Q2 2025 Motorola Solutions Inc Earnings Call
And thank you for holding. Welcome to the Motorola Solutions, second quarter 2025 earnings conference call.
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I would now like to introduce Mr. Tim Yocum, vice president of investor relations Mr. Yoakam who may begin your conference.
Good afternoon. Welcome to our 2025 second quarter earnings call with me today are Greg Brown chairman and CEO Jason Winkler Executive, Vice President and CFO Jack Malloy, Executive Vice President and coo and the head staff to reach the Executive Vice President and CTO.
Greg and Jason will review our results along with commentary and Jack and the hash will join for Q&A.
We posted an earnings presentation and news release at Motorola solutions.com investors.
These materials include gaps and non-gaap reconciliations for your reference.
during the call, we referenced non-gaap Financial results including those in our Outlook, unless otherwise noted
a number of forward-looking statements will be made during this presentation and during the Q&A portion of the call,
These statements are based on current expectations and assumptions that are subject to a variety of risks and uncertainties actual results could differ materially from these forward. Looking statements,
Information about factors that could cause such differences can be found in today's earnings news, release in the comments made during this conference, call in the risk factor section of our 2024 annual report on form 10K 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 will turn it over to Greg.
Uh, thanks Tim and good afternoon, and thanks for joining us today.
I'll begin with a few thoughts for the business uh, before turning it over to Jason.
First, Q2 was another outstanding quarter.
With record Q2 revenue and earnings per share that exceeded our guidance, as we continue to see strong customer demand across all areas of the business.
Revenue was up 5% in the quarter highlighted by 15% growth in software and services. We also expanded operating margins by 80 basis points, which led to record Q2 operating earnings and strong operating cash flow growth, which was a record for the first half of this year.
Second investments in Public Safety and Security continue to be a priority for our customers highlighted by our record. Q22 orders up 27% versus last year, inclusive of 10% growth in products. We also ended the quarter with over 14.1 billion of backlog including 10.7 billion of software and services backlog, which is our highest SNS backlog ever and up 1 billion versus last year.
And finally based on our strong, Q2 results and our increased expectation. For the remainder of the Year, we're raising our full year guidance for sales, earnings per share and operating cash flow. Now I'll turn the call over to Jason who will take us through results and outlook before I return for some final thoughts.
Thank you, Greg revenue for the quarter. Grew 5% was above our Guidance with growth in all 3 Technologies.
Foreign currency Tailwind during the quarter, were 9 million while Acquisitions added 39 million.
Gap, operating earnings were 692 million or 25% of sales up from 24.5%. In the year ago, quarter non-gaap operating earnings were 818 million up 8% from the year go quarter and non-gaap operating margin was 29.6% up. 80 basis points driven by higher sales and improved operating Leverage
Gap earnings per share was 3.4 up from 2.60. In the year ago quarter
Non-gaap EPS was $3.57 up, 10% from $3.24 last year, driven by higher sales and operating margins as well as the lower diluted share count in the current year.
Opex in Q2 was 615 million up 22 million versus last year primarily due to acquisitions.
What was 272 million up 92 million versus last year and free cash flow was 224 million up. 112 million, the increase in year-over-year. Cash flow was primarily driven by higher earnings and improved working capital, and for the first half of the Year, operating cash flow was a record. 783 million up, 39% versus the first half of 2024.
For the full year, we're raising our operating cash flow expectations to 2.75 billion up 15% from last year and is inclusive of 75 million of transaction fees related to the silver sex acquisition as well as incremental interest to financing the deal.
Capital allocation for Q2 included $218 million in share repurchases at an average price below $415 a share, $182 million in cash dividends, and $48 million of CapEx.
and subsequent to the quarter end, we closed the silver acquisition for 4.4 billion of upfront consideration which was primarily funded through 2 billion of long-term notes that we issued in Q2 and 1 and a half billion of new term loans drawn, subsequent to quarter end
The remaining consideration of 900 million was settled through a combination of cash on hand and issuance of commercial paper.
Moving to our segment results, in products, and Si sales of 1.7 billion with flat, compared to the year prior while operating earnings of 442 million or 26.7% of sales was comparable, inclusive of additional tariff costs and the continued investments in video during the current year offset by lower material cost.
Some notable Q2 wins in the events in this segment include an 82 million p25 system upgrade for Tri County systems in the St. Louis region.
A $30 million p25 device order for the City of Miami Florida. A 22 million p25 system upgrade for the state of Michigan.
A 15 million fixed video order for a US Federal customer and an 11 million p25 device order for the Las Vegas Metro Police Department.
In software and services Revenue was up, 15% compared to last year, driven by strong growth across. All 3 Technologies revenue from Acquisitions was 39 million in the quarter, operating earnings in the segment, where 376 million or 33.8% of sales up from 32.3% last year, driven by higher sales and improved operating leverage partially offset by acquisitions.
The notable Q2 highlights in SNS include a 44 million Command Center order for a US state and local customer. A 20 M, 29 million p25 system, upgrade and LMR Services order for the city of Chicago. A 12 million LMR cyber security order for the state of Victoria, Australia and 11 million Services order for the state of New Mexico. And finally, a 9 million LMR Services order for a US Federal customer.
Looking next at our regional results North America. Q2 Revenue was 2 billion dollars up 6% on growth. In all 3 Technologies International Q2 Revenue was 738 million up 4% versus last year driven by growth in LMR.
Moving to backlog, ending backlog for Q2 was 14.1 billion up 150 million versus last year and up 19 million. Sequentially driven by strong demands including record. Q2 orders which were up double digits in both of our segments.
In the Products and SI segment, ending backlog decreased $902 million versus last year and $172 million sequentially due to continued strong LMR shipments.
In software and services backlog, increased 1 billion dollars compared to last year and 191 million. Sequentially driven by strong demand for multi-year contracts across all 3 Technologies and the impact of foreign currency partially offset by Revenue recognition for the UK home office.
Earning next to our Outlook. We expect Q3 sales growth of approximately 7% with non-gaap EPS between 3.82 and 3.87 cents per share
This is assumes a weighted average diluted share count of approximately 169 million shares and an effective tax rate of approximately 24% for the full year. We now, expect revenue of approximately 11.65 billion or 7.7% growth up approximately 250 million from our prior guidance of 5 and a half percent growth.
And expect non-gaap EPS between 14.88 and 14.98. Cents per share up from our prior guidance of 146,064 to 14.74.
And now assumes a weighted average diluted share count of approximately 169 million shares.
Before I turn the call back to Greg, I'd like to share a few thoughts regarding the syllabus transaction.
first, when we announced the transaction in may, we shared the strong financial profile of syllabus with expectations of 475 million of full year, 25 Revenue at approximately 45% adjusted Eva margin
Our full year outlook assumes, 185 million of Revenue contribution from Silver. This year representing the stuff period, following the transaction closed yesterday.
It also assumes that syllabus will be slightly diluted for EPs and Q3 and neutral.
For 2025.
Second as it relates to our 3 Technologies. We are expanding our LMR technology category to include syllabus under the new name of mission, critical networks or MCN.
With the inclusion of syllabus this year, we expect ncn MCN to grow mid single digits.
And from a segment perspective, the majority of the business will be reported under products and systems integration.
And finally, our balance sheet remains strong following the acquisition of syllabus and the financing plan. I described earlier.
And all 3 rating agencies have affirmed, our Triple B level ratings.
we maintain a balanced maturity profile with approximately 8 years of duration and an average C coupon of just under 4.6% on our senior notes,
Strong growth in our earnings power cash. Generation has significantly expanded our leverage capacity which we expect to continue to grow with sylvis, providing us flexibility to deliver on our Capital allocation framework, which includes share repurchases as well as additional acquisition.
With that. I'd like to turn the call back to Greg.
Uh, thanks Jason.
First, I'm very pleased with our Q2 results which highlight the durability of our business and the strength of our portfolio.
We continue to invest both organically and inorganically to in solutions that are continuing to provide us with sustainable long-term growth.
Some recent examples, include our announcement of scx.
Which is a first of its kind video. Remote p25 speaker mic that converts to secure voice video and Ai and eliminates the need for a separate body worn camera. We started shipping svx just a few weeks ago, and the customer feedback has been strong.
Since the launch, we've received orders from over 30 agencies with the majority coming from customers that do not currently use a Motorola body camera by letting the opportunity. We have to capture future market share in the US public safety body, worn, camera space.
In drones and unmanned systems. We've made several Investments this year that allow us to capitalize on this fast growing space.
With our acquisition of suss. We're now a leader in mobile ad hoc networks, which provides the high speed infrastructure list, Communications backbone for unmanned systems in the air on the ground and in the water that it become increasingly important in today's Defence environment as well as border security and Public Safety.
in drone, is the first responder our strategic alliance with Brink provides us with an American-made purpose-built, Public Safety, grown, that allows customers to reduce emergency response times and deliver critical supplies, to those in need
And in drunk detection, our alliance with skysafe integrates their Advanced Solutions into our Command Center Software, and allows customers to detect identify track and analyze Throne activity.
And finally, we've introduced our next Generation, Astro p25 LMR infrastructure. Featuring our D series base stations and axis consoles.
Which bring many benefits including increased capacity, improved Energy, Efficiency and greater interoperability through leveraging complimentary Technologies. Such as low, earth orbit satellites.
We received several large orders, this quarter, including from the St, Louis Tri Counties and the state of Michigan or and we're building a strong pipeline of large multi-year Network, refresh opportunities.
With expanded scope and software and services that we expect to convert to orders over the next several years.
Second, I'm very encouraged by our differentiated approach to AI.
We began utilizing AI when we entered the fixed video space. Several years ago to solve complex video, security problems with AI enabled cameras and video management software. And it continues to be an important driver of growth and video software, which actually grew 25% in Q2 and has grown over 20% annually, over the last 5 years.
To expand in. Just a few months ago, we announced our Public Safety. AI platform assist, which is built around the objective of helping everybody involved in the incident. Workflow from 911 call takers to Frontline responders make better decisions and save precious time. This comprehensive approach allows us to do things. No, 1 else is doing in key areas, such as AI. Assisted report writing, where our AI solution, leverages a holistic view of the incident, including the 9111 call dispatch and responder voice Communications, as well as body warn. Uh, video recording When implementing AI, we're also making sure that we continue to build, trust both with our customers, and the communities they serve, which is reflected in our recent launch of AI labels and industry first.
These labels provide transparency as to what how and where AI is used in customer work flows, which is a critical step in the path to Product Trust and adoption. And further differentiates us from our competitors in this area.
And finally, I'm very excited about the silvas acquisition which is the culmination of discussions that lasted more than a year.
When allocating capital for Acquisitions, we remain committed to a very disciplined approach, prioritizing long-term value, creation for our shareholders. With sylvis, we're acquiring a technology leader in a rapidly growing industry. That's seen impressive customer adoption and has a very strong financial profile.
Their business, complements our leadership in LMR and video and provides us with opportunities. To leverage, our strong customer relationships.
Additionally, in particularly excited about the exceptional engineering and Technical talent that the syllabus team brings us. And I look forward to working closely with them to drive, meaningful revenue and earnings growth for years to come. And with that turn, I'll, I'll turn the call over to Tim and open it up to questions.
Thank you, Greg. Before we begin taking questions, I'd like to remind callers to limit themselves to 1 question and 1 follow.
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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The first question is from Joseph cardosa with JP Morgan. Your line is now open.
Hey, good afternoon everyone, thanks for the question Greg. Maybe I just wanted to start off, you know, last quarter you put out this and made 3 products by our mid 3 billion product backlog, Bowie out there for the year end. And you know, which based on the 2q orders looks like you're well on track to maybe you can just take a moment and talk about, like, on a product level, where you're seeing this growth in the product orders across your portfolio. Obviously, it sounds like the p25 devices are doing well, you mentioned a couple of deals on the base stations, um, and as well as anything else that you can think of that you think is really driving the momentum there and then, you know, as you kind of think about that Boby that you put out for year end how you're feeling about momentum tracking towards that. Bogey and particularly any update just giving now that you have still this under the bell and it sounds like that's going to be levered towards product side. And thank you. And then I have a follow-up.
Yep. Um so Joe in regards to the, you know, the zip code of mid threes in product backlog.
Which I mentioned last quarter. If anything, uh, I feel uh, as good. I actually feel better about that and just to be clear that color did not include anything associated with syllabus.
Um so I still feel very good about the mid threes even better than I did in May and you're right uh coming out of Q2 with uh 27% record orders, uh 10% of that in product. Uh I feel really good about that I think.
Uh, the strong Q2 orders were driven on the product side, uh, by LMR, uh, device refresh by LMR infrastructure, uh, and the Astro NEXT D series and, uh, uh, Apex consoles. I mentioned we've also had strong fixed video orders.
Is ever at 44 million. So, it was across the board, really good strength coming out of Q2, uh, which further supplements, even more confidence, in quote, unquote, the mid-30s or slightly better.
No, I appreciate the thought their sounds sounds wonderful. You know, and maybe as my second question it it's more of a big picture question. Like obviously it's been like a little bit more than a month since we had the beautiful Bill get passed. There's various programs in Europe that are aiming funds towards areas that look like for Motorola. Particularly now with silver um, under the covers here, you know? So just maybe 1 curious as you look across these opportunities, where are you feeling most excited about? Um and then in both the us as well as internationally. And if there's any difference between like the opportunities between the 2 areas and then 2, how do you think investors should think about the timing around these opportunities. Materializing for Motorola and then I mean just just to kind of hit it on the nose. Are you seeing any of these opportunities trickling into your orders today?
Trickling into what orders. Okay, so let's start with Silas. I mean, look, we love Silas. We spent a lot of time on it as a team. Um, you know, I've heard from some people that said, you know, this this thing actually looks too good to be true.
Um, and we spent a lot of time on it and we love the fact that it's a market leader. We love the fact that it was the tip of the spear and has been tested from an efficacy and a performance in a scale standpoint in Ukraine. Um, you know, we expect Silas to grow about 20%
Uh in 2026, its EPS neutral for the stub period this year and we expect it to be at least 20% sorry, 20 cents.
A creative in 2026 and I love the fact that look Silver's Powers a number of defense and military drone platforms, including anderol, and Aero, Aero environment, and it's certified, with over a 100 leading manufacturers. Um, when I think about the revenue contribution, particularly around Ukraine and Silas, you mentioned, Europe and international. We expect the revenue from Ukraine in. As it relates to Silver's Revenue expectations this year to be less than 15%,
Of overall revenues. And we expect Ukraine Revenue,
For Silver's next year to be even less than that. So I like the fact that it's driven by, uh, a wide base of us, defense X, Ukraine, and unmanned systems. And I think there'll be a lot of uh, attention and interest in European allies.
Uh, to invest in technologies that I think Seuss will be front and center as an opportunity.
As it relates to the $1 big, beautiful bill.
Um, and maybe Jack, you might want to talk about that a little bit here. Joe, I think the first thing I'd address is it think of the 1 big beautiful Bill, its funding over the next 4 years. So it's a 4 year Horizon and it's good news for Motorola from a DOD standpoint, they've increased funding 150 billion dollars which would have been good before, but it's even better. Now that we've acquired fill this in as Greg just articulated their defense border and on manned, uh, systems trajectory also there's money in there, another 70 billion dollars for Customs and Border, uh, 2 customers 2 of a big customer of ours as well as ice another 75 billion. A lot of that funding is being directed at refreshing technology, both video, secure Communications, uh, and the and services as well. The last thing I'd say which probably has been underappreciated is for our Enterprise customers. Think of our PCR channel, uh, the accelerated depreciation of capex, provides them, an opportunity to go, talk to manufacturing Healthcare.
Our customers and the like, uh, and go talk about net refreshing, their Network. And some of the tax benefits that they have. Um, so we're excited about the 1, big, beautiful Bill. Uh, I would add the final piece of it. Is the timing of it given it was signed on July 4th and that there's a 90-day window. We're expecting a lot of some of that funding to actually kick in in early Q4 this year.
Uh, and that's implied in our guide.
Yep. Got it. Thank you Greg. Thank you, Jack. Appreciate all the color.
The next question is from the line of Andrew spaniola with UBS your line is now open.
Thank you. Um, I want to follow up on the question on Seuss. You know, the question I've gotten mostly is, people are trying to understand why syllabus.
It's going to be incorporated into your LMR technology longer term. Or is this a new Avenue that you're going down and we're going to see you investing more in defense Tech and acquiring more increasing a new business line. How should we think about it?
Yeah, Andrew, I think about it as first. I love the fact that it's a market leader.
And it's a market leader that gives us exposure to a market. We don't participate in today, unmanned
Uh, systems in the air in the water on the ground. So it's new. Having said that it's video and data Centric.
So it's all about ad hoc highspeed infrastructure lists.
Mobile and data and Video Communications, we see it in defense. We see it on border security, obviously, to your point. We see it in Mission critical. Deployments.
Uh, primarily on the battlefield and adjacencies where there's intense conflict. But having said that, we also see it as complimentary.
Complimentary to LMR and uh complimentary to video. Um we leave in land mobile, radio infrastructure and devices. This gives us an opportunity to let to lead in infrastructure. Lists ad hoc mesh Networks,
Given both syllabus and our heritage in LMR have a radio frequency or RF centricity. I like the fact that I think there's a 1 plus 1 equals 3 proposition in terms of expansion to New Markets. This is a great great product. I think 1 of the limiting factors of their growth is their ability to to reach out outside the United States and capitalize on a global print footprint. Where like in Motorola Solutions Malloy has people in dozens and dozens and dozens of countries
So I think in the Federal Business internationally it's a new market but I also think of it as complimentary as well to LMR and video and you know maybe you want to talk Mahesh a little bit about the thinking not just in what they do today but some of the possibilities going forward. Uh so besides
Really offering a highly resilient communication, the other element of fill the spectrum monitoring. Um, and it's probably very important to talk about in the context of drones, being able to detect drones in this case. So, as part of our overall drone strategy, the ability to detect drones not just with radar, which is the most common way of detecting drones today, but also through RF, I think we believe really enhances us and makes us uniquely positioned in that space. Uh, the other very important element about syllabus is that it's.
And Greg mentioned this, it's data, its data oriented communication, and it allows for any IP device to be attached to it, including cameras. So, we believe that there's an opportunity there with cameras as well. That's coming in the future.
The the only thing I'd add and as we've discussed Greg is that similar to Motorola Solutions our LMR business as well as our video security business. There's an opportunity to add recurring revenues by way of service. Uh, providing just given the nature of the customer base as well. I agree.
Perfect, thank you very much.
Thanks Andrew.
The next question is from the line of Keith husam with North Coast research. Your line is now open,
Good afternoon guys. Um, hey question for you on, uh, maybe a little bit off the wall here but the base station uh, that you guys are introducing here. And I don't remember, perhaps the last time you actually introduced the a new base station here. And is there a pent-up demand here that I could perhaps the uh a little bit more of a growth driver than some of us are thinking here?
Yeah so uh you're right Keith. It's been uh I think I'm gonna you're you're jogging my memory here but I think it has been uh
It was probably about 12 years ago that we last had our base station.
Continues to extend our capabilities and need for us to deliver more services for our comp for our customers, meaning cyber security services which are up substantially for us this year, as well as new software. Uh, monetization services for the new, uh, D series station the last piece of it. We're really pleased is the access, which gives us a new dispatch console, uh, through these Investments we've made in an example of that, in the city of Chicago, really proud our hometown. We went and displaced the competitor and had a significant pickup in a command center when, uh, by way of access console. So again, great opportunity for us. I think it's multi-year Horizon. But also lent itself to new service selling capabilities as well and Keith, um, most of our customers are on software agreements that keep them current and ready. What this opportunity presents is in a hardware, refresh with a lot of attributes. And exact point comes with yet another opportunity to sell them additional software and services around that new new hardware. So we view it as benefiting.
Uh, us long-term for sure.
Great, appreciate it. And then if I can just ask 1, follow-up question on the backlog. Um, obviously there's a lot of focus on that recently. Um, but how do we look at the backlog of the, the makeup of that? Is it similar to the disagrees? You guys have in the presentation here, or is there a different mix? We should be thinking about within that backlog.
Uh, well, most of the backlog within S, and S Services and software comes from LMR. So I'd say, the, the power hitter in our backlog contribution, particularly for SNS, is LMR because of the nature of our long-term contracts, and the services and software business that we built over the years, um, that would be 1 indicator and then, you know, the size of LMR, um, includes even in products, it's our largest business. So, I, I think those 2 things give you some insights around the makeup of of backlogs. And to Greg's Point earlier,
As we began the year, we expected quick turns to accelerate. And it's done that with our record, Q2 orders, and 10% growth in products, and we expect that growth to continue into the second half. That's long, been a part of our Outlook and our outlooks improved
helpful. Thank you.
Thanks Keith.
The next question is, from the line of Tim long with Barkley's, your line is now open.
Thank you. Um, 2, 2, quick ones. If I can um Greg you talked about FCX and some of their early momentum understanding it's only been out a month or so um could you guys talk a little bit about what you think, uh, that will do um from a ramp uh Revenue ramp perspective, as well as impacting uh maybe the upgrade cycle, uh, to Apex next.
Um, number 1, and number 2, if you can talk about the video business, uh, still strong growth there, uh, very much driven by the software side. Um, the hardware piece of that still, kind of flat to low single digit type of growth. I get there's a, you know, Cloud uh impact. But maybe can you just touch a little bit on the product side there and and what we could uh expect to see to potentially re-accelerate growth there. Thank you.
Yeah, just on the SBX and Jack and Mahesh can jump in. But um as I mentioned first of all, I'd say the orders are out facing our expectations. That's number 1.
Um, number 2, I I love it because we're not selling a product per se, we're selling an ecosystem and that's just not hyperbole but sdx is anchored and runs off of an apex. Next, we upgraded that device
Uh, we upgraded it to dual Bandit to include LTE, 4G, or 5G to get all the benefits of a dual banded radio.
Um and you see using that we're driving more applications and recurring Revenue off of the Apex next. And now we have
the speaker mic, which is
tied to every radio we sell virtually and it displaces the need for a body camera. It's kind of like if you want an iPod, buy a body camera, but if you want a multi-dimensional full function device,
You would just go with SVX, and SVX is really an ingestion point.
Um, that does a lot more than just body cam, which is why I referenced earlier, it's the Tipping Point that injects more information on situational awareness.
AI around dispatch information around 911 audio logs around the radio p25 system as well as the body cam video. So it does more than that.
The fact that we're right in the middle of going through fed ramp certification process.
So that continues to go well and I'm optimistic about the timeline for that which will in turn open up more opportunities for us as well.
Greg. Um the uh the rest of the portfolio is I think about internationally in the body warning cameras that we've been refreshing. We've made some some pretty significant wins in Romania, Scotland, France, Bulgaria, and a number of agencies in the UK. So our International body warn camera business, which is not FDX attached, Apex Max, which is more North America right continues to do well. Also, I agree.
Perhaps the last thing I'll say on svx is we believe we're creating a new category here. This is a body 1 camera. Uh, it's not just recording evidence. It is all about capabilities like translation and svx is a gateway into a cyst so you can ask questions about, uh, either situational awareness questions. It's integrated to assist chat. So, at the end of the day, we're creating a new category here. It's not just a body 1 camera,
And I think Tim the last piece of it is just related to the fixed video business. Really pleased with our Q2 performance and I'd say refreshed. Uh, portfolio largely with alta alta leading the engine, meaning our Cloud business driving. Uh, that growth and I think we continue to see incremental Investments. We make in our go to market team continued, uh, to expand our reach. Not only here in the US and in Canada, but also overseas. We've made surgical Investments uh, in Europe, and in Australia. And we're starting to see the benefits of those Investments that we've made, uh, there as well.
And those Investments continue to show up uh in higher software growth within video while the category of video or the technology, we expect to grow 10 to 12%, the software portion of that continues to grow, much faster.
Okay, thank you guys.
The next question is from.
The next question is from the line of meta Marshall with Morgan Stanley, your line is now open
Uh, great. A couple of smaller questions for me, just on, you know, you guys have been talking about kind of this software transition, particularly on the video side of the business. Um, you know, is that any meaningful headwind to revenue growth at this point? Clearly kind of helping the backlog transition. Um,
So just a question there, and then just second kind of any update on uh Apex next uh adoption rates. Thanks.
So, on cloud, adoption within video. We, as Jack mentioned, we continue to see the fastest growth within our Cloud platform of Alta. Uh, orders are greater than sales, uh, although we're able to manage through the deferred revenue transitions. We haven't, uh, outlined a number this year, as to what that is because we're managing through it, and still printing.
Significant growth. So I say cloud is on path and video and then the second question in terms of Apex next adoption.
Jack. Yeah, sure. Uh, so Apex a couple things uh, Q2. Let's start there. Double digit order growth with Apex. Next, we just spoke about svx but it's important to note that the svx is exclusive to the Apex next family, uh, which helps which which, you know, from good collaborative collaborative aspect there benefits both svx as well as Apex next. The last thing that I would note that we talked about before is
it's also driving our application service business. So for every Apex next radio and we've got greater 90% attachment rate. $300, a radio and application services for a year. Um so we continue to see the benefit. I think svx is also been a Tailwind in terms of customers making that conversion and looking to move from Apex original to Apex next.
Great. Thank you.
Thanks.
The next question is from the line of Amit Daria Nani with evercore isi. Your line is now open.
Yep. Um, thanks and I just have to as well. Um, maybe to start with, you know, operating margins even better than R and Street expectations. So can you just touch on, you know, a what the Tariff headwinds were in the quarter for you, folks? And then B just what's a durability of the lever that helped the operating margins here?
Uh, impact will be about 80 million down from the 100 million that's in part due to mitigation exercise, Med mitigations and other things that have changed.
Uh, we began seeing the Tariff uh, impact in late, Q2 most of that 80 million.
Is in front of us in the second half. So the operating margin expansion that you saw uh, didn't have a significant impact from tariffs. Uh, it was more core to the business on on improved mix in the and SMS.
And emit we, uh, a quarter ago, we said, Gross margins would be comparable for the year. We now expect gross margins to be up year on year and to your point on operating margin expansion. We envision about a 1005 100, 100 basis points expansion year-over-year.
And that that Improvement is coming, not not just from the addition of syllabus but from also the Core Business, both are helping gross margins and operating margins this year exactly.
I'm super helpful and then you know maybe just shift gears a bit. Um, can you just talk about how do you think your position to address sort of this growing focus in the unmanned systems, uh Market as you go forward and how big do you think this can eventually become for for for you folks? I get Silas, give you a really good presence there, but I just want to understand like, you know, on longer term, how big do you think this unmanned systems Market can get? And then maybe some specific? Do you think syllabus enables you to participate in like some of the initiatives? That the Pentagon,
Has like replicated or the diu autonomy pushes the making. Thank you.
Well and then let me just talk about the Tam first. Uh we see the Tam for unmanned at about 3 billion dollars.
Um, and growing probably 1 of, the fastest growing Tams. We have now, with the addition, uh, of silver now in the portfolio and, um, we would expect that Tam not be surprised to double it uh, in the next 4 years.
and maybe just
Focusing a bit on drones, uh, per se. If you think about our drone strategy right now, we have, we have 3 elements to it. Uh, there's a drone as the first responder, this is our strategic alliance with Brink, uh, in North America. Uh, we also have a solution, uh, for international. Uh, given the increase. The FAA, uh, waivers, uh, in 2025, uh, we see that as a significant force and, uh, that strategic alliance with Brink. I think it's, it's important. Uh, and we see, uh, uh, our mission critical networks. Uh, Silva's in particular also integrating with Brink in that uh scenario.
uh,
for communications, we just talked about it. I think silus is, uh, dominant in terms of being able to be the most resilient communication mechanism. So low probability of detection, low probability of intercept for grow drones, which I think is a is a key driver. Uh and that continues to grow and finally drone detection uh and forensics. We have a partnership.
With Sky safe. And and as I mentioned before with Silvis, we have the ability to detect drones leveraging their Spectrum monitoring functionality as well. So across those 3 things for drones as a specific instance, of unmanned systems, that is our strategy there.
Okay, the next question is from the line of Ben Bolan with Cleveland research company. Your line is now open
good afternoon, everyone. Thank you for taking the question.
The first 1, I'm interested. Your thoughts on what the syllabus sales motion looks like, could you maybe compare and contrast it to your existing sales motion?
And any preliminary thoughts, you have on getting your existing sales teams up to speed and out there, accelerating this and, and driving more attached. And then I have a follow-up.
Sure so uh their sales motion they've had you know they it's a it's amazing. The success that that team has had. Uh you know when we first started a year ago they had a relatively small sales team that was largely focused uh in the US. Um and some of the Us sales resources focused outside the continental United States would call on bases, Etc, in Europe and other points abroad. Um, it's a direct sales motion largely um, given the size and the Strategic level of of the selling process.
Putting salespeople over there. We've already invested in Channel salespeople as well to get after new channels to sell. Uh, the uh, the syllabus, uh, Minette software into those elements. And I think the last, the last component of it is lobbying, um, they have had limited resources and lobbying we have a government Affairs. Arm in DC, we will be looking to address, not only lobbying on the hill for approaches for DOD, but also lobbying into the different branches of government where I think we can articulate our story, its us-made technology. It plays really well I think uh with where we want to go. Um but yeah. So we're really excited. You know, we've run this Playbook before when we got into the video space I think it's a different Playbook, a different End Market but you know it starts with just having a strategic idea of where we want to go where we want to invest. And I think you'll quickly see um that we're going to be making moves uh in the next coming weeks and months ahead there.
Okay, um, uh, that's great. Uh, I guess that the follow-up.
Uh, probably more for you jack. I'm, I'm interested, you know, a lot of the US states closed their fiscal year, uh, in June,
How, how do you think budgets are coming together into fiscal 2026? Just any high-level thoughts on what you're hearing. I understand the orders have been exceptional; just interested if you've got much visibility into incremental fiscal 2026 budgets at this point. Thank you.
Yeah, sure. Um, so I think as you articulated, uh, record Q2 orders. Um, we've we've raised our our annual guide, but we just took a look because we know we now have a view to what the 26, state and local budgets look like. And the reality is, we just had a, we just had a went through this in detail with their strategy team, a couple weeks back, the budgets look very good. So the budget situation remains, uh, very strong, uh, you know, the other piece of it that we always think about is we're a little different because we can tap 911 funds. Uh, we get the benefit of the increase, uh, in property, taxes sales taxes, because the reality is in the sale, the seller selling environment is still good. And then we have income tax and incomes are relatively steady so across the board. Uh, the situation looks good and I think, you know that that really advises our confidence in the back half of 2 5,
Thank you.
Thanks Ben. Once once again, if you have a question you may press star 5 on your telephone keypad.
The next question is from the line of tour zilberman from Bank of America Securities. Your line is now open.
Hey guys, uh, question for you on the core LMR business. Uh, if I think about the long-term kind of historical growth, trajectory of this Market, it's anywhere between 1 to 3%. You know, last 2 quarters, you've been growing 3 to 4% and I believe you previously guided for that. Uh, similar type of growth rate 34% for the rest of the year. My question more so is how can we think about next year or the next few years? Are these trends that you're talking about about in regards to this ecosystem, with Apex snacks and svx and the other positive Trends, you're seeing enough to sustain these kind of above market growth rates or do you think that these Trends have a long enough uh,
Tail that, you know, we might be more exposed to cyclical growth, um, you know, fluctuations of growth over the next few years.
well from a technology standpoint, you know, we as Jason mentioned already we we are relabeling LMR
The MCN Mission critical networks, and as a result.
Uh, we now expect mission-critical networks, inclusive of LMR, to be mid-single digits.
for this fiscal year, we're obviously not going to comment yet on 26 but I think that the strong Q2 orders print
The, uh, gaining confidence in the product backlog, even though it is transitioning more to a quick-turn business, but our confidence is incrementally higher than it was a quarter ago. i.e., these would be the mid-threes.
Um, I like that Trend. Now remember, also, we're coming off of record years last year and the year before. So, we're and and as somebody earlier mentioned on the call,
Given the ecosystem that you just referenced, we're trying to drive more toward recurring revenue, toward more applications revenue, and toward more revenue as a service.
so, as long as we can continue,
Expansion. And continuing to build backlog, particularly around multi-year services or recurring apps revenues. That's the profile we want for the firm. So, you know, we'll come in in and out of quarters. We'll come in and out of years. But when we take a look where we are now and going forward and I think of the long-term durability and the criticality of 13,000 networks, for LMR that composed, both critical infrastructure and Enterprise as well as Public Safety, as well as North America and international. And again, just to come back to Silas.
I love Silas because it's intelligent.
High growth.
High-performance infrastructure. It can support. Lots of different drone platforms. Lots of different drone manufacturers. We've had a lot of experience and I have, uh, in, you know, selling quote, unquote devices, or Commodities, you could, you could call the Drone Market depending upon which 1 you define as a commodity. We've been very purposeful to invest, where we think we can differentiate where we think the revenues and the competitive Advantage are sticky and where we can build the competitive advantage in adjacency for Public Safety, critical infrastructure and National Security. That's the strategy we're implementing and I feel good about it and I definitely feel good about exiting Q2 and what we need to get done between now and the end of the year and tour is you
Know, we'll update you uh on next year in November.
Got it maybe as a quick, follow-up. Just a housekeeping question. Apologies, if I missed it earlier. Uh, your guidance raised includes a mix of The Sylvers acquisition but also core improvements. Did you break out? What you expect silver to contribute in Q3 versus Q4. Um, I know you have the stub period going on. So uh any directional any direction you can give us would be helpful.
The work flowing through the Q2B.
Uh, we're flowing to flowing through the Improvement of FX.
And we're articulating that silver is about $185 million in the sub-period of revenue.
Um, for the remaining 5 months, post close, we haven't specifically broken out Q3, but if you want to use weeks, it's a pretty good approximation of where to put the 185. Yep. We just remaining
got it. Thank you.
Thanks our final.
Our final question today is from the line of Louie DePalma with William Blair your line is now open.
Greg, Jason, Jack, Mahesh, Tim, and Vicky, good afternoon, and congrats on closing Silvis.
Hey Louie. How you doing? Thanks.
Great. Um, I was wondering, does Silas give you a competitive advantage for your drone of the first responder offering on the law enforcement side today? Nearly all of SUSS revenue is for the battlefield, but it seems you can significantly enhance their first responder capabilities, especially as that scales.
Alternatively. Do you do do you today if you still, this is too powerful of a solution for law enforcement. So are you going to focus all of your efforts on on the battlefield?
What's the strategy there with, with still this expansion?
Louis, I think, uh, in the near term, at least, uh, our biggest limitation is going to be spectrum availability, uh, in North America. Um, because uh,
We we need to operate within a certain Spectrum to be able to take advantage of uh, uh, Services technology within uh drones uh specifically licensed Spectrum. Um, so we think it'll happen but uh, it'll happen in the future. In the meantime, uh, the other important element of us supporting dfr operations is being able to
Track and being able to detect drones uh in airspace and that's where Spectrum monitoring comes into play and being able to do that, not just with radar, but also to do it with RF. Uh, I think that gives us uh, uh, the ability to integrate that as part of our dfr program, uh, while we figure out the Spectrum challenges,
And there are a couple of instances, uh, with public safety agencies in the U.S. that have had.
This does is silver's basically builds a bridge.
To our LMR or the Voice Mission, critical networks to video, and they're going to secure the borders leveraging this.
Leveraging this technology, and with that, it's going to pull through video opportunities for us as well.
That, that makes sense. And and Greg, um, you mentioned Leo satellite connectivity being integrated into your network. Can you elaborate further there or maybe mhm. Are you partnering with?
Starlink or, or firstnet via as space mobile there.
Oh, so I think it's what Jack referred to in the context of our LMR infrastructure there. Uh, Louis. Um, we will support Leo via our base stations, uh, because I think that's the better way to, uh, attack redundancy and have high bandwidth connectivity to, with low earth. Orbit satellites. Uh, and, uh, you know, we are having conversations with all the appropriate IO providers there, to give us that flexibility.
Great. Thanks. Everyone.
Thanks Louie.
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.
Yeah, I just want to close and say thank you to all the people at Motorola and all of our partners. I'm really pleased with the strong Q2 performance on revenue, earnings per share, and cash. We achieved record Q2 orders, in particular, up 27%, as we talked about. As was mentioned earlier on the call, it's fairly broad-based.
Uh, the performance on record orders is even more foundational and gives us even more confidence. Um, I’m pleased with the fact that, you know, mid-year here, we're able to raise top line, bottom line, and overall, raise operating cash flow in the face of...
Uh, 80 million of tariffs headwind, the majority of, which is in the back half.
Um, and, uh, in increased interest expense.
As well as $75 million in fees associated with the Silvas acquisition and expanding gross margins and expanding operating margins. So I'm excited about, uh,
2 3 and Q4 and really excited about Silver's joining. The Firm, all the capabilities, engineering, technical Talent, uh, the sales organization that's coming over as well. I think it's going to be a great, a great mix, and a great team, and I'm excited about it. And I look forward to talking to everybody again, uh, in 3 months.
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