Motorola Solutions(MSI) - 2025 Q2 - Quarterly Results

Q2 2025 Financial Results Overview Motorola Solutions achieved record Q2 2025 financial results, driven by strong segment performance and increased full-year guidance Q2 2025 Performance Highlights Motorola Solutions achieved record Q2 revenue and earnings, with total sales growing 5% to $2.8 billion and non-GAAP EPS rising 10% to $3.57 Q2 2025 Key Financial Results (in millions, except EPS) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Sales | $2,765 | $2,628 | 5% | | GAAP Operating Earnings | $692 | $644 | 7% | | GAAP EPS | $3.04 | $2.60 | 17% | | Non-GAAP Operating Earnings | $818 | $758 | 8% | | Non-GAAP EPS | $3.57 | $3.24 | 10% | - The Software and Services segment was the primary growth driver, with sales up 15%, while the Products and Systems Integration segment sales remained flat[2][3] - Operating cash flow increased by $92 million year-over-year to $272 million[3] - Ending backlog grew by $150 million to $14.1 billion, driven by record Q2 orders[3][5] - Subsequent to the quarter, the company acquired Silvus Technologies for $4.4 billion in upfront consideration[3][5] Detailed Financial Analysis The company's backlog reached $14.1 billion, driven by Software and Services, while operating margins expanded and capital was returned through buybacks and dividends Backlog by Segment (vs. Year-Ago) | Segment | Change (Amount, in billions/millions) | Change (%) | Driver | | :--- | :--- | :--- | :--- | | Software and Services | +$1.0 billion | +11% | Strong demand across all technologies | | Products and Systems Integration | -$902 million | -21% | Strong LMR shipments | - The acquisition of Silvus for $4.4 billion was primarily funded through $2 billion of new long-term senior notes and $1.5 billion of new term loans[5] - Capital allocation in Q2 included $218 million in share repurchases and $182 million in dividend payments[6] Q2 2025 Operating Margin Performance | Margin Type | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | GAAP Operating Margin | 25.0% | 24.5% | +50 bps | | Non-GAAP Operating Margin | 29.6% | 28.8% | +80 bps | Business Outlook and Achievements Motorola Solutions secured key contracts and raised its full-year 2025 financial guidance following strong Q2 performance Notable Wins and Achievements The company secured significant Q2 contracts in both Software and Services and Products and Systems Integration segments, demonstrating strong demand - Software and Services: Secured significant orders including a $44 million Command Center deal for a U.S. state/local customer and a $29 million P25 system upgrade for the City of Chicago[10] - Products and Systems Integration: Won major contracts such as an $82 million P25 system upgrade for a tri-county system in the St. Louis region and a $30 million P25 device order for the City of Miami[10] Updated Business Outlook Motorola Solutions raised its full-year 2025 guidance for revenue, earnings, and operating cash flow, incorporating the Silvus acquisition Q3 2025 Guidance | Metric | Guidance | | :--- | :--- | | Revenue Growth | Approx. 7% YoY | | Non-GAAP EPS | $3.82 to $3.87 | Full-Year 2025 Updated Guidance | Metric | New Guidance | Prior Guidance | | :--- | :--- | :--- | | Revenue | ~$11.65 billion (7.7% growth) | ~$11.4 billion (5.5% growth) | | Non-GAAP EPS | $14.88 to $14.98 | $14.64 to $14.74 | | Operating Cash Flow | $2.75 billion | Not specified (increased) | - The full-year outlook includes an expected $185 million of revenue from the Silvus acquisition[8] Other Disclosures The company addresses macroeconomic challenges, clarifies non-GAAP financial reporting, and outlines forward-looking statement disclaimers Macroeconomic Environment The company navigates a complex global tariff environment, expecting to mitigate anticipated increases in material and component costs in 2025 - The company is observing elevated volatility and uncertainty around the global supply chain due to the current global tariff environment[11] - Motorola Solutions is working with its global supply base to mitigate exposure to tariff risks and expects to substantially mitigate anticipated increases in material and component costs in 2025[12] Use of Non-GAAP Financial Information Motorola Solutions utilizes non-GAAP financial measures to provide clearer insights into core operating performance by excluding specific non-recurring or non-cash items Highlighted Items and Exclusions The company excludes specific items like share-based compensation and intangible asset amortization from non-GAAP results for a clearer view of core business performance - Share-based compensation is excluded because it is a significant non-cash expense, although it is a key incentive for employees[26] - Intangible assets amortization is excluded as it is a non-cash expense significantly affected by the timing and size of acquisitions[27] Hytera-Related Legal Expenses The company provides an update on Hytera litigation, excluding related legal expenses and gains from non-GAAP results since 2020 - In November 2024, approximately $61 million held in escrow from Hytera royalty payments was released to the company and recorded as a gain[20] - Hytera made additional partial judgment payments totaling approximately $20 million in March and April 2025, which were also recorded as gains[23] - As of 2020, the company excludes Hytera-related legal expenses and any associated gains from its non-GAAP operating income to better align with how management evaluates ongoing business performance[25] Forward-Looking Statements The earnings release contains forward-looking statements, including financial outlooks, subject to various risks and uncertainties that could impact actual results - Forward-looking statements include the financial outlook for Q3 and the full-year 2025, and the expected impact of global tariffs and supply chain volatility[29] - The company cautions that it cannot guarantee future results and that statements are subject to numerous risks, including global economic conditions, competition, supply chain disruptions, and cybersecurity threats[29] Financial Statements and Reconciliations This section presents the company's consolidated financial statements and detailed reconciliations of GAAP to non-GAAP measures Consolidated Statements of Operations The statements detail the company's revenues, costs, and expenses, showing Q2 2025 net income of $513 million, up from $443 million in Q2 2024 Q2 Statement of Operations Highlights (in millions) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net sales | $2,765 | $2,628 | | Gross margin | $1,413 | $1,339 | | Operating earnings | $692 | $644 | | Net earnings attributable to MSI | $513 | $443 | Consolidated Balance Sheets The balance sheet as of June 28, 2025, shows total assets increased to $16.4 billion, with long-term debt rising to $7.7 billion Balance Sheet Highlights (in millions) | Line Item | June 28, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $3,206 | $2,102 | | Total assets | $16,412 | $14,595 | | Long-term debt | $7,661 | $5,675 | | Total stockholders' equity | $1,968 | $1,703 | Consolidated Statements of Cash Flows Net cash from operating activities for Q2 2025 significantly increased to $272 million from $180 million in the prior year Q2 Cash Flow Highlights (in millions) | Activity | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $272 | $180 | | Net cash used for investing activities | ($60) | ($71) | | Net cash from (used for) financing activities | $1,376 | ($231) | Non-GAAP Reconciliations This section provides detailed reconciliations from GAAP to non-GAAP financial measures, including free cash flow, net earnings, EPS, operating earnings, and organic revenue - Free cash flow for Q2 2025 was $224 million, double the $112 million from Q2 2024[47] - The reconciliation from GAAP EPS ($3.04) to Non-GAAP EPS ($3.57) for Q2 2025 involved a net positive adjustment of $0.53 per share, primarily related to share-based compensation and intangible asset amortization[52] - Organic revenue, which excludes sales from recent acquisitions, grew 4% in Q2 2025[61]