Q3 2023 Motorola Solutions Inc Earnings Call
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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 2023 third quarter earnings call with me today are Greg Brown, Chairman and CEO, Jason Winkler Executive Vice President and CFO, Jack Molloy, Executive Vice President and COO, and <unk>, <unk> Executive Vice President and CTO, Greg and Jason will review our results along with.
Commentary and Jack and Mahesh will join for Q&A.
Posted an earnings presentation and news release at Motorola solutions Dot Com 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.
As noted.
Number of forward looking statements will be made during this 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 the factors that could cause such differences can be found in today's earnings news.
Please and the comments made during this conference call and the risk factors section of our 2022 annual report on Form 10-K, or any quarterly report on Form 10-Q, 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, everybody for joining us today.
First Q3 was another strong quarter with revenue and earnings per share exceeding our guidance driven by continued strong demand and an improving supply chain environment.
Revenue was up 8% in the quarter highlighted by 12% growth in software and services and 5% growth in products and systems integration. We also expanded operating margins for the fifth consecutive quarter, which resulted in record Q3 operating earnings in both segments and over $700 million of operating.
Cash flow.
Second investments in safety and security continue to be a priority for our customers and we had another record orders quarter in Q3 year.
Year to date orders are up 11% driven by strong software and services record U S. Federal demand and continued adoption of our apex next device by U S state and local customers. Additionally, we ended Q3 with record backlog of $14 3 billion up 6% versus the prior.
Year.
And finally based on our Q3 results and continued momentum in the business. We are again, raising our full year guidance for both sales and EPS for the third time this year.
Now I'll turn the call over to Jason.
Thank you Greg revenue for the quarter grew 8% and was above our guidance with growth in both segments, both regions and all three technologies.
Ex tailwind during the quarter were $13 million, while acquisitions added $19 million.
GAAP operating earnings were $639 million or 25% of sales up from 15, 7% in the year ago quarter, which had the impact of the $147 million fixed asset impairment charge related to our exit from the ESN contract in the UK non.
non-GAAP operating earnings were $741 million up 10% from the year ago quarter, and non-GAAP operating margin was 29% up 50 basis points, driven by higher sales lower material costs and improved operating leverage partially offset by a higher mix of international product shipments and the Rev.
Deferral related to Airwave.
GAAP earnings per share was $2 70.
Up from $1 63 in the year ago quarter, which had the impact of the ESN asset impairment.
non-GAAP EPS was $3 19 up 6% from $3 per share last year. The growth in EPS was driven by higher sales and margins, partially offset by the air where deferral and a higher effective tax rate in the current year.
Opex in Q3 was $551 million up $29 million versus last year, primarily due to acquisitions and higher employee incentives in the current year.
Turning to cash flow Q3, operating cash flow was $714 million up $326 million versus last year and free cash flow was $649 million up $331 million increase.
The increase in year over year cash flow was primarily driven by higher earnings and improved working capital.
And with our Q3 year to date operating cash flow of $799 million up significantly from last year. We are solidly on track to deliver on our $1 9 billion.
Operating cash flow outlook for this year.
<unk> allocation for Q3 included a $147 million in cash dividends $322 million in share repurchases and $65 million of Capex.
Moving to segments and the products and Si segment sales were up 5% versus last year driven by growth in both LMR and video currency tailwind were $4 million in revenue from acquisitions in the quarter was $1 million.
Operating earnings for the segment were $420 million or 26, 1% of sales up from 24, 5% in the prior year driven by higher sales lower direct material costs and improved operating leverage partially offset by mix.
Some notable Q3 wins and achievements in the product segment include a $75 million P 25 device order for our U S federal customer or.
$55 million P 25 system order for a southeast Asia customer a.
A $42 million 25 device order for the Texas Department of public safety, a $30 million P 25 device order for U S federal customer.
$20 million 25 device order for Indiana State police.
And a $3 million fixed video expansion order for U S federal customer.
In software and services.
Revenue was up 12% inclusive of the Airwave deferral with 31% growth in command center and 15% growth in video revenue from acquisitions was $18 million in the quarter and FX tailwind were $9 million operating earnings in the segment were $321 million up 7% versus last year and operating margins were 34.
4% down from 35, 7% last year.
Excluding the Airwave deferral operating margins for the segment were up driven by higher sales and improved operating leverage.
Some notable Q3 highlights in this segment include a $23 million LMR service agreement for a large European customer a 23 million service agreement for East Bay Regional communication systems in California, a $20 million LMR service agreement for the Los Angeles Police Department.
<unk> million dollars Command Center order for Tarrant County, 911 district in Texas, and an $8 million body worn camera order for the Metro Nashville police.
Looking at our regional results North America, Q3 revenue was $1 8 billion up 6%.
On growth in all three technologies.
International Q3 revenue was $773 million up 13% versus last year, driven by growth in LMR and video <unk>.
Moving to backlog.
Backlog was a Q3 record of $14 3 billion up 6% or $764 million versus last year inclusive of $321 million of favorable currency rates driven by strong demand in North America.
Sequentially backlog was down $4 million inclusive of $125 million of unfavorable FX driven by the revenue recognition of airwave, partially offset by strong demand in North America.
Products, and Si ending backlog was up $62 million or 1% versus last year, driven primarily by strong demand in North America and sequentially backlog was up $80 million also driven by strong demand in North America.
In software and services backlog increased $702 million compared to last year inclusive of $294 million of favorable FX driven by strong demand for multiyear software and services contracts in North America, partially offset by the revenue recognition for Airwave.
Sequentially backlog was down $84 million driven by unfavorable FX of 96 million, partially offset by growth in multiyear software and services contracts in North America.
Turning next to our outlook, we expect Q4 sales growth of approximately 4% with non-GAAP EPS between $3 60, and $3 65 per.
Per share this assumes a weighted average share count of approximately 171 million shares and an effective tax rate of approximately 24%.
For the full year, we are again, increasing both our revenue and earnings guidance. We now expect revenue in the range of $9 93 billion to $9 94, 5 billion up from our prior range of $9, 875% to $9 9 billion and we expect non-GAAP earnings per share between $11 65.
And $11 70.
Up from our prior guide of $11 40 to $11 48 per share.
This full year outlook assumes $40 million of FX headwinds up $25 million.
<unk> from our prior guidance, our weighted average diluted share count of approximately 172 million shares and an effective tax rate of approximately 23%.
Before I turn the call back to Greg I'd like to highlight two points.
In addition to the strength of our LMR and video business. Our command center portfolio performed well during the quarter in Q3, we achieved strong growth complemented by a robust contribution contribution from rave and acquisition, which continues to exceed our expectations.
Secondly, our supply chain execution navigating extended lead times for some semiconductors and reducing broker purchases continues to drive year over year cost savings. We now expect the impact of lower broker purchases to be a $70 million tailwind for this year up from our prior estimate of $60 million as.
A result, we now expect full year operating margin expansion of approximately 200 basis points up from our prior guidance of 175 basis points.
Now I'll turn the call back to Greg.
Thanks, Jason.
First I'm really pleased with our Q3 results, which highlight the durability and criticality of our business and the strength of our portfolio revenue was up 8% and that's inclusive of the revenue deferral related to Airwave that we've talked to you about already.
We also achieved record operating earnings in both segments record Q3, operating cash flow of over $700 million and a Q3 record backlog that is 6% higher than last year, which positions us well as we head into next year.
Second the resilient nature, the resilient nature of our business and strong cash flow allows us to continue to be flexible as we deploy capital to drive shareholder value.
Strength of our cash flow comes from strong demand from product refresh consistent margin expansion and improving cash conversion through October we've repurchased just under $800 million of stock highlighting our conviction in the long term value of MSI. We also ended the quarter with net debt to EBITDA ratio.
One seven which provides us with a healthy balance sheet and additional firepower to continue to invest both organically and consider consider inorganic investments as well.
And finally, as we look to close out another record year I think we're exceptionally well positioned for continued growth demand for our solutions remains robust, we're continuing to add value to our customers. Our end markets remain resilient and our teams continue to execute at a high level I'll now turn the call over to Tim and welcome your.
Questions Accordingly.
Thank you Greg before we begin taking questions I'd like to remind callers to limit themselves to one question and one follow up to accommodate as many participants as possible. Operator would you. Please remind our callers on the line how to ask a question.
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Our first question comes from Tim Long from Barclays. Your line is now open.
Thank you.
Two if I could first maybe on the command center software side.
Sounded pretty strong obviously with rates are part of that could you maybe Greg talk a little bit about.
What what's driving that.
Additional rate seems to be positive is it.
Adding to.
The ability to cross sell some of the different platforms or.
Just a little bit more color on what's driving that and how.
Ties into that and then the second one.
On the backlog still being record that's pretty impressive most companies are seeing backlog coming down so.
A little color there and maybe how that makes you feel about next year.
As far as growth do you think you can kind of sustain the type of growth rates, you're seeing this year. Thank you.
Just on rave and then maybe Mahesh can jump in I would tell you Tim our loved the acquisition.
I think it was well done by the internal team here that founded did the diligence both technical strategic as well as financial I Love, Todd Hyatt and his entire team that's come over to the organization.
And the performance of rave since joining Motorola has exceeded the business case and exceeded our expectations.
Full year I would say that we still expect our growth to be 20%.
Look our core platforms.
<unk> 911, CAD records aware are all doing well as well.
As Jason read out in the script, our St Charles Missouri.
Just refresh their call handling solution and adopted our geospatial routing and you see us.
So you Shouldnt Western Australia police refresh their CAD.
There's also an ecosystem story here.
Wave is certainly performing well above our expectations, Arizona is now the 15 states to sign onto <unk> alert.
As a state wide mass notification system as we're doing that we're also refreshing all the call handling instances instances across the piece apps.
In Arizona.
And I'll call handling system integrated with rave.
As appropriate here as well.
When you think about a city like glue.
Glendale, Glendale now brings in radio brings in.
CAD 91, one.
Wave et cetera, now into a state of the art real time crime Center, all integrated with aware and now you can think about orchestration when major incidents happen.
The heels of things like active shooter incidents et cetera that benefit from the fact that the ecosystem allows you to now respond much faster.
Tim on backlog, we remain in a strong backlog position with an 8% revenue print in Q3 and backlog of $14 billion or more being up 6%.
Our backlog is very strong and I'd also point out that our backlog comes over 95% of it from government customers, who buy what they need when they need it and count on us to deliver it. So we remain in Q3 orders inbound in Q3 inbound orders were also strong so our backlog position.
Is one of strength.
Greg I'll turn it to you for further comments, yes, and Tim as it relates to 2024, obviously.
We will wait till February to give specifics on any kind of detailed guidance.
I'd tell you as we sit here today from a high level.
We would estimate revenue again kind of back of the cocktail napkin to be about $10 5 billion.
At this point as we sit here today by the way that's inclusive of $250 million.
Incremental revenue headwinds about $200 million of that out of the UK home office, we've talked to you about that before the deferral of airwave, representing a little bit over $100 million the balance of that being the formal exit of ESN.
For a total of $200 million related to the UK home office.
Anticipated FX headwinds of about $50 million, so high level as I sit here today and take a look at as kind of how I would dimensionalize next year in filling in more detail when we get together in February.
Okay. Thank you very much guys appreciate it.
Thank you Tim.
The next question comes from the line of George Notter with Jefferies. Your line is now open.
Hi, guys, thanks very much.
Greg you mentioned the U K I guess I was wondering what the latest and greatest is out of the U K I know you guys were going through the Cat Tribunal process.
I think the release today references that you still haven't heard back.
Thank you had expected to hear back after a number of weeks and so.
I'm wondering what's going on there I'm wondering if the delay anything back with you would potentially good news but.
What do you think is going to happen there and then what it looked like in terms of if you appeal processes, if that cat tribunal process does not work out.
Yeah on the U K, there's really no news to report George we had the hearing on August 2nd and third.
I think we reiterated the strong case, we feel.
With a high level of.
Conviction and.
You've heard me use adjectives before.
I'm very specific with how I would describe the situation.
I think it's unprecedented I think its overreaching.
Entirely disproportionate, but we made the case and as a result, we're waiting on that that cap that competition Appeals tribunal you referenced that ruling.
It's a fairly opaque regulatory process.
I couldn't speculate one way or the other on how to interpret that.
We will wait to get it I would anticipate getting it certainly between now and the end of the year.
And as I've already said.
As well.
In turn does not go our way, we will continue to exhaust all legal options to defend the position we have.
Provisioning and delivering.
Outstanding and very reliable emergency communication services throughout the U K.
Got it and then just as a quick follow up I assume.
Yes.
I understand that you guys have.
Made the adjustment in terms of your financials and expectations, but I assume that contract is still going out.
While we wait for the catch up you know to make a decision and then potentially other appeals processes.
Are you taking the price it now that's right.
We're still delivering the services, we're still investing in the network.
We're still doing all the things that are expected of.
US to deliver superior reliable emergency communication services, we've referenced this to your point.
We did start the deferral of revenue.
On Airwave on August 1st.
So we are deferring that revenue through the balance of this year.
And that informs the about $200 million of incremental revenue headwinds for next year.
Airwave, we're all in is about $110 million to $115 million of that with a balance of $85 million or so being ESN.
So we are obligated to recognize that accounting.
Consistent with the price control final remedies order and when we're doing that.
If theres a different outcome than we would change that accordingly.
Alright, thank you.
Thanks George.
The next question.
<unk> is from the line of Keith Hudson with Northcoast Research. Your line is now open.
Good morning, guys and great quarter.
Terms of the supply chain issues that you guys have had in terms of the semiconductor chips.
Where do we stand with that I mean, do we still have a significant backlog shifts that might carryover into next year or is that largely caught up.
Hi.
Keith Thanks for the question the supply chain environment for our needs for chips, which I'll remind everyone is for generally 40 nanometers and above is improving although it's not to levels of normality. For example lead times for certain chips are now approaching $25 26.
<unk>, where they had been double that but in a normal environment. They should be 15 or 16. So.
Improvements, yes, and that's what's helping us drive the favorability of now $70 million in the P&L.
But still some opportunity to improve further and that's what's incorporated into our expectations for Q4 that we'll continue to.
To use the tools that we've been using for a number of quarters now looking for substitutes working with our.
Our supplier partners.
And using the available supply that we can find.
At lower prices and we would've correct, Jason continue the NPV benefit in 'twenty four as well, yes next year as we told you on the last call. We're planning for about $60 million of 'twenty four incremental PPP relief over 23.
So we still have opportunity to capture there and I expect that in the P&L and again that that aligns to our expectations that things will continue to improve.
Into 'twenty four.
Great. Thanks, I appreciate it if I could just follow up M&A has been a key part of motorola's strategy over the years.
Looking forward I mean, it's our anticipation that you're going to keep with some of these small tuck in acquisitions or is there an appetite for perhaps a larger more transformational acquisition as well.
Well, we certainly are in great shape from a balance sheet standpoint, and the firepower.
To do some things Inorganically, it's ironic Keith because.
Here, we are sitting in November and we have not done an acquisition yet to date that is certainly not for a lack of inactive in a fulsome funnel.
But we've been pretty diligent and quite frankly, some sellers have been reluctant at prices that we thought would be more reasonably valued that's okay.
Having said that do I anticipate some continued M&A tuck in activity I do.
And the team Raj <unk>, Jack Jason Michael answer actively working that funnel.
I think we still probably emphasize in general.
<unk> and video security and access control as areas of probably higher priority than others that we would look to do inorganically and if theres something larger for us to consider we.
We would evaluate that as well clear eyed.
But balanced both financially and strategically and we'll see what comes.
Great. Thank you.
Thanks Keith.
The next question is from the line of Adam Tindle with Raymond James Your line is now open.
Okay. Thanks, good afternoon, congrats on the results Greg I wanted to start with backlog again record levels, just I guess the heart of the question would be how long you think this can continue do you think we're going to exit this year with record backlog again or when do you expect to see maybe some level of attenuation or normalization slowing in backlog based on what your businesses.
Looks like right now.
Yes, I certainly wouldn't speculate on backlog because I don't have a crystal ball, having said that.
Q3, we ended record backlog Q3 was also a record orders quarter.
So I love the funnel I love our conversion.
The record orders and I think we're well positioned by the way when I look at the quality of the backlog in terms of aged or duration that remains strong as well as Jason said, we still have to navigate supply chain on the semi conductor front, it's not normalized lead times remain elevated.
At the end of the day I liked our end markets I think they are pretty resilient.
The demand in criticality for what we do I E public safety and enterprise security informed by video security and access control as well as all the great work the Haitians doing on the product side in command Center.
We'll see where we're at but as we sit here in November do I like how we're entering into 2024, absolutely and if there is any changes to that obviously, we will update you in February.
Got it Okay, and then as we think about that backlog converting to revenue, obviously supply chain still challenged but starting to get better and I'm wondering what that could ultimately mean for 2024 growth in various scenarios, obviously not guiding to that I hear you on the 10, five but if supply were to kind of free up and a boost.
Scenario are you looking at high single digit growth or better what are the kind of a different scenarios based on potential backlog converting to revenue.
Yes, I think I would just stick to the 10 five as a general high level anticipated marker and reserve any additional color on either technologies or segments for the February conversation.
Again, Adam and I appreciate the question, but I <unk>.
All I would tell you is I think I feel very good about going into 2024, and we'll update you in about 90 days.
Okay, Yeah, I understood I know you like to stay Conservative, which we I think we all appreciate maybe just one final point on this for Jason.
This backlog comes through can you maybe speak to the margin profile of that I can't remember if your FIFO LIFO, but.
There may be some benefit from higher priced backlog coming through and would think that would potentially help margins moving forward, but any finer point you can put on the mechanics of that would be helpful. Thanks.
So.
Beginning in Q3 of last year is when our P&L began to see the benefits of the work that Jack and his team did around.
Strategic pricing.
We've seen that continuing.
Back half of last year as well as the entirety of this year so.
Continue to focus on price optimization.
Optimization and some of our new products.
Which customers really like also come.
At a price increase for us so.
In terms of backlog.
We're we prioritize around first of all customers.
Priority goes to public safety.
But for the most part the backlog that we do have in products.
Is representative of the prices that we've implemented circa July of last year. So you've seen it show up in the P&L and we would expect that to continue with our growth being driven by both volume and price.
And I think we do expect operating margin and.
Next year, absolutely, yes exactly.
Okay I appreciate that clarification. Thanks, Greg.
Thanks, Adam.
The next question comes from the line of tumor Silberman with Bank of America. Your line is now open.
Hey, guys. Thank you for the question first one for me.
So your revenue outperformance this quarter.
Versus street expectations really shown through LMR Command Center.
But it looks like you fell a little bit short on a video product and Si can you talk about the weakness there what drove the 5% growth this quarter.
Sure.
Thanks, Tomer, so first of all I want to highlight the fact that we're actually really pleased with Q3, because the 8% is against the backdrop of a comp last Q3 of 33%.
So our full year expectations remain unchanged, it's really a linearity story and I think leaving that I think we take a look at it and say from an alignment standpoint from the portfolio investments, we just announced the <unk> six a camera. We're now shipping the ACC eight which is a unified video management solution and then.
More importantly, if you think about the verticals that we serve it's government, which has shown a resilience and funding it's education, it's healthcare.
In industrial which is actually grew 17% for us this quarter, we're really pleased and we think there's good synergies on the investments we're making in the markets that we serve.
<unk> I think you said, 5% per video as Jack said video actually 8%, 8% over 33, 3% comp in terms of the segment SNS five I remind you that includes the detriment and deferral of Airwave revenue, which is important.
And compresses that but at the same time.
We continue to have great performance in command Center software.
With the strong print for Q3, we have strong managed services performance and something that's not even reflected in Q3 as Denmark, and we'll always team did a fabulous job.
On a multi year project.
And multi year managed services contract to close on Denmark.
So I think that also should.
Inform how you interpret the SNS performance.
Got it and if I can just follow up.
In terms of your <unk> and your physical guidance I'm sure. This is Jeff something more with language than anything, but your <unk> guidance of 4% implies the higher end of your revamped our fiscal guidance.
While the low end of your fiscal guidance would imply around three 5% growth for <unk>. So can you just talk about what would draw what could happen that would draw that incremental half a point of weakness.
Yes, I think.
What I would say tomer as I kind of focus on the approximately 4% I understand the math differences are valued disaggregated it but we're looking at and anticipate 4% revenue growth for Q4 by the way that's in the face of.
$105 million of headwind for Q4 $50 million, which is the airwave deferral, that's in that growth $40 million, which is the business light business model.
Change that we informed you on a couple of months ago, a couple of quarters ago, and there is $15 million of additional FX headwinds. So the 4% is actually pretty healthy quarter.
We're pretty proud of and that's why we're raising the full year accordingly as well.
Great. Thank you.
Thanks Tomer.
The next question comes from the line of meta Marshall with Morgan Stanley. Your line is now open.
Great. Thanks, I just wanted to dive into a couple of your comments on the call.
As noted that rate was doing very well is that it.
More customers coming on is that you're able to kind of cross sell it.
Yeah.
<unk> other products, along with that just kind of where some of that strength coming from and then maybe on the federal side as well.
I noted.
Talked about the $75 million 25 deal, but just is that a broadening of agencies just faster refresh us just kind of commentary on the two sources of upside this quarter that'd be helpful. Thanks.
Just to start out with on the on the integration piece.
We announced.
A quarter ago I believe at this point, where we are bundling rabe with all our new Vesta offers going forward.
Integration between our call handling solution.
And <unk> as well, we have deeper penetration into the <unk>.
Education market with our integration with orchestrate and with our video.
So <unk>.
Button being a big part of it.
We integrated the panic button rave.
<unk> with aware.
Command Central were for real time crime center, so all of that.
As a very positive synergy and I think that helps with the really accelerating rate of adoption across the board.
As it relates to federal.
We're having a record year and as you know the federal government close just occurred.
September 30th we're seeing it it's broad based it's department of Defense Civil is law enforcement, it's multiyear.
So we're really pleased with happened in federal and then when you start to think about some of the federal supplemental requests one of the items and there is a $106 billion for the critical National security.
Which is going to fund, Ukraine, and Israel, what I would highlight is during the course of this year, we've actually shipped a $100 billion into Ukraine, low greater than $100 million at this point in time. So as you think about it everything related to federal Joe Bell tune John's at our and their team have really done a job, we're really pleased with and just to remind everybody of the <unk>.
Size and scale of our federal business last year was 7% of our total revenues. This year, it's trending slightly higher than that it's an important market for us.
And it remains.
An area of focus.
It's smaller than state and local.
One final thing.
We've talked about is around the NDA and secure Communications Act that has essentially been an unfunded mandate and now there's $450 million for the cyber security state local grant Thats got a fund rip and replace which should be beneficial from a camera business standpoint.
Great. Thank you.
But.
The next question comes from the line of Ben Bollin with Cleveland Research. Your line is now open.
Good afternoon. Thanks for taking the question. This is Brian Wilcox on for Ben I was wondering if you could update us on the apex next refresh cycle and where we are in that and how you see that playing out into 'twenty four and 'twenty five.
Sure. So two words I'd say momentum acceleration. We've now we're now receipt of $600 million of orders since our introduction in late 2020, we actually did $100 million of orders in Q3 'twenty three I think the thing. We're most pleased with is we're having good success.
Within major cities, but we're now starting to see smaller state and local customers.
Place orders against Us.
Attribute a few things.
A lot of the basics I would call World class Ergonomics audio quality.
But the game changer for US has really been the application adoption customers. The demand to have location that works hand in glove with our command center software and rave solution.
Ease of use by way of Smart programming and then the ability to extend the networks through smart connect have really been a game changer and I think we look at and say they are.
When we look at our portfolio apex next family of radios. It's.
There's really nothing like it in the public safety domain.
Okay.
I think you asked a follow up question around 'twenty, we've typically said, our LMR business and the device plays into that as it's a mid single digit kind of kind of business.
Okay.
One follow up if I could on the surveillance business.
I think you called out.
Let me incremental verticals getting involved there, but would love to hear your perspective on the mix between commercial and public sector and surveillance and kind of how that's shifted and where it's going.
Sure So public safety.
Now one of our two largest vertical markets in terms of video security.
So I remind everybody that we acquired a visual on that was essentially a nascent business. So that's been the function of our sales team's ability to take a new portfolio into government. So that's the first thing in the enterprise.
Our business in enterprise, particularly in video security and access control is a little different than most it's really centered around safety and security. The primary verticals that we touch there as we've said is education.
Health care and then.
Our business around energy production, and utilities, and transportation, which have all grown as well those are really the core verticals for that business.
In the enterprise space.
Thank you.
The next question comes from the line of Joe Cardoso with J P. Morgan. Your line is now open.
Hey, good afternoon, and thanks for the questions.
I actually just wanted to follow up on the apex snacks comments and the momentum you're seeing there in combo with the LMR growing mid single digits.
We're just coming up against some quarters with tough compares so just wanted to just curious or maybe it's more of a clarification. If you think that mid single digit growth is sustainable even on top of the difficult compares over the next couple of quarters and then I have a follow up thank you.
So our portfolio is.
<unk> refreshing itself around apex next.
And Jack mentioned $600 million of orders since introduction in 2020.
And we have continued to invest in other parts of the portfolio to like Tetra and others.
We're.
Still early stages of device refresh and while having had a number of good quarters.
And continued demand we would expect to continue to be able to grow that business.
As well as I mentioned earlier, the pricing strategy that supports the investments that we make and we spend a sizable amount of R&D too.
To innovate and advance the portfolio should lead to continued growth in the next year.
Got it that's great and then my follow ups actually on free cash flow you had another solid quarter here appears that tailwind are materializing.
Example, being the elevated levels of inventories that we've seen over the past couple of quarters, that's coming down a bit I guess, if we take a step back and we starting to cycle past some of the choppy free cash flow generation, we've seen over the past couple of quarters, just given kind of that dynamic macro environment environment and returning more to a consistency there.
Type of level, we've seen in the past relative to <unk>.
Conversions.
Any thoughts on whether that the level of shareholder return can be maintained or accelerating going forward, just given working capital improving the momentum behind the business et cetera. Thanks, guys.
Sure So I'll start with this year.
I mentioned that we're solidly on track to deliver on the $1 9 billion in cash flow that wasn't aggressive plan that we set at the beginning of the year.
We mentioned in February that that included $300 million of higher cash taxes over 2022, and with cash flow at this point through three quarters being up we are well positioned to deliver on that one nine you are also right in that our inventory levels.
Continue to come down they are down $200 million from this point last year, they are down $85 million sequentially.
And they're still at $950 million, so as we look into next year and the opportunities.
Envision continued opportunity to balance investments in inventory with record backlog and working capital optimization into the future.
Got it thanks for all the color.
Thanks, Joe.
Once again, if you have a question you May press star five on your telephone keypad.
Yeah.
This concludes our question and answer session I will now turn the floor over to Mr. Greg Brown.
Chairman and Chief Executive Officer for any additional comments or closing remarks.
So first of all thanks for everybody dialing in and listening, but also thank you to everybody at Motorola solutions.
Great quarter, great execution, a lot of moving parts, but I love the team, we've assembled and I love the collaboration and pristine focus we have both balancing results and investing for the long term I also would say in closing that.
In a world of challenging and increasing threats.
I think the investments we've made in safety and security are as important as ever.
In effect when you think about what we do we are solving for safer we're solving for safer communities safer schools safer hospitals safer stadiums, and we do that by linking and integrating public safety with private organizations and private institutions to ensure that the.
<unk> that we deliver in provision and the bi directional customize workflow within them protect people property and places.
Again, I'm proud of everybody.
The outlook for our business is strong record orders record backlog a robust funnel.
Lots to do but also lots of opportunity as well look forward to talking to you in February.
Ladies and gentlemen, this does conclude today's teleconference. A replay of the call will be available over the internet within three hours.
Website address is www dot Motorola solutions Dot com slash investor.
We thank you for your participation and ask that you. Please disconnect your lines at this time.
Yeah.
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