Motorola Solutions, Inc. — 2024 Q1

Yes. Tim, on Video, pleased with the results in Q1. As you know, we remain convicted around the 10% for the full year. We did talk about last quarter that we are seeing an increased adoption to Avigilon Alta and cloud adoption. We talked last quarter and it remains unchanged. That's probably about -- probably a $40 million estimated headwind in terms of the top line growth number that informs the 10% but feel very good about Q1's performance. And by the way, in particular, the orders for video were strong, both in fixed and mobile.

And Tim, on the second part of your question, you're right, software within video is growing faster than the product side. That's a trend we've been seeing. And keep in mind, it's not just Alta, it's all of the exciting developments that we have around analytics. Both of our VMSs, our software products are recorded there. Mobile video is also there, all complemented by cloud subscription. So that's a very important and fast-growing part of our business. Now the LMR piece.

Yes. I think -- look, I can't be more pleased with the performance of LMR products and services. And Jack talked about the continued strong demand last quarter, it's the same as this quarter. In terms of APX NEXT, as an example, a lot of customers are indexing and in Q1 indexed to more feature-rich devices which helped drive revenue and quite frankly, Tim, margin expansion.

The only thing Tim I'd add on top of that is, as just Greg pointed out, it's the breadth of the portfolio is a strength. But what's particularly driving the APX NEXT adoption are the applications. So in the quarter, in Q1, we secured two large state patrols as well as one Department of Transportation, as you think about what drives those, it's location. It's the ability to extend the network vis-a-vis SmartConnect and SmartProgramming with large fleets, their ability to reprogram and the like in a more expeditious fashion, so.

Jack, you've seen customers embrace a blended fleet too.

Exactly, right. In fact, all three of those customers have APX Original and like 1/3 of those are APX NEXT.

Good point.

Yes. Thanks, George. So we recorded the backlog of the extension of years '27, '28 and '29, because in March, we received notice from the U.K. Home Office for the extension of Airwave. Aside from our disputes, let's put that off to the side for a minute. I think it confirms our belief all along in the durability, longevity and quite frankly, criticality of mission-critical LMR, particularly in this case, Airwave. So it reaffirms the long-standing need of how critical that technology is, and that's one of the best performing from a network performance standpoint, emergency networks in the world.

No. No. I think the U.K. is very, very unique in many ways, but the answer is no. .

Our view on the full year and what's informing our raise does not change from what we updated you on the Ukraine situation last year. We did talk about $100 million, Jack referenced that about $100 million headwind. By the way, that headwind still exists. It's primarily in the second half of this year, which informs kind of the seasonality that's implied in both Q2 and our full year guide. By the way, we remain in game, I'm thrilled. We're thrilled that the Foreign Aid Bill got passed for $95 billion and Molloy's team remains actively engaged on multiple fronts. But our view in terms of the full year guide is unchanged from what we said last time.

Still very enthusiastic about Command Center overall as a category. We still expect 10% growth for the full year. By the way, I might add that remember, ESN in the way we record revenue was in the Command Center technology bucket. So Q1 would have grown handsome double digits normalized for U.K. Home Office. And quite frankly, when you look at the 10% guide implied for Command Center for the full year, it's a number higher than that when you normalize for ESN as well. And you may want to mention just some of the other things going on.

We just actually finished our summit. This has been our largest summit, I think, ever, over 1,300 customers attending. We launched our VESTA NEXT refreshed products, both for cloud and for on-prem, along with quite a few other new launches or responder, our mobile app. So it's been -- traction has been amazing, and we see greater than 60% of our Command Center customers now adopting a cloud connected product and Rave and our other Command Center cloud products are doing exceptionally well beyond expectations. .

Sure. So I'll take the first one. We remain seeing the $60 million of lower broker costs, we call the PPV that we guided to 90 days ago. That's a full year number. Q1 included some of that benefit. There's more to go in getting to the total $60 million. We're on path for that. We are seeing certainly the need to use far less and the supply improvements from our direct vendors are helping us get the parts we need at the price we need. That's in part what informed our Q1 as well as our expectations for the year, complemented by the continued strong demand. So on plan in terms of the margin improvements related to lower supply chain costs, I would also point to what we talked about on the call is the continued benefit of customers adopting more feature-rich parts of the portfolio. That comes with a margin improvement for us as well.

And in terms of margins, we -- by the way, this year, we do expect gross margins to be up slightly, and we also now expect operating margins to be up about 75 basis points. As we think about it holistically and kind of on a pro forma basis, we think the levers of volume mix, which we're enjoying now, some surgical price increases, primarily around services, where we have contracts that have appropriate cost of living mechanisms built into multiyear services contracts. And as they come due we will be disciplined in making sure we're recovering appropriate cost increases that come and hit the firm.

So Adam, I mentioned it earlier, if I -- if we exclude the Home Office impact on a multi-quarter basis, total backlog is up over $500 million and S&S backlog is up over $600 million. So while we recorded the $748 million in this Q1 related to the extension of years '27, '28, '29. We also in the quarter before that, reduced the backlog related to the pricing control implemented for years, '24, '25 and '26. So they're a bit of a cancellation, if you will, and then the core of the business at Home Office is absolutely growing.

Yes. Thank you. First and foremost, I want to thank the Motorola Solutions employees around the world and our channel partners. It's a great team, very proud of the performance in the quarter and very proud of what I think we can do between now and the end of the year. I do want to highlight, we had some great significant events in Q1, Mahesh mentioned 1 of them, the Solutions Summit in Dallas. A week ago, we had 1,300 customers. It's the largest ever event we had on that front. We demonstrated operational working public safety an enterprise security ecosystem. It was significant, well attended and lots of good feedback.