The FINANCIAL — Motorola Solutions, Inc. on August 4 reported its earnings results for the second quarter of 2016.
“Q2 was a strong quarter demonstrated by our growth in earnings, cash flow and backlog,” said Greg Brown, chairman and CEO of Motorola Solutions. “I am pleased with our progress heading into the second half of the year.”
The company also announced that its board of directors has approved a $2 billion increase to the share repurchase program, raising the total authorization since July 2011 to $14 billion. Under the company’s previously authorized $12 billion share repurchase program, approximately $400 million remained at the end of the second quarter of 2016. The company may continue to repurchase shares from time to time in the open market or in other privately negotiated transactions, subject to market conditions, according to Motorola.
OTHER SELECTED FINANCIAL RESULTS
Revenue – Sales increased 5 percent, including $146 million in sales associated with the Airwave acquisition. As expected, Products segment sales declined 8 percent primarily driven by weakness in Latin America, Europe and China. The Services segment grew 26 percent with the addition of Airwave, and posted growth of 4 percent in organic managed and support services. Excluding Airwave, the Services segment declined 4 percent due to lower systems integration revenues associated with the completion of a large project in Europe.
Operating margin – GAAP operating margin was 15.7 percent of sales, compared with 18.6 percent in the year-ago quarter, reflecting higher amortization and restructuring charges. Non-GAAP operating margin was 22.7 percent of sales, compared with 19.0 percent in the year-ago quarter, driven by higher sales and $31 million in lower operating expenses compared with the second quarter of 2015.
Taxes – The GAAP effective tax rate was 35 percent, compared with 30 percent in the year-ago quarter. The non-GAAP tax rate was 32 percent, compared with 35 percent in the year-ago quarter. The full-year non-GAAP tax rate is expected to be approximately 33 percent.
Cash flow – The company generated $292 million in operating cash from continuing operations, reflecting an increase of $143 million over the prior year, driven by higher earnings and improved working capital. Free cash flow2 was $201 million.
Cash and cash equivalents – The company ended the quarter with cash and cash equivalents of $1.5 billion and a net debt position of $3.5 billion3. The company repurchased approximately $555 million of its common stock in the quarter and paid approximately $72 million in cash dividends.
Backlog – Ending backlog is $8.2 billion, up $2.2 billion from the year ago period, driven by the addition of $1.6 billion from Airwave and approximately $600 million of organic managed and support services. Products backlog was up $64 million from the year-ago period.
$200 million award for a multi-county, P25 ASTRO system in the Richmond, Virginia, region
$44 million contract for P25 ASTRO system and subscribers with a large U.S. utility
$19 million service extension with an Australian customer
Innovation and investments in growth
Introduced WAVE 7000 system that enhances work group communications with a redundant, high-availability push-to-talk capability that links millions of users regardless of device
Facilitated TETRA Interop field trial with police in Belgium, the Netherlands and Germany to test cross-border, multi-network interoperability
Introduced ST7000 small TETRA radio with high-quality audio and a touch screen that appeals to customer-facing staff and executives
Announced partnership with Singapore Technologies Electronics to accelerate development of specialized technologies for high-security, mission-critical broadband, cybersecurity solutions and purpose-built applications
Received unconditional clearance for acquisition of Airwave from the United Kingdom’s Competition and Markets Authority
Third-quarter 2016 – Motorola Solutions expects a revenue increase of 6 to 7 percent compared with the third quarter of 2015, which assumes approximately $130 million in revenues associated with the Airwave acquisition. The company expects non-GAAP earnings per share from continuing operations in the range of $1.17 to $1.22 per share.
Full-year 2016 – The company continues to expect revenue to increase 5 to 7 percent and non-GAAP earnings per share from continuing operations in the range of $4.45 to $4.65 per share.