Motorola Solutions, Inc. (NYSE:MSI) posted strong second-quarter 2022 results, powered by operational plan execution and healthy growth dynamics backed by good order trends. Both earnings and revenues beat the Zacks Consensus Estimate. Despite supply chain constraints, Motorola produced record second-quarter sales and backlog, demonstrating the strength of its product portfolio.
Motorola Profits Decreased on Higher Expenses
Second-quarter 2022 GAAP net earnings were $228 million or $1.33 per share, down from $293 million or $1.69 per share a year earlier. Higher cost of sales and income tax expense in the reported quarter drove the year-over-year reduction despite top-line growth.
Non-GAAP earnings were $354 million or $2.07 per share compared to $359 million or $2.07 in the year-ago quarter. The bottom line beat by $0.20.
Motorola Posts a Rise Revenues
Quarterly net sales were $2,140 million, up 8.6% year over year, with record sales in both categories due to growth in North America driven by its business model and mission-critical ecosystem. Video surveillance, command center software, and LMR services were popular. The top line beat the consensus estimate of $2,055 million.
North American quarterly revenues rose 13.1% to $1,484 million, owing to LMR and video security growth. Growth in video security equipment and command center software was countered by foreign currency impact. Foreign exchange headwinds were $44 million, while acquisitions generated $34 million.
Net sales from Products and Systems Integration climbed to $1,212 million from $1,094 million in the year-ago quarter. High LMR demand in North America and International markets boosted the segment’s backlog by $1 billion to $4.3 billion.
Software and Services revenues rose 5.8% to $928 million, led by command center software and video security services. Multi-year software and service agreements in the Americas and the Airwave contract renewal boosted the segment’s backlog by $1.2 billion to $9.1 billion.
Non-GAAP operating earnings increased to $497 million from $482 million a year ago. The company closed the quarter with a record $2.2-billion backlog.
GAAP operating margin was 16.7%, down from 18.8%, while non-GAAP was 23.2%, down from 24.4%. Greater operating expenses due to increased direct material costs and acquisitions, partially offset by higher sales, lowered both GAAP and non-GAAP operating margins.
Products and Systems Integration’s non-GAAP operating earnings fell 3% to $188 million, or 14.6%. Software and Services’ non-GAAP operating earnings were $309 million, up 7% year-over-year, with an operating margin of 36.1%, down from 37.2%.
Cash & Liquidity
Motorola generated $162 million in operating cash in the first half of 2022, compared to $758 million a year earlier. Free cash flow in the first half of 2022 was $49 million, down from $644 million due to greater inventories, employee incentives, and taxes. Second-quarter stock repurchases totaled $162 million. The corporation had $717 million in cash and equivalents and $6,011 million of long-term debt on July 2, 2022.
2022 Outlook
Motorola raised its 2022 forecast due to strong quarterly earnings and demand. Non-GAAP earnings for 2022 are anticipated to be in the $10.03–$10.13 per share range, up from the earlier forecast of $9.80–$9.95. Year-over-year sales growth of 8% is expected (up from the earlier forecast of 7%), with increases in both divisions due to increased demand.
Healthy demand patterns are predicted to boost third-quarter non-GAAP earnings to $2.85-$2.90 per share on a 10% year-over-year revenue increase.
Motorola’s capital deployment and balance sheet are excellent. The company predicts significant demand for LMR devices, video security, services, and software.
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