Motorola Solutions, Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Quarterly Performance: Q1 was an excellent start to the year with record first quarter revenue, operating earnings, and cash flow. Software and Services sales were up 9%, and Products and SI sales were up 4% with significant operating margin expansion.
• Investments and Acquisitions: The company acquired RapidDeploy and Theatro, adding to Software offerings. Launched SVX and Assist technologies, which are transformative in public safety technology.
• Regional Results: North America Q1 revenue was $1.9 billion, up 9% on growth in all three technologies. International Q1 revenue was $676 million, down 3% versus the previous year due to foreign currency headwinds and lower LMR revenue from Ukraine.
• Backlog: Ending backlog for Q1 was $14.1 billion, down 2% versus the previous year, driven by strong LMR shipments and revenue recognition from the UK Home Office, partially offset by strong growth in Software and Services.

Segment Performance

• Products and SI: Sales increased 4% versus the previous year, driven by growth in LMR. Currency headwinds for the quarter were $14 million. Operating earnings were $434 million, representing 28.1% of sales, up from 24.8% in the prior year, due to higher sales, favorable mix, and lower direct material costs. Notable Q1 achievements included a $19 million TETRA Award for a German customer, a $10 million fixed video order for Duke Energy, etc.
• Software and Services: Revenue grew 9% compared to the previous year, driven by strong growth across all three technologies. Revenue from acquisitions was $32 million, and FX headwinds were $11 million. Operating earnings in the segment were $282 million, or 28.7% of sales, down from 29.8% of sales the prior year primarily due to acquisitions. Notable Q1 highlights included a $19 million LMR managed services extension for an international customer, an $18 million LMR services renewal for a U.S. utility, etc.

Guidance

• Q2: Expect sales growth of approximately 4% with non-GAAP earnings per share between $3.32 and $3.37 per share, assuming a weighted average share count of approximately 170 million shares and an effective tax rate of approximately 23.5%.
• Full Year: Continue to expect revenue growth of 5.5% and non-GAAP EPS between $14.64 and $14.74 per share. This full-year outlook assumes $40 million of foreign currency headwinds, a weighted average share count of approximately 170 million shares, and an effective tax rate of approximately 23%. Reaffirmed full-year guidance despite tariff costs up to $100 million, using supply chain actions, cost savings, and pricing.

Risks

• Tariff Impacts: Estimated tariff costs up to $100 million this year, but mitigation plans in place including supply chain actions, cost savings, and pricing opportunities.
• Volatility and Uncertainty: Volatility in foreign exchange rates and trade policies pose risks to financial performance.

Question and Answer

Q: Alyssa Shreves on video product revenue performance and tariff customer behavior A: Greg Brown noted video grew nicely and is on track for 10%-12% growth for the year, with Software leading the growth. Greg Brown also stated no pullback in customer behavior due to tariffs internationally or in North America Q: Joseph Cardoso on demand trends and tariff Mexico manufacturing A: Greg Brown stated no softening demand, North America had record orders, and Mexico manufacturing is mostly USMCA compliant. Jason Winkler mentioned mitigation plans cover the $100 million tariff impact through discretionary costs, supply chain flexibility, and pricing Q: Unidentified Analyst on SVX and Assist early demand A: Jason Winkler shared early interest from customers, including a police department changing plans to unify on Motorola Solutions' body-worn camera solution and upgrade to APX next radios. Greg Brown and Mahesh Saptharishi discussed SVX's monetization potential through increased APX NEXT adoption and software opportunities