Motorola Solutions Reports Fourth-Quarter and Full-Year Financial Results

Rhea-AI Summary

Motorola Solutions, Inc. (NYSE: MSI) reported Q4 2020 earnings with $2.3 billion in revenue, a 4% decline year-over-year, and $555 million in GAAP operating earnings. EPS rose 71% to $2.37, while full-year revenue decreased 6% to $7.4 billion. The Software and Services segment grew 8%, offsetting a 10% decline in Products and Systems Integration. Despite lower overall sales, the company had a record backlog of $11.4 billion and expects 7.25%-8% revenue growth in 2021.

Positive

• Record backlog of $11.4 billion, indicating strong future demand.
• Software and Services segment grew 8% in Q4 2020.

Negative

• Revenue decreased 4% in Q4 2020 and 6% for the full year.
• Products and Systems Integration segment sales declined 10% in Q4 2020.

Motorola Solutions, Inc. (NYSE: MSI) today reported its earnings results for the fourth quarter and full year of 2020. Click here for a printable news release and financial tables.

“Our fourth-quarter results, highlighted by record LMR orders in North America and continued strong growth in the Software and Services segment, reflect the criticality of our solutions and our team's unwavering execution throughout an unprecedented year,” said Greg Brown, chairman and CEO, Motorola Solutions. “This momentum, combined with our record ending backlog, positions us very well for strong growth in 2021.”

KEY FINANCIAL RESULTS (presented in millions, except per share data and percentages)

		Fourth Quarter									Full Year
		Q4 2020			Q4 2019			% Change			2020			2019			% Change
Sales		$2,273			$2,377			(4	)%		$7,414			$7,887			(6	)%
GAAP
Operating Earnings		$555			$590			(6	)%		$1,383			$1,581			(13	)%
% of Sales		24.4	%		24.8	%					18.7	%		20.0	%
EPS		$2.37			1.39			71	%		$5.45			$4.95			10	%
Non-GAAP*
Operating Earnings		$667			$707			(6	)%		$1,835			$1,975			(7	)%
% of Sales		29.3	%		29.7	%					24.8	%		25.0	%
EPS		$2.86			$2.94			(3	)%		$7.69			$7.96			(3	)%
Products and Systems Integration Segment
Sales		$1,510			$1,673			(10	)%		$4,634			$5,329			(13	)%
GAAP Operating Earnings		$351			$426			(18	)%		$656			$994			(34	)%
% of Sales		23.2	%		25.5	%					14.2	%		18.7	%
Non-GAAP Operating Earnings*		$408			$484			(16	)%		$880			$1,173			(25	)%
% of Sales		27.0	%		28.9	%					19.0	%		22.0	%
Software and Services Segment
Sales		$763			$704			8	%		$2,780			$2,558			9	%
GAAP Operating Earnings		$204			$164			24	%		$727			$587			24	%
% of Sales		26.7	%		23.3	%					26.2	%		22.9	%
Non-GAAP Operating Earnings*		$259			$223			16	%		$955			$802			19	%
% of Sales		33.9	%		31.7	%					34.3	%		31.4	%

*Non-GAAP financial information excludes the after-tax impact of approximately $0.49 for Q4 and $2.24 for FY per diluted share related to share-based compensation, intangible assets amortization expense and highlighted items. Details on these non-GAAP adjustments and the use of non-GAAP measures are included later in this news release.

OTHER SELECT FOURTH-QUARTER FINANCIAL RESULTS

• Revenue - Fourth-quarter revenue was $2.3 billion, down 4% from the year-ago quarter driven by declines in North America and International. The Products and Systems Integration segment declined 10% primarily due to lower sales of public safety LMR products and professional and commercial radio (PCR), partially offset by growth in video security. The Software and Services segment grew 8% driven by growth in LMR services, video security and command center software. Revenue from acquisitions was $60 million, and the impact of favorable currency rates was $19 million.
• Operating earnings - GAAP operating margin was 24.4% of sales, down from 24.8% in the year-ago quarter primarily due to lower sales in the Products and Systems Integration segment, partially offset by higher sales and improved operating leverage in the Software and Services segment. Non-GAAP operating margin was 29.3% of sales, down from 29.7% in the year-ago quarter primarily due to lower sales in the Products and Systems Integration segment, partially offset by higher sales and improved operating leverage in the Software and Services segment.
• Taxes - The GAAP effective tax rate was 20.9%, compared to (26.4)% in the year-ago quarter. The year-over-year increase in the GAAP rate was primarily due to the valuation allowance release of the US foreign tax credit in the year-ago quarter. The Non-GAAP effective tax rate was 21.0%, compared to 22.0% in the year-ago quarter. The year-over-year decrease was primarily driven by research and development credits recognized in 2020.
• Cash flow - The company generated $703 million in operating cash, compared with $795 million in the year-ago quarter. Free cash flow was $637 million, compared with $736 million in the year-ago quarter. The year-over-year decline in cash flow was primarily driven by lower sales in Q4 2020.
• Capital allocation - During the quarter, the company repurchased $171 million of its common stock and paid $109 million in dividends. Additionally, the company repaid the remaining $200 million of its revolving credit facility borrowing.

OTHER SELECT FULL-YEAR FINANCIAL RESULTS

• Revenue - Full-year revenue was $7.4 billion, down 6% driven by declines in North America and International. The Products and Systems Integration segment declined 13% primarily due to lower sales of public safety LMR products and PCR, partially offset by growth in video security. The Software and Services segment grew 9% driven by growth in LMR services, video security and command center software. Revenue from acquisitions was $203 million, and the impact of unfavorable currency rates was $12 million.
• Operating earnings - For the full year, GAAP operating margin was 18.7% of revenue, compared with 20.0% for the prior year. The decrease was primarily driven by lower sales in the Products and Systems Integration segment, partially offset by higher sales and improved operating leverage in the Software and Services segment. Non-GAAP operating margin was 24.8% of revenue, compared with 25.0% for the prior year, driven by lower sales in Products and Systems Integration, partially offset by higher sales and improved operating leverage in the Software and Services segment.
• Taxes - The 2020 GAAP effective tax rate was 18.8%, compared to 13.0% for the prior year. The year-over-year increase in the GAAP rate was primarily due to the valuation allowance release of the US foreign tax credit in the prior year, offset by a higher tax benefit from share based compensation deduction in 2020. The non-GAAP effective tax rate was 20.0% compared with 22.4% in the previous year. The year-over-year decrease was driven by higher credits related to research and development and share based compensation recognized in the current year.
• Cash flow - The company generated $1.6 billion in operating cash, compared to $1.8 billion in the prior year. Free cash flow was $1.4 billion, compared to $1.6 billion in the prior year. The decrease in cash flow was driven by lower sales and higher cash taxes, partially offset by improvements in working capital.
• Backlog - The company ended the year with record backlog of $11.4 billion, up $175 million from the prior year. Software and Services segment backlog was up 3% or $213 million, primarily driven by growth in North America and $139 million of favorable currency rates, partially offset by revenue recognized for the Airwave and ESN contracts. Products and Systems Integrations segment backlog was down 1% or $38 million driven by delay in sales engagements related to COVID-19.
• Capital allocation - In 2020, the company repurchased $612 million of its common stock at an average price of $155.93, paid $436 million in dividends, and used $287 million for acquisitions. Additionally, the company refinanced approximately $900 million of debt with a new ten-year debt issuance at 2.3%.

NOTABLE WINS & ACHIEVEMENTS IN Q4

Software and Services

• $100 million+ P25 managed services contract with State of Tasmania, Australia
• $79 million TETRA managed services contract extension in Europe
• $30 million P25 multi-year service contract with Minnesota DOT
• $29 million P25 multi-year service contract with Austin, Texas
• $11 million for a command center software contract in Norway

Products and Systems Integration

• $122 million P25 order for Nassau County, New York
• $61 million P25 order for State of New Jersey
• $50 million+ of P25 orders for several large North America utilities customers
• $26 million P25 order for Morris County, New Jersey
• $20 million TETRA MTS order in the U.K.
• Double-digit growth in fixed video sales into government customers

BUSINESS OUTLOOK

• First-quarter 2021 - The company expects revenue growth of 5.5% to 6% compared with the first quarter of 2020. The company expects non-GAAP earnings per share in the range of $1.58 to $1.64 per share. This assumes current foreign exchange rates, approximately 174 million fully diluted shares, and an effective tax rate of approximately 19%.
• Full-year 2021 - The company expects revenue growth of 7.25% to 8% and non-GAAP earnings per share in the range of $8.50 to $8.62 per share. This assumes current foreign exchange rates, 174 million fully diluted shares and a non-GAAP effective tax rate of 22.5% to 23%.

COVID-19

In response to the evolving COVID-19 pandemic, the company continues to adhere to its plans to keep its employees and customers healthy and safe, as well as ensuring continued operations and business continuity. Safety measures during this outbreak include having the vast majority of employees work remotely, suspending employee travel, withdrawing from certain industry events, increasing cleaning services, encouraging face coverings and using thermal scanning. The company continues to ensure customer continuity by fulfilling several emergency orders, completing remote software maintenance where possible, and continuing to service mission-critical networks on-site as needed to ensure seamless operations. In addition, our supply chain partners remain supportive and continue to do their part to ensure that service levels to the company and its customers remain fulfilled.

The sales teams’ engagement with customers, both virtual and in-person, improved during the fourth quarter. Additionally, the company’s engineering teams have adapted its solutions offerings to equip customers with the latest technology in the fight to protect their workplace from the spread of COVID-19. Specifically, in the video security business, the company has adapted its software and hardware offerings to provide analytics for occupancy counting, face mask detection and thermal detection capabilities. Given the prioritization of mission-critical communication solutions, we do not anticipate funding at the state and local levels to have a material, negative effect on expected revenues in 2021.

The company has also taken actions in a number of areas to reduce its operating expenses, mostly driven by lower variable compensation, travel costs, contractor spend and reduced real estate footprint to limit the negative effect on operating margins for the year despite the expected reduction of revenue.

CONFERENCE CALL AND WEBCAST Motorola Solutions will host its quarterly conference call beginning at 4 p.m. U.S. Central Standard Time (5 p.m. U.S. Eastern Standard Time) Thursday, Feb 4. The conference call will be webcast live with audio and slides at www.motorolasolutions.com/investor.

CONSOLIDATED GAAP RESULTS (presented in millions, except per share data)

A comparison of results from operations is as follows:

		Fourth Quarter				Full Year
		2020		2019		2020		2019
Net sales		$2,273		$2,377		$7,414		$7,887
Gross margin		1,146		1,220		3,608		3,931
Operating earnings		555		590		1,383		1,581
Amounts attributable to Motorola Solutions, Inc. common stockholders
Net earnings		412		244		949		868
Diluted EPS from continuing operations		$2.37		$1.39		$5.45		$4.95
Weighted average diluted common shares outstanding		173.5		175.6		174.1		175.6

HIGHLIGHTED ITEMS

The table below includes highlighted items, share-based compensation expenses, and intangible amortization expense for the fourth-quarter of 2020.

(per diluted common share)		Q4 2020
GAAP Earnings		$2.37
Highlighted Items:
Intangibles amortization expense		0.25
Share-based compensation expenses		0.13
Reorganization of business charges		0.06
Hytera-related legal expenses		0.03
Pelco purchase accounting adjustment		0.02
Investment impairments		0.02
Sale of investments		0.01
Acquisition-related transaction fees		—
Release of uncertain tax positions		—
Fair value adjustments to equity investments		(0.03	)
Non-GAAP Diluted EPS		$2.86

USE OF NON-GAAP FINANCIAL INFORMATION

In addition to the GAAP results included in this news release, Motorola Solutions also has included non-GAAP measurements of results. The company has provided these non-GAAP measurements to help investors better understand its core operating performance, enhance comparisons of core operating performance from period to period and allow better comparisons of operating performance to its competitors. Among other things, management uses these operating results, excluding the identified items, to evaluate performance of the businesses and to evaluate results relative to certain incentive compensation targets. Management uses operating results excluding these items because it believes this measurement enables it to make better period-to-period evaluations of the financial performance of core business operations. The non-GAAP measurements are intended only as a supplement to the comparable GAAP measurements and the company compensates for the limitations inherent in the use of non-GAAP measurements by using GAAP measures in conjunction with the non-GAAP measurements. As a result, investors should consider these non-GAAP measurements in addition to, and not in substitution for or as superior to, measurements of financial performance prepared in accordance with GAAP.

Highlighted items: The company has excluded the effects of highlighted items including, but not limited to, acquisition-related transaction costs, tangible and intangible asset impairments, restructuring charges, certain non-cash pension adjustments, legal settlements and other contingencies, gains and losses on investments and businesses, Hytera-related legal expenses, and the income tax effects of significant tax matters, from its non-GAAP operating expenses and net income measurements because the company believes that these historical items do not reflect expected future operating earnings or expenses and do not contribute to a meaningful evaluation of the company's current operating performance or comparisons to the company's past operating performance. For the purposes of management's internal analysis over operating performance, the company uses financial statements that exclude highlighted items, as these charges do not contribute to a meaningful evaluation of the company's current operating performance or comparisons to the company's past operating performance.

Hytera-Related Legal Expenses: On February 14, 2020, the company announced that a jury in the U.S. District Court for the Northern District of Illinois (the "Court") decided in the company's favor in its trade secret theft and copyright infringement case against Hytera Communications Corporation Limited of Shenzhen, China; Hytera America, Inc.; and Hytera Communications America (West), Inc. (collectively, “Hytera”). In connection with this verdict, the jury awarded the company $345.8 million in compensatory damages and $418.8 million in punitive damages, for a total of $764.6 million. The Court denied Hytera’s motion for a new trial on October 20, 2020. On December 17, 2020, the Court denied the company’s motion for a permanent injunction, finding instead that Hytera must pay the company a forward-looking reasonable royalty on products that use the company’s stolen trade secrets. The royalty rate is yet to be determined, and will be set by the Court absent agreement of the parties.

On January 11, 2021, the Court granted Hytera’s motion for certain equitable relief and reduced the $764.6 million judgment award to $543.7 million. That same day, the Court also granted the company’s motion for pre-judgment interest, although the precise amount of interest owed to the company by Hytera is still to be determined by the Court. Other post-trial motions are fully briefed and awaiting ruling, including the company's motion for attorneys' fees and its motion to require Hytera to turn over certain assets in satisfaction of the company’s judgment award. Hytera America, Inc. and Hytera Communications America (West), Inc. each filed for Chapter 11 bankruptcy protection in May 2020; the company previously filed motions to dismiss the bankruptcy proceedings in July 2020. On January 22, 2021, the U.S. Bankruptcy Court entered an agreed order, allowing a partial sale of Hytera's U.S. assets in the bankruptcy proceedings. The proposed sale does not include Hytera inventory accused of including the company’s intellectual property.

Management typically considers legal expenses associated with defending our intellectual property as “normal and recurring” and accordingly, Hytera-related legal expenses were included in both our GAAP and non-GAAP operating income for fiscal years 2017, 2018 and 2019. We anticipate further expenses associated with Hytera-related litigation; however, we believe that these expenses are no longer a part of the “normal and recurring” legal expenses incurred to operate our business. In addition, if any contingent or actual gain associated with the Hytera litigation is recognized in the future, it will be similarly excluded from our non-GAAP operating income. We believe after the jury award, the presentation of excluding both Hytera-related legal expenses and gains related to awards better aligns with how management evaluates our ongoing underlying business performance.

For comparative purposes, $5 million, or $0.02 of earnings per share, net of tax, of Hytera-related legal expense was included in our fourth quarter 2019 Non-GAAP operating earnings and $43 million, or $0.20 of earnings per share, net of tax, was included in 2019 Non-GAAP operating earnings.

Share-based compensation expenses: The company has excluded share-based compensation expense from its non-GAAP operating expenses and net income measurements. Although share-based compensation is a key incentive offered to the company’s employees and the company believes such compensation contributed to the revenue earned during the periods presented and also believes it will contribute to the generation of future period revenues, the company continues to evaluate its performance excluding share-based compensation expense primarily because it represents a significant non-cash expense. Share-based compensation expense will recur in future periods.

Intangible assets amortization expense: The company has excluded intangible assets amortization expense from its non-GAAP operating expenses and net earnings measurements, primarily because it represents a non-cash expense and because the company evaluates its performance excluding intangible assets amortization expense. Amortization of intangible assets is consistent in amount and frequency but is significantly affected by the timing and size of the company’s acquisitions. Investors should note that the use of intangible assets contributed to the company’s revenues earned during the periods presented and will contribute to the company’s future period revenues as well. Intangible assets amortization expense will recur in future periods.

Free cash flow: Free cash flow represents operating cash flow less capital expenditures. We believe that free cash flow is also useful to investors as the basis for comparing our performance and coverage ratios with other companies in our industries, although our measure of free cash flow may not be directly comparable to similar measures used by other companies.

Organic Revenue: Organic revenue reflects net sales calculated under GAAP excluding net sales from acquired business owned for less than four full quarters. The company believes non-GAAP organic revenue growth provides useful information for evaluating the periodic growth of the business on a consistent basis and provides for a meaningful period-to-period comparison and analysis of trends in the business.

Details of the above items and reconciliations of the non-GAAP measurements to the corresponding GAAP measurements can be found at the end of this news release.

The company has not quantitatively reconciled its guidance for non-GAAP measurements under "Business Outlook" in this news release to their most comparable GAAP measurements because the company does not provide specific guidance for the various reconciling items as certain items that impact these measures have not occurred, are out of the company’s control, or cannot be reasonably predicted. Accordingly, a reconciliation to the most comparable GAAP financial measurement is not available without unreasonable effort. Please note that the unavailable reconciling items could significantly impact the company’s 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 first quarter and full-year 2021. Motorola Solutions cautions the reader that the risks and uncertainties below, as well as those in Part I Item 1A of Motorola Solutions’ 2019 Annual Report on Form 10-K, Part II Item 1A of Motorola Solutions’ 2020 First Quarter report on Form 10-Q, 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”) and AI-enabled products; (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) impacts of, and associated responses to, COVID-19 and other catastrophic events; (vi) increased risk and competition associated with the expansion of our platforms within our Products and Systems Integration and Software and Services segments; (vii) the effectiveness of our investments in new products and technologies; (viii) the effectiveness of our integrations of acquired businesses; (ix) a security breach or other significant disruption of our IT systems; (x) our inability to protect our intellectual property or potential infringement of intellectual property rights of third parties; (xi) our license of the MOTOROLA, MOTO, MOTOROLA SOLUTIONS and the Stylized M logo and all derivatives and formatives thereof from Motorola Trademark Holdings, LLC; (xii) the global nature of our employees, customers, suppliers and outsource partners; (xiii) 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; (xiv) the inability of our subcontractors to perform in a timely and compliant manner; (xv) 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; (xvi) risks related to our large, multi-year system and services contracts; (xvii) the inability of our products to meet our customers’ expectations or regulatory or industry standards; (xviii) impact of current global economic and political conditions in the markets in which we operate; (xix) the inability to settle for cash our 1.75% senior convertible notes; (xx) impact of returns on pension and retirement plan assets and interest rate changes; (xxi) inability to attract and retain senior management and key employees; (xxii) impact of product regulatory and safety, consumer, worker safety and environmental laws; (xxiii) inability to access the capital markets for financing on acceptable terms and conditions; and (xxiv) impact of tax matters. 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 mission-critical communications and analytics. Our technology platforms in mission-critical communications, command center software, video security & analytics, bolstered by managed & support services, make communities safer and help businesses stay productive and secure. At Motorola Solutions, we are ushering in a new era in public safety and security. Learn more at www.motorolasolutions.com.

MOTOROLA, MOTOROLA SOLUTIONS and the Stylized M Logo are trademarks or registered trademarks of Motorola Trademark Holdings, LLC and are used under license. All other trademarks are the property of their respective owners. ©2021 Motorola Solutions, Inc. All rights reserved.

						GAAP-1
Motorola Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In millions, except per share amounts)
		Three Months Ended
		December 31, 2020				December 31, 2019
Net sales from products		$	1,326			$	1,507
Net sales from services			947				870
Net sales			2,273				2,377
Costs of products sales			568				621
Costs of services sales			559				536
Costs of sales			1,127				1,157
Gross margin			1,146				1,220
Selling, general and administrative expenses			343				368
Research and development expenditures			182				182
Other charges			9				26
Intangibles amortization			57				54
Operating earnings			555				590
Other income (expense):
Interest expense, net			(53	)			(55	)
Gains (losses) on sales of investments and businesses, net			(1	)			1
Other, net			21				(343	)
Total other expense			(33	)			(397	)
Net earnings before income taxes			522				193
Income tax expense (benefit)			109				(51	)
Net earnings			413				244
Less: Earnings attributable to noncontrolling interests			1				-
Net earnings attributable to Motorola Solutions, Inc.			412				244
Earnings per common share:
Basic:		$	2.43			$	1.43
Diluted:		$	2.37			$	1.39
Weighted average common shares outstanding:
Basic			169.5				170.9
Diluted			173.5				175.6
		Percentage of Net Sales*
Net sales from products			58.3	%			63.4	%
Net sales from services			41.7	%			36.6	%
Net sales			100.0	%			100.0	%
Costs of products sales			42.8	%			41.2	%
Costs of services sales			59.0	%			61.6	%
Costs of sales			49.6	%			48.7	%
Gross margin			50.4	%			51.3	%
Selling, general and administrative expenses			15.1	%			15.5	%
Research and development expenditures			8.0	%			7.7	%
Other charges			0.4	%			1.1	%
Intangibles amortization			2.5	%			2.3	%
Operating earnings			24.4	%			24.8	%
Other income (expense):
Interest expense, net			(2.3	)%			(2.3	)%
Gains (losses) on sales of investments and businesses, net			-	%			-	%
Other, net			0.9	%			(14.4	)%
Total other expense			(1.5	)%			(16.7	)%
Net earnings before income taxes			23.0	%			8.1	%
Income tax expense (benefit)			4.8	%			(2.1	)%
Net earnings			18.2	%			10.3	%
Less: Earnings attributable to noncontrolling interests			0.1	%			-	%
Net earnings attributable to Motorola Solutions, Inc.			18.1	%			10.3	%
* Percentages may not add up due to rounding

										GAAP-2
Motorola Solutions, Inc. and Subsidiaries
Consolidated Statements of Operations
(In millions, except per share amounts)
		Years Ended
		December 31, 2020				December 31, 2019				December 31, 2018
Net sales from products		$	4,087			$	4,746			$	4,463
Net sales from services			3,327				3,141				2,880
Net sales			7,414				7,887				7,343
Costs of products sales			1,872				2,049				2,035
Costs of services sales			1,934				1,907				1,828
Costs of sales			3,806				3,956				3,863
Gross margin			3,608				3,931				3,480
Selling, general and administrative expenses			1,293				1,403				1,254
Research and development expenditures			686				687				637
Other charges			31				52				146
Intangibles amortization			215				208				188
Operating earnings			1,383				1,581				1,255
Other income (expense):
Interest expense, net			(220	)			(220	)			(222	)
Gains (losses) on sales of investments and businesses, net			(2	)			5				16
Other, net			13				(365	)			53
Total other expense			(209	)			(580	)			(153	)
Net earnings before income taxes			1,174				1,001				1,102
Income tax expense			221				130				133
Net earnings			953				871				969
Less: Earnings attributable to noncontrolling interests			4				3				3
Net earnings attributable to Motorola Solutions, Inc.		$	949			$	868			$	966
Earnings per common share:
Basic:		$	5.58			$	5.21			$	5.95
Diluted:		$	5.45			$	4.95			$	5.62
Weighted average common shares outstanding:
Basic			170.0				166.6				162.4
Diluted			174.1				175.6				172.0
		Percentage of Net Sales*
Net sales from products			55.1	%			60.2	%			60.8	%
Net sales from services			44.9	%			39.8	%			39.2	%
Net sales			100.0	%			100.0	%			100.0	%
Costs of products sales			45.8	%			43.2	%			45.6	%
Costs of services sales			58.1	%			60.7	%			63.5	%
Costs of sales			51.3	%			50.2	%			52.6	%
Gross margin			48.7	%			49.8	%			47.4	%
Selling, general and administrative expenses			17.4	%			17.8	%			17.1	%
Research and development expenditures			9.3	%			8.7	%			8.7	%
Other charges			0.4	%			0.7	%			2.0	%
Intangibles amortization			2.9	%			2.6	%			2.6	%
Operating earnings			18.7	%			20.0	%			17.1	%
Other income (expense):
Interest expense, net			(3.0	)%			(2.8	)%			(3.0	)%
Gains (losses) on sales of investments and businesses, net			-	%			0.1	%			0.2	%
Other, net			0.2	%			(4.6	)%			0.7	%
Total other expense			(2.8	)%			(7.4	)%			(2.1	)%
Net earnings before income taxes			15.8	%			12.7	%			15.0	%
Income tax expense			3.0	%			1.6	%			1.8	%
Net earnings			12.9	%			11.0	%			13.2	%
Less: Earnings attributable to noncontrolling interests			0.1	%			-	%			-	%
Net earnings attributable to Motorola Solutions, Inc.			12.8	%			11.0	%			13.2	%
* Percentages may not add up due to rounding

						GAAP-3
Motorola Solutions, Inc. and Subsidiaries
Consolidated Balance Sheets
(In millions)
		December 31, 2020				December 31, 2019
Assets
Cash and cash equivalents		$	1,254			$	1,001
Accounts receivable, net			1,390				1,412
Contract assets			933				1,046
Inventories, net			508				447
Other current assets			242				272
Total current assets			4,327				4,178
Property, plant and equipment, net			1,022				992
Operating lease assets			468				554
Investments			158				159
Deferred income taxes			966				943
Goodwill			2,219				2,067
Intangible assets, net			1,234				1,327
Other assets			482				422
Total assets		$	10,876			$	10,642
Liabilities and Stockholders' Equity (Deficit)
Current portion of long-term debt		$	12			$	16
Accounts payable			612				618
Contract liabilities			1,554				1,449
Accrued liabilities			1,311				1,356
Total current liabilities			3,489				3,439
Long-term debt			5,163				5,113
Operating lease liabilities			402				497
Other liabilities			2,363				2,276
Total Motorola Solutions, Inc. stockholders’ equity (deficit)			(558	)			(700	)
Noncontrolling interests			17				17
Total liabilities and stockholders’ equity (deficit)		$	10,876			$	10,642

							GAAP-4
Motorola Solutions, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In millions)
		Three Months Ended
		December 31, 2020				December 31, 2019
Operating
Net earnings		$	413				$	244
Adjustments to reconcile Net earnings (loss) to Net cash provided by operating activities:
Depreciation and amortization			109					104
Non-cash other charges (income)			15					8
U.S. pension settlement loss			-					359
Share-based compensation expense			29					31
Loss (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			(222	)				(109	)
Inventories			(16	)				14
Other current assets and contract assets			168					(55	)
Accounts payable, accrued liabilities, and contract liabilities			263					341
Other assets and liabilities			(8	)				(16	)
Deferred income taxes			(49	)				(125	)
Net cash provided by operating activities			703					795
Investing
Acquisitions and investments, net			(4	)				(86	)
Proceeds from sales of investments			3					6
Capital expenditures			(66	)				(59	)
Proceeds from sales of property, plant and equipment			-					7
Net cash used for investing activities			(67	)				(132	)
Financing
Repayment of debt			(4	)				(604	)
Repayment of unsecured revolving credit facility draw			(200	)				-
Issuances of common stock			49					32
Purchases of common stock			(171	)				(145	)
Payment of dividends			(109	)				(98	)
Net cash used for financing activities			(435	)				(815	)
Effect of exchange rate changes on cash and cash equivalents			46					13
Net increase (decrease) in cash and cash equivalents			247					(139	)
Cash and cash equivalents, beginning of period			1,007					1,140
Cash and cash equivalents, end of period		$	1,254				$	1,001
Financial Ratios:
Free cash flow*		$	637				$	736
*Free cash flow is a non-GAAP financial measure and is calculated as Net cash provided by operating activities - Capital expenditures

								GAAP-5
Motorola Solutions, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In millions)
		Years Ended
		December 31, 2020			December 31, 2019			December 31, 2018
Operating
Net earnings		$	953		$	871		$	969
Adjustments to reconcile Net earnings (loss) to Net cash provided by operating activities:
Depreciation and amortization			409			394			360
Non-cash other charges (income)			(13	)		35			56
U.S. pension settlement loss			-			359			-
Share-based compensation expense			129			118			73
Losses (gains) on sales of investments and businesses, net			2			(5	)		(16	)
Losses from the extinguishment of long-term debt			56			50			-
Gain from the extinguishment of 2.00% senior convertible notes			-			(4	)		(6	)
Changes in assets and liabilities, net of effects of acquisitions, dispositions, and foreign currency translation adjustments:
Accounts receivable			90			(79	)		62
Inventories			(14	)		(74	)		71
Other current assets and contract assets			167			49			(251	)
Accounts payable, accrued liabilities, and contract liabilities			(116	)		198			271
Other assets and liabilities			(25	)		(5	)		(523	)
Deferred income taxes			(25	)		(84	)		9
Net cash provided by operating activities			1,613			1,823			1,075
Investing
Acquisitions and investments, net			(287	)		(709	)		(1,164	)
Proceeds from sales of investments			11			16			95
Capital expenditures			(217	)		(248	)		(197	)
Proceeds from sales of property, plant and equipment			56			7			-
Net cash used for investing activities			(437	)		(934	)		(1,266	)
Financing
Net proceeds from issuance of debt			892			1,804			1,090
Repayment of debt			(914	)		(2,039	)		(323	)
Proceeds from unsecured revolving credit facility draw			800			-			400
Repayment of unsecured revolving credit facility draw			(800	)		-			(400	)
Issuances of common stock			108			114			168
Purchases of common stock			(612	)		(315	)		(132	)
Settlement of conversion premium on 2.00% senior convertible notes			-			(326	)		(169	)
Payment of dividends			(436	)		(379	)		(337	)
Payment of dividends to noncontrolling interest			(4	)		(3	)		(1	)
Deferred acquisition costs			-			-			(76	)
Net cash provided by (used for) financing activities			(966	)		(1,144	)		220
Effect of exchange rate changes on cash and cash equivalents			43			(1	)		(40	)
Net increase (decrease) in cash and cash equivalents			253			(256	)		(11	)
Cash and cash equivalents, beginning of period			1,001			1,257			1,268
Cash and cash equivalents, end of period			1,254			1,001			1,257
Financial Ratios:
Free cash flow*		$	1,396		$	1,575		$	878
*Free cash flow is a non-GAAP financial measure and is calculated as Net cash provided by operating activities - Capital expenditures

										GAAP-6
Motorola Solutions, Inc. and Subsidiaries
Segment Information
(In millions)
Net Sales
		Three Months Ended
		December 31, 2020				December 31, 2019				% Change
Products and Systems Integration		$	1,510			$	1,673			(10	)%
Software and Services			763				704			8	%
Total Motorola Solutions		$	2,273			$	2,377			(4	)%
		Years Ended
		December 31, 2020				December 31, 2019				% Change
Products and Systems Integration		$	4,634			$	5,329			(13	)%
Software and Services			2,780				2,558			9	%
Total Motorola Solutions		$	7,414			$	7,887			(6	)%
Operating Earnings
		Three Months Ended
		December 31, 2020				December 31, 2019				% Change
Products and Systems Integration		$	351			$	426			(18	)%
Software and Services			204				164			24	%
Total Motorola Solutions		$	555			$	590			(6	)%
		Years Ended
		December 31, 2020				December 31, 2019				% Change
Products and Systems Integration		$	656			$	994			(34	)%
Software and Services			727				587			24	%
Total Motorola Solutions		$	1,383			$	1,581			(13	)%
Operating Earnings %
		Three Months Ended
		December 31, 2020				December 31, 2019
Products and Systems Integration			23.2	%			25.5	%
Software and Services			26.7	%			23.3	%
Total Motorola Solutions			24.4	%			24.8	%
		Years Ended
		December 31, 2020				December 31, 2019
Products and Systems Integration			14.2	%			18.7	%
Software and Services			26.2	%			22.9	%
Total Motorola Solutions			18.7	%			20.0	%

								Non-GAAP-1
Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Adjustments (Intangibles Amortization Expense, Share-Based Compensation Expense, and Highlighted Items)
Q1 2020
Non-GAAP Adjustments		Statement Line		PBT (Inc)/Exp				Tax Inc/(Exp)				PAT (Inc)/Exp				EPS impact
Intangibles amortization expense		Intangibles amortization		$	53			$	13			$	40			$	0.23
Share-based compensation expenses		Cost of sales, SG&A and R&D			38				9				29				0.17
Hytera-related legal expenses		SG&A			25				6				19				0.11
Reorganization of business charges		Cost of sales and Other charges (income)			18				4				14				0.08
Acquisition-related transaction fees		Other charges (income)			2				-				2				0.01
Legal settlements		Other charges (income)			2				-				2				0.01
Fair value adjustments to equity investments		Other income			(1	)			-				(1	)			(0.01	)
Release of uncertain tax positions		Income tax expense			-				1				(1	)			(0.01	)
Gain on sale of property, plant, and equipment		Other charges (income)			(50	)			(12	)			(38	)			(0.22	)
Total impact on Net earnings				$	87			$	21			$	66			$	0.37
Q2 2020
Non-GAAP Adjustments		Statement Line		PBT (Inc)/Exp				Tax Inc/(Exp)				PAT (Inc)/Exp				EPS impact
Intangibles amortization expense		Intangibles amortization		$	51			$	12			$	39			$	0.22
Reorganization of business charges		Cost of sales and Other charges (income)			41				10				31				0.18
Share-based compensation expenses		Cost of sales, SG&A and R&D			31				7				24				0.14
Legal settlements		Other charges (income)			7				2				5				0.03
Hytera-related legal expenses		SG&A			5				1				4				0.02
Fixed asset impairment		Other charges (income)			5				1				4				0.02
Acquisition-related transaction fees		Other charges (income)			1				-				1				0.01
Release of uncertain tax positions		Income tax expense			-				(1	)			1				0.01
Fair value adjustments to equity investments		Other income			(4	)			(1	)			(3	)			(0.02	)
Total impact on Net earnings					137			$	31			$	106			$	0.61
Q3 2020
Non-GAAP Adjustments		Statement Line		PBT (Inc)/Exp				Tax Inc/(Exp)				PAT (Inc)/Exp				EPS impact
Loss from extinguishment of long-term debt		Other expense		$	56			$	13			$	43			$	0.25
Intangibles amortization expense		Intangibles amortization			54				12				42				0.24
Share-based compensation expenses		Cost of sales, SG&A and R&D			31				7				24				0.14
Reorganization of business charges		Cost of sales and Other charges (income)			13				3				10				0.06
Hytera-related legal expenses		SG&A			5				1				4				0.02
Acquisition-related transaction fees		Other charges (income)			5				-				5				0.03
Fair value adjustments to equity investments		Other expense			4				1				3				0.02
Pelco purchase accounting adjustment		Cost of sales			3				1				2				0.01
Sale of investments		(Gain) or loss on sales of investments and businesses, net			1				-				1				-
Total impact on Net earnings				$	172			$	38			$	134			$	0.77
Q4 2020
Non-GAAP Adjustments		Statement Line		PBT (Inc)/Exp				Tax Inc/(Exp)				PAT (Inc)/Exp				EPS impact
Intangibles amortization expense		Intangibles amortization		$	57			$	13			$	44			$	0.25
Share-based compensation expenses		Cost of sales, SG&A and R&D			29				7				22				0.13
Reorganization of business charges		Cost of sales and Other charges (income)			14				4				10				0.06
Hytera-related legal expenses		SG&A			7				2				5				0.03
Pelco purchase accounting adjustment		Cost of sales			4				1				3				0.02
Investment impairments		Other expense			4				1				3				0.02
Sale of investments		(Gain) or loss on sales of investments and businesses, net			1				-				1				0.01
Acquisition-related transaction fees		Other charges (income)			1				-				1				-
Release of uncertain tax positions		Other income and Income tax expense			(3	)			(3	)			0				-
Fair value adjustments to equity investments		Other income			(5	)			(1	)			(4	)			(0.03	)
Total impact on Net earnings				$	109			$	24			$	85			$	0.49
FY 2020
Non-GAAP Adjustments		Statement Line		PBT (Inc)/Exp				Tax Inc/(Exp)				PAT (Inc)/Exp				EPS impact
Intangibles amortization expense		Intangibles amortization		$	215			$	50			$	165			$	0.95
Share-based compensation expenses		Cost of sales, SG&A and R&D			129				30				99				0.57
Reorganization of business charges		Cost of sales and Other charges (income)			86				21				65				0.37
Loss from extinguishment of long-term debt		Other expense			56				13				43				0.25
Hytera-related legal expenses		SG&A			42				10				32				0.18
Legal settlements		Other charges (income)			9				2				7				0.04
Acquisition-related transaction fees		Other charges (income)			9				-				9				0.05
Pelco purchase accounting adjustment		Cost of sales			7				2				5				0.03
Fixed asset impairment		Other charges (income)			5				1				4				0.02
Investment impairments		Other expense			4				1				3				0.02
Sale of investments		(Gain) or loss on sales of investments and businesses, net			2				-				2				0.01
Release of uncertain tax positions		Other income and Income tax expense			(3	)			(3	)			-				-
Fair value adjustments to equity investments		Other income			(6	)			(1	)			(5	)			(0.03	)
Gain on sale of property, plant, and equipment		Other charges (income)			(50	)			(12	)			(38	)			(0.22	)
Total impact on Net earnings				$	505			$	114			$	391			$	2.24

										Non-GAAP-2
Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Segment Information
(In millions)
Net Sales
		Three Months Ended
		December 31, 2020				December 31, 2019				% Change
Products and Systems Integration		$	1,510			$	1,673			(10	)%
Software and Services			763				704			8	%
Total Motorola Solutions		$	2,273			$	2,377			(4	)%
		Years Ended
		December 31, 2020				December 31, 2019				% Change
Products and Systems Integration		$	4,634			$	5,329			(13	)%
Software and Services			2,780				2,558			9	%
Total Motorola Solutions		$	7,414			$	7,887			(6	)%
Non-GAAP Operating Earnings
		Three Months Ended
		December 31, 2020				December 31, 2019				% Change
Products and Systems Integration		$	408			$	484			(16	)%
Software and Services			259				223			16	%
Total Motorola Solutions		$	667			$	707			(6	)%
		Years Ended
		December 31, 2020				December 31, 2019				% Change
Products and Systems Integration		$	880			$	1,173			(25	)%
Software and Services			955				802			19	%
Total Motorola Solutions		$	1,835			$	1,975			(7	)%
Non-GAAP Operating Earnings %
		Three Months Ended
		December 31, 2020				December 31, 2019
Products and Systems Integration			27.0	%			28.9	%
Software and Services			33.9	%			31.7	%
Total Motorola Solutions			29.3	%			29.7	%
		Years Ended
		December 31, 2020				December 31, 2019
Products and Systems Integration			19.0	%			22.0	%
Software and Services			34.3	%			31.4	%
Total Motorola Solutions			24.8	%			25.0	%

										Non-GAAP-3
Motorola Solutions, Inc. and Subsidiaries
Operating Earnings after Non-GAAP Adjustments
Q1 2020
		TOTAL				Products and Systems Integration				Software and Services
Net sales		$	1,655			$	993			$	662
Operating earnings ("OE")		$	259			$	92			$	167
Above-OE non-GAAP adjustments:
Intangibles amortization expense			53				12				41
Share-based compensation expenses			38				27				11
Hytera-related legal expenses			25				25				-
Reorganization of business charges			18				14				4
Acquisition-related transaction fees			2				1				1
Legal settlements			2				2				-
Gain on sale of property, plant, and equipment			(50	)			(50	)			-
Total above-OE non-GAAP adjustments			88				31				57
Operating earnings after non-GAAP adjustments		$	347			$	123			$	224
Operating earnings as a percentage of net sales - GAAP			15.6	%			9.3	%			25.2	%
Operating earnings as a percentage of net sales - after non-GAAP adjustments			21.0	%			12.4	%			33.8	%
Q2 2020
		TOTAL				Products and Systems Integration				Software and Services
Net sales		$	1,618			$	968			$	650
Operating earnings ("OE")		$	218			$	49			$	169
Above-OE non-GAAP adjustments:
Intangibles amortization expense			51				12				39
Reorganization of business charges			41				33				8
Share-based compensation expenses			31				22				9
Legal settlements			7				7				-
Hytera-related legal expenses			5				5				-
Fixed asset impairment			5				3				2
Acquisition-related transaction fees			1				-				1
Total above-OE non-GAAP adjustments			141				82				59
Operating earnings after non-GAAP adjustments		$	359			$	131			$	228
Operating earnings as a percentage of net sales - GAAP			13.5	%			5.1	%			26.0	%
Operating earnings as a percentage of net sales - after non-GAAP adjustments			22.2	%			13.5	%			35.1	%
Q3 2020
		TOTAL				Products and Systems Integration				Software and Services
Net sales		$	1,868			$	1,163			$	705
Operating earnings ("OE")		$	352			$	164			$	188
Above-OE non-GAAP adjustments:
Intangibles amortization expense			54				12				42
Share-based compensation expenses			31				22				9
Reorganization of business charges			13				10				3
Acquisition-related transaction fees			5				3				2
Hytera-related legal expenses			5				5				-
Pelco purchase accounting adjustment			3				3				-
Total above-OE non-GAAP adjustments			111				55				56
Operating earnings after non-GAAP adjustments		$	463			$	219			$	244
Operating earnings as a percentage of net sales - GAAP			18.9	%			14.1	%			26.7	%
Operating earnings as a percentage of net sales - after non-GAAP adjustments			24.8	%			18.8	%			34.6	%
Q4 2020
		TOTAL				Products and Systems Integration				Software and Services
Net sales		$	2,273			$	1,510			$	763
Operating earnings ("OE")		$	555			$	351			$	204
Above-OE non-GAAP adjustments:
Intangibles amortization expense			57				13				44
Share-based compensation expenses			29				21				8
Reorganization of business charges			14				11				3
Hytera-related legal expenses			7				7				-
Pelco purchase accounting adjustment			4				4				-
Acquisition-related transaction fees			1				1				-
Total above-OE non-GAAP adjustments			112				57				55
Operating earnings after non-GAAP adjustments		$	667			$	408			$	259
Operating earnings as a percentage of net sales - GAAP			24.4	%			23.2	%			26.7	%
Operating earnings as a percentage of net sales - after non-GAAP adjustments			29.3	%			27.0	%			33.9	%
FY 2020
		TOTAL				Products and Systems Integration				Software and Services
Net sales		$	7,414			$	4,634			$	2,780
Operating earnings ("OE")		$	1,383			$	656			$	727
Above-OE non-GAAP adjustments:
Intangibles amortization expense			215				49				166
Share-based compensation expenses			129				92				37
Reorganization of business charges			86				68				18
Hytera-related legal expenses			42				42				-
Legal settlements			9				9				-
Acquisition-related transaction fees			9				4				5
Fixed asset impairment			5				3				2
Pelco purchase accounting adjustment			7				7				-
Gain on sale of property, plant, and equipment			(50	)			(50	)			-
Total above-OE non-GAAP adjustments			452				224				228
Operating earnings after non-GAAP adjustments		$	1,835			$	880			$	955
Operating earnings as a percentage of net sales - GAAP			18.7	%			14.2	%			26.2	%
Operating earnings as a percentage of net sales - after non-GAAP adjustments			24.8	%			19.0	%			34.3	%

								Non-GAAP-4
Motorola Solutions, Inc. and Subsidiaries
Non-GAAP Organic Revenue
(In millions)
Total Motorola Solutions
Three Months Ended
		December 31, 2020			December 31, 2019			% Change
Net sales		$	2,273		$	2,377		(4	)%
Non-GAAP adjustments:
Sales from acquisitions			60			0
Organic revenue		$	2,213		$	2,377		(7	)%
Year Ended
		December 31, 2020			December 31, 2019			% Change
Net sales		$	7,414		$	7,887		(6	)%
Non-GAAP adjustments:
Sales from acquisitions			291			88
Organic revenue		$	7,123		$	7,799		(9	)%

 

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FAQ

What were Motorola Solutions' earnings for Q4 2020?

Motorola Solutions reported Q4 2020 earnings of $2.3 billion in revenue and $2.37 per diluted share.

How did Motorola Solutions perform in 2020 compared to 2019?

In 2020, Motorola Solutions' revenue decreased 6% year-over-year to $7.4 billion.

What is Motorola Solutions' revenue outlook for 2021?

Motorola Solutions expects revenue growth of 7.25% to 8% in 2021.

What were the key segments contributing to Motorola Solutions' revenue?

The Software and Services segment grew 8% in Q4 2020, while Products and Systems Integration segment saw a 10% decline.