Motorola Solutions, Inc. Net Income surged on 723% while EBITDA Margin decreased on 3.5 pp from 25.5% to 22.0%
02/07/2019 • About Motorola Solutions, Inc. (
$MSI) • By InTwits
Motorola Solutions, Inc. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is quite volatile: 22.0% in 2018, 25.5% in 2017, 22.2% in 2016, 20.1% in 2015, -14.2% in 2014
- Motorola Solutions, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.4%. At the same time it's a lot of higher than industry average of 5.2%.
- CAPEX is quite volatile: $50m in FY2018, $72m in FY2017, $34m in FY2016, $30m in FY2015, $45m in FY2014
- In the last 5 years the company invested considerably less than D&A: $1,051m vs. $1,321m. In 2018 this situation was still the same: CAPEX was 197 while D&A was 360
- The company has highly profitable business model: ROIC is 35.3%
- It operates with medium-size leverage: Net Debt/EBITDA is 2.5x while industry average is -0.5x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Motorola Solutions, Inc.'s Revenue surged on 15.1%. Revenue growth showed acceleration in 18Q4 - it increased 15.2% YoY. Revenue decline was slowing down on average by 5.0 pp per annum in 2014-2018. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin surged on 15.7 pp from 20.9% to 36.5% in 2018. During the last 5 years EBITDA Margin topped in 2017 at 25.5%.
Gross Margin showed almost no change in 2018. Gross Margin followed a declining trend at -0.18 pp per annum in the last 5 years. SG&A as a % of Revenue increased slightly on 1.0 pp from 16.1% to 17.1% in 2018. During 2014-2018 SG&A as a % of Revenue bottomed in 2017 at 16.1%. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in 2018. SBC as a % of Revenue followed a declining trend at -0.15 pp per annum in the last 5 years.
Net Income margin surged on 15.6 pp from -2.4% to 13.2% in 2018. During the last 5 years Net Income margin bottomed in 2017 at -2.4%. The efficient tax rate was 12.1% in 2018.
Investments (CAPEX, working capital and M&A)
Motorola Solutions, Inc.'s CAPEX/Revenue was 2.7% in 2018. CAPEX/Revenue showed almost no change from 2015 to 2018. It's average CAPEX/Revenue for the last three years was 3.6%.
Accounts receivable as a % of Revenue decreased on 6.3 pp from 23.9% to 17.6% in 2018. Inventories as a % of Revenue showed almost no change at 4.8% in 2018. Accounts payable as a % of Revenue decreased on 2.3 pp from 17.7% to 15.3% in 2018.
Motorola Solutions, Inc. has spent
$1,164m on M&A in 2018 which accounts for 15.9% of revenue.
Leverage (Debt)
Debt level is 2.5x Net Debt / EBITDA and 3.3x Debt / EBITDA. Net Debt / EBITDA jumped on 0.5x from 2.0x to 2.5x in 2018. Debt jumped on 19.0% while cash increased on 3.4%.
Motorola Solutions, Inc. has good short term financial stability: Interest coverage ratio (ICR) is 5.2x. Motorola Solutions, Inc. has no short term refinancing risk: cash is higher than short term debt (4,019.4%).
Average interest expence paid by the company was 4.5% in 2018.
Valuation and dividends
Motorola Solutions, Inc.'s trades at EV/EBITDA 16.4x and P/E 23.1x.
The company paid 34.9% of Net Income as dividends in 2018. Dividends grew on average at 1.2% per annum in the last 5 years).
Management team
The company's CEO Gregory Q Brown "Greg" is a founder and has spent 11 years with the company. CEO total compensation was
$20,348,558 in 2018 which included
$1,250,000 salary. Motorola Solutions, Inc.'s CFO is Gino A Bonanotte. Gino A Bonanotte has 5 years tenure at the company.
Insider ownership is 0.43%. Insider ownership didn't change in 2018.
The company has 16,000 employees. The number of employees increased on 6.7%. Average revenue per employee in 2018 was
$458,938 and it increased on 7.9%.
Financial and operational results
FY ended 12/31/2018
Motorola Solutions, Inc. ($MSI) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 5,881 | 5,695 | 6,038 | 6,380 | 7,343 | 15.1% |
| Gross Profit | 2,831 | 2,719 | 2,869 | 3,024 | 3,480 | 15.1% |
| SG&A | 1,184 | 1,021 | 1,044 | 1,025 | 1,254 | 22.3% |
| EBITDA | -833 | 1,144 | 1,343 | 1,627 | 1,615 | -0.7% |
| EBIT | -1,006 | 994 | 1,048 | 1,284 | 1,255 | -2.3% |
| Interest expence | 147 | 186 | 225 | 215 | 240 | 11.6% |
| Tax | -465 | 274 | 282 | 1,227 | 133 | -89.2% |
| Net Income | 1,299 | 610 | 560 | -155 | 966 | |
| Stock Based Compensation | 94 | 78 | 68 | 66 | 73 | 10.6% |
Balance Sheet
|
|---|
| Cash | 3,954 | 1,980 | 967 | 1,205 | 1,246 | 3.4% |
| Accounts Receivable | 1,409 | 1,362 | 1,410 | 1,523 | 1,293 | -15.1% |
| Inventory | 345 | 296 | 273 | 327 | 356 | 8.9% |
| Accounts Payable | 540 | 518 | 553 | 593 | 592 | -0.2% |
| Short Term Debt | 4 | 4 | 4 | 52 | 31 | -40.4% |
| Long Term Debt | 3,396 | 4,345 | 4,392 | 4,419 | 5,289 | 19.7% |
Cash flow
|
|---|
| Capex | 181 | 175 | 271 | 227 | 197 | -13.2% |
| Dividends | 318 | 277 | 280 | 307 | 337 | 9.8% |
| Acquisitions | 47 | 586 | 1,474 | 404 | 1,164 | 188.1% |
Ratios
|
|---|
| Revenue growth | -5.6% | -3.2% | 6.0% | 5.7% | 15.1% | |
| EBITDA growth | -175.4% | -237.3% | 17.4% | 21.1% | -0.7% | |
|
|---|
| Gross Margin | 48.1% | 47.7% | 47.5% | 47.4% | 47.4% | -0.0% |
| EBITDA Margin | -14.2% | 20.1% | 22.2% | 25.5% | 22.0% | -3.5% |
| EBIT Margin | -17.1% | 17.5% | 17.4% | 20.1% | 17.1% | -3.0% |
| SG&A, % of revenue | 20.1% | 17.9% | 17.3% | 16.1% | 17.1% | 1.0% |
| SBC, % of revenue | 1.6% | 1.4% | 1.1% | 1.0% | 1.0% | -0.0% |
| Net Income Margin | 22.1% | 10.7% | 9.3% | -2.4% | 13.2% | 15.6% |
| CAPEX, % of revenue | 3.1% | 3.1% | 4.5% | 3.6% | 2.7% | -0.9% |
|
|---|
| ROIC | -16.1% | 18.9% | 26.4% | 39.5% | 35.3% | -4.2% |
| ROE | 40.6% | | | | | |
| Net Debt/EBITDA | | 2.1x | 2.6x | 2.0x | 2.5x | 0.5x |
| Interest coverage ratio (ICR) | | 5.3x | 4.7x | 6.0x | 5.2x | -0.7x |
| Interest expence / Average debt | 4.3% | 4.8% | 5.1% | 4.8% | 4.5% | -0.3% |
People
|
|---|
| Insider ownership | 0.4% | 0.4% | 0.4% | 0.4% | 0.4% | 0.0% |
| Employees | 15,000 | 14,000 | 14,000 | 15,000 | 16,000 | 6.7% |
| Revenue/Employee, th. $ | 392 | 407 | 431 | 425 | 459 | 7.9% |
Motorola Solutions, Inc. ($MSI) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,468 | 1,760 | 1,862 | 2,254 | | 14.6% | 17.6% | 13.2% | 15.2% |
| EBITDA | 253 | 369 | 383 | 609 | | -1.2% | 6.3% | -10.1% | 2.9% |
| Net Income | 117 | 180 | 247 | 423 | | 51.9% | 37.4% | 16.5% | |
Balance Sheet
|
|---|
| Cash | 858 | 878 | 839 | 1,246 | | 3.5% | 18.3% | 28.5% | 3.4% |
| Short Term Debt | 492 | 347 | 337 | 31 | | 1,018.2% | 654.3% | 617.0% | -40.4% |
| Long Term Debt | 5,304 | 5,298 | 5,095 | 5,289 | | 20.2% | 19.8% | 15.2% | 19.7% |
Ratios
|
|---|
| Gross Margin | 45.6% | 46.7% | 48.4% | 48.3% | | 1.1% | 0.6% | 0.1% | -1.3% |
| EBITDA Margin | 17.2% | 21.0% | 20.6% | 27.0% | | -2.8% | -2.2% | -5.3% | -3.2% |
| Net Income Margin | 8.0% | 10.2% | 13.3% | 18.8% | | 2.0% | 1.5% | 0.4% | 48.1% |
Peers in Communications Equipment
Below we provide Motorola Solutions, Inc. benchmarking against other companies in Communications Equipment industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Ribbon Communications Inc. ($RBBN) | | | | 30.6% | 75.2% |
| Extreme Networks, Inc. ($EXTR) | | 6.4% | -4.4% | 13.2% | 64.4% |
| Optical Cable Corporation ($OCC) | | -11.3% | -12.2% | -0.8% | 37.0% |
| ParkerVision Inc ($PRKR) | | | 37,601.2% | -97.5% | 35.0% |
| Network-1 Technologies, Inc. ($NTIP) | | 34.6% | 292.9% | -74.7% | 34.4% |
| |
|---|
| Median (66 companies) | | 0.7% | 7.6% | 5.1% | 2.8% |
|---|
| Motorola Solutions, Inc. ($MSI) | | -3.2% | 6.0% | 5.7% | 15.1% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F5 Networks, Inc. ($FFIV) | 82.1% | 82.7% | 83.1% | 83.1% | 83.3% |
| Radware Ltd. ($RDWR) | 82.1% | 82.4% | 81.8% | 81.3% | 82.2% |
| Radcom Ltd. ($RDCM) | 63.2% | 76.8% | 69.6% | 71.8% | 74.0% |
| Casa Systems, Inc. ($CASA) | | 70.8% | 69.1% | 73.4% | 73.4% |
| NetScout Systems, Inc. ($NTCT) | 78.7% | 79.2% | 65.6% | 70.2% | 72.4% |
| |
|---|
| Median (67 companies) | 41.4% | 41.3% | 43.7% | 41.0% | 40.5% |
|---|
| Motorola Solutions, Inc. ($MSI) | 48.1% | 47.7% | 47.5% | 47.4% | 47.4% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Network-1 Technologies, Inc. ($NTIP) | 35.5% | 33.7% | 50.6% | 37.8% | 42.8% |
| InterDigital, Inc. ($IDCC) | 50.8% | 58.1% | 73.6% | 67.3% | 41.9% |
| EchoStar Corporation ($SATS) | 25.7% | 39.7% | 40.3% | 38.1% | 37.4% |
| Ubiquiti Networks, Inc. ($UBNT) | 34.7% | 25.5% | 37.3% | 34.3% | 32.8% |
| Ituran Location and Control Ltd. ($ITRN) | 32.4% | 30.5% | 29.9% | 29.9% | 30.4% |
| |
|---|
| Median (65 companies) | 5.6% | 4.7% | 5.5% | 6.0% | 4.6% |
|---|
| Motorola Solutions, Inc. ($MSI) | -14.2% | 20.1% | 22.2% | 25.5% | 22.0% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Resonant Inc. ($RESN) | | | 132.5% | 124.8% | 245.2% |
| ViaSat, Inc. ($VSAT) | 22.8% | 26.5% | 26.7% | 33.0% | 32.1% |
| Applied Optoelectronics, Inc. ($AAOI) | 31.5% | 30.1% | 19.0% | 17.5% | 26.9% |
| EchoStar Corporation ($SATS) | 19.7% | 43.8% | 39.9% | 30.9% | 26.5% |
| Finisar Corporation ($FNSR) | 11.3% | 11.9% | 9.4% | 9.7% | 16.8% |
| |
|---|
| Median (65 companies) | 2.2% | 2.2% | 1.9% | 1.8% | 1.6% |
|---|
| Motorola Solutions, Inc. ($MSI) | 3.1% | 3.1% | 4.5% | 3.6% | 2.7% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| F5 Networks, Inc. ($FFIV) | 33.9% | 40.8% | 43.1% | 46.9% | 47.9% |
| Ubiquiti Networks, Inc. ($UBNT) | 61.4% | 31.5% | 41.5% | 38.5% | 39.1% |
| Ituran Location and Control Ltd. ($ITRN) | 50.9% | 46.8% | 50.1% | 48.5% | 35.1% |
| Casa Systems, Inc. ($CASA) | | | 43.2% | 39.7% | 21.9% |
| Ceragon Networks Ltd. ($CRNT) | -5.8% | 13.8% | 13.2% | 16.2% | 17.6% |
| |
|---|
| Median (70 companies) | 2.1% | 2.0% | 2.2% | 2.1% | 0.3% |
|---|
| Motorola Solutions, Inc. ($MSI) | -16.1% | 18.9% | 26.4% | 39.5% | 35.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Extreme Networks, Inc. ($EXTR) | | | -2.2x | -1.5x | 7.1x |
| ViaSat, Inc. ($VSAT) | 3.4x | 2.5x | 3.2x | 2.5x | 5.8x |
| CommScope Holding Company, Inc. ($COMM) | 2.3x | 9.6x | 4.3x | 4.6x | 4.4x |
| Inseego Corp. ($INSG) | | | | | 3.9x |
| Finisar Corporation ($FNSR) | -0.3x | 0.2x | -0.5x | 1.6x | 3.8x |
| |
|---|
| Median (45 companies) | -0.7x | -0.8x | -0.9x | -0.8x | -0.3x |
|---|
| Motorola Solutions, Inc. ($MSI) | | 2.1x | 2.6x | 2.0x | 2.5x |
