Motorola Solutions, Inc. Q2 FY2025 earnings call

• Q2 was an outstanding quarter with record revenue and earnings per share exceeding guidance, driven by strong customer demand across all areas. Revenue up 5%, software and services up 15%. Operating margins expanded by 80 basis points. - Record Q2 orders up 27% vs last year, including 10% growth in products, and backlog of over $14.1 billion. - Raised full-year guidance for sales, earnings per share, and operating cash flow. - Investments in public safety, security, AI, drones, and unmanned systems. Launched SVX video remote P25 speaker mic, made investments in drones and unmanned systems, introduced next-generation ASTRO P25 LMR infrastructure, and expanded AI applications. - Acquired Silvus, which will contribute to revenue and expand the Mission Critical Networks category.

Products and SI: Sales were $1.7 billion, flat compared to the prior year, with operating earnings of $442 million or 26.7% of sales. Software and Services: Revenue was up 15% compared to last year, with operating earnings of $376 million or 33.8% of sales.

• Raised full-year operating cash flow expectation to $2.75 billion, up 15% from last year. - Expect Q3 sales growth of approximately 7% with non-GAAP EPS between $3.82 and $3.87 per share. - Full-year revenue expected to be approximately $11.65 billion, up 7.7% from prior guidance, with non-GAAP EPS between $14.88 and $14.98 per share. - Silvus expected to contribute $185 million of revenue in 2025 as a stub period following the acquisition.

Forward-looking statements are subject to a variety of risks and uncertainties. Actual results could differ materially from forward-looking statements. Factors causing such differences can be found in the earnings news release, comments during the call, Risk Factors section of the 2024 annual report on Form 10-K, quarterly reports on Form 10-Q, and other SEC filings.

Q: Joseph Cardoso asked about product order growth across the portfolio, tracking towards the mid-3s product backlog and the impact of Silvus.

A: Gregory Q. Brown said he feels more confident about the mid-3s product backlog, driven by LMR device refresh, infrastructure, fixed video orders, and large software and services orders.

Q: Andrew Spinola asked about Silvus and its integration into Motorola's business.

A: Gregory Q. Brown and Mahesh Saptharishi discussed Silvus being a market leader in ad hoc networks, complementary to LMR and video, with capabilities in spectrum monitoring and data-oriented communication.

Q: Keith Housum asked about the base station introduction and pent-up demand.

A: John P. Molloy talked about the D-Series base station's benefits, multiyear growth, and opportunities for service selling.

Q: Tim Long asked about cloud adoption in video and APX NEXT adoption.

A: Jason J. Winkler and John P. Molloy discussed cloud adoption on path in video and double-digit order growth with APX NEXT, including SVX's role.

Q: Amit Daryanani asked about operating margins and tariff headwinds.

A: Gregory Q. Brown said tariff impact this year estimated at $80 million, down from $100 million, with operating margin expansion from higher sales and leverage.

Q: Amit Daryanani also asked about unmanned systems market and Silvus's role.

A: Gregory Q. Brown and Mahesh Saptharishi discussed the large TAM for unmanned systems, Motorola's drone strategy including alliance with BRINC, Silvus's role in communication, and drone detection partnership.

Q: Ben Bollin asked about Silvus's sales motion and existing sales teams.

A: John P. Molloy talked about Silvus's sales motion, plans to expand local resources, channel sales, and lobbying.

Q: Tomer Zilberman asked about sustaining above-market growth rates.

A: Gregory Q. Brown discussed relabeling LMR to Mission Critical Networks, focus on recurring revenue and operating leverage.

Q: Michael Louie D DiPalma asked about Silvus's impact on drone as a first responder and LEO satellite connectivity.

A: Mahesh Saptharishi and Gregory Q. Brown discussed spectrum challenges, Silvus's role in drone operations, and LEO satellite connectivity integration via base stations.