-GAAP EPS | $13.84 | - Full-year 2024 GAAP operating earnings of $2,688 million were adjusted by $454 million for items like share-based compensation ($243 million) and intangible amortization ($152 million) to arrive at non-GAAP operating earnings of $3,142 million[69]