Motorola Solutions(MSI) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Q2 revenue grew 12% year-over-year, exceeding guidance, with double-digit growth in both segments and all three technologies [102][138] - GAAP operating earnings were $518 million, or 21.6% of sales, up from 16.7% in the prior year, while non-GAAP operating earnings were $641 million, up 29% from the year-ago quarter [102][139] - Operating cash flow for Q2 was $93 million, up $83 million year-over-year, and free cash flow was $40 million, up $89 million [4] Business Line Data and Key Metrics Changes - In the Software and Services segment, revenue increased by 13%, with operating earnings up 15% [30][140] - The Products and Systems Integration segment saw sales rise by 12%, with operating earnings growing by 52% [101][102] - Ending backlog reached a record $14.3 billion, up 6% year-over-year, driven by strong demand across all technologies [33][138] Market Data and Key Metrics Changes - North America Q2 revenue was $1.6 billion, up 11%, while international revenue was $762 million, up 16% [110] - The company experienced currency headwinds of $23 million during the quarter, while acquisitions contributed an additional $20 million [102] Company Strategy and Development Direction - The company is focusing on enhancing its AI capabilities to improve public safety and enterprise security solutions [8][143] - Continued investment in software and services is expected to drive growth, with a strong pipeline for multiyear contracts [112][111] - The company is leveraging its global installed base to sell more value-added software and services [112] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand drivers for public safety and enterprise security, indicating a healthy business environment [39][146] - The company raised its full-year guidance for revenue and earnings per share, reflecting robust customer demand and a strong backlog [3][104] - Management noted that the funding environment for public sector remains strong, benefiting from increased tax receipts due to inflation [52][146] Other Important Information - Moody's upgraded the company's credit rating from Baa3 to Baa2, highlighting the strength of its balance sheet and liquidity [6] - The company anticipates approximately $1.9 billion in operating cash flow for the full year, with consistent cash flow linearity expected [4] Q&A Session All Questions and Answers Question: Clarification on expenses related to Airwave accounting - Management clarified that the accounting treatment for Airwave will result in an $80 million reduction in revenue for the back half of the year, but they remain confident in their overall business performance [9][145] Question: Insights on public sector funding and its evolution - Management indicated that the funding environment for public sector remains strong, with various tax streams benefiting from inflation, which has led to increased tax receipts [51][52] Question: Expectations for margins and profitability - Management expects to see continued margin expansion, with a projected $60 million benefit from lower broker fees in 2024 [42][119] Question: Status of the integration of Rave Wireless with VESTA - Management confirmed that the integration of Rave with VESTA is progressing well, enhancing public safety capabilities and driving demand in the education sector [171]