Q3 2020 Motorola Solutions Inc Earnings Call
Good afternoon, and thank you for holding welcome to the Motorola solutions third quarter 2020 earnings Conference call.
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I would now like to introduce Mr., Tim Yocum, Vice President of Investor Relations.
Mr. Young you may begin your conference.
Thank you good afternoon, welcome to our 2023rd quarter earnings call with me today are Greg Brown, Chairman and CEO, Jason Winkler Executive Vice President and CFO.
Additionally, executive Vice President products, and sales and Kelly, Mark Executive Vice President software and services.
Great and Jason will review, our results along with commentary and Jack and Kelly will join for <unk>.
We posted an earnings presentation and news release at Motorola solutions Dot Com slash industry [noise].
Materials include GAAP to non-GAAP reconciliations for your reference during the call, we will reference non-GAAP financial results, including those in our outlook unless otherwise noted.
A number of forward looking statements will be made during this presentation and during the Q and a portion of the call.
These statements are based on current expectations and assumptions that are subject to a variety of risks and uncertainties.
Actual results could differ materially from these forward looking statements in.
Information about factors that could cause such differences can be found in today's earnings news release in the comments made during this conference call in the risk factor section of our 2019 annual report on form 10-K, and our other reports and filings with the FCC, we do not undertake any duty to update any forward looking statements and with that I'll turn it on.
Okay great.
Thanks, Tim Good afternoon, and thanks for joining us today I'll start off by sharing a few thoughts about the overall business before Jason takes us through.
Our Q3 results and outlook.
First I'm proud of the team and I'm pleased with our results and execution in these challenging times.
During the during the quarter, we achieved both revenue and earnings per share above the guidance we provided in August.
Driven by growth in video Security Command Center software and services. Additionally, we generated 392 million of operating cash flow and strengthened our portfolio by closing the acquisitions of telco a leader in fixed video security solutions and Kallio cloud based SAS mobile apps for.
Vitor law enforcement.
Second our software and services segment continues to perform well.
During the quarter. The segment grew revenue, 9% expanded operating margins by 220 basis points and generated over half of the operating earnings for the company. We were also awarded the largest command center software order in our history.
$120 million plus next generation 911 multiyear contract.
And finally, while the environment with co, but certainly remains fluid I'm encouraged by the improvements we saw in many areas of our business during the quarter order.
Orders for body worn cameras were up significantly year over year.
Sales of fixed video to our government customers were strong.
And we saw improved demand from both our public safety L. M R and PCR customers versus Q2.
I'll now turn the call over to Jason to take you through our results and outlook before returning.
Some final thoughts.
Thank you Greg Q3 results included revenue of 1.9 billion down 6% from a year ago, including 55 million from acquisitions GAAP operating earnings of 352 million and operating margins of 18.9% of sales compared to 20.7% in the year ago quarter.
Non-GAAP operating earnings.
Hundred 63 million down 46 million and non-GAAP operating margins of 24.8% down from 25.5% in the year ago quarter due to lower sales and gross margin contribution in the products and that's I segment, partially offset by higher sales higher gross margins and improved operating leverage.
In software and services GAAP operating earnings per share were down.
All are 18 compared to a dollar and 51 cents in the year ago quarter.
Non-GAAP EPS of $1.95 cents versus $2.04 last year, primarily due to lower sales in the products and that size segment, partially offset by higher sales gross margin and improved operating leverage in software and services.
Opex in Q3 was 455 million down $49 million versus last year, primarily due to lower discretionary spending incentives, partially offset by cost related to acquisitions.
Q3 effective tax rate was 20% compared to 23% in the your prior a change driven primarily by higher R&D credits and a favorable U.S. federal return to provision adjustment recorded in the third quarter turning.
Turning to cash flow.
Free operating cash flow was 392 million compared with 525 million in the prior year and free cash flow was 343 million compared with 465 million in your prior.
<unk>.
The decrease in cash flow was primarily due to lower sales.
Capital allocation for Q3 included 181 million per acquisitions 109 million in cash dividends 105 million or share repurchases and 49 million of Capex. Additionally, during the quarter, we refinance upcoming debt maturities with a new $900 million 10 year debt issuance at a rate of two point.
3%.
Finally, we repaid $400 million against our revolving credit facility of which 300 million was repaid during the quarter and 100 million subsequent to quarter end.
We expect to repay the remaining $100 million balance by year end.
Moving to segment results [noise].
Three products and systems integration sales were 1.2 billion down 14% driven by a decline in public safety Lamar and PCR, partially offset by growth in video security.
Operating earnings were 219 million or 18.9% of sales down 330 basis points from last year, primarily due to lower sales.
Some notable Q3 wins and achievements in this segment include a $44 million P 25 order with a large U.S., but no customer a $28 million P 25 order for the state of Wyoming.
A 20 million dollar P 25 order for the state of North Carolina.
$18 million Tetra order for a large international transportation customer and we saw strong growth in fixed video sales to government customers during the quarter.
Moving to our software and services segment revenue was $705 million up 9% from last year driven by growth in both services and software revenue from acquisitions in the quarter was 24 million.
Operating earnings were 244 million or 34.6% of sales up 220 basis points from last year, driven by higher sales gross margin and improved operating leverage.
Some notable Q3 wins in the segment include and over $120 million next generation 911 multiyear contract.
A $19 million body worn in car video multiyear as a service contract in North America, and an $18 million P 25, multiyear services contract Seminole County, Florida.
Additionally, we received strong orders for body worn cameras launched our premier one cloud software suite and closed the acquisition of Kaleo, a cloud based SAS mobile application provider for law enforcement.
Looking at regional results North America, Q3 revenue was one point threebillion down 6% due to declines in public safety Alomar and professional commercial radio partially offset by growth in services video security and software Internet.
International Q3 revenue was 600 million down 8%, primarily due to decline in public and private professional commercial radio and public safety Alomar, partially offset by growth in services video security and software sales grew in Europe, While Latin America declined on continued challenges from cold at 19.
Moving to backlog ending backlog was 10.7 billion down 360, Min 361 million compared to last year driven by revenue recognition on the Airwave in your son contracts, partially offset by growth in North America, and $81 billion of favorable currency rates sequentially backlog was.
Up 174 million driven by growth in North America, and 93 million of favorable currency rates software and services backlog was down 44 million or 1% compared to last year due to revenue recognition on airware sand contracts, partially offset by growth in North America, multiyear agreements and $74 million.
Favorable currency rates sequentially backlog was up 138 million or 2% due to growth in North America, and 83 million of favorable currency.
Products and that's I segment backlog was down 317 million or 10% compared to last year, primarily due to large international deployments and COVID-19, delaying some sales engagements sequentially backlog was up 36 million or 1% driven primarily by international.
Turning to our outlook, we expect Q4 sales to be down between 6% and 5.5% with non-GAAP EPS between $2 and 71 and $2.76 per share. This assumes a weighted average diluted share count of 175 million shares and an effective tax rate of 23.
<unk>, 24%.
For the full year, we now expect sales to be down approximately 76.5% up from our prior guidance up by 7% decline with non-GAAP EPS between $7.52 and $7.58 up from our prior guidance of $7.40 to.
$7.52.
Summers are increasingly seeing the benefits of the cloud across their entire work flow.
And LMR or land mobile radio we've launched our Sera central cloud based offerings for P. Twenty-five networks that provide remote management and backup core options for our radio customers and video security, we launched a video as a service offering for body. One cameras that includes our cloud based digital evidence management soft.
Where as well as a vigilant cloud services, which now has over 4000, a C C. Seven dot X sites connected to the cloud.
All of these subscription based offerings provide increased capabilities to our customers and opportunities for us to grow recurring revenues.
And finally through the global pandemic natural disasters and civil unrest, our customers continue to depend on and rely on our solutions as need to have.
Demonstrating the criticality of what we provide and.
And our teams in People's resilience in support of our customers around the World was nothing and is nothing short of remarkable.
Additionally, we were just recently recognized by the Wall Street Journal is one of the world's most sustainably managed companies ranking the sixth highest.
In the country.
As we move forward, we will continue to focus on supporting both our customers and our people while also deploying the capital to drive growth and continued shareholder return.
And with that Tim I'll turn it back to you.
[noise]. Thanks scribe before we begin take them questions I'd like to remind callers to limit themselves to one question and one follow up to accommodate as many participants as possible.
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Thank you.
The first question today.
Credit Suisse. Please go ahead.
Hi, there. Thank you and congrats on the solid results in three Q I first wanted to ask about the 120 million dollar 911 contract and you guys sign that was the highest in the company's history and maybe two two pieces to this how will that be recognized over time, it's kind of like the first question and then I know.
There's probably going to be similar deals like this in the future probably not the same magnitude, but maybe you could you give us a little bit of an idea on how popular this type of specific large deal could potentially be in demand and the medium to long term.
Sure is Sammy it's Kelly so on the N. G. C. S. I think I I would I would say three things about it first off look we're really excited about that part of the business. It is the entry point for all 911 calls and as I think I may have referenced prior call what that effectively does is creates the as he net multi lane highway.
<unk> entry point to 911 centers, where they can now handle video audio pictures text versus the single Lane Highway a voice that they could handle before the second thing I'd say about this deal is when you think about it this and other similar deals like that will get on in Gcs, There's always an installation component that up.
Front, and then there's a longer tail of as a service where will run the trip will run the system for our customers and that's similar to what we have here in the multiyear contract. The third thing I just remind you about around in Gcs is while we have some of our own software and componentry in it. We are also acting as a systems integrator. So we are in effect we.
Selling backhaul and other components as a offering for the entire solution.
Which is a bit different than what we do when our 911 call taking software our CAD software. We are the entirety of the software solution, but we're excited about this we think that in gcs and as he net is I would call. It if you're looking at nine inning baseball game I think we're somewhere around maybe.
Second or third inning. So we're early in the conversion of as he net across the United States. So there are certainly other deals out there. It will just continue to fight for those and update you on those as they come and Sammy.
This contract 120 million plus will.
Will be Rev recognized over a multiyear long term contract.
Got it. Thank you and then correct just one question for you.
Still have the $9 billion of revenue and $10 AVP EPS guideposts laid out for 2021, and obviously covid may have shifted the surrounding little bit, but I was hoping you could give us a little bit of an update around this skype poster this framework and how we should be thinking about what's to come in the medium to long term.
Yeah, well, obviously covid was the ultimate disruptor, but what I would say.
Is I'm pleased with.
The momentum of how the businesses performing.
We talked about queue to have this year Sammy being a low point, we would improve in Q3, we expect.
To improve in queue for I think the print for this quarter reflects some of that improvement all I would say look I'm not going to guide 2021, I think that would be premature, but I would say as we sit here today and I don't have a crystal ball I would expect us to grow and.
And returned to overall revenue growth next year and I would also expect us to grow in both segments for next year, but again, we'll update you a quarter from now on the next earnings call.
I appreciate it thank you thanks Sammy.
Our next question is from George Snyder of Jaffray's. Please go ahead.
Hi, guys. Thanks, very much I was really interested in some of your comments.
Greg on the software business I think you mentioned and $500 million run right at this point.
Can you can you talk a little bit more about.
How that I would imagine that run rate is getting cannibalize to some degree as you move customers from perpetual software licenses to subscription and can you talk about potential cannibalization on that on that revenue run right or maybe talk about the mixture of customers that are converting just a prescription or anything you can that can.
Give us more insight in that transition.
Sure George So the majority of the software revenue today's license revenue.
Kelly and Andrew have done a good job plowed, enabling the sweet the only component left.
To cloud enable his records, which will be done in the first half of 2021.
So we're incrementally moving more and more customers to as a service, but again I think we're still going to be able to manage that transition.
From perpetual license incrementally to more as a service without any major dislocation or disruption of top line revenue said another way you see that.
Software and services.
We will perform this year in the high single digits.
And I expect software and services in total in the segment in both sub segments software and services to continue to grow in 2021 as well, even while we're transitioning those clients.
Gradually to as a service I view that as a multi year transition and George the only thing I might add Kelly is the we're really excited about the command Center software suite, We just announced which now fully cloud enables CAD records and our mobile but that's in addition to already what we do in aware are vast license.
Plate recognition as as a service and also our Kodiak part of our portfolio as well the only part of the entirety of the of what we have that won't be cloud abled, yet is or 911 call taking that should happen in the first half of next year.
And in addition to that we're excited about what we just did with Kallio. The acquisition, we just did which picks up a very large customer base of of.
Folks that are using that mobile application, which is also an as a service part of the portfolio.
Got it Okay, and then one just quick housekeeping items.
I didn't see it in the press release from the presentation, but.
Was there an FX impact on top line in the quarter and could you tell us what that was.
It was pretty small.
Okay, Louisiana.
Yeah.
Our next question today is from keep house.
Please go ahead.
Good morning guidance I Hope you have a right on the ability to do sales this quarter in terms of in the last quarter I think what we heard was without challenges in terms of getting in to see the customers how did that develop over the third quarter and is it a challenge going into the fourth quarter.
Sure he.
Keith It's Jack.
Good afternoon, yes.
Yeah. So we saw sequential improvement in terms of our ability to engaging customers and just to kind of give you. The geographic around the world first of all in North America and government, we've been able to engage in person with customers and we've seen that manifest in terms of increase in proposals and sequential increase in terms of LMR business and is Kelly pointed out commands.
Center and video.
In Europe.
It's important to point out 55% of our revenue in Europe as recurring revenue, but we are starting to see we saw certainly in Q3, both in the enterprise market and government the ability of our customers to actually common extended meet us virtually so that that's been an improvement Asia Pac same thing the one area of the World where we're we're.
Having essentially lockdown continues to be locked down and we've got very much diminished expectations is Latin America, but I would certainly say, it's improved but I'm really proud of the resilience of the team in terms of use a video conferencing and really trying to engage our customers and pull them along we've been heavy in terms of virtual tradeshows and demonstrations.
<unk>.
And as I said in government, particularly in public safety, we engage with our customers in person messed up et cetera, and Keith just one other anecdote I'd give you as we just completed Kelly's team.
The annual software summit.
Just a few days ago, we did it in person a year ago.
We just completed the virtual multi day engagement just a few days ago and attendance was literally double.
Virtually so I think malloy teen and Kelly's team and our customers quite frankly.
Have been good in transitioning virtual engagement digital engagement business continuity.
It depends on the theater is Jack reference internationally, but we've been able to navigate that much better than we and we were doing a quarter ago.
Gotcha I appreciate that and just as a follow up there in terms of changing gears actually in terms of like first net and airwave.
Give us the latest on where Ltte versus LMR kind of stands and turns around the world.
I think it.
The high level answer is no changed from the last time, we spoke to you.
<unk> and ultimately as it transitions here in North America to <unk>.
LTE or five G as a complementary technology.
To mission critical land mobile radio I think the the awards that Winkler went through on State awards and upgrades.
Particularly in state and local.
Reinforce in reference the criticality need to have dimensions of land mobile radio.
As it relates to Airwave I think it's the same thing.
We believe we remain inactive discussions with the customer.
And we do have an expectation that that airwave contract will get another extension.
But that timing will be dictated largely by the customer.
But again I think LMR LTE or if you want a substitute that and say LMR five G.
Co exist and quite frankly, we think the upgrade and faster speeds domestically and in the UK are good for command center good for our video security business.
And overall are a net positive.
Great. Thank you.
Thank you.
Our next question is from Adam Kendall.
Please go ahead.
Okay. Thanks, Good afternoon, Greg I, just wanted to start with a question on margins between the two segments. It's been a little tale of two cities.
And products and ESI, that's been the drag on overall performance, but probably the biggest opportunity moving forward. So hopefully you can maybe just walk through some of the moving parts to get this segment back to the kind of 22% to 23% operating margin range from years past as revenue key to get back above 5 billion or the things you can do from an opex standpoint and.
Just the timing to that.
Adam So kind of taking let's take a look at Opex overall, all for the full year will remove about 250 million.
Of Opex out of this business this year year over year, if you net debt to include acquisitions.
It's a net 170 million dollar.
Reduction so I think the team has moved quickly and did a good job on expense structure, both structural and variable.
To adapt to the Covid environment, we got hit with a couple of quarters ago. So think of Opex. This year all in year over year being down net 170.
Approximately 100 of that returns next year.
In the form of incentive compensation.
Operating margins for the two segments.
We still expect software and services to be consistent with what we told you last time with operating margins for the full year 2020 of being about 34%.
Obviously, the product segment declines this year, given the topline volume decline.
I expect the operating margins, obviously to improve with volume and even though $100 million of Opex returns next year. That's as we sit here today will always look to see if we can refine or further improve that cost structure, but that's kind of a composite view.
Okay, and maybe just as a follow up I would imagine from a topline standpoint, one of the good drivers in that segment is gonna be that your business. If you could just maybe just update us on where that business today in the four Q. So that we can kind of think about the opportunity moving forward into 2021 is it potentially rebounds.
Yeah, I think that PCR has been incrementally it clearly was and.
An extreme low point.
In queue too, it's performed a little bit better in Q3.
And we expect it to improve a little bit better.
That's informed into our overall queue for guidance PCR as you know has been hit with.
Primarily the critical industries that getting slammed by Covid, the most hospitality entertainment.
Transportation oil and gas.
And quite frankly, I think that.
We expect PCR to return to some form of growth.
In 2021, and that's in part what informs our expectations for the product segment.
To return to growth as well.
It also might be worth, noting that even in this environment North America, which represents our largest theater and is sold primarily through channels. The channel inventory in North America is down so that's a good that's another good indicator.
Terms of potential foundation for us to continue to print improvement as time goes on.
And maybe one other thing Greg just historically was we look at PCR new product introduction, even in challenging times, good point equates to growth and we do have some product refresh on the slate for 2021 as well.
Got it thanks recognize Jack.
Our next question is from 10 long of Barclays. Please go ahead.
Thank you.
I could hear Greg maybe first let's talk a little bit high level about kind of the the state of your customers state.
State and local budgeting, given given the macro and stimulus and anything of note. There are any changes and then secondly, if you could talk a little bit on the on the video side, you mentioned that I'm getting good traction with with the government to.
Maybe just give us a little bit more color there how.
Much video is ramping there and are you seeing kind of any level of cross selling across that that video business. Thank you.
Sure thing just to take them in reverse order.
On video specifically, let's start out with body worn video we have the strongest quarter. We've we've had.
Really good demand for a lot of the obvious demand driver reasons, you would suspect.
But I think malloy and John <unk> and the team are doing a good job with.
The acquisition, we made there in the form of Watchguard quite frankly also another.
Impetus behind the body warm video growth as international performance.
Which came through an acquisition as a part of what started called Edith six so I liked our performance there.
And also I liked the increased demand.
We also did have strong growth in fixed video to government.
Solid double digit growth.
I think a reflection of we've said the sales cycle is always longer and state and local and said.
But very good performance on fixed video into the government by the way Pillco being a benefit to that as well given the fact that that acquisition came with a lot of contractual government clearances that allowed us to move right in to.
To further fed government purchases.
That were beneficial in terms of state and local customers Jack mentioned, it I think that our customers have found a good way to engage during these challenging times many of them do meet.
In person, we also meet digitally or virtually and remember the state and local budgets have been largely set so that's a good thing that moves as well into next year. We've also been the beneficiaries of cares Act money.
From the Feds.
And I think that has had a favorable impact as well.
So I don't know Jack if you want to add anything on the state and local budgets. We on that no I think it's just prioritization prioritization prioritization.
As you've heard me mentioned before we're not in the business have a nice to have we are in the business of the need to have in terms of emergency response, so really.
We continue to see our customers drive projects through.
The other thing is I think that sometimes losses, there's just a multitude of different funding sources, Greg talked about <unk>.
<unk>, but there's also things like special purpose local option taxes, which are still getting past.
And so we remain highly engaged with our customers wishy great demand across the portfolio in government and as we know with what's happened in the World right now security means a great deal to cities to states and I think to our federal government. So more to follow but we're encouraged what we've seen.
Okay. Thank you very much.
Thanks to them.
Our next question.
Silverstein of Calvin and company. Please go ahead.
Right right.
Somebody mentioned that your your businesses Fuji Parker sent recurring what does recurring revenue overall company.
No I think malloy reference was that the majority of our European revenue is recurring largely because of the airwave contract. If you call no no. That's all right Paul but if you look at overall software and services, which we view as largely a proxy for recurring.
This year in full year of 2020.
Software and services will be.
Higher than 35%.
For this year, which we view as a as a favorable byproduct of the year I guess so that's good.
Mmm Mmm follow up on the government to some video looking you know we can help them next year.
Any any <unk> excuse me to provide us ballpark in terms of how.
No you just sort of swelling.
Though.
Help me do my business do next year.
Big we'll do this as well.
Well.
So just to kind of if you take all the video assets.
That we have fixed.
Body worn in car license plate recognition.
Domestically and internationally.
[noise] business all in for assets hardware software.
Is likely to be about 940 million.
Paul for this year, you've heard us talk about growing at three X the market that.
That three X the market is around the fixed video and access control piece.
Which we still believe we can achieve if you take the size of the video market all in.
Worldwide, and we always zero China out.
Given their indigenous competitors. This is about an 18 17 18 billion dollar business addressable market, it's actually the largest addressable market we have.
So I think there's room to run here.
With the assets, we've accumulated along with the analytics.
That our team is developing an intelligent edge devices as well.
Greg Greg I appreciate that I was actually focus on the government.
Market that you entered back about a year ago.
I think hey, Paul So I think we had mentioned.
Probably maybe three calls ago, probably nine months ago. The question was asked Hey, how big is your government video business and and really we said approximately $200 million at the time and that's an aggregation of two things. It's the mobile video market. It's come through visa Visa Watch guard acquisition as well as Greg had mentioned the <unk>.
Also came as acquisition the.
The remnants of it or fix video security sales into into all governments and I would tell you.
Both of those businesses are growing strong double digits right now both fixed video into government. We talked about the success. We had in Q3, both in the Feds and state local but also we highlighted some of the success. We've had in body more in terms of unit and dollar bookings substantially up in the strong double digits there. So.
Hopefully that helps.
I appreciate that thank you. Thank you Paul.
Our next question.
Come from five.
M. K M. Please go ahead.
Thanks for taking my question, Greg I want to ask you a big picture question in in light of the view that most of your government customers are very slow to move and they tend to be not covid by like usually enterprises are driven by profits and maximizing profit.
Government customers tend to be more floor or you know anything any kind of an inflection point in your government customers decision, making when it comes to whether it's.
911 Command Center solutions on video for Ya.
On a new trend and that's going to accelerate going forward.
I would say this I mean.
The command Center software next.
Next Gen 911, as a new opportunity for us and that's obviously a favorable trend. The other thing I would say in terms of decision cycles is command center software historically has had some of the oldest.
Legacy technology.
And workflow processes literally over several years 10, 15 years, plus so I actually think that the inflection point is.
Covid induced in part.
That's accelerating decisions to the cloud traditionally state and local customers would prefer control and they would confer they'd prefer on Prem I actually think that.
This pandemic has been a positive accelerant.
To decision, making around command center software.
Particularly around cloud I think this sweet that Kelly and Andrew's team is built also can be an accelerant to decision, making because instead of trying to decide a forklift process in an all or nothing.
You can get an anchor tenant module in place and then upgrade those modules for additional components along the sweet on land mobile radio.
Where.
We literally have tens of thousands of different contracts that are at different lengths and these systems are a different ages. The pandemic in the civil unrest has been an accelerant to some older systems here in North America that needed to be upgraded to digital and with state of the yard encryption.
To protect the communities in the local law enforcement better I think is malloy and his team have built new devices.
<unk> next in Tetra. The MTX 600, that's just announced those to represent events and opportunities for our customers to make decisions to refresh as well.
You hit it really well I think the other thing that we have a compelling ecosystem for our customers. That's an overused term, but I say that under the lens of Greg nail that devices that work with command centre. How do you extract how do you disseminate information in a mobile environment. Those are the expectations that we've seen frankly for a number of years in the enterprise space and government is Serge.
Catching up to that and I think those will be accelerants moving forward for us in public safety.
Thanks, you you've touched upon and follow up piece I wanted to ask which is.
As your government customers migrate command and control infrastructure too next and digital platforms.
That creating E.
Opportunity new applications mission critical pushed to talk.
Features on the radio then.
Okay. How are you beginning to see that and can you quantify that opportunity.
This is Kelly I would say, it's not that it's offering up those type of opportunities on the mission critical pushed to talk but it offers up the opportunity to enrich the whole workflow with multimedia and at the edge officers today carry a mobile device with them. They can receive now from the command centre video images and data.
That they couldn't received before but the radio was part of the workflow was instrumental in regards to that uniqueness of its communications at a provides so it's not so much about mission critical push to talk as much as it's about enriching the entire command center workflow with all the information that we're very used to dealing with today on our day to day lives, it's now enabling that across that <unk>.
<unk> critical operational workflows. So they can manage that information from 911 call intake to record in case management at the end.
If I can rephrase my question, which was a bit more simpler I wasn't.
Particularly horning in on mission critical pushed to talk of what I was trying to get it is are you beginning to see eaten fresh of your devices business as a result of the.
And the new command and control software that you are now selling.
We are so we announced last last October the apex next device.
We've built.
Already built north of $100 million in terms of final opportunities for that we're very encouraged remember we introduced devices at the top and so as we get through 2021 will start to.
Broaden the reach of those devices, we see great demand for those devices, because it's not only purpose built 25 communication, which is truly the bedrock of how cities and states and public safety communicate but to bring in LTE capabilities for backup pushed to talk for ability to do on the fly programming and those kind of things it brings.
The number of those different things so excited about that Greg talked about just this week, we announced a a collaborative device for the tetra market in Europe in.
And essentially we've already been we're booked out for the year. This year. So we are really encouraged about that as well. So we see a need for devices that can do more for our customers as I said earlier in terms of aggregating disseminating really intelligence within their ecosystem.
I appreciate it. Thank you. Thank you.
Once again, if you do have a question press Star then one on your touch 10 fan at this time. Our next question is from <unk> City. Please go ahead.
Hi, This is Josh Keogh on for Jim's who've. Thanks for taking our questions can you provide any more color on the headwinds you're facing in the public safety LMR business and when you expect to be through them and is it largely due to COVID-19 or is there more to it. Thank you.
I think.
Headwinds, we talked about when Covid hit us back in March where.
PCR.
And the industries that were affected by it.
And public safety LMR kind of quote unquote being pushed to the right the pushed to the right largely around sales engagement and deployments I don't think that's changed at all.
Still the primary reason for the push to the right. Although I will tell you it performed at public safety LMR performed.
Better than our expectations.
In Q3, and we expect it to improve again.
In queue for which informs our guide.
And I think public safety LMR Npr's I referenced earlier, I think we'll both improve which will primarily drive.
Hi, we expect the product segment.
To return to growth.
Next year. There is a lot is still budget sources that malloy referenced we've been the beneficiaries of the cares act as well.
But that's what I would say yeah. The only thing I'd I'd just piggyback on a greggs comments are the one issue that we've been challenge with is actually physical deployment of systems in the Middle East and Africa and in Latin America. So we're completely impaired to go do anything and that's really elongated our ability to recognize revenues in those theaters.
Okay and as a follow up as you're looking at 2021, how are you thinking about prioritizing M&A versus share repurchases. Thank you.
I think that.
R Capital allocation framework is 50, 30, 20, 50% of the cash flow being available for either acquisitions or share repurchase it's a fungible amount depending upon the opportunities that are in front of us.
30% is dividend and 20% is capex. So that framework loosely is that it's not meant to be a prescription, but it's a framework.
We were active in buying back shares at these levels as you've seen in Q3.
We think these are attractive levels to buy the stock.
In Q3.
And we will evaluate opportunities as they come.
We've done tuck in acquisitions on the video side on the software side.
Think that.
In regards to acquisitions next year it will be in part.
A reflection of what opportunities come our way.
But that's that's the thinking around the deployment of capital at this point.
Thank you thanks, Josh.
This concludes our question and answer session.
I will now turn the floor back to Mister Tinyurl Com, Vice President I've Investor Relations for any additional are closing remarks.
No additional comments, thanks for joining us today.
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