The operator welcomes participants to the Motorola Solutions' Fourth Quarter 2023 Earnings Conference Call and provides information on accessing presentation materials and a webcast replay. Tim Yocum introduces the company's executives and mentions that they will be discussing the company's results and answering questions. He also notes that non-GAAP financial results will be referenced and that forward-looking statements will be made. These statements are subject to risks and uncertainties.

The speaker, Greg Brown, discusses the exceptional fourth quarter and full year results for the company. He highlights the record revenue in both segments and the expansion of operating margins. He also mentions the recent acquisition of IPVideo and the strong demand for their safety and security solutions. The company has also generated record operating cash flow and is well positioned for another year of growth. The call is then turned over to Jason Winkler.

The company's revenue for the quarter grew 5% and exceeded expectations, with growth in all segments, regions, and technologies. FX tailwinds and acquisitions contributed to this growth. GAAP and non-GAAP operating earnings also increased, driven by higher sales and lower direct material costs. GAAP and non-GAAP EPS also increased, with higher margins and sales. For the full year, revenue was $10 billion, up 10%, and GAAP and non-GAAP operating earnings also increased. GAAP EPS was $9.93, up 25%, primarily due to higher earnings and a prior year asset impairment charge.

In the fourth quarter of 2023, the company's non-GAAP earnings per share increased by 15% due to higher earnings, but was partially offset by a higher effective tax rate. Operating cash flow for the quarter was $1.2 billion and for the full year, the company generated record operating cash flow and free cash flow. The company also announced an increase in their share repurchase program and an 11% increase in their dividend. In the Products and SI segment, sales were up 4% and operating earnings increased to 30.0% of sales. Some notable wins and achievements in this segment include large orders for P25 systems and devices in the US and internationally.

In the fourth quarter, revenue for Products and SI increased by 9% due to higher sales of LMR and Video. Acquisitions contributed $15 million to the revenue, while currency headwinds had a negative impact of $19 million. Operating earnings for the full year were $1.5 billion, representing a growth from the previous year. In Software and Services, revenue increased by 7% in the fourth quarter, driven by growth in Video, Command Center, and LMR. Operating margins for the segment were 31.6%, lower than the previous year due to the Airwave revenue reduction. Some notable highlights for the fourth quarter included a $330 million LMR managed services renewal for Denmark's public safety communications network and a $48 million Command Center order for the city of Chicago. For the full year, North America revenue increased by 9%, while international revenue increased by 3%.

The article discusses the financial performance of the company for the fourth quarter and full year, highlighting a growth in international revenue and a decrease in backlog. The company expects sales to continue to increase in the first quarter and for the full year, with a focus on technology growth. The company also expects strong operating cash flow for the year.

The company is expecting 10% growth in Video Security and Access Control, as well as Command Center, due to the popularity of their cloud offerings. They have entered into partnerships with Jabil and Google to optimize their manufacturing operations and harness the power of Google Cloud's advancements for their video solutions. The introduction of their cloud-native platform, Avigilon Alta, has contributed significantly to their growth and is preferred by certain industries such as education.

In 2023, the company had a strong year with a solid balance sheet, increased operating margins, and record operating cash flow. They also returned money to shareholders and acquired IPVideo. The company's new brand narrative focuses on public safety and enterprise security, and they are seeing continued momentum in their business with investments in their portfolio and software applications. The company also has a strong balance sheet and the opportunity to continue to drive shareholder value.

The speaker is pleased with the company's current position and expects strong growth in revenue and earnings in 2024. They will now take questions from callers, with a reminder to limit questions to one per person. The first question is about margin expansion and the headwinds in 2023, with the speaker confirming that they expect operating margin expansion and improvement in PPV. They also expect gross margin to be comparable or slightly higher. The second question is about Silver Lake, with the speaker saying there is no update and they expect to fund the unwind of the position.

The company expects a significant increase in OpEx for the next year, with half of it being organic and the other half inorganic. They provide an update on their partnership with Silver Lake, which is set to expire in September. The Q1 guide looks strong, but there is a discrepancy in the full year growth rate. The company expects higher interest expenses due to refinancing, including $1 billion in Silver Lake notes. The CEO is proud of the previous year's performance. Analysts question the growth rate and the CEO discusses the company's success in gaining market share and securing government contracts.

The company's backlog and pipeline are both strong, which is a good sign for the rest of the year. The full year guidance is higher than previously expected, but there are some potential challenges, such as a $200 million headwind from the UK Home Office and a decrease in revenue from Ukraine. However, the company's overall growth is solid and they are seeing strong growth in their cloud-based video platform.

The company's expectations for growth are driven by both cloud and on-premises business, with a focus on market share. Government video sales are growing faster than overall business, driven by prioritization and efficiency in police forces. The company is not concerned about any impact on full year performance from weaning off PPV and managing supply chain disruptions. There is no noticeable impact from the Red Sea front disruption on costs.

Greg Brown, CEO of Motorola Solutions, answers questions about the company's Jabil agreement and the impact of higher container rates on their supply chain. The Jabil agreement will not have a significant change in cost profile until 2024, but will help the company scale and manage costs in the future. The company primarily uses air transportation, so the impact of higher container rates is negligible. They expect to see improvements in supply chain and inventory levels by the end of the year.

Jason Winkler responds to a question about backlog trends and clarifies that while the reported backlog appears to be down, this is largely due to the impact of Airwave. He also mentions that he is proud of the overall backlog of $14.3 billion, which only saw a decrement of $800 million when excluding Airwave. Winkler also addresses concerns about backlog in the tech hardware industry and expresses confidence in their current supply and demand situation.

The speaker is optimistic about the company's future due to a strong product backlog and pipeline. They have a high percentage of backlog coming from government and public safety customers, and expect 6% growth due to this strength. The Jabil agreement will not have a significant impact on working capital, but the company still expects working capital improvement and a strong operating cash flow of $2.2 billion. Capital expenditures will remain at 15% or less of the operating cash flow.

The operator introduces a question from Joseph Cardoso of J.P. Morgan regarding the company's free cash flow and potential for deployment in 2024. CEO Greg Brown discusses the company's strong balance sheet and their approach to capital allocation, including returning value to shareholders through dividends and share repurchases, as well as potential for acquisitions. He also mentions the organic growth opportunities available to the company.

The company is excited about potential acquisitions in the areas of video, software, and services to strengthen their portfolio. They have earned an upgrade from Moody's and will be refinancing $1.3 billion in debt. They will be appealing the UK Court of Appeals in regards to the Airwave situation and believe that it will be needed beyond 2026.

The company plans to continue moving forward, maintaining high levels of customer service and investing in the network. Their current backlog includes a contract with the UK Home Office through 2026, with potential for further opportunities. The company expects ARPA to contribute 5% to orders in 2022, and state and local budgets for public safety remain solid. The duration of the backlog has slightly improved since the beginning of last year.

The speaker responds to a question about the backlog and quality attributes, then moves on to address a bigger picture question about the impact of an election year on their top line targets. They mention their strong performance regardless of the administration and the consistent demand for public safety. They also discuss their 10% target for fixed video growth and the benefit of having a broad portfolio to meet customer needs.

The company is seeing an increase in cloud adoption, which may moderate top line growth but is still beneficial due to revenue stickiness and market share gains. Camera refresh cycles vary depending on the type of deployment, but the company is making efforts to leverage their telco portfolio and expand their camera offerings to support growth in the cloud. The introduction of Unity8, which can bridge on-prem solutions with the cloud, is also expected to contribute to growth.

Avigilon's acquisition of IPVideo is a strategic move to expand their capabilities within education and beyond. They have been reselling IPVideo's solutions for some time and see potential for cross-selling in other markets such as healthcare and workplaces. The HALO Video sensor is particularly useful for detecting issues like smoking and vaping in areas where cameras cannot be used. This acquisition will be integrated with Avigilon's Unity and Alta platforms.

Avigilon Alta Video has partnered with Google Cloud for its scale and AI capabilities. This partnership will help expand Alta geographically and improve video delivery. The company believes that Google will be a good partner as it expands its installation and capabilities. There are many developments happening in the cloud industry, such as AI and core cloud services.

The company's partnership with Google is part of their multi-cloud strategy to provide customers with the best performance at the best price point. They offer both Unity and Alta as options, with growth expectations for both. The purchase decision remains dynamic, but they have seen competitors eliminated and both Alta and Unity as finalists. The growth of cloud fixed video is a strong multiple of the prem solution, and there is increasing momentum for Alta.

The speaker is responding to a question about the growth of Command Center in the fourth quarter and the outlook for 2024. They mention that the growth in Command Center was 21% for the year, with Rave being a key driver. The organic growth, when excluding Rave, was 10%. They also mention a $25 million headwind due to the transition out of ESN.

In the paragraph, the speaker discusses the growth of Command Center, which includes the normalization of the exit of ESN worth $25 million. They mention that growth remains strong in this segment due to both volume and price, including the adoption of feature-rich products like APX NEXT. The speaker also expresses excitement about their partnership with Google and thanks the team for their hard work in 2023, anticipating another strong year in 2024. They conclude by thanking everyone and looking forward to debriefing in a quarter.

A recording of the call will be posted online within three hours at www.motorolasolutions.com/investor. The participants are thanked for joining and are asked to disconnect their lines.

This summary was generated with AI and may contain some inaccuracies.