OTHER SELECTED FINANCIAL RESULTS
- Revenue - Sales increased $217 million, or 13 percent from the year-ago quarter, driven by growth in the Americas and EMEA. Approximately $145 million of revenue growth was related to acquisitions, and $19 million was related to the adoption of accounting standard ASC 606. The Products and Systems Integration segment grew 10 percent driven by the Americas and EMEA. The Services and Software segment grew 22 percent with growth in all regions.
- Operating margin - GAAP operating margin was 15.8 percent of sales, compared with 21.1 percent in the year-ago quarter. The decline was primarily due to higher operating expenses related to acquisitions and an increase to an existing environmental reserve related to a legacy business, partially offset by higher gross margins in Services and Software. Non-GAAP operating margin was 24.3 percent of sales, compared with 25.0 percent in the year-ago quarter due to higher operating expenses related to acquisitions partially offset by higher sales and favorable gross margin mix.
- Taxes - The GAAP effective tax rate was 8 percent, compared with 26 percent in the year-ago quarter. The Non-GAAP effective tax rate was 18 percent compared with 30 percent in the year-ago quarter. Both the GAAP and Non-GAAP tax rates were favorably affected by the recognition of U.S. federal return to provision adjustments and the tax benefits related to share-based compensation; however, certain return to provision benefits that relate to the Tax Cuts and Jobs Act of 2017 were excluded from the Non-GAAP tax rate.
- Cash flow - Operating cash flow was $338 million, compared with $270 million of operating cash generated in the year-ago quarter. Free cash flow1 was $292 million, compared with $185 million of free cash flow generated in the year-ago quarter. Cash flow for the quarter increased on higher earnings, improved working capital and lower capital expenditures.
- Capital allocation - The company paid $84 million in cash dividends. From a debt perspective, the company repaid the remaining $300 million on the revolving credit facility ahead of schedule; $200 million was repaid during the quarter, and $100 million was repaid subsequent to the quarter-end. The company also repurchased 20% of the Silver Lake convertible note for $369 million; the $200 million of principal was repaid with new senior unsecured debt and the $169 million premium was paid in cash.
- Backlog - The company ended the quarter with backlog of $9.5 billion, up $572 million from the year-ago quarter. Products and Systems Integration segment backlog was up 9 percent or $277 million, and Services and Software was up 5 percent or $295 million. Land mobile radio demand led by the Americas continues to drive backlog growth.
KEY HIGHLIGHTS
Services and Software wins
- $19 million digital evidence management solution contract for the city of Las Vegas
- $18 million computer aided dispatch (CAD) & mobile records contract for Chesterfield County, Virginia
- $17 million multi-year services contract for Petrobras (Brazil)
Products and Systems Integration wins
- $50+ million Tetra system upgrade in Europe
- $21 million P25 system and device upgrade for city of Indianapolis and Marion County, Indiana
- $15 million P25 device order for city of Austin, Texas
- $12 million P25 system order for city of Augusta, Georgia
BUSINESS OUTLOOK
- Fourth-quarter 2018 - Motorola Solutions expects revenue growth of approximately 13.5 percent compared with the fourth quarter of 2017. The company expects non-GAAP earnings in the range of $2.50 to $2.55 per share. This assumes current foreign exchange rates, approximately 173 million fully diluted shares and a 25 percent effective tax rate.
- Full-year 2018 - The company continues to expect revenue growth of approximately 14.5 percent, and now expects non-GAAP earnings per share in the range of $7.00 to $7.05, up from the prior guidance of $6.79 to $6.89. This assumes current foreign exchange rates, approximately 172 million fully diluted shares and a 22.5 percent effective tax rate.
