Motorola Solutions, Inc. (MSI)

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Motorola Solutions (MSI)

Q4 2011 Earnings Call

January 25, 2012 8:00 am ET

Executives

Edward J. Fitzpatrick - Chief Financial Officer and Senior Vice President

Shep Dunlap - Vice President of Investor Relations

Gregory Q. Brown - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

Unknown Executive -

Analysts

Matthew Thornton - Avian Securities, LLC, Research Division

Peter Misek - Jefferies & Company, Inc., Research Division

C. Stephen Tusa - JP Morgan Chase & Co, Research Division

Brian T. Modoff - Deutsche Bank AG, Research Division

Deepak Sitaraman - Crédit Suisse AG, Research Division

Tavis C. McCourt - Morgan Keegan & Company, Inc., Research Division

Jim Suva - Citigroup Inc, Research Division

Lawrence M. Harris - CL King & Associates, Inc.

Jeffrey T. Kvaal - Barclays Capital, Research Division

Craig Hettenbach - Goldman Sachs Group Inc., Research Division

Stanley Kovler - Morgan Stanley, Research Division

Presentation

Operator

Good morning, and thank you for holding. Welcome to the Motorola Solutions Fourth Quarter 2011 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 currently posted on the Motorola Solutions Investor Relations website.

In addition, a replay of this call will be available approximately 3 hours after the conclusion of this call over the Internet. The website address is www.motorolasolutions.com/investor. [Operator Instructions] I would now like to introduce Mr. Shep Dunlap, Vice President of Investor Relations. Mr. Dunlap, you may begin your conference.

Shep Dunlap

Thanks, and good morning. Welcome to our conference call to present Motorola Solutions' fourth quarter results. With me this morning are Greg Brown, Chairman and Chief Executive Officer; Ed Fitzpatrick, Executive Vice President and CFO; and Mark Moon, Executive Vice President, Sales and Field Operations.

Greg and Ed will review our fourth quarter results along with commentary, and Mark will join us for Q&A. I would like to point out that the results Greg and Ed will highlight in their prepared remarks refer to continued operations and exclude the Amateur, Marine and Airband radio businesses we recently exited. Updated financials reflecting this transaction can be found on our Investor website. We have posted an accompanying earnings presentation and press release at motorolasolutions.com/investor. In addition, we have posted updated pro forma non-GAAP financials that reflect the recent move of the Amateur, Marine and Airband radio businesses to discontinued operations. I encourage you to review these materials.

A number of forward-looking statements will be made during this presentation. Forward-looking statements are any statements that are not historical facts. These forward-looking statements are based on the current expectations of Motorola Solutions, and we can give no assurance to any future results or events discussed in these statements will be achieved.

Any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date.

Forward-looking statements are subject to a variety of risks and uncertainties that could cause our actual results to differ materially from the statements contained in this presentation.

With that, I will now turn the call over to Greg.

Gregory Q. Brown

Thanks, Shep, and good morning, and thank you for joining us today. Q4 marked another great quarter for Motorola Solutions as we achieved a record performance for sales, operating earnings and operating margin. These quarterly results helped cap a very strong and exciting year for our company. 2011 was a year in which we streamlined and strengthened our portfolio, generated excellent cash flow, delivered substantial operating earnings expansion and returned significant capital to our shareholders.

Highlights for the quarter included growth in all regions. Strong Government growth, improved operating leverage and the continuation of a meaningful capital distribution program for our shareholders.

This morning, we reported sales in the fourth quarter of $2.3 billion, an increase of 5% from Q4 of last year. On a GAAP basis, net earnings were $0.54 per share from continuing operations compared to $0.49 in the year-ago quarter. Non-GAAP net earnings from continuing operations were $0.87 per share compared to $0.64 per share in Q4 of last year, a 36% increase.

For the full year, we posted revenue growth of approximately 8% while increasing non-GAAP operating earnings by 29%. For the remainder of this call, we'll reference non-GAAP financial results unless otherwise noted. So overall, our Government business revenues increased 6%. North America, Asia and Latin America all saw steady growth, while EMEA was down slightly due to continued challenges in Western Europe, but also the modules business divestiture we had earlier.

Operating earnings in the Government business grew 39% due to the strength in sales, a stronger product portfolio and continued expense management. Government sales increased 6% for the full year exceeding our outlook of low single digits.

In our Enterprise business, sales increased 3% from the year-ago quarter, including an anticipated decline in iDEN. Growth in Enterprise, excluding iDEN, was 9% for the quarter. Growth was driven by enterprise mobile computing and wireless LAN, including managed services as customers continue to view us as a strategic partner, enabling them to increase efficiencies, revenues and customer satisfaction. Operating earnings in the Enterprise business grew 10%. On a full year basis, the Enterprise business delivered revenue growth of 11%.

The sales growth this past year in both businesses is a result of our continued focus on new product innovation and delivering solutions recognized by Enterprise and Government customers as an investment with high returns. We continue to enhance the features available on our products, and we've expanded or tiered many of our product portfolios including mission critical voice and enterprise mobile computing.

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