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    MSI
    Earnings call· Dec 2024(Q4 FY24)

    Motorola Solutions, Inc. MSI

    Feb 13, 2025 Source

    Executive summary

    Motorola Solutions Q4 FY24 — Record Revenue, Backlog, and Double-Digit Operating Cash Flow Growth

    Motorola Solutions delivered a strong Q4 and full-year 2024, achieving record revenue and backlog driven by robust demand across its Safety and Security ecosystem, particularly in Video and Command Center. The company is well-positioned for continued growth in 2025, anticipating another year of double-digit operating cash flow expansion despite foreign exchange headwinds and increased interest/tax expenses, supported by a healthy balance sheet and strategic acquisitions.

    Highlights

    5

    • Achieved record Q4 revenue in both segments and all three technologies, including double-digit growth in Video and Command Center.

    • Generated record operating earnings in both segments for Q4.

    • Ended the year with a record backlog of $14.7 billion, up $438 million year-over-year.

    • Full-year non-GAAP EPS grew 16% to $13.84.

    • Full-year operating cash flow grew 17% to $2.4 billion, marking the second consecutive year of double-digit growth.

    Concerns

    5

    • International Q4 revenue decreased 3% year-over-year, primarily due to lower Ukraine revenue and the exit from ESN.

    • Software and Services Q4 operating margin declined to 30.3% from 31.6% in the prior year, primarily due to acquisitions.

    • Full-year International revenue decreased 2% year-over-year.

    • Anticipates $120 million in foreign exchange headwinds for full-year 2025 revenue growth.

    • Expects a $25 million headwind in 2025 from higher interest and a slightly higher tax rate.

    Guidance & targets

    13
    CategoryTargetConfidence
    Q1 Sales Growth
    5% to 5.5%
    medium materiality
    High
    Q1 Non-GAAP EPS
    $2.98 to $3.03
    high materiality
    High
    Full-year Revenue Growth
    approximately 5.5%
    high materiality
    High
    Full-year Non-GAAP EPS
    $14.64 and $14.74
    high materiality
    High
    Full-year Operating Cash Flow
    $2.7 billion
    high materiality
    High
    Software and Services Segment Growth
    high single digits or double digits
    medium materiality
    High
    Products Segment Growth
    low to mid-single-digit growth
    medium materiality
    High
    Video Technology Growth
    approximately 10% to 12%
    medium materiality
    High
    Command Center Technology Growth
    12%
    medium materiality
    High
    LMR Technology Growth
    low to mid-single-digit growth
    medium materiality
    High
    Gross Margins
    comparable to slightly up
    medium materiality
    Medium
    Operating Margin
    expansion
    medium materiality
    Medium
    PPV Benefit
    $25 million
    low materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Products and SI
    Q4 growth driven by LMR and Video. FY growth driven by higher sales in LMR and Video. Operating margin expansion in FY driven by higher sales, favorable mix, and lower direct material costs.
    Q4 Revenue from acquisitions: $11MQ4 Favorable foreign currency rates impact: $1MQ4 Operating margin: up from 30% in prior yearFY Revenue: $6.9BFY Revenue growth: 10%FY Revenue from acquisitions: $43MFY Unfavorable foreign currency rates impact: $2MFY Operating earnings: $1.9B (28.1% of sales)FY Operating margin: up from 24.3% in prior yearP25 device order: $53M (U.S. state and local customer)P25 system and device order: $52M (Canadian customer)P25 device order: $36M (Broward Sheriff's Office in Florida)P25 system order: $33M (Kentucky State Police)P25 device order: $32M (City of Phoenix Police & Fire)Fixed video order: $16M (Duke Energy)
    		—3%—$594M (30.5% of sales)
    Software and Services
    Q4 growth driven by all three technologies. FY growth driven by all three technologies, with U.K. Home Office exclusion showing 13% growth. FY operating margin decline driven by Airwave Charge Control and higher expenses associated with acquired businesses.
    Q4 Revenue from acquisitions: $26MQ4 Favorable foreign currency rates impact: $5MQ4 Operating margin: down from 31.6% in prior yearFY Revenue: $3.9BFY Revenue growth: 5% (13% excluding U.K. Home Office)FY Revenue from acquisitions: $52MFY Operating earnings: $1.2B (30.8% of sales)FY Operating margin: down 310 basis points versus prior year10-year services renewal: $329M (Melbourne, Australia's LMR network)5-year LMR managed services renewal: $160M (Norway's nationwide public safety network)LMR services order: $68M (U.S. state and local customer)Command center order: $40M (Scottish Fire Service)Fixed video order: $16M (São Paulo State Government in Brazil)
    		—11%—$322M (30.3% of sales)
    North America
    Growth in both segments and all three technologies for both Q4 and full year.
    FY Revenue: $7.8BFY Revenue growth: 13%
    		$2.2B9%——
    International
    Q4 decline primarily driven by lower Ukraine revenue and ESN exit, offset by growth in Video and Command Center. FY growth driven by all three technologies when excluding U.K. Home Office.
    FY Revenue: $3BFY Revenue growth: -2% (mid-single digits growth excluding U.K. Home Office)
    		$807M-3%——

    Operational metrics

    27
    GAAP Operating Earnings
    $814Mup from 25.9% of sales in prior year
    Q4 FY24

    Explicitly requested GAAP figure.

    Non-GAAP Operating Earnings
    $916Mup 5% YoY
    Q4 FY24
    Non-GAAP Operating Margin
    30.4%vs 30.5% YoY
    Q4 FY24
    GAAP EPS
    $3.56up from $3.47 YoY
    Q4 FY24

    Explicitly requested GAAP figure.

    Non-GAAP EPS
    $4.04up 4% YoY
    Q4 FY24
    Operating Expenses
    $652Mup $55M YoY
    Q4 FY24
    Revenue
    $10.8Bup 8% YoY
    FY24
    GAAP Operating Earnings
    $2.7Bvs 23% of sales in prior year
    FY24

    Explicitly requested GAAP figure.

    Non-GAAP Operating Earnings
    $3.1Bup $358M
    FY24
    Non-GAAP Operating Margin
    29%up from 27.9% YoY
    FY24
    GAAP EPS
    $9.23down from $9.93 YoY
    FY24

    Explicitly requested GAAP figure.

    Non-GAAP EPS
    $13.84up 16% YoY
    FY24
    Operating Expenses
    $2.4Bup $197M YoY
    FY24
    Effective Tax Rate
    22%vs 21.9% YoY
    FY24
    Dividends Paid
    $654M
    FY24
    Acquisitions Spend
    $282M
    FY24
    Share Repurchases
    $244M
    FY24
    Capital Expenditure
    $257M
    FY24
    Silver Lake Convertible Premium Settlement
    $593M
    Q1 FY24

    Used cash to settle in Q1 FY24.

    Dividend Increase
    11%
    November
    Cash and Investments Balance
    Over $2B
    Year-end FY24
    Net Debt-to-EBITDA Ratio
    1.1
    Year-end FY24
    Total Addressable Market (TAM)
    $72B
    Current
    PPV Benefit
    $65M to $70M
    FY24
    Ukraine Revenue
    $80M
    FY24

    No revenue expected for 2025.

    Video Revenue in Government Vertical
    Over $550M
    FY24

    Expected to grow faster than 10-12% for the technology as a whole in 2025.

    Silver Lake Convertible Note Settlement Price
    Less than $320
    Q1 FY24

    Price at which the note was settled.

    Industry KPIs

    8
    MetricValueDetails
    Capital return$1.5BUSD
    Backlog order book$14.7BUSD
    Orders backlog qualityrecord backlog
    Product orders order growthstrong LMR shipments
    Ai cloud infrastructure ordersTheatro acquisition
    Recurring software service revenueup 13%%
    Revenue mix by product customer typeNorth America $2.2B; International $807MUSD
    Design wins product cycle transitionsFedRAMP high classification

    Orderbook & backlog

    6
    Ending Backlog$14.7BQ4 FY24

    up $438M YoY

    Inclusive of $226M of foreign currency headwinds.

    Ending Backlog$14.7BQ4 FY24

    up $602M QoQ

    Inclusive of $319M of foreign currency headwinds.

    Products and SI Backlogdown $858MQ4 FY24

    YoY

    Driven primarily by strong LMR shipments during the year.

    Products and SI Backlogdown $46MQ4 FY24

    QoQ

    Primarily driven by unfavorable FX.

    Software and Services Backlog$10.6BQ4 FY24

    up $1.3B YoY

    Inclusive of $195M foreign currency headwinds.

    Software and Services Backlog$10.6BQ4 FY24

    up $648M QoQ

    Inclusive of $281M foreign currency headwinds.

    Product announcements

    2
    ProductTypeDetails
    Theatrolaunch
    APX NEXT Application Servicesmilestone

    Deals & partnerships

    1
    TheatroAcquisition of AI and voice-powered communication and digital workflow software for frontline workers.

    Definitive agreement to acquire Theatro, which will be integrated into Motorola Solutions' Command Center offerings.

    Risks & headwinds

    5
    International Revenue DeclineQ4 FY24, FY24

    Q4 revenue down 3% YoY; FY revenue down 2% YoY

    Mitigation: Growth in Video and Command Center offsetting declines; mid-single digit growth for FY International revenue excluding U.K. Home Office.

    Software and Services Operating Margin CompressionQ4 FY24, FY24

    Q4 operating margin down to 30.3% from 31.6% YoY; FY operating margin down 310 bps YoY

    Mitigation: Primarily driven by acquisitions in Q4; FY impact from Airwave Charge Control and higher expenses associated with acquired businesses.

    Foreign Exchange HeadwindsFY25, Q1 FY25

    $120M for FY25 revenue growth; $25M for Q1 FY25 sales

    Mitigation: Company expects to achieve 5.5% revenue growth for FY25 despite FX headwinds; flexible manufacturing footprint to navigate tariffs.

    Higher Interest and Tax RatesFY25

    $25M headwind

    Mitigation: Expected operating margin expansion for FY25 is inclusive of this headwind.

    Absence of Ukraine RevenueFY25

    No revenue expected in 2025 (vs. ~$80M in 2024)

    Mitigation: Not explicitly stated, but overall strong demand and pipeline are expected to drive growth.

    What to watch in Q1 FY25

    5

    S&S Segment Growth

    FY25
    CurrentFY24: 5% (13% ex-U.K. Home Office)
    TargetHigh single digits or double digits (normalized for FX)

    Why it matters

    Indicates the success of strategic investments in software and services and cloud adoption, crucial for recurring revenue growth.

    First, with the U.K. Home Office headwinds behind us on a full year basis, and the strong momentum we are seeing in cloud adoption and SaaS, we expect our S&S segment growth to be high single digits or double digits when normalized for📎 FX.

    Q&A highlights

    8

    Are recent federal initiatives, including the Trump administration's focus and DOGE, impacting customer behavior or deployment timing?

    Management sees no changes in customer behavior due to DOGE, viewing it as an effort to reduce wasteful spending, which is generally positive.

    “No, we're not. I think that my view and our view of DOGE, we like the opportunity where the government is deploying that organization to get after kind of frivolous and wasteful spending, which I think is a good thing overall.”

    asked by Alyssa Shreves · answered by Gregory Brown

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Q4 and Full-Year Performance

    Motorola Solutions concluded 2024 with record Q4 revenue and operating earnings in both segments, driven by double-digit growth in Video and Command Center technologies. Full-year revenue reached $10.8 billion, up 8%, with non-GAAP EPS increasing 16% to $13.84 and operating cash flow growing 17% to $2.4 billion. GAAP operating earnings for Q4 were $814 million, or 27% of sales, up from 25.9% in the prior year, primarily due to a recovery related to the Hytera litigation.

    02

    Record Backlog and Demand

    The company ended the year with a record backlog of $14.7 billion, up $438 million year-over-year despite $226 million in unfavorable currency rates. Sequentially, backlog was up $602 million. The Software and Services segment backlog increased $1.3 billion year-over-year to $10.6 billion, reflecting strong demand across all three technologies and informing the positive outlook for 2025. Products and SI backlog was down $858 million year-over-year due to strong LMR shipments.

    03

    Strategic Investments and Acquisitions

    Motorola Solutions strengthened its safety and security offerings with four acquisitions in Video and Command Center technologies during 2024, totaling $282 million in spend. Subsequent to quarter-end, the company announced the definitive agreement to acquire Theatro, an AI and voice-powered communication and digital workflow software provider for frontline workers, which will be part of its Command Center offerings.

    04

    Technology-Specific Growth Drivers

    The company anticipates continued robust demand in 2025, with Video and Command Center technologies expected to achieve double-digit growth (10-12% and 12% respectively), fueled by increased cloud adoption and SaaS offerings. LMR is projected for low to mid-single-digit growth, supported by multi-year contracts and upgrade cycles to APX NEXT devices and B Series ASTRO infrastructure. Video revenue in the government vertical was over $550 million in FY24.

    05

    Capital Allocation and Financial Strength

    Motorola Solutions returned nearly $1.5 billion to shareholders in 2024 through $654 million in dividends, $244 million in share repurchases, and a $593 million settlement of the Silver Lake convertible note at less than $320 per share. The company increased its dividend by 11% for the 14th consecutive year and ended the year with over $2 billion in cash and a net debt-to-EBITDA ratio of 1.1, providing significant flexibility for future capital deployment within its $72 billion total addressable market.

    06

    Operating Environment and Government Spending

    Management noted a favorable operating environment, particularly in state and local public safety, driven by continued prioritization of safety and strong funding from income, sales, and property taxes. Federal engagement, including DOJ, DHS, and DOD, also remains positive, with the company recently achieving FedRAMP high classification for APX NEXT application services, opening incremental opportunities for high-tier devices in federal agencies. No Ukraine revenue is expected in 2025, compared to approximately $80 million in 2024.

    AI-generated summary of the company’s earnings call. Not investment advice.