Q2 2026 Motorola Solutions Inc Earnings Call

August 5, 2026

Speaker #1: Good afternoon, and thank you for holding. Welcome to the Motorola Solutions second quarter 2026 earnings conference call. Today's call is being recorded. If you have any objections, please disconnect at this time.

Operator: Good afternoon. Thank you for holding. Welcome to the Motorola Solutions Second Quarter 2026 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. A webcast replay of this call will be available on our website within 3 hours after the conclusion of this call. The website address is www.motorolasolutions.com/investor. All participants have been placed in a listen-only mode. You will have an opportunity to ask questions after today's presentation. If you'd like to ask a question, please press star 5 on your telephone keypad to be placed into the queue. You may also press star 5 again to remove yourself from the queue. I would now like to introduce Mr. Brian Piotrowski, Vice President of Investor Relations.

Operator: Good afternoon. Thank you for holding. Welcome to the Motorola Solutions Second Quarter 2026 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. A webcast replay of this call will be available on our website within three hours after the conclusion of this call. The website address is www.motorolasolutions.com/investor. All participants have been placed in a listen-only mode. You will have an opportunity to ask questions after today's presentation. If you'd like to ask a question, please press star five on your telephone keypad to be placed into the queue. You may also press star five again to remove yourself from the queue. I would now like to introduce Mr. Brian Piotrowski, Vice President of Investor Relations.

Speaker #1: The presentation material and additional financial tables are posted on the Motorola Solutions Investor Relations website. In addition, a webcast replay of this call will be available on our website within 3 hours after the conclusion of this call.

Speaker #1: The website address is www.motorolasolutions.com/investor. All participants have been placed in a listen-only mode. You will have an opportunity to ask questions after today's presentation.

Speaker #1: If you would like to ask a question, please press star 5 on your telephone keypad to be placed into the queue. You may also press star 5 again to remove yourself from the queue.

Speaker #1: I would now like to introduce Mr. Brian Petrowski, Vice President of Investor Relations, Mr. Petrowski, you may begin your conference.

Operator: Mr. Piotrowski, you may begin your conference.

Speaker #2: Good afternoon. 2026 second quarter earnings Welcome to our 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 Mahesh Saptarishi, Executive Vice President and CTO.

Brian Piotrowski: Good afternoon. Welcome to our 2026 Q2 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 Mahesh Saptharishi, Executive Vice President and CTO. Greg and Jason will review our results along with commentary. Jack and Mahesh will join for Q&A. We have posted an earnings presentation and news release at motorolasolutions.com/investors. 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. 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.

Speaker #2: Greg and Jason will review our results, along with commentary, and Jack and Mahesh will join for Q&A. We have posted an earnings presentation and news release at motorolasolutions.com/investors.

Speaker #2: 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. A number of forward-looking statements will be made during this presentation and during the Q&A portion of the call.

Speaker #2: 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.

Speaker #2: 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 2025 annual report on Form 10-K, or any quarterly report on Form 10-Q, and in our other reports and filings with the SEC.

Brian Piotrowski: 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 Factors section of our 2025 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. I'll now turn it over to Greg.

Speaker #2: We do not undertake any duty to update any forward-looking statements. I'll now turn it over to Greg.

Speaker #3: Thanks, Brian. Good afternoon, and thanks for joining us today. I'll start off by sharing a few thoughts about the business before Jason takes us through our results and outlook.

Greg Brown: Thanks, Brian. Good afternoon, and thanks for joining us today. I'll start off by sharing a few thoughts about the business before Jason takes us through our results and outlook. First, Q2 was an exceptional quarter with record sales and earnings. Revenue was up 13%, driven by double-digit growth in both segments and all three technologies. Products and Systems Integration delivered an outstanding quarter, growing 15%, highlighted by mission-critical network sales that exceeded our expectations in public safety LMR, along with continued strength in Silvus. Software and Services also continues to perform well, growing 10% in the quarter. Additionally, Q2 included operating margin of expansion of 140 basis points, excluding the benefit of the IEPA tariff refunds. Second, our Q2 results and broad-based demand provide strong momentum for continued growth heading into the H2 of this year, led by our APX NEXT devices and next-generation D-series infrastructure.

Speaker #3: First, Q2 was an exceptional quarter. With record sales and earnings, revenue was up 13%, driven by double-digit growth in both segments and all three technologies.

Speaker #3: Products and Systems Integration delivered an outstanding quarter, growing 15%, highlighted by mission-critical network sales that exceeded our expectations in public safety LMR, along with continued strength in Silvus.

Speaker #3: And software and services also continues to perform well, growing 10% in the quarter. Additionally, Q2 included operating margin of expansion of $140 basis points excluding the benefit of the IEPA tariff refunds.

Speaker #3: Second, our Q2 results and broad-based demand provide strong momentum for continued growth heading into the second half of this year, led by our Apex Next devices and next-generation D-Series infrastructure.

Speaker #3: Our latest generation ApexNext devices continue to redefine mission-critical reliability, and our increasingly integrated with new features that leverage our entire ecosystem. On the P25 network side, interest in D-series is growing, as agencies prioritize the modernization of their core mission-critical communications platforms.

Greg Brown: Our latest generation APX NEXT devices continue to redefine mission-critical reliability and are increasingly integrated with new features that leverage our entire ecosystem. On the P25 network side, interest in D-series is growing as agencies prioritize the modernization of their core mission-critical communications platforms. Finally, demand for our safety and security ecosystem remains robust, fueled by record Q2 orders in all three technologies. As a result, we achieved a record Q2 ending backlog of $15.6 billion, which is up 11% versus a year ago. As a result of the strong Q2 performance and growing momentum, we're again raising our full year guidance for both sales and EPS. With that, I'll now turn the call over to Jason.

Speaker #3: And finally, demand for our safety and security ecosystem remains robust. Fueled by record Q2 orders in all three technologies. As a result, we achieved a record Q2 ending backlog of 15.6 billion, which is up 11% versus a year ago.

Speaker #3: As a result of the strong Q2 performance and growing momentum, we're again raising our full-year guidance for both sales and EPS, and with that, I'll now turn the call over to Jason.

Speaker #4: Thank you, Greg. Revenue for the quarter grew 13% and was above our guidance, with double-digit growth in both segments and in all three technologies, primarily driven by strong LMR demand and accelerated quick-turn conversion.

Brian Piotrowski: Thank you, Greg. Revenue for the quarter grew 13% and was above our guidance with double-digit growth in both segments and in all three technologies, primarily driven by strong LMR demand and accelerated quickturn conversion. Revenue from acquisitions was $243 million, while foreign currency tailwinds were $35 million during the quarter, consistent with our expectations. GAAP operating earnings were $809 million or 25.8% of sales, up from 25% in the year-ago quarter.

Jason Winkler: Thank you, Greg. Revenue for the quarter grew 13% and was above our guidance with double-digit growth in both segments and in all three technologies, primarily driven by strong LMR demand and accelerated quickturn conversion. Revenue from acquisitions was $243 million, while foreign currency tailwinds were $35 million during the quarter, consistent with our expectations. GAAP operating earnings were $809 million or 25.8% of sales, up from 25% in the year-ago quarter.

Speaker #4: Revenue from acquisitions was $243 million, while foreign currency tailwinds were $35 million during the quarter, consistent with our expectations. Gap operating earnings were $809 million, or 25.8% of sales, up from 25% in the year-ago quarter.

Speaker #4: Non-gap operating earnings were just over $1 billion, up 26% from the year-ago quarter, and non-gap operating margin was 32.9%, up 330 basis points. The increase in both gap and non-gap operating margin was driven by higher sales and improved operating leverage, inclusive of higher direct material costs and a $60 million benefit from the IEPA refunds recorded during the quarter.

Jason Winkler: Non-GAAP operating earnings were just over $1 billion, up 26% from the year ago quarter, and Non-GAAP operating margin was 32.9%, up 330 basis points. The increase in both GAAP and Non-GAAP operating margin was driven by higher sales and improved operating leverage, inclusive of higher direct material costs and a $60 million benefit from the IEPA refunds recorded during the quarter. Excluding the refunds, Non-GAAP operating margins expanded by 140 basis points. GAAP earnings per share was $3.33, up from $3.04 in the year ago quarter. Non-GAAP EPS was $4.41, up $0.84 or 24%, from $3.57 last year. The growth in EPS was driven by higher operating earnings and a $0.25 benefit from the IEPA refunds, partially offset by higher interest expense in the current quarter. OpEx in Q2 was $673 million, up $58 million versus last year, primarily due to acquisitions. Turning to cash flow.

Speaker #4: Excluding the refunds, non-gap operating margins expanded by 140 basis points. Gap earnings per share was $3.33, up from $3.04 in the year-ago quarter. Non-gap EPS was $4.41, up 84 cents, or 24%, from $3.57 last year.

Speaker #4: The growth in EPS was driven by higher operating earnings and a 25% benefit from the IEPA refunds, partially offset by higher interest expense in the current quarter.

Speaker #4: OPEX in Q2 was $673 million, up 58 million versus last year, primarily due to acquisitions. Turning to cash flow, Q2 operating cash flow was $469 million, up 197 million from last year, and free cash flow was $414 million, up 190 million.

Jason Winkler: Q2 operating cash flow was $469 million, up $197 million from last year, and free cash flow was $414 million, up $190 million. The increase in both operating and free cash flows was primarily driven by our higher earnings, partially offset by higher investments in inventory. Capital allocation for Q2 included $326 million in share repurchases at an average price of $413.53 per share, $201 million in cash dividends, and $55 million in CapEx. During the quarter, we also entered into a definitive agreement to acquire D-Fend, an industry leader in counter-drone solutions for $1.5 billion, which we expect to close during H2 of this year. We are targeting to close the previously announced acquisition of Bell Canada's LMR Network Services business in late Q4. Moving to segment results.

Speaker #4: The increase in both operating and free cash flows was primarily driven by our higher earnings, partially offset by higher investments in inventory. Capital allocation for Q2 included $326 million in share repurchases at an average price of $413.53 per share, $201 million in cash dividends, and $55 million in CapEx.

Speaker #4: During the quarter, we also entered into a definitive agreement to acquire Defend, an industry leader in counter-drone solutions, for $1.5 billion, which we expect to close during the second half of this year.

Speaker #4: And we are targeting to close the previously announced acquisition of Dell Canada's LMR network services business in late Q4.

Speaker #3: Moving to segment results, in the products and SI segment, sales were up 15% versus last year. Driven by growth in MCN and video, with MCN exceeding our expectations in public safety LMR and continued strength in Sylvus.

Jason Winkler: In the Products & SI segment, sales were up 15% versus last year, driven by growth in MCN and video, with MCN exceeding our expectations in Public Safety LMR and continued strength in Silvus. Revenue from acquisitions was $210 million, and foreign currency tailwinds were $19 million during the quarter. Operating earnings were $599 million, or 31.4% of sales, up 470 basis points from 26.7% in the prior year, driven by higher sales and improved operating leverage, inclusive of higher direct material costs and the IEPA refunds. Excluding the refunds, operating margin expanded 150 basis points during the quarter. Some notable Q2 wins and achievements in this segment include a $36 million P25 device and SVX order for a US federal customer, a $20 million P25 device order for Atlanta, Georgia, a $17 million P25 device order for Miami-Dade Corrections in Florida.

Jason Winkler: In the Products & SI segment, sales were up 15% versus last year, driven by growth in MCN and video, with MCN exceeding our expectations in Public Safety LMR and continued strength in Silvus. Revenue from acquisitions was $210 million, and foreign currency tailwinds were $19 million during the quarter. Operating earnings were $599 million, or 31.4% of sales, up 470 basis points from 26.7% in the prior year, driven by higher sales and improved operating leverage, inclusive of higher direct material costs and the IEPA refunds. Excluding the refunds, operating margin expanded 150 basis points during the quarter. Some notable Q2 wins and achievements in this segment include a $36 million P25 device and SVX order for a US federal customer, a $20 million P25 device order for Atlanta, Georgia, and a $17 million P25 device order for Miami-Dade Corrections in Florida.

Speaker #3: Revenue from acquisitions was $210 million in foreign currency tailwinds were $19 million during the quarter. Operating earnings were $599 million, or 31.4% of sales, up 470 basis points, from 26.7% in the prior year, driven by higher sales and improved operating leverage, inclusive of higher direct material costs and the IEPA refunds.

Speaker #3: Excluding the refunds, operating margin expanded 150 basis points during the quarter. Some notable Q2 wins and achievements in this segment include a $36 million P25 device and SVX order for a U.S.

Speaker #3: federal customer, a $20 million P25 device order for Atlanta, Georgia, a $17 million P25 device order for Miami-Dade Corrections in Florida, we also won three large awards for our next-generation P25 infrastructure.

Jason Winkler: We also won three large awards for our next generation P25 infrastructure. A $52 million order from a US federal customer, a $34 million order with a state and local customer in the Southeast region, and a $22 million order for St. Louis County, Missouri. All of these demonstrate the continuing customer demand for D-series and a strong foundation for future Software and Services growth. In Software and Services, revenue was up 10% compared to last year, driven by growth across all three technologies. Revenue from acquisitions was $33 million, and foreign currency tailwinds were $16 million in the quarter. Operating earnings in the segment were $433 million, or 35.3% of sales, up from 33.8% last year, driven by higher sales, inclusive of a favorable mix.

Jason Winkler: We also won three large awards for our next-generation P25 infrastructure. A $52 million order from a US federal customer, a $34 million order with a state and local customer in the Southeast region, and a $22 million order for St. Louis County, Missouri. All of these demonstrate the continuing customer demand for D-series and a strong foundation for future Software and Services growth. In Software and Services, revenue was up 10% compared to last year, driven by growth across all three technologies. Revenue from acquisitions was $33 million, and foreign currency tailwinds were $16 million in the quarter. Operating earnings in the segment were $433 million, or 35.3% of sales, up from 33.8% last year, driven by higher sales, inclusive of a favorable mix.

Speaker #3: A $52 million order from a U.S. federal customer, a $34 million order with a state and local customer in the Southeast region, and a $22 million order for St.

Speaker #3: Louis County, Missouri. All of these demonstrate the continuing customer demand for D-series and a strong foundation for future software and services growth. In software and services, revenue was up 10% compared to last year, driven by growth across all three technologies, revenue from acquisitions was $33 million, and foreign currency tailwinds were $16 million in the quarter.

Speaker #3: Operating earnings in the segment were $433 million, or 35.3% of sales, up from 33.8% last year, driven by higher sales inclusive of favorable mix.

Speaker #3: Some notable Q2 highlights in this segment include a $24 million P25 services order for a North America energy company, a $20 million command center order for the state of Montana, Department of Justice, a $16 million P25 services order for Fulton County, Georgia, and a $14 million command center order for Hillsborough County, Florida.

Jason Winkler: Some notable Q2 highlights in this segment include a $24 million P25 services order for a North America energy company, a $20 million command center order for the State of Montana Department of Justice, a $16 million P25 services order for Fulton County, Georgia, and a $14 million command center order for Hillsborough County, Florida. During the quarter, we also secured two large wins for our mobile video ecosystem. A $25 million order with the Florida Highway Patrol, and a $24 million order with the Kansas City Police Department, successfully converting these two high-profile agencies inclusive of our core responder AI assist capabilities. Looking at regional results, North America Q2 revenue was $2.2 billion, up 9%, with growth across all three technologies, and international Q2 revenue was $923 million, up 25% versus last year, driven by strong double-digit growth across all three technologies. Moving to backlog.

Speaker #3: During the quarter, we also secured two large wins for our mobile video ecosystem, a $25 million order with the Florida Highway Patrol, and a $24 million order with the Kansas City Police Department.

Speaker #3: Successfully converting these two high-profile agencies, inclusive of our core responder AI assist capabilities. Looking at regional results, North America Q2 revenue was $2.2 billion, up 9%, with growth across all three technologies, and international Q2 revenue was $923 million, up 25% versus last year, driven by strong double-digit growth across all three technologies.

Speaker #3: Moving to backlog, ending backlog for Q2 was $15.6 billion, up $1.5 billion, or 11% versus last year, driven by record Q2 orders. Sequentially, backlog declined $71 million, primarily driven by revenue recognition for the UK Home Office.

Jason Winkler: Ending backlog for Q2 was $15.6 billion, up $1.5 billion or 11% versus last year, driven by record Q2 orders. Sequentially, backlog declined $71 million, primarily driven by revenue recognition for the UK Home Office. In the Products & SI segment, backlog increased $329 million versus last year due to strong demand in MCN and video. Sequentially, backlog decreased $99 million, driven by strong MCN shipments during the quarter. In Software and Services, backlog increased $1.2 billion compared to last year, driven by strong demand for multi-year contracts across all three technologies. Sequentially, backlog increased $28 million, primarily driven by strong demand in Command Center and video, partially offset by revenue recognition for the UK Home Office. Turning next to our outlook. We expect Q3 sales growth of approximately 8%, with non-GAAP earnings per share between $4.39 and $4.44 per share.

Speaker #3: In the products and SI segment, backlog increased 329 million versus last year, due to strong demand in MCN and video, sequentially backlog decreased 99 million, driven by strong MCN shipments during the quarter.

Speaker #3: In Software and Services, backlog increased $1.2 billion compared to last year, driven by strong demand for multi-year contracts across all three technologies. Sequentially, backlog increased $28 million, primarily driven by strong demand in command center and video, partially offset by revenue recognition for the UK Home Office.

Speaker #3: Turning next to our outlook, we expect Q3 sales growth of approximately 8%, with non-GAAP earnings per share between $4.39 and $4.44 per share, this assumes a weighted average diluted share count of approximately 168 million shares, and an effective tax rate of approximately 23%.

Jason Winkler: This assumes a weighted average diluted share count of approximately 168 million shares and an effective tax rate of approximately 23%. For the full year, we now expect revenue of approximately $12.975 billion, up from our prior guidance of $12.8 billion, along with non-GAAP earnings per share between $17.62 and $17.72 per share, up from our prior guide of $16.87 to $16.99 per share. This full year outlook assumes a weighted average diluted share count of approximately 168 million shares and an effective tax rate between 22% and 22.5%. It also assumes favorable FX of about $100 million, which is unchanged from our prior expectations. The $175 million raise in our full-year revenue expectations is driven by MCN, including approximately $100 million from Silvus, which we now expect to generate approximately $850 million in full-year revenue.

Speaker #3: For the full year, we now expect revenue of approximately $12.975 billion, up from our prior guidance of $12.8 billion, along with non-GAAP earnings per share between $17.62 and $17.72 per share, up from our prior guide of $16.87 to $16.99 per share.

Speaker #3: This full-year outlook assumes a weighted average diluted share count of approximately 168 million shares, and an effective tax rate between 22 and 22.5%, it also assumes favorable effects of about 100 million, which is unchanged from our prior expectations.

Speaker #3: The 175 million dollar raise in our full-year revenue expectations is driven by MCN, including approximately 100 million from Sylvus, which we now expect to generate approximately $850 million in full-year revenue, the remainder of the increase we expect in MCN is a reflection of the continued strong demand for public safety LMR.

Jason Winkler: The remainder of the increase we expect in MCN is a reflection of the continued strong demand for public safety LMR. With these increased top-line expectations, we now expect double-digit growth for both segments and all three technologies for the full year. Products & SI is expected to now grow 11%, up from our prior guidance of 8% to 9%, and Software and Services is expected to grow 11%, up from our prior guidance of 10% to 11%. From a technology perspective, MCN is now expected to grow between 10% and 11%, up from our prior expectations of 8% to 9%. Video is expected to grow 11%, while in Command Center, we continue to expect approximately 15% growth. Before I turn the call back to Greg, I wanted to provide an update around tariffs and memory costs.

Speaker #3: With these increased top-line expectations, we now expect double-digit growth for both segments, and all three technologies for the full year. Products and SI is expected to now grow 11%, up from our prior guidance of 8 to 9%, and software and services is expected to grow 11%, up from our prior guidance of 10 to 11%.

Speaker #3: And from a technology perspective, MCN is now expected to grow between 10% and 11%, up from our prior expectations of 8% to 9%.

Speaker #3: Video is expected to grow 11%, while in command center we continue to expect approximately 15% growth. Before I turn the call back to Greg, I wanted to provide an update around tariffs and memory costs.

Speaker #3: We now expect the tariff impact to be neutral for the full year, as the IEPA refunds we recorded in Q2 offset the $60 million in tariff headwinds that we had planned for this year.

Jason Winkler: We now expect the tariff impact to be neutral for the full year as the IEPA refunds we recorded in Q2 offsets the $60 million in tariff headwinds that we had planned for this year. Regarding memory, we now anticipate our direct memory spend to be approximately $150 million this year, up from $50 million last year. Our teams continue to successfully navigate this challenging supply environment, carrying higher inventory and collaborating closely with our key suppliers to secure continuity of supply. We still expect gross margins to be comparable to last year, as the now improved tariff outlook I mentioned offsets the increased memory cost expectations since our last call. For full-year operating margins, we now expect approximately 170 basis points of expansion, up from 100 basis points previously. Finally, our balance sheet remains strong and gives us plenty of headroom and flexibility on capital allocation.

Speaker #3: And regarding memory, we now anticipate our direct memory spend to be approximately $150 million this year, up from $50 million last year. Our teams continue to successfully navigate this challenging supply environment, carrying higher inventory and collaborating closely with our key suppliers to secure continuity of supply.

Speaker #3: We still expect gross margins to be comparable to last year, as the now-improved tariff outlook I mentioned offsets the increased memory cost expectations since our last call.

Speaker #3: And for full-year operating margins, we now expect approximately 170 basis points of expansion, up from 100 basis points previously. Finally, our balance sheet remains strong and gives us plenty of headroom and flexibility on capital allocations.

Speaker #3: As we previously highlighted, we expect to raise approximately $1 billion of incremental debt in the form of senior notes and term loans, to finance the defend acquisition, and we still expect to finish the year with a net debt-to-EBITDA leverage at approximately 2X, which is similar to where we ended last year.

Jason Winkler: As we previously highlighted, we expect to raise approximately $1 billion of incremental debt in the form of senior notes and term loans to finance the D-Fend acquisition. We still expect to finish the year with a net debt to EBITDA leverage at approximately 2x, which is similar to where we ended last year. With that, I would now like to turn the call back to Greg.

Speaker #3: With that, I would now like to turn the call back to Greg.

Speaker #1: Thanks, Jason. I'd like to conclude with a few final thoughts before we open it up for Q&A. First, Q2 was superb, and I'm extremely pleased with our execution.

Greg Brown: Thanks, Jason. I'd like to conclude with a few final thoughts before we open it up for Q&A. First, Q2 was superb. I'm extremely pleased with our execution. Revenue was up 13% with significant operating margin expansion, and we drove just under $500 million in operating cash flow. Additionally, we achieved record Q2 orders and backlog, putting us in a strong position heading into the H2 of this year. Second, we're seeing strength across our safety and security ecosystem. Our video business continues to perform well, particularly in mobile video, where, as Jason mentioned, we secured two significant orders from Florida Highway Patrol and Kansas City Police Department. These deals were highly competitive. What's most encouraging is that both of these large agencies are first-time users of our body-worn camera and in-car video solutions.

Speaker #1: Revenue was up 13%, with significant operating margin expansion, and we drove just under $500 million in operating cash flow. Additionally, we achieved record Q2 orders and backlog, putting us in a strong position heading into the second half of this year.

Speaker #1: Second, we're seeing strength across our safety and security ecosystem. Our video business continues to perform well, particularly in mobile video, whereas Jason mentioned we secured two significant orders from Florida Highway Patrol and Kansas City Police Department.

Speaker #1: These deals were highly competitive, and what's most encouraging is that both of these large agencies are first-time users of our body-worn camera and in-car video solutions.

Speaker #1: In addition, command center continues its strong momentum, as customers are increasingly adopting our software and AI-assist solutions to simplify their complex emergency response workflows.

Greg Brown: In addition, CommandCentral continues its strong momentum as customers are increasingly adopting our software and AI assist solutions to simplify their complex emergency response workloads. Third, Silvus is performing exceptionally well, powering leading-edge MANET connectivity for unmanned systems and battlefield communications. Pending regulatory approvals, we're also looking forward to the acquisition of D-Fend, an industry leader in counter-drone solutions, which goes beyond simple detection and differentiating itself through non-kinetic cyber takeover mitigation capabilities that are increasingly critical for public safety. When you consider Silvus' leading-edge MANET communications for defense and D-Fend's leading-edge detection and mitigation for public safety, I think we're very well positioned to address our customers' rapidly growing needs for unmanned systems in defense and counter-drone solutions in public safety.

Greg Brown: In addition, CommandCentral continues its strong momentum as customers are increasingly adopting our software and AI assist solutions to simplify their complex emergency response workloads. Third, Silvus is performing exceptionally well, powering leading-edge MANET connectivity for unmanned systems and battlefield communications. Pending regulatory approvals, we're also looking forward to the acquisition of D-Fend, an industry leader in counter-drone solutions, which goes beyond simple detection and differentiates itself through non-kinetic cyber takeover mitigation capabilities that are increasingly critical for public safety. When you consider Silvus' leading-edge MANET communications for defense and D-Fend's leading-edge detection and mitigation for public safety, I think we're very well positioned to address our customers' rapidly growing needs for unmanned systems in defense and counter-drone solutions in public safety.

Speaker #1: Third, Sylvus is performing exceptionally well. Powering leading-edge Manet connectivity for unmanned systems in battlefield communications, and pending regulatory approvals, we're also looking forward to the acquisition of defend, an industry leader in counter-drone solutions which goes beyond simple detection and differentiating itself through non-kinetic cyber takeover mitigation capabilities that are increasingly critical for public safety.

Speaker #1: When you consider Sylvus's leading-edge Manet communications for defense, and defend's leading-edge detection and mitigation for public safety, I think we're very well positioned. To address our customers' rapidly growing needs for unmanned systems in defense, and counter-drone solutions in public safety.

Speaker #1: And finally, in addition to our strong results and momentum, our balance sheet and continued robust cash flow enable us to be flexible in how we deploy capital, and drive long-term value both organically and through targeted acquisitions.

Greg Brown: Finally, in addition to our strong results and momentum, our balance sheet and continued robust cash flow enable us to be flexible in how we deploy capital and drive long-term value, both organically and through targeted acquisitions. I feel very good about where we are. The increased guidance for the year reflects our confidence. I'll now turn the call back over to Brian.

Speaker #1: I feel very good about where we are, and the increased guidance for the year reflects our confidence. I'll now turn the call back over to Brian.

Speaker #3: Thank you, Greg. Before we begin taking questions, I would like to remind callers to limit themselves to one question and one follow-up to accommodate as many participants as possible.

Brian Piotrowski: Thank you, Greg. Before we begin taking questions, I would like to remind callers to limit themselves to one question and one follow-up to accommodate as many participants as possible.

Speaker #3: Operator, would you please remind our callers on the line how to ask a question?

Brian Piotrowski: Operator, would you please remind our callers on the line how to ask a question?

Operator: 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, please pick up your handset to provide optimal sound quality. Thank you. Our first question will come from Tim Long with Barclays. Your line is open. Please go ahead.

Speaker #4: The floor is now open for questions. If you have a question or comment, please press star 5 on your telephone keypad. If for any reason you would like to remove yourself from the queue, please press star 5 once again.

Speaker #4: We do ask that, while you pose your question, please pick up your handset to provide optimal sound quality. Thank you. Our first question will come from Tim Long with Barclays.

Speaker #4: Your line is open. Please go ahead.

Speaker #5: Thank you. I've got a question on Sylvus, and then I'll follow up with one on video. For Sylvus, obviously another raise here that's great to see in demand seems really strong there.

Tim Long: Thank you. Got a question on Silvus, and then I'll follow up with one on video. For Silvus, obviously, another raise here. That's great to see, and demand seems really strong there. Greg or Jack, could you just touch upon some of the capacity increases you guys are undertaking? What does that mean for the flow of this business? Are we still limited by capacity, and what would that mean for Silvus as we look out the next year or two? I'll follow up after that.

Speaker #5: Greg or Jack, could you just touch upon some of the capacity increases you guys are undertaking? What does that mean for the flow of this business?

Speaker #5: Are we still limited by capacity? And what would that mean for Sylvus as we look out the next year or two, and then I'll follow up after that.

Speaker #6: Sure. Tim, let me just dimensionalize Sylvus too, in terms of its performance. It did about $210 million in Q1, about $230 million in Q2, and as you heard us on the call, we raised the year to about $850 million.

Jason Winkler: Sure, Tim. Let me just dimensionalize Silvus, too, in terms of its performance. It did about $210 million in Q1, about $230 million in Q2. As you heard us on the call, we raised the year to about $850 million, and Jack can talk about some of the things we're doing around capacity expansion.

Speaker #6: And Jack can talk about some of the things we're doing around capacity expansion.

Speaker #5: Yeah. Tim, so the first thing we did was, within our Los Angeles site, we added capacity there, specifically a second floor. I think you read, Tim, that we announced the construction of a facility a new manufacturing facility in Salt Lake City, which we're very excited about and consistent with what we said before.

Jack Molloy: Yeah, Tim. The first thing we did was within our Los Angeles site, we added capacity there, specifically a second floor. I think you read, Tim, that we announced the construction of a facility, a new manufacturing facility in Salt Lake City, which we're very excited about. Consistent with what we said before, we'll start to see the benefit of that in 2027. The increased guide for Silvus this year takes into account our current capacity, and we're living within that. I think one of the things we're also pleased with, Tim, is we've doubled the size of the sales force, so it just continues to put more balls in play for us.

Speaker #5: We'll start to see the benefit of that in 2027. But the increased guide for Sylvus this year takes into account our current capacity, and we're living within that.

Speaker #5: I think one of the things we're also pleased with, Tim, is we've doubled the size of the sales force, so it's just continues to put more balls in play for us.

Speaker #5: Okay. That's great. Thanks. And then just wanted to touch on the video business. Pretty just looking actually, it looked like a lot more a little bit about that mix and what that means in the quarter, and does that lead us towards a little bit more growth in the software side in the future?

Tim Long: Okay. That's great. Thanks. Just wanted to touch on the video business. A little bit about that mix and what that means in the quarter, and does that lead us towards a little bit more growth in the software side in the future? Anything on that mix and the take from that? Appreciate it.

Speaker #5: Anything on that mix and the take from that? Appreciate it.

Speaker #6: Tim, you broke up a little bit, but I think you're asking about the mix and performance of software versus products in SI there? Or video.

Jason Winkler: Tim, you broke up a little bit. I think you're asking about the mix and performance of software versus products in SI there.

Jack Molloy: Yeah.

Jack Molloy: Of video.

Jason Winkler: Of video? Okay. Yeah.

Jack Molloy: Yeah, correct. In video, yeah.

Speaker #6: In video.

Jason Winkler: First of all, we're very pleased with where we're at, we actually grew 12% during the quarter in total, we bumped up our guide to 11%, from 10% to 11%. Overall, performing even better than we had expected. In terms of the mix, at H1, both Software and Services and products are performing well. SNS software specifically for that part of the business is up double digits, and we expect software to be up double digits in the second half as well. We've seen strong camera sales. That's what's in part driving two quarters in a row now of strong products. The overall mix as we step back to the year, it reflects what we expect, the investments that Mahesh and team are making in our cloud and hybrid offer, and the increased sales coverage that Malloy has.

Speaker #5: So, first of all, we’re very pleased with where we’re at, and we actually grew 12% during the quarter in total, and we bumped up our guide to 11%, from 10 to 11.

Speaker #5: So overall, performing even better than we had expected. In terms of the mix, at the half, both software and services and products are performing well.

Speaker #5: SNS software specifically, for that part of the business, is up double digits, and we expect software to be up double digits in the second half as well.

Speaker #5: We've seen strong camera sales. That's what's, in part, driving two quarters in a row now of strong products. But the overall mix, as we step back to the year, reflects what we expect: the investments that Mahesh and team are making in our cloud and hybrid offering, and the increased sales coverage that Malloy has.

Speaker #5: So we're happy with where we're at. By the way, mobile video, as we mentioned on the call, mobile video also expectations are very good.

Jason Winkler: We're happy with where we're at. By the way, mobile video, as we mentioned on the call, mobile video also, expectations are very good.

Speaker #5: Okay. Thank you, guys. Appreciate it.

Tim Long: Okay. Thank you, guys. Appreciate it.

Speaker #6: Thanks, Tim.

Jason Winkler: Thanks, Tim.

Speaker #4: Your next question will come from Joseph Cardosa with JP Morgan. Your line is open. Please go ahead.

Operator: Your next question will come from Joseph Cardoso with J.P. Morgan. Your line is open. Please go ahead.

Operator: Your next question will come from Joseph Cardoso with JPMorgan. Your line is open. Please go ahead.

Speaker #7: Hey, good afternoon, and thanks for the question here. Maybe for my first one, and perhaps maybe I'm jumping ahead here and looking at the fourth quarter, but when I do the back of the envelope math on the implied fourth quarter revenue outlook, it embeds a pretty nice acceleration both sequentially and year over year.

Joseph Cardoso: Hey, good afternoon, and thanks for the question here. Maybe for my first one, perhaps I'm jumping ahead here and looking at Q4. When I do the back of the envelope math on the implied Q4 revenue outlook, it embeds a pretty nice acceleration both sequentially and year-over-year. Maybe you can just help me think through the drivers behind that uptick that you guys are embedding into the guide. Maybe thinking about it from a demand perspective across the portfolio. Is there anything in particular that's driving that acceleration here as we think about the exit trajectory for the year? Also maybe just a quick clarification. Are you guys including acquisitions that haven't been closed yet into that guidance? I do have a follow-up.

Speaker #7: So maybe you can just help me think through the drivers behind that uptick that you guys are embedding into the guide, maybe thinking about it from a demand perspective across the portfolio.

Speaker #7: Is there anything that in particular that's driving kind of that acceleration here as we think about the exit trajectory for the year? And then also maybe just a quick clarification, are you guys including acquisitions that haven't been closed yet into that guidance?

Speaker #7: And then I do have a follow-up.

Speaker #6: So, Joe, to answer the last part first, the guidance we're providing for the full year and the beat and the raise reflect the assets we have today.

Jack Molloy: Joe, to answer the last part first. The guidance we're providing for the full year and the beat and the raise reflect the assets we have today. Love the fact that we're, as Jason mentioned, guiding the year up $175 million for the full year on top line revenue. All of that is pretty much MCN, of which $100 million is Silvus, $75 million of LMR. The confidence is also informed by the over-performance in Q2, which we beat consensus by $130 million. Why did we do that? It's because of better conversion and strong demand. That said, the H2 as we look remains unchanged. We've always planned for a strong H2. That's informed by the visibility of what we have. It's informed by double-digit orders growth again, expected in Q2. Expected double-digit orders in the H2.

Greg Brown: Joe, to answer the last part first. The guidance we're providing for the full year and the beat and the raise reflect the assets we have today. Love the fact that we're, as Jason mentioned, guiding the year up $175 million for the full year on top-line revenue. All of that is pretty much MCN, of which $100 million is Silvus, $75 million of LMR. The confidence is also informed by the over-performance in Q2, which we beat consensus by $130 million. Why did we do that? It's because of better conversion and strong demand. That said, the H2 as we look remains unchanged. We've always planned for a strong H2. That's informed by the visibility of what we have. It's informed by double-digit orders growth again, expected in Q2. Expected double-digit orders in the H2.

Speaker #6: Love the fact that we're, as Jason mentioned, guiding the year up 175 million. For the full year on top line revenue, all of that is pretty much MCN.

Speaker #6: Of which 100 million is Sylvus, 75 million of LMR. The confidence is also informed by the overperformance in Q2, which we beat consensus by 130 million.

Speaker #6: Why did we do that? It's because of better conversion. And strong demand. That said, the second half as we look remains unchanged. We've always planned for a strong second half.

Speaker #6: That's informed by the visibility of what we have. It's informed by double-digit orders growth again—expected in Q2, expected double-digit orders in the second half. And when you decompose kind of our expectations, there are some specific ship acceptances and product releases around the infrastructure D series that are coming in Q4, that marry up with the conversion expectations of Jack's sales team, which informs that strong Q4.

Jack Molloy: When you decompose our expectations, there are some specific ship acceptance and product releases around the infrastructure D-series that are coming in Q4 that marry up with the conversion expectations of Jack's sales team, which informs that strong Q4.

Greg Brown: When you decompose our expectations, there are some specific ship acceptance and product releases around the infrastructure D-series that are coming in Q4 that marry up with the conversion expectations of Jack's sales team, which informs that strong Q4.

Speaker #6: And lastly, I'd say, LMR is strong. LMR was stronger than we thought in Q2, but by the way, we still expect the LMR business to grow in the second half of this year 10% as well.

Greg Brown: Lastly, I'd say, LMR is strong. LMR was stronger than we thought in Q2. By the way, we still expect the LMR business to grow in the H2 of this year, 10% as well. Just really strong growth, great orders performance, and feel good about where we are now with our expectations between now and the end of the year.

Speaker #6: So just really strong growth, great orders performance, and feel good about where we are now with our expectations between now and the end of the year.

Speaker #7: Yeah. Awesome color, Greg. Really appreciate all of that. And then maybe as my second one here, gross margins stepped up meaningfully in the quarter, even excluding the tariff benefits, but you guys are still guiding for a stable gross margin outlook for the full year.

Joseph Cardoso: Awesome color, Greg. Really appreciate all of that. Maybe as my second one here, gross margin stepped up meaningfully in the quarter, even excluding the tariff benefit, you guys are still guiding stable gross margin outlook for the full year. Maybe can you bridge the Q2 performance against that? What are the puts and takes relative to the headwinds from the cost inflation that you're highlighting versus maybe the tailwinds from mix and pricing levers, how does that shake out as we progress through the year to kind of get us to this more stable gross margin outlook for the full year? Thanks for the question.

Speaker #7: Maybe can you bridge the two Q performance against that? What are the puts and takes relative to the headwinds from the cost inflation that you're highlighting versus maybe the tailwinds from mix and pricing levers?

Speaker #7: And how does that shake out as we progress through the year to kind of get us to this more stable gross margin outlook for the full year?

Speaker #7: Thanks for the question.

Speaker #6: Sure. So, favorable mix has been a growth driver for us for a number of quarters. We expect that to continue. Customers are adopting more feature-rich solutions, and that's in part what helps drive our growth.

Jason Winkler: Sure. Favorable mix has been a growth driver for us for a number of quarters, and we expect that to continue. Customers are adopting more feature-rich solutions, and that's in part what helps drive our growth. In terms of headwinds, I mentioned on the call that memory, which last year was $50 million, we now expect to be $150 million. That's up from 90 days ago. That $100 million of increase, a large part of that's going to be faced in the H2 because of timing, because of inventory, and the positions we had to begin the year. That's a little color around the headwinds. With the offsets we're planning, we're still able to maintain comparable gross margins for the year and to grow OE for the company at 170 basis points, with contributions at OE from both segments.

Speaker #6: In terms of headwinds, I mentioned on the call that memory which last year was 50 million, we now expect to be 150 million. That's up from 90 days ago.

Speaker #6: So that 100 million of increase, a large part of that's going to be faced in the second half. Because of timing, because of inventory and the positions we had to begin the year.

Speaker #6: So that's a little color around the headwinds, and that's with the offsets we're planning, we're still able to maintain comparable gross margins for the year.

Speaker #6: And to grow OE for the company at 170 basis points, with contributions to OE from both segments.

Speaker #4: Your next question will come from Andrew Spinola with UBS. Your line is open. Please ask your question.

Operator: Your next question will come from Andrew Spinola with UBS. Your line is open. Please ask your question.

Speaker #5: Thank you. I think there is obviously a lot of interest in the second half ramp in the LMR business coming into this quarter, but the second question that I typically have been getting is trying to understand if you put all this COVID backlog shifting behind us and this sharp ramp in the second half, how are we looking in terms of increases in officers or international markets, anything that can drive that, or infrastructure D series, anything that can drive that business to an accelerated growth rate over the medium term?

Andrew Spinola: Thank you. I think there's obviously a lot of interest in the H2 ramp in the LMR business coming into this quarter. The second question that I typically have been getting is trying to understand if you put all this COVID backlog shifting behind us and this sharp ramp in the H2, how are we looking in terms of increases in officers or international markets? Anything that can drive that, or infrastructure D-series, anything that can drive that business to an accelerated growth rate over the medium term?

Speaker #6: Yeah. Thanks for the question. So certainly coming out of the last call, there's been a lot of interest in LMR. We're pleased with where public safety LMR is, which is MCN, the technology, minus Sylvus.

Jason Winkler: Yes. Thanks for the question. Certainly coming out of the last call, there's been a lot of interest in LMR. We're pleased with where public safety LMR is, which is MCN the technology minus Silvus. We had growth in the quarter. We had continued order strength, as Greg mentioned. We overperformed in the quarter, and we increased the year $75 million, whereas now we expect this year's LMR growth to be better than last year's. We've always planned for a ramp in H2, and that's consistent with, in part, product releases. The D-series deals that we've been talking about, we've talked about three of them on the call and more prior to that, require staging and implementation and getting to sites. That's planned for H2.

Speaker #6: We had growth in the quarter. We had continued order strength, as Greg mentioned. We overperformed on the quarter, and we increased the year by $75 million, whereas now we expect this year's LMR growth to be better than last year's.

Speaker #6: And we've always planned for a ramp in the second half. And that's consistent with, in part, product releases. The D series deals that we've been talking about, we talked about three of them on the call, and more prior to that, require staging and implementation and going and getting to sites.

Speaker #6: That's planned for the second half, and in addition, Jack, you've got some product releases happening in D series that'll make it available to more customers in the second half.

Jason Winkler: In addition, Jack, you've got some product releases happening in D-series that'll make it available to more customers in H2.

Speaker #5: UHF will be begin shipping Q4, Jason. Yeah.

Greg Brown: UHF should begin shipping in Q4, Jason. Yep.

Speaker #6: So nothing's changed in our expectations for first half, second half contribution. If anything, we've overperformed our expectations in the first half. And Andrew, I would say just kind of overall, when you think about the trend of public safety systems or let's just call it LMR, and what those platforms afford our customers, historically, it was always around mission-critical voice, now with the adoption of Apex Next, it incorporates broadband applications, now our latest Apex Next radio, is Leo compatible, adding another band for rural coverage for low earth orbit satellite.

Jason Winkler: Nothing's changed in our expectations for H1, H2 contribution. If anything, we've overperformed our expectations in H1.

Greg Brown: Andrew, I would say just kind of overall, when you think about the trend of public safety systems, or let's just call it LMR, and what those platforms afford our customers. Historically, it was always around mission-critical voice. Now with the adoption of APX NEXT, it incorporates broadband for 5G and broadband applications. Now our latest APX NEXT Radio is LEO-compatible, adding another band for rural coverage for low Earth orbit satellite. You have the device refreshes with APX NEXT. Now we introduce the D-series, which is the first time we've upgraded the infrastructure in 12 years, and that's informing part of the strong growth in Q4, given ship release of new infrastructure. Then look, you're going to see us continue to do things around this multidimensional, multimodal platform called public safety LMR. I just think that more and more customers see the criticality of LMR.

Greg Brown: Andrew, I would say just kind of overall, when you think about the trend of public safety systems, or let's just call it LMR, and what those platforms afford our customers. Historically, it was always around a mission-critical voice. Now with the adoption of APX NEXT, it incorporates broadband for 5G and broadband applications. Now our latest APX NEXT Radio is LEO-compatible, adding another band for rural coverage for low Earth orbit satellite. You have the device refreshes with APX NEXT. Now we introduce the D-series, which is the first time we've upgraded the infrastructure in 12 years, and that's informing part of the strong growth in Q4, given ship release of new infrastructure. Then look, you're going to see us continue to do things around this multidimensional, multimodal platform called public safety LMR. I just think that more and more customers see the criticality of LMR.

Speaker #6: You have the device refreshes with Apex Next. Now we introduce the D series, which is the first time we've upgraded the infrastructure in a dozen years.

Speaker #6: And that's informing part of the strong growth in Q4, given ship release of new infrastructure, and then, look, we'll see. You're going to see us continue to do things.

Speaker #6: Around this multidimensional, multimodal platform called public safety LMR. And I just think that more and more customers see the criticality of LMR, they're making investments in LMR and MCN.

Greg Brown: They're making investments in LMR and MCN. We too are as well, both organically and inorganically. While we mentioned D-Fend and the announcement of that deal. D-Fend was a highly sought-after asset. It's all about leading counter-drone technology. Not just detect and track and identify, but surgically do cyber takeover, which very, very few people do, and we think D-Fend does the best. We'll work the traps on the regulatory approvals, and there's still work to be done there, but we're excited about that asset as well, which we had mentioned to you at the time we announced the deal. We expect it to be about $185 million in revenue. It has historically a CAGR revenue growth of 50% over the last 3 years.

Speaker #6: We too are as well, both organically and inorganically. And while we mentioned defend and the announcement of that deal, that defend was a highly It's all about leading counter-drone technology, not just detect and track and identify, but surgically do cyber takeover, which very, very few people do.

Speaker #6: And we think defend does the best. We'll work the traps on the regulatory approvals, and there's still work to be done there, but we're excited about that asset as well, which we had mentioned to you at the time we announced the deal.

Speaker #6: We expect it to be about $185 million in revenue. It has historically had a CAGR revenue growth of 50% over the last three years. But again, as you think about LMR, as you think about critical networks, as you think about public safety platforms, and the unique ecosystem and capability we're building, it's not just what we have today, but what we expect to have shortly, and that's exciting as well.

Greg Brown: Again, as you think about LMR, as you think about critical networks, as you think about public safety platforms and the unique ecosystem and capability we're building, it's not just what we have today, but what we expect to have shortly, and that's exciting as well.

Speaker #5: Appreciate that. One follow-up question, Greg. AI has been in the market now; you've had a product for maybe a couple of quarters. Some of the competitors have had different types of products similar to yours, some more analytical.

Andrew Spinola: Appreciate that. One follow-up question, Greg.

Greg Brown: Yeah.

Andrew Spinola: AI has been in the market now. You've had a product for maybe a couple of quarters. Some of the competitors have had different types of products similar to yours, some more analytical. How is the industry accepting AI? Is it performing to expectation, both your product and across the industry in terms of acceptance and just performance?

Speaker #5: How is the industry accepting AI? Is it performing to expectations both your product and across the industry in terms of acceptance and just performance?

Speaker #6: I think it's performing well. We talk about AI in the context of embedding it in pretty much everything we do, specifically in the context of public safety, around the individual personas.

Greg Brown: I think it's performing well. We talk about AI in the context of embedding it in pretty much everything we do, specifically in the context of public safety around the individual personas. How does AI get implemented and productized through the lens of a public safety responder, law enforcement officer? How does it get instantiated with a dispatcher? How does it get implemented through a real-time crime center? I think Mahesh has done a great job of building it out both on-prem as well as hybrid solutions, and I think our traction is quite good.

Speaker #6: So how does AI how does it get implemented in product eyes through the lens of a public safety responder, law enforcement offer? How does it get instantiated with a dispatcher?

Speaker #6: How does it get implemented through a real-time crime center? And I think Mahesh has done a great job of building it out both on-prem as well as hybrid solutions.

Speaker #6: And I think our traction is quite good.

Speaker #3: The outcome I would say, and maybe echoing one of the key points that Greg just made, is AI is no longer a nice-to-have. It's a need-to-have within each of our applications.

Mahesh Saptharishi: The other thing I would say, and maybe echoing one of the key points that Greg just made, is AI is no longer a nice-to-have. It's a need-to-have within each of our applications, and we have taken that philosophy right from the beginning, where it's not an over-the-top solution. It is embedded deeply within each of our platforms.

Speaker #3: And we have taken that philosophy. Right from the beginning, where it's not an over-the-top solution, it is embedded deeply within each of our platforms.

Speaker #5: Yeah. It's integrated.

Greg Brown: Exactly. It's integrated.

Speaker #3: And just to sort of punctuate that point, 100% of our Vesta emergency call handling solutions in Q2, we're at the assist tier, which is effectively the tier of our solution that includes all the AI capabilities.

Mahesh Saptharishi: Just to sort of punctuate that point, 100% of our VESTA emergency call handling solutions in Q2 were at the Assist tier, which is effectively the tier of our solution that includes all the AI capabilities. The same is true across CAD records as well. It is becoming something that is key and embedded within each of those platforms, and that in turn is meaningfully raising our ASPs across the board. A couple of other things that I think that we have done and we take great pride in is we introduced this notion of AI labels.

Speaker #3: The same is true across CAD, records as well. So it is becoming something that is key and embedded within each of those platforms. And that, in turn, is meaningfully raising our ASPs across the board.

Speaker #3: A couple of other things that I think that we have done and we take great pride in is we introduced this notion of AI labels.

Speaker #3: And that is, I think, quite important for our customers because they would like to know what the status of data ownership is, what type of models are being used.

Mahesh Saptharishi: That is, I think, quite important for our customers because they would like to know what the status of data ownership is, what type of models are being used, does it run on-prem, does it run on cloud, what elements of data are used to compute various things that they are seeing from a decision standpoint. We are very transparent and open about what it is that they do, and across the board, we also offer free training on demand for our customers to effectively use those capabilities in whatever workflows that they choose to use it for. We are seeing great acceptance across the board with that.

Speaker #3: Does it run on-prem? Does it run on cloud? What elements of data are used to compute various things that they are seeing from a decision standpoint?

Speaker #3: We are very transparent and open about what it is that they do. And across the board, we also offer free training on demand for our customers to effectively use those capabilities in whatever workflows that they choose to use it for.

Speaker #3: And we are seeing great acceptance across the board with that.

Speaker #5: Thank you. Thanks, Andrew.

Andrew Spinola: Thank you.

Greg Brown: Thanks, Andrew.

Speaker #1: Your next question will come from Adam Tyndall with Raymond James, your line is open. Please go ahead.

Operator: Your next question will come from Adam Tindle with Raymond James. Your line is open. Please go ahead.

Speaker #7: Okay. Thanks. Good afternoon. I just wanted to maybe start this time last quarter, I think a lot of us were surprised by the PSI operating margin in Q1.

Adam Tindle: Okay. Thanks. Good afternoon. I just wanted to maybe start, this time last quarter, I think a lot of us were surprised by the PSI operating margin in Q1. SNS had an upside to offset, but I think the composition of that quarter was a little different than investors thought. Here we are 90 days later with a huge rebound in PSI margins on a sequential basis. Maybe just as a starting point, Jason, could you walk through sort of the drivers that led to this level of improvement? You've mentioned memory costs increasing. I know in the past, as you had cost increases, it makes sense for you to start raising price to correspond with that. I wonder how you're thinking about pricing as a lever as well going forward.

Speaker #7: SNS had an upside to offset, but I think the composition of that quarter was a little different than investors thought. Here we are 90 days later with a huge rebound in PSI margins on a sequential basis.

Speaker #7: So maybe just as a starting point, Jason, could you walk through the drivers that led to this level of improvement? And you've mentioned memory costs increasing.

Speaker #7: I know in the past, as you've had cost increases, your it makes sense for you to start raising price to correspond with that. I wonder how you're thinking about pricing as a lever as well going forward.

Speaker #6: Sure, Adam. So part of Q2, as we mentioned, was stronger conversion with orders brought in by the sales team that were able to execute in.

Jason Winkler: Sure, Adam. Part of Q2, as we mentioned, was stronger conversion with orders brought in by the sales team that we were able to execute in. A lot of that has to do with devices. We had more devices shipments. We have a higher inventory position, by the way, that's helping us get to strong quick turn levels. It's helping us navigate the memory challenges on pricing. Part of the improvement in op margin quarter-over-quarter had to do with the mix towards devices, which we were able to turn within the quarter. That's a key driver as to the overperformance and the better margins. The second part of your question around levers that we have. I mean, memory as a content to LMRs are pretty small. It's a more material contributor or item in video.

Speaker #6: A lot of that has to do with devices. And so we had more devices shipments. We have a higher inventory position, by the way, that's helping us get to strong, quick-turn levels.

Speaker #6: It's helping us navigate the memory challenges on pricing. So part of the improvement in op margin quarter over quarter had to do with the mix towards devices, which we were able to turn within the quarter.

Speaker #6: That's a key driver as to the overperformance and the better margins. The second part of your question around levers that we have, I mean, memory as a content to LMR is a pretty small it's a more material contributor or item in video.

Speaker #6: We have made some surgical price increases on high memory content items in video, for example, like video servers. And we'll continue to look at that as an overall offset for the portfolio.

Jason Winkler: We have made some surgical price increases on high memory content items in video, for example, like video servers. We'll continue to look at that as an overall offset for the portfolio. Continuing to secure the supply that we need. Of course, paying higher prices, but it's enabling us to meet the demand that we're seeing. We'll continue to look at it as a possibility going forward.

Speaker #6: But continuing to secure the supply that we need of course, paying higher prices, but it's enabling us to meet the demand that we're seeing.

Speaker #6: We'll continue to look at it as a possibility. Going forward.

Speaker #7: Got it. Maybe just continuing that thought as a follow-up, Greg, investors are looking at the product backlog being down sequentially but also your positive commentary on the outlook for the product business in particular.

Adam Tindle: Got it. Maybe just continuing that thought as a follow-up. Greg, investors are looking at the product backlog being down sequentially, but also your positive commentary on the outlook for the product business in particular, and I think Jason's guidance suggests that H2 is actually going to accelerate in terms of the product growth. Is product backlog down sequentially versus this acceleration implied in revenue? What are investors maybe missing if they over-fixate on the backlog trends thing?

Speaker #7: And I think Jason's guidance suggests that the back half is actually going to accelerate in terms of the product growth. So with product backlog down sequentially, we're versus this acceleration implied in revenue what are investors maybe missing if they over-fixate on the backlog trend thing?

Speaker #6: No, look, we're thrilled. I know you're focused on the sequential, but we love the year-over-year performance. And at the end of the day, this is more about, as Jason and we have said since the beginning of the year, the MSI revenue story becomes more of one of conversion than backlog.

Greg Brown: No. Look, we're thrilled. I know you're focused on the sequential, but we love the year-over-year performance. At the end of the day, this is more about, as Jason and we have said since the beginning of the year, the MSI revenue story becomes more of one of conversion than backlog. Now, having said that, love the fact that Q2 was another double-digit A orders quarter. Love the fact that H2 on orders growth is expected to be double digits. If you want to specifically look at product backlog, look, as we sit here in August, at the end of the day, I expect product backlog to be up at the end of this year versus last year. Backlog is a component, but the story more about our growth is overall demand, which is stronger, conversion, which is stronger, and double-digit orders growth.

Speaker #6: Now, having said that, love the fact that Q2 was another double-digit orders quarter love the fact that the back half on orders growth is expected to be double digits.

Speaker #6: But if you want to specifically look at product backlog, look, as we sit here in August, at the end of the day, I expect product backlog to be up at the end of this year versus last year.

Speaker #6: So, I think backlog is a component, but the story about our growth is really more about overall demand, which is stronger, and conversion, which is also stronger.

Speaker #6: And double-digit orders growth. I think we're in good shape.

Greg Brown: I think we're in good shape.

Jack Molloy: Adam, to your point, the product backlog of the high threes is a strong place to be complemented by the double-digit orders.

Speaker #3: And Adam, to your point, the product backlog of the high threes is a strong place to be, complemented by the double-digit orders.

Jack Molloy: Adam, to your point, the product backlog of the high threes is a strong place to be complemented by the double-digit orders.

Speaker #6: Exactly.

Greg Brown: Exactly

Speaker #3: That's in front of us, and that we've been capturing and that the pipeline supports going forward. And that's the setup for how we expect things to play out in the second half of the year.

Jack Molloy: that's in front of us and that we've been capturing, and that the pipeline supports going forward. That's the setup for how we expect things to play out in H2.

Speaker #7: That's helpful. Congrats on an awesome quarter.

Adam Tindle: That's helpful. Congrats on an awesome quarter.

Speaker #6: Yeah. Thank you, Adam. Appreciate it.

Greg Brown: Yeah. Thank you, Adam. Appreciate it.

Speaker #1: Your next question will come from George Nodder with Wolf Research. Your line is open. Please go ahead.

Operator: Your next question will come from George Notter with Wolfe Research. Your line is open. Please go ahead.

Speaker #8: Hi, guys. Thanks very much. I wanted to dig into the Syllabus progress a bit more. Obviously, it continues to really do well. I know, I think you said, Jack, that you increased the sales force or doubled the size of the sales force. But I'm just curious as you look out, where you're seeing opportunities—what geos, what applications—anything more you can tell us about the underlying demand trends there and customer interest would be great.

George Notter: Hi, guys. Thanks very much. I wanted to dig into the Silvus progress a bit more. Obviously, continued to really do well. I think you said, Jack, that you increased the sales force or doubled the size of the sales force. I'm just curious, as you look out, where are you seeing opportunities? What geos? What applications? Anything more you can tell us about the underlying demand trends there and customer interest would be great. Thanks.

Speaker #8: Thanks.

Speaker #6: And we could tag team it, but contextually, George, I think the good news is the overall demand is driven by international demand and what I would characterize as kind of a macro global defense modernization.

Greg Brown: Yeah, we could tag team it. Contextually, George, I think the good news is the overall demand is driven by international demand and what I would characterize as kind of a macro global defense modernization. I think you see our growth driven by NATO countries, EU defense spending. Germany is a theater, in particular, that's strong. Obviously, Ukraine that's in conflict. Growing demand in the US and Indo-Pacific. You take that strong demand and couple it with the earlier question around capacity expansion. Jack's done a great job more than doubling the sales force. I think you'll see supply chain efficiencies increase as well. We have the new capacity facility in Salt Lake City that comes online in early Q1. Could not be more pleased with that asset. It's been a year, like a year tomorrow or a year the following day, that we actually closed on it.

Speaker #6: I think you see our growth driven by NATO countries. You defense spending. Germany is a theater in particular that's strong. Obviously, Ukraine that's in conflict.

Speaker #6: And growing demand in the U.S. and Indo-Pacific. You take that strong demand and couple it with the earlier question around capacity expansion—Jack's done a great job, more than doubling the sales force.

Speaker #6: I think you'll see supply chain efficiencies increase as well. We have the new capacity facility in Salt Lake City that comes online in early Q1.

Speaker #6: Could not be more pleased with that asset. It's been a year I think a year tomorrow or a year the following day that we actually closed on it.

Speaker #6: It's performing better than we thought. We knew demand would be strong—it's even stronger than we thought. And I think a tip of the hat to Jack and his team, and Babek and the Syllabus team in LA—it's been superb.

Greg Brown: It's performing better than we thought. We knew demand would be strong. It's even stronger than we thought. I think a tip of the hat to Jack and his team, Babak, and the Silvus team in LA. It's been superb, and thrilled to have it. Look, it's proving out, I think, the thesis behind, we were very disciplined and intentional with that Silvus acquisition. I would say the same thing about D-Fend. We think in Silvus, it's the leading player and the leading-edge technology in unmanned. Similarly, once we run the traps on the regulatory approvals, we think D-Fend is unique specifically around cyber takeover and mitigation, which is a unique characteristic, and we love both of those assets.

Speaker #6: And thrilled to have it. And look, it's proving out, I think, the thesis behind we were very disciplined and intentional with that syllabus acquisition.

Speaker #6: I would say the same thing about defense. We think in syllabus, it's the leading player and the leading edge technology in unmanned. And similarly, once we run the traps on the regulatory approvals, we think defend is unique specifically around cyber takeover and mitigation which is a unique characteristic and we love both of those assets.

Speaker #6: Yeah. The only thing I'd build on is, listen, the secret sauce here is a Spectrum Dominance 2.0 software.

Jack Molloy: Yeah. The only thing I'd build on is, listen, the secret sauce here is the Spectrum Dominance 2.0 software.

Speaker #7: Exactly.

Greg Brown: Exactly.

Speaker #6: It's not only—we talked about man-aid technology being high bandwidth, which enables various forms of multimodal throughput on the battlefield—but it's anti-jam, it's a low-profile, intersect and detect.

Jack Molloy: We talked about MANET technology being high bandwidth, which enables various forms of multimodal throughput on the battlefield, it's anti-jam. It's a low-probability intercept and detect. Just specifically, the US DoD just ran some trials, and Silvus received exceptional scoring in terms of anti-jam testing results. I think as we see in highly contested environments, when us versus our competition get put to the test, I think it's just further testament to what Babak and the technical team have built there. Then we've added, as we talked about being a scale player. We're invested in additional capacity, go to market. We continue to extend and invest in R&D, not only in the waveform, but in the software aspects of it. They're firing on all cylinders. I think just to echo what Greg said, we're really proud of what they've accomplished.

Speaker #6: But just specifically, the U.S. DOD just ran some trials and Syllabus received exceptional scoring in terms of anti-jam testing results. And I think as we see in highly contested environments, when us versus our competition get put to the test, I think it's just further testament to what Babek and the technical team have built there. And then we've added, as we talked about being a scale player, we're investing in additional capacity go-to-market.

Speaker #6: We continue to extend and invest in R&D, not only in the waveform, but in the software aspects of it. And they're firing on all cylinders.

Speaker #6: And I think, just to echo what Greg said, we're really proud of what they've accomplished.

George Notter: Super. Thank you very much.

Speaker #8: Super. Thank you very much.

Speaker #6: Thanks, George.

Greg Brown: Thanks, George.

Speaker #1: Your next question will come from Meta Marshall with Morgan Stanley. Your line is open. Please go ahead.

Operator: Your next question will come from Meta Marshall with Morgan Stanley. Your line is open. Please go ahead.

Speaker #2: Great, thanks. I wanted to ask a question on APX NEXT and just the software subscriptions that you're seeing kind of attached to that. In the past, you've noted somewhere around $300 per year.

Meta Marshall: Great. Thanks. Wanted to ask a question on APX NEXT and just the software subscriptions that you're seeing kind of attached to that. In the past you've noted somewhere around $300 per year. Just wanted to see what applications are either getting the most traction or if there's any update to that number. Maybe as a follow-up question, just kind of any traction with the SDR. Thanks.

Speaker #2: Just wanted to see what applications are either getting the most traction or if there's any update to that number. And then maybe as a follow-up question, just kind of any traction with the SPX.

Speaker #2: Thanks.

Speaker #6: Sure, thanks. Meta, you're right. We expect 300,000 subscribers by year-end 2026. That would be up from about 200,000 by the end of 2025.

Jack Molloy: Sure. Thanks, Meta, and you're right. We expect 300,000 subscribers by the year-end 2026. That would be up from about 200,000 by end of 2025. Strong growth. The pricing of the apps is around $300. It's gone up a little bit with the advent of some new apps, and I'll let Jack talk about where the apps that the customers like best, but it's a driver. It's now gonna be almost a $100 million ARR business by year's end.

Speaker #6: So, strong growth. The pricing of the apps is around $300. It's gone up a little bit with the advent of some new apps, and I'll let Jack talk about where the apps that the customers like best.

Speaker #6: But they are definitely it's a driver. It's now going to be almost 100 million dollar ARR business. By year's end. Yeah. I think just Meta in terms of those things, it's smart connect, which is an essentially enables a user who may be going out of their jurisdiction to expand their coverage capacity.

Greg Brown: Yeah. I think just, Meta, in terms of those things, it's SmartConnect, which essentially enables a user who may be going out of their jurisdiction to expand their coverage capacity. Smart programming, location continues to be, as we think about accountability, location continues to be an application.

Speaker #6: Smart programming. And then, location continues to be—as we think about accountability—location continues to be an application that gets consumed. Related to SVX and the hash, may have something you want to add.

Jack Molloy: That gets consumed. Related to SVX, and Mahesh may have something he wants to add. SVX traction, we're really proud. We've now got 150 customers operational with SVX. You heard Greg and Jason talk about Florida Highway Patrol and Kansas City, Missouri. Want to point out that we didn't go in and extend those customers. They're not existing customers we extended. Those were new RFPs that we secured against our competition. In addition to St. Joseph County, Indiana, who used to deal with one of our competitors, and now signed on because they love the story of our full ecosystem. That's just in North American Q2. You look at what we've done internationally, well, we're over 20 countries right now in body-worn camera.

Speaker #6: SVX traction—we're really proud. We've now got 150 customers operational with SVX. You heard Greg and Jason talk about Florida Highway Patrol and Kansas City, Missouri.

Speaker #6: I want to point out that we didn't go in and extend those customers. They're not existing customers we extended. Those were new RFPs that we secured against our competition.

Speaker #6: In addition, the St. Joseph County, Indiana, who used to deal with one of our competitors, and now signed on because they love the story of our full ecosystem.

Speaker #6: That's just in North American Q2. You look at what we've done internationally where we're over 20 countries right now in body-worn camera. Name a couple of big big ones.

Jack Molloy: Name a couple big ones, over 20,000 users with the São Paulo Military Police, Moroccan Gendarmerie, a Nordic national police department. I think we continue to get momentum with our reach and trust that we have internationally. Those successes were competitive flips. They absolutely were. Right. The other point I'd make around APX NEXT and SVX is they are paired together. When we talk about an SVX win, that's paired with customers that are using APX NEXT. It's yet another combination that's powerful for both parts of the portfolio.

Speaker #6: Over 20,000 users with the São Paulo military police. Moroccan gendarmerie. A Nordic national police department. And I think we continue to get momentum with our reach and trust that we have internationally.

Speaker #7: And those successes were competitive flips.

Speaker #6: They absolutely were.

Speaker #7: Right. The other point I'd make around APEX Next and SVX is they are paired together. So when we talk about an SVX win, that's paired with customers that are using APEX Next.

Speaker #7: So it's yet another combination that's powerful for both parts of the portfolio.

Speaker #2: Great. Thanks so much.

Meta Marshall: Great. Thanks so much.

Speaker #6: Thanks, Meta.

Jack Molloy: Thanks, Meta.

Speaker #1: Your next question will come from Tomer Zilberman from Bank of America. Your line is open. Please go ahead.

Operator: Your next question will come from Tomer Zilberman from Bank of America. Your line is open. Please go ahead.

Speaker #5: Hey, guys. I wanted to go back to the LMR discussion. I think you mentioned earlier that you expect the segment to grow 10% in the second half.

Tomer Zilberman: Hey, guys. I wanted to go back to the LMR discussion. I think you mentioned earlier that you expect the segment to grow 10% in H2. I mean, that's a really strong number. That's on par with the growth that you were seeing a couple of years ago when you had the benefit of both the North American refresh cycle and also the supply chain environment, which was driving up orders. I guess the question is, as it pertains to your commentary around APX NEXT, is that driving another cycle this time around? I think a while ago, you gave us a disclosure that APX NEXT was about 25% of public safety shipments. Is there any update to that number you can give us?

Speaker #5: I mean, that's a really strong number. That's on par with the growth that you were seeing a couple of years ago when you had the benefit of both the North American refresh cycle and also the supply chain environment, which is driving up orders.

Speaker #5: But I guess the question is, as it pertains to your commentary around APEX Next, is that driving another cycle this time around? And I think a while ago you gave us a disclosure that APEX Next was about 25% of public safety shipments.

Speaker #5: Is there any update to that number you can give us?

Speaker #6: Sure. So we talked about a growth driver of the second half ramp being infrastructure, which is D-series. And the timing of the deployments and the new offer of UHF, which is coming to market.

Jack Molloy: Sure. We talked about a growth driver of the H2 ramp being infrastructure, which is D-series, and the timing of the deployments and the new offer of UHF, which is coming to market. Conversion and quick turn for devices continues to be strong. It was stronger than we expected in Q2, and we expect it to be strong in H2 with continued momentum in customers choosing APX NEXT, which comes to us at a premium at the time of sale, and also with the ARR subscription that Metta just asked about. Yeah. The only other thing that we haven't talked about is APX NEXT has historically been a police phenomenon, and a credit to Mahesh and his team, but in Q2, we announced the first APX NEXT XN, which actually puts us in the first National Fire Protection 1930 certification.

Speaker #6: Conversion and quick turn for devices continues to be strong. It was stronger than we expected in Q2. And we expect it to be strong in the second half with continued momentum and customers choosing APEX Next.

Speaker #7: Exactly.

Speaker #6: Which comes to us at a premium at the time of sale, and also with the ARR subscription that Meta just asked about.

Speaker #7: Yeah. I mean, the only other thing that we haven't talked about is APEX Next has historically been a police phenomenon, and credit to Mahesh and his team.

Speaker #7: But in Q2, we announced the APEX the first APEX Next XN, which actually puts us in the first NF National Fire Protection 1930 certification.

Speaker #7: So we have an APEX Next device that we can now bring to the fire market as well.

Jack Molloy: We have an APX NEXT device that we can now bring to the fire market as well.

Speaker #5: Thanks.

Tomer Zilberman: Thanks.

Speaker #7: Thank you.

Jack Molloy: Thank you.

Speaker #1: Your next question will come from James Fisher with Piper Sandler. Your line is open. Please go ahead.

Operator: Your next question will come from James Fish with Piper Sandler. Your line is open. Please go ahead.

Speaker #8: Thanks for taking my question. This is Ryan on for James Fish. On the drone side, any pickup in the pipeline post-World Cup? And now that you have Defend and Silvus as pillars here, how are you feeling about mitigation and prevention strategies that we could see MSI add organically or inorganically going forward?

[Analyst] (Piper Sandler): Thanks for taking my question. This is Ryan on for James Fish. On the drone side, any pickup in pipeline post-World Cup? Now that you have D-Fend and Silvus as pillars here, how are you feeling about mitigation and prevention strategies that we could see MSI add organically or inorganically going forward?

Speaker #6: Well, Ryan, we don't have defend yet. We are expecting that transaction to close in the second half. But think about it. Silvas is unmanned defense.

Jack Molloy: Well, Ryan, we don't have D-Fend yet. We are expecting that transaction to close in H2. Think about it. Silvus is unmanned defense. D-Fend is counter-drone technology for public safety. Different technologies and different verticals of MS. I love D-Fend. It was an engagement that took multiple months, as I mentioned a few minutes ago. It's a leading-edge, highly sought-after asset. Look, we hear all these things about drones. It's one thing to detect them. A lot of people can do that. D-Fend can detect, it can track, it can identify, how do you mitigate it? How do you mitigate it in a public safety context or critical infrastructure context without collateral damage? You can't use bombs or bullets or kinetic. You have to find a different way.

Speaker #6: Defend is counter-drone technology for public safety. So different technologies and different verticals of emphasis. I love defend. I love it was an engagement that took multiple months, as I mentioned a few minutes ago.

Speaker #6: It's a leading-edge, highly sought-after asset. Because look, we hear all these things about drones. It's one thing to detect them. A lot of people can do that.

Speaker #6: Defend can detect. It can track. It can identify. But then, how do you mitigate it? And how do you mitigate it in a public safety context or critical infrastructure context without collateral damage?

Speaker #6: You can't use bombs or bullets or kinetic you have to find a different way. What we loved about defend and their creativity and ingenuity is they do it through surgical cyber takeover.

Jack Molloy: What we loved about D-Fend and their creativity and ingenuity is they do it through surgical cyber takeover. They track it, identify it, take it over, and take the communications link over, and then neutralize that threat with no residual damage, no threat to public safety communities. That's what we think is best in class. I think there's a lot of that. By the way, if you look at FIFA, you mentioned, Ryan, World Cup. D-Fend was in virtually all of those theaters, all of those stadiums, providing cyber mitigation, which played a critical role. I read a report several days ago that there was over 700 different drones detected over multiple sites over the course of FIFA. I think D-Fend was a meaningful component to that detection and mitigation. Feel very good about it.

Speaker #6: So they track it, identify it, take it over, and take the communications link over, and then neutralize that threat, with no residual damage, no threat to public safety, communities. That's what we think is best in class.

Speaker #6: So I think there's a lot of that. By the way, if you look at FIFA—you mentioned around the World Cup—'defend' was in virtually all of those theaters.

Speaker #6: All of those stadiums. Providing cyber mitigation, which played a critical role and I read a report several days ago that there was only over 700 different drones detected over multiple sites during the over the course of FIFA.

Speaker #6: I think 'defend' was a meaningful component to that detection and mitigation, so I feel very good about it. Yeah. And if you look at just in the last seven days, the Department of Homeland Security came out and announced a $1.5 billion unmanned aircraft contract.

Jack Molloy: Yeah, if you look at just in the last 7 days, the Department of Homeland Security came out and announced a $1.5 billion unmanned aircraft contract, 2 tiers. The first of which was systems, the second of which was comprehensive services. It's important to point out that there was multi-vendors selected on the systems. Only one, D-Fend, that actually provides cyber mitigation system. As Greg, I think, eloquently pointed out, to keep the public safe, to bring the drone down safely, there's only one way to do it, and that's cyber, and they were the company selected there.

Speaker #6: There were two tiers: the first of which was systems, and the second of which was comprehensive services. It's important to point out that there was multi-vendor selection on the systems.

Speaker #6: But only one, defend, that actually provides cyber mitigation system is to Greg, I think eloquently pointed out, to keep the public safe, to bring the drone down safely.

Speaker #6: There's only one way to do it. And that's cyber. And they were the companies selected there.

Speaker #8: Thank you. And then a quick follow-up. How are state and local municipal budgets holding up for 2026? And are you seeing any hesitation in large-scale APX Next upgrades?

James Fish: Thank you. Then a quick follow-up. How are state and local municipal budgets holding up for 2026? Are you seeing any hesitation in large-scale APX NEXT upgrades, or is the funding environment still highly supportive?

[Analyst] (Piper Sandler): Thank you. Then a quick follow-up. How are state and local municipal budgets holding up for 2026? Are you seeing any hesitation in large-scale APX NEXT upgrades, or is the funding environment still highly supportive?

Speaker #8: Or is the funding environment still highly supportive?

Speaker #6: No. So 2026, the budgets have been continue to be continue to be very good. We've actually what we do this time of year, mid-year, because we start to look at 27 budgets which have now been floated in some cases approved.

Jack Molloy: No. 2026, the budgets continue to be very good. What we do this time of year, mid-year, because we start to look at 2027 budgets, which have now been floated, in some cases, approved. The good news for us is in 2027, for state and local, public safety budgets are growing faster than government budgets, both state and local. If we think about software as it relates to public safety, and the funding attributed to software for public safety, that's growing even faster than money's being allocated to public safety. We think all in for 2027, generally conducive to our business.

Speaker #6: The good news for us is, in 2027, for state and local, public safety budgets are growing faster than government budgets, both state and local.

Speaker #6: And then, if we think about software as it relates to public safety and the funding attributed to software for public safety, that's growing even faster than monies being allocated to public safety.

Speaker #6: So, we think all in for '27, generally conducive to our business.

Speaker #8: Okay. Thank you very much.

James Fish: Okay. Thank you, guys.

[Analyst] (Piper Sandler): Okay. Thank you, guys.

Speaker #6: Thanks, Ryan.

Jack Molloy: Thanks, Ryan.

Greg Brown: Thanks, Ryan.

Speaker #1: Your next question will come from Matt Niknam with Truist. Your line is open, please go ahead.

Operator: Your next question will come from Matt Niknam with Truist. Your line is open. Please go ahead.

Speaker #7: Hey. Thanks so much for taking the question. Congrats on the quarter. I have one follow-up and one I guess more main question. So the follow-up is we talked about double-digit order of growth in the second half of the year.

Matt Niknam: Hey, thanks so much for taking the question. Congrats on the quarter. I have one follow-up and one, I guess more main question. The follow-up is, you talked about double-digit order growth in H2. I just want to clarify, is that for the Products & SI segment, or is that for the total business? Then, broadly speaking around supply chain, just wondering if you can talk about the visibility you've got with your suppliers in terms of being able to procure what you need to accommodate demand, and whether there could be upside to the guide if you're able to get access to more this year. Thanks.

Speaker #7: I just want to clarify. Is that for the products in SI segment? Or is that for the total business? And then broadly speaking around supply chain, just wondering if you can talk about the visibility you've got with your suppliers in terms of being able to procure what you need to accommodate demand.

Speaker #7: And whether there could be upside to the guide if you're able to get access to more this year. Thanks.

Speaker #6: Matt, I'll answer the second question first. I think you're getting at memory. Memory, for us, is a challenge in terms of what we're having to pay for.

Jack Molloy: Matt, I'll answer the second question first. I think you're getting at memory. Memory for us is a challenge in what we're having to pay for. We're paying more. This year, we're going to spend $150 million. Last year was $50 million. The availability has been good and continues to be good. Because we're working with our vendors to secure the continuity of supply, we are carrying higher inventory, and capturing its availability. I'd remind those on the call that our LMR, specifically MCN portfolio, does use a simpler form of RAM. It's not the latest, greatest high-speed DRAM. We can substitute it. That's allowing us to have more shots on goal, and we are attaining and getting the continuity of supply we need. We are having to pay more.

Greg Brown: Matt, I'll answer the second question first. I think you're getting at memory. Memory for us is a challenge in what we're having to pay for. We're paying more. This year, we're going to spend $150 million. Last year was $50 million. The availability has been good and continues to be good. Because we're working with our vendors to secure the continuity of supply, we are carrying higher inventory, and capturing its availability. I'd remind those on the call that our LMR, specifically MCN portfolio, does use a simpler form of RAM. It's not the latest, greatest high-speed DRAM. We can substitute it. That's allowing us to have more shots on goal, and we are attaining and getting the continuity of supply we need. We are having to pay more.

Speaker #6: We're paying more. This year, we're going to spend $150 million. Last year was $50 million. The availability has been good and continues to be good.

Speaker #6: Because we're working with our vendors to secure the continuity of supply, we are carrying higher inventory and capturing its availability. And I'd remind those on the call that our LMR, specifically the MCN portfolio, does use a simpler form of ramp.

Speaker #6: It's not the latest, greatest, high-speed DRAM, and we can substitute it. And so that's allowing us to have more shots on goal, and we are attaining and getting the continuity of supply we need.

Speaker #6: We are having to pay more. That said, we're still growing operating margins 170 bips expected this year with comparable gross margins. To answer the first part of your question, the double-digit growth is expected in products.

Jack Molloy: That said, we're still growing operating margins 170 bps expected this year with comparable gross margins. To answer the first part of your question, the double digits growth is expected in products, specifically Products & SI in H2.

Greg Brown: That said, we're still growing operating margins 170 bps expected this year with comparable gross margins. To answer the first part of your question, the double digits growth is expected in products, specifically Products & SI in H2.

Speaker #6: Specifically, products in SI in the second half.

Speaker #7: Thank you.

Matt Niknam: Thank you.

Speaker #1: Once again, if you have a question, you may press *5 on your telephone keypad to enter the queue. Your next question will come from Irvin Liu with Evercore ISI.

Operator: Once again, if you have a question, you may press star five on your telephone keypad to enter the queue. Your next question will come from Irvin Liu with Evercore ISI. Your line is open. Please go ahead.

Speaker #1: Your line is open. Please go ahead.

Speaker #5: Hi, thank you, and congrats on the nice set of numbers. I had one follow-up as well. Just given the continued outperformance of Silvus, I wanted to check whether you held an updated view on where the Silvus TAM stands today.

Irvin Liu: Hi. Thank you, and congrats on the nice set of numbers. I had one and a follow-up as well. Just given the continued outperformance of Silvus, I wanted to check whether you held an updated view on where the Silvus TAM stands today. I think most recently you indicated the TAM is currently about $3 billion and expected to double over the next four to five years. I guess I just wanted to better understand whether your growth here on Silvus was more TAM-driven or share-driven. It sounds like the latter to me.

Speaker #5: I think most recently you indicated the TAM is currently about $3 billion. And expected to double over the next four to five years. But I guess I just wanted to better understand whether your growth here on Silvus was more TAM-driven or share-driven.

Speaker #5: I mean, it sounds like the latter to me.

Jack Molloy: I would say it's more share-driven, actually, than TAM-driven. We don't have any information that would materially change the TAM that you just outlined that we have quantified. I think the performance of Silvus is around share gain and execution, and not addressable market expansion per se.

Greg Brown: I would say it's more share-driven, actually, than TAM-driven. We don't have any information that would materially change the TAM that you just outlined that we have quantified. I think the performance of Silvus is around share gain and execution, and not addressable market expansion per se.

Speaker #6: I would say it's more share-driven, actually, than TAM-driven. We don't have any information that would materially change the TAM that you just outlined that we have quantified.

Speaker #6: I think the performance of Silvus is around share gain and execution, and not addressable market expansion per se.

Speaker #5: Got it. And thank you. For my follow-up, you discussed the D-series infrastructure product as a contributor to LMR strengthening for Q4, looking ahead.

Irvin Liu: Got it. Thank you. For my follow-up, you discussed the D-series infrastructure product as a contributor of LMR strengthening for Q4. Looking ahead, just given that this is the first infrastructure product in 12 years, are you seeing any sort of benefits of a pent-up demand for infrastructure broadly that can potentially unlock a multi-year infrastructure refresh cycle?

Speaker #5: Given that this is the first infrastructure product in 12 years, are you seeing any sort of benefits from pent-up demand for infrastructure broadly, that could potentially unlock a multi-year infrastructure refresh cycle?

Speaker #6: Yes, we are. And just to dimensionalize it, infrastructure is a little less in the quarter for the LMR business. And to have a D-series, as Greg mentioned, that's new, refreshed. Jack can talk about the customer attributes they like the best.

Jack Molloy: Yes, we are. Just to dimensionalize it, infrastructure's a little less than a quarter of the LMR business. To have a D-series, as Greg mentioned, that's new, refreshed. Jack can talk about the customer attributes they like the best. To have them investing in it means that it's expected to be a growth driver, not only for Products & SI, by the way. Most of the customers that are investing in this infrastructure are signing up for new 5, 10-year Software and Services wrappers around it. We'll see the benefit of that over time as well. Jack, in terms of features and what's really uptaking?

Greg Brown: Yes, we are. Just to dimensionalize it, infrastructure's a little less than a quarter of the LMR business. To have a D-series, as Greg mentioned, that's new, refreshed. Jack can talk about the customer attributes they like the best. To have them investing in it means that it's expected to be a growth driver, not only for Products & SI, by the way. Most of the customers that are investing in this infrastructure are signing up for new 5, 10-year Software and Services wrappers around it. We'll see the benefit of that over time as well. Jack, in terms of features and what's really uptaking?

Speaker #6: And to have them investing in it means that it's expected to be a growth driver, not only for products in SI, by the way, most of the customers that are investing in this infrastructure are signing up for new 5, 10-year software and services wrappers around it.

Speaker #6: So we'll see the benefit of that over time as well. Jack, in terms of features, and what's really uptaking?

Speaker #7: Yeah. I think we've made coverage more efficient. It's more energy efficient at the site, which is critically important to a lot of customers right now as they think about kind of greening their networks.

Jack Molloy: I think we've made coverage more efficient. It's more energy efficient at the site, which is critically important to a lot of customers right now as they think about greening their networks. We also introduced our ASTRO Site Satellite Resiliency, which essentially improves the resiliency and redundancy of the networks. That incorporates low Earth orbit satellite just as a backup to a backup, if you will. I think the most important thing for us as we look at it is our customers are betting on us for the long term.

Speaker #7: We also introduced our Astro site satellite resiliency, which essentially improves the resiliency and redundancy of the networks by incorporating low Earth orbit satellite, just as a backup to a backup, if you will.

Speaker #7: But I think the most important thing for us as we look at it is it's our customers are betting on us for the long term.

Speaker #7: It's Minnesota Department of Transportation for five years, Maryland a 10-year renewal. It's Australia, a customer down in Australia, signing on for 10 years. So I think it's continued validation. We've had three big states that have signed on with D-series in the last three or four quarters.

Jack Molloy: It's Minnesota Department of Transportation for five years, Maryland a 10-year renewal. It's Australia. We have customer down in Australia signing on for 10 years. I think it's a continued validation.

Greg Brown: We've had three big states that have signed on with D-series in the last three, four quarters, and three major American cities that have signed on. We think there's more to come. Our customers are excited about it. By the way, there's two rails. They're investing in the network, but they're also, as Jason pointed out earlier, continuing to think about the refreshing of the devices. I think it's a testament to our product team on how they envision these things working together, and then obviously the services that we provision for our customers to wrap around those things.

Jack Molloy: We've had three big states that have signed on with D-series in the last three, four quarters, and three major American cities that have signed on. We think there's more to come. Our customers are excited about it. By the way, there's two rails. They're investing in the network, but they're also, as Jason pointed out earlier, continuing to think about the refreshing of the devices. I think it's a testament to our product team on how they envision these things working together, and then obviously the services that we provision for our customers to wrap around those things.

Speaker #7: And three major American cities that have signed on. We think there's more to come. Our customers are excited about it. And by the way, there are two rails.

Speaker #7: They're investing in the network, but they're also, as Jason pointed out earlier, continuing to think about the refreshing of the devices. And I think it's a testament to our product team, on how they envision these things working together.

Speaker #7: And then, obviously, the services that we provision for our customers to wrap around those things.

Speaker #1: Your final question will come from Louis De Palma with William Blair. Your line is open. Please go ahead.

Operator: Your final question will come from Lou DiPalma with William Blair. Your line is open. Please go ahead.

Lou DiPalma: Greg, Jason, Jack, and Mahesh, good afternoon.

Speaker #3: Greg, Jason, Jack, and Mahesh, good afternoon.

Speaker #6: How are you?

Jack Molloy: How are you?

Speaker #3: Great. Following up on the last question, should the D-series upgrade cycle be considered a one-time boost to the second-half growth rate for this year?

Lou DiPalma: Great. Following up on the last question, should the D-series upgrade cycle be considered a one-time boost to the H2 growth rate for this year, or should it carry over into next year such that LMR will remain in positive growth territory?

Speaker #3: Or should it carry over into next year, such that LMR will remain in positive growth territory?

Speaker #6: So, think of D-series and infrastructure as a slower moving, building part of our growth story. It's because—I just talked about three states.

Jack Molloy: Think of D-series and infrastructure as a slower-moving, building part of our growth story. I talked about three states. We have over 40 statewide networks in the United States, and we have 10 of the provincial networks in Canada. You can just do the math on that, Lou DiPalma. We got a lot more to do, and these are multi-year plan. The reality of it is a lot of these people sit down, particularly with infrastructure, and look at a 10-year plan. They're all not going to happen at once. It won't be just a Q4 thing. This will be something that will continue to refresh networks, quite frankly, into the 2030s.

Speaker #6: We have over 40 statewide networks in the United States, and we have 10 of the provincial networks in Canada. And so you can just do the math on that, Lou.

Speaker #6: We've got a lot more to do, and these are multi-year plans. I mean, the reality of it is, a lot of these people sit down, particularly with infrastructure, and look at a 10-year plan.

Speaker #6: And so they're all not going to happen at once. It won't be just a fourth quarter thing. This will be something that will continue to refresh networks quite frankly into the 2030s.

Lou DiPalma: Great. It should be a positive catalyst also for next year, right?

Speaker #3: Great. So it should be a positive catalyst also for next year, right?

Speaker #6: Yes.

Jack Molloy: Yes.

Speaker #3: Great. And my second question—the Silvus acquisition has been a home run. Many investors have wondered why Silvus didn't go the IPO path rather than selling to you, because the growth has been so exceptionally strong.

Lou DiPalma: Great. My second question, the Silvus acquisition has been a home run, and many investors have wondered why Silvus didn't go the IPO path rather than selling to you because the growth has been so exceptionally strong. I wanted to ask about this Motorola effect and your ability to supercharge growth. So Defend has elite technology for radio frequency counter-drone mitigation, and do you expect the combination of Defend's technology with Motorola's brand and the cross-selling and the manufacturing capacity that you can replicate with Defend what you've done with Silvus?

Speaker #3: I wanted to ask about this Motorola effect and your ability to supercharge growth. So, DFAN has elite technology for radio frequency counter-drone mitigation, and do you expect the combination of DFAN's technology with Motorola's brand, the cross-selling, and the manufacturing capacity—that you can replicate with DFAN what you've done with Silvus?

Speaker #6: Yeah. And you hit on it. It's exactly right. So I think Silvus we think Silvus is a one of one asset. I mentioned that and that acquisition took a long time.

Jack Molloy: Yeah, you hit on it. It's exactly right. We think Silvus is a one of one asset. I mentioned that and that acquisition took a long time. We were really thorough. It was almost a year in its engagement. We were very intentional. We were very thorough. What is it about Motorola Solutions that can make Silvus grow better than they can on their own? Number one is the brand equity and the install base of the customers that we have, in this case, particularly MODs internationally, where we immediately give that asset, which is you called elite, I agree, visibility into theaters maybe they didn't have initially. Second, it's go-to-market sales motion. Molloy's already more than doubled the sales force. Third is coals on the fire and expansion and focus around government affairs, both in North America and internationally.

Greg Brown: Yeah, you hit on it. It's exactly right. We think Silvus is a one of one asset. I mentioned that and that acquisition took a long time. We were really thorough. It was almost a year in its engagement. We were very intentional. We were very thorough. What is it about Motorola Solutions that can make Silvus grow better than they can on their own? Number one is the brand equity and the install base of the customers that we have, in this case, particularly MODs internationally, where we immediately give that asset, which is you called elite, I agree, visibility into theaters maybe they didn't have initially. Second, it's go-to-market sales motion. Molloy's already more than doubled the sales force. Third is coals on the fire and expansion and focus around government affairs, both in North America and internationally.

Speaker #6: We were really thorough. I mean, it was almost a year in its engagement. We were very intentional. We were very thorough. What is it about Motorola Solutions that can make Silvus grow better than they can on their own?

Speaker #6: Number one is the brand equity and the install base of the customers that we have, in this case particularly MODs internationally, where we immediately give that asset, which is what you call the elite.

Speaker #6: I agree. Visibility into theaters, maybe they didn't have that initially. Second, it's the go-to-market sales motion. Malloy's already more than doubled the sales force. Third is putting coals on the fire and focusing on expansion, especially around government affairs, both in North America and internationally.

Speaker #6: Fourth is being able to buy supply chain components, efficiency, and capacity in a way that Motorola can bring to bear the back office, the IT, the systems, the manufacturing, and low unit cost component acquisition.

Jack Molloy: Fourth is being able to buy supply chain components, efficiency, capacity in a way that Motorola Solutions can bring to bear the back office, the IT, the systems, the manufacturing, low unit cost component acquisition. Net-net, it can grow faster through sales, and it can scale faster with the infrastructure of Motorola Solutions. Lastly, highly culturally compatible. RF centricity, different market, great product. The Silvus team has been superb, not just because of the revenue and the growth. We love all that. It's great. The people are outstanding. The technical depth, superb. They see around corners. They look and we look to extend the lead we believe we have even further from a technology expansion point. I think we feel very similarly about Defend. The elite technology around cyber takeover, around not just detection and tracking and identification, but unique mitigation.

Greg Brown: Fourth is being able to buy supply chain components, efficiency, capacity in a way that Motorola Solutions can bring to bear the back office, the IT, the systems, the manufacturing, low unit cost component acquisition. Net-net, it can grow faster through sales, and it can scale faster with the infrastructure of Motorola Solutions. Lastly, highly culturally compatible. RF centricity, different market, great product. The Silvus team has been superb, not just because of the revenue and the growth. We love all that. It's great. The people are outstanding. The technical depth, superb. They see around corners. They look and we look to extend the lead we believe we have even further from a technology expansion point. I think we feel very similarly about Defend. The elite technology around cyber takeover, around not just detection and tracking and identification, but unique mitigation.

Speaker #6: So net-net, we can have it grow faster through sales, and it can scale faster with the infrastructure of Motorola Solutions. And lastly, it's highly culturally compatible.

Speaker #6: RF-centricity different market, great product, Silvus team has been superb. Not just because of the revenue, and the growth, and the we love all that.

Speaker #6: It's great. The people are outstanding. The technical depth is superb. They see around corners. They look, and we look, to extend the lead we believe we have even further from a technology expansion point.

Speaker #6: And I think we feel very similarly about DFAN, the elite technology around cyber takeover—around not just detection and tracking and identification, but unique mitigation, once again.

Jack Molloy: Once again, by the way, an Israeli company, we've been in Israel over 60 years. We have 600 people there, plus or minus. The density of our presence in Israel, the commonality around cultural innovation, not just in Israel, but in RF, and that cultural creativity that Mahesh's LMR team and Mission Critical team brings, I think it'll be a similar story with Defend. I think we can do more with Defend than anyone else can or they could do on their own, and I think that was largely in part why the two companies decided to get together. I'm super excited about the opportunities in public safety counter-drone for that asset once we're able to close it after regulatory approval.

Greg Brown: Once again, by the way, an Israeli company, we've been in Israel over 60 years. We have 600 people there, plus or minus. The density of our presence in Israel, the commonality around cultural innovation, not just in Israel, but in RF, and that cultural creativity that Mahesh's LMR team and Mission Critical team brings, I think it'll be a similar story with Defend. I think we can do more with Defend than anyone else can or they could do on their own, and I think that was largely in part why the two companies decided to get together. I'm super excited about the opportunities in public safety counter-drone for that asset once we're able to close it after regulatory approval.

Speaker #6: By the way, an Israeli company. We've been in Israel over 60 years. We have 600 people there. Plus or minus. So the density of our presence in Israel the commonality around cultural innovation, not just in Israel, but in RF and that cultural creativity that Mahesh's LMR team and Mission Critical team brings, I think it'll be a similar story with DFAN.

Speaker #6: I think we can do more with DFAN than anyone else can, or than they could do on their own. And I think that was largely, in part, why the two companies decided to get together.

Speaker #6: I'm super excited about the opportunities in public safety counter-drone for that asset once we're able to close it after regulatory approval.

Lou DiPalma: Excellent. Thanks, Greg.

Speaker #3: Cool. Thanks, Greg.

Speaker #6: Thank you.

Greg Brown: Thank you.

Speaker #1: 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.

Operator: 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.

Speaker #6: I just want to say thank you to all the Motorola people listening in, to our customers, and thank you to our partners. It was a great quarter.

Greg Brown: I just want to say thank you to all the Motorola people listening in, to our customers, thank you to our partners. It was a great quarter. Great quarter with double-digit orders, strong revenue growth, operating margin expansion, generating just under $500 million just in Q2 of cash flow. We talked about the strength of mission-critical networks and land mobile radio specifically. That informed our beat in Q2, which was $130 million, which was $100 million from LMR and $30 million driven by Silvus. That's informing the full-year raise of $175 million, $100 million from Silvus, generally $75 million from LMR. The business is strong. The product refresh cycle is good, both on devices and on infrastructure. I think the supply chain team, I want to say thank you as well to Motorola. We made a conscious decision to carry more inventory.

Speaker #6: Great quarter with double-digit orders, strong revenue growth, and operating margin expansion. We generated just under $500 million in cash flow in Q2. We also talked about the strength of Mission Critical networks.

Speaker #6: And Land Mobile Radio specifically. That informed our beat in Q2, which was $130 million—$100 million from LMR and $30 million driven by Silvus.

Speaker #6: That's informing the full year raise of $175 million—$100 million from Silvus, and generally $75 million from LMR. The business is strong. The product refresh cycle is good, both on devices and on infrastructure.

Speaker #6: I think the supply chain team, I want to say thank you as well to Motorola. We made a conscious decision to carry more inventory.

Speaker #6: We were thoughtful about getting ahead of memory, and aligning that with conversion that allowed us to execute. We think that will continue in the back half.

Greg Brown: We were thoughtful about getting ahead of memory and aligning that with conversions that allowed us to execute. We think that will continue in the H2. Lastly, I just love the momentum we have as we sit here today for the rest of this year. Thanks for listening. Look forward to talking to you next November.

Speaker #6: And lastly, I just love the momentum we have as we sit here today for the rest of this year. Thanks for listening. I look forward to talking to you next November.

Speaker #1: 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/investor. We thank you for your participation and ask that you please connect disconnect your lines at this time.

Operator: 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/investor. We thank you for your participation and ask that you please disconnect your lines at this time.

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