Q4 2019 Earnings Call

Software and services, we grew revenue double-digits and expanded operating margins by 330 basis points on strong demand for our Command Center Software Solutions Inc continued growth in our services business. And finally as I Look to 2020 our record backlog position coupled with the investments in our Command Center software update security portfolios position as well for another year of organic Revenue growth operating margin expansion and strong free cash flow generation. I'll now turn the call over to Gino to provide additional details on Q4 results and 2020 outlook before returning for some closing thoughts. Thank you, Greg Q4 includes Revenue off of two point four billion dollars up 5% including eighty two million dollars of revenue from Acquisitions and $17 of currency headwinds.

Gap operating earnings

It's a $590 up $74 million dollars and operating margins of 24.8% of sales compared to 22.9% in the year-ago quarter non-gaap operating earnings of $707 up $57 or 9% and non-gaap operating margins of 29.7% of sales up 90 basis points from 28.8% driven by higher sales and gross margin partially offset by higher objects from acquisition.

Gaap earnings per share of a dollar thirty-nine compared to $2.44 in the year-ago quarter the current year quarter includes a non-cash charge of $1,053 per share related to actions taken to de-risk 1 billion dollars in pension obligations.

Non-gaap EPS of $2.94 up 12% from $2.63 last year on higher operating earnings and a lower effective tax rate.

For was 523 million dollars up $40 versus last year primarily due to Acquisitions. The Q4 effective tax rate was 22% compared to 23.5% in the prior year.

For the full year Revenue was seven point nine billion dollars up 7% driven by growth in the Americas revenue from Acquisitions was 312 million dollars and currency ones were $113 Gap operating earnings were 1.6 billion dollars up 326 million dollars or 26% off really driven by higher revenue and gross margin.

Non-gaap, operating earnings were two billion dollars up 235 million dollars or 14%

And non-gaap operating margins were twenty-five percent of sales up 130 basis points driven by higher sales and gross margin partially offset by higher up from Acquisitions wage Gap earnings per share.

Was $4.95 compared to $5.62 in the prior-year the current year included a non-cash charge of a dollar fifty three per share relation to actions taken to de-risk 1 billion dollars in pension obligations. Non-gaap EPS was $7.96 up 11% from $7 and fifteen cents in 2018 on higher sales and operating earnings partially offset by a higher effective tax rate and a higher diluted share count in 2019.

For the full-year op-ex was two billion dollars up $158 versus last year primarily due to Acquisitions and the effective tax rate for 2019 month was 22.4% compared to 21.7% in the prior year.

Turning to cash flow for operating cash flow was $795 compared to $812 in the prior-year and free cash flow was 736 million dollars compared with 743 million dollars in the prior-year for the full year operating cash flow was one point eight billion dollars up 748 million dollars off and free cash flow was one point six billion dollars up six hundred ninety-seven million dollars the increase in cash flow was driven by the impact of the $500 pension contributions in 2018 higher operating earnings and improved working cap.

Apple allocation for 2019 included $709 of Acquisitions 379 million dollars in cash dividends and 315 million dollars and share repurchases off at an average price of $137.35.

Additionally during the year. We repaid the remaining $400 balance on the term loan used to acquire a vigilon.

We refinanced approximately $800 of senior unsecured debt extending our debt maturity profile. We settled the initial five-year convertible note with Silver Lake one year ahead of its maturity and extended the relationship with a new five-year convertible note that expires in 2024.

And finally, we reduced 1 billion dollars in pension obligations through a lump sum window paying approximately $836 million dollars out of pension plan assets to participants who elected this offer.

Moving to segment results for products and systems integration sales were one point seven billion dollars up three million dollars with growth in the Americas and Asia pack offset by a decline in the Middle East in Africa revenue from Acquisitions. And the quarter was thirty-eight million dollars in currency had ones or nine million dollars you for product and systems a segment operating margins Thursday. We're 484 million dollars or 28.9% of sales flat with the prior-year higher gross margin in the current year was offset by higher up primarily from Acquisitions. Some notable you for wins and achievements in the segment include a sixty four million dollar twenty-five order for the state of Arkansas a $36,000 order from Thurston County, Washington a 24 million dollar p 25 order for Luzerne County Pennsylvania and five million dollars in fixed wage.

security wins for

How many customers additionally during the quarter we launched our next Generation p25 radio Apex next as well as our avigilon A.I powered h v cameras.

For the full-year products and systems integration Revenue was five point three billion dollars up to $129 or 5% on growth in the Americas rev positions was $157 and FX headwinds or fifty four million dollars products and systems integration operating earnings were 1.2 billion or 22% of sales up slightly from the prior year and higher sales and gross margins partially offset by higher op-ex related to acquisitions.

Moving to the software and services segment you for Revenue was 704 million dollars up 120 million dollars or 21% from last year driven by growth in both regions revenue from Acquisitions. And the quarter was 44 million dollars and currency had ones were eight million dollars.

Operating earnings were 223 million dollars or 31.7% of sales up 310 basis points from last year driven by higher sales and gross margins and improve Leverage.

For twins in the segment include eight million dollar. Command Center is sweet order from Tulare County, California, six million dollar Command Center software suite order them from the Irvine, California Police Department, six million dollars for a computer aided dispatch system for the City of Atlanta Georgia, a $68 million-dollar p25 multi-year service contract with the state of Victoria in Australia, 8:29 million dollar multi-year service contract with the state of Connecticut and a 24 million dollar multi-year service contract with the US Navy.

For the full-year software and services. Revenue was two point six billion dollars up 315 million dollars or 14% with growth in the Americas and emea.

You from Acquisitions was $155 million dollars and FX headwinds were $59 million dollars software and services operating earnings in 2019 were $800 or 31.4% of sales up 330 basis points versus the prior-year driven by higher sales and gross margins and improved Apex Leverage.

Looking at Regional results America's Q4 Revenue was one point seven billion dollars up 10% driven by broad-based growth across our services video security and Command Center software for the full-year America's Revenue was five point seven billion dollars up 12% with growth in both segments.

Yeah me a Q4 Revenue was $448 down 9% due to large system deployments in the Middle East and Africa in the prior-year partially offset by growth in Europe for the full year. Revenue was one point six billion dollars down 3% you FX headwinds and declines in the Middle East and Africa partially offset by growth in Europe. And in Asia packs Q4 Revenue was $214 up 6% or 12 million dollars driven by growth in Australia for the full-year asia-pac revenue was 656 million dollars down 3% driven by China and FX headwinds.

moving

Backlog and being backlog was eleven point three billion dollars up $659 or 6% compared to last year. Sequentially backlog was up $270 million driven by growth in software and services.

Software and services backlog was up 699 million dollars or 9% compared to last year driven by multi-year agreements in North America as well as the ESN contract extension sequentially backlog was up 261 million dollars with growth in all regions products and system integration segment backlog was down forty million dollars or 1% compared to last year driven by the Middle East and Africa sequentially backlog was down forty four million dollars with growth in the Americas offset by declines in a mea and asia-pac.

Turning to our Outlook. We expect q1 sales to be up approximately 2% with non-gaap EPS between a dollar and a dollar thirty-five. This assumes an effective tax rate of approximately 20% and a weighted average diluted share count of approximately 176 million shares for the full year. We expect growth of approximately 4% with non-gaap EPS between $8.65 and $8.80 per share. This. Assumes an effective tax rate of approximately 23%

weighted average

Diluted share count between 176 and 177 million shares and full-year down sixty million dollars versus 2019 month. We expect full-year operating cash flow to be approximately one point nine billion dollars right now like to turn the call back over to Greg.

Thanks, Geno and let me just close with a few final thoughts first 2019 was an outstanding year or land mobile radio business had a second consecutive record year in America while our video security and Command Center Software businesses. Both exceeded our expectations. Second was particularly pleased by the performance of software or Services during the year, which now makes up roughly a third of our overall sales and is approxi for our recurring Revenue the demand for our integrated Command Center software suite drove out for revenue and backlog growth in our software business while our services business grew mid-single digits organically led by another strong year in North America. Additionally, we expected operating margins in the segment by 330 basis points, which drove overall operating margin expansion of 130 basis points for the company dead.

and finally, I think we're

Very well positioned for another strong year in 2020. We serve large addressable markets. We have a seasoned team focused on consistent execution off any Investments. We've made in North America along with our Command Center Software and video security portfolios will continue to drive organic Revenue growth operating margin expansion pack of at least two times Revenue growth and strong free cash flow over the long-term. I'll now turn it back over to Tim.

Thank you Greg before we begin taking questions. I'd like to remind callers to limit themselves to one question and one follow-up to accommodate as many participants as possible operator. Would you please remind omkar hours on the line how to ask the question? Thank you. The floor is now open for questions at this time. If you have a question or comment, please press star then one on your telephone keypad at any point. Your question is answered. You may remove yourself from the queue by pressing star then too. We do ask that while you pose your question. Please pick up your handset to provide Optimum sound off. Thank you.

our first question

Come from Tim long with Barclays, please go ahead. Thank you. Yeah, just one and then the follow-up I'll give you them both. You guys can take so first choice on the you know, the the the targets for 20 21 the the nine billion in revenues in $10 in EPS talk a little bit how we're going to get there. It seems like, you know, given the strong margins and and effects management the EPS seems a little little easier than the revenues but if you could just touch on that a little bit and secondly might be related, you know, that organic chem one is is kind of low. I'm wondering if there's other large deals that impact that kind of like they did in Q4 and then also looking at the 4% for the year. You do have a little bit of m&a help and you have you know, bigger contribution from software and and videos. So just curious if if something's going on in the LM our side of the business when you look in a

The full year twenty-twenty. Thank you.

Yes, so first in terms of the the concept of nine and ten and twenty Twenty-One. I think I've been pretty consistent in saying approximately 9 and approximately 10 and 21 Tim. It's meant was always meant to be directional and not prescriptive or specific guidance. And as you mentioned I think it also includes in contemplation both organic and inorganic. I think that you see the guide for both q1 and the full year and 20/20 on top of what we did in June of 2019. And I like the progression and the path that we're on your right that if you extrapolate that out. It will likely be closer to a proximately 10:00 on the bottom then on the top, but again, it contemplates both organic and inorganic and we'll see how that develops.

In terms of Q one specifically I would just say that a couple of things were coming off of two consecutive record years wage previous year, in q1 of last year was 13% growth and as we referenced and have been consistent that included of the timing of a fifty million dollar fed order in q1 that when you normalize for the timing of that I think you feel a little bit better the linearity of Q ones consistent with the last several years about 20% It's always our smallest quarter and with the exception of the anomaly of last year, I think is consistent and in line with the way our our business generally flows the final point, I'd make two is that are all in four percent growth for 2020.

is generally

Balanced with a little bit less than 4% growth in the first half four percent growth in the second half and the 4% overall numbers consistent with what I mentioned a quarter ago from a competition standpoint. We still expect growth overall in l m are all in with services in 2020 And We Believe video Security will grow again with that, uh in the 15% range and Command Center Software in High Teens, so all-in-all, I think balanced strong across multiple platforms, but that gives you the color of hue one and twenty twenty as well as the you're twenty Twenty-One question. Okay. Thank you very much for the color. Thank you.

The next question will be from Georgia with Jeffries, please go ahead.

Please go ahead George perhaps your line is muted on your end.

We'll move to our next I'm sorry about that. There you go. We can hear you now, sir. Can you reach apologies? All right. So on on a vigilon you've been talking about a 15% off Target for 2019 to confirm you guys hit that or beat that I get curious what that business grew for you last year. And then again, you're you mentioned 15% kind of growth aspiration for this year again and video. I'd love to get an update on kind of where you are in terms of investing in that business and and starting to get leverage in terms of your Governor opportunities International opportunities. Just give us an update on the progress there. Thanks. So just overall on the business and then Jack could comment on the Investments and the and the other composition of your question. But um, we did grow 15% actually a little bit better, but still it exceeded our expectations in 2019. I'm really pleased with the acquisition and off.

Really pleased with me.

Play John kozerski all the original on team of the waves of an integrated the way we're investing the way we're refreshing the way we're expanding go to market and we do expect again wage growth around 15% for that business, which I remind you is about 3x the market.

Yeah, I'd be the only color I had grad just just in terms of the investment George. We we invested fairly significantly in terms of go to Market North America. And the first quarter last year. I think that helped a tribute to the momentum is Greg indicated. We picked up in the second half of the year. The other piece of it is it's obviously a very innovation-driven Market, but we launched we had a relatively large launch with our high-powered H 5 camera line and again the queue for success and even what we're seeing in terms of pipeline build is very encouraging the last eight of it is we formulated a government sales team and we did Geno make mention of it. We did five million in sales half of that was in the federal government Market, which is really the longest selling cycle. So all-in-all she encouraged in terms of the markets internationally. One of the things estimates were making Now is really focused on routes to Market taking our go-to-market coverage and getting into new countries the division log.

Not in when we acquired them. So I think some work to do there. But uh, but definitely I think some opportunity as well. Yeah, just George one other thing just to compliment the team one of the verticals wage. I think has been the strongest.

Performing is education in the notion of safe schools. I think it's been The Sweet Spot of demand for a vigilon and Jack and team are going to make even more money Investments to expand our the width and breadth of our reach in that vertical Nationwide. I think it's front and center with so many school systems and and countywide education system Choice whole notion of safe students and doing the necessary protection around perimeter and anomaly detection motion detection. So we're investing more in that vertical and we're investing in integrating the end of individual on video security analytics system integrated with our existing land mobile radio. So stay tuned on that front for more updates over time both the education vertical and a few others, but that's been high demand for us.

Thank you. Thank you George.

Our next question is from Keith's house on with North Coast research, please go ahead Gino question for you. Just a little more details on the on the numbers are indeed took quite a bit this quarter. Is that kind of a new run right to think about that? And is there a specific area as I guess you're expanding the R&D in order to to capture. It's more future opportunities. Yeah, as we talked about the the the increase Keith was attributable to Acquisitions. Um, we will continue to rationalize spend we have made in Chrome investments in arbroath businesses. Both Jack mentioned go to market as well as additional investments in R&D with the new camera as well as in Command Center Software, and we connect you to drive costs out of the overall business. So, you know, I talked about a sixty million dollar reduction in 2020. So what you're seeing in twenty years

Teen is really.

A function of the Acquisitions coming on and as we work through cost structures across the the Acquisitions and uh, uh more so across the underlying business you'll see that come down right follow up in terms of the License Plate Reader business and the watch guard. Can you guys go to the color and how those Acquisitions are performing for you?

Yeah, sure Keith. It's Jack. So related to watch guard one of the encouraging things we have with watchguard and with vast is really the ability to First bundle video with license plate recognition software and ultimately look at those as a platform. So we've Q4 last year. We announced our for our a mobile video watchguard that's integrated with license plate recognition that's tied to our learn database which is the biggest license plate recognition database in the market early returns from customers and tell us this gives them better evidentiary management as well as it improves officer safety. So we're encouraged by both of these and I'd remind you that that watchguard is the song and video we see more and more of the potty Warren and in car video sales being tethered together and obviously our go-to-market scale in North America is significant. So we're we

really like both of those acquisitions

great. Thank you.

The next question will be from Adam Tyndall.

with Raymond James

Okay. Thanks and good evening, Greg. I know it's not a normal practice to talk about individual contracts. But the State of Florida LMR deal was a landmark one that you've talked about in the past has an example of kind of the threat of Lte cannibalization being overblown seems like some potentially unattractive terms being asked of you based on what's being reported on that and I don't think you'd come to an agreement. But just hoping for a little bit more color. Why am I am not sure if those terms are boilerplate they've been agreed to in the past and what has changed to see such a big deal that seems like it may be falling through you know what I'm saying? So first of all, I mean just to think a picture of remind everybody we did anticipate getting State of Florida. We didn't I think it was largely a result of over a year and half of delays in lawsuits and feels primarily by the incumbent competitor on top of that. There's some been some Administration Management changes, but I think it's fair to say that there was fluidity in scope and Ed.

And some design assumptions now having said that we have an extensive presence.

Throughout the state already. We'd still look forward to participating in what the state of Florida decides to do next the project by the wage was never in backlog while we did anticipate signing it we didn't and it was going to be a managed service. So it would have been I think about thirteen to Fifteen million a year over several years. I think we're going to stay engaged with the state of Florida. We would like to think there's still opportunity to re-engage and participate in that going forward in terms of overall demand for LMR. As I mentioned. We've had to record years back to back. You know, we've had the state of Pennsylvania map of the state of Iowa and there's a whole we had the largest LMR deal in the history of the company in Canada. So LMR is remains strong and and these deals off

our continued to come in and they're usually accompanied with seven and ten and twelve

Your maintenance contracts as well. I think the State of Florida had a lot of factors involved we would still like to participate and hope we have a role going forward but that's really the state of play at this point. I'm okay that's helpful and just as a follow-up kind of circling back on some of the things that you said in the prepared remarks at the end the 2020 guidance, I think implies somewhere around low-budget operating profit dollar growth on 4% Revenue growth. I know that Leverage is something that you've done in years past but largely through a lot of cost optimization programs and think the composition of the dollar growth and leverages becoming more a function of scaling the software and services piece. So I'm hoping that maybe you could just touch on that Dynamic that change in composition of profit dollar growth and leverage wage click on where you see software and services margins moving to in 2020.

So it was a lot but you know, we still think the business can be expected to grow all in 4% We do think that video Security Solutions will grow at 15% and Command Center Software in the High Teens as I've commented before as it relates to China are China Revenue agent continues to fall off largely as expected in an accelerated way, you know just to contextualize that mainland China was about a hundred and twenty million of Revenue Office in 2019. I think that's going to be cut in half in 20 20 more pronounced not an anticipated but more pronounced and not reflective of our strategy around China and we've been emphasizing that theater for the last several years. So I think we will continue to grow or gas.

I think

Our continues to grow all in inclusive of services video security and Command Center Software. I mentioned services will grow should grow mid single-digits from operating leverage standpoint as Geno mentioned. We think off X goes down sixty million largely normalized and optimized from g n a rationalization from Acquisitions made previously, but software and services will continue to grow High single-digit. That's what we anticipate and from an operating margin standpoint. I think that software and services will be about 33% uh-uh expanding over 2019 and we would see an anticipate the product segment took a margin expanding as well.

Very helpful. Thank you. Sure. The next question is from Jim Suva with City investment research.

Thank you. Just one clarification that kind of a more detailed strategy question in the clarification question is if I got my memory correct, which it could very well be wrong the long-term guidance that you gave the nine billion sales and $10 and EPS not guidance, but say let's call it goal or whatever for twenty twenty one that does not include unannounced m&a but for the 2020 guidance for this year of the sales of 4% plus or minus some of the EPS that does not include phone now instead m&a that hasn't been announced yet. So that's kind of my clarification question. Then my strategy question Greg when you look at running the company for twenty twenty what's kind of them, maybe one or two variables to the underside or downside that you're taking a look at whether it's state budgets or there are a couple big contract renewals from competitors or within yourself that come up for Renewal just so we can think about

The key factors you're looking at 4.

120 thank you. Sure. So Jim your your memory is correct the approximate nine and ten does contemplate a future Acquisitions and you're also correct that are 12:00 guidance that we're confirming today does not so you're right on that front in terms of you know, kind of overall levels and thinking about 20-25 like the fact that we have record backlog. I like the fact that more of the revenue is dimension alized toward a recurring theme a Visa Vie software and services. I'm really pleased with Kelly Mark and Andrew Sinclair and Jack Malloy and John kozerski and I don't say that conveniently or to be nice and give the commercial for those guys. They've done an excellent job on two of these growth strategies that are very critical to us going forward and at the same time land mobile radio all in continues to be steady product and services and will grow

the variables

You know you always think about is there a geopolitical event that could happen maybe who knows the coronavirus is relatively maybe it off early in in stages. We'll see we don't think that impacts us at this point in time, but we'll see how that plays out. You know, this is also an election year and sometimes if there's a change in administration that could provide a temporary pause or dislocation. I don't know if that's twenty twenty or Twenty Twenty-One. But you know that's going to be an interesting set of Dynamics to watch that whole political theater unfold I think overall State budgets in the US are solid. I think the US Federal budgets are solid month. We've talked about Tailwind with the National Defense authorization act FX is very muted for us in 2020 as we sit here today, maybe 10 a.m.

headwind, uh

So I think our our guidance in our view is balanced prudent, but I like the underlying strength of the business with the performance drivers in the execution by which we're achieving.

Thank you so much for the details. It's great. Thank you. Thank you.

And our next question will come from Ben volin with Cleveland research, please go ahead.

Good evening, everyone. Thanks for taking my question. I wanted to start if you could just talk specific to public sector surveillance opportunities wage historically, it seems like a vigilon has disproportionately been weighted towards Enterprise. How do you feel about the progress? You're making what's the visibility on large deal opportunities as it reads relates to public sector customers.

And it's Jack. So we've I made a comment earlier that we put a team that was specifically focused state and local really when we think about local. It's local. It's a video security systems. I think we've talked about before that. We managed the city of Chicago, but just last year we had opportunities that we won in in Cleveland jersey in in in Dallas as well. So we've got opportunities. We've got relationships. I'm actually very encouraged what we typically see with Citywide safe City opportunities that they typically put it in an area particularly in the central business district or an area that's very hard and by crime and build out so that the other kind of elegant thing when we secure those deals is there's a scalability wage. Um, they don't happen in twenty this year 2020 and 2021 is they make sustained investments in those networks as well.

Okay.

And looking at Command Center, where do you think customers are in their piece that modernization efforts? Is it still Ultra beginnings? And you know things get a lot better from here just sending high-level thoughts on where that market is and it's Evolution and it's Kelly. I think it's still early Innings package that modernization. Certainly we're starting to see some moves with some of the larger cities out there in regards to building into the g-net as you probably heard us talk about it, which is the more advanced wage multimedia to the nine-one-one call centers, but I'd say that's still early Innings the impact of that eventually it will drive turn of software because they'll update the software which sort of sits down stream from that 911 call to be able to handle the multimedia, but that's also falls within the normal budget cycle that they have to prioritize so it's not a Thursday.

It will drive a tremendous acceleration.

But certainly something that will see happen over the next many years. Thanks guys.

The next question is from Paul Coster with JPMorgan. Yes. Thanks for taking my question. Can you break out the the the rose by region? Give us some sense if there's any differences between the regions.

Yeah. Hey Paul is Jack will when you think about it North America last year, we grew 13% in 2019 a 7% in constant currency this year in 2020. By the way, I do want to note North America. It's it's it's particularly important that we grew across LMR had tremendous success with Command Center Software as well as in our video security business. We actually expect continued growth across all platforms. We expect growth in North America and the federal government area and Thursday as well as in the US and state and local is we think about Europe immediate last year. We had a it's important no to Mia was down in 2019, 3% off most of that was driven by a culmination of two things two deals in the Middle East to Nationwide deployments one in Northern Africa and one in the Middle East. They created a tough cop also.

We were in a tough FX.

Environment last year, but we did grow in Europe and Eastern Europe and Western Europe and in 2020. We expect the region in hold to grow not only in Europe at the Middle East and Africa as well. And then lastly I am in asia-pac and I think Greg Greg made mention. This is we expect asia-pac to decline slightly this year and really that's driven by the fact that our revenue and China will be cut cut in half. The rest of Asia pack is fairly stable for us, but it's just the plan continued deterioration of Revenue and China that really impacts asia-pac.

McGregor I sent you changing the administration might cause a pause in spending what's happened in Prior presidential cycles that you can walk you out of material if anything. Well, I mean, I think just in general whether it's Republican or Democrat. It wasn't meant to be a partisan comment. But whenever there's a change there's typically you go through a new cycle. They appoint new people in cabinet members, they reconstruct the budget there may or may not be a continuing resolution. Um, you know took the bunch of details need to be solidified which could really are foundational to what they will spend the first few quarters after the election. I think that's what we've experienced in the past. I think that's exactly right. The other piece of it is just what happens in the House and Senate and are there changes there that might change budget priorities as well, but it is Greg said it's not we we wage.

very good years and Democratic administrations and very good years and

Public administrations, it's really just how quickly can get can they get the agency heads in place that can start to set the wheels in motion for both our customers and our team makes sense. Thank you, ma'am. The next question is from Paul Silverstein with Cowen and Company.

I appreciate you taking the questions. I appreciate that. These might have been out in different forms, but do you know if I remember correctly last year you spoke about gross margin uplifting the largest driver of operating margin uplift and with objects being relatively flashed but not down and you delivered on that this year you're talking about objects declining once again by sixty million. I don't think I heard you reference to a smart if you did, I apologize. But what should we expect from gross margin relative to the opportunity for operating margin up with for incremental leveraged? Yeah Paul, this is Gino. We did not mention it but really the expectation from and the product segment is for gross margins to be compared to what they were in 2019 and continued expansion in software and services from 19 and 2:20.

All right.

The follow-up. I appreciate that both of you have done a very good job trying to herd the cats and keep expectations in line. So Greg and you apologize if this goes in the other direction, but you're telling us that you expect trying to be down by sixty million or so to get cut in half. So starting out if we normalize for China.

You were getting groceries or normalized growth looks more like 5% and I'm asking obviously a longer-term question here. And then if I think about the growth you're putting up in command and Control software and voice mail of 15 to High Teens as those grow as a percentage of Revenue and is Elam are comes down as a percentage of Revenue. That should obviously have a dog with long term on growth all these things being equal. I just want to make sure I'm thinking about this the right way. We think about longer-term growth as you go forward in time. I appreciate law of large numbers, but when I look at what's going on in your business, it sounds like gross should actually turned up over time.

well

A couple of things in the context of twenty-twenty. We went through that appreciate the question and I understand where you're coming from. You are right that over time as software and services and video security. Obviously Command Center software that are growing substantially faster and become a greater range from a contribution standpoint that that should provide lift both from a growth rate and organic growth rate and we would anticipate that Trend over time. We're only guides for 2020. The China being cut in half is much more pronounced. So China was down twenty million in 2019 against eighteen. It's much more pronounced this year. It's not unexpected. I think it's related to a lot of the things we've been doing and decisions that we made dead.

proactive

With China, so that's not unanticipated. But also I think in the context of the overall guidance, I think it's appropriate to be prudent. By the way. Some of this growth remember friends here is incrementally things that were sold as capex that might roll to the Top Line growth number to take three to four to five to six months. Um, go more toward annuity Revenue multi-year annual recurring so as we move some product to incremental annual recurring Revenue off that would temper down top-line growth as we transition over time, but enhance the longevity and durability and predictability of the cash flow. So there's there that's that dynamic as well. But I am pleased with where we are record backlog high-growth businesses performing an l m. R as well remember coming off to record years that's important to understand.

And the LM our business being longer sales cycles and a little bit lumpy in.

Teacher, you know 20/20 is reflective of that, but that too is still growing all in with services.

Greg I appreciate the response to be clear. I was looking for you to change the 20/20 guy and said it was not informed about it correctly. Yeah. No, I know. I appreciate it. And I totally understand where you're coming from.

Thank you. You bet. The next question is from Fahad with Colin. Thank you for taking my question. I wanted to see if you can address something that hasn't really come up lately is the opportunity in the public LTE or private LTE space for you guys. I assumed your video or increase growing portfolio of video services. That is a Synergy with your private. LTE offerings. Can you speak to any incremental deployments you've had with your private LTE offerings is is 4 hot. It's Jack and and it's a good question. If you think about our LTE offerings historically we've we've got a couple things we've we've talked about firstnet. We think there's muted expectations for first at North America. But LTE to the Enterprise is where we've got significant opportunity. We announced a

c b r s portfolio

March and our Channel partner Expo, we won some of our first deals with a big Health Care system out west. So we're encouraged by that. We also have a nine hundred megahertz offering to the utility space that we announced last week at distributech and think of this as being something that actually takes advantage of existing footprint. So less sign a better return on investment for utilities Leverage is higher power capabilities and it has p 25 and essentially LTE capabilities standing side-by-side the last thing off LTE it will be an enabler for a px next device, which is our our Public Safety police Fire EMS device targeted and that you remember that's got a p 25 capabilities. But also it'll have 5G capabilities resident in the device. It's going to have LMR flow through capabilities are so really it's coming at a job.

different things device opportunities in public safety some stuff

For opportunities in public safety on first net and then in infrastructure as well as device opportunities in the Enterprise space namely utilities and Healthcare cetera.

Appreciate it. And if I could be asked you about the competitiveness of your video products, you know, one of your competitors they talked about their wings at Fresno and off Cincinnati, but I just want to understand how competitively your products are coming together. You've got watchguard and in your other video platform. Can you speak to the competitiveness of competitiveness of your product offerings relative to your competitors? Yeah, I think and and our video business is obviously as you mentioned, we've got a fixed a video security analytics business individual on Thursday. It's the only end end game in town everything from cameras at the edge to video Management Systems to a part that we don't talk about a lot and that's life is controlled Greg talked a little bit earlier about education and I think access control is every bit as important to our story as we secure campuses in the like dead.

when we think about our our video business and the public safety, and I talked to

But earlier again, we're the only one we've really got we've got the only one who's got an end-to-end story there. We've got not only on body where the leading in car video provider, but we've also got LPR capabilities, but more importantly are learned database is the most robust database in play in content matters as you well know. We've got over twenty billion plate plates in the system. So we think we're pulling the story together. We've actually Consolidated our sales teams in public safety directed at video cuz through the Acquisitions, we have different people in different places. We've investigated those teams have Mantra central leader now and we're focused and getting after the public safety space, but I think from The Innovation standpoint from our portfolio, we've got everything we need to execute

I appreciate the Insight. Thank you very much.

Once again, if you do have a question, you may press star than one on your touchtone phone at this time. The next question comes from Sammy with credit Swiss, please go ahead.

Hi.

Thank you for the question on your video. When in the quarter that was for five million dollars and I appreciate some of the comments you gave regarding your federal sales team that has been ramping up but took this in any way related to the NDA policy or the NDA policy went to your advantage to win this actual contract or was this completely unrelated to the ndaa wage policy that actually boxed out some of the Chinese vendors.

Sammy the NDA I think we've dimensional eyes. It is being a Tailwind to our business. It's created a favorable environment for a vigilon, but I would tell you I think it's more more of a result of having the right portfolio the right focus in the right relationships and the ability to navigate the federal government sales cycle, I'd probably attribute it more of success to Mark McMillan the engineers and their teams and getting after that business.

I think that's it. Yeah, and the only other thing I did on the video again is you think about the video assets we've Acquired and aggregated in 2019 there roughly off in about seven hundred million in Revenue that includes fixed video in car video body-worn video licensed recognition video. We feel very good about the end-to-end system orientation, uh strong AI Edge analytics and then we take those and integrate them into office or incumbency around land mobile radio for of a pretty powerful ecosystem Around Mission critical Communications and analytics so that that's the path. We're on

Thank you. And then one follow-up is if you look at the all your command center contracts that you've been signing and winning over every quarter has the average size of these contracts from a dollar perspective started getting larger wage, or is it very online on a quarterly basis, or was it very online in 4019 versus the prior three quarters?

Sammy's Kelly, we are seeing the contract start to get a bit larger as we see the bundles and the sweets certainly referencing a couple of large ones as we did in the earnings materials with Irvine. So we may as we see the customer step in and rather than just buy a point product like CAD or records there now bundling more and more together. So that will lead to a bit more of an influx in regards to the size of those as those happening.

Got it. Thank you.

Ladies and gentlemen, this concludes our question-and-answer session. I will turn the floor back over to mr. Tim Yoakam vice president of investor relations for any additional or closing remarks and they use to add appreciate everyone joining today, and we'll we'll talk to many of you soon.

ladies and gentle

This does conclude today's teleconference a replay of this call will be available over the internet in approximately 3 hours. The website address is www.motorola.com. We thank you for your participation and ask that you please disconnect your lines at this time. Take care.

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