Q1 2020 Earnings Call
The vast majority of our workforce do their jobs remotely and they've successfully and smoothly transition to their new environments.
Those who needed to work on site have shown a fearless dedication to our customers, leaving the safety of their homes to ensure that our mission critical operations centres and customers sites.
Main reliable and always on.
I'd also like to say that were deeply thankful for the actions of the public safety and health care professionals that are keeping us and our communities safe.
And we're acutely aware of our responsibility to them during these unprecedented times.
Because of this our employees have gone to great lengths to continue to support them and I could not be more proud of their efforts.
Second despite the challenges brought on by covert 19, we grew earnings per share by 16% during the quarter expanded operating margins by 200 basis points and generated 308 million of operating cash flow, an increase of 23% versus the prior year.
Additionally, we continued to see strong demand for our video security solutions highlighted by 828 million dollar order from a large utility in North America.
Single largest order in the history of the vigilant business.
And our software and services segment grew sales by 13% and expanded operating margins Bye bye hundred and 20 basis points.
And finally, while the Cobin 19 pandemic has converted confirmed the fundamental need for our mission critical solutions. It's also brought uncertainties surrounding it severity impact and duration.
So as a result, we've made the decision to withdraw our full year guidance at this time, we'll reassess this decision at the end of the second quarter based on the information and clarity we have at that time.
And with that I'll now turn the call over a gino to provide additional details on Q1, and our second quarter outlook before returning person pros and cons.
Thank you Greg.
On includes revenue of $1.7 billion flat versus a year ago, including $48 million of revenue from acquisition and $7 million of current <unk>.
Gap operating earnings of $259 million <unk> $30 million, an operating margin of 15.6% of sales compared to 13.8 in a year ago for.
Non gap operating earnings of $347 million up $32 million or 10%.
And non gap operating margin of 21% of sales up 200 basis points from 19% driven by higher gross margin.
Yep earnings per share of $1.12 compared to 86 cents in a year ago Porter.
Non gap P.P. us of $1.49, 16% from $1.28 last year on higher operating earnings.
And the lower effective tax rate in the current or though.
<unk> that you one was $451 million down $15 million versus last year, primarily due to lower incentives and lower legal expenses.
Really upset by costs related to acquisition.
But you want effective tax rate was 15% compared to 20 per cent than the prior year.
A year over year decrease was primarily due to higher access tax benefits on sherbet compensation.
Turning to cash flow Q1, operating cash flow was $308 million compared with $251 million in the prior year and free cash flow was $260 million compared with $185 million in the front or year.
The year over your increasing cash flow was primarily due to improve working yep.
Capital allocation for the quarter included $253 million, a share repurchases $109 million cash dividend $48 million of got back and $36 million for acquisition.
Additionally out of an abundance of caution we made the decision to draw down $800 million from a revolving credit so.
We ended the quarter with $1.7 billion in cash.
Have an additional $1.4 billion have committed on drawn capacity remaining out in the revolver.
We've also taken numerous actions over the past several years to restructure adept maturity profile and the rest are pension liability.
As the results, we'd have no debt maturities and 2020 or 2021 absence of revolver and no expected pension contributions <unk> <unk> <unk>.
A strong liquidity position and balance sheet provides us with the capital deployment flexibility for acquisition opportunities in the future.
Moving to segment results, you, one products and systems integration sales.
993 million dollar 76 million or 7%.
Given by a decline and professional in commercial radio.
Partially offset by strong role in video secure.
Revenue from acquisitions in the quarter was 24 million and currency had ones were $5 million.
Operating earnings were 123 million or 12.4% of sales down 140 basis points from last year.
The longer revenue.
Notable chew on wins in the segment included 28 million dollar video Security Award for a large utility customer in North America of which $10 million was recognized as revenue into one.
Over $50 million of sales into governments across the entire video security portfolio.
13 million dollar P. 25 order report of Los Angeles, California.
He 12 million dollar P. 25 order for didn't when he county, Virginia.
And an 8 million dollar Tetra order for Germany Armed forces.
Moving to software and services revenue with 662 million up 74 million or 13% from last year driven by growth in command Center software and services.
Revenue from acquisitions in the quarter was $24 million and currency had one or $2 million.
Operating earnings were $224 million or 33.8% Upsales up 520 basis points from last year, driven by higher gross margins and improved operating leverage.
What about you ones in the segment include.
And 8 million dollar P. 25, multi year service contract extension with Cleveland, Ohio.
6 million dollar P. 25, multimedia services contract in Latin America.
4 million dollar Command Center software suite contract with Brampton, Ontario.
And to $3 million demand centered software suite contract with Fort Wayne, Indiana.
Looking at regional results during the quarter, we restructured our operations to realize more operational efficiency binding Yeah me a major impact in Latin America into one region, which is not reflected as the international Accordingly, We now report net sales and two regions North America, which includes the United States in Canada.
International.
North America Q1 revenue was $1.1 billion up 4% driven by growth and video Security Command Center software and services.
Partially offset by a decline in professional in commercial radio.
International to one revenue was $539 million down 7% due to a decline in professional in commercial radio primarily in nature path.
Moving to backlog ending backlog was $10.4 billion up $48 million compared to last year.
Inclusive of $462 million of unfavorable currency.
Sequentially backlog was down $821 million due to $470 million of unfavorable currency right.
<unk> revenue recognition of the airwaves <unk> contract and typical North America orders season out.
Software and services backlog was up $120 million or 2% compared to last year due to Rome in North America, multi <unk>, partially offset by $423 million of unfavorable currency right.
Sequentially backlog was down $604 million, primarily due to $368 million of unfavorable currency rate and rubbing you've recognition for E.S. and airway.
Product and S.I. segment backlog was down 72 million or 2% compared to last year inclusive of $39 million of unfavorable from too.
A decline in their national backlog was partially offset by growth in North America.
[noise] sequentially backlog was down to $117 million driven primarily by typical North America orders scenes in Atlas.
Turning to our outlook, we expect to choose sales to be down between 17, and 14% with nine gap E.P.S. between $1.18 and $1.27.
This assumes approximately $30 million of unpacked headwins the current rates.
Weighted average diluted share account of approximately 175 million shares.
<unk> no effective tax rate of between 24, 25%.
Right now like the during the call back over to correct.
Thanks to you know I thought I would end with a few high level comments regarding the full year. In fact, cobot 19 is having in our business and how we're responding.
First of all this pandemic has disrupted and delayed our engagements with some customers and we'll have an impact on certain parts of our business we remains fully committed.
To continue investing in our growth businesses in command centres software, we're accelerating our development to move to the cloud and recently launched our first cloud unable cab customer.
We also expect our records and CAD solutions to be fully cloud enable.
The end of this year with our 911 software to follow in 2021.
In the video security business I'm very pleased with the continued traction with our enterprise and government customers and will continue to invest in R.H. five camera line analytics.
Loud based V.M.S. solutions and features that integrate video and land mobile radio while also expanding our sales coverage.
Additionally are durable cash flow generation and strong balance sheet put us in a unique position to be opportunistic with respect to acquisitions going forward.
Second well this is a critical time to continue to invest we're also taking actions in a number of other areas to reduce our operating expenses.
We now expect operating expenses to be down approximately $210 million versus 2019, which is 150 million more than the annual decrease we discussed on our last earning school.
This additional reduction driven by lower variable compensation lower discretionary spend in areas such as traveled wouldn't contractors and third party expenses and a reduction in real estate should allow us to slightly expand operating margins for this year.
And finally.
Motorola solutions has been providing mission critical solutions to customers on the front line Rover 90 years and have managed through a number of crisis seats and I couldn't be more proud of how are people have responded to just one.
Whether it's aren't airwaves team, enabling network coverage for temporary hospitals being built into U.K.
Where our team helping a customer move there 911 command center operations to a backup location in days when their employees tested positive recoded.
Our teams you're going to great Blanche to make sure our customers mission critical needs are met.
We entered this pandemic in a very secure position.
And I, absolutely believe that will emerge and even stronger company.
On the other side of it and now let me turn this fall back over to Tim.
Right.
Before I began taking questions I'd like to remind collars to limit themselves to one question and one follow up to accommodate as many participants as possible. Operator would you. Please your mind or callers on the line had asked them questions.
Yes. Thank you.
To ask a question you.
You May press Star then one on your Touchtone phone.
You are using a speaker phone please pick up your handset before pressing the keys to withdraw your question. Please press star than to this time with a plus momentarily to assembler roster.
[noise] or first question comes from Tim long with Barclays. Please go ahead.
Thank you yeah, maybe just for the two of them first maybe the quick one first like when thinking about kind of of the whole in rapid using in two two verse kind of what was probably originally expected you know can you help parse out how much of that is his P.C.R. related and how much.
<unk> public safety and then kragh, if you could just talk a little bit about the public safety market. It seems like over all the companies being impacted more than than prior you know backrow events in in the world. So could you talk a little bit about you know what's different what do you think.
'cause driving the change to the public public safety Mark it other than just logistics D.C. any other you know fundamental changes here given given the the macro backdrop. Thank you.
Hi, Kansas Gino on the first part of the question clearly we've seen pressure in professional in commercial radio certain verticals have been significantly impacted you can think about hospitality transportation, specifically airlines oil and gas manufacturing related to the pandemic.
And the and the shut down for shelter and place orders, we have seen some impact of public safety as our engagement have been delayed both in terms of a site work, but also in terms of being able to talk to customers. Obviously, our customers are on the front lines of dealing with a pen.
<unk> and there's certainly been a delay in that engagement and the ability to talk to our customers really frankly, beginning in mid March last thing through April and and certainly in larger markets through may.
It's also important to know that embedded in that guidance <unk>. We continue to expect command Center and video Security Command Center software and video security to grow in Q2.
Dimensionally P.C.R.
Verticals very much impacted public safety characterized as a move to the right based on as you said logistics and inability to get in front of people and get the sites.
Yeah, and Tim I I would add that.
Even though put things have been pushed to the right.
You know, we're a different company now.
Then we were several years ago. The good news is you know, we still expect software and services to grow.
This year it could grow you know it could grow mid single digits, we'll see but we still expect that to grow we do expect video security to grow Command center software as part of software and services.
And I actually think look I think the severity of cute too.
Isn't so much as things have changed in public safety I actually don't think they have I.
I think they've been pushed.
Two or three weeks in March we effectively became locked down in major locations domestically here in the states.
That lockdowns continued in May.
As well as April so I think when you look at two two and.
And see the sharpness of that decline, it's really things pushing to the right than any structural or behavioral patterns that are changing and public safety. What we do is still a need to do versus a nice to do but obviously this situation is pretty expensive given that.
It's a combination of a public public health crisis.
As well as a dramatic economic decline.
In 180, plus countries all at once so <unk>, I, I think or fruit and approach.
At this point in time.
I think the product segment.
For the full year.
Will be down as things pushed to the right it could be down low double digits again, we'll have to see.
But I think with resilient backlog.
And it overall strength of our position with 75 about 75 per cent of our business as public safety in government and 25 per cent enterprise I still think we're well position.
Okay. Thank you very yeah sure Tim.
Mm.
Our next question.
Comes from Adam to do with Raymond James. Please go ahead.
Okay. Thanks, Good afternoon, great I, just wanted to start kind of going back to less financial crisis, I know that businesses difference, but if we looked at the lake to like basis during that time revenue for the full year was down somewhere around the mid single digit range do you remember what it was on kind of Max Payne on a quarterly basis is there any similar.
Charities to sort of admitting decline that you're seeing and q. too and also maybe how quickly did it recover what what could be similar or different this time around versus.
Yeah, I think the difference is again in.
Unlike last time, where we had the financial great recession and things recovered.
We've experienced here is a little bit like the market seizing up literally we couldn't get in front of customers. Many customers on this sale side from an engagement standpoint, and even on services and implementations deployments were pushed out as well.
I think we're much better position this time software and services is a little bit more than a third.
Of our business most of that largely recurring long term contracts mission critical in nature, if I rewind the tape last time that was 20% or sub 20% of our overall revenue. The other thing is even though we're having a difficult to to.
I could comment on this but we're seeing the funnel even know projects get pushed to the right. We've actually just over the last few weeks and months seen a constant.
Replenishment of projects coming into.
So we just thought given the fog and uncertainty in the uniqueness of this thing.
In a once and literally a century pandemic it was kind of prudent.
For us to Ah suspenseful your guidance at this time, but I think I think we're much better position I think we still expect growth and video we still expect growth in command Center software.
Professional in commercial radio business, which is think of the radio business for commercial.
Has it been hit hard serving verticals like hospitality transportation.
Airline gaming and some of the things that have been hit, particularly hard Jack I don't know if you want to anything yeah, maybe just a couple things as we look around the globe things are starting to open up in certain countries in Asia pack, who was frankly a hit first so there's potentially some size of encouragement there in terms of reengaging with customers customers focus.
[noise] moving back to technology projects. The second thing that I think that all of us feel pretty proud of as a team the their ability to continuously engage virtually with the customers by way of video.
Conference mechanisms, but also we held a video virtual trade show for our video security and analytics business because industry of that was cancelled in March and we actually had we had over 30 per cent more people that actually tend to our virtual conference that would have attended the account.
It's in person.
And literally had chatrooms questions that everything from access control school safety and so we're encouraged by a lot of those things we actually even senior in April.
States engagements starting to improve and so it's just one of those things obviously the pandemic is taken the focus of our customers and will continue to work with them in any way, we can to support them.
Okay. That's helpful. Maybe just as a follow up in the a commentary on coven 19, unpack it talked about delayed engagement appointments with state and local customers near term, which may impact future revenue and maybe Greg and Jack can provide some color on that statement more specifically are you finding that customers are now evaluating other options.
Fear that Hey, you know long you know been worried about the potential cannibalization L.P.N. broad band is that a way to save money our customers evaluating that in a big away and in this kind of the catalyst to finally see that shift happen in the bigger away.
No I I don't think in fact, we see the opposite of that.
During this time, we see the importance and critic county of land mobile radio.
Versus any alleged migration or or a shift to L.T.E. I think L.T.E. is complimentary. It's a data broadband network. That's an extension of L.M.R. actually are apex next product that integrates broad band width land mobile radio is best positioned to take advantage of that.
I know that there's been some speculation or commentary.
That suggests that L.T.E. is is starting to cannibalize, we've seen no absolutely.
No indication of that and if anything maybe the opposite yeah. So just maybe one thing to add to that obviously, we'd see that we have an L.T. a public safety L.T. device intellectual haven't but more importantly, as Greg said, we have a collaborative device in terms of apex next it does pay 25, obviously in the focus here is what we've seen in the.
Pandemic in the response with public safety is fundamentally when someone calls 911.
There's a multitude of things that happen, but that puts our technology in place and there's been more strain on the networks, which really is evidence to the fact of why you need a purpose built network, but a really good example is a major without getting into specifics a major city health Department procured apacs next devices, because they needed to talk.
To the front line fire in E.M.S. people, but also wanted that backup capability when they left the city. It was a big health Department that was really to traditionally a secondary type customer for Motorola that bought obviously high tech equipment in terms of apex. Next. So this thing has really been a lot of what we're seeing and Q. too is really bend the ability to not get to <unk>.
Nickel sites to not engage physically with customers I think that's that's really the challenge and we've used that as being kind of short term challenge.
I understood thanks to the color stay safe.
[noise]. Our next question comes from George daughter with Jeffrey's. Please go ahead.
[noise] I think very much I guess, just as a fall onto that thoughts yeah, you mentioned it to initiate around just customer engagement, but what about budgets.
Obviously states are going through budgeting cycles at this point I think certainly you know tax receipts are going to be down municipalities counties. Similar situations. So do you see sort of an economic kind of fall out of of lower tax receipts or do you think the alomar businesses more immune to that.
Yeah, So hey, George it's Jack a couple of things I think it's always important we see there's been a lot written a lot discussed around state and local budgets I think it's very important to decompose what those budgets mean, the reality estate local budgets, there's a comprehensive probably five to six different funding streams, a federal transfer dollars.
Federal Grant dollars property tax income tax sales tax in some states, but also 911 funding, which is one of the real reasons why we've made a lot of acquisitions in the command center space 'cause part and parcel that's a different fundingstream. That's essentially protected so it's a number of those things, but I go back to you know one.
The benefits, we have a being a company that's close to 95 years old as we've gone through a number of these things after 911 and they're all little different the great recession, but what we've seen and when we've gone back and looked at the data suggests that public safety.
Gets prioritized and these things there's other things around the margins. It may get delayed may get the fertile those kind of things, but at the end of the day when we we've even seen it has evidence in this response to the pandemic you need to have the best technology in the hands of those first responders. We think that we think that gets protected there's always by the way the budget situations in state local haven't been easy for the last.
Number of years I think that's lastly, where sales team as much as they have relationships and everything we've got a very veteran team out there that is very focused that working with our customers to navigate funding plants and and they're really holistic plans that they work with our customer base. So I think I think we'll come out of this with the with the same level a priority the public.
Safety is always gotten if not more George so I think I think that answers your question.
God is great and then I'll just ask one more the engine on on one opportunity seems a more interesting. These days I mean, there's obviously a stimulus package that's a brewing here coming from.
From Congress in the administration and I don't pass draft. There's then 12 plus billion dollars in phones that were here <unk> upgrades and I'm not sure with his current packages going to look like but does that do you see that as an opportunity for Motorola solutions and and how much of that you know those dollars do you think of trickled down to the stuff that you've.
Yeah.
Hey, George It's Kelly it absolutely, we do see that as an opportunity for us not just in the energy 911, which is a refresh of the backbone associated with the nine one call center to help turn it into more of a broadband backbone, but it's also there's been a lot of interest in related to cloud.
Code as a result of this pandemic, where a lot of our customers in the past I've been operating with their equipment on on on Prim basis, where they operate it there the need to be able to operate of remotely has something that has definitely been introduced as part of this pandemic. The good news is we've already been investing cloud in a good portion of our software was already cloud enabled but.
As you heard Greg mention in our remarks were celebrating our investments even born cloud based on the demand. We see now we just launched our first CAD customer into cloud by the end of this year, our cat our records portfolio will be completely pull out enabled and an early next year will be our 911 efforts were all be cloud able to.
As well so it does definitely drive that and yes, we do see some of those dollars starting to flow through his folks prioritize not just energy 911, but the rest of the command center software refresh.
Thanks.
[noise]. Our next question comes from Keith how awesome with North Coast Research. Please go ahead.
[noise] overpower selling and for Keith.
<unk> three heresy, originally said that alomar sales decline by 10%. This year do you agree with that market assessment.
Well I think that I think our view is reflected in the commentary that we gave.
They are a a a much smaller player in the business I think we have much more extensive installed base and contacts.
And annuity revenues, but I as I mentioned.
You know two two is is very unique because as malloy pointed out just to the sheer logistical difficulty.
Of a customer engagement in deployment.
But do I think product revenues are likely to decline yes.
And they they I think they will be on a decline that will be comparable.
To what we saw in the land mobile radio business actually in Oh nine.
But again, that's more about delayed and deferred demand.
Than any demand, it's actually lost her goes away.
And I think it will recover and I think public safety has demonstrated over the last several years and longer it remains at the top of the food chain. So I think they have a certain view of the market.
That's their opinion, but I would maintain that I think we have a very long standing and more thorough and comprehensive perspectives.
Great. Thank you very much just one one additional item on that note. It's it's also important to know the composition of the business and as Greg mentioned earlier the percentage of our business. That's commercially that thier mark for commercial customers. The P.C.R. business, specifically and that's where we're seeing the pressure or more.
Specifically is a round P.C. are not around necessarily the public safety to the degree of that we're seeing in the P.C.R. marketplace.
Thanks.
Our next question comes from Paul Silverstein. This Cohen. Please go ahead.
But can you hear me okay.
Yep Yep.
Okay. <unk> you know I know you don't normally break it out but given that you've got to <unk> particular exposure I assume particularly have you exposure to those sectors that had been absolutely [noise].
<unk>.
Energy, that's where the ones who look good.
Then what consumers of revenue comes from the Lexus.
Yeah, Paul the professional in commercial radio last year again, as you know referenced.
Think lend mobile radio for commercial enterprise last year, all in was about a billion dollars.
So as we think about it this year, obviously, that's the area that's come under the most fresher.
And 232 thirds of that is vertical served.
Airlines retail hospitality oil and gas that had been the most significantly impacted.
So that's what's driving the more pronounced double digit decline in that area.
<unk>, that's exactly what I would expect from somewhere we'll north of 50%. So it's around two thirds second question.
[noise] looking question with respect to common studies.
<unk> I don't think it's been uniform in terms of the time you'd impact <unk> no sign of personalities thing boys are being on silent et cetera. My question is there any in so you can gain in terms of <unk> sequencing.
Seven going cold, Turkey, and coming back I know, it's very very early there's all a lot of <unk> I trust anywhere <unk> take away from that.
<unk>.
North American business and or worldwide.
Yeah, I so Paul I think we look at age of Asia fact, your point, it's essentially pretty sporadic things within country, you can't get in there from off at our biggest country and Asiapac as Australia.
Things are I I'd say, they're slightly ahead of where a certain states that have started reopened are here with a lot of the same precautions and measures that have been set up. It's just really early to kind of tell to be honest with you, but I won't tell you you know one of the things that we look at is are you know, where we haven't really talked about about or or video.
Ah security analytics business in the states, where they've opened up we've seen engagement, even within North America improve there. So it's there's not a whole lot. We can glean you look at parts of the Middle East Dubai. Those places are starting to open up a little bit as well, but it's it's what I would call very cautious.
Opening up.
But <unk>.
[noise]. Our next question comes from Ben Bowling with Cleveland Research. Please go ahead.
Good good evening, everyone. Thank you for taking the question I wanted to begin.
Could you start by discussing a little bit about how you think of.
Your sale cycle duration as yet Reengage customers you think there's any change in a kind of the traditional period of those awards just any high level thoughts on you know, where you think customers heads or add as you're starting to have the discussions and your ability to close new business and then I have a follow up.
Okay, Okay, Ben So I I Dimensionalize our business, it's not all things are not the same there's big projects and then there's a amount of what you'd call kind of term agreement and grass roots business that by the way has continued to to an extent to continue to float large projects typically go through you get a request for proposal that's.
Timeline, but then you have elements, where they have to go through board approval approval City Council approvals state procurement approvals and the like choose that example, and really what Chino and like Rag have referenced is a lot of those meetings have been delayed so there's not an issue that we have to go resell re canvas.
You will it's really just that <unk> procedural milestones if move to the right whereby we've had to re kind of reshuffle than milestones of a project and just extend them out you know into the second half and those kinds of things that's been the issue. It hasn't been the good news is <unk> with video technology in those kinds of things, we've been able to stay engaged with our customers answer question.
And all those kind of things, but it's really just a a milestone type thing. We're <unk>. We were we've seen the delays and as we talked about you know the physical access to get not only in at sites, but in the command center and those kinds of things as well if we've got to go do work, where there's people there there's been some delays as <unk> as it relates to those things as well.
Thanks for that Jack you also earlier commented on the diversity in the funding sources.
<unk> outside of the 911 Sunday when you look at the federal transfer tax federal grants property in income taxes.
Just stepping back.
<unk> don't seem to be in a very good position looking forward. So I'm I'm not looking for guidance, but I'm interested how you're thinking about.
The absolute budget opportunity coming from the public sector customers.
The future just that aggregate bucket of opportunity.
You know, how you're thinking that develops over time or any specific feedback you're you're getting from from customers. Thank you.
Yeah, So I'd start with the <unk>.
Listen if we were selling and I don't want to if if we were selling something that they would deem is non critical not essential to their work flow communications I'd I'd, maybe be a little bit concerned, but I think the fact that you know you're selling mission critical communications, you're at the very top of the priority chain. That's a good thing, but it's interesting if you look at it.
A lot of our customers feel like property taxes, you know a lot of these things if there's a recovery that's a little bit sharper. They may not have the impact that we had obviously there's been a pretty significant impact is a relates a sales tax but remember most of our things are things that they've been planned for multiple years there.
Technology upgrades expansions and those kind of things related to mission critical and we've kind of went through this before went through this a little after 911 certainly felt this you know I I was pretty close to the customer.
Back in 2009 navigated a team in the central United States that was probably hit frankly from a budget perspective harder than everybody and we saw some things delayed we had some additional questions to answer but every deal that we had at that point in time continued to move forward and I think I look at that is is encouraging as we move through this pandemic.
<unk>.
Thanks, guys best Best fucking two q. in the year.
Our next question comes from Paul cost her with J.P. Morgan.
Ahead.
Oh, Yeah take him of course, and the the sequential decline that you're looking for ooh from a geographic from spoke to visit some uniform across geography.
Mm.
Yeah, So Paul I think it as it if you look at it because of the broad spread nature and we do business Greg. It said it hit 180 countries. Yeah. There's 120 of those that we do business. It in general if you look at it on the surface. It's it's essentially had an equal weight.
And I think the reason for that is because it hasn't that the opportunities have just gone away. It's been that we've had some of the same limits physically engaging with customers going to sites and physically deploying systems and those kinds of things.
Venice Central equal opportunity delays, it's related to those things. So I'd say in general it's been it's been felt largely equally around the globe.
But the budget contention question for a moment it seems to me from a public safety perspective shifted dramatically and they're going to be around for awhile now and the and the big ships of course is towards testing and then the demonstration of the public health systems, and and that's going to be dates or intensive.
And it seems like buttons for the bullets are gonna be going in the future. What do you feel about doesn't contend with your budget.
Diplomat in passing also does the opportunity.
Presents itself to Motorola as well I mean can you participate in what seems like a very big image to go over the next couple <unk>.
So Paul it's a great question in one that frankly has us if there's a lot of things that we've that this has been certainly have struggled the last couple of months for most companies.
But it really delights isn't the fact that we've added substantially in terms of the video security and analytics a portfolio or the company right now our teams are working on and we'll be in you know in May and June will be continue to market video analytic solutions around social this.
Sensing around mask compliance and detection in campuses in manufacturing facilities in the public domain.
Fever scanning technology as well as contact tracing so analytics that will essentially tell you. If you think about the a lot of the dialog around getting return to campus is returned to schools in in this like our access control solutions will be able to monitor and tell you. If somebody was sick who went through that door.
At school, who might likely have come in contact with someone who six so as much as we'll see maybe a change or a a moderation of different type of opportunities are video security analytic space put a spot on and that I also think the moving Kelly and his team have done a great job moving the command center to the cloud, but if you look at our.
Vigilant cloud services business. This has been a thing we've moved 35000 cameras to the cloud. So far this year. So I think with every challenge comes and opportunity and the video security <unk> business.
Is one that I think has an opportunity to benefit from this.
You don't see the the consent <unk> Oh see the the opportunity to but <unk> you don't even seem to contention for <unk> resources. The the tension between public safety hazard <unk> healthcare buses public so see through.
Plus respond the systems.
If you talk to a paramedic.
Lease officer or a fireman. They tell you the most important piece of equipment that they have that they've always had and this is a millennium firemen or it's a fireman who has been on the job for 30 years. The single most important communication in a lifeline that they have is or two way radio we don't see that changing our customers are telling us they don't see that changing.
Thanks.
[noise]. Our next question comes from Wall plastic with light shit. Please go ahead.
[noise]. Thanks.
Next course guidance basically just assumes that the current state of affairs extends until.
The end of June you're not expecting any recovery and just.
Just kind of thought process on that because obviously you've had some states opening up in some airlines talking about.
<unk> increased okay.
Hadn't competitive companies talk about a return to gross horizon talked about.
While consumer ones down.
Some of their larger enterprise or public safety clients, we're stronger than ever <unk> curious about.
And what the guidance for Q2 implies and and.
How far to the right I guess you can realistically.
It can be given some of the data points that already exists now and narrowly match.
Yeah, I think that wall. It largely reflects and is driven by as Gino mentioned, the professional and commercial.
Radio segment itself, so radio for corporate verticals, that's the most accentuated pressure point on Q. too.
The second is the engagement in deployment and again it was.
The second half of March.
Ah April and largely a lot of may as well and we just thought.
If we're going to guide to to do it in a responsible prudent way.
And move forward accordingly, but that it's really.
That's a P.C.R. that you're involved with because the P.C.R. that other companies are involved with I'm not sure seem that type of dramatic moments I was <unk> is adjust that.
When you talk about airlines and things like that but it's it's just the specific things because your products are addressing customers that are dealing with large crowds that it's it's more specific to you guys. As a result, and then I guess, it's hard for or any of us to figure out.
When those types of business, so we're going to come back if at all.
Right I mean for some of these somebody's customers theoretically could just go away right.
Yeah.
Well, maybe if I could so PCR if you think about I think you were talked about rising but the the traditional pacey are you know if you think about it from a competitive set it's companies like Kenwood.
Like Hi, Tara.
I a number of those type of people and so I think they've without a doubt they felt the same thing and again if those are private systems dedicated towards a refinery an airline.
Marriott hotel and those kinds of things and I think Dave I think that industry is equally felt that there's because there's a physical element of design and deployment of a system as well <unk> a lot different you could go and pick up at a key ask you get a phone delivered on you can pick it up so I I wouldn't see the same sort of physical go you know the.
Delay if you will that we would see in our business. So I think that's really yeah, I was I'm, referring only a variety of <unk> Eriksson axon Sina com scope I try I mean, there's I mean, obviously, if there's more than just horizon as a day to point, but it seems like some of these customers you just mentioned like airlines and some of these you know again customers that rely on large crowds.
Might be more specific right. So again are you worried that maybe those customers don't push to the right, but they just never kind of return it all because of the state of how people are going to return to you know to large crowd as opposed to not.
Yeah, I think it'd be a small portion of it I mean that you know the example, as if an airline goes out of business well, that's one airline that won't need.
A radio system, but as we look at it's it's it's.
It's relatively we view that to be a relatively small subset of the customers frankly.
Okay, but it's enough and it's driving rubbing her down that much and cutillo cause I I thought you said the the public safety was doing well and it was just that it was there was this segment there was doing poorly and that was enough to to take guidance down by 15 or or excuse me a revenue growth down by 15%.
Yeah, well I think what what we're trying to say is that to to as a timing issue.
Not in evaporation issue.
And and it's a cute.
Negative fourteens and negative 17, but it's not evaporating, it's going to the right and there might be some that evaporates, but we think it's a pretty small percentage, it's really representative of things being pushed to the right in that professional commercial radio category.
Awesome. So if I see like for example of jet Blue sees their numbers and we see those numbers go up and Marianne Caesar, we see their numbers go up there should be indicative that that business could bank come back next quarter <unk>, you know not June corner, but the September quarter is that <unk>, well, that's exactly right and I look I can't speak to the exact timing.
Of quarterly alignment I don't know where that precise but you are right that as airlines recover people start to fly again people go to Mari <unk> Hilton Hyatt the states in the economy's in commerce reopened does that business and the acute pressure downward start to improve yes it'll.
Improve.
Gotta. Thanks, right. That's helpful. Yeah, No problem all thank you.
Our next question comes from Jim Suva with City. Please go ahead.
Thank you Gray again, you know I've known you have for over a decade have time and we've both been through a a lot of cycles you correctly talks about you know so much that puts and takes my question since a lot of questions already have been answered is more on the.
The latter so to speak or what do you talked about Motorola solutions will get it's fair piece of pie or even bigger than it's fair a piece of pie is that pie.
Or top of the ladder.
Permanently structurally compressed or compressed for like maybe six to 12 months.
You know just do too less inflows of you mentioned five just six influence the state and local budgets I'm more focused on the state and local budgets.
Balancing opportunities and what's your experience has been in that thank you.
Well I think I think what I would say is this obviously this is a situation that I don't think any of us have seen before.
We've had.
911, we've had the dot com.
Collapse, we've had the Lehman brothers, great recession. This one's different in that it's 187 countries and it's a compilation.
Both of public health crisis.
<unk>, a severe economic downturn at once and their intertwined.
So.
If I take a step back and think about are we in the right businesses do we have brand equity do we have strengthened <unk> and incumbency do we have a greater percentage of recurring revenues and software and services and I look at command centres software that will continue to grow we believe it it should.
Grow this year, even in the face of this video security and analytics.
We expect to grow even in the face of this software and services, we would expect and still could grow around mid single digits, even in the face of this and the incumbent footprint.
And strength that we have or an hour installed base of 13000 land mobile radio networks worldwide with probably our strongest anchor tenants position being North America is that a good business to be in we absolutely believe that will Monotypes services will move up stream will by the way will.
Integrate these as well <unk> integrate video security with.
Integrated land mobile radio networks as a an anchor tenants conveyor of communications and critical information and this addressable market and we zero out China.
Forget China.
Is about a 40 billion dollar addressable market is it temporarily dislocated obviously the answers, yes, and that's reflected in the queue to guide.
We always guide I've never in my career or not and guided for a full year. This as a first we just think it was a prudent thing to do there's a lot of variables and things that are moving around but it doesn't change the fundamental strength.
Attributes longevity and advantage is that our brand in our market position and the technologies we play.
We can capitalize on which is also why we are going to continue to invest organically.
Sales coverage.
<unk> security.
Command Center software to the cloud.
Cheering a different newer radios that you'll see.
Later, this year and next year and we're going to continue to invest in organically and I think this is an opportunity.
To prioritize capital deployment.
Around the acquisitions.
Of assets that they're having temporary dislocation that may make sense for us creatively to fold into Motorola solutions. So.
There's no doubt, it's a tough environment, but I really believe that I think our team does too that this is an opportunity to invest and leaning responsibly.
Down the break even and take out 210 million about backs.
And position the from even stronger to come out of the other end.
In 2021 and beyond and that's exactly what we're going to do.
Great It might click follow up his other companies have kind of <unk> simply because you can't meet in person you can't walk to fours and factories. It sounds like from your comment you. Just gave me now that I'm, an a. is actually very very interesting to you and you're still going to go forward as planned is that correct or maybe you go for.
Planned it just takes a little bit longer.
I I would say, it's going forward it may take a little bit longer but you know there's a couple of opportunities that we're engaged with now.
And that dialogue is b. gun will see most of them don't pan out, but I don't see and right now Jim as we're you know in the middle of May. This is another area that I feel is kind of reopening if you will I don't see conversations in this regard being encumbered.
That will delay any plans are opportunities that come our way.
Thank you so much for the detailed which greatly appreciated thank you.
Our next question some some Sammy Penn tree with credit Suisse. Please go ahead.
Hi, Thank you very much for the question. My question Manly has to do it that your lawn and the idea of surveillance business and you have guided to a slight growth were some growth in 2020 for video, but I was hoping to tell us what video and watch the Vitramon grew in one Q. 2020 and were really.
You should be thinking about the growth rate just because the growth rate is coming from a net teams growth rate.
In 2019 at least when they got a better sense on how to auto back the 2020.
Yeah, we so obviously Q2 as as Greg Gino as we've pointed out there's been some limitations in terms of just ability to me and and some of those.
Customer engagements you know that's been the issue for Q. too, but I would tell you Sammy looking at Q1.
Where we were coming out of the end of March and Q1. It was it was the best quarter, we'd had with a vigilant frankly, we had talked about growing three times the market, we're taking more share, particularly in North America. The team has done an outstanding job, we've made significant investments and go to market even greater investment.
In research and development Ah I spoke to some of the the interesting things were working on in pandemic response earlier, we've got a completely new line of H. five cameras software analytic investments. We made that's not even to include what we've invested in in public safety and watch guard the acquisition of <unk>.
Watch garden vast and we're doing there so we actually.
We expect to businesses, assuming a return to normal sometime in the third quarter, we expect to get back.
So those growth rate levels, if not grader.
And then I just had a follow up on command center.
And there was a big uptick that you guys have called out if you've addressed that in the big thing I really and you are are pointing across at a full year. The one thing I really wanted to know is when it comes to the command Center Sweet do you have existing customers buying more modules within the command center is that what what what the big uptick was or is just this customer that needed.
The command Center suite in the first place and then they just happen to execute that in one q. 2020, and you're going to see more new customers come in for the rest of the air versus existing customers buying and more modules don't understand kinda like what the motion as within command Center.
So is sammy as Kelly it it's a combination of both actually in in the first quarter, we actually picked up a number of new customers frankly, more new customers than sweet customers, which is great because that gives us the opportunity to landed expand those customers and grow the platform in the within the death of what we provide to them we are still so.
<unk> also though many of our customers are still moving and we are expanding and adding more modules of the commands in our sweet as you probably recall as I said in the past folks don't walk in and buy typically all the components at one time I'm simply because of the risk profile of a command center and and 911 center they will schedule and they will do 911.
One year CAD. The next year Records and next year of and the thing that we watch is how they're doing regards to penetrating across those positions and we're still seeing good progress on that so I don't know if you have a follow up on that but that's that's pretty much. How we look at the command center and as a performance and why we saw the the growth we didn't to one.
Perfect. Thank you.
This concludes our question answer session I would like turn the conference back over to Tim Yoakum for any closing remarks.
No additional comments. Thanks, thanks for joining today and we'll talk to a lot of you soon.
[noise] [noise]. The conference is now concluded. Thank you for attending today's presentation you may know disconnect.
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