The FINANCIAL — Motorola Solutions, Inc. on November 4 reported its earnings results for the third quarter of 2015.
SUPPORTING QUOTE
“Our business showed resilience in the third quarter despite a mixed global economic environment and significant currency headwinds,” said Greg Brown, chairman and CEO of Motorola Solutions. “We delivered a strong quarter of 32 percent earnings per share growth, additional cost reductions and more than $2 billion of capital return. We believe we are well positioned for significant growth in operating earnings and free cash flow per share.”
OTHER SELECTED FINANCIAL RESULTS
Revenue – Sales decreased 1 percent, including $54 million of unfavorable foreign currency impact. Sales grew 3 percent in constant currency terms. These results reflect 5 percent growth in North America, which delivered improvements in both Products and Services sales in state and local governments along with strong performance in the U.S. Federal business. Overall company product sales were flat due to currency headwinds and weakness in the Latin America region. The Services business declined 3 percent primarily due to currency headwinds, lower iDEN revenue and a decline in systems integration revenues in Norway.
Operating margin – GAAP operating margin was 16.2 percent of sales in the third quarter of 2015, compared with 14.4 percent in the third quarter of 2014; non-GAAP operating margin was 20.5 percent of sales, compared with 18.0 percent in the third quarter of 2014, reflecting $39 million in lower operating expenses compared with the third quarter of 2014, due to the company’s cost reduction initiatives, lower pension expense and a stronger dollar.
Taxes – The third quarter of 2015 GAAP effective tax rate was 36 percent. This compares with a tax rate of 56 percent in the third quarter of 2014, which included a $55 million tax expense related to a valuation allowance. The third quarter of 2015 non-GAAP tax rate was 35 percent, compared with a tax rate of 33 percent in the third quarter of 2014. The full-year non-GAAP tax rate is expected to be approximately 33 percent. The full-year cash tax rate3 is expected to be approximately 15 percent.
Cash flow – The company generated $300 million in operating cash from continuing operations during the quarter, reflecting an increase of $415 million over the prior year. Free cash flow was $250 million in the quarter. The increase was largely driven by $397 million in lower pension contributions and improved earnings performance.
Cash and cash equivalents – The company ended the quarter with cash and cash equivalents of $2.2 billion and a net debt position of approximately $2.2 billion4. The company repurchased approximately $2.1 billion of its common stock in the third quarter of 2015 and paid approximately $70 million in cash dividends.
KEY HIGHLIGHTS
Strategic wins
$50 million for a nationwide Project P25 digital land mobile radio (P25) system for the state police force in northern Africa covering approximately 50 sites and more than 5,000 subscribers
$45 million extension to complete the build-out and final phase of a multiyear, statewide network upgrade in the eastern United States
$24 million contract for a P25 system that provides a combined, inter-operable radio solution for the Texas cities of Mesquite, Garland, Rowlett and Sachse covering nearly 400,000 people
Multiple U.S. Smart Public Safety Solutions wins including computer-aided dispatch, Next Gen 911, and expansion of Intelligence Led Public Safety solutions
Innovation and investments in growth
Launched the company’s first three-in-one combination body-worn video camera, radio speaker and microphone, and new, cloud-based content management system. The end-to-end video solution, the Si500/Si300 and CommandCentral Vault, combines the company’s secure, digital evidence management software with voice communications, body-worn video, voice recording and emergency alerting delivered in one compact device.
Growing new product revenue well ahead of expectations with the launch of the APX 8000 radio. The enhanced functionality of being a multiband device with Wi-Fi and Bluetooth enables personal area networks that access the Internet of Things and serves as a platform for future APX devices.
Leading public safety LTE trials with multiple international police forces in every region to provide high-speed broadband capabilities and securely distribute situational-aware content to and from officers on the front lines with command centers, utilizing interoperability between LTE and land-mobile radio (LMR) networks enabled by Motorola Solutions WAVE technology, third-party mobile applications, broadband devices and video.
BUSINESS OUTLOOK
Fourth quarter 2015 – Motorola Solutions expects a revenue decline of 6 to 8 percent compared with the fourth quarter of 2014. This assumes a $65 million5 unfavorable currency impact, which translates to a revenue decline of 3 to 5 percent in constant currency. The company expects non-GAAP earnings per share from continuing operations in the range of $1.45 to $1.50 per share. This outlook is driven primarily by further weakness in Latin America and incremental currency pressure.
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