Motorola Releases Fourth-Quarter, Full-Year 2019 Results
Friday, February 07, 2020 | Comments

Motorola Solutions reported its earnings results for the fourth quarter and full year of 2019.

“Our strong Q4 results capped another year of record sales, cash flow and backlog,” said Greg Brown, chairman and CEO of Motorola Solutions. “Our momentum, particularly in video security and software and services, positions us well for another strong year.”

Fourth-quarter revenue was $2.4 billion, up $123 million or 5% primarily on the strength in the Americas. Revenue from acquisitions was $82 million and currency headwinds were $17 million. The products and systems integration segment was flat with growth in the Americas and Asia Pacific offset by declines in Europe, the Middle East and Africa (EMEA) related to large LMR deployments in the Middle east and Africa the year before. The software and services segment grew 21%.

Full-year revenue was $7.9 billion, up $544 million, or 7% driven by growth in the Americas. Revenue from acquisitions was $312 million, and currency headwinds were $113 million. The products and systems integration segment grew 5% driven by the Americas. The software and services segment grew 14% driven by growth in the Americas and Europe, the Middle East and Africa (EMEA).

In the fourth quarter, GAAP operating margin was 24.8% of sales compared with 22.9% in the year-ago quarter, driven by higher sales and gross margin in the current quarter and higher costs related to the closure of certain supply chain operations in Europe in the prior year, partially offset by higher operating expenses related to acquisitions. Non-GAAP operating margin was 29.7% of sales, up from 28.8% in the year-ago quarter due to higher sales and gross margins, partially offset by higher operating expenses related to acquisitions.

For the full year, GAAP operating margin was 20% of revenue, compared with 17.1% for the prior year. The increase was primarily driven by higher revenue and gross margin in the current year as well as an increase to an existing environmental reserve related to a legacy business booked in the prior year, partially offset by higher operating expenses related to acquisitions in the current year. Non-GAAP operating margin was 25% of revenue, compared with 23.7% for the prior year, driven by higher revenue and gross margin, partially offset by higher operating expenses related to acquisitions.

The company generated $795 million in operating cash in the fourth quarter, compared with $812 million in the year-ago quarter. Free cash flow was $736 million, compared with $743 million in the year-ago quarter. The year-over-year decline in cash flow was primarily driven by changes in working capital in the current quarter, partially offset by higher operating earnings in the current quarter.

The company generated $1.8 billion in operating cash for the year, up $748 million from the prior year. Free cash flow was $1.6 billion, up $697 million from the prior year. The increase in cash flow was driven by the impact of the $500 million debt funded pension contribution made in Q1 2018 and higher revenue and associated operating earnings in the current year.

The company ended the quarter with record backlog of $11.3 billion, up $659 million from the year-ago quarter. Software and services segment backlog was up 9% or $699 million, primarily driven by growth in the Americas and the extension of the U.K. Emergency Services Network (ESN) contract. Products and system integrations segment backlog was down 1% or $40 million due to declines in EMEA and Asia Pacific, partially offset by growth in the Americas.

The company invested $709 million in acquisitions, paid $379 million in dividends, and repurchased $315 million of its common stock at an average price of $137.35 per share.

Notable wins for the year included:
• $68 million Project 25 (P25) multiyear service contract with state of Victoria, Australia
• $29 million P25 multiyear service contract with the state of Connecticut
• $24 million P25 multiyear service contract with the U.S. Navy
• $8 million for a Command Center Software suite order from Tulare County, California
• $6 million for a Command Center Software suite order from Irvine, California
• $6 million for a CAD system for Atlanta
• $64 million P25 order for the state of Arkansas
• $36 million P25 order for Thurston County, Washington
• $24 million P25 order for Luzerne County, Pennsylvania
• $5 million in fixed video security wins for government customers

The company expects revenue growth of approximately 2% for the first quarter of 2020 compared with the first quarter of 2019. The company expects non-GAAP earnings per share in the range of $1.30 to $1.35 per share. This assumes current foreign exchange rates, approximately 176 million fully diluted shares, and a 20% effective tax rate. The company expects revenue growth of approximately 4% and non-GAAP earnings per share in the range of $8.65 to $8.80 per share. This also assumes current foreign exchange rates, between 176 and 177 million fully diluted shares and a non-GAAP effective tax rate of approximately 23%.

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