Q4 2020 Motorola Solutions Inc Earnings Call

Good afternoon, and thank you for holding welcome to the Motorola solutions fourth quarter 2020 earnings Conference call today's call is being recorded.

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I would now like to introduce Mr. Tim Yocum, Vice President of Investor Relations. Mr. Yocum, you may begin your conference.

Good afternoon, welcome to our 2024th quarter earnings call with me today are Greg Brown, Chairman and CEO, Jason Winkler Executive Vice President and CFO, Jack Molloy Executive Vice President of products and sales and Kelly Mark Executive Vice President of software and services, Greg and Jason will review our results along with commentary.

And Jack and Kelly will join for Q&A.

We've posted an earnings presentation of the news release that Motorola solutions Dotcom Slash Investor. These materials include GAAP to non-GAAP reconciliations for your reference during the call we reference non-GAAP financial results, including those in our outlook unless otherwise noted.

The number of forward looking statements will be made during the presentation and during the Q&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 information about factors that could cause such differences can be found in today's earnings news release.

And the comments made during this conference call in the risk factors section of our 2019 annual report on form 10-K, and in our other reports and filings with the SEC, we do not undertake any duty to update any forward looking statements and with that I'll turn it over to Greg.

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 results.

As well as our outlook.

First I'm very pleased with our performance during the quarter.

We achieved revenue and earnings per share above our guidance had our largest quarter ever for.

LMR orders in North America, and we ended the year with record backlog of $11 4 billion.

175 million versus last year and up.

$750 million sequentially.

Additionally, we generated $703 million of operating cash flow during the quarter and $1 6 billion for the full year.

Second our software and services segment had another strong quarter as demand for our LMR services video Security and command Center software continues to drive growth for the full year of the segment grew 9% expanded operating margins by 200 of 90 basis points and a cow.

<unk> for 37% of total revenues and 52% of total operating earnings for the entire company. Additionally, the recurring nature of the segment and record ending backlog provides us with good visibility going forward and we expect another year of strong growth in this segment in 2021.

Finally, we saw a number of events during the year they continue to reinforce the importance of having.

Secure reliable mission critical communications for first responders, whether it was the hurricanes in the southeast fires in California, or more recently the explosion of Nashville.

Lemarr networks continued to provide private secure voice communication to the men and women on the front lines when other networks were down.

And while we continue to invest in broadband solutions, the augment LMR with valuable data and location capabilities The road.

<unk> see.

Resiliency reliability, then MMR provides during the most critical moment continues to be foundational and of must have.

Our customer and so I'll now turn the call back over to Jason take through your results and outlook before returning for some final thoughts.

Thank you Greg our Q4 results included revenue of $2 3 billion down, 4%, including 60 million from acquisitions of 19 million from favorable currency rates.

GAAP operating earnings of $555 million and operating margins of $24 four per cent compared to $24 eight per cent in the year ago quarter.

Non-GAAP operating earnings of $667 million down $40 million or 6% of non-GAAP operating margins of 29 three.

3% down from 29, 7% due to lower sales in the products and the Si segment, partially offset by higher sales and improved operating leverage in software and services.

GAAP earnings per share of $2 37, compared to $1 39 in the year ago quarter. The increase was primarily due to a noncash charge of $1 53.

Booked in Q4 of 2019 related to the actions taken debt to Derisk our pension.

Non-GAAP EPS of $2.86 versus $2.94 last year down primarily due to lower sales and products and outside partially offset by higher sales and improved operating leverage in software and services.

Opex in Q4 was 492 million down 31 million versus last year, primarily due to lower discretionary spend lower incentives and then partially offset by costs related to acquisitions.

The Q4 effective tax rate was 21 per cent compared to 22 per cent and the prior year.

Moving to the full year 'twenty 'twenty, our revenue was $7 4 billion down 6% primarily related to lower sales of public safety Elmar and PCR products, partially offset by growth in LMR services growth in video security and growth in command Center software revenue.

From acquisitions was $203 million and currency headwinds were $12 million.

GAAP operating earnings were $1 4 billion or $18 seven per cent of sales versus 20 per cent and the year prior.

The decrease was primarily driven by lower sales in products in that site, partially offset by higher sales and improved operating leverage and software and services.

Non-GAAP operating earnings were $1 8 billion.

$140 million and.

And non-GAAP operating margins were $24 eight per cent of sales a decrease of only 20 bips. Despite the sales decline in products in that side driven by the actions, we implemented around costs lower incentives and growth in software and services.

GAAP earnings per share was $5 45, compared to $4 of 95 cents in the prior year, which included.

The previously mentioned noncash charge for pension.

Non-GAAP EPS was $7 69 down 3% from $7.96 in 2019 on lower sales and operating earnings partially offset by a lower effective tax rate and a lower diluted share count in 2024.

For the full year Opex was $1 8 billion down $162 million from last year, primarily driven by lower incentives lower discretionary spend and offset by $75 million from acquisitions.

And the effective tax rate for 2021 20 per cent compared to $22 four per cent in the prior year on higher Iron D tax credits and higher tax benefits from share based compensation recognized in the current year.

Turning to cash flow Q4, operating cash flow was $703 million compared with 795 million in the prior year and free cash flow of $637 million compared with $736 million in the prior year.

For the full year operating cash flow was $1 6 billion compared to $1 8 billion in the prior year and free cash flow was $1 4 billion versus $1 6 billion in the prior year.

The decrease in cash flow was driven by lower sales and higher cash taxes in the current year, partially offset by improvements in working capital.

Capital allocation in 2020 for US included 612 million of share repurchases at an average price of 155, and 93 cents per share $436 million in cash dividends and 287 million per acquisitions. Additionally, during the year, we refinanced outside of outstanding debt.

Maturities with the new 900 million 10 year debt issuance at a rate of 2.3 per cent and raised our dividend of 11%.

Moving to our segment results Q.

Q4 products and system integration sales were $1 5 billion down 10%, primarily due to lower sales of public safety LMR and lower sales of public of pre.

First of all in commercial radio partially offset by growth in video security.

Revenue from acquisitions in the quarter was 44 million.

Operating earnings were 408 million of 27 per cent of sales down from 28, 9% in the prior year on lower sales.

Some notable Q4 wins and achievements in this segment include.

$122 million P 25 order for Nassau County, New York of $61 million P 25, order, where state of New Jersey.

The $50 million of P 25 orders from several large North America utilities customers.

The $26 million P 25 order for Morris County, New Jersey.

And the $20 million Tetra order in the U K.

Additionally, we had another quarter of double digit growth in fixed video sales into our government customers.

For the full year revenue in the segment was $4 6 billion down 13% from the prior year driven by lower sales of public safety on the Martin piece yard, partially offset by growth in video security.

Revenue from acquisitions was $119 million of.

Operating earnings were 880 million or <unk> 19 per cent of sales down from 22% in the prior year on lower sales, partially offset by lower operating expenses.

Moving next to our software and services segment Q4 revenue was $763 million up 8% from last year driven by growth in the LMR services growth in video security and growth in command Center software.

Revenue from acquisitions in the quarter was $16 million.

Operating earnings were $259 million or 33, nine percentage of sales up 220 basis points from last year, driven by higher sales and improved operating leverage.

Some notable Q4 wins in this segment include a $100 million P. 25 managed services contract with the state of Tasmania, Australia.

The $79 million Tetra managed services contract extension in Europe.

$30 million of P 25, multiyear service contract with the Minnesota D O T a.

The $29 million P 25, multiyear service contract with the Austin, Texas.

And finally of $11 million Award for our command Center software contract in New Jersey.

Excuse me in Norway.

For the full year revenue was $2 8 billion up 9% on growth in LMR services growth.

Growth in video security and growth in command Center software revenue from acquisitions was 84 million of.

Operating earnings in 2020 were 955 million or $34 three per cent of sales up 290 basis points versus the prior year, driven by higher sales and improved operating leverage.

Looking next at our regional results North America, Q4 revenue was $1 6 billion down 4% on declines in public safety LMR and P. C arm, partially offset by growth in LMR services video Security and command Center software.

For the full year of North America revenue was $5 2 billion down 5% with declines in public safety all the modern PCR, partially offset by growth in LMR services video Security and command Center software.

International Q4 revenue was $725 million down 6% due to declines in public safety of Martin PCR, partially offset by growth in video serve video security and LMR services.

Revenues declined in Latin America, and Asia Pac, while EMEA was up 2%.

And for the full year International revenue was $2 4 billion down 8% on declines in public safety LMR and PCR, partially offset by growth in video Security Command Center software and LMR services revenue declined for the year in Latin America, and Asia Pac, while EMEA was flat year over year.

Sure.

Moving to backlog.

Our ending backlog was a record 11 4 billion up $175 million compared to last year sequentially.

Sequentially backlog was up $753 million driven by record LMR orders in North America during the fourth quarter.

Software and services backlog was up 213 million compared to last year, driven by multiyear agreements in North America, partially offset by revenue recognition for airwave sequentially.

Sequentially backlog was up $518 million with growth in both regions.

Products in the S. I backlog was down 38 million compared to last year driven by delays in sales engagements during the year related to COVID-19.

Sequentially backlog was up 236 million of products now side driven by record LMR orders in North America during the fourth quarter.

Turning next to our outlook, we expect Q1 sales to be up between five and a half of 6% with non-GAAP earnings per share of between $1 58, and $1 64.

This assumes FX at current spot rates of share count of approximately 174 million shares and an effective tax rate of approximately 19%.

And for the full year, we expect sales to be up between seven to five 8% with mid single digit growth in products and Si and low double digit growth in software and services.

And we expect full year non-GAAP EPS between the $8 50, and $8 62 per share.

This assumes FX at current spot rates and the share count of 170, approximately 174 million shares.

And in the effective tax rate of 22.5% to 23%.

We expect full year operating cash flow of approximately $1 8 billion, which includes an unfavorable year over year impact of approximately $125 million related to higher cash taxes.

And we expect full year opex to be approximately $1 9 billion, which includes the year over year increase of $75 million related to higher incentives as we plan for growth and 60 million related to acquisitions closed in 2020 offset by further cost reductions.

Finally, I'd like to highlight that we are updating our reporting to incorporate and enhance disclosure around our three major technologies across both segments. As a result in our forthcoming 10-K, you'll see net sales in our two segments reported in the following three technologies LMR mission critical communications.

Video security and analytics and command Center software, we have provided a supplemental slide in the back of our earnings presentation, representing this view for the previous three years and then the ongoing basis, we will incorporate this into our quarterly reporting.

I would now like to turn the call back over to Greg.

Thanks, Jason and I thought I would end with a few thoughts on the business.

The first I want to take a minute to talk about the substantial progress we're making in video security.

Three years ago, we began our investment in video security with our acquisition of the vigilant.

Since that time, we've added acquisitions that leverage our scale across our portfolio of AI powered analytics NDA, a compliant manufacturing and go to market coverage. As a result, we expect to generate over $1 billion of annual revenue this year across our portfolio of video security technologies. This.

Includes our fixed end to end video security and access control solutions embedded with advanced analytics and mobile video, which includes purpose built body worn and in car video solutions that are integrated with backend evidence management software.

Additionally, this quarter, we began shipping cameras from our new global N V. A compliant video manufacturing facility in Richardson, Texas.

In fixed video, we launched a vigil on cloud services last year to connect customers to cloud based analytics system management and continuous updates as customers embrace analytics, the convert video into data and the <unk>.

Scalability of the cloud to run their operations, we expect this to be of growth driver for the <unk>.

Business and.

And in mobile video of this quarter, we'll begin deploying customers on command Central evidence, which is our next generation digital evidence management platform and a fully integrated component of our Premier one cloud suite that includes CAD mobile and record solutions available on the secure Azure government cloud.

Currently we have thousands of customers using either our digital evidence management system or command Center software and we believe the intersection of our installed base in mobile video in the command center positions us well for continued growth.

Second the investments, we're making to integrate video security Command Center software and LMR continue.

This past summer, we launched safety re imagined focusing the integration of our products into one unified ecosystem, helping our customers be more efficient and proactive in their security and safety operations.

We're redefining the ease with which our AI enabled solutions adapt to the needs of our customers by removing system silos, simplifying management and automating workflows for the effective detection analysis communication and response to incidents Maj.

Imagine a scenario where an unusual activity is detected by our vigil on camera all security guards with Motorola radios in the vicinity are notified in the case is automatically and seamlessly opened in the incident management system simultaneously live video streams from the relevant cameras.

<unk> automatically pumped into the of vigilant.

Control Center, and an operator is able to verify the presence of the suspicion suspicious package by leveraging our appearance search feature.

This intuitive easily customizable interaction between technologies is enabled by our new cloud based.

This workflow automation software orchestrate.

Which we launched just this past week.

Finally, as we close out literally a year like no other I want to take a moment to reflect on.

Everything we accomplished as a company.

When COVID-19 hit we move swiftly and with focus to make a number of the immediate decisions, including implementing a work from home policy to ensure the safety of our employees.

And reducing operating expenses quickly, culminating in a $162 million opex reduction year over year inclusive of acquisitions.

And yet we remain focused on executing in a challenging environment with software and services growing every quarter and products in assai improving in the second half as we expected.

We also continue to deploy capital and invest for the future.

We launched several new products accelerated product migrations of the cloud across our three technologies acquired five companies refinanced approximately $900 million of debt at very attractive low rates.

Purchased $612 million of shares as well.

And Additionally, with Gino's retirement, we elevated adjacent Winkler to the CFO position, a strong example of our readiness and succession planning.

I'm really proud of the way our team performed during an unprecedented year.

All the we've accomplished and the improvement in our sales engagements demonstrate the enduring strength and durability of bulk are.

Our business.

And our people.

Ending the year with a record backlog position is a testament to those efforts and that momentum helps position us well for a year of strong growth.

Revenue earnings and cash flow growth I'll now turn the call back over to Tim.

Thanks, 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 our callers on the line how to ask the question.

Thank you of course now open for questions. At this time, if you have a question or comment. Please press Star then one of your question. So if at any point of your question is answered you may remove yourself from the queue by pressing star then to redo.

We do ask that while you pose your question. Please pickup your handset to provide optimal sound quality.

Yeah.

And our first question will come from Tim long with Barclays. Please go ahead.

Thank you to two if I could first maybe Greg could you just give us an update obviously, we're in a weird time with Covid and whatnot, but kind of what's your what you're hearing from customers in the public safety side on the budgeting and overall health of of the customer base and.

If there's any impact that you would see one way of the other if there was of some some federal stimulus for state and local and then the second one maybe for you or Jack on the video side could you just talk about of two of the areas. One is on the government side of government. It sounds like it's going well how much.

You know how much more.

Room is there for growth as you further penetrate there and then secondly, what does it take to do a better job on the body Cam side is and how do you see that as an opportunity.

Thanks, Tim so kind of overall contextually.

I feel pretty good about the demand signals, we see overall at this point for 2021 now.

Now obviously, we're we're still in a pandemic.

We're matching supply and demand given some of the supply constraints that were occurring currently going through.

So that's in our guidance is informed by those components and we think our full year as a prudent prudent view, given where we are but I think that.

I'm really pleased with Q4 in particular, a record quarter in North America, a record quarter specifically are.

With the LMR in North America.

And finishing the the year with the with record backlog are all positive trends environmentally you know we transitioned from one administration to another.

I think that what we do.

The rises to the top of the food chain, despite Republican or Democratic presidential administrations.

I think our federal business and Jack could talk about it in 2020 was solid overall was down slightly but it was also coming off.

Two back to back record years, but I think the the binding the administration.

<unk> has opportunities for us I think it's more likely than not that we'll see stimulus, but we'll see.

And I think that the there's also an opportunity perhaps in the new administration.

For some byproduct of bipartisan support for potentially.

An infrastructure, Bill, which I think foundational Lee would serve us well.

Terms of state local and the video so Tim just to kind of decompose. Your two questions number one in terms of our fixed a video of government sales were really pleased with the progress if you remember.

When we acquired of visual on it was essentially a nascent business.

And a very strong growth in fact, the fixed video growth in 2020 was.

The north of 45%. So we like that that feels good. We also acquired telco and I think it's important to point out the telco gave us the federal government contractual mechanisms with which to sell upon and we we are you know enjoy debt those contracts in 2020. So we feel good about that but more importantly, where we're going moving forward in 'twenty and 'twenty one.

With respect of mobile video.

Actually we had a we had a very strong year. If you look at the second half of the year of both Q3 and Q4 orders for body Cams were up for us over 60% in both respective quarters fundamentally what we're hearing from our customer base as customers want an alternative I think with our market reach our go to market coverage our channels I think.

We've got a reach to start to get into suburban rural municipalities as well, which is where we're going to start seeing the next level of decisions. The other piece of it that we haven't talked much about which we acquired a company called eat of six two are vigilant acquisition, we had two international wins of over $1 million last year and again, we think we're well set for the international market.

The last thing and I think that really ties it all together and Greg hit on it in the script is the kitchen.

We're we're obviously launching of new digital evidence management platform. This year with the command Central evidence, we've got a differentiator in that we are body worn and how mobile video flows ties into our full workflow with CAD Mobile records.

And our obviously the digital evidence management, so we think.

We're excited we think of well poised for the body worn space as well.

Okay. Thank you guys.

Thanks, Tim.

And the next question will come from Adam Tindle with Raymond James. Please go ahead.

Okay. Thanks, Good afternoon, Greg I just wanted to start on the last call you called a 'twenty 'twenty one of growth year for both segments I know you didn't.

Specifically guide, but you know there's some perception that you were comfortable with street estimates.

You have strong backlog I think currency moved your direction, but now today guiding below Street estimates.

So is this just the case, where we were off in terms of the street or is there anything that gives you maybe a little bit more conservative.

Part of it is now versus 90 days ago.

So I as I mentioned 90 days ago, I did expect us to forecast growth in 2021.

And that's what we're doing I do feel Adam are pretty good about the growth.

The overall, but also by segment and our and the respective technologies in the in the theaters.

I think that will grow our products.

In mid single digit will we expect to grow software and services and low double digit.

The backlog position as you referenced.

Serves us well I think.

The fact, the matter is we're still early.

Early days in February and still in the middle of the pandemic things are incrementally getting better and we're still operating.

At this point, Adam with some supply constraints.

And limitations now the demand signals are stronger.

Then the current supply constraints that we have so that's also informing our guidance and we think given the overall environment is probably a prudent thing to do at this point in time, we'll see how the rest of the year plays out.

Okay. That's that's helpful and just as a follow up I wanted to maybe paint a narrative and how have you respond to it.

Right now it seems like the body worn camera market is becoming increasingly important to the customer base I'm wondering how this impacts the share of wallet opportunity within the customer base for follow on products because the investor concern is that you're known for LMR leadership, not necessarily known for body worn camera leadership.

And as this becomes more important perhaps is the better opportunity for your competitor to up sell their software suite. So I think you kind of understand the the narrative there just be curious your comments on that and how you would potentially debunk that.

No I mean, I look I think the body worn video area is a great opportunity I think historically its been served by one provider.

Now, there's a more compelling viable choice.

As an alternative and Motorola solutions, So I think Jack referenced the strong order activity that he saw in Q3 and Q4 I think that serves US well. We also think the integration of body worn video and evidence management into the command center, given our incumbency and strong position.

Across the different modules that broadened the whole suite and command center software is of I liked debt position.

And you know look I also think we can grow internationally with body worn camera and at the end of the day.

The body worn video addressable market, we think is about $500 million all in with body worn camera and evidence management I think we have a great opportunity to take share and be a competitive compelling number too but.

But I also like the fixed video and access control addressable market being a multiple of that without China. We think it's about $15 billion. So theres a lot of room to run across the technologies inclusive of body worn.

But I think historically that market has been served by one provider and the only thing the only other thing I'd add on that Greg. We don't think it's one of the other as we said before they're all need to have technologies do you need body cams for accountability of yes, without a doubt and we've seen our growth over 60% of both Corp. Both Q3 and Q4, but if you look at our.

From an LMR perspective, it was big deals like Nassau in New Jersey.

Quite frankly Q4 from of grassroots perspective, which we track was our strongest Q4 and five years and so we think we think there are certainly opportunities on both ends of the spectrum and we think wallets won't be constrained Wallace will open up for more technology.

Yeah very helpful. Thank you both.

Thank you Adam.

And the next question is from George Notter with Jefferies. Please go ahead.

Hi, guys. Thanks, very much I guess I was curious about some of the comments on record backlog was there anything unusual about the order book This quarter was there an airwave contract extension for example.

Anything of sizable in terms of the order book.

Hi, George Thanks for the question so.

We saw strong orders across the board in North America, we highlighted as being a record we talked about some rather large orders Nassau County, some utilities summing the 50 million, but as Jack just mentioned, our grass roots, which is small or deals transactional type deals were also up significantly so across the board type of.

Deal activity in North America complemented also by international with.

The renewal of the managed services, Inc, and a new contract award for the state of Tasmania in Australia, So I'd say across the board in both theaters of strong orders performance.

Got it Okay. That's great and then just as a follow up and you guys seem to be talking a lot more about LMR services and I know managed services in general has been a push for the company, but just based on your commentary. It seems like there is a positive inflection there or is that is that the right perception to have and you know can you talk more about what's intuitively driving the thanks a lot.

Hey, George It's Kelly.

On the services, we've been pleased with the performance of services in particular, you know it demonstrates the resiliency of the recurring revenue business that we built in software and services in particular as we look at 2020 and going into 2021, North America services has been growing so as international we.

Spanning our service offering we are now pushing a bit more into cyber security as well, which is of very very attractive area that continues to be of focus amongst municipalities, but I think that the services business. So we look at it continues to operate at a steady pace as Jason just highlighted we had a number of good orders managed service.

Internationally, the either extended existing network networks that we had or also added on new ones like the Tasmania, a transaction that we just discussed so of the services business continues to be something that demonstrates also of the resiliency of LMR and the demand for that because we see our customers continue to renew the contracts that they have.

At increased rates and on time, which is a very positive indicator of both the compelling nature of our services, but also the importance of LMR.

So the investments, we're making on the product side of LMR to advance the networks continue to get more complex and connecting to the cloud with Cirrus will continue to provide opportunities opportunities to grow our managed services offer in and around those new products.

Thank you.

The next question comes from Keith household with Northcoast Research. Please go ahead.

Thanks, guys.

Starting first in the larger or is that came out of the fourth quarter again.

Perhaps could drive of the more card you can in terms of what's the primary driver of that you're seeing from your customers or is it really of the large guys versus small guys as the new offerings are allowing the.

Of the contracts at a higher price I guess is there a two or three things are primary drivers of those large orders now.

So of so a few things.

As you can imagine.

Part of this was we had I would say our engagement with customers, particularly in Q2 was slightly impaired. So we saw obviously the velocity of those engagements improve in the second half, but the other thing that I think we're going to start to see particularly as it relates the Nassau County, which was one of the big deals that we cited in our script was a mixed of the apex index, which we are.

In October of 2019.

Will that be in a well that will that is that obviously come out of ASP appreciation for us It does but I think more importantly, as you look throughout the portfolio you look at what Kelly's brought to market in command Center software you look at what we're doing from a PCR perspective, just this week, we announced the category changer in the eye on device, which was combines of legacy P. C. R.

Of device, but also does private LTE and C. B R. S. In one device and so we think some of the investments we've made from an R&D perspective on device refresh on converging devices in those experiences will continue to to provide you know kind of an upgrade upsell opportunity for our customers and we think more to follow into 'twenty 'twenty, one, yes, I mean I agree.

At the end of the day.

We said things would improve sequentially.

In the back half of 2020 as sales engagement improved I think that was the driver.

There has been pent up demand and exactly what Jeff just said.

Even during the Covid year.

I can't remember this number of new products that we invested in in 'twenty 'twenty, Yes, we manage discretionary expenses down yes, we didn't have travel.

Incentives, we had a benefit on expenses, but at the same time, whether it was apex next a new tetra device.

On for PCR cloud enabled modules in command center of refreshing the video security suite, we made a conscious effort to.

To invest organically in product development and I think that that's strong for Q4 in part is because of some of those new products. Our whole intent was not only to come out.

Of Covid, but come out stronger than we went in.

And I think Kelly and Jack particularly of done a great job on prioritizing new products and investments and the thing we failed to mention just internationally as we start to see our momentum grow there as of yet.

<unk> 600, which was really the first major tetra device announcements and quite frankly, we were oversubscribed for that in Q4, we took as many orders we could ship. So we're happy with that too.

Great. Thanks, and then just.

Just following up from earlier here the cyber security I know you guys have made some several small acquisitions in that space can you provide a little bit more color about what the plan is for cyber security cyber security related to the networks or is it beyond that for public safety agencies I guess, what's your goal.

Hey, Keith it's Kelly so sure so the cyber security services that we offer right now and the ones that we also expanded last year with a couple of acquisitions will focus around monitoring and the incident resolution and helping our customers understand the risk profile of what they have installed both in the command center and of our LMR networks. So our initial focus.

This is on those core areas that we provide we provide our products around specifically the LMR networks as I said in the command center.

We look to expand to their critical networks that they may need to manage their operations.

So it's pretty focused right now, but something that our customers are very interested in because those are obviously, the most critical assets that they need to protect and make sure they're always up and running.

Greg.

Great. Thank you.

Yeah.

And the next question will be from Louie Dipalma with William Blair. Please go ahead.

Greg, Jason and Kim and good afternoon.

Hi, Louie how are you hi.

Great.

You formally launched the command center in the cloud Premier one platform in October and I was wondering have adoption trends and performance lived up to your internal expectations and as a follow up to that is the pandemic stimulating the shift to your premise.

The one platform from your on premise customer base.

Hey, Louie, it's Kelly again on the on that question. The answer is yes, it's definitely stimulated the interest in the cloud I think everybody from consumers all the way the government have learned the importance of cloud and the ability to operate remotely we accelerated our efforts to drive more and more of our command center.

Of the cloud Youll continue to see us expand more to the cloud even this year. It is one of the faster growing areas in our portfolio, we're getting a lot of interest in regards to Congress.

Conversations with our customers as you know those those buying cycles are somewhat long so you'll hear more and more about that in the future I would highlight just you know as we talk about our command center growth our SaaS revenue growth as a component of our command center is growing at a multiple of our overall command center software growth. So that's the.

A good indication that we're seeing more and more customers show interest in transition towards that type of model.

Thanks and are related to what you just said I know you have CAD mobile and records on the Premier One platform and you also spoke about SaaS. You previously indicated that you plan to offer 911 call taking in the cloud in the first half of 2021 is that.

They are still on track.

That's correct and yes. It is that is it definitely the another component that's the final and the last component that we need to add to the cloud.

Perfect. Thanks.

Thanks Louie.

And the next question is from Paul Silverstein with Cowen. Please go ahead.

Thanks, guys I appreciate you taking the questions first of all of us at before US and of course, there's just sort of clarify Jason.

Say, the PCR with some of them were $63 million for the year.

PCR no I didn't I didn't know.

But PCR was down about 300 million.

Hum.

From last year that was the decline that we saw in 2020.

Alright.

I'll make that Mike first question. So I think I remember you of registering that you all were expecting about a $350 million given the 5% decline for the year. It sounds like it wasn't that much different but somewhat better my question. David My first question is.

Is that reflective of the stronger I assume it means you have a stronger Q4 than you were expecting and the real question is looking forward what is your expectations for the peers recovery given how hard.

<unk> 65 per cent of the revenue of PCR was hit.

Are you seeing that actually come back faster than you expected, what's your expectation for the year.

So Paul you're right Q4 was better than we anticipated.

In PCR so for the full year as Jason just mentioned it was down about 300 million, we had signaled that it could be about $350 million.

So a slight improvement we do think it will continue to improve in 2021 and in fact at this point overall I think our expectation is that it can grow now it will be incrementally as these a number of different key verticals like transportation airline hospitality oil and gas as they.

Prove.

But 2020 was pretty draconian I look at it as more or less of floor and our expectation is for PCR to return to growth in 2021, now having said that we still have to operate in.

And execute on that against the supply constraints and limitations.

That are in front of us, but as we've started out the year in 2021.

It's a good start.

Alright. My second question is would you have video in your command Center software and appreciate all of giving the breakout.

That's great.

Most of you as is.

Video if I look at the numbers correctly, you put up.

And almost all of them the COVID-19, another almost 30% growth in gallery 'twenty, obviously that was helped by the many acquisitions you've made.

And the expansion of software you have about 30 per cent of the room growth of COVID-19, albeit Washington parish of growth in calendar 'twenty of assume impacted by the Penguin and the.

Those two particular product mortgage the represent the glitter.

The growth opportunities for you or you see the step up in organic growth.

Looking beyond the pandemic in terms of the true, especially on the software side of the video.

But you're taking the two together or you see the step up in organic growth.

So within the technologies, you're referring to of the growth expectations for video security.

<unk> to be up high teens, this year and command Center software.

<unk> to 20% growth like the measures that would you mentioned on some of the look back into 2019 and 2018 as we get beyond the pandemic impact and that LMR would be up mid single digits of those are the expectations for 'twenty one.

From a technology standpoint.

Okay I appreciate the clarity.

Thank you Paul.

The next question is from how hard the job with MK and partners. Please go ahead.

Thank you for taking my question.

If you could help me understand in terms of I understand it's a difficult question to answer but can you give us sort of rough idea on the average life.

All of the devices in the field.

Greg do you have of new.

Product that you launched last year, you had before so maybe you can give us some indication as to whether you can expect to see some meaningful upside from a device of infection per.

Yeah, So hot Hi, it's Jack.

So we've seen historically of 567 years ago people would hold the device for 10 years. The the refresh cycle now looks more like six to seven years for of device.

And can you give us some indication as to where the average life of the.

The device is already in the field per day in and when and how the adoption of the new.

The effects in the next day license going in and it should we expect meaningful a refresh of an upgrade cycle, maybe the near term of the.

Within the next 12 months, so obviously there's a.

Within the U S and globally, there's so many municipalities law enforcement.

But the one thing that I would say is that we look we've looked over history of the <unk> family of the apex family. We typically get three to five years until the revenue becomes a very meaningful and so we're two and a half years and we feel like we've got a great amount of refresh cycle of both of the apex next and then internationally with their M X P 600 device.

And if you back out of that I'd add in our product cycles, we run concurrent devices both of the old and the new so that we continue to sell both its not you know of consumer like where you switch from one of the other so the customers expect of device to be available for some time and then of course of the new <unk> device is more as it becomes more feature rich.

Compelling leads to a transition point.

Thank you appreciate the answers.

Thanks, Paul.

The next question will be from Sami Badri with credit Suisse. Please go ahead.

Yeah.

Hi, Thank you for the question. So I kind of just wanted to cover something that I don't think of has been touched on on this conference call on the prepared remarks, it's referring to the high tier of litigation, we didn't get an update in January of 2021, I was hoping if we could just kind of go through the latest that you guys have heard from the ongoing litigation.

And whether or not the <unk>.

Actual 'twenty 'twenty one guidance include any contribution or award contribution from that litigation outcome.

Yeah, So Sami the guidance for full year 2021 does not contemplate.

Any award or anticipated the.

Monetary settlement, what I would say is.

Our engagement in pursuit legally of high terror.

Is unwavering and relentless the court recently kind of recalculated.

The compensatory and punitive judgment to a number thats I think its $544 million.

Is the Recalculated Federal Court award.

But it doesn't change the fact that hi, tera stole they stole trade secrets.

The infringed.

And they infringed on the copyright source code so that's unchanged.

And having said that we expect the current damages award again, I think it's $5 44, and we expect that to increase after of course applies of pre and post trial interest as well as the compulsory royalty going forward. So.

Stay tuned we continue to pursue it will remain front and center nothing more important than protecting our intellectual property, but none of what I described is reflective of the numbers we talked about today.

Okay, Great and then debt that's very outflow of clear that up the other thing I wanted to talk about more of a Motorola strategic perspective is on prior calls we've talked about you going after acquisitions and targets I'm sorry, if it was mentioned earlier on this call and I'm essentially just repeating things like you know.

Repeat the questions already asked but what.

What is the appetite of Motorola to go out and do you know the same number of deals the 'twenty 'twenty, one comparable to 2020, because their appetite for that right now or are you guys and digestion of digestion mode.

There is appetite and there is capacity, but if you take the step back.

We my priority is investing organically in the business, we have great markets.

Of the technologies of land mobile radio of mission critical communications.

All of the trends around modernizing 911, and command center software and of course, all things video fixed video and access control as well as body worn but these are big addressable markets in combination.

Approaching 40 billion of an addressable market, that's probably three ex greater than it was for this company five years ago or so.

Prioritizing new product and.

The investments by the way of an investment like the global manufacturing facility for fixed video in Richardson, Texas to give us of.

Better scale better capacity, a lower unit cost.

Jack talked about apex next day talked about Tetra He talked about PCR you know, we're investing in the cloud and by the way.

We also bought back stock.

At attractive rates, we look at the long range plan, we do the DCF.

We look at where we think the stock is attractive to buy back and we've been active on that front as well.

$612 million of share repurchase last year, 287, or $289 million of acquisitions, and we did another of double digit raise on dividend.

The of 11% of $436 million. So, yes, we continue to scan acquisition opportunities there.

Probably be more around.

Video security.

Software.

And services.

But I think we've been good stewards of capital we will continue to be responsible on that front, but we like the prospects both organically and inorganically.

Perfect. Thank you.

<unk>.

Once again, if you do have a question you May Press Star then one on your Touchtone phone at this time.

And the next question will come from Ben Bolan with Cleveland Research. Please go ahead.

Good afternoon.

Everyone. Thanks for taking the question.

Can we start looking at.

This Iot device specifically.

Hum.

How how incremental is that product.

The relative to what <unk> been out there historically, it looks to be higher price versus debt the previous plenty of turbo of product. So.

I'm interested in the spread there and then I'm also curious.

Any thoughts you have on this product to open up new addressable market because it's got more features and multimode and capabilities or does it have more use cases and it opens up some tam of.

What's your perspective on that product in that line as it expands.

Yeah.

We are we invested in the eye on because we believe we had an opportunity to create a new category. So some of the things that it does obviously when we when we make an engineering decision to include a higher throughput mechanisms like private LTE C. B R. S. We wanted to do though because we have an eye on the workflow that of customer applications.

As an example, it does image capture it does scanning it does things that no radio that we've ever made for the PCR space has ever done so fundamentally that creates new opportunities think of things like warehousing manufacturing, even theres hospitality Stadium security type of applications. We also think as we Greg referred to safety <unk>.

<unk> as we start to see you know.

Our video opportunities access control merge with piece of our opportunities, we think that kind of device plays well into that environment too. So again, it would be accretive to what we typically do it redefines the PCR category.

Okay.

And then my second question.

Just stepping back you know Greg when when I look across the portfolio, you're really the only vendor who touched.

Touches radio surveillance command center with the breadth and scope.

Could you talk a little bit about.

The feedback from customers as you leverage that portfolio and just your long term aspiration to gain share in some of the markets, where you're not as incumbent thank you.

Yes, Thanks, Ben well first of all Youre right I don't think anybody else has the width and breadth of our portfolio, but our goal is to.

The the best and compelling across all three technologies.

I mentioned the size of the addressable market, but I also think.

And I referenced this a little bit in the opening remarks.

So.

I think the special sauce is the integration of these technologies not only does not no one else have them.

But I think youre going to see us integrate them as well.

<unk> workflow machine learning AI powered analytics.

That allow I mean, there is volumes of video and how do you see it how do you watch it how do you extract it how do you redact. It how do you push it to an incident two of dispatcher and we're working not just having best in class point products for these technologies and I like the hand of cards, we're playing but its the orchestration.

And the integration led by our Chief Technology Officer the head.

<unk>, who is making great progress on the orchestration and integration.

So you think about the things that are going on.

Whether it's social unrest.

<unk> fires.

Immigration.

There's a lot of trends socially and environmentally that I think are favorable theres a lot of technology trends that I think are favorable.

And as we've talked about consistently about the overarching purpose of our company of.

Helping people be their best in the moment those critical mission critical literally moments that matter.

That's the envelope of our vision and the technologies that we invest in the integration that we're pursuing.

And I think theres more room to run to your point outside of the United States in a number of international theaters.

And stay tuned for us to.

To share some more things on that front as well.

Thanks Ben.

Thanks, Chris.

The next question is from Jim Suva with Citi. Please go ahead.

Thank you and congratulations and it's very encouraging the backlog bookings outlook.

I correct to say that that does not include any potential government stimulus packages is because it seems like whenever I read the online or watch the news or talking about stimulus packages and maybe some of that comes to you or maybe it doesn't come to you or how should we think about are there any things potentially being talked about and stimulus is that could actually.

Take that that number even higher or does it simply not filter into you guys I'm just kind of curious about if anything there yet.

Yes, Jim I would say remember I mean, I think the engagements improved new products getting traction.

The pent up demand and we did have some benefit of cares Act money.

About $150 million in 2020, but also cares funding is now extended through December of 2021. So there is a good level of continuity there.

But you're right I don't think you know as we describe the business and look at the visibility in terms of in terms of current demand signals.

The potential stimulus potential.

The infrastructure Bill some things from Washington.

<unk> would be further enabling.

And some of the growth that were expecting the only other thing Jim that I'd I'd piggyback on to what Greg said is that obviously the education space appears to be a place that theres going to be funding directed at and prioritized, what's really lost in the shelf, where the lost in the noise of I think of pretty solid print in Q4 with what we've done with connected learning with our CVR.

Investment, we did close to $10 million in 2020 with some pretty major cities.

Those projects are a little bit like a snowball they'll continue to grow they'll also pull through of video opportunities and access control opportunities. So you know we think there could be some potential in that in the education space as well.

That's what I thought and thank you congratulations to you and your team for a strong 2020 and an outlook for 'twenty one thank you.

Jim Jim.

Yeah.

This concludes our question and answer session I will turn the floor back over to Mr. Tim Yocum, Vice President of Investor Relations for any additional or closing remarks.

No further comments, thanks for joining us today.

Thank you ladies and gentlemen, this does conclude today's teleconference. A replay of this call will be available over the internet in approximately three hours website address is www dot Motorola solutions Dot com slash of Investor.

Can you for your participation today.

Mike Your lines at this time thank you.

Hum.

Yeah.

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