Motorola Solutions Releases Third-Quarter Financial Results
Friday, November 05, 2021 | Comments

Motorola Solutions reported its earnings results for the third quarter of 2021.

"Q3 was another excellent quarter, highlighted by double-digit revenue growth and strong operating margin expansion in both segments," said Motorola Chairman and CEO Greg Brown. “Our Q3 record-ending backlog and continued business momentum position us well to finish the year with record sales, earnings, and cash flow.”

Sales were $2.1 billion, up 13% from the year-ago quarter driven by growth in both North America and internationally. Revenue from acquisitions was $15 million and currency tailwinds were $25 million in the quarter. The products and systems integration segment grew 14%, driven by growth in LMR and video security. The software and services segment grew 11%, driven by growth in LMR services, video security and command center software.

Generally accepted accounting principles (GAAP) operating margin was 21.4% of sales, up from 18.9% in the year-ago quarter. Non-GAAP operating margin was 26.3% of sales, up from 24.8% in the year-ago quarter. The increase in both GAAP and non-GAAP operating margins was primarily due to higher sales, higher gross margin and improved operating leverage in both segments. GAAP operating margin was also positively impacted by lower reorganization charges in the current quarter as compared to the year-ago quarter.

The GAAP effective tax rate was 24%, compared to 18% in the year-ago quarter. The non-GAAP effective tax rate was 22.4%, compared to 19.7% in the year-ago quarter. Both the GAAP and non-GAAP tax rates were higher in the current quarter primarily due to higher discrete benefits in the year-ago quarter from favorable U.S. return-to-provision adjustments.

Operating cash flow was $376 million, compared to $392 million in the year-ago quarter. Free cash flow was $315 million, compared to $343 million in the year-ago quarter. Both the operating cash flow and free cash flow for the quarter decreased primarily due to an increase in working capital, partially offset by higher earnings. Year-to-date operating cash flow was $1.1 billion, up $225 million compared to last year, and free cash flow was $959 million, up $201 million compared to last year. The increase in year-to-date operating cash flow and free cash flow was primarily driven by higher earnings, partially offset by higher cash taxes paid in the current year.

During the quarter, the company repurchased $137 million of shares, paid $120 million in cash dividends and incurred $61 million of capital expenditures. Additionally, the company closed the acquisition of Openpath for $297 million, net of cash acquired, and invested $50 million in equity securities of Evolv Technologies. Subsequent to quarter end, the company acquired Envysion, a provider of enterprise video security and business analytics for $124 million, net of cash acquired.

The company ended the quarter with record third-quarter backlog of $11.4 billion, up 7%, or $710 million, from the year-ago quarter. Products and systems integration segment backlog was up 24%, or $704 million. The growth was primarily driven by strong LMR demand in both regions. Software and services segment backlog was up $6 million, driven by a $479 million increase in multi-year services and software contracts, partially offset by revenue recognition on Airwave and the Emergency Services Network (ESN).

The company now expects revenue growth of 10% to 10.25%, up from the prior guidance of growth of 9.5% to 10%, and non-GAAP earnings per share (EPS) in the range of $9 to $9.04, up from the prior guidance of $8.88 to $8.98. This assumes current foreign exchange rates, approximately 174 million fully diluted shares and an effective tax rate of approximately 21.5%.

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