Motorola Solutions Inc

Previous wording

This commentary should be read in conjunction with the condensed consolidated financial statements and related notes thereto of Motorola Solutions, Inc. (“Motorola Solutions,” the “Company,” “we,” “our,” or “us”) for the three and nine months ended September 28, 2024 and September 30, 2023, as well as our consolidated financial statements and related notes thereto and management’s discussion and analysis of financial condition and results of operations in our Annual Report on Form 10-K for the year ended December 31, 2023 (the "Form 10-K").

Current wording

This commentary should be read in conjunction with the condensed consolidated financial statements and related notes thereto of Motorola Solutions, Inc. (“Motorola Solutions,” the “Company,” “we,” “our,” or “us”) for the three months ended March 29, 2025 and March 30, 2024, as well as our consolidated financial statements and related notes thereto and management’s discussion and analysis of financial condition and results of operations in our Annual Report on Form 10-K for the year ended December 31, 2024 (the "Form 10-K").

Previous wording

Statements in this Quarterly Report on Form 10-Q for the quarter ended September 28, 2024 (this “Form 10-Q”) which are not historical in nature are 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,” “aims,” “estimates” and similar expressions. We can give no assurance that any future results or events discussed in these statements will be achieved. Any forward-looking statements represent our views only as of today and should not be relied upon as representing our 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 our actual results to differ materially from the statements contained in this Form 10-Q. Some of these risks and uncertainties include, but are not limited to, those discussed in Part I, Item 1A “Risk Factors” of the Form 10-K, and those described elsewhere in our other SEC filings. Forward-looking statements include, but are not limited to, statements included in: (1) “Management's Discussion and Analysis of Financial Condition and Results of Operations,” about: (a) the impact of the United Kingdom's Competition and Markets Authority's legal order regarding Airwave (including our actions in response); (b) the impact of our proceedings in the UK High Court regarding the notice of contract extension from the UK Home Office relating to Airwave; (c) the impact of acquisitions on our business; (d) the return of capital to shareholders through dividends and/or repurchasing shares; (e) future payments, charges, and use of accruals associated with our reorganization of business programs and employee separation costs; (f) expected payments of exit costs related to our exit of the Emergency Services Network ("ESN") contract with the UK Home Office; (g) our ability and cost to repatriate funds; (h) the liquidity of our investments; (i) our ability and cost to access the capital markets; (j) our ability to borrow under our credit facilities; (k) adequacy of internal resources to generate an adequate amount of cash to meet expected working capital, capital expenditure and cash requirements; (l) future cash flows generated from operations, and future uses of such cash; and (m) the impact of the adoption of accounting pronouncements on our financial results; (2) “Quantitative and Qualitative Disclosures about Market Risk,” about: (a) the impact of foreign currency risk; (b) the impact of interest rate risk; and (c) future hedging activity and expectations of the Company; and (3) “Legal Proceedings,” about the ultimate disposition of legal matters and timing. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise, except as legally requ…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Statements in this Quarterly Report on Form 10-Q for the quarter ended March 29, 2025 (this “Form 10-Q”) which are not historical in nature are 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,” “aims,” “estimates” and similar expressions. We can give no assurance that any future results or events discussed in these statements will be achieved. Any forward-looking statements represent our views only as of today and should not be relied upon as representing our 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 our actual results to differ materially from the statements contained in this Form 10-Q. Some of these risks and uncertainties include, but are not limited to, those discussed in Part I, Item 1A “Risk Factors” of the Form 10-K, and those described elsewhere in our other SEC filings. Forward-looking statements include, but are not limited to, statements included in: (1) “Management's Discussion and Analysis of Financial Condition and Results of Operations,” about: (a) the impact of global tariffs and volatility in the global supply chain and our expected ability to mitigate increased costs related thereto (b) the impact on our business of the United Kingdom's Competition and Markets Authority's prospective price control regarding Airwave; (c) our expectations regarding the Airwave collective proceeding claim with the Competition Appeal Tribunal; (d) the impact of acquisitions and other investments on our business; (e) the impact of existing and future laws, regulations, international treaties and industry standards relating to climate change and other environmental and social impacts on our business; (f) market growth, demand, spending and resulting opportunities; (g) industry growth and demand, including opportunities resulting from such growth, (h) expected impacts to operating leverage; (i) the growth of sales opportunities in our Products and Systems Integration and Software and Services segments; (j) the return of capital to shareholders through dividends and/or repurchasing shares; (k) the impact and success of our business strategy and portfolio; (l) future payments, charges, and use of accruals associated with our reorganization of business programs and employee separation costs; (m) future exit costs related to our exit of the Emergency Services Network ("ESN") contract with the Home Office of the United Kingdom; (n) our ability and cost to repatriate funds; (o) the liquidity of our investments; (p) our ability and cost to access the capital markets; (q) our ability to borrow and the amount available under our credit facilities; (r) adequacy of internal resources to fund expected working capital, capital …

Excerpt shortened here; the source contains the full paragraph.

Previous wording

•Video: Cameras (fixed, body-worn, in-vehicle), access control, infrastructure, video management, software and artificial intelligence (AI)-powered analytics that help enable visibility and bring attention to what’s important.

Current wording

•Video: Cameras (fixed, body-worn, in-vehicle), access control, sensors, infrastructure, video management, software and artificial intelligence (AI)-powered analytics that help enable visibility and bring attention to what’s important.

Previous wording

•Net earnings attributable to Motorola Solutions, Inc. was $562 million, or $3.29 per diluted common share, in the third quarter of 2024, compared to net earnings of $464 million, or $2.70 per diluted common share, in the third quarter of 2023.

Current wording

•Net earnings attributable to Motorola Solutions, Inc. was $430 million, or $2.53 per diluted common share, in the first quarter of 2025, compared to a net loss of $39 million, or $(0.23) per diluted common share, in the first quarter of 2024.

Previous wording

•Operating cash flow increased $522 million to $1.3 billion in the first nine months of 2024 compared to $799 million in the first nine months of 2023.

Current wording

•Operating cash flow increased $128 million to $510 million in the first quarter of 2025 compared to $382 million in the first quarter of 2024.

Previous wording

•We repurchased $141 million of common stock and paid $490 million in dividends in the first nine months of 2024.

Current wording

•We repurchased $325 million of common stock and paid $182 million in dividends in the first quarter of 2025.

Previous wording

In October 2021, the Competition and Markets Authority ("CMA") opened a market investigation into the Mobile Radio Network Services market. This investigation included Airwave, our private mobile radio communications network that we acquired in 2016. Airwave provides mission-critical voice and data communications to emergency services and other agencies in Great Britain.

Current wording

Beginning August 1, 2023, the United Kingdom's Competition and Markets Authority ("CMA") imposed a legal order which implemented a prospective price control ("the Charge Control") on Airwave, our private mobile radio communications network that provides mission-critical voice and data communications to emergency services and other agencies in Great Britain. Our appeal of the implementation of the Charge Control to the United Kingdom's Court of Appeal was unsuccessful and we have no further right to appeal to the United Kingdom Courts. Since August 1, 2023, revenue under the Airwave contract has been, and will continue to be, recognized in accordance with the Charge Control.

Previous wording

Our backlog for Airwave services contracted with the UK Home Office through December 31, 2026 was previously reduced by $777 million to align with the Charge Control. In the first quarter of 2024, as a result of the UK Home Office's notice of a contract extension pursuant to their Deferred National Shutdown Notice, we have recorded additional backlog of $748 million to reflect the incremental three years of services. On April 11, 2024, we filed proceedings in the UK High Court challenging the decision of the UK Home Office to issue the Deferred National Shutdown Notice as being in breach of applicable UK procurement and public law. The hearing on this matter has been set to commence on April 22, 2025. The backlog related to the incremental years of service contemplated in the Deferred National Shutdown Notice could change depending on the outcome of the proceedings.

Current wording

In 2024, we received a notice of contract extension (the “Deferred National Shutdown Notice”) from the Home Office of the United Kingdom (the "Home Office"). The Deferred National Shutdown Notice extends the “national shutdown target date” of the Airwave service from December 31, 2026 to December 31, 2029, at the Charge Control rates and is fully reflected in our reported backlog. In 2024, we filed proceedings with the U.K. High Court challenging the decision of the Home Office to issue the Deferred National Shutdown Notice as being in breach of applicable U.K. procurement and public law. During the first quarter of 2025, these proceedings were discontinued.

Previous wording

The results of operations for the third quarter of 2024 are not necessarily indicative of the operating results to be expected for the full year. Historically, we have experienced higher revenues in the fourth quarter as compared to the rest of the quarters of our fiscal year as a result of the purchasing patterns of our customers.

Current wording

The results of operations for the first quarter of 2025 are not necessarily indicative of the operating results to be expected for the full year. Historically, we have experienced higher revenues in the fourth quarter as compared to the rest of the quarters of our fiscal year as a result of the purchasing patterns of our customers.

Previous wording

The Products and Systems Integration segment’s net sales represented 64% of our net sales in the third quarter of 2024 and 63% in the third quarter of 2023. The Software and Services segment’s net sales represented 36% of our net sales in the third quarter of 2024 and 37% in the third quarter of 2023.

Current wording

The Products and Systems Integration segment’s net sales represented 61% of our net sales in the first quarter of 2025 and 62% in the first quarter of 2024. The Software and Services segment’s net sales represented 39% of our net sales in the first quarter of 2025 and 38% in the first quarter of 2024.

Previous wording

Net sales increased $234 million, or 9%, in the third quarter of 2024 compared to the third quarter of 2023. The $172 million, or 11%, increase in net sales within the Products and Systems Integration segment was driven by an increase of 13% in the North America region and an increase of 5% in the International region. The $62 million, or 7% increase in net sales within the Software and Services segment was driven by an increase of 12% in the North America region, partially offset by a decrease of 4% in the International region. Net sales includes:

Current wording

Net sales increased $139 million, or 6%, in the first quarter of 2025 compared to the first quarter of 2024. The $83 million, or 9% increase in net sales within the Software and Services segment was driven by an increase of 10% in the North America region and an increase of 7% in the International region. The $56 million, or 4%, increase in net sales within the Products and Systems Integration segment was driven by an increase of 9% in the North America region, partially offset by a decrease of 10% in the International region. Net sales includes:

Previous wording

•an increase in the Products and Systems Integration segment, inclusive of $32 million of revenue from acquisitions, driven by an increase in LMR and Video;

Current wording

•an increase in the Software and Services segment, inclusive of $32 million of revenue from acquisitions, driven by an increase in Video, LMR services and Command Center;

Previous wording

•an increase in the Products and Systems Integration segment, inclusive of $11 million of revenue from acquisitions, driven by an increase in LMR, partially offset by a decrease in Video;

Current wording

•an increase in the Products and Systems Integration segment, driven by an increase in LMR, partially offset by a decrease in Video; and

Previous wording

•an increase in the Software and Services segment, inclusive of $25 million of revenue from acquisitions, driven by an increase in Video and Command Center, partially offset by a decrease in LMR services due to the revenue reduction on Airwave services in accordance with the Charge Control and the Company's exit of the ESN contract with the UK Home Office in 2022, inclusive of twelve months of transition services through the end of 2023 (the "ESN Exit"); and

Current wording

•inclusive of $25 million from unfavorable currency rates.

Previous wording

•a 14% increase in the North America region, inclusive of revenue from acquisitions, driven by an increase in LMR, Video and Command Center; partially offset by

Current wording

•a 9% increase in the North America region, inclusive of revenue from acquisitions, driven by an increase in LMR, Video and Command Center; partially offset by

Previous wording

•a 1% decrease in the International region, inclusive of revenue from acquisitions, driven by a decrease in LMR due to the revenue reduction on Airwave services in accordance with the Charge Control and the ESN Exit, partially offset by an increase in Video and Command Center.

Current wording

•a 3% decrease in the International region, inclusive of revenue from acquisitions, driven by a decrease in LMR partially offset by an increase in Command Center and Video.

Previous wording

•$8 million, or 3% decrease in Video, inclusive of revenue from acquisitions, driven by the International and North America regions; and

Current wording

•$4 million, or 2%, decrease in Video, driven by the International and North America regions; and

Previous wording

•$16 million, or 9% growth in Command Center, inclusive of revenue from acquisitions, driven by the North America and International regions; partially offset by

Current wording

•$17 million, or 10%, growth in Command Center, inclusive of revenue from acquisitions, driven by the North America and International regions; and

Previous wording

Gross margin was 51.4% of net sales in the third quarter of 2024 compared to 50.1% in the third quarter of 2023. The primary drivers of this increase in gross margin as a percentage of net sales were:

Current wording

Gross margin was 51.4% of net sales in the first quarter of 2025 compared to 49.9% in the first quarter of 2024. The primary drivers of this increase in gross margin as a percentage of net sales were:

Previous wording

Selling, General and Administrative Expenses

Current wording

Selling, General and Administrative ("SG&A") Expenses

Previous wording

Other charges decreased by $28 million in the first nine months of 2024 compared to the first nine months of 2023. The change was driven primarily by the following:

Current wording

Other charges decreased by $9 million in the first quarter of 2025 compared to the first quarter of 2024. The decrease was primarily driven by:

Previous wording

Operating earnings increased $72 million, or 11%, in the third quarter of 2024 compared to the third quarter of 2023. The increase in Operating earnings was due to:

Current wording

Operating earnings increased $63 million, or 12%, in the first quarter of 2025 compared to the first quarter of 2024. The increase in Operating earnings was due to:

Previous wording

•an $82 million increase in the Products and Systems Integration segment, primarily driven by higher sales, favorable change in year-over-year mix and lower direct material costs, partially offset by higher employee incentive costs, including share-based compensation, and higher expenses related to legal matters; partially offset by

Current wording

•a $42 million increase in the Products and Systems Integration segment, primarily driven by higher sales, favorable change in year-over-year mix and lower direct material costs, partially offset by higher expenses related to legal matters, including Hytera related expenses, and higher employee incentive costs, including share-based compensation; and

Previous wording

•a $383 million increase in the Products and Systems Integration segment, primarily driven by higher sales, favorable mix, and lower direct material costs, partially offset by higher employee incentive costs, including share-based compensation, higher expenses associated with acquired businesses and higher expenses related to legal matters; partially offset by

Current wording

•a $21 million increase in the Software and Services segment, primarily driven by higher sales, partially offset by higher expenses associated with acquired businesses and higher employee incentive costs.

Previous wording

The $5 million increase in Interest expense, net in the third quarter of 2024 compared to the third quarter of 2023 was primarily driven by higher interest rates on outstanding debt, partially offset by higher interest income.

Current wording

The $7 million increase in Interest expense, net in the first quarter of 2025 compared to the first quarter of 2024 was primarily driven by higher interest rates on outstanding debt.

Previous wording

The $35 million increase in Other, net in the third quarter of 2024 compared to the third quarter of 2023 was primarily driven by:

Current wording

The $581 million increase in Other, net in the first quarter of 2025 compared to the first quarter of 2024 was primarily driven by:

Previous wording

•$585 million loss from the extinguishment of the $1.0 billion of 1.75% senior convertible notes issued to Silver Lake Partners and scheduled to mature in September 2024 (the "Silver Lake Convertible Debt") which was recognized in the first nine months of 2024;

Current wording

•$585 million loss from the extinguishment of 1.75% senior convertible notes issued to Silver Lake Partners ("Silver Lake Convertible Debt") in the first quarter of 2024; and

Previous wording

•$22 million gain on derivatives in the third quarter of 2024 compared to a $26 million loss on derivatives in the third quarter of 2023;

Current wording

•$13 million gain on derivatives in the first quarter of 2025 compared to a $10 million loss on derivatives in the first quarter of 2024; partially offset by

Previous wording

•$26 million of foreign currency losses in the third quarter of 2024 compared to $23 million of foreign currency gains in the third quarter of 2023.

Current wording

•$20 million of foreign currency losses in the first quarter of 2025 compared to $1 million of foreign currency gains in the first quarter of 2024.

Previous wording

Income tax expense decreased by $107 million in the first nine months of 2024 compared to the first nine months of 2023, resulting in an effective tax rate of 18%. Our effective tax rate of 18% for the nine months ended September 28, 2024 was lower than the effective tax rate for the nine months ended September 30, 2023 of 22%, primarily due to the tax benefit recognized upon the Company's decision to implement a business initiative in 2024 which allows for additional utilization of foreign tax credit carryforwards and a higher foreign derived intangible income deduction on its 2023 U.S. tax return, tax benefits recognized upon settlement of audits with taxing authorities in foreign jurisdictions, and higher excess tax benefits of share-based compensation in 2024, offset by the non-tax deductible loss on the extinguishment of Silver Lake Convertible Debt in 2024.

Current wording

Income tax expense increased by $167 million in the first quarter of 2025 compared to the first quarter of 2024, resulting in an effective tax rate of 21%. Our effective tax rate for the three months ended March 29, 2025 of 21% was lower than the effective tax rate for the three months ended March 30, 2024 of 58%, primarily due to the non-tax deductible loss on the extinguishment of the Silver Lake Convertible Debt in 2024, partially offset by the tax benefit recognized upon the Company's decision to implement a business initiative in 2024 which allowed for additional utilization of foreign tax credit carryforwards and a higher foreign derived intangible income deduction on its 2023 U.S. tax return.

Previous wording

During the third quarter of 2024, we recorded net reorganization of business charges of $7 million, including $5 million of charges recorded within Other charges and $2 million of charges in Cost of sales in our Condensed Consolidated Statements of Operations. Included in the $7 million were charges of $8 million related to employee separation costs, partially offset by $1 million of reversals for employee separation accruals that are no longer needed.

Current wording

During the first quarter of 2025, we recorded net reorganization of business charges of $17 million, consisting of $12 million of charges in Other charges and $5 million of charges in Cost of sales in our Condensed Consolidated Statements of Operations. Included in the $17 million were charges of $19 million related to employee separation costs, partially offset by $2 million of reversals for employee separation accruals that are no longer needed.

Previous wording

During the third quarter of 2023, we recorded net reorganization of business charges of $6 million, including $4 million of charges in Other charges and $2 million of charges in Costs of sales in our Condensed Consolidated Statements of Operations. Included in the $6 million were charges of $8 million related to employee separation costs, partially offset by $2 million of reversals for employee separation accruals no longer needed.

Current wording

During the first quarter of 2024, we recorded net reorganization of business charges of $10 million, including $7 million of charges recorded in Other charges and $3 million of charges in Costs of sales in our Condensed Consolidated Statements of Operations. Included in the $10 million were charges of $12 million related to employee separation costs, partially offset by $2 million of reversals for employee separation accruals no longer needed.

Previous wording

Cash payments for employee severance in connection with the reorganization of business plans were $27 million in the first nine months of 2024 and $28 million in the first nine months of 2023. The reorganization of business accrual at September 28, 2024 was $21 million related to employee separation costs that are expected to be paid within one year.

Current wording

Cash payments for employee severance in connection with the reorganization of business plans were $14 million in the first quarter of 2025 and $9 million in the first quarter of 2024. The reorganization of business accrual at March 29, 2025 was $30 million related to employee separation costs that are expected to be paid primarily within one year.

Previous wording

At January 1, 2024, we had an accrual of $5 million for exit costs related to our exit of the ESN contract with the UK Home Office. During the nine months ended September 28, 2024, we recorded a $4 million reversal for accruals no longer needed. The $1 million of exit costs are recorded in Accrued liabilities in our Condensed Consolidated Balance Sheets at September 28, 2024, and are expected to be paid within one year.

Current wording

At January 1, 2025, we had an accrual of $1 million for exit costs related to our exit of the ESN contract with the U.K. Home Office. The $1 million of exit costs are recorded in Accrued liabilities in our Condensed Consolidated Balance Sheets at March 29, 2025, and are expected to be paid within one year.

Previous wording

At September 28, 2024, $1.1 billion of the $1.4 billion cash and cash equivalents balance was held in the U.S. and $297 million was held in other countries.

Current wording

At March 29, 2025, $1.3 billion of the $1.6 billion cash and cash equivalents balance was held in the U.S. and $302 million was held in other countries.

Previous wording

The increase in cash flows provided by operating activities from the first nine months of 2023 to the first nine months of 2024 was driven primarily by higher earnings, net of non-cash adjustments, and improved working capital.

Current wording

The increase in cash flows provided by operating activities from the first quarter of 2024 to the first quarter of 2025 was driven primarily by higher earnings and improved working capital.

Previous wording

The increase in cash flows used for investing activities in the first nine months of 2024 compared to the first nine months of 2023 was primarily due to an increase in cash used for acquisitions and investments, offset by proceeds from the sale of our Richmond, British Columbia and Richardson, Texas video manufacturing operations.

Current wording

The increase in cash flows used for investing activities in the first quarter of 2025 compared to the first quarter of 2024 was primarily due to an increase in cash used for acquisitions and investments.

Previous wording

The increase in cash flows used for financing activities in the first nine months of 2024 compared to the first nine months of 2023 was primarily driven by (see also further discussion in the "Debt," "Share Repurchase Program" and "Dividends" sections below in this Part I, Item 2 of this Form 10-Q):

Current wording

The increase in cash flows used for financing activities in the first quarter of 2025 compared to the first quarter of 2024 was primarily driven by (see also further discussion in the "Debt," "Share Repurchase Program" and "Dividends" sections below in this Part I, Item 2 of this Form 10-Q):

Previous wording

•$1.3 billion increase in net proceeds in the first nine months of 2024 compared to the first nine months of 2023 driven the issuance of our 5.0% senior notes due 2029 and 5.4% senior notes due 2034; and

Current wording

•$1.3 billion decrease in net proceeds from the issuance of debt in the first quarter of 2024 driven the issuance of our 5.0% senior notes due 2029 and 5.4% senior notes due 2034 that did not occur in first quarter of 2025;

Previous wording

•$529 million decrease in share repurchases in the first nine months of 2024 compared to the first nine months of 2023.

Current wording

•$286 million increase in share repurchases in the first quarter of 2025 compared to the first quarter of 2024;