The operator welcomes participants to the Motorola Solutions First Quarter 2024 Earnings Conference Call and provides information on how to access presentation materials and a webcast replay. Tim Yocum introduces the speakers and mentions that non-GAAP financial results will be referenced. He also notes that forward-looking statements will be made and that actual results may differ from these statements due to various risks and uncertainties.

The speaker, Greg Brown, discusses the company's Q1 performance, highlighting a 10% revenue growth, 27% earnings per share growth, and record Q1 operating cash flow. He mentions that the growth was driven by strong demand for their products and services, leading to an increase in backlog. The speaker also mentions that the company is raising their revenue and earnings guidance for the full year. The next speaker, Jason Winkler, provides more details on the quarter's results, including a 10% revenue growth and a significant increase in GAAP operating earnings.

In the first quarter, non-GAAP operating earnings for the company increased by 20%, driven by higher sales and improved operating leverage. However, GAAP earnings per share showed a loss due to a $585 million charge related to the settlement of Silver Lake convertible notes. Non-GAAP EPS, which excludes this charge, showed a strong growth of 27%. Operating cash flow and free cash flow also saw significant increases, while capital allocation included dividends, CapEx, share repurchases, and the settlement of the Silver Lake conversion premium. The company also acquired Silent Sentinel for $37 million.

In the first quarter, the company saw a 14% increase in sales in the segment of products and SI, with a rise in operating earnings due to higher sales, favorable mix, and improved operating leverage. Notable wins in this segment include large orders for P25 devices and LMR products. In the Software and Services segment, revenues were up 4%, with a 12% increase excluding the impact of the U.K. Home Office. Operating earnings in this segment decreased due to the Airwave charge control. In terms of regional results, North America saw a 13% increase in revenue, while international revenue was up 3% despite lower U.K. Home Office revenues and the company's exit of ESN.

In the Home Office segment, there was a double digit increase in impact year over year. The ending backlog reached a record high of $14.4 billion, driven by strong demand for multiyear contracts in both regions. The year-over-year increase includes a reduction of $777 million related to Airwave and a $748 million backlog related to a three year extension notice from the U.K. Home Office. Excluding the U.K. Home Office, the total backlog was up over $500 million compared to last year. Sequentially, backlog was up $138 million due to the extension notice related to Airwave, but was partially offset by Q4 to Q1 order seasonality and unfavorable FX. In the Products and SI segment, ending backlog was down $74 million due to unfavorable FX, and sequentially was down $354 million due to Q4 to Q1 order seasonality. However, Software and Services backlog was up $404 million compared to last year, driven by strong demand for multi-year contracts. Excluding the U.K. Home Office, S&S backlog was up almost $600 million compared to last year. For the outlook, Q2 sales are expected to be up 7-8% with non-GAAP EPS between $2.97 and $3.02 per share. The full year revenue and EPS guidance has been increased.

In the first quarter, the company has exceeded their revenue and earnings expectations, with a projected growth of approximately 7% and non-GAAP earnings per share between $12.98 and $13.08 per share. The company also faced a $30 million FX headwind and increased interest expenses due to debt issuance. The company also repurchased shares and upgraded their credit ratings. Overall, the first quarter was successful with strong revenue growth and increased operating margins.

In the first quarter, the company saw record operating cash flow and raised expectations for revenue and earnings for the full year. They also settled convertible notes with Silver Lake and are pleased to have Greg Mondre remaining on their board. The company is well positioned for future growth with investments in their LMR product portfolio, increasing recurring revenues, and strong balance sheet. They also refinanced and extended debt and received credit rating upgrades. The first question from a caller is about the video side, which saw decent growth in the quarter.

In this paragraph, the speaker asks the CEO to discuss the impact of movements to cloud on the quarter and the high percentage of software services in the video business. The CEO responds by stating that they are seeing increased adoption of Avigilon Alta and cloud adoption, which is estimated to be a $40 million headwind for top line growth. They are pleased with the results for video and remain confident in their 10% growth target for the year. The CFO adds that software within video is growing faster than the product side due to developments in analytics, VMSs, and mobile video, all complemented by cloud subscriptions. The speaker then asks about the LMR segment, to which the CEO responds that they are pleased with the performance and strong demand, particularly for APX NEXT. The speaker asks for more information on where they are in the cycle for LMR.

In the first quarter, many customers upgraded to more advanced devices, driving revenue and margin expansion for APX Radio. The entire APX portfolio, including the newer APX NEXT and APX Originals, performed well, as did TETRA and PCR devices. The company expects continued growth from device refreshes. The breadth of the portfolio and the strength of the applications, such as location and network extension, are driving adoption of APX NEXT. Customers are also embracing a blended fleet of devices. The company recently renewed and extended its contract with Airwave, but there is still an ongoing appeal regarding the CMA situation.

During a conference call, Greg Brown discussed the extension of Airwave and the backlog for years 2027-2029. He mentioned that the U.K. Home Office confirmed the criticality of Airwave technology and they recorded the backlog at worst case scenario. They are still contesting the charge control rates and are waiting for a decision from the U.K. Court of Appeal. There is no evidence of other managed services customers trying to reprice contracts. Jamie Reynolds asked about the $100 million headwind from less business in Ukraine.

The company's view on the full year and their expectations for growth have not changed due to the recent aid package that was passed. The company is still facing a $100 million headwind due to the Ukraine situation, primarily in the second half of the year. They remain enthusiastic about the command center business and expect 10% growth for the year, with Q1 showing handsome double-digit growth after normalizing for the U.K. Home Office. The company just finished their summit and launched new products, with over 60% of command center customers adopting a cloud connected product.

The company's Command Center cloud products are performing well and exceeding expectations. Adam Tindle from Raymond James asks about the margins in the product segment and the drivers for continued margin expansion in fiscal years 2024 and beyond. Jason Winkler responds that they are on track to reach the $60 million savings from lower broker costs and are seeing improvements in supply chain costs. He also mentions the benefit of customers adopting more feature-rich parts of the portfolio.

Greg Brown discusses the expected increase in gross and operating margins for the year, attributing it to a combination of factors such as volume mix, surgical price increases, and investments in the business. He also mentions the expected increase in OpEx due to investments in the video sector, higher sales commissions, and legal costs related to defending the company's position in various matters. He also mentions the potential for acquisitions, but emphasizes the importance of ensuring they are financially, strategically, and culturally beneficial, and can result in synergies.

The executive team and company are focused on not just growing, but also increasing top line, margins, operating cash flow, and market share. They are proud of their operating margins but recognize there is still room for improvement. They plan to use AI in various aspects of the company, but it is not factored into their current goals. The record backlog of $14.4 billion includes $748 million from Airwave, and without that, there is a decline of $500 million, which is more than the typical seasonal decline. The company is not concerned about this and believes there is still room for improvement in backlog.

In the paragraph, Jason Winkler discusses the increase in total backlog and S&S backlog, excluding the impact of the Home Office. He also mentions a cancellation in backlog related to pricing controls, but notes that the core of the business is growing. The operator then opens the floor for questions, and Greg Brown thanks the employees and channel partners for their performance in the quarter. He also highlights significant events, such as the solution summit and joint channel partner executive partner forum, which aim to develop relationships and focus on cross-selling and upselling the company's portfolio.

In the first quarter, the company had a strong presence at ISC West and introduced their enterprise body-worn camera, which is gaining traction. The company has a strong backlog and a strong funnel of opportunities, along with a strong balance sheet. The speaker is excited about the company's momentum and thanked everyone for their contributions. The call has now ended and a replay will be available on the company's website.

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