MSI - Earnings call transcript Q3 2017 | Motorola Solutions, Inc.

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Operator

Good afternoon, and thank you for holding. Welcome to the Motorola Solutions' Third Quarter 2017 Earnings Conference Call. Today's call is being recorded.

If you have any objections, please disconnect at this time. The presentation material and additional financial tables are currently posted on the Motorola Solutions' Investor Relations website.

of the will over conclusion replay three available the a after hours of addition, this be call approximately Internet. In this call address website is The www.motorolasolutions.com/investor. mode been At your for the in participants time, following line have this a be all questions listen-only and presentation. opened the will placed would I like introduce to now Mr. Investor President Chris Kutsor, of Vice Relations. Mr. Kutsor, begin conference. your you may

Chris Kutsor

and Brown, Executive you CFO; and about Executive With now reports over in not me update call. and other quarter third earnings with Bonanotte, factors news Greg. results our for do forward-looking These I'll turn Vice Executive from presentation cause Q&A and good earnings forward-looking Thank XXXX of duty call. our found news materials release Actual Jack the expectations to along Brda, the filings Worldwide annual our on and Jack results Gino SEC. current are Bruce the and reconciliations and to and section afternoon. that differ commentary, and Chairman during today's of Greg include are President, Form to statements. are made XXXX will such subject could differences any Vice materially GAAP Solutions; Gino risk review based can CEO; of Welcome to Greg the Q&A. Service. These call, a Bruce on XX-K Information President uncertainties. your could statements of statements. Vice variety to conference an it And portion any join posted comments factors and in in assumptions our that during risks these number and non-GAAP be this release with and Sales reference. that undertake reports forward-looking We and and today A Products President, and made this during and at will We've for statements motorolasolutions.com/investor. with presentation be will earnings Molloy, the

Gregory Q. Brown

afternoon, and Good today. us Chris. thanks Thanks, joining for

Before in I'd to a like moment and all take safety. women to public begin, recognize men we of the

First and their was every that dedicated during disasters. to in our responders be to and the serve importance natural the critical We're moments our recent communities, work matter. customers exemplified best day to hard protect helping their

like also events our assisting about few that public role I'd last to these the that, thank So for over during mission-critical results their the few extreme of I to employees remained all and thoughts safety operational business. months. a in share to communications quarterly turn With ensure

mission-critical growth redundant our First, and the organically business. grew QX continued private, communications. region. revenue was sales in another grew X% Radio Organic grew customer reliable results These always-on, Land every in revenue Total America strong revenue Mobile grew in secure, outstanding we by X%. for and Organic quarter, driven North also demand reflect X%. voice

before like And thoughts. over the longevity closing to now a we many again grown record returning last $X.XX. typically QX from momentum results with and of but primary our X% Not and Considering finished have full-year has call X% backlog Second, to that ending North provide revenue of demand additional X% by systems driver our turn is XX a revenues growth strong expect I'd to years, for EPS some XX QX demand on testament XXXX. to led the approximately QX our finally, both is into revenue business. to of non-GAAP execution, $X.XX And with into pleased LMR of only we're year-to-date, The full-year our especially on America. to now ago. America, revenue of raising over in which outlook growth LMR Gino year criticality details and North growth and and also XXXX of we continued heading continued billion outlook EPS up this I'm year-to-date $X and demand for We backlog. and

Gino A. Bonanotte

revenue earnings billion, Ending was $X.X was last Greg. last year, were year. including up million, margins million operating include earnings $X up of X%. comparable X% $X.XX, operating Product to you, $X.XX, $X.X $XXX GAAP versus billion, million, non-GAAP Non-GAAP of revenue $X.XX EPS $XXX million last $XXX the was million up and QX up was from up of of were up X% year. from XX% revenue Services was results prior last backlog million $XXX Organic Thank sales, $XXX XX% XX.X% million. million year. backlog GAAP year. up Operating year, was from per $X.XX or down from $XX from from acquisitions. backlog up $XX last earnings approximately share year. last

up lower Gross margins versus last of growth quarter million is the million $XXX $XXX and million we'll up For backlog which over our results was $XX This operating customers. the million non-GAAP $XXX the each. at Product ended year, commercial up was prior by PXX last in last sequential segment The financial backlog by QX OpEx. year. call, XX% PXX and driven were of including consecutive year, the America, remainder quarter otherwise flat unless noted. primarily basis valued demand from EMEA at segment and sales Products $XXX XX $X.X for were Product orders safety the or product from on public higher year. America or and of to compared or continued outlook QX income led points growth. reference system backlog year-over-year up systems driven X% for those sales, XXX XXth to billion, be sales both continues North North XX%. had year-over-year Sequentially, by XX% million,

from year. Services; Turning $XXX up last was revenue QX services million, X% to

income from XX.X% XX% Our Managed revenue & Support X%. down or million Services year. operating services grew of sales, last was $XXX

to As expected, ago from the XXs returned the high year quarter. the mid-XXs in gross margins

Services As expect margins gross segment. range previously noted, we continue mid-XX% for the to in the

billion, be currency or Services X% adjustments. backlog in million reduction. a million $XXX Managed year, Support including Services continues up ended by last backlog Airwave $XX primarily including $XXX favorable approximately up up the backlog segment, at America Sequentially, million to acquisitions. of driven Services North was result long-term OpEx million, is for million contract. of demand services & $XXX primarily Additionally, from as of $XXX $X.X backlog

operating the expenses; XX.X%. the was QX compared from OpEx million to million inclusive to Moving up effective from expense related acquisitions. of million operations continuing tax quarter. million, and quarter, rate total year-ago $XX $XX The million was to year-ago in Other $XXX was $XX income $X

Turning trailing a capital driven cash tax $XX last year. decrease $XX year, of the million cash implementation to operating of $XX from million, and with million, free higher million Free flow $XXX was was was perspective, $XXX ERP cash From higher decrease working million. XX-month flow payments. flow flow; QX up last a associated cash a from by

net expect QX We and ended with $XXX approximately a XXXX. billion We of $X.X in cash position $X.X flow cash billion. million operating of debt for

During $XX million $XX.XX the of of dividends million. and average paid quarter, repurchased we $XXX of an we stock at price

paid $XXX to also acquisition announced share. Kodiak. the million we XX% quarterly to per to $X.XX cash related in an our Additionally, of of increase dividend Today, we

we QX outlook; our and guidance. to our are full-year raising Turning

OpEx of $X.XX. increase expected to growth a approximately EPS $X.XX, average X% million previous between of including our to We acquisitions. $X.XX of outlook share an expected approximately growth X% forecast expect with approximately XXXX be to of This from X% and prior revenue shares. of expenses $X.XX. the $X.XX $X.XX of is revenue are to Full-year We from now $X versus EPS weighted diluted X%. expect million $XX full-year count million QX non-GAAP be assumes approximately approximately XXXX, down to $XX operating XXX billion, from Non-GAAP

rate the expect full-year We year. expected $X.X XX% be XXXX the cash for to is and effective flow approximately approximately billion be to tax operating

Services, was for products, for more was of results; as customers customers. serving products, long X% regional LMR revenue up by the North up to at backlog EMEA million $X.X conversion. is invest strong in driven for revenue from This Products growth by growth well billion strong continue Americas demand as demand in up $XXX X% PXX also solutions while commercial more than in up demand was X%, as PCR Backlog and down sequentially, Looking was the on term. America. driven organic year-over-year Airwave than and

Pac up Services. driven X%, by primarily Asia was

Stafford for like for Tennessee; for three system a highlights. deals Products a XXXX. our Jersey. In million Support million we the the Georgia. that include contracts in won support contract with a County, three segment, $XX the support regional Managed in a In for deploy a end networks to through Phoenix a Services Memphis, in that several million contract of segment PXX I'd our & million to counties system some These new PXX area, awarded were a Oregon; $XX million New for include award Virginia notable and a Burlington, we and award PXX in $XX segment, Finally, extend $XX $XX $XX contract State year million system award in a PXX

customers from push-to-talk, Additionally, introduced America, push-to-talk The safety such vehicular command portal. alerts or LTE in website acquisition AT&T's over for automatic drawn call users. the Greg. Latin the modem now LTE Canada over We as the closed FXX technology applications PSX the and that provides of back Application were perspective, LEX responder providing VML and to Public speed Motorola Kodiak which the technology as announced AT&T, and public we solutions Verizon, XXX FirstNet.com Europe Bell Telefónica. messaging Suite, center triggers weapon Safety turn finally, fired. we America to a designed such And specifically like added North for and I'd to mapping the for and handset alert, Networks, events to Sprint, cellular

Gregory Q. Brown

Thanks, Gino.

just thoughts. close three with me final Let

our forecast full-year EPS again. raised we First, and revenue

by customers U.S. the communication that require mission-critical the recent continue hurricanes. situations and voice our for of to was always-on Our reliability systems during reinforced

finally, safety while complementary for confident which provide LMR continued the We're for I I'm strategic over leveraging and building cash record-ending think now foundation growth, we're to turn with very into and base position. our I'll generation incremental term. growth Chris. with expansion positioned command return center services, systems backlog, together and simultaneously long the shareholder Second, to our call the continued our LTE, And public attach heading XXXX. installed continued over for platforms back the well earnings continued

Chris Kutsor

Greg. Thanks,

possible. can our Operator, questions, as themselves and a question? limit callers one please Before ask one as would I many to remind we please to taking like we callers to would begin remind follow-up you how participants so get question

Operator

floor now The for open questions. is

from with Please Sachs. first Goldman go question Our ahead. coming is Cabral Matthew

Matthew Cabral

a you so what see the Greg, remarks. But growth wanted just thank on about momentum thinking up about as comment I to prepared your going sustainability Yes, the you and biggest just if organic behind bit little more comment the in that? wondering XXXX, can forward been drivers of good a from as far. you. it's pick of year last started we Clearly,

Gregory Q. Brown

Yes.

with consecutive I Matt, that QX. quarter It's organic growth of I'm as think our really pleased, fourth performance our company. in a

As is XX% of America-based. revenue our North you know,

nine So heading see into when I good have that last that, feel on I I the to ending that at year. quarters, grown look feel backlog the foundation XX I build out of good and the they've next we about about and

been grown I demand remains America. remarks, think the as in mentioned regions. overall prepared It's strong organically, We've in in all I North strong.

well commercial coverage year I expect and than frankly, state was in execution organically ago. as to grow months think markets, XX ago sales do our And expect XXXX. We is we've we and to in quite federal. local think a grow also and I XXXX and seen or strength overall, in stronger it as

down that's $XX and approximately in with be – iDEN So million to XXXX.

Matthew Cabral

on And it. quickly just Got then FirstNet.

have we're in. I to So that states opted up now XX think

August Just the point where about think you just that that commentary this more fits and announcement the and that the have wondering incremental we how if picture Verizon any ramp in there's made should broadly? at into in

Gregory Q. Brown

we update don't in I Yes. change at that any think this time. have real you on there's point to

We're whether that in. December I opt-out. XX All by that's they We think XX encouraged great. that. and or to XX you Matt, the the states think know, decision opt-in territories or there's states as have of till have, make opted

work the and city, by carrier-to-carrier once on us, behind then to with that's county, carrier road said, state our switch rubber that see Verizon say we'll thing what to it's they the their traction today. as solution end-user going much they're whether the switch can but other going decisions, and we on to get individual Kodiak Now the acquisition do Kodiak. they're do, do. AT&T, on they of decisions what a that the front, municipality, because of regard. closed only decisions all we partner, how existing I'd to The meets And Verizon a in push-to-talk uses

a have XXXX Verizon with on entre think update the better QX FirstNet I working fiscal and But view call have terms that our of now financially. we front. in earnings for So we'll on you around

Matthew Cabral

Thank you.

Operator

you. Thank

go with Stanley Research. Our next ahead. Please question from Citi Kovler comes

Stanley Kovler

Thanks very much.

conversations customers question angle deals some sense with customers, Just sales are level opposite then deals the FirstNet, push-outs? having FirstNet at some that get to that on you're and sort in essentially in cases, Thank a now, because respect Gino. for the field some different it slightly the of for a the lock on could And is a you're be, of effect cycles, you is that there or taking trying getting having and to these do planning I follow-up you. have that with

Gregory Q. Brown

I broadband in we LMR. network a it's think happening in change we've along, result in FirstNet. pattern I Yeah, I don't LMR see is results data overlay been LTE and all of as in don't think buying think incremental market, any said that's and – the to demonstrated what there's our a as

I Wolf to mean, that's going think I today Pennsylvania on parallel. signed activity an in adjunct it's opt-in. Governor

maintenance. few a of State quarters of system several an we back end-to-end competitively ago, multi-year years and Pennsylvania Just won include a that mobile network the radio will land for

meet. don't the two So, think I

John P. Molloy

Stanley, Greg on piggyback it's said. Yes. Maybe to what Jack.

LTE customer just three Just ago. a eight-year secured enough, ago, they that recently in Halton, I private who Interestingly just just SUA afternoon, with an network procured from months for signed they Canada, met Motorola. a PXX a XX this years network

you'll be for So base. paths, I PXX see will mission-critical customer to think voice solution continue the our parallel

discussions, As cycles. hasn't to, slowed hasn't slowed Greg any alluded

there deals XX Gino had conversation really as was to they around the kinds closed officers Halton I and next-generation to. we're million, how command into fact, plays intelligence, center into in those intelligence, Think CAD, moving from about field. an applications, seamlessly. intelligence alluded optimize making $XX what today efficient things the field we mobile the link making the more of over In investments In more ultimately records, with you which perspective do

we but a real slowed, story good hasn't it path. on in really So ends both think there's parallel

Stanley Kovler

fiscal you full sense Gino And a sense in about should just approximately organic tailwind give and X% us for outlook. then QX just number? the Thank of for and fiscal clarification a growth Can then FX XXXX year we that Thanks. on the how much think embedded for now year a you. the

Gino A. Bonanotte

in respect is X% year down organic start now FX Embedded in and growth. based the that in for full organic between the With $XX de that it's growth million minimis. X% a number. million It's $XX to I'll our year, Stanley. push of full in iDEN for number quarter QX – $XX Sure, on with and million approximately QX includes rates to the right XXXX.

Stanley Kovler

Thank you.

Operator

Thank you.

with comes next Bank. Bhagavath Deutsche question from Our Vijay

Vijay Bhagavath

Gino. Greg, Hi,

Gregory Q. Brown

Hey, Vijay. How are you?

Gino A. Bonanotte

Hey. Vijay.

Vijay Bhagavath

from Andrew Microsoft, franchise know building attractive is Hey, whom MSI. an at I software Sinclair,

those And impact recent near-term catalysts? be Thanks. the your get could to Greg, new software Would the like state on I'd into portfolio business cycle events. how we've year. water-falling So start and view, and seen local, hurricane then numbers the and in product

Gregory Q. Brown

Yeah.

our all the the of demonstrated the first, didn't of they material as at systems By that stayed The way, time Irma That's in systems proud we of Florida noteworthy really to part stayed have we're the as stayed hurricane It's the and during of performance print relates LMR the this why the ones we one by in pretty how systems significant. second slides season. communications up, hit anything monitor, the On the hurricanes. QX up. of up. really all deck it

Sinclair, happy the was core North opportunity state fundamental we're going of think really add-on rebuild America-led. hire. the around more strength Andrew future local, seeing, forward, the exists QX what with commercial, demand or of Federal, and I but for business the

toward moving closing We services. Airbus in – we've revenue was the greater our but command You revenue end role a we're has know XX% still software I revenue ground year, play will Services the were that acquisitions We've the think anticipate Andrew made Recurring QX. stated the XX% strategy. that reflect in running. and of that PlantCML revs of hit Recurring more QX, by center. overall that we said in and our of

Bruce Brda

this Vijay, Brda. And Bruce is

Just to a little add bit.

Let you, Jack said. the software the me are center, in command in both investments remind as

wrapper So around so Console, and and broadband analytics delivering and collaboration with think workflow an a we're FirstNet applications, solutions then, as and the XXX, what world. CAD, customers around cloud-based communication delivering to Dispatch applications, records, other secondarily Increasingly, be we'll it; those service.

good command leaders Andrew, to Andrew's that progress really we As we've applications you mentioned senior are and individual center. we a other to the deliver as couple start suite integrate making a software into added to those can of true team also

Vijay Bhagavath

Thanks. Perfect.

Gregory Q. Brown

Thank you.

Operator

you. Thank

comes go question from Please Jefferies. Notter Our George next with ahead.

Kyle McNealy

a Kyle your seasonally if George. any for always wondering into It any I guide, QX. here is it guys. I'm if but from like across quarter. Hi, pull-forward biggest your there's It was for is customers? lot. look strong your QX reason Thanks was – you doesn't just that QX This a know saw any there

Gregory Q. Brown

is to the Kyle, at and to I at half QX take way and combination. the think it look best look QX in second

that's think It our a was I quarters five a could last do year, The We to to expect it organically revenue only in guide. in QX year QX grow was row. is, other monster. which you reflected XX% mention I thing bit would in make a still growth. this

be to So the growth X%. into QX of year-on-year was last that. incorporated compare needs Organic year

a in East year-over-year. America that's down. LTE million Middle last and public that of safety XX% part the about Latin in that it, So grew winding embedded that's down is and $XX project QX That's

them what certain organic this in more to is dimensionalize and guidance. of business you think combination. done has I and the in periods. traditionally contextualize But And way reflective point at I really to growth would the the then that's and look So QX, QX

Kyle McNealy

can you other you Thanks of there all? as are to I great. add duration – the know any Is a it backlog? a mentioned recurring changing the of much at revenue regarding And the lot. guide comments And sales just coming backlog, your for of – in getting But total with recurring expected percent combination converted QX. of QX? of your how terms what's in that would Okay, revs and be

Gregory Q. Brown

number, up the revenue but know exact was age don't slightly. recurring I very backlog Kyle,

was the think quarter previous XX%. I

and is a your revenue. Product up on print not number to up, of that like it So the up to X% we face Product Services, the Products XX%. backlog What both is edges backlog little only in being and it in it's in an point, up even bit

So would that backlog bodes performance that, have age on my as in think for I for our the certainly position, don't QX. mentioned, I XXXX. well number I fingertips

Gino A. Bonanotte

this will a a QX QX it perspective, And end our if better still are of Kyle, from the perspective, quarter. a not or from the largest being linearity QX normal the we And quarter, experience percentage a linearity be look of the we largest during so aged year. is From started you than last it's entering particular we comment that any entering perspective, at quarter. the within point QX QX. were aged at with Gino. into year you would

Kyle McNealy

on great. quarter. Thanks very helpful. the That's guys. Okay, Congrats

Gregory Q. Brown

Kyle. Thanks,

Gino A. Bonanotte

Thanks, Kyle.

Operator

Thank you.

Our next question comes Research. from Keith Housum go ahead. with Please Northcoast

Keith Housum

Thanks afternoon, for Good gentlemen. opportunity. the

that customer Just is more the or And understand into to understand So, is universe? you it how for that can mean, trying perhaps agency? a Kodiak, bit falls guess look carrier on Greg, your more. your done? help public and bit that is how us little color a the I bit you a more billing that I at little if provide safety themselves the little

Gregory Q. Brown

Sure.

mid-tier me, we addition markets. more – remind frankly, and solution premises-based to around was was designed for solution, quite have around a it you, contemplated carrier-centric, in it was when Kodiak the a carrier-integrated to to our solution. And it acquisition, commercial Just

Bruce Brda

Bruce this Brda. Keith, is So,

close couple we optimized comments. as to can so is of as a XXXX Kodiak Just around WAVE really get carrier-integrated. broadband performance-based, LMR performance, more – really

operate driven So the the billing, We by support it. sell requirements provisioning, intercept, think lawful systems, of application of carrier. all those to They carriers.

per paid month, initial the to part actually per sub question. of dollars we're your So

Keith Housum

Spillman gears how that quarters just combine Great. bit you changing Public going to Smart color products. growth segment? the more now, And to past in Obviously, the perhaps on that's little ability then from the Thanks. I doing. Solutions, appreciate that few Safety your a that. over had with guys How the is

Bruce Brda

us. a I acquisition fits terms a communication apps enterprise, both discussed. just It's that in about comms of well. the is It's made in couple focus. So, then I command and software of ago Spillman a The been collaboration the Kodiak moment and going and for collaboration center extremely comments apps. highlight

have serve command Tier generated between some get Tier we that and, as hope and our well from largely X, centers. We the of additional the ECW reach same Spillman fact, market, cross-sell of in and traction tiers for they as to the X think

Keith Housum

Great. Thank you.

Operator

you. Thank

with Please Our BMO comes Tim ahead. Long from next go question Capital Markets.

Timothy Patrick Long

get growing on on of Thank in the on could seeing if and markets? over And public safety to Home Thank momentum pipeline you. that, for large update related the U.K. Airwave? potential with any you. just kind Can the going we both LTE you us there an just Is more international Office update you're in other deals what's out there? what or

Gregory Q. Brown

Yeah, the question. for Tim. Thanks

work We both it's the a project. Home on closely Office and of continue very to it's a EE actually one a mean, – kind. I U.K. complex with

with So closely we're working them.

$XX XXXX, would about that million higher UK that with Office of we and don't timeline ESN XXXX. re-estimated reasons number think we than have where this Home to we one You've our you given year revenues they the resized year thought regard. for be replan in That's announcements have LTE $XX to when the or of ESN to remind work. in probably fiscal the seen they're closer in why some revenue million the of the I associated public full what kind any a

Bruce whole shoulder. closely imagine, work has we're them, you as would team with accordingly shoulder a and to dedicated to closely to continue Brda, We them. working

will quarters previous they mentioned of customer In while Molloy dollars Canada, an probably since mind. make ago. But more decision our than think on I comes just the Asia a that that small, horizon other of of the it's Pac one really and a awards. symbolic millions of in purchased other few an size of that's it's system only LTE I the tens There's the terms Halton, think anecdotally, demand, QX some LMR also next in to

think positioned. think will four And or I months first hard generally XXXX. we're three speaking, it in working well be and I

Timothy Patrick Long

a you're LMR you you just in on U.S., successes the And seeing strong are that seeing seeing markets same follow-up, Okay. still the LMR are international the systems? the

John P. Molloy

Tim, Hey, it's Jack.

We are.

Middle fact, think continent, Asia world and opportunities if in the I In now. in in the of opportunities every every the opportunities, East, about large-scale we've got PXX U.S., got Africa TETRA we've Pac and right as well. Outside both region big

Timothy Patrick Long

you. Okay, thank

Operator

remarks. Thank you. Kutsor, for of I will back to Chris now President Investor additional closing floor turn over Relations, the any or Mr. Vice

Chris Kutsor

I it. think for time. great everybody, that will day. Have a your do Thanks,

Operator

disconnect of call teleconference. Ladies Internet this participation please in your time. for that website available address approximately will this and is replay conclude over A three you your lines this ask gentlemen, at does We hours. The today's and thank be the www.motorolasolutions.com/investor. you

Motorola Solutions (MSI) 2 Nov 172017 Q3 Earnings call transcript