Motorola Solutions Reports Third Quarter 2023 Financial Results

FORWARD LOOKING STATEMENTS

This news release contains "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,” “anticipates,” “estimates” and similar expressions. The company can give no assurance that any actual or future results or events discussed in these statements will be achieved. Any forward-looking statements represent the company’s views only as of today and should not be relied upon as representing the company’s 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 the company’s actual results to differ materially from the statements contained in this release. Such forward-looking statements include, but are not limited to, Motorola Solutions’ financial outlook for the fourth quarter and full-year of 2023 (including with respect to Airwave revenue); the impact of the CMA's final decision regarding Airwave (including the appeal of the final decision to the CAT); and the impact of the COVID-19 pandemic, supply chain constraints and inflation, including the impact of actions taken by Motorola Solutions in response to such events, on Motorola Solutions' business and results of operations. Motorola Solutions cautions the reader that the risks and uncertainties below, as well as those in Part I Item 1A of Motorola Solutions' 2022 Annual Report on Form 10-K, Part II, Item 1A of Motorola Solutions' Quarterly Report on Form 10-Q for the Second Quarter of 2023 and in its other SEC filings available for free on the SEC’s website at www.sec.gov and on Motorola Solutions’ website at www.motorolasolutions.com, could cause Motorola Solutions’ actual results to differ materially from those estimated or predicted in the forward-looking statements. Many of these risks and uncertainties cannot be controlled by Motorola Solutions, and factors that may impact forward-looking statements include, but are not limited to: (i) the impact, including increased costs and potential liabilities, associated with changes in laws and regulations regarding privacy, data protection and information security; (ii) challenges relating to existing or future legislation and regulations pertaining to artificial intelligence (“AI”), AI-enabled products and the use of biometrics and other video analytics; (iii) the impact of government regulation of radio frequencies; (iv) audits and regulations and laws applicable to our U.S. government customer contracts and grants; (v) the impact, including additional compliance obligations, associated with existing or future telecommunications-related laws and regulations; (vi) the evolving state of environmental regulation relating to climate change, and the physical risks of climate change; (vii) impact of product regulatory and safety, consumer, worker safety and environmental laws; (viii) impact of tax matters; (ix) the continuing and future impact of the COVID-19 pandemic on our business; (x) impact of elevated inventory levels; (xi) additional compliance obligations and increased risk, costs and competition associated with the expansion of our technologies within our Products and Systems Integration and Software and Services segments (including, but not limited to, with respect to the CMA's final decision regarding Airwave and our actions in response to such decision, including the appeal of the final decision to the CAT); (xii) the effectiveness of our investments in new products and technologies; (xiii) the effectiveness of our strategic acquisitions, including the integrations of such acquired businesses; (xiv) increased cybersecurity threats, a security breach or other significant disruption of our IT systems or those of our outsource partners, suppliers or customers; (xv) our inability to protect our intellectual property or potential infringement of intellectual property rights of third parties; (xvi) our license of the MOTOROLA, MOTO, MOTOROLA SOLUTIONS and the Stylized M logo and all derivatives and formatives thereof from Motorola Trademark Holdings, LLC; (xvii) the global nature of our employees, customers, suppliers and outsource partners; (xviii) our use of third-parties to develop, design and/or manufacture many of our components and some of our products, and to perform portions of our business operations; (xix) the inability of our subcontractors to perform in a timely and compliant manner or adhere to our Human Rights Policy; (xx) our inability to purchase at acceptable prices a sufficient amount of materials, parts, and components, as well as software and services, to meet the demands of our customers, and any disruption to our suppliers or significant increase in the price of supplies; (xxi) risks related to our large, multi-year system and services contracts (including, but not limited to, with respect to the ESN and Airwave contracts); (xxii) the inability of our products to meet our customers’ expectations or regulatory or industry standards; (xxiii) impact of current global economic and political conditions in the markets in which we operate (including, but not limited to inflation); (xxiv) impact of returns on pension and retirement plan assets and interest rate changes; (xxv) inability to access the capital markets for financing on acceptable terms and conditions; (xxvi) inability to attract and retain senior management and key employees; and (xxvii) the return of capital to shareholders through dividends and/or repurchasing shares. Motorola Solutions undertakes no obligation to publicly update any forward-looking statement or risk factor, whether as a result of new information, future events or otherwise.

ABOUT MOTOROLA SOLUTIONS

Motorola Solutions is a global leader in public safety and enterprise security. Our solutions in land mobile radio communications, video security and command center, bolstered by managed & support services, create an integrated technology ecosystem to help make communities safer and businesses stay productive and secure. At Motorola Solutions, we’re ushering in a new era in public safety and security. Learn more at www.motorolasolutions.com.

				GAAP-1
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In millions, except per share amounts)

	Three Months Ended
	September 30, 2023			October 1, 2022
Net sales from products	$	1,490		$	1,439
Net sales from services		1,066			934
Net sales		2,556			2,373
Costs of products sales		658			659
Costs of services sales		618			683
Costs of sales		1,276			1,342
Gross margin		1,280			1,031
Selling, general and administrative expenses		380			378
Research and development expenditures		215			197
Other charges		7			20
Intangibles amortization		39			63
Operating earnings		639			373
Other income (expense):
Interest expense, net		(53	)		(60	)
Gains (losses) on sales of investments and business, net		(1	)		1
Other, net		7			19
Total other expense		(47	)		(40	)
Net earnings before income taxes		592			333
Income tax expense		127			53
Net earnings		465			280
Less: Earnings attributable to non-controlling interests		1			1
Net earnings attributable to Motorola Solutions, Inc.	$	464		$	279
Earnings per common share:
Basic	$	2.78		$	1.67
Diluted	$	2.70		$	1.63
Weighted average common shares outstanding:
Basic		166.7			167.2
Diluted		171.7			171.5


	Percentage of Net Sales*
Net sales from products		58.3	%		60.6	%
Net sales from services		41.7	%		39.4	%
Net sales		100.0	%		100.0	%
Costs of products sales		44.2	%		45.8	%
Costs of services sales		58.0	%		73.1	%
Costs of sales		49.9	%		56.6	%
Gross margin		50.1	%		43.4	%
Selling, general and administrative expenses		14.9	%		15.9	%
Research and development expenditures		8.4	%		8.3	%
Other charges		0.3	%		0.8	%
Intangibles amortization		1.5	%		2.7	%
Operating earnings		25.0	%		15.7	%
Other income (expense):
Interest expense, net		(2.1	)%		(2.5	)%
Gains (losses) on sales of investments and business, net		-	%		-	%
Other, net		0.3	%		0.8	%
Total other expense		(1.8	)%		(1.7	)%
Net earnings before income taxes		23.2	%		14.0	%
Income tax expense		5.0	%		2.2	%
Net earnings		18.2	%		11.8	%
Less: Earnings attributable to non-controlling interests		-	%		-	%
Net earnings attributable to Motorola Solutions, Inc.		18.2	%		11.8	%
* Percentages may not add up due to rounding

				GAAP-2
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In millions, except per share amounts)

	Nine Months Ended
	September 30, 2023			October 1, 2022
Net sales from products	$	4,063		$	3,697
Net sales from services		3,066			2,708
Net sales		7,129			6,405
Costs of products sales		1,867			1,844
Costs of services sales		1,747			1,683
Costs of sales		3,614			3,527
Gross margin		3,515			2,878
Selling, general and administrative expenses		1,138			1,069
Research and development expenditures		640			577
Other charges		44			68
Intangibles amortization		137			194
Operating earnings		1,556			970
Other income (expense):
Interest expense, net		(164	)		(171	)
Gains (losses) on sales of investments and businesses, net		-			3
Other, net		46			50
Total other expense		(118	)		(118	)
Net earnings before income taxes		1,438			852
Income tax expense		321			75
Net earnings		1,117			777
Less: Earnings attributable to non-controlling interests		4			3
Net earnings attributable to Motorola Solutions, Inc.	$	1,113		$	774
Earnings per common share:
Basic	$	6.66		$	4.62
Diluted	$	6.46		$	4.50
Weighted average common shares outstanding:
Basic		167.2			167.5
Diluted		172.2			171.9


	Percentage of Net Sales*
Net sales from products		57.0	%		57.7	%
Net sales from services		43.0	%		42.3	%
Net sales		100.0	%		100.0	%
Costs of products sales		46.0	%		49.9	%
Costs of services sales		57.0	%		62.1	%
Costs of sales		50.7	%		55.1	%
Gross margin		49.3	%		44.9	%
Selling, general and administrative expenses		16.0	%		16.7	%
Research and development expenditures		9.0	%		9.0	%
Other charges		0.6	%		1.1	%
Intangibles amortization		1.9	%		3.0	%
Operating earnings		21.8	%		15.1	%
Other income (expense):
Interest expense, net		(2.3	)%		(2.7	)%
Gains (losses) on sales of investments and businesses, net		-	%		-	%
Other, net		0.6	%		0.8	%
Total other expense		(1.7	)%		(1.8	)%
Net earnings before income taxes		20.2	%		13.3	%
Income tax expense (benefit)		4.5	%		1.2	%
Net earnings		15.7	%		12.1	%
Less: Earnings attributable to non-controlling interests		0.1	%		-	%
Net earnings attributable to Motorola Solutions, Inc.		15.6	%		12.1	%
* Percentages may not add up due to rounding

			GAAP-3
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In millions)

	September 30, 2023		December 31, 2022
Assets
Cash and cash equivalents	$	910	$	1,325
Accounts receivable, net		1,667		1,518
Contract assets		1,092		974
Inventories, net		959		1,055
Other current assets		404		383
Total current assets		5,032		5,255
Property, plant and equipment, net		931		927
Operating lease assets		453		485
Investments		142		147
Deferred income taxes		1,047		1,036
Goodwill		3,278		3,312
Intangible assets, net		1,217		1,342
Other assets		336		310
Total assets	$	12,436	$	12,814
Liabilities and Stockholders' Equity
Current portion of long-term debt	$	1,313	$	1
Accounts payable		722		1,062
Contract liabilities		1,898		1,859
Accrued liabilities		1,355		1,638
Total current liabilities		5,288		4,560
Long-term debt		4,704		6,013
Operating lease liabilities		368		419
Other liabilities		1,700		1,691
Total Motorola Solutions, Inc. stockholders’ equity		362		116
Non-controlling interests		14		15
Total liabilities and stockholders’ equity	$	12,436	$	12,814

				GAAP-4
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In millions)

	Three Months Ended
	September 30, 2023			October 1, 2022
Operating
Net earnings	$	465		$	280
Adjustments to reconcile Net earnings to Net cash provided by operating activities:
Depreciation and amortization		86			108
Non-cash other charges		12			1
Loss on ESN fixed asset impairment		-			147
Share-based compensation expenses		52			45
Losses (gains) on sales of investments and businesses, net		1			(1	)
Changes in assets and liabilities, net of effects of acquisitions, dispositions, and foreign currency translation adjustments:
Accounts receivable		(164	)		(101	)
Inventories		58			(83	)
Other current assets and contract assets		(111	)		(24	)
Accounts payable, accrued liabilities and contract liabilities		217			116
Other assets and liabilities		(20	)		(9	)
Deferred income taxes		118			(91	)
Net cash provided by operating activities		714			388
Investing
Acquisitions and investments, net		(2	)		(19	)
Proceeds from sales of investments and businesses, net		6			27
Capital expenditures		(65	)		(70	)
Net cash used for investing activities		(61	)		(62	)
Financing
Issuances of common stock		40			86
Purchases of common stock		(306	)		(94	)
Payments of dividends		(147	)		(132	)
Payments of dividends to non-controlling interests		(1	)		-
Net cash used for financing activities		(414	)		(140	)
Effect of exchange rate changes on total cash and cash equivalents		(39	)		(81	)
Net increase in total cash and cash equivalents		200			105
Cash and cash equivalents, beginning of period		710			717
Cash and cash equivalents, end of period	$	910		$	822

				GAAP-5
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In millions)

	Nine Months Ended
	September 30, 2023			October 1, 2022
Operating
Net earnings	$	1,117		$	777
Adjustments to reconcile Net earnings to Net cash provided by operating activities:
Depreciation and amortization		271			331
Non-cash other charges		8			20
Loss on ESN fixed asset impairment		-			147
Share-based compensation expenses		160			126
Gain on sales of investments and businesses, net		-			(3	)
Loss from the extinguishment of long-term debt		-			6
Changes in assets and liabilities, net of effects of acquisitions, dispositions, and foreign currency translation adjustments:
Accounts receivable		(154	)		5
Inventories		94			(360	)
Other current assets and contract assets		(140	)		(38	)
Accounts payable, accrued liabilities and contract liabilities		(534	)		(183	)
Other assets and liabilities		(21	)		(66	)
Deferred income taxes		(2	)		(212	)
Net cash provided by operating activities		799			550
Investing
Acquisitions and investments, net		(12	)		(590	)
Proceeds from sales of investments and businesses, net		12			38
Capital expenditures		(172	)		(183	)
Net cash used for investing activities		(172	)		(735	)
Financing
Net proceeds from issuance of debt		-			595
Repayments of debt		(1	)		(283	)
Issuances of common stock		76			137
Purchases of common stock		(670	)		(749	)
Payments of dividends		(443	)		(398	)
Payments of dividends to non-controlling interests		(5	)		(6	)
Net cash used for financing activities		(1,043	)		(704	)
Effect of exchange rate changes on total cash and cash equivalents		1			(163	)
Net decrease in total cash and cash equivalents		(415	)		(1,052	)
Cash and cash equivalents, beginning of period		1,325			1,874
Cash and cash equivalents, end of period	$	910		$	822

							Non-GAAP-1
Motorola Solutions, Inc. and Subsidiaries
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
(In millions)


	Three Months Ended						Nine Months Ended

	September 30, 2023			October 1, 2022			September 30, 2023			October 1, 2022
Net cash provided by operating activities	$	714		$	388		$	799		$	550
Capital expenditures		(65	)		(70	)		(172	)		(183	)
Free cash flow	$	649		$	318		$	627		$	367

							Non-GAAP-2
Motorola Solutions, Inc. and Subsidiaries
Reconciliation of Net Earnings Attributable to MSI to Non-GAAP Net Earnings Attributable to MSI
(In millions)

		Three Months Ended					Nine Months Ended
	Statement Line	September 30, 2023		October 1, 2022			September 30, 2023			October 1, 2022
Net earnings attributable to MSI		$	464	$	279		$	1,113		$	774
Non-GAAP adjustments before income taxes:
Share-based compensation expenses	Cost of sales, SG&A and R&D	$	52	$	45		$	160		$	126
Intangible assets amortization expense	Intangibles amortization		39		63			137			194
Investment impairments	Other (income) expense		7		-			16			1
Fair value adjustments to equity investments	Other (income) expense		7		5			(12	)		35
Reorganization of business charges	Cost of sales and Other charges (income)		6		14			22			31
Hytera-related legal expenses	SG&A		3		15			13			25
Acquisition-related transaction fees	Other charges (income)		1		2			3			16
Legal settlements	Other charges (Income)		1		12			1			23
Gains (losses) on sales of investments	(Gain) or loss on sales of investments and businesses, net		1		(1	)		-			(3	)
Environmental reserve expense	Other charges (income)		-		-			15			-
Operating lease asset impairments	Other charges (income)		-		4			4			16
Fixed asset impairments	Other charges (income)		-		1			3			12
Adjustments to uncertain tax positions	Interest income, net		-		1			-			(1	)
Loss on ESN fixed asset impairment	Cost of sales		-		147			-			147
Loss from extinguishment of long-term debt	Other (income) expense		-		-			-			6
Gain on Hytera legal settlement	Other charges (income)		-		-			-			(13	)
Gain on TETRA Ireland equity method investment	Other (income) expense		-		-			-			(21	)
Total Non-GAAP adjustments before income taxes		$	117	$	308		$	362		$	594
Income tax expense on Non-GAAP adjustments			34		73			86			206
Total Non-GAAP adjustments after income taxes			83		235			276			388
Non-GAAP Net earnings attributable to MSI		$	547	$	514		$	1,389		$	1,162

													Non-GAAP-3
Motorola Solutions, Inc. and Subsidiaries
Reconciliations of Operating Earnings to Non-GAAP Operating Earnings and Operating Margin to Non-GAAP Operating Margin
(In millions)

	Three Months Ended
	September 30, 2023									October 1, 2022
	Products and Systems Integration			Software and Services			Total			Products and Systems Integration			Software and Services			Total
Net sales	$	1,612		$	944		$	2,556		$	1,529		$	844		$	2,373
Operating earnings ("OE")		364			275			639			303			70			373
Above OE non-GAAP adjustments:
Share-based compensation expenses		38			14			52			33			12			45
Intangible assets amortization expense		9			30			39			15			48			63
Reorganization of business charges		5			1			6			3			11			14
Hytera-related legal expenses		3			-			3			15			-			15
Legal settlements		1			-			1			3			9			12
Acquisition-related transaction fees		-			1			1			1			1			2
Operating lease asset impairments		-			-			-			2			2			4
Fixed asset impairments		-			-			-			-			1			1
Loss on ESN fixed asset impairment		-			-			-			-			147			147
Total above-OE non-GAAP adjustments		56			46			102			72			231			303
Operating earnings after non-GAAP adjustments	$	420		$	321		$	741		$	375		$	301		$	676

Operating earnings as a percentage of net sales - GAAP		22.6	%		29.1	%		25.0	%		19.8	%		8.3	%		15.7	%
Operating earnings as a percentage of net sales - after non-GAAP adjustments		26.1	%		34.0	%		29.0	%		24.5	%		35.7	%		28.5	%

													Non-GAAP-4
Motorola Solutions, Inc. and Subsidiaries
Reconciliations of Operating Earnings to Non-GAAP Operating Earnings and Operating Margin to Non-GAAP Operating Margin
(In millions)

	Nine Months Ended
	September 30, 2023									October 1, 2022
	Products and Systems Integration			Software and Services			Total			Products and Systems Integration			Software and Services			Total
Net sales	$	4,352		$	2,777		$	7,129		$	3,918		$	2,487		$	6,405
Operating earnings ("OE")		752			804			1,556			460			510			970
Above OE non-GAAP adjustments:
Share-based compensation expenses		116			44			160			92			34			126
Intangible assets amortization expense		32			105			137			45			149			194
Reorganization of business charges		22			-			22			17			14			31
Environmental reserve expense		10			5			15			-			-			-
Hytera-related legal expenses		13			-			13			25			-			25
Operating lease asset impairments		3			1			4			13			3			16
Acquisition-related transaction fees		-			3			3			8			8			16
Fixed asset impairments		2			1			3			9			3			12
Legal settlements		1			-			1			3			20			23
Loss on ESN fixed asset impairment		-			-			-			-			147			147
Gain on Hytera legal settlement		-			-			-			(13	)		-			(13	)
Total above-OE non-GAAP adjustments		199			159			358			199			378			577
Operating earnings after non-GAAP adjustments	$	951		$	963		$	1,914		$	659		$	888		$	1,547

Operating earnings as a percentage of net sales - GAAP		17.3	%		29.0	%		21.8	%		11.7	%		20.5	%		15.1	%
Operating earnings as a percentage of net sales - after non-GAAP adjustments		21.9	%		34.7	%		26.8	%		16.8	%		35.7	%		24.2	%

					Non-GAAP-5
Motorola Solutions, Inc. and Subsidiaries
Reconciliation of Revenue to Non-GAAP Organic Revenue
(In millions)

	Three Months Ended

	September 30, 2023		October 1, 2022		% Change
Net sales	$	2,556	$	2,373	8	%
Non-GAAP adjustments:
Sales from acquisitions		20		1
Organic revenue	$	2,536	$	2,372	7	%


	Nine Months Ended

	September 30, 2023		October 1, 2022		% Change
Net sales	$	7,129	$	6,405	11	%
Non-GAAP adjustments:
Sales from acquisitions		87		6
Organic revenue	$	7,042	$	6,399	10	%

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