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Classified in: Science and technology, Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

 Motorola Solutions Reports Third-Quarter 2020 Financial Results


Motorola Solutions, Inc. (NYSE: MSI) today reported its earnings results for the third quarter of 2020. Click here for a printable news release and financial tables.

"I'm really proud of the way our team continues to perform in this challenging environment, and I'm pleased with our Q3 results highlighted by the growth in software & services and video security," said Greg Brown, chairman and CEO, Motorola Solutions. "I'm encouraged by the momentum of our business, and our continued focus on customers and execution positions us well going forward."

KEY FINANCIAL RESULTS (presented in millions, except per share data and percentages)

 

Q3 2020

Q3 2019

% Change

Sales

$1,868

$1,994

(6)%

GAAP

 

 

 

Operating Earnings

$352

$413

(15)%

% of Sales

18.9 %

20.7 %

 

EPS

$1.18

$1.51

(22)%

Non-GAAP*

 

 

 

Operating Earnings

$463

$509

(9)%

% of Sales

24.8 %

25.5 %

 

EPS

$1.95

$2.04

(4)%

Products and Systems Integration Segment

 

 

 

Sales

$1,163

$1,349

(14)%

GAAP Operating Earnings

$164

$258

(36)%

% of Sales

14.1 %

19.1 %

 

Non-GAAP Operating Earnings*

$219

$300

(27)%

% of Sales

18.9 %

22.2%

 

Software and Services Segment

 

 

 

Sales

$705

$645

9 %

GAAP Operating Earnings

$188

$155

21 %

% of Sales

26.7 %

24.0 %

 

Non-GAAP Operating Earnings*

$244

$209

17 %

% of Sales

34.6 %

32.4 %

 

*Non-GAAP financial information excludes the after-tax impact of approximately $0.77 per diluted share related to share-based compensation, intangible assets amortization expense and highlighted items. Details on these non-GAAP adjustments and the use of non-GAAP measures are included later in this news release.

OTHER SELECTED FINANCIAL RESULTS

NOTABLE WINS AND ACHIEVEMENTS

Software and Services

Products and Systems Integration

BUSINESS OUTLOOK

COVID-19

In response to the evolving COVID-19 pandemic, the company continues to adhere to its plans to keep its employees and customers healthy and safe, as well as ensuring continued operations and business continuity. Safety measures during this outbreak include having the vast majority of employees work remotely, suspending employee travel, withdrawing from certain industry events, increasing cleaning services, encouraging face coverings and using thermal scanning. The company continues to ensure customer continuity by fulfilling several emergency orders, completing remote software maintenance where possible, and continuing to service mission-critical networks on-site as needed to ensure seamless operations. In addition, our supply chain partners remain supportive and continue to do their part to ensure that service levels to the company and its customers remain fulfilled.

The sales teams' engagement with customers, both virtual and in-person, improved during the third quarter. The expectation is for improvement to continue throughout the remainder of 2020. Additionally, the company's engineering teams have adapted its solutions offerings to equip customers with the latest technology in the fight to protect their workplace from the spread of COVID-19. Specifically, in the video security business, the company has adapted its software and hardware offerings to provide analytics for occupancy counting, face mask detection and thermal detection capabilities. Given the prioritization of mission-critical communication solutions, we do not anticipate funding at the state and local levels to have a material, negative effect on expected revenues for the remainder of 2020.

The company has also taken actions in a number of areas to reduce its operating expenses, mostly driven by lower variable compensation, travel costs, contractor spend and reduced real estate footprint to limit the negative effect on operating margins for the year despite the expected reduction of revenue.

CONFERENCE CALL AND WEBCAST Motorola Solutions will host its quarterly conference call beginning at 4 p.m. U.S. Central Time (5 p.m. U.S. Eastern Time) on Thursday, Oct. 29. The conference call will be webcast live at www.motorolasolutions.com/investor.

CONSOLIDATED GAAP RESULTS (presented in millions, except per share data)

A comparison of results from operations is as follows:

 

Q3 2020

Q3 2019

Net sales

$1,868

$1,994

Gross margin

909

 

1,007

 

Operating earnings

352

 

413

 

Amounts attributable to Motorola Solutions, Inc. common stockholders

 

 

Net earnings

205

 

267

 

Diluted EPS

$1.18

$1.51

Weighted average diluted common shares outstanding

173.5

 

176.4

 

HIGHLIGHTED ITEMS

The table below includes highlighted items, share-based compensation expenses and intangible amortization for the third quarter of 2020.

(per diluted common share)

Q3 2020

 

 

GAAP Earnings

$1.18

Highlighted Items:

 

Loss from extinguishment of long-term debt

0.25

 

Intangibles amortization expense

0.24

 

Share-based compensation expenses

0.14

 

Reorganization of business charges

0.06

 

Hytera-related legal expenses

0.02

 

Acquisition-related transaction fees

0.03

 

Fair value adjustments to equity investments

0.02

 

Pelco purchase accounting adjustment

0.01

 

Sale of investments

?

 

Non-GAAP Diluted EPS

$1.95

USE OF NON-GAAP FINANCIAL INFORMATION

In addition to the GAAP results included in this presentation, Motorola Solutions also has included non-GAAP measurements of results. The company has provided these non-GAAP measurements to help investors better understand its core operating performance, enhance comparisons of core operating performance from period to period and allow better comparisons of operating performance to its competitors. Among other things, management uses these operating results, excluding the identified items, to evaluate performance of the businesses and to evaluate results relative to certain incentive compensation targets. Management uses operating results excluding these items because it believes this measurement enables it to make better period-to-period evaluations of the financial performance of core business operations. The non-GAAP measurements are intended only as a supplement to the comparable GAAP measurements and the company compensates for the limitations inherent in the use of non-GAAP measurements by using GAAP measures in conjunction with the non-GAAP measurements. As a result, investors should consider these non-GAAP measurements in addition to, and not in substitution for or as superior to, measurements of financial performance prepared in accordance with generally accepted accounting principles.

Highlighted items: The company has excluded the effects of highlighted items including, but not limited to, acquisition-related transaction costs, tangible and intangible asset impairments, restructuring charges, certain non-cash pension adjustments, legal settlements and other contingencies, gains and losses on investments and businesses, Hytera-related legal expenses, and the income tax effects of significant tax matters, from its non-GAAP operating expenses and net income measurements because the company believes that these historical items do not reflect expected future operating earnings or expenses and do not contribute to a meaningful evaluation of the company's current operating performance or comparisons to the company's past operating performance. For the purposes of management's internal analysis over operating performance, the company uses financial statements that exclude highlighted items, as these charges do not contribute to a meaningful evaluation of the company's current operating performance or comparisons to the company's past operating performance.

Hytera-Related Legal Expenses: On February 14, 2020, the Company announced that a jury in the U.S. District Court for the Northern District of Illinois decided in the Company's favor in its trade secret theft and copyright infringement case against Hytera Communications Corporation Limited of Shenzhen, China; Hytera America, Inc.; and Hytera Communications America (West), Inc. (collectively, "Hytera"). In connection with this verdict, the jury awarded Motorola Solutions $345.8 million in compensatory damages and $418.8 million in punitive damages, for a total of $764.6 million. A motion for a new trial was filed by Hytera in April 2020. The Court denied the motion and upheld the damages awarded to the Company on October 20, 2020, subsequent to the quarter. Other post-trial motions are fully briefed and awaiting ruling, including the Company's motion for a permanent global injunction, as well as the Company's requests for attorneys' fees and increased damages to include post-trial amounts. Hytera America, Inc. and Hytera Communications America (West), Inc. each filed for Chapter 11 bankruptcy protection in May 2020; the Company filed motions to dismiss the bankruptcy proceedings in July 2020. As of the third quarter of 2020, the United States Bankruptcy Court granted a continuance of Hytera's sale motion and the Company's motion to dismiss Hytera's bankruptcy.

Management typically considers legal expenses associated with defending our intellectual property as "normal and recurring" and accordingly, Hytera-related legal expenses were included in both our GAAP and non-GAAP operating income for fiscal years 2017, 2018 and 2019. We anticipate further expenses associated with Hytera-related litigation; however, we believe that these expenses are no longer a part of the "normal and recurring" legal expenses incurred to operate our business. In addition, if any contingent or actual gain associated with the Hytera litigation is recognized in the future, it will be similarly excluded from our non-GAAP operating income. We believe after the jury award, the presentation of excluding both Hytera-related legal expenses and gains related to awards better aligns with how management evaluates our ongoing underlying business performance.

For comparative purposes, $22 million, or $0.10 of earnings per share, net of tax, of Hytera-related legal expense was included in our third quarter 2019 Non-GAAP operating earnings.

Share-based compensation expenses: The company has excluded share-based compensation expenses from its non-GAAP operating expenses and net income measurements. Although share-based compensation is a key incentive offered to the company's employees and the company believes such compensation contributed to the revenue earned during the periods presented and also believes it will contribute to the generation of future period revenues, the company continues to evaluate its performance excluding share-based compensation expenses primarily because it represents a significant non-cash expense. Share-based compensation expenses will recur in future periods.

Intangible assets amortization expense: The company has excluded intangible assets amortization expense from its non-GAAP operating expenses and net earnings measurements, primarily because it represents a non-cash expense and because the company evaluates its performance excluding intangible assets amortization expense. Amortization of intangible assets is consistent in amount and frequency but is significantly affected by the timing and size of the company's acquisitions. Investors should note that the use of intangible assets contributed to the company's revenues earned during the periods presented and will contribute to the company's future period revenues as well. Intangible assets amortization expense will recur in future periods.

Free cash flow: Free cash flow represents operating cash flow less capital expenditures. We believe that free cash flow is also useful to investors as the basis for comparing our performance and coverage ratios with other companies in our industries, although our measure of free cash flow may not be directly comparable to similar measures used by other companies.

Organic revenue: Organic revenue reflects net sales calculated under GAAP excluding net sales from acquired business owned for less than four full quarters. The company believes non-GAAP organic revenue growth provides useful information for evaluating the periodic growth of the business on a consistent basis and provides for a meaningful period-to-period comparison and analysis of trends in the business.

Details of the above items and reconciliations of the non-GAAP measurements to the corresponding GAAP measurements can be found at the end of this press release.

The company has not quantitatively reconciled its guidance for non-GAAP metrics to their most comparable GAAP measure because the company does not provide specific guidance for the various reconciling items as certain items that impact these measures have not occurred, are out of the company's control, or cannot be reasonably predicted. Accordingly, a reconciliation to the most comparable GAAP financial metric is not available without unreasonable effort. Please note that the unavailable reconciling items could significantly impact the company's results.

BUSINESS RISKS

This news release contains "forward-looking statements" within the meaning of applicable federal securities law. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and generally include words such as "believes," "expects," "intends," "anticipates," "estimates" and similar expressions. The company can give no assurance that any actual or future results or events discussed in these statements will be achieved. Any forward-looking statements represent the company's views only as of today and should not be relied upon as representing the company's views as of any subsequent date. Readers are cautioned that such forward-looking statements are subject to a variety of risks and uncertainties that could cause the company's actual results to differ materially from the statements contained in this release. Such forward-looking statements include, but are not limited to, Motorola Solutions' financial outlook for the fourth quarter and full-year 2020. Motorola Solutions cautions the reader that the risk factors below, as well as those on pages 10 through 22 in Item 1A of Motorola Solutions' 2019 Annual Report on Form 10-K, on page 34 of Motorola Solutions' 2020 first quarterly report on Form 10-Q, and in its other SEC filings available for free on the SEC's website at www.sec.gov and on Motorola Solutions' website at www.motorolasolutions.com, could cause Motorola Solutions' actual results to differ materially from those estimated or predicted in the forward-looking statements. Many of these risks and uncertainties cannot be controlled by Motorola Solutions, and factors that may impact forward-looking statements include, but are not limited to: (1) the economic outlook for the government communications industry; (2) the impact of foreign currency fluctuations on the company; (3) the level of demand for the company's products; (4) the company's ability to refresh existing and introduce new products and technologies in a timely manner; (5) exposure under large systems and managed services contracts, including risks related to the fact that certain customers require that the company build, own and operate their systems, often over a multi-year period; (6) negative impact on the company's business from global economic and political conditions, which may include: (i) continued deferment or cancellation of purchase orders by customers; (ii) the inability of customers to obtain financing for purchases of the company's products; (iii) increased demand to provide vendor financing to customers; (iv) increased financial pressures on third-party dealers, distributors and retailers; (v) the viability of the company's suppliers that may no longer have access to necessary financing; (vi) counterparty failures negatively impacting the company's financial position; (vii) changes in the value of investments held by the company's pension plan and other defined benefit plans, which could impact future required or voluntary pension contributions; (viii) the company's ability to access the capital markets on acceptable terms and conditions; and (ix) the ongoing COVID-19 pandemic and governmental and societal responses thereto; (7) the impact of a security breach or other significant disruption in the company's IT systems, those of its partners or suppliers or those it sells to or operates or maintains for its customers; (8) the outcome of ongoing and future tax matters; (9) the company's ability to purchase sufficient materials, parts and components to meet customer demand, particularly in light of global economic conditions and reductions in the company's purchasing power; (10) risks related to dependence on certain key suppliers, subcontractors, third-party distributors and other representatives; (11) the impact on the company's performance and financial results from strategic acquisitions or divestitures; (12) risks related to the company's manufacturing and business operations in foreign countries; (13) the creditworthiness of the company's customers and distributors, particularly purchasers of large infrastructure systems; (14) the ownership of certain logos, trademarks, trade names and service marks including "MOTOROLA" by Motorola Mobility Holdings, Inc.; (15) variability in income received from licensing the company's intellectual property to others, as well as expenses incurred when the company licenses intellectual property from others; (16) unexpected liabilities or expenses, including unfavorable outcomes to any pending or future litigation or regulatory or similar proceedings; (17) the impact of the percentage of cash and cash equivalents held outside of the United States; (18) the ability of the company to pay future dividends due to possible adverse market conditions or adverse impacts on the company's cash flow; (19) the ability of the company to complete acquisitions or repurchase shares under its repurchase program due to possible adverse market conditions or adverse impacts on the company's cash flow; (20) the impact of changes in governmental policies, laws or regulations; (21) negative consequences from the company's use of third party vendors for various activities, including certain manufacturing operations, information technology and administrative functions; and (22) the company's ability to settle the par value of its 1.75% senior convertible notes in cash. Motorola Solutions undertakes no obligation to publicly update any forward-looking statement or risk factor, whether as a result of new information, future events or otherwise.

ABOUT MOTOROLA SOLUTIONS

Motorola Solutions is a global leader in mission-critical communications and analytics. Our technology platforms in mission-critical communications, command center software and video security & analytics, bolstered by managed & support services, make cities safer and help businesses stay productive and secure. At Motorola Solutions, we are ushering in a new era in public safety and security. Learn more at www.motorolasolutions.com.

MOTOROLA, MOTOROLA SOLUTIONS and the Stylized M Logo are trademarks or registered trademarks of Motorola Trademark Holdings, LLC and are used under license. All other trademarks are the property of their respective owners. ©2020 Motorola Solutions, Inc. All rights reserved.

GAAP-1

Motorola Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In millions, except per share amounts)

 
Three Months Ended
September 26, 2020 September 28, 2019
Net sales from products

$

1,044

 

$

1,196

 

Net sales from services

 

824

 

 

798

 

Net sales

 

1,868

 

 

1,994

 

Costs of products sales

 

487

 

 

501

 

Costs of services sales

 

472

 

 

486

 

Costs of sales

 

959

 

 

987

 

 
Gross margin

 

909

 

 

1,007

 

Selling, general and administrative expenses

 

313

 

 

359

 

Research and development expenditures

 

175

 

 

172

 

Other charges

 

15

 

 

11

 

Intangibles amortization

 

54

 

 

52

 

Operating earnings

 

352

 

 

413

 

Other income (expense):
Interest expense, net

 

(58

)

 

(54

)

Loss on sales of investments and businesses, net

 

(1

)

 

-

 

Other, net

 

(42

)

 

(11

)

Total other expense

 

(101

)

 

(65

)

Net earnings before income taxes

 

251

 

 

348

 

Income tax expense

 

45

 

 

80

 

Net earnings

 

206

 

 

268

 

Less: Earnings attributable to non-controlling interests

 

1

 

 

1

 

Net earnings attributable to Motorola Solutions, Inc.

$

205

 

$

267

 

Earnings per common share:
Basic

$

1.21

 

$

1.60

 

Diluted

$

1.18

 

$

1.51

 

Weighted average common shares outstanding:
Basic

 

169.7

 

 

166.7

 

Diluted

 

173.5

 

 

176.4

 

 
Percentage of Net Sales*
Net sales from products

 

55.9

%

 

60.0

%

Net sales from services

 

44.1

%

 

40.0

%

Net sales

 

100.0

%

 

100.0

%

Costs of products sales

 

46.6

%

 

41.9

%

Costs of services sales

 

57.3

%

 

60.9

%

Costs of sales

 

51.3

%

 

49.5

%

Gross margin

 

48.7

%

 

50.5

%

Selling, general and administrative expenses

 

16.7

%

 

18.0

%

Research and development expenditures

 

9.4

%

 

8.6

%

Other charges

 

0.8

%

 

0.6

%

Intangibles amortization

 

2.9

%

 

2.6

%

Operating earnings

 

18.9

%

 

20.7

%

Other income (expense):
Interest expense, net

 

(3.1

)%

 

(2.7

)%

Losses on sales of investments and businesses, net

 

(0.1

)%

 

-

%

Other, net

 

(2.2

)%

 

(0.6

)%

Total other expense

 

(5.4

)%

 

(3.3

)%

Net earnings before income taxes

 

13.4

%

 

17.4

%

Income tax expense

 

2.4

%

 

4.0

%

Net earnings

 

11.0

%

 

13.4

%

Less: Earnings attributable to non-controlling interests

 

-

%

 

0.1

%

Net earnings attributable to Motorola Solutions, Inc.

 

11.0

%

 

13.4

%

* Percentages may not add up due to rounding

GAAP-2

Motorola Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In millions, except per share amounts)

 
Nine Months Ended
September 26, 2020 September 28, 2019
Net sales from products

$

2,807

 

$

3,260

 

Net sales from services

 

2,334

 

 

2,251

 

Net sales

 

5,141

 

 

5,511

 

 
Costs of products sales

 

1,325

 

 

1,435

 

Costs of services sales

 

1,354

 

 

1,365

 

Costs of sales

 

2,679

 

 

2,800

 

 
Gross margin

 

2,462

 

 

2,711

 

 
Selling, general and administrative expenses

 

951

 

 

1,035

 

Research and development expenditures

 

505

 

 

505

 

Other charges

 

20

 

 

26

 

Intangibles amortization

 

158

 

 

154

 

Operating earnings

 

828

 

 

991

 

 
Other income (expense):
Interest expense, net

 

(167

)

 

(165

)

Gains (losses) on sales of investments and businesses, net

 

(1

)

 

4

 

Other, net

 

(8

)

 

(22

)

Total other expense

 

(176

)

 

(183

)

Net earnings before income taxes

 

652

 

 

808

 

Income tax expense

 

112

 

 

180

 

Net earnings

 

540

 

 

628

 

Less: Earnings attributable to non-controlling interests

 

3

 

 

3

 

Net earnings attributable to Motorola Solutions, Inc.

$

537

 

$

625

 

Earnings per common share:
Basic

$

3.16

 

$

3.78

 

Diluted

$

3.08

 

$

3.56

 

Weighted average common shares outstanding:
Basic

 

170.1

 

 

165.3

 

Diluted

 

174.3

 

 

175.7

 

 
Percentage of Net Sales*
Net sales from products

 

54.6

%

 

59.2

%

Net sales from services

 

45.4

%

 

40.8

%

Net sales

 

100.0

%

 

100.0

%

Costs of products sales

 

47.2

%

 

44.0

%

Costs of services sales

 

58.0

%

 

60.6

%

Costs of sales

 

52.1

%

 

50.8

%

Gross margin

 

47.9

%

 

49.2

%

Selling, general and administrative expenses

 

18.5

%

 

18.8

%

Research and development expenditures

 

9.8

%

 

9.2

%

Other charges

 

0.4

%

 

0.5

%

Intangibles amortization

 

3.1

%

 

2.8

%

Operating earnings

 

16.1

%

 

18.0

%

Other income (expense):
Interest expense, net

 

(3.3

)%

 

(3.0

)%

Gains (losses) on sales of investments and businesses, net

 

-

%

 

0.1

%

Other, net

 

(0.2

)%

 

(0.4

)%

Total other expense

 

(3.4

)%

 

(3.3

)%

Net earnings before income taxes

 

12.7

%

 

14.7

%

Income tax expense

 

2.2

%

 

3.3

%

Net earnings

 

10.5

%

 

11.4

%

Less: Earnings attributable to non-controlling interests

 

0.1

%

 

0.1

%

Net earnings attributable to Motorola Solutions, Inc.

 

10.4

%

 

11.3

%

* Percentages may not add up due to rounding
 

GAAP-3

Motorola Solutions, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In millions)

 
September 26, 2020 December 31, 2019
Assets
Cash and cash equivalents

$

1,007

 

$

1,001

 

Accounts receivable, net

 

1,155

 

 

1,412

 

Contract assets

 

1,069

 

 

1,046

 

Inventories, net

 

489

 

 

447

 

Other current assets

 

251

 

 

273

 

Total current assets

 

3,971

 

 

4,178

 

 
Property, plant and equipment, net

 

976

 

 

992

 

Operating lease assets

 

472

 

 

554

 

Investments

 

154

 

 

159

 

Deferred income taxes

 

876

 

 

943

 

Goodwill

 

2,207

 

 

2,067

 

Intangible assets, net

 

1,268

 

 

1,327

 

Other assets

 

437

 

 

422

 

Total assets

$

10,361

 

$

10,642

 

 
Liabilities and Stockholders' Equity (Deficit)
Current portion of long-term debt

$

212

 

$

16

 

Accounts payable

 

536

 

 

618

 

Contract liabilities

 

1,359

 

 

1,449

 

Accrued liabilities

 

1,205

 

 

1,356

 

Total current liabilities

 

3,312

 

 

3,439

 

Long-term debt

 

5,162

 

 

5,113

 

Operating lease liabilities

 

401

 

 

497

 

Other liabilities

 

2,226

 

 

2,276

 

Total Motorola Solutions, Inc. stockholders' equity (deficit)

 

(756

)

 

(700

)

Non-controlling interests

 

16

 

 

17

 

Total liabilities and stockholders' equity (deficit)

$

10,361

 

$

10,642

 

 

GAAP-4

Motorola Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In millions)

 
Three Months Ended
September 26, 2020 September 28, 2019
Operating
Net earnings attributable to Motorola Solutions, Inc.

$

205

 

$

267

 

Earnings attributable to non-controlling interests

 

1

 

 

1

 

Net earnings

 

206

 

 

268

 

Adjustments to reconcile Net earnings to Net cash provided by operating activities:
Depreciation and amortization

 

103

 

 

99

 

Non-cash other charges (income)

 

12

 

 

22

 

Share-based compensation expenses

 

31

 

 

30

 

Losses on sales of investments and businesses, net

 

1

 

 

-

 

Losses from the extinguishment of long term debt

 

56

 

 

7

 

Gain from the extinguishment of 2.00% senior convertible notes

 

-

 

 

(4

)

Changes in assets and liabilities, net of effects of acquisitions, dispositions, and foreign currency translation adjustments:
Accounts receivable

 

26

 

 

(80

)

Inventories

 

(1

)

 

(27

)

Other current assets and contract assets

 

(137

)

 

(24

)

Accounts payable, accrued liabilities, and contract liabilities

 

75

 

 

202

 

Other assets and liabilities

 

(3

)

 

8

 

Deferred income taxes

 

23

 

 

24

 

Net cash provided by operating activities

 

392

 

 

525

 

Investing
Acquisitions and investments, net

 

(181

)

 

(252

)

Proceeds from sales of investments and businesses, net

 

2

 

 

-

 

Capital expenditures

 

(49

)

 

(60

)

Net cash used for investing activities

 

(228

)

 

(312

)

Financing
Repayments of debt

 

(903

)

 

(770

)

Repayment of unsecured revolving credit facility draw

 

(300

)

 

-

 

Net proceeds from issuance of debt

 

892

 

 

1,159

 

Issuances of common stock

 

10

 

 

12

 

Purchases of common stock

 

(105

)

 

-

 

Payments of dividends

 

(109

)

 

(94

)

Settlement of conversion premium on 2.00% senior convertible notes

 

-

 

 

(326

)

Net cash used for financing activities

 

(515

)

 

(19

)

Effect of exchange rate changes on total cash and cash equivalents

 

17

 

 

(18

)

Net increase (decrease) in total cash and cash equivalents

 

(334

)

 

176

 

Cash and cash equivalents, beginning of period

 

1,341

 

 

964

 

Cash and cash equivalents, end of period

$

1,007

 

$

1,140

 

 
Financial Ratios:
Free cash flow*

$

343

 

$

465

 

 
*Free cash flow = Net cash provided by operating activities - Capital expenditures
 

GAAP-5

Motorola Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In millions)

 
Nine Months Ended
September 26, 2020 September 28, 2019
Operating
Net earnings attributable to Motorola Solutions, Inc.

$

537

 

$

625

 

Earnings attributable to non-controlling interests

 

3

 

 

3

 

Net earnings

 

540

 

 

628

 

Adjustments to reconcile Net earnings to Net cash provided by operating activities:
Depreciation and amortization

 

300

 

 

290

 

Non-cash other charges (income)

 

(28

)

 

27

 

Share-based compensation expenses

 

100

 

 

87

 

Losses (gains) on sales of investments and businesses, net

 

1

 

 

(4

)

Losses from the extinguishment of long term debt

 

56

 

 

50

 

Gain from the extinguishment of 2.00% senior convertible notes

 

-

 

 

(4

)

Changes in assets and liabilities, net of effects of acquisitions, dispositions, and foreign currency translation adjustments:
Accounts receivable

 

312

 

 

30

 

Inventories

 

2

 

 

(88

)

Other current assets and contract assets

 

(1

)

 

104

 

Accounts payable, accrued liabilities, and contract liabilities

 

(379

)

 

(143

)

Other assets and liabilities

 

(18

)

 

10

 

Deferred income taxes

 

24

 

 

41

 

Net cash provided by operating activities

 

909

 

 

1,028

 

Investing
Acquisitions and investments, net

 

(282

)

 

(623

)

Proceeds from sales of investments and businesses, net

 

8

 

 

10

 

Capital expenditures

 

(151

)

 

(189

)

Proceeds from sales of property, plant and equipment

 

56

 

 

-

 

Net cash used for investing activities

 

(369

)

 

(802

)

Financing
Net proceeds from issuance of debt

 

892

 

 

1,804

 

Repayments of debt

 

(911

)

 

(1,435

)

Proceeds from unsecured revolving credit facility draw

 

800

 

 

-

 

Repayment of unsecured revolving credit facility draw

 

(600

)

 

-

 

Issuances of common stock

 

59

 

 

82

 

Purchases of common stock

 

(441

)

 

(170

)

Payments of dividends

 

(327

)

 

(281

)

Payments of dividends to non-controlling interests

 

(4

)

 

(3

)

Settlement of conversion premium on 2.00% senior convertible notes

 

-

 

 

(326

)

Net cash used for financing activities

 

(532

)

 

(329

)

Effect of exchange rate changes on total cash and cash equivalents

 

(2

)

 

(14

)

Net increase (decrease) in total cash and cash equivalents

 

6

 

 

(117

)

Cash and cash equivalents, beginning of period

 

1,001

 

 

1,257

 

Cash and cash equivalents, end of period

$

1,007

 

$

1,140

 

 
Financial Ratios:
Free cash flow*

$

758

 

$

839

 

 
*Free cash flow = Net cash provided by operating activities - Capital expenditures
 

GAAP-6

Motorola Solutions, Inc. and Subsidiaries

Segment Information

(In millions)

 

Net Sales

 
Three Months Ended
 
September 26, 2020 September 28, 2019 % Change
Products and Systems Integration

$

1,163

 

$

1,349

 

(14

)%

Software and Services

 

705

 

 

645

 

9

%

Total Motorola Solutions

$

1,868

 

$

1,994

 

(6

)%

 
Nine Months Ended
 
September 26, 2020 September 28, 2019 % Change
Products and Systems Integration

$

3,124

 

$

3,656

 

(15

)%

Software and Services

 

2,017

 

 

1,855

 

9

%

Total Motorola Solutions

$

5,141

 

$

5,511

 

(7

)%

 

Operating Earnings

 
Three Months Ended
 
September 26, 2020 September 28, 2019 % Change
Products and Systems Integration

$

164

 

$

258

 

(36

)%

Software and Services

 

188

 

 

155

 

21

%

Total Motorola Solutions

$

352

 

$

413

 

(15

)%

 
Nine Months Ended
 
September 26, 2020 September 28, 2019 % Change
Products and Systems Integration

$

305

 

$

568

 

(46

)%

Software and Services

 

523

 

 

423

 

24

%

Total Motorola Solutions

$

828

 

$

991

 

(16

)%

 

Operating Earnings %

 
Three Months Ended
 
September 26, 2020 September 28, 2019
Products and Systems Integration

 

14.1

%

 

19.1

%

Software and Services

 

26.7

%

 

24.0

%

Total Motorola Solutions

 

18.9

%

 

20.7

%

 
Nine Months Ended
 
September 26, 2020 September 28, 2019
Products and Systems Integration

 

9.8

%

 

15.5

%

Software and Services

 

25.9

%

 

22.8

%

Total Motorola Solutions

 

16.1

%

 

18.0

%

 

Non-GAAP-1

Motorola Solutions, Inc. and Subsidiaries

Non-GAAP Adjustments (Intangibles Amortization Expense, Share-Based Compensation Expense and Highlighted Items)

(In millions)

Q1 2020

 
Non-GAAP Adjustments Statement Line PBT
(Inc)/Exp
Tax
Inc/(Exp)
PAT
(Inc)/Exp
EPS impact
 
Intangibles amortization expense Intangibles amortization

$

53

 

$

13

 

$

40

 

$

0.23

 

Share-based compensation expenses Cost of sales, SG&A and R&D

 

38

 

 

9

 

 

29

 

 

0.17

 

Hytera-related legal expenses SG&A

 

25

 

 

6

 

 

19

 

 

0.11

 

Reorganization of business charges Cost of sales and Other charges (income)

 

18

 

 

4

 

 

14

 

 

0.08

 

Acquisition-related transaction fees Other charges (income)

 

2

 

 

-

 

 

2

 

 

0.01

 

Legal settlements Other charges (income)

 

2

 

 

-

 

 

2

 

 

0.01

 

Fair value adjustments to equity investments Other income

 

(1

)

 

-

 

 

(1

)

 

(0.01

)

Release of uncertain tax positions Income tax expense

 

-

 

 

1

 

 

(1

)

 

(0.01

)

Gain on sale of property, plant, and equipment Other charges (income)

 

(50

)

 

(12

)

 

(38

)

 

(0.22

)

Total impact on Net earnings

$

87

 

$

21

 

$

66

 

$

0.37

 

 

Q2 2020

 
Non-GAAP Adjustments Statement Line PBT
(Inc)/Exp
Tax
Inc/(Exp)
PAT
(Inc)/Exp
EPS impact
 
Intangibles amortization expense Intangibles amortization

$

51

 

$

12

 

$

39

 

$

0.22

 

Reorganization of business charges Cost of sales and Other charges (income)

 

41

 

 

10

 

 

31

 

 

0.18

 

Share-based compensation expenses Cost of sales, SG&A and R&D

 

31

 

 

7

 

 

24

 

 

0.14

 

Legal settlements Other charges (income)

 

7

 

 

2

 

 

5

 

 

0.03

 

Hytera-related legal expenses SG&A

 

5

 

 

1

 

 

4

 

 

0.02

 

Fixed asset impairment Other charges (income)

 

5

 

 

1

 

 

4

 

 

0.02

 

Acquisition-related transaction fees Other charges (income)

 

1

 

 

-

 

 

1

 

 

0.01

 

Release of uncertain tax positions Income tax expense

 

-

 

 

(1

)

 

1

 

 

0.01

 

Fair value adjustments to equity investments Other income

 

(4

)

 

(1

)

 

(3

)

 

(0.02

)

Total impact on Net earnings

$

137

 

$

31

 

$

106

 

$

0.61

 

 

Q3 2020

 
Non-GAAP Adjustments Statement Line PBT
(Inc)/Exp
Tax
Inc/(Exp)
PAT
(Inc)/Exp
EPS impact
 
Loss from extinguishment of long-term debt Other expense

$

56

 

$

13

 

$

43

 

$

0.25

 

Intangibles amortization expense Intangibles amortization

 

54

 

 

12

 

 

42

 

 

0.24

 

Share-based compensation expenses Cost of sales, SG&A and R&D

 

31

 

 

7

 

 

24

 

 

0.14

 

Reorganization of business charges Cost of sales and Other charges (income)

 

13

 

 

3

 

 

10

 

 

0.06

 

Hytera-related legal expenses SG&A

 

5

 

 

1

 

 

4

 

 

0.02

 

Acquisition-related transaction fees Other charges (income)

 

5

 

 

-

 

 

5

 

 

0.03

 

Fair value adjustments to equity investments Other expense

 

4

 

 

1

 

 

3

 

 

0.02

 

Pelco purchase accounting adjustment Cost of sales

 

3

 

 

1

 

 

2

 

 

0.01

 

Sale of investments (Gain) or loss on sales of investments and businesses, net

 

1

 

 

-

 

 

1

 

 

-

 

Total impact on Net earnings

$

172

 

$

38

 

$

134

 

$

0.77

 

 

Non-GAAP-2

Motorola Solutions, Inc. and Subsidiaries

Non-GAAP Segment Information

(In millions)

 

Net Sales

 
Three Months Ended
 
September 26, 2020 September 28, 2019 % Change
Products and Systems Integration

$

1,163

 

$

1,349

 

(14

)%

Software and Services

 

705

 

 

645

 

9

%

Total Motorola Solutions

$

1,868

 

$

1,994

 

(6

)%

 
Nine Months Ended
 
September 26, 2020 September 28, 2019 % Change
Products and Systems Integration

$

3,124

 

$

3,656

 

(15

)%

Software and Services

 

2,017

 

 

1,855

 

9

%

Total Motorola Solutions

$

5,141

 

$

5,511

 

(7

)%

 
 

Non-GAAP Operating Earnings

 
Three Months Ended
 
September 26, 2020 September 28, 2019 % Change
Products and Systems Integration

$

219

 

$

300

 

(27

)%

Software and Services

 

244

 

 

209

 

17

%

Total Motorola Solutions

$

463

 

$

509

 

(9

)%

 
Nine Months Ended
 
September 26, 2020 September 28, 2019 % Change
Products and Systems Integration

$

473

 

$

689

 

(31

)%

Software and Services

 

696

 

 

580

 

20

%

Total Motorola Solutions

$

1,169

 

$

1,269

 

(8

)%

 
 

Non-GAAP Operating Earnings %

 
Three Months Ended
 
September 26, 2020 September 28, 2019
Products and Systems Integration

 

18.9

%

 

22.2

%

Software and Services

 

34.6

%

 

32.4

%

Total Motorola Solutions

 

24.8

%

 

25.5

%

 
Nine Months Ended
 
September 26, 2020 September 28, 2019
Products and Systems Integration

 

15.1

%

 

18.8

%

Software and Services

 

34.5

%

 

31.3

%

Total Motorola Solutions

 

22.7

%

 

23.0

%

 

Non-GAAP-3

Motorola Solutions, Inc. and Subsidiaries

Operating Earnings after Non-GAAP Adjustments

(In millions)

Q1 2020

 
TOTAL Products and
Systems
Integration
Software and
Services
Net sales

$

1,655

 

$

993

 

$

662

 

Operating earnings ("OE")

$

259

 

$

92

 

$

167

 

 
Above-OE non-GAAP adjustments:
Intangibles amortization expense

$

53

 

$

12

 

$

41

 

Share-based compensation expenses

 

38

 

 

27

 

 

11

 

Hytera-related legal expenses

 

25

 

 

25

 

 

-

 

Reorganization of business charges

 

18

 

 

14

 

 

4

 

Acquisition-related transaction fees

 

2

 

 

1

 

 

1

 

Legal settlements

 

2

 

 

2

 

 

-

 

Gain on sale of property, plant, and equipment

 

(50

)

 

(50

)

 

-

 

Total above-OE non-GAAP adjustments

 

88

 

 

31

 

 

57

 

Operating earnings after non-GAAP adjustments

$

347

 

$

123

 

$

224

 

 
Operating earnings as a percentage of net sales - GAAP

 

15.6

%

 

9.3

%

 

25.2

%

Operating earnings as a percentage of net sales - after non-GAAP adjustments

 

21.0

%

 

12.4

%

 

33.8

%

 

Q2 2020

 
TOTAL Products and
Systems
Integration
Software and
Services
Net sales

$

1,618

 

$

968

 

$

650

 

Operating earnings ("OE")

$

218

 

$

49

 

$

169

 

Above-OE non-GAAP adjustments:
Intangibles amortization expense

$

51

 

$

12

 

$

39

 

Reorganization of business charges

 

41

 

 

33

 

 

8

 

Share-based compensation expenses

 

31

 

 

22

 

 

9

 

Legal settlements

 

7

 

 

7

 

 

-

 

Hytera-related legal expenses

 

5

 

 

5

 

 

-

 

Fixed asset impairment

 

5

 

 

3

 

 

2

 

Acquisition-related transaction fees

 

1

 

 

-

 

 

1

 

Total above-OE non-GAAP adjustments

 

141

 

 

82

 

 

59

 

Operating earnings after non-GAAP adjustments

$

359

 

$

131

 

$

228

 

 
Operating earnings as a percentage of net sales - GAAP

 

13.5

%

 

5.1

%

 

26.0

%

Operating earnings as a percentage of net sales - after non-GAAP adjustments

 

22.2

%

 

13.5

%

 

35.1

%

 

Q3 2020

 
TOTAL Products and
Systems
Integration
Software and
Services
Net sales

$

1,868

 

$

1,163

 

$

705

 

Operating earnings ("OE")

$

352

 

$

164

 

$

188

 

 
Above-OE non-GAAP adjustments:
Intangibles amortization expense

 

54

 

 

12

 

 

42

 

Share-based compensation expenses

 

31

 

 

22

 

 

9

 

Reorganization of business charges

 

13

 

 

10

 

 

3

 

Acquisition-related transaction fees

 

5

 

 

3

 

 

2

 

Hytera-related legal expenses

 

5

 

 

5

 

 

-

 

Pelco purchase accounting adjustment

 

3

 

 

3

 

 

-

 

Total above-OE non-GAAP adjustments

 

111

 

 

55

 

 

56

 

Operating earnings after non-GAAP adjustments

$

463

 

$

219

 

$

244

 

 
 
Operating earnings as a percentage of net sales - GAAP

 

18.9

%

 

14.1

%

 

26.7

%

Operating earnings as a percentage of net sales - after non-GAAP adjustments

 

24.8

%

 

18.9

%

 

34.6

%

 

Non-GAAP-4

Motorola Solutions, Inc. and Subsidiaries

Non-GAAP Organic Revenue

(In millions)

 

Total Motorola Solutions

 
Three Months Ended
 
September 26, 2020 September 28, 2019 % Change
Net sales

$

1,868

$

1,994

(6

)%

Non-GAAP adjustments:
Sales from acquisitions

 

55

 

-

Organic revenue

$

1,813

$

1,994

(9

)%

 
 

Total Motorola Solutions

 
Nine Months Ended
 
September 26, 2020 September 28, 2019 % Change
Net sales

$

5,141

$

5,511

(7

)%

Non-GAAP adjustments:
Sales from acquisitions

 

146

 

3

Organic revenue

$

4,995

$

5,508

(9

)%

 


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