Motorola Solutions Reports 2018 Fourth-Quarter, Full-Year Results
Friday, February 08, 2019 | Comments

Motorola Solutions reported its earnings results for the fourth quarter and full-year 2018.

Fourth-quarter sales were $2.3 billion, up $297 million, or 15 percent from the year-ago quarter, driven by growth in the Americas and European, Middle East and Asia (EMEA). About $159 million was related to acquisitions, and $25 million was related to the adoption of ASC 606 accounting. The products and systems integration segment grew 16 percent, driven by the Americas and EMEA. The services and software segment grew 12 percent with growth in all regions.

GAAP operating margin was 22.9 percent of sales, compared with 25.7 percent in the year-ago quarter. The decline was primarily because of costs related to the closure of certain supply chain operations in Europe and acquisition-related operating expenses. Higher gross margins were offset by higher operating expenses related to acquisitions.

Tax rates for the fourth quarter of 2018 were favorably affected by the ongoing rate reduction and by other provisional adjustments as a result of the U.S. Tax Cuts and Jobs Act of 2017.

Operating cash flow was $812 million, compared with $761 million of operating cash generated in the year-ago quarter driven primarily by higher earnings. Free cash flow was $743 million, compared with $740 million in the year-ago quarter on higher earnings partially offset by higher capital expenditures related primarily to the Airwave extension.

The company paid $85 million in cash dividends, repurchased $66 million of common stock and repaid the remaining $100 million on the revolving credit facility.

The company ended the quarter with backlog of $10.6 billion, up $988 million from the year-ago quarter inclusive of a $205 million unfavorable currency change. Services and software backlog was up 18 percent or $1.1 billion primarily due to growth in the Americas and the Airwave contract extension through the end of 2022. Products and systems integration backlog was down $116 million primarily on two large system deployments in the Middle East and Africa. Products and system integration backlog grew in the Americas and Asia Pacific.

For full-year 2018, sales were $7.3 billion, up $963 million, or 15 percent driven by growth in the Americas and EMEA. About $507 million of revenue growth was related to acquisitions, and $83 million was related to the adoption of ASC 606. The products and systems integration segment increased 13 percent driven by the Americas and EMEA. The services and software segment grew 20 percent with growth in all regions.

GAAP operating margin was 17.1 percent of sales, compared with 20.1 percent in the prior year driven primarily by costs related to the closure of certain supply chain operations in Europe, an increase to an existing environmental reserve related to a legacy business and higher expenses related to acquisitions.

Operating cash flow was $1.1 billion, compared with $1.3 billion in the prior year. Excluding a voluntary $500 million debt-funded U.S. pension contribution in quarter one, operating cash flow was $1.575 billion. Free cash flow was $878 million, compared with $1.1 billion in the prior year. Excluding the U.S. pension contribution in quarter one, free cash flow was $1.4 billion. The higher cash flow, excluding the U.S. pension contribution, was driven primarily by higher earnings.

The company repurchased $132 million of its common stock, paid $337 million in cash dividends and invested $1.2 billion in acquisitions. The company issued $500 million in senior unsecured debt to make a $500 million voluntary contribution to the U.S. pension plan in quarter one. Additionally, the company entered into a $400 million term loan and borrowed $400 million under the revolving credit facility to complete the Avigilon acquisition in in the first quarter. The credit was paid off throughout the year. The company also repurchased 20 percent of the Silver Lake convertible notes for $369 million in the third quarter, of which $200 million of principal was repaid with new senior unsecured debt in the fourth quarter.

“From strong organic revenue growth and cash generation to record EPS (earnings per share) and backlog, we delivered an outstanding 2018, capped by an excellent fourth quarter,” said Greg Brown, chairman and CEO, Motorola Solutions.

Motorola highlighted the following services and software wins:
• $1.1 billion contract extension through 2022 for the Airwave network in the U.K.
• $71 million services award from Maricopa County, Arizona
• $26 million next-generation 9-1-1 (NG 9-1-1) core services contract in North America
• $16 million services award in Australia

The company also highlighted the following Project 25 (P25) contracts:
• $47 million P25 order with Snohomish County, Washington
• $24 million P25 order with Ingham County, Michigan
• $16 million P25 order with Riverside County, California

In the first quarter 2019, Motorola Solutions expects revenue growth of about 11 percent compared with the first quarter of 2018. The company expects non-GAAP earnings in the range of $1.11 to $1.16 per share. For the full-year 2019, the company expects revenue growth of about 6 to 7 percent and non-GAAP earnings per share in the range of $7.55 to $7.70.

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