The FINANCIAL — Motorola Solutions, Inc. on August 3 reported its earnings results for the second quarter of 2017.
SUPPORTING QUOTE
“Q2 was an outstanding quarter of revenue and EPS growth driven primarily by our land mobile radio (LMR) business,” said Greg Brown, chairman and CEO of Motorola Solutions. “Additionally, I’m pleased with our strong backlog position and recent acquisitions that provide the foundation for continued success.”
Revenue – Sales increased 5 percent driven by the Americas region. Products segment sales grew 6 percent with growth in every region, driven primarily by P25 LMR systems. The Services segment grew 3 percent driven by the Americas, with global Managed & Support Services growth of 3 percent despite $20 million of Airwave currency headwinds.
Operating margin – GAAP operating margin was 17.2 percent of sales, compared with 15.7 percent in the year-ago quarter. The improvement reflects higher sales volume and lower other costs. Non-GAAP operating margin was 21.9 percent of sales, compared with 22.7 percent in the year-ago quarter. As expected, the sales increase was offset by lower gross margin associated with higher systems mix in North America, as well as Airwave currency headwinds.
Cash flow – The company generated $173 million in operating cash, a decrease of $119 million from the year-ago quarter. Free cash flow2 was $120 million, down $81 million. Cash flow for the quarter was down due to timing of higher working capital primarily associated with the implementation of a new ERP system. Year-to-date operating cash flow and free cash flow were higher than the prior year driven by higher earnings.
Capital Allocation – The company ended the quarter with cash and cash equivalents of $805 million and a net debt position of approximately $3.7 billion3. The company repurchased approximately $80 million of its common stock and paid approximately $77 million in cash dividends. Additionally, the company announced the acquisition of Airbus DS Communications (Plant Holdings, Inc.), strengthening its command center software portfolio.
Backlog – The company ended the quarter with $8.5 billion of backlog, up $265 million from the year-ago quarter. Products segment backlog is up 15 percent or $204 million, and Services is up 1 percent or $61 million. LMR demand led by the Americas continues to drive the backlog growth.
KEY HIGHLIGHTS
Strategic wins and awards
$160 million for a 10-year Managed & Support Services agreement in Canada
$43 million for P25 devices in a major U.S. city
$40 million for P25 system in Broward County, Florida
$24 million for P25 system with a large utility in the northeastern U.S.
$19 million for P25 system covering three Kentucky counties that includes a 10-year Managed & Support Services agreement
$10 million for P25 devices in Australia
Innovation and investments in growth
Announced acquisition of Airbus DS Communications (Plant Holdings, Inc.), strengthening the company’s command center software portfolio. Airbus DS Communications is a leading provider in North America of command center software for emergency call-handling
Certified Public Safety LTE device LEX F10 for the AT&T FirstNet network
Delivered 1,000th TETRA digital radio system and 25,000th base station
BUSINESS OUTLOOK
Third-quarter 2017 – Motorola Solutions expects revenue growth of 3 to 4 percent compared with the third quarter of 2016. The company expects non-GAAP earnings in the range of $1.36 to $1.41 per share.
Full-year 2017 – The company now expects revenue growth of approximately 3 to 4 percent versus the prior outlook of approximately 2 percent, and non-GAAP earnings per share now in the range of $5.20 to $5.30 from the prior outlook of $5.08 to $5.23. This assumes current foreign exchange rates and approximately 170 million fully diluted shares for the full year.
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