Motorola Solutions, Inc. ( MSI Quick Quote MSI - Free Report) reported strong second-quarter 2022 results, driven by diligent execution of operational plans and healthy growth dynamics backed by solid order trends. Both adjusted earnings and revenues surpassed the respective Zacks Consensus Estimate. In addition, Motorola achieved record second-quarter sales and quarter-ending backlog despite supply chain headwinds, which further exemplified the strength of its product portfolio. Net Earnings
On a GAAP basis, net earnings in second-quarter 2022 were $228 million or $1.33 per share compared with $293 million or $1.69 per share in the year-earlier quarter. The year-over-year decline despite top-line growth was primarily attributable to higher cost of sales and income tax expense in the reported quarter.
Excluding non-recurring items, non-GAAP earnings in the quarter were $354 million or $2.07 per share compared with $359 million or $2.07 in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 20 cents. Revenues
Quarterly net sales were $2,140 million, up 8.6% year over year, with record sales in both segments due to growth in North America driven by the strength of its business model and the value of its mission-critical integrated ecosystem. The company witnessed strong demand for video security, command center software and LMR (land mobile radio) services. The top line beat the consensus estimate of $2,055 million.
Region-wise, quarterly revenues were up 13.1% in North America to $1,484 million due to growth in LMR and video security products. International revenues were flat at $659 million as growth in video security products and command center software was offset by adverse foreign currency impact. Acquisitions contributed $34 million to revenues while foreign exchange headwinds were $44 million. Segmental Performance
Net sales from Products and Systems Integration increased to $1,212 million from $1,094 million in the year-ago quarter, driven by higher demand for LMR and video security solutions. The segment’s backlog was up $1 billion to $4.3 billion, primarily due to high LMR demand in North America and the International markets.
Net sales from Software and Services were up 5.8% to $928 million, with solid performance across command center software and video security services. The segment’s backlog increased $1.2 billion to $9.1 billion, primarily due to multi-year software and service agreements in the Americas and the extension of the Airwave contract. Other Quarterly Details
GAAP operating earnings decreased to $358 million from $370 million in the prior-year quarter, while non-GAAP operating earnings were up to $497 million from $482 million a year ago. The company ended the quarter with a record second-quarter backlog of $13.4 billion, up $2.2 billion year over year.
Overall GAAP operating margin was 16.7%, down from 18.8%, while non-GAAP operating margin was 23.2% compared with 24.4% in the year-ago quarter. The decrease in both GAAP and non-GAAP operating margins was due to higher operating expenses owing to inflated direct material costs and acquisitions, partially offset by higher sales. Non-GAAP operating earnings for Products and Systems Integration were down 3% to $188 million for a margin of 14.6%. Non-GAAP operating earnings for Software and Services were $309 million, up 7% year over year, for an operating margin of 36.1% for the segment, declining from 37.2%. Cash Flow and Liquidity
Motorola generated a record $162 million of cash from operating activities in the first six months of 2022 compared with $758 million a year ago. Free cash flow in the first half of 2022 was $49 million, significantly down from $644 million due to an increase in inventory, higher employee incentives and higher taxes. The company repurchased $162 million worth of stock during the second quarter. As of Jul 2, 2022, the company had $717 million of cash and cash equivalents with $6,011 million of long-term debt.
With solid quarterly results and robust demand patterns, the company increased its earlier guidance for 2022. Non-GAAP earnings for 2022 are expected in the $10.03-$10.13 per share range, up from previous expectations of $9.80-$9.95, on year-over-year revenue improvement of 8% (up from 7% expected earlier), with a rise in both segments on higher demand.
For third-quarter 2022, non-GAAP earnings are expected in the $2.85-$2.90 per share range on year-over-year revenue improvement of 10% due to healthy demand trends. Moving Forward
Motorola is poised to gain from disciplined capital deployment and a strong balance sheet position. The company expects to witness strong demand across LMR products, the video security portfolio, services and software while benefiting from a solid foundation.
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