Q4 2024 Motorola Solutions Inc Earnings Call
Good afternoon, and thank you for holding welcome to the Motorola solutions fourth quarter 2024 earnings Conference call. Today's call is being recorded if you have any objections. Please disconnect at this time the presentation material and additional financial tables are posted on the Motorola solutions Investor Relations website.
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The website address is www dot Motorola solutions Dotcom slash investor.
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Speaker Change: I would now like to introduce Mr. Tim Yocum, Vice President of Investor Relations. Mr. Yocum, you may begin your conference.
Speaker Change: Good afternoon, welcome to our 2020 for fourth 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 CFO and Mahesh SAP, the Richy Executive Vice President and C. T O, Greg and Jason will review our results along with commentary.
And Jack and Mahesh will join for Q&A.
Speaker Change: We've 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 noted.
Speaker Change: A 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.
Speaker Change: 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 on our 2023 annual report on Form 10-K, or any quarterly report on Form 10-Q.
Speaker Change: 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 will turn it over to Greg.
Greg: Thanks, Tim and good afternoon, and thanks for joining us today.
Greg: I'm going to start off by sharing a few thoughts about the overall business before Jason takes us through results and our outlook.
Greg: First Q4 was another exceptional quarter, we achieved record revenue in both segments and all three technologies, including double digit growth in video and command center, highlighting the depth and breadth of our safety and security ecosystem that helps us protect people property and places. Additionally, we generated Q.
Greg: For record operating earnings in both segments and ended the year with record backlog of $14 7 billion up 438 million inclusive above 226 million of unfavorable currency rates.
Greg: Second our full year results were outstanding and product and Si revenue was up 10% driven by growth in both LMR and video. We also expanded operating margins in this segment by 380 basis points driven in part by continued favorable mix to our feature rich devices and lower material cost.
Greg: Yeah.
Greg: In software and services revenue was up 5% or 13%, excluding U K home office driven by strong growth in video Command Center, and our LMR services businesses outside of the U S.
Greg: We also grew earnings per share a 16% operating cash flow by 17% and strengthened our safety and security offerings with four acquisitions, and our video and command center and technologies and subsequent to quarter end, we announced that we've entered into into a definitive agreement to acquire theatrical.
Greg: Baker of AI and voice powered communication and digital workflow software for frontline workers and finally as we enter 2025. The continued robust demand for our solutions, coupled with our record backlog and healthy balance sheet position.
Jason: Positions us well for another year of strong revenue earnings per share and cash flow growth and with that I'll now turn the call over to Jason.
Jason: Thanks, Greg revenue for the quarter grew 6% and was above our guidance with growth in both segments and all three technologies revenue from acquisitions was $37 million and the impact of favorable foreign currency rates was $6 million.
Speaker Change: GAAP operating earnings were $814 million or 27% of sales up from 25, 9% in the year ago quarter, driven primarily by a recovery related to the high tariff litigation.
Speaker Change: non-GAAP operating earnings were $916 million up 5% from the year ago quarter, and non-GAAP operating margin was 34% versus 35% in the year ago quarter.
Speaker Change: GAAP earnings per share was $3.56 up from $3 47.
Speaker Change: In the year ago quarter, non-GAAP EPS was $4 four up 4% from $3.90 last year, driven by higher sales and favorable mix Opex in Q4 was $652 million up 55 million versus the prior year, primarily due to higher employee incentives investments in video and higher expenses.
Speaker Change: Fences from acquisitions.
Speaker Change: For the full year 2024 revenue was $10 8 billion up 8% with strong growth in both segments and across all three technologies revenue from acquisitions was $95 million and the impact of unfavorable foreign currency rates was $2 million GAAP operating earnings were $2 7 billion or 24.
Speaker Change: 8% of sales versus 23% in the prior year.
Speaker Change: non-GAAP operating earnings were $3 1 billion up 358 million and non-GAAP operating margins were 29% of sales up from 27, 9% of sales in the prior year driven by higher sales favorable mix and lower direct material costs, partially offset by the airwave charge control and the impact of acquisitions.
Speaker Change: GAAP earnings per share was $9 23 down from $9 93 in the prior year, primarily due to the $3 42.
Speaker Change: Per share pretax loss booked in Q1 related to the accounting treatment for the settlement of the Silverlake convertible notes non.
Speaker Change: non-GAAP EPS was $13 84 up 16% from $11 95 in.
Speaker Change: In 2023, driven primarily by higher earnings.
Speaker Change: For the full year Opex was $2 4 billion up $197 million versus 2023, primarily driven by higher employee incentives higher expenses associated with acquisitions and higher legal costs inclusive of the CMA appeal.
Speaker Change: And the effective tax rate for 2024 was 22% compared to 21, 9% in the prior year.
Speaker Change: Turning to cash flow Q4, operating cash flow was $1 1 billion down from $1 2 billion in the prior year as the linearity of cash generation improved and resulted in full year record operating cash flow of $2 4 billion and record free cash flow of $2 1 billion, the 17% year over year operating cash flow increase was driven by high.
Speaker Change: Your earnings and marks the second consecutive year of double digit operating cash flow growth cap.
Speaker Change: Capital allocation in 'twenty four included 654 million in dividends $282 million for acquisitions $244 million in share repurchases and $257 million of Capex. We also used $593 million of cash to settle the silverlake convertible premium in Q1 and increased.
Speaker Change: Our dividend by 11% in November which was our 14th consecutive year of double digit increases.
Speaker Change: Moving to segment results in products Q4 sales were up 3% versus last year driven by growth in LMR and video revenue from acquisitions was $11 million in the quarter, while the impact of favorable foreign currency rates was $1 million operating earnings were $594 million or 35% of sales up from 30% in the.
Speaker Change: Prior year, driven by higher sales favorable mix and lower direct material costs.
Speaker Change: Notable wins and achievements in this segment include a $53 million P 25 device order from a U S state and local customer of $52 million P 25 system and device order for a Canadian customer of $36 million P. 25 device order for Broward Sheriff's office in Florida.
Speaker Change: $33 million P 25 system order from the Kentucky State police a $32 million P. Twenty-five device order for the city of Phoenix Police and fire and a $16 million fixed video order for Duke energy and.
Speaker Change: And for the full year products and Si revenue was $6 9 billion up 10% from the prior year driven by higher sales in LMR and video revenue.
Speaker Change: Revenue from acquisitions was $43 million and the impact of unfavorable foreign currency rates was $2 million.
Speaker Change: Operating earnings were $1 9 billion or 28, 1% of sales up from 24, 3% in the prior year on higher sales favorable mix and lower direct material costs.
Speaker Change: In software and services Q4 revenue was up 11% driven by growth in all three technologies revenue from acquisitions was $26 million, while the impact of favorable foreign currency rates was $5 million.
Speaker Change: Q4 operating earnings in this segment were $322 million and operating margins were 33% of sales down from 31, 6% last year, primarily driven by acquisitions.
Speaker Change: <unk> Q4 highlights in this segment include a $329 million 10 year services renewal for Melbourne, Australia's LMR network.
Speaker Change: It was $160 million five year LMR managed services renewal for Norway's nationwide public safety network, a $68 million LMR services order for a U S state and local customer a $40 million Command center order from the Scottish Fire services, and finally, a $16 million fixed video order for the Sao Paulo State.
Speaker Change: <unk> in Brazil.
Speaker Change: For the full year SaaS revenue was $3 9 billion up 5% compared to last year.
When excluding the U K home office revenue grew 13% with the growth in all three technologies revenue from acquisitions was $52 million during the year full year operating earnings were $1 2 billion or 38% of sales down 310 basis points versus the prior year, driven by the airwave charge control and higher expense.
Speaker Change: Is associated with acquired businesses during the year.
Speaker Change: Looking at regional results North America revenue was $2 2 billion in Q4 up 9% and seven eight the <unk>.
Speaker Change: Full year up 13% driven by growth in both segments and in all three technologies International Q4 revenue was $807 million down 3% versus last year, primarily driven by lower Ukraine revenue in the current year and our exit from ESN, which was in the year ago quarter offset by growth in video and.
Speaker Change: Command Center.
Speaker Change: For the full year International revenue was $3 billion down 2%, excluding the U K home office International revenue was up mid single digits driven by growth in all three technologies.
Speaker Change: Moving next to backlog ending backlog for Q4 was $14 7 billion up $438 million versus last year inclusive of $226 million of foreign currency headwinds sequentially backlog was up $602 million inclusive of $319 million of foreign currency headwinds.
Speaker Change: And in the products and Si segment, ending backlog was down $858 million driven primarily by strong LMR shipments during the year.
Speaker Change: Sequentially backlog was down $46 million, primarily driven by unfavorable FX.
Speaker Change: In software and services backlog increased $1 3 billion from last year and $648 million sequentially.
Speaker Change: The growth was driven by strong demand in all three technologies inclusive of foreign currency headwinds of $195 million year over year and $281 million sequentially.
Speaker Change: Turning next to our outlook, we expect Q1 sales to be up between five and five 5% with non-GAAP EPS between $2 98, and $3 <unk> per share.
Speaker Change: This assumes approximately $25 million and foreign exchange headwinds $170 million 171 million diluted shares.
Speaker Change: And a non-GAAP effective tax rate of approximately 21%.
Speaker Change: And for the full year, we expect revenue growth of approximately five 5%.
Speaker Change: Inclusive of our expectations for $120 million of FX headwinds driven by the U S dollar strength over the last few months.
And for non-GAAP earnings per share between $14 64, and $14 74 per share.
Speaker Change: The full year outlook also assumes 171 million shares and our non-GAAP effective tax rate of approximately 23%.
Speaker Change: Additionally, the outlook assumes tariff rates that are in effect today.
Speaker Change: And finally with respect to cash flow, we expect to generate $2 7 billion and Ocs, which we would expect to make 2025, our third consecutive year of double digit operating cash flow growth before I turn it over to Greg I wanted to share just a few other things first with the U K.
Speaker Change: Home office headwinds behind us on a full year basis and the strong momentum we are seeing in cloud adoption in SaaS, we expect our SNF segment growth to be high single digits or double digits when normalized for FX.
Speaker Change: And on the product segment, we are expecting low to mid single digit growth coming off a record 2024.
Speaker Change: Secondly, I would provide you with some color on the technology growth expectations as well in video we're planning for another strong year of approximately 10% to 12% growth.
Speaker Change: Inclusive of the increased cloud adoption, we're seeing from our customers.
Speaker Change: And command Center, we're planning for 12% growth driven in part by continued strong adoption for our SaaS offerings there.
Speaker Change: And in LMR, we expect low to mid single digit growth inclusive of the majority of the FX headwinds that I mentioned earlier.
Speaker Change: And finally, I'd highlight the strength of our balance sheet, which includes over $2 billion in cash at year end, our fixed rate debt maturity profile with no significant maturities until 2028, and a solid investment grade credit rating all of which gives us significant flexibility in capital allocation.
Speaker Change: Greg I'd like to turn it back to you. Thanks, Jason and then let me just end with some final thoughts.
Greg: First 2024 was another exceptional year for the company, we achieved record sales in both segments and all three technologies significantly expanded operating margins grew EPS by 16%.
Greg: Generated record operating cash flow of $2 4 billion up 17% from the prior year and we also returned almost 1 billion $5 to our shareholders through dividends share repurchases.
Greg: And the settlement of the Silverlake convertible note at less than $320 a share and we added four acquisitions within our video and command Center technologies.
Greg: Second the investments, we're making in software and services continue to drive strong recurring revenue growth for the company software and services revenue was up 13% during the year, excluding U K home office driven in part by accelerating demand for our software solutions and command Center video and our suite of.
Greg: <unk> running on our apex next family of devices.
Greg: We also finished the year with SNS backlog of $10 6 billion up 14%, including record backlog in all three technologies, which is informing our guide for another strong year of growth in 2025.
Greg: And finally as we enter this year, we're very well positioned for another outstanding year, our customers are continuing to invest in LMR for the long term highlighted by the numerous large multi year contracts that we received over the last year. We're also seeing strong interest in our latest generation.
Greg: <unk> series, Astro infrastructure, which is creating a healthy pipeline of upgrade opportunities and is a further testament to the foundational longevity of this technology.
Greg: And Additionally, the upgrade cycle to our apex next family of devices.
Greg: <unk> to drive product and recurring revenue growth via the applications that are on each device and.
Greg: And in video and command Center, we continue to see robust demand and are expecting another year of double digit growth in both of those technologies as well.
Greg: Finally, our healthy cash generation and strong balance sheet with a net debt to EBITDA ratio of one one probably the lowest we've seen in almost a decade.
Greg: Abides us with significant flexibility to deploy capital Opportunistically.
Tim Yocum: And drive value for our shareholders and our total addressable market, which is now approximately $72 billion. So now I'll give the call back to Tim and we can take your questions.
Tim Yocum: Thank you Greg.
Tim Yocum: Before we begin taking questions I'd like to remind callers to limit themselves to one question 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.
Tim Yocum: The floor is now open for questions. If you have a question or comment. Please press star five on your telephone keypad. If for any reason you would like to remove yourself from the queue. Please press star five once again, we do ask that while you pose. Your question you. Please pick up your handset to provide optimal sound quality.
Tim Yocum: Kim.
The first question is from Tim long with Barclays. Your line is now open.
Speaker Change: Thank you Melissa on for Tim.
Tim Yocum: Q.
Tim Yocum: Perfect.
Tim Yocum: Alright.
Tim Yocum: The holiday, we think Trump administration federal spending shifts and goes are you guys seen any impact in terms of customer behavior.
Tim Yocum: Claimant.
Tim Yocum: And then I had one follow up.
Tim Yocum: Yeah.
Tim Yocum: No we're not.
Tim Yocum: I think that.
Tim Yocum: My view and our view of dose, we like the opportunity where the government is deploying that organization.
To get after kind of frivolous and wasteful spending, which I think is a good thing overall, but in direct answer to your question, we're not seeing any changes in customer behavior. As a result of that effort at this point in time.
Tim Yocum: Okay. That's helpful. And then just one follow up on the video piece given.
And that's inclusive of customers move to the cloud.
Tim Yocum: How should we think about.
Tim Yocum: If there wasn't a move to the cloud.
Tim Yocum: The growth be a point or two higher if we didn't count those headwinds as customers move to the cloud how should we think about.
Tim Yocum: The growth rate for video.
Tim Yocum: The cloud.
Tim Yocum: What we love the fact that customers are moving to the cloud you know we offer solutions for both prim.
Tim Yocum: And cloud.
Tim Yocum: We talked about it last year that there was.
Tim Yocum: Pretty good acceleration to the cloud we are seeing a continuation of that.
Tim Yocum: Which is a good thing and we love the fact that we're still able to grow double digits 10.
Tim Yocum: 10% to 12%, even with the cloud adoption, which of course kind of smooths out revenue rec. So we see it as a favorable trend we like the continued momentum and we think we're well positioned in the cloud adoption continues in other parts of the portfolio, Absolutely Command center and the work that Mashes done there so and.
Tim Yocum: With the further integration of video and command Center legs, we view that the cloud adoption of our customers to be a strength indicator across really the entire platform.
Tim Yocum: Thank you.
Meta Marshall: Our next question comes from meta Marshall with Morgan Stanley. Your line is now open.
Mary: Hi, This is Mary on for meta.
Mary: Another question on federal.
Mary: What are you seeing in terms of the federal Budge.
Mary: <unk> approval and any upside from integration efforts and any expectation of Ukraine revenue.
Mary: And this year.
Speaker Change: Yeah by the way just as it relates to Ukraine.
Speaker Change: Really no revenue expectation for this year, we had about $80 million last year. So.
Speaker Change: We don't have expectations for really any ukranian revenue at this point in 2025, most of the Ukraine revenues were in PCR that's true.
Speaker Change: And Mary most of our engagement with the federal government as.
Speaker Change: As Doj DHS and D O D and I would say D O D. It's based security.
Speaker Change: Think of enterprise security at based security operations.
Speaker Change: Multiyear.
Speaker Change: Pipeline, we've got Pete.
Speaker Change: <unk> 25, both systems and device opportunities I think it's important to highlight that yesterday, we were given a go ahead in fat fed ramp high classification, which enables us to sell apex next our application services on APAC snacks, we're excited about that because actually that'll open up incremental opportunity to sell high tier devices.
Speaker Change: And then the last thing I'd highlight is video engagement. Government has outpaced video security growth for the company, and federal government has certainly been an area of brightness for us, and I think the engagement with our customers with the new administration continues to look very positive. And if you think about video all-in...
Speaker Change: All in for us, it was a little over $550 million last year in the government vertical. The government vertical remains our largest for video, and we expect in 2025, all in video growth to grow faster than the 10-12% for the technology as a whole.
Great, thank you.
Thank you.
Speaker Change: Our next question comes from Joseph Cardoso with J.P. Morgan. Your line is now open.
Speaker Change: Hey, thanks for the question. Um, I guess maybe just wanted to follow up on that last one and just maybe it's more of a clarification, but Greg, you know, saw some interviews, you know, towards the end of the year.
Speaker Change: where essentially post the election you're sounding a little bit more positive about the operating environment.
Speaker Change: Highlighting some of the topics and focus around police and border patrol, obviously, you know, and obviously we see the rhetoric out there, but just curious, like, could you just dimensionalize like how tangible this is today in terms of potentially maybe upside to like spending?
Speaker Change: across maybe some of those areas of focus, and if you're actually seeing it in orders, or at least is there any early discussions with customers that is kind of tied into maybe that upside around that? And then I have a quick follow-up for Jason.
Speaker Change: Sure Joe, well, so let's start with kind of since we last talked in November and I gave high-level color of five to six percent all in for the firm.
Speaker Change: We got it obviously at five and a half percent, but when you incorporate the expectations for 120 million
Speaker Change: of FX, it's actually a stronger view today in February than I had in 2020, 2025 than I had
Speaker Change: in November. So I think the also, the positive feeling about the year is informed not just by the record backlog, but by the pipeline. The pipeline continues to grow.
So, with the pipeline growing...
Speaker Change: and the setup for this year, I feel pretty good about where we are. I think that in addition to growing the top line five and a half percent absorbing expectations for FX,
Speaker Change: We expect gross margins to be comparable to slightly up. We still expect operating margin expansion.
And, you know, that's inclusive of...
Speaker Change: about $25 million of headwind associated with higher interest and a little bit of a higher tax rate. So all in, Joe, I kind of like the setup.
Speaker Change: They're looking at and it would you know, I got an earlier question about Doge look they're looking about
Speaker Change: efficiencies and workflow. And a lot of what we do in public safety and security speaks to workflow efficiencies and doing more with less. So I feel good about where we are and we'll operate accordingly with this administration.
Speaker Change: No, that's great, Greg. Thank you for the insights there. And then maybe just a quick one for Jason. On the tariffs, can you maybe just quantify how much of a headwind you're embedding from a tariff impact?
Speaker Change: And then the second part of that is, any way you can kind of help us think about if you're more biased to any of the particular regions that are under the scope here?
Speaker Change: Sure, thanks. So, clearly supply chain is an ever-changing environment, you know, having tackled semiconductor challenges over the last two years, now it's tariffs.
Speaker Change: We like our footprint, the flexibility of it, and where we're positioned. Outside the USA, we're in Mexico, Malaysia, and then Canada, in that order.
Speaker Change: China is not a risk for us. The 301 tariffs we've navigated.
Speaker Change: with minimal impact because we don't have operations or manufacturing there.
Speaker Change: So, as we look forward, and the guide we gave is reflective of...
The tariff rates that we're paying
today. We'll continue to monitor and navigate.
with flexibility in the footprint we have and ROI-based decisions.
Speaker Change: with facts on the ground as they present themselves. So we'll continue to be nimble in that regard. And Joe, just an adder, even though it's a tariff kind of slash supply chain question.
Speaker Change: Jason's team and Chad Workum did a great job over the last year or two.
Speaker Change: We did end up benefiting $65 to $70 million of PPV benefit, which we said we would achieve last year. Baked into the forward-looking guidance for this year, we're expecting
Speaker Change: PPV benefit of about 25 million that would help you to kind of dimensionalize the current trend in that regard.
Speaker Change: Got it, guys. Thank you for all the color. Appreciate it. Thanks, Bill.
Speaker Change: Our next call, a question comes from Keith Hausman with North Coast Research. Your line is now open.
Keith Hausman: Good afternoon, guys. Hopefully, you know, Jason or Greg, can you guys unpack the theatrical acquisition a little bit more for us in terms of what it brings to the table in terms of, you know, its capabilities and how you plan on, you know, expanding the business from here?
Jason: Yeah, Keith, so in terms of revenue contributions, we expect it to close this year. It'll be pretty small.
Keith Hausman: We will record it and it'll be part of our command center offer.
Jason: We're really excited about the technology that it represents, and I think Mahesh is best positioned to give you some insights as to why.
He's for frontline workers. Eyes up.
hands-free.
Speaker Change: is important, but they would like to benefit from AI as well. And audio ends up being a very significant interface into AI. And Theatro has an entire solution that is turnkey, today specifically optimized for frontline worker workflows.
Jason: They're very strong in retail, and we feel like we can expand them into other markets as well, so we're pretty excited.
Jason: Great. Appreciate it. And if I can just expand, Jason, on the tariff question from before, I noticed your commentary was that tariffs are in place today, but it sounds like, you know, a Canadian and Mexico tariff could be on a
Jason: I'm going to come here really quick. Is it possible to kind of give some context of what that perhaps would mean for you guys?
Keith Hausman: I think with the flexible footprint, Keith, we would first of all need to understand what the tariffs are, we're working through that, as well as what
Keith Hausman: where and how we would switch positioning. So, you know, the tariffs that have been discussed, we're working through them. In terms of what's in our guide, it's the tariffs that are in effect right now.
Keith Hausman: a global manufacturing footprint across EMSs that can afford us flexibility, could take some investment, could take a little time, but we'll continue to monitor this. But what's reflected now is what's
I'm in paper right now.
Okay, thank you.
Thanks, Keith.
Speaker Change: Once again, if you have a question, you may press star 5 on your telephone keypad.
Speaker Change: Our next question comes from Louis DePalma with William Blair. Your line is now open.
Greg, Jason, Jack Mahesh, and Tim, good afternoon.
Hey Louie, how are you?
doing well.
Speaker Change: There's been a lot of questions on DOJ, which relates to federal spending and efficiency. But I was wondering, how is the local and state spending environment
right now in the U.S. I think it was...
Speaker Change: A year or two years ago, you said it was the strongest spending environment that you've ever seen, Greg, but how would you categorize it now, two years later?
Speaker Change: Yeah, hey Louie, it's Jack. First of all, I think the most important point here is what's happening in urban American cities across the country.
Speaker Change: public safety, public safety technology continues to get prioritized. So that's the overarching narrative. As it applies to funding, it's still a very good, I'd say it's a great funding environment because if you think about it, local revenues essentially come from income.
Speaker Change: Sales and property taxes. There's been a tailwind and actually inflation has put more money into state and local coffers as relates to that. In addition, 9-1-1 funding, the environment is strong there. So 2025.
Speaker Change: Looks to be historically, and I've been in doing business in state and local for 25 years.
Speaker Change: It's as good as an environment as Greg articulated two, two years ago. I agree. And I think the point is we look at a lot of things. Our pipeline, as Jason and Greg indicated, continues to be strong, but we're also looking at, you know, bottom of funnel things.
Speaker Change: quoting an activity which is up substantially year-over-year, and I think that's a measure not only of sales activity, but customer demand and what they need to keep their municipality safe.
Speaker Change: Thanks. Thanks, Jack. And on several earnings calls and, you know, for fireside chats, Mahesh, you have discussed Motorola's
Speaker Change: Robust investments in AI for like video preventive alerts and 911 transcription and many other applications. I was wondering on the LMR side
Apple has launched Apple intelligence at the edge.
Speaker Change: And does Motorola have plans to also bring AI apps to, you know, your edge radios beyond what you already have? Is that like a big focus area for the company?
So if I maybe take a step back there, Louie.
today like
Speaker Change: You take a generative AI model, a large language model of some sort, you can get it to summarize, you can chat with it, etc. It's pretty easy to implement those capabilities. But taking it to the mission critical problem set is quite different. And it's much harder, specifically because
Speaker Change: You are not catering to the typical circumstances, you're actually catering to the somewhat typical and atypical circumstances. And oftentimes those atypical circumstances are actually the life critical problems that we deal with.
Speaker Change: When it comes to AI for us, we actually already play not just in the cloud, but also at the edge.
Speaker Change: The majority of our video platforms today, over 90% of our cameras, actually have edge intelligence built into them. Most of them run vision transformers and other AI technologies, mainly for computer vision type of applications.
Speaker Change: So as we think about what we do on the radio side, we introduced Vicky quite a few years ago, along with Apex Next.
Speaker Change: And we feel like that, combined with generative AI capabilities, gets us more capabilities. And we are thinking about that, and we are planning for it. Audio quality ends up being a very significant part of it, and that, we believe, is a...
Speaker Change: a significant strength of Apex Next and our radio products as a whole. So there's a lot to be excited about that.
Speaker Change: Great and are you using like AI to improve the like existing high audio quality of your your LMR network?
Speaker Change: We use AI actively for background noise cancellation, and we also use it to improve the audio codec itself, along with a beam steering for the multiple microphones we have on our RSMs.
Meta Marshall: Excellent. Thanks. That's exactly what I was looking for. Thanks, Mesh.
Thank you.
Speaker Change: Our next question comes from Tomer Ziberman with Bank of America. Your line is now open.
Tomer Ziberman: Hey guys, sorry I joined a little bit late, so apologies if these questions have already been asked. Looking at the P&L, it looks like the product portion of your video security business actually picked up this quarter. I just wanted to see what the trends were there, specifically around video security products.
Tomer Ziberman: Yeah, so you're picking up on it, right? It did grow in Q4. And as we mentioned last quarter, the...
Tomer Ziberman: The solution in video is not only products, it's also software.
Tomer Ziberman: And the software rate of growth within video has, for the entirety of 24, grew faster than that of products. So the product growth we're pleased with in Q4 represents a bit more cameras and contribution towards products, and the software that's embedded with them follows.
Speaker Change: understood and maybe as a follow-up asking about backlog I guess more
Speaker Change: philosophically, where do you think, you know, the product portion of your backlog, not where it ends up, but this year, but going forward over the next few years, do you get back to a roughly 3 billion historical level or because there's an increased...
video security portion, does that have elevated levels versus historical?
Speaker Change: Well the video part of our business which is growing and we expect this year to be over two billion is largely a quick turn business and doesn't come from backlog so that that is
changing the mix of what we would expect to do.
Speaker Change: But I think stepping back, demand continues to be strong. It's reflective in not only our backlog position, but also a growing pipeline.
Speaker Change: and this quick turner in your orders is something that in any year is important to be a contributor to our outlook expectations. So it's both backlog and pipeline. Exactly.
Understood. Thank you very much.
Speaker Change: Thanks, Tomer. 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.
Greg Brown: So I just want to say thank you to all the people and the partners in Motorola Solutions that made this past year a great year. I appreciate everything you do.
Greg Brown: As importantly, or more importantly, I appreciate what you continue to do as we start this year with a growing pipeline, a strong balance sheet, and operating a company where safety and security remains prioritized.
Greg Brown: with a lot of our end-user customers. And I think that informs our excitement about the year, informs our prudent guide.
Greg Brown: But it leads me to anticipate another year of record revenue, of record earnings, and I love the fact
Greg Brown: that were set up, and we expect a third consecutive year of double-digit.
Greg Brown: operating cash flow. I also do want to point out and thank all the people
Greg Brown: associated with the LA fires and the terrorist attack in New Orleans.
Greg Brown: By the way, there's some employees that were impacted within our company by those tragedies.
Greg Brown: but every single time something like that occurs, inevitably I hear from Jack and the team about countless examples of selfless employees who go above and beyond.
and I'm reminded...
Greg Brown: around the criticality of the solutions that we sell in all things public safety and mission-critical communications, and I appreciate that. Thank you for joining us today. Look forward to talking to you all again with our team in May, and I appreciate you. Thanks.
Speaker Change: This does conclude today's teleconference. A replay of this call will be available over the internet within three hours. The website address is www.motorolasolutions.com slash investor. We thank you for your participation and ask that you please disconnect your lines at this time.
Speaker Change: [music].