Motorola Solutions Reports Third-Quarter Financial Results
Friday, November 02, 2018 | Comments

Motorola Solutions reported its earnings results for the third quarter of 2018. Sales increased $217 million, or 13 percent from the year-ago quarter, driven by growth in the Americas and Europe, Middle East and Africa (EMEA). Asia-Pacific revenues decreased 1 percent.

About $145 million of revenue growth was related to acquisitions, and $19 million was related to the adoption of accounting standard ASC 606. The products and systems integration segment increased 10 percent, driven by the Americas and EMEA. The services and software segment grew 22 percent with growth in all regions.

During an earnings call, Motorola Solutions President and CEO Greg Brown said Motorola anticipates signing final contracts for the U.K. Airwave and Emergency Services Network (ESN) extensions by year-end, echoing what a Home Office official said last month. Brown said the Airwave three-year extension contract is worth about $1.45 billion, and ESN’s impact on 2019 results will be “reasonably modest.”

When questioned on the declining Asia-Pacific revenues, Brown said Australia leads the firm’s Asia-Pacific strategy, while China represents 2 percent of its overall revenue. Motorola has no manufacturing or product development in China, only sales and support, he said.

GAAP operating margin was 15.8 percent of sales, compared with 21.1 percent in the year-ago quarter. The decline was primarily due to higher operating expenses related to acquisitions and an increase to an existing environmental reserve related to a legacy business, partially offset by higher gross margins in services and software.

Operating cash flow was $338 million compared with $270 million of operating cash generated in the year-ago quarter. Free cash flow was $292 million, compared with $185 million of free cash flow generated in the year-ago quarter. Cash flow for the quarter increased on higher earnings, improved working capital and lower capital expenditures.

The company paid $84 million in cash dividends. From a debt perspective, the company repaid the remaining $300 million on the revolving credit facility ahead of schedule; $200 million was repaid during the quarter, and $100 million was repaid subsequent to the quarter end. The company also repurchased 20 percent of the Silver Lake convertible note for $369 million; the $200 million of principal was repaid with new senior unsecured debt and the $169 million premium was paid in cash.

The company ended the quarter with backlog of $9.5 billion, up $572 million from the year-ago quarter. Products and systems integration segment backlog was up 9 percent or $277 million, and services and software was up 5 percent or $295 million. LMR demand led by the Americas continues to drive backlog growth, executives said.

"Q3 was another strong quarter of revenue and earnings growth,” said Greg Brown, chairman and CEO of Motorola Solutions. “Our overall business performance, along with our record Q3 backlog, provides solid momentum moving forward.”

The results highlighted a more than $50 million TETRA system upgrade in Europe and Project 25 (P25) systems and device orders in Indianapolis; Austin; and Augusta, Georgia.

For the fourth quarter, Motorola Solutions expects revenue growth of about 13.5 percent compared with the fourth quarter of 2017. The company expects non-GAAP earnings in the range of $2.50 to $2.55 per share.

For the full year, Motorola continues to expect revenue growth of about 14.5 percent and now expects non-GAAP earnings per share in the range of $7 to $7.05, up from the prior guidance of $6.79 to $6.89.

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