Q1 2021 Motorola Solutions Inc Earnings Call
Good afternoon, and thank you for holding welcome to the Mozzarella solutions first quarter 2021 earnings conference call.
Today's call is being recorded if you have any objections. Please disconnect at this time of.
The presentation material and additional financial tables, and apparel be posted on the mozzarella solutions the Investor Relations website.
The end 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 and today's earnings news release and the comments made during this conference call and the.
A risk factor section of of 2020 annual report on for them 10-K, and and the 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 the Greg.
Thanks, Tim Good afternoon, and thanks for joining us today.
And I'll start off by sharing a few thoughts about the overall business before Jason takes us through results and our outlook.
The first Q1 was an excellent quarter, we achieved Q1 records for sales operating earnings and cash flow, we expanded operating margins by 220 basis points and ended the quarter with backlog of 11.3 billion up eight per cent versus last year. Additionally demand <unk>.
The main strong, resulting and orders that were higher than any other first quarter and our history.
Second our software and services segment had another outstanding quarter and continues to drive revenue growth and operating margin expansion sales for the quarter were up 15% driven by growth across our LMR video Security and command Center software technologies and the segment also finished with operating margins.
310 basis points versus last year and.
And finally based on the increased demand, we're seeing across our business and our strong backlog position, we're raising our full year guidance for both sales.
And earnings per share for the full year I'll now turn the call over to Jason to take you through a results and outlook before returning for some final thoughts.
Thank you Greg Mark you. One results included revenue of 1.8 billion up seven per cent, including 48 million from acquisitions and 32 million from favorable currency GAAP.
Gap operating earnings of $298 million and operating margins of 16.8 per cent of sales compared to 15.6% and the year ago quarter non-GAAP operating earnings of 411 million of 64 million or 18% and non-GAAP operating margins of 23.2 person.
And of sales up from 21% driven by higher sales and improved operating leverage and both segments.
GAAP earnings per share of of dollars 41, compared to $1.12 and the year ago quarter and the increase was primarily due to higher sales volume improve the operating leverage and lowered legal fees, partially offset by the gain from the sale of of manufacturing facility recognized and the prior year and.
Non-GAAP EPS of of dollars 87, compared to $1 49 last year, primarily due to higher sales and improved operating leverage and both segments higher pension income and of lower diluted share count, partially offset by of higher effective tax rate.
Opex and Q1 was for 155 million up for million dollars versus last year, primarily due to costs related to acquisitions, partially offset by lower discretionary spend.
Turning to cash flow R Q1, operating cash flow was 370 million compared with $308 million and the prior year and free cash flow is $318 million compared with $260 million and the prior year the increase and cash flow was primarily due to higher sales and improved working capital part is partially offset by higher cash too.
Texas.
The allocation for Q1 included $170 million a share repurchases at an average price of 175 and 53 cents.
121 million and cash dividends and $52 million of Capex during the quarter, we entered into a new five year 2.25 billion dollar revolving credit facility, replacing our prior $2.2 billion facility and.
And subsequent the quarter and the board of Directors approved a 2 billion dollar increase to the share repurchase program move.
Moving to a segment results Q1 products and systems integration sales were $1 billion up two per cent, primarily driven by growth and video security and professional and commercial radio partially offset by lower sales of public safety, LMR, which were impacted by supply constraints revenue from acquisitions and the quarter was 35 million.
Operating earnings for $131 million or 12.9% of sales up from $12 for percent and the year prior and higher sales and improved leverage.
Some notable queue wins, and Q1 wins and achievements in the segment include of $300 million frame of agreement with the German M. O D to meet their tetra LMR requirements with an initial order of 154 million recorded and Q1.
$72 million of video sales with government government customers up 32% from last year of $37 million P. Twenty-five upgrade for a government agency and Canada of $33 million Tetra upgrade for a large customer and Europe and of $12 million P. Twenty-five order with a large U S federal customer.
Moving to the software and services segment Q1 revenue was 758 million up 15 per cent from last year, driven by growth and LMR services video Security and command Center software revenue from acquisitions and the quarter was $13 million operating.
Operating earnings were $280 million or 36.9% of sales of 310 basis points from last year, driven by higher sales higher gross margins and improved leverage so notable queue ones and the Q1 wins and the segment include for $40 million of orders for P twenty-five services upgrades and body.
And and cameras with Nashville, Tennessee of 35 million dollar pushed to talk over broadband multi year contract with a large use customer of $22 million P 25, and pushed to talk over broadband contract from a large middle eastern customer.
$13 million of body war and cameras with multiple UK customers and our largest plowed based command center software wind today of 5 million dollar contract with Saint Lucci, Florida.
Additionally, we announced the new product integration between R. V 300 body, one camera and our apex P twenty-five radio platform.
Looking at a regional results North America Q1 revenue was 1.2 billion up 6% and growth and LMR video Security and command Center software.
International Q1 revenue of 588 million was up 9% with growth and EMEA Asia Pack and Latin America. The growth was driven by video security and LMR.
Moving to backlog ending backlog was of Q1 record of 11.3 billion up 866 million compared to last year, driven by 639 million of growth and North America, and 227 million of growth internationally.
Sequentially backlog was down and 130 million driven by revenue recognition on the airwaves and yes, and contracts, partially offset with international growth and LMR products.
Software and services backlog was up 548 million compared to last year, driven by 491 million of growth and multiyear LMR services and command Center software contracts and North America, and $58 million of international software growth the favorable impact of FX to backlog was offset by revenue wreck.
Ignition for Airwave and ESN.
Sequentially backlog was down and $269 million also driven by revenue recognition for Airwave and the S N <unk>.
Products and S. I backlog was 318 million compared up $318 million compared to last year, primarily driven by LMR growth and both regions.
Sequentially backlog was up of 139 million driven by international LMR growth.
Turning to our outlook, we expect Q2 sales to be up between 19, and 20% with non-GAAP earnings per share between $1.90 and $1.95 per share. This assumes FX the current spot rates way.
Weighted average diluted share count of approximately 173 million shares and and effective tax rate of 23% to 24%.
And for the full year, we now expect sales to be up between eight and 9% and increase from our prior <unk> guide of 7.25% to 8% and we expect full year non-GAAP EPS between $8.70 and $8.80 per share up from our prior guidance of $8 and 50 to $8.62 per share.
This increased outlook includes the ongoing supply chain constraints, primarily and LMR products and assumes FX. The current spot rates of weighted average diluted share count of 173 million shares and and the effective tax rate of 22.5% to 23%.
And would now like to turn the call back over to Greg.
Jason Thanks, and now I'd like to and with a few thoughts on the business.
The first or results for the quarter or outstanding we achieved Q1 record sales orders operating earnings and cash flow expanded both gross and operating margins achieved double digit growth and video Security Command center of software and LMR services.
And our P. C R business returned the growth. Additionally.
Additionally, we exited the quarter with the record Q1 backlog and continued strong demand that we expect will drive growth for the remainder of the year inclusive of the supply challenges that we have we also announced today that the board approved of 2 billion dollar increase to our share repurchase program.
The second thing I would say as demand and our video security business is really strong and we now expect full year growth to be 20 per cent plus up from the high teens, we referenced and our last call and fixed video, which makes up approximately 70% of the total video security revenue, our investments and AI and <unk>.
<unk> cloud services access control and NDAA compliant manufacturing is differentiating us from our competitors and driving growth faster than the overall market.
And and mobile video the call for more transparency is driving growth for our purpose built body worn and in car cameras solutions and were gaining share and the market that has predominantly been served by one vendor during the quarter. We had several large body one camera wins, both and the U S and internationally.
Just this morning, we announced the 17 and a half million dollar contract to provide about 30000 body worn cameras to the French ministry of interior and Additionally, during the quarter, we announced to new offerings. The integration of R. V 300 body, one camera with our apex be twenty-five radios, which allow us to leverage our market leading LMR installed.
Base and the hour $49 per month body, one camera as the service offering which offers every police agency and the U S with the affordable access to of video solution, that's fully integrated with our command Central software suite.
And finally, I'm very pleased with our progress and leveraging our leading installed base and LMR to expand into command Center software video security and LMR services today, almost half of our revenue is generated from these higher growth areas up from 20% five years ago, and our addressable market has trip.
Pulled over that same period of time.
And while we've made significant progress I, absolutely believe we still of a long runway ahead as we continue to deploy capital of both organically and Inorganically and these areas to drive revenue margin and cash flow for the company and with that I'll now turn the call back over to Tim and look forward to your questions. Thanks, Greg.
Before we begin taking questions I'd like to remind colors to limit themselves to one question and one follow up to accommodate as many participants as possible operated would you. Please remind our callers and the line how to ask a question.
The floor and is now open for questions. At this time, if you have the question I comment police pressed hard then one and got attached chunky.
If at any point of your question is and said you may be moving I shall send the queue by pressing the balance of <unk>, we do ask that while you're pushing the question. Please speak up your handset the provide asked him out of town quantity. Thank you. Yeah. The first question comes from the line of <unk> from back in the East Your line of Snow open.
Thank you Uhm two two questions if I could both both kind of <unk> video business.
Greg could you talk a little bit of give us an update on how the move into more of the <unk>. The public safety of verticals with with all of the video offerings is is going where are where are we and in that process and how much traction and she and there and then second maybe for Greg.
Meg or Jack Uhm talk a little bit about the body one area to see Mike you guys are seeing more traction there and making it a little bit more of of focus can you talk a little bit about kind of go to market sales force pushed there and if you could just remind us also for that business you know how important and how meaningful is.
Kind of the software and the and the on the back end of the the actual bar.
Of.
Whereby we grew body warrant shipments of 104%.
Which is 11005 hundred units and so I think that's indicative of the share we've taken the second thing Tim I think you talked about in general our video business into government and if you remember that was the largely nascent business for US just a few years ago will eclipse $300 million to start there and I think that really plays and as Greg said.
Both strength and fixed and mobile and I think we stand at the intersection of two really important things transparency and government efficiency.
The last thing I'd close with is the American rescue plan.
Puts us in play for multiyear tailwind as it relates to incremental public safety spend.
And around education.
We're fixing schools with both video security and access control as well so I feel good as Greg said just to reiterate a few of those points and add a little deeper but feel good all and on government and Tim just on software, which was your last part of your question on what how that plays into it.
This past quarter, you may have seen we announced our Cc command central evidenced platform, which is our new Azure based cloud platform, which works seamlessly with all of our body worn video to help manage the body worn video and in car video of that comes in and that's important because it doesn't just work with our body worn video of it also works seamlessly with the whole command Center software suite that we.
Evidence being managing the body worn video, but it integrates seamlessly with the entirety of our records platform as well so they all play together and work well together and we're making the investments across the board as Jack referenced on body worn and of course also on the software that handles that and the backend.
Okay. Thank you.
Tim.
Your next question comes from the line of Adam Tindle from Raymond James Your line is now open.
Okay. Thanks, Good afternoon I just wanted to start you know obviously, a very strong Q1, Greg record backlog and I think on a forward basis. It seemed to be a good conditions for the PCR business to continue to recover anything from stimulus might be incremental and then looking at the full year guidance the back half growth is around five.
Percentage year over year, and it's more muted seasonality just seems like the environment might be healthier than normal from the macro standpoint. So maybe you could touch on the offsets that would cause more muted growth for the full year and I recognize I'm getting greedy, but I have to ask.
No Adam look I think the environment is very healthy and the demand is very strong I think thats indicated by the record Q1 that I outlined and a number of categories and the robustness and the strength of the backlog that we're exiting Q1 as well now having said that right. If you look at first half second half growth.
And obviously first half growth for us this year is very high it's a bit distorted for.
For us and other companies given the Q2.
Pronounced COVID-19 effect, but nonetheless, I'm very happy with what we did in Q1 and I'm pleased with how we're guiding Q2 and I remind you Adam also.
$90 million of FX favorability is and the first half, it's more like $30 million to $40 million in the second half, but also as it relates to supply we're still operating under the current environment, which is generally comparable to what it was when we talked to you a quarter ago, Although I would point out.
While it remains challenging.
The team did a nice job working with some key suppliers pulling forward key components to execute and print Q1, and Theyre also doing it again, which is informing and driving a very healthy guide in Q2, so while the supply environment remains challenging we will look to continue on those improvements and the back half.
But at this point and time and given the fact that the pandemic is still there which is thought of it was a prudent guide.
Understood makes sense just as a follow up I did want to ask of you touched on video, which is very healthy I did want to ask on command Center software. If I looked in the slides correctly I think that grew up around 13% year over year previously.
Previously you had talked about a goal of of 20%. So maybe just color on delta and the quarter is this just lumpiness and wondering how to think about growth rate of that moving forward do you think you'll catch up to that 20 per cent of should we be thinking about attenuating that for now.
Adam It's Kelly the the answer is yes, we're still tracking to the 20%.
The we're pleased with the growth, we got the 13% and Q1, but as we come into the back half of the year of the growth rates associated with Q2 Q2 through Q4 will benefit from the softer comps of what we saw in 2020 on COVID-19 impact and not to mention the other thing is we have some very large and gcs deals which we.
One last year that will start contributing revenue and the back half of the year. So go into the approximately 20% of something that we're still we.
And we're still targeting.
Got it that's helpful. Thank you.
Your next question comes from the line of meta Marshall from Morgan Stanley. Your line is now open.
Yeah.
Yeah.
Great.
Alright, great. Thanks, I appreciate it sorry, and the problems of my phone.
Maybe if we could just spend the second on just any you mentioned you're having good.
You know, you're mitigating and supply chain issues, but just whether any overhang on margins and just and some of the stimulus plans are being rolled out.
What do you think will be the cadence.
Are you seeing kind of front loaded investment as the stimulus funds.
<unk>.
And like Backloaded, and Batman or do you think it'll be more mitigated and throughout the year.
Yeah, Mike So as we look kind of at the full year and from a margin perspective.
<unk> for the company from a gross margin standpoint, I think there'll be comparable maybe slightly up.
And that includes probably of the gross margin profile for the segments as well and products.
As well as software and services, if you take operating margins.
We're now anticipating operating margin expansion and software and services to be up about 140 basis points. That's an increase from what we talked about a quarter ago by 40 basis points, and we expect product segment operating margins to grow as well.
More commensurate with volume in.
In terms of the demand environment I think it's partially pent up demand I think things of reopening.
As the pandemic, depending upon the geography.
The release itself and the economy starts to get back into a a strong rhythm of expansion from the stimulus standpoint, there's a lot of money available to our customers, particularly on the public safety side, both around the cares Act, which was already in place for 2020 and continues on through 2010.
One as well as the American rescue plan, which is new available money and the bite and one nine trillion dollars plan. There is 350 billion for state and local funding. There is of 170 billion for school funding. There is 38 billion for airports and transit.
There's a lot of money. The other important thing is that these funds are available for about the next three to three and a half years. So our customers will have available grant money the environments remaining strong and gets stronger and public safety. The PCR business on the enterprise side grew at 8%.
In Q1, and we are reaffirming its growth all in for this year. So I like the position we're in and I liked the signals we're seeing.
One thing I would add on the input cost, we're not seeing measurable increases on inputs of the one area, where we've had to navigate as higher freight costs.
And moving things to the ocean off of what had been freight airfreight, which are very high so that's leading to a slightly higher inventory for the time being but we will navigate through those but as Greg said more opportunities there.
Great. Thanks.
Thank you.
Your next question comes from the line of Louie Dipalma from William Blair. Your line is now open.
Good afternoon.
Can you talk about your strategy for the education vertical and why.
And you are seeing there in terms of demand.
Sure Louie.
Louis Hi, it's Jack.
The education vertical it's interesting because Greg just talked about the American rescue plan Theres $170 billion directed to school funding.
And that runs through September of 'twenty, three and so we've really got a duality of opportunities with education and the biggest opportunity we have with education and our fixed video security and access control business.
Simply put it's been one of our highest growing verticals and that business.
Not only have our regional sales team, but we of group of business development vertical specialists and focus and working with schools on directing funding and those kind of things. So we're really pleased there, but we also work and do it we of our safety re imagine campaign going on and that actually pulls together fixed video security and PCR and.
And that message resonates very well, so think about you get and intrusion on the door access control sends a signal to a PCR radio whereby every teacher might have won.
And the level of security the it enhances Ed schools has been impressive and I think our resonates with our customers. So we're really excited actually and my career here. This is probably the best opportunities that we've had and education.
And Louis and the other key and the other key around that is in addition to what Jack said.
Automation and think analytics think integration.
So as the as the Motorola solutions critical infrastructure on fixed video mobile video land mobile radio perimeter detection backpack.
The delinquent.
The delinquent student the inappropriate truck on the parking lot all of that would be automated as Jack said, not only sends and alert to the radio but also can automatically alert and command central aware of <unk>.
And one one dispatch operator as well so we're leveraging the installed base capitalizing on the new fixed video architecture targeting safe schools.
And integrating and.
And automating all of the technology, we have to differentiate and and offering that we don't think anyone else can provide.
Greg It's not just the does rely on and that's the.
And the broad suite of products and the exactly.
Billing youre bundling with the analytics and I think you mentioned the.
The PCR radios as well.
Yes and.
Our CTO Mark.
H.
Who came with us too from us to the from.
From the acquisition of a visual on the Motorola has been critical in the orchestration software work and integration work to make all of these technology seamlessly work together.
Great, Yes, I saw him.
Presentation for your investment and evolved technologies.
Right and with evolve that gives us another investment around access control, we were and investor earlier, probably a year or two ago with evolve we're committed to make of future investments, it's a little bit more consequential and so when you think about critical infrastructure locations like schools or stadiums for airports.
For hospitals evolve and that partnership around weapons detection is another interesting component to integrate into the suite as we develop of our product portfolio and think about of differentiated operating going forward.
Sounds good thanks, Mike.
The next question comes from the line of Paul Silverstein from Cowen. Your line is now open.
And so I appreciate you taking the questions first just a clarification Paul.
Josh you stated and I misheard, but Greg I think I heard you say that the for confirming the growth for PCR for the full year, but I didn't hear what the growth was.
We are confirming it for the full year Paul.
I mentioned that it grew 8% and Q1, we didn't give a specific number but it wouldn't surprise me if the full year growth is generally commensurate with that kind of number but I liked the signals that are coming back from that that business.
Alright, I'm glad to hear that I'm actually paying attention.
And if you remember Mike.
[laughter].
And it was encouraging.
But on the <unk> no.
Any incremental insight you can give in terms of recovery, where all we can read the period for and assume the news that oil and gas and transportation and hospitality for all.
The opening of theirs talked about cruise ships and eventually soon all of it hasnt happened yet a true.
And Youre seeing ongoing improvement and if I may.
Question for you on your video security and the public sector. So now that it's one of $300 million.
For over $300 million annualized run rate and a normal jumping more crossing the chasm adoption cycle, one would expect or I would expect that to accelerate.
And that number becomes meaningful and I don't know if that's the 300 mile and I know you just said, 20% up from 15 previously.
Should we expect some goes on further acceleration with the benefit of critical mass.
Well of critical mass Paul is certainly a benefit as we get greater density and it just.
Kind of a nucleus for a flywheel of growth.
And we did raise.
Our outlook today on the video security technologies, all into 20% plus growth for fiscal 2021 up from high teens I wouldn't necessarily extrapolate into 2022 necessarily so a little too early for that but the markers are good the momentum is good the product portfolio.
<unk> is getting refreshed and the investments that are being made and we're taking share we're taking share both in the fixed video component, where we're taking share and the body worn camera component and I also believe that the access control.
And the integration of access control with video security is also a nice opportunity for us as it relates to the individual enterprise verticals that are recovering from the PCR perspective, maybe Jack can provide a little bit on that front, yes. So internationally.
And those markets have still been slow to rebound we have seen I would say.
Very measured and slight improvements and oil and gas.
Earlier this year really even in the Q4 of last year, we started to see some recovery.
Hospitality in general is still slow I would say in the southeast.
And through the southwest, it's a little better, but it's still been slow we think those things will improve.
Q2 in the Q3 and.
And just to throw out the two points on growth the.
Last year's video business for Us and total was $926 million. That's the business that we're talking about growing at 20% plus in this year of 21 Jack's comments earlier were about the $300 million of that that's anticipated this year to be from specifically government and Thats a part of the business that was very.
Nathan just three or four years ago, and was part of our thesis and penetrating the original and portfolio into our legacy accounts and we're doing that.
Understood and appreciate the responses.
Thanks, Paul.
Your next question comes from the line of Kyle Mcnealy from Jefferies. Your line is now open.
Hi, This is kind of on for George Notter. Thanks, a lot for the question. This is somewhat similar to the the video question you just answered, but and you talked about some of the recovering verticals, but.
Can you talk a little bit about the verticals that are driving that growth too.
For you to take it up from high teens to 20% of.
Lot of the government I would assume but is there other enterprises retail schools I believe you mentioned.
And Theres casinos hotels and then.
As the international and play here too or just the U S could you kind of.
Give us some clarity on how youre, playing internationally and how thats doing versus versus domestic and.
So for and.
For fixed video of the growth drivers really and fundamentally been through the first part of this year North America, we talked about North America.
The market coverage of debt paid big dividends I would also tell you internationally every theater grew well.
<unk> done a really nice job and growing international key accounts. That's also a growth driver and when we start to think about from a technology standpoint, it's really been driven by the strength and analytics refreshed camera refreshes and I'd have to hit it again, but the government vertical as well as education continue to be of benefit not only of vigilant, but also of the <unk>.
The <unk> acquisition, which have helped us and the federal government's leave as well.
Okay great.
And then it's also nice to hear some recovery and the PCR business I'm wondering if you could comment about the trajectory of past this year and whether you have line of sight for when it might recover to the $1 billion run rate it was pre COVID-19 as Ed.
And I'm too far off to predict or can you give us kind of a timeframe on when you might get back to the previous run rate.
Well I would just say this it is probably too early to predict predict on that front, but through Q1.
And actually.
<unk> to date from and orders and bookings standpoint.
The trend is very good now I'm not going to declare and endpoint of when we return to that level, but I would simply say, it's certainly ahead of the expectations that we had a quarter ago. When we had the full year view.
And I'd also say, even though we are operating in the supply constrained environment. Our channel partners have done a good job.
Managing this and.
Handling and balancing the inventory levels that they hold to satisfy their customers, but the signals are strong and.
Certainly stronger I thought they would be good for PCR as you heard me say I thought TCR would return to growth and 2021 and we're off to a very good start orders are strong and they are probably ahead of my expectations of where we are as we sit here and may but we'll update you again in August but it's very good the other encouraging sign is that.
We saw good product launch and ion and the good reception from that very important part of the portfolio of that was released recently and are seeing good good take rates and the other.
The only other thing Jason I'd piggyback on that is also we talked about our distance learning and we talked about monies that have been available for broadband investments and schools are investing and distance learning we talked about for Big school districts last year, we've replicated that in Q1 and there continues to be a drumbeat of interest and a lot of those upgrades happen during the summer months. So.
We're actually very excited about our private LTE Nitro solutions as well.
Okay, great. Thanks very much.
Q.
Your next question comes from the line of Keith Husson from Mike calls Research. Your line is now open.
Hi, Good afternoon, this is traveling and filling in for Keith.
The American rescue plan, you mentioned earlier that customers will have access to that money for the next few years have you seen any impact yet on the sales pipeline and or is it too early.
Yes, we have a really good question, we've seen the team.
Kind of it.
And of joking way, but you'd give salespeople of half the money good salespeople and they go find it and we've had discussions already public safety engaged us right away for the state and local funding we've been engaged with schools, but also airports and transit when they've had a little bit of downtime there doing some planning as well now that they know they've got funding available.
Okay, Great and maybe a quick follow up how would you characterize the sales cycle has that returned to normal yet or not so much.
I would say the sales cycle here as we sit in and 2021 I would caveat and North America, It's largely return to normal both in terms of government and in terms of our PCR business, which is focused and the enterprise.
Europe has been very slow borders are still slow down a lot of it's virtual parts of Asia of returned back to normal and it's and COVID-19 is running through Latin America, and things engagements very slow there but in north.
Erica things of return very much close to normal.
Okay, great, Thanks, and congrats on the corner.
Thanks Trevor.
Your next question comes from the line of Fahad nature of them from MK and partners. Your line is now open.
Thank you for taking my question.
You bet.
Supply chain.
A couple of time was there any impact to your current quarter from component shortages and how much of the outlook is impacted by component shortages can you whats the.
Quantification and I have of fall.
Yeah for Hot Yes, there was.
And impact and of constraint on Q1 results.
From a supply chain standpoint, it's a very small number of suppliers currently it's primarily LMR.
As I mentioned earlier and while the environment is for the most part unchanged. It has incrementally improved.
In working with the suppliers to get some additional units for Q1, although.
We had demand that was stronger than what we could.
Supply and Q1, and we of the supply chain team here has also made some good improvements for Q2 as well.
How about the outlook as the.
How much of.
Got it.
Baking in some headwinds from component shortages.
It's definitely our full year eight to nine guide absolutely incorporates the current supply constraints.
Without and that would be higher but.
Again.
I think we'd have a stronger second half and and.
Unconstrained environment, but we're working through it we made improvements from Q1.
We're making improvements and Q2, which in part and forms the 19% to 20% strength of guide and there is work for us to do and Q3 and Q4 and we will update you again in August.
Okay.
For my other question I wanted to die.
Dive into the video opportunity outside of the United States.
The two largest Chinese based competitive takeaways and and <unk> been pretty much implicated and Glen and concentration camps and.
And China.
To what extent of you're beginning to now see meaningful.
Wins, and hydrogen and diverse footprint and can you provide some quantification and I appreciate that.
Video is growing overall, but how much of it is coming from share of it again.
Most of the players.
Well Youre right and I know you asked and international question, but.
And the National Defense Authorization Act both of those companies are named by name.
Not having any fixed video deployments and government agencies are and certainly also not being eligible.
For any federal grant money. It's also important to remind everybody. We are clear eyed about the opportunity and the addressable market here, which we characterize as about 15 or 16 billion and that's zeroing out of China Zero, we expect the zero fixed video sales in China.
I know that his vision and dawah will continue to be the indigenous providers in country.
But I think with the NDAA compliance and the concern around those two vendors and critical security implementations that clearly has a favorable impact as well.
And other parts of Europe, and the Western democracy, So I think it's a tailwind.
It is Greg I think you said, it well and I would just say within Europe, I think there's a great deal of skepticism.
For Ralph.
His vision and dollar right now I'd say that also travels into the middle East and into Australia, We've got significant opportunities and the answer your question directly we've displaced Dhawan hick vision on gaming opportunities and the Middle East Indigo vision, we acquired Indigo vision. If you remember last year. They were the inverse of what we did and telco as well where they have better international.
Footprint of.
We brought that footprint into our fixed video business and we've been really really pleased with work they've done to get us in the middle East certain parts of Europe of weird, some softness with the vigilant and so.
Again, I think international is.
As a market that's going to ramp well for us.
And.
I appreciate the answers thank you.
Thanks for hard.
Your next question comes from the line of Ben Bollin from Cleveland Research. Your line is now open.
And thanks for taking the question good afternoon, everyone.
I wanted to step back.
And the earlier question.
Specifically when you look at ARPA could you talk a little bit about.
How that stimulus money.
How do you think it might influence customers' willingness to adopt newer technologies such of surveillance of command Center and then how does the stimulus money specifically influence the sales cycle, which I think historically are a bit longer and public sector does it the shrink that sales cycle any impact there and then a follow up.
Yes, Ben so let's start with US we have we are of selling process that looks at every technology. We make every government agency or every enterprise decision maker that we have and we do it really of three dimensional view and any accounts, we're continually talking about.
Not only our core technology of our emerging technologies with those customers. So in the mind of a customer of your first of all of the identify a need the second thing is really how do you fund. It. So you asked the question what does the ERP plan done it's alleviated a lot of concerns around visibility to money and so in that sense.
And some ways and it's never easy to make the sale, but and a lot of ways. It clears up one of the biggest obstacle to sale.
The great news is albeit that theres some of the deadlines on this funding go all the way out to 2020 for the reality is that there is no reason or no prohibition to spend that money earlier. So our sales team. Obviously has had many many years at this with funding and we can provide.
Different incentives et cetera to get customers to move.
Or if that may be the case, but.
Just knowing they have visibility to that money I think.
It provides a very good environment for us.
Thanks, Jack and Greg one for you.
I'm sure lots of encouraging things backlog and stimulus.
And the recovery of the hall.
And I got some reaching a little bit, but any perspective on the former $9 billion and revenue of $10 and EPS framework that you've talked about.
No no perspective on that yet.
Ben but.
Again, you know, how we printed Q1 and I referenced the whole litany of different records that we've had and that's fine, but I don't really care about that in terms of what needs to be done today and tomorrow, it's important and that is foundational and its momentum.
And this is some of the strongest momentum I've seen and a long time.
We have to deliver we got to execute we have to navigate supply challenges theres always a lot to do but I'm really proud of everybody here on.
On the team.
Everybody knows the role there is no confusion about what we're trying to do and.
Between the deployment of capital organically and Inorganically and there remains some interesting inorganic opportunities.
It's all about driving sustained.
Shareholder value creation, and I don't mean to sound corny, but I think generally we've been good stewards of capital we have the expansion of the share repurchase program, although that doesn't.
We did that because of the previous program was running out.
But the capital allocation framework that we think about.
50% for acquisitions and share repurchase and.
The 30% for dividend and 20% for Capex and of normalized balance sheet continues.
So.
Stay tuned for the opportunities and front, but.
We're looking to and by the way, it's not just about 2021 I want to make sure that we continue this momentum in 2022 and beyond so lots more work to do but I like I like the cards and we have.
Thanks for the perspective.
Yes, Thank you Ben.
Your next question comes from the line of Sami Badri from Credit Suisse. Your line is now open.
Hi, Thank you.
Unfortunately, I'm going to go back to the supply shortage and component shortage conversation and maybe I was hoping could you give us an idea on the number of suppliers, who are working with the are actually supply constrained and have they given you guys essentially accounts and weeks in terms of what lead times and I'm looking at I think 30 40 or the fifth.
The weeks across some of the most important components for radios and some of other products you guys have.
So it's a handful of supply first of all of the category of semiconductor.
As a general category of I'm sure that's not a surprise to you the Sammy.
It's about three or four vendors really that we're working with we are doing detailed planning with them.
By week and by month.
We regularly weekly go through the allocation necessary for us to meet demand as we balance what to fulfill and what not to again its primarily LMR.
And I'm engaged with all of those vendors and I have to say the responding pretty well.
I don't want to get over our skis.
But they were pretty good and Q1, helping us pull forward some incremental units and they've been helpful. Particularly one supplier of that comes to mind I won't name, but they have been great and the CEO has been and excellent partner and he has been accessible and I call him on his cell phone and he calls me and we talk regularly he has been excellent.
<unk> and his team is really good and they're helping us through Q2, as well and we know what work needs to be done and the back half, but at the end of the day, we just want to be prudent.
The full year guide and while there is so many strong signals.
We will go a quarter as we go and we'll update you again in August.
Got it thank you and then.
One question for Kelly and this is a little bit tied to the Americas rescue plan now when Youre working with the first responders now they're looking to deploy or finally integrate sophisticated command center offerings of the modules and it's more of an end to end solutions does the Americas rescue plan and allow.
These customers to go bigger and wider and more expensive on the number of modules and solutions are deploying and.
Their own narrow and organizations.
The general answer on that is yes. It is allocated there they will have to apply for it. The one area in particular that will get touched on that is the and gcs component, which is the fundamental of 911 database backbone, which as you know is a new and growing area of our business that we were.
Participating in now so youre going to see a lot of applications for the and gcs component to start building on and enhanced 911 call centers, which we think will also drive additional churn of the 911 software base around that to have enhanced software too.
Harvest the multi media that will come through the Ed.
And gcs stuff.
Got it thank you.
Thanks Sami.
Your next question comes from the line of Jim Suva from Citigroup investment. Your line is now open.
Thank you and first I want to say you and your team for having a great strategy and executing on the operations during such a very difficult time in the past year year and a half.
As we look forward with the government stimulus.
Now on the cusp of about the come in and enter into the market and as you mentioned, it's multi year.
It seems like it's going to impact many parts of your business, which parts of kind of going to be the most material and kind of timing of those is it more like stationary cameras first and then software second but it seems like the software or the cameras won't really work with all the software and it seems like it kind of all touches each other so I'm just kind of wonder.
And about where you see the biggest opportunity from these government programs as they start to come out and the next few years.
So if you think about the three technology groups that we reported is the sub line out of my first of all say given that its not only state and local funding, but theres educational funding and airports and transit I would dimensionalize fixed video is likely the biggest beneficiary of the American rescue plan followed quickly by command.
Center software.
And then LMR upgrades as well as services and that'll be addressed and attached to namely the state and local budget line.
<unk>.
So Jim those will be those will be the primary beneficiary of that I would I would say the one with the with the secondary groups as being one day Command Center software and LMR and services.
Great. Thanks, so much and again congratulations to you and every one of your company.
Thank you Jim.
There are no further question and at this time and this concludes our question and answer session.
The Florida backhaul victim of Mr. Tim Yocum, Vice President of Investor Relations for any additional or closing remarks.
Thanks to everyone for joining us today, and we look forward to talking to you soon.
Yeah.
Okay.
Ladies and gentlemen, this does conclude today's teleconference. A replay of this call will be available over the internet and approximately three hours. The website address is www dot mozzarella solutions dotcom slash investor and we thank you for your participation and ask that you. Please disconnect your lines.
At this time.
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