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Date

Thursday, August 7, 2025, at 5 p.m. ET

Call participants

  • Chairman and Chief Executive Officer — Greg Brown
  • Executive Vice President and Chief Financial Officer — Jason Winkler
  • Executive Vice President and Chief Operating Officer — Jack Molloy
  • Executive Vice President and Chief Technology Officer — Mahesh Saptharishi
  • Vice President, Investor Relations — Tim Yocum

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Takeaways

  • Revenue-- $2.93 billion P25 system upgrade and LMR Services Order for the City of Chicago in fiscal Q2 2025, up 5% year-over-year (non-GAAP), driven by growth across all three technologies, supported by $39 million in acquisition-related revenue, and $9 million in foreign currency tailwinds.
  • Software and services growth-- Segment revenue increased 15% year-over-year, with software and services backlog rising $1 billion year-over-year to a record $10.7 billion, attributed to multiyear contract demand in all three technologies.
  • Operating margin-- Non-GAAP operating margin reached 29.6%, expanding by 80 basis points, driven by improved sales and operating leverage (non-GAAP); GAAP operating earnings were $692 million (25.0% of sales), up from 24.5% in fiscal Q2 2024 (GAAP).
  • Earnings per share-- GAAP EPS was $3.04. Non-GAAP EPS was $3.57, a 10% year-over-year increase in product orders, supported by higher sales, margin expansion, and a lower diluted share count (non-GAAP).
  • Operating cash flow-- Operating cash flow reached $272 million, up $92 million year-over-year; free cash flow improved by $112 million to $224 million.
  • Backlog-- Ended fiscal Q2 2025 with over $14.1 billion of backlog, up $150 million year-over-year, with $19 million sequential growth; Product and SI backlog declined by $92 million year-over-year due to strong LMR shipments, while SNS backlog increased $191 million sequentially.
  • Orders-- Record fiscal Q2 orders, up 27% versus fiscal Q2 2024, including 10% product order growth and major wins such as an $82 million P25 upgrade and a $2.93 billion P25 system upgrade and LMR services order for the City of Chicago.
  • Silvis acquisition-- Closed post-quarter for $4.4 billion upfront consideration; expected to contribute $185 million in revenue in the 2025 stub period and at least $0.20 accretion to EPS in 2026.
  • Guidance raised-- Full-year 2025 outlook now forecasts $11.65 billion in revenue (7.7% growth, non-GAAP), non-GAAP EPS of $14.88-$14.98 for fiscal 2025, operating cash flow of $2.75 billion (up 15%), incorporating Silvis and $75 million in associated transaction fees for the full year.
  • Shareholder return-- $218 million spent on share repurchases at under $415 per share, $182 million in cash dividends paid, and $48 million in capital expenditures.
  • Gross margin outlook-- The company now expects gross margins to increase year-over-year for full year 2025, revising prior full-year guidance, with anticipated 100 basis point expansion in operating margin year-over-year.
  • Segment performance-- Products and SI revenue was $1.7 billion, flat year-over-year, with 26.7% operating margin for the Products and Systems Integration segment; notable orders included federal and state LMR and video system upgrades.
  • Regional results-- North America revenue was $2 billion, up 6% in North America; International revenue was $738 million, up 4%, led by LMR growth.

Summary

Motorola Solutions(MSI 2.00%) reported record fiscal Q2 2025 revenue and EPS, supported by robust order activity and continued high demand for both software and services. Management highlighted major new multiyear contracts, most notably in LMR, and the integration of Silvis, which materially augments mission-critical network capabilities and is expected to be accretive to EPS by at least $0.20 in 2026. Product innovation, including the launch of the SCX video remote P25 speaker mic and next-generation base stations, provides new hardware and recurring software and services revenue opportunities. Strategic guidance was raised across revenue, non-GAAP EPS, and operating cash flow for fiscal 2025, reflecting both organic momentum and initial contributions from Silvis, as well as disciplined capital allocation through share buybacks and dividends.

  • Management said, "we expect Silvis to grow about 20% in 2026," while clarifying that Ukraine-related revenues will be under 15% of Silvis revenue in 2025 and even less in 2026.
  • Chief Technology Officer Saptharishi noted, "the other element of Silvis is spectrum monitoring. And it's probably very important to talk about in the context of drones," underlining new capabilities for spectrum-based drone detection and integration into public safety workflows.
  • Chief Operating Officer Molloy stated, "We see the TAM for unmanned at about $3 billion and growing ... not be surprised to double it in the next four years," articulating the company's expectation of rapid addressable market expansion driven by the Silvis transaction.

Industry glossary

  • LMR (Land Mobile Radio): Wireless communications system used primarily for mission-critical public safety and enterprise sectors, enabling voice and data communications among field users.
  • MCN (Mission-Critical Networks): An expanded technology category at Motorola Solutions, now including land mobile radio along with newly acquired mobile ad hoc networks from Silvis.
  • P25 (Project 25): A digital radio communications standard designed for U.S. public safety organizations for interoperable communication.
  • Stub period: The partial period from the closing date of an acquisition to the end of the fiscal year, during which initial integration and revenue recognition occur.
  • Spectrum monitoring: Technology for detecting, analyzing, and managing frequency use in communications systems, used for applications such as drone detection.
  • Alta: Motorola Solutions' cloud-based video security platform, noted as a driver of cloud software growth in the video segment.
  • SVX / SCX: Motorola Solutions' newly launched body-worn device acting as a video-enabled P25 speaker mic, positioned as both a hardware and a software/applications revenue generator.

Full Conference Call Transcript

Operator: Good afternoon. And thank you for holding. Welcome to the Motorola Solutions second quarter 2025 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 on the Motorola Solutions investor relations website. In addition, 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 would like to ask a question, you may also press 5 again to remove yourself from the queue.

I would now like to introduce Mr. Tim Yocum, Vice President of Investor Relations. Mr. Yocum, you may begin your conference.

Tim Yocum: Good afternoon. Welcome to our 2025 second-quarter earnings call. With me today are Greg Brown, Chairman and CEO; Jason Winkler, Executive Vice President and CFO; Jack Molloy, Executive Vice President and COO; and Mahesh Saptharishi, Executive Vice President and CTO. Greg and Jason will review our results along with commentary, and Jack and Mahesh will join for Q&A. We've posted an earnings presentation and news release at motorolasolutions.com/investor. These materials include GAAP to non-GAAP reconciliations for your reference. During the call, we reference non-GAAP financial results, including those in our outlook, unless otherwise noted. A number of forward-looking statements will be made during this presentation and during the Q&A portion of the call.

These statements are based on current expectations and assumptions that are subject to a variety of risks and uncertainties. Actual results could differ materially from these forward-looking statements. Information about factors that could cause such can be found in today's earnings news release, in the comments made during this conference call, in the Risk Factors section of our 2024 Annual Report on Form 10-Ks or any quarterly report on Form 10-Q and in our other reports and filings with the SEC. We do not undertake any duty to update any forward-looking statements. And with that, I will turn it over to Greg.

Greg Brown: Thanks, Tim, and good afternoon, and thanks for joining us today. I'll begin with a few thoughts on the business before turning it over to Jason. First, Q2 was another outstanding quarter with record Q2 revenue and earnings per share that exceeded our guidance as we continue to see strong customer demand across all areas of the business. Revenue was up 5% in the quarter, highlighted by 15% growth in software and services. We also expanded operating margins by 80 basis points, which led to record Q2 operating earnings and strong operating cash flow growth, which was a record for the first half of this year.

Second, investments in public safety and security continue to be a priority for our customers, highlighted by our record Q2 orders up 27% versus last year, inclusive of 10% growth in products. We also ended the quarter with over $14.1 billion of backlog, including $10.7 billion of software and services backlog, which is our highest SNS backlog ever and up $1 billion versus last year. And finally, based on our strong Q2 results and our increased expectation for the remainder of the year, we're raising our full-year guidance for sales, earnings per share, and operating cash flow. Now I'll turn the call over to Jason, who will take us through results and outlook before I return for some final thoughts.

Jason Winkler: Thank you, Greg. Revenue for the quarter grew 5% and was above our guidance with growth in all three technologies. Foreign currency tailwinds during the quarter were $9 million, while acquisitions added $39 million. GAAP operating earnings were $692 million or 25% of sales, up from 24.5% in the year-ago quarter. Non-GAAP operating earnings were $818 million, up 8% from the year-ago quarter, and non-GAAP operating margin was 29.6%, up 80 basis points, driven by higher sales and improved operating leverage. GAAP earnings per share was $3.04, up from $2.60 in the year-ago quarter.

Non-GAAP EPS was $3.57, up 10% from $3.24 last year, driven by higher sales and operating margins as well as a lower diluted share count in the current year. OpEx in Q2 was $615 million, up $22 million versus last year, primarily due to acquisitions. Turning to cash flow, Q2 operating cash flow was $272 million, up $92 million versus last year, and free cash flow was $224 million, up $112 million. The increase in year-over-year cash flow was primarily driven by higher earnings and improved working capital. And for the first half of the year, operating cash flow was a record $783 million, up 39% versus 2024.

For the full year, we're raising our operating cash flow expectations to $2.75 billion, up 15% from last year and inclusive of $75 million of transaction fees related to the Silvisax acquisition as well as incremental interest to financing the deal. Capital allocation for Q2 included $218 million in share repurchases at an average price below $415 a share, $182 million in cash dividends, and $48 million of CapEx. And subsequent to the quarter end, we closed the Silvis acquisition for $4.4 billion of upfront consideration, which was primarily funded through $2 billion of long-term notes that we issued in Q2 and $1.5 billion of new term loans drawn subsequent to quarter end.

The remaining consideration of $900 million was settled through a combination of cash on hand and issuance of commercial paper. Moving into our segment results and product and SI, sales of $1.7 billion were flat compared to the year prior, while operating earnings of $442 million or 26.7% of sales were comparable inclusive of additional tariff costs and continued investments in video during the current year, offset by lower material cost. Some notable Q2 wins and achievements in this segment include an $82 million P25 system upgrade for Tri-County systems in the St.

Louis region, a $30 million P25 device order for the city of Miami, Florida, a $22 million T25 system upgrade for the state of Michigan, a $15 million fixed video order for a US federal customer, and an $11 million P25 device order for the Las Vegas Metro Police Department. In software and services, revenue was up 15% compared to last year, driven by strong growth across all three technologies. Revenue from acquisitions was $39 million in the quarter. Operating earnings in the segment were $376 million or 33.8% of sales, up from 32.3% last year, driven by higher sales and improved operating leverage partially offset by acquisitions.

Some notable Q2 highlights in SNS include a $44 million command center order for a US state and local customer, a $2.929 billion P25 system upgrade, and LMR Services Order For The City Of Chicago, a $12 million LMR cybersecurity order for the state of Victoria, Australia, an $11 million services order for the state of New Mexico, and finally, a $9 million LMR services order for a US federal customer. Looking next at our regional results, North America, Q2 revenue was $2 billion, up 6% on growth in all three technologies. International Q2 revenue was $738 million, up 4% versus last year, driven by growth in LMR.

Moving to backlog, ending backlog for Q2 was $14.1 billion, up $150 million versus last year and up $19 million sequentially, driven by strong demand including record Q2 orders, which were up double digits in both of our segments. In the Products and SI segment, ending backlog decreased $92 million versus last year, and $172 million sequentially due to continued strong LMR shipments. In software and services, backlog increased $1 billion compared to last year, and $191 million sequentially, driven by strong demand for multiyear contracts across all three technologies and the impact of foreign currency partially offset by revenue recognition for The UK home office.

Turning next to our outlook, we expect Q3 sales growth of approximately 7% with non-GAAP EPS between $3.82 and $3.87 per share. This assumes a weighted average diluted share count of approximately 169 million shares and an effective tax rate of approximately 24%. For the full year, we now expect revenue of approximately $11.65 billion or 7.7% growth, up approximately $250 million from our prior guidance of 5.5% growth. And expect non-GAAP EPS between $14.88 and $14.98 per share, up from our prior guidance of $14.64 to $14.74. This full-year outlook assumes an effective tax rate of approximately 23%, which is unchanged. And now assumes a weighted average diluted share count of approximately 169 million shares.

Before I turn the call back to Greg, I'd like to share a few thoughts regarding the Silvis transaction. First, when we announced the transaction in May, we shared the strong financial profile of Silvis with expectations of $475 million full-year '25 revenue at approximately 45% adjusted EBITDA margin. Our full-year outlook assumes a $185 million revenue contribution from Silvis this year, representing the stub period following the transaction closed yesterday. It also assumes that Silvis will be slightly dilutive for EPS in Q3 and neutral for 2025. Second, as it relates to our three technologies, we are expanding our LMR technology category to include Silvis under the new name of mission-critical networks, or MCN.

With the inclusion of Silvis, this year, we expect MCN to grow mid-single digits. And from a segment perspective, the majority of the business will be reported under products and systems integration. And finally, our balance sheet remains strong. Following the acquisition of Silvis, and the financing plan I described earlier, and all three rating agencies have affirmed our triple B level ratings. We maintain a balanced maturity profile with approximately eight years of duration, and an average coupon of just under 4.6% on our senior notes.

Strong growth in our earnings power and cash generation has significantly expanded our leverage capacity, which we expect to continue to grow with Silvis, providing us flexibility to deliver on our capital allocation framework, which includes share repurchases as well as additional acquisition. With that, I'd like to turn the call back to Greg.

Greg Brown: Thanks, Jason. First, I'm very pleased with our Q2 results, which highlight the durability of our business and the strength of our portfolio. We continue to invest both organically and inorganically in solutions that are continuing to provide us with sustainable long-term growth. Some recent examples include our announcement of SCX, which is a first-of-its-kind video remote P25 speaker mic that converts to secure voice, video, and AI and eliminates the need for a separate body-worn camera. We started shipping SVX just a few weeks ago, and the customer feedback has been strong.

Since the launch, we've received orders from over 30 agencies, with the majority coming from customers that do not currently use a Motorola body camera, highlighting the opportunity we have to capture future market share in the US public safety body-worn camera space. In drones and unmanned systems, we've made several investments this year that allow us to capitalize on this fast-growing space. With our acquisition of Silvis, we're now a leader in mobile ad hoc networks, which provides the high-speed infrastructure-less communications backbone for unmanned systems in the air, on the ground, and in the water. That have become increasingly important in today's defense environment as well as border security and public safety.

In drone as a first responder, our strategic alliance with Brink provides us with an American-made purpose-built public safety drone that allows customers to reduce emergency response times and deliver critical supplies to those in need. And in drone detection, our alliance with SkySafe integrates their advanced solutions into our command center software and allows customers to detect, identify, track, and analyze drone activity. And finally, we've introduced our next-generation ASTRO P25 LMR infrastructure featuring our D series base stations and AXIS consoles, which bring many benefits, including increased capacity, improved energy efficiency, and greater interoperability through leveraging complementary technologies such as low Earth orbit satellites. We received several large orders this quarter, including from the St.

Louis Tri-Counties and the state of Michigan, and we're building a strong pipeline of large multiyear network refresh opportunities with expanded scope in software and services that we expect to convert to orders over the next several years. Second, I'm very encouraged by our differentiated approach to AI. We began utilizing AI when we entered the fixed video space several years ago to solve complex video security problems, with AI-enabled cameras and video management software. And it continues to be an important driver of growth in video software, which actually grew 25% in Q2 and has grown over 20% annually over the last five years.

Our investments in AI have continued to expand, and just a few months ago, we announced our public safety AI platform, Assist, which is built around the objective of helping everybody involved in the incident workflow, from 911 call takers to frontline responders, make better decisions and save precious time. This comprehensive approach allows us to do things no one else is doing in key areas such as AI-assisted report writing, where our AI solution leverages a holistic view of the incident, including the 911 call, dispatch, and responder voice communications as well as body-worn video recording.

When implementing AI, we're also making sure that we continue to build trust both with our customers and the communities they serve, which is reflected in our recent launch of AI labels, an industry first. These labels provide transparency as to what, how, and where AI is used in customer workflows, which is a critical step in the path to product trust and adoption and further differentiates us from our competitors in this area. And finally, I'm very excited about the Silvis acquisition, which is the culmination of discussions that lasted more than a year. When allocating capital for acquisitions, we remain committed to a very disciplined approach, prioritizing long-term value creation for our shareholders.

With Silvis, we're acquiring a technology leader in a rapidly growing industry that's seen impressive customer adoption and has a very strong financial profile. Their business complements our leadership in LMR and video and provides us with opportunities to leverage our strong customer relationships. Additionally, I'm particularly excited about the exceptional engineering and technical talent that the Silvis team brings us, and I look forward to working closely with them to drive meaningful revenue and earnings growth for years to come. And with that, Aaron, I'll turn the call over to Tim and open it up to questions.

Tim Yocum: Thank you, Greg. Before we begin taking questions, I'd like to remind callers to limit themselves to one question and one follow-up to accommodate as many participants as possible. Operator, would you please remind our callers on the line how to ask a question? The floor is now open for questions. If you have a question or comment, please press 5 on your telephone keypad. If for any reason you would like to remove yourself from the queue, please press 5 once again. We do ask that while you pose your question, please pick up your handset to provide optimal sound quality. Thank you. The first question is from Joseph Cardoso with JPMorgan. Your line is now open.

Joseph Cardoso: Hey, good afternoon, everyone. Thanks for the question. Greg, maybe I just wanted to start off. Last quarter, you put out this in the threes product mid $3 billion product backlog bogey out there for year-end, which based on the 2Q orders looks like you're well on track to. Maybe you can just take a moment and talk about, like, on a product level, where you're seeing this growth in the product orders across your portfolio? Obviously, it sounds like the P25 devices are doing well. You mentioned a couple of deals on the base station. And as well as anything else that you can think of that you think is really driving the momentum there.

And then, you know, as you kinda think about that bogey that you put out for year-end, how are you feeling about momentum tracking towards that bogey, particularly any update just given now that you have Silvis under the belt? And it sounds like that's gonna be levered towards the product side? And thank you. And then I have a follow-up.

Greg Brown: Yep. So, Joe, in regard to the, you know, the ZIP code of MidThrees in product backlog, which I mentioned last quarter, if anything, I feel as good. I actually feel better about that. And just to be clear, that color did not include anything associated with Silvis. So I still feel very good about the MidThrees. Even better than I did in May. And you're right. Coming out of Q2, with 27% record orders, 10% of that in product, I feel really good about that. I think the strong Q2 orders were driven on the product side by LMR device refresh by LMR infrastructure, and the ASTRO NEXT V series and Apex consoles. I mentioned.

We've also had strong fixed video orders and one of the largest fed orders we've ever had in regards to Silent Sentinel. So it was multiproduct. And on software and services, we had one of our largest command center orders ever at $44 million. So it was across the board, really good strength coming out of Q2. Which further supplements even more confidence in, quote, unquote, the mid threes or slightly better.

Joseph Cardoso: No. I appreciate the thoughts there. Sounds wonderful. You know, and maybe as my second question, it more of a big picture question. Like, obviously, it's been, like, a little bit more than a month since we've had the beautiful bill get passed. There's various programs in Europe that are aiming funds towards areas that look alike for Motorola. Particularly now with Silvis under the covers here. So just maybe one, curious as you look across these opportunities, where are you feeling most excited about? And then in both The U.S. as well as internationally, and if there's any difference between, like, the opportunities between the two areas.

And then two, how are you think investors should think about the timing around these opportunities materializing for Motorola? And then, I mean, just to kind of hit it on the nose, are you seeing any of these opportunities trickling into your orders today?

Greg Brown: Trickling into what?

Joseph Cardoso: Orders.

Greg Brown: Okay. So let's start with Silvis. I mean, look. We love Silvis. We spent a lot of time on it as a team. You know, I've heard from some people that said, you know, this thing actually looks too good to be true. And we spent a lot of time on it, and we love the fact that it's a market leader. We love the fact that it was the tip of the spear and has been tested from an efficacy and a performance and a scale standpoint in Ukraine. You know, we expect Silvis to grow about 20% in 2026. It's EPS neutral for the stub period this year, and we expect it to be at least 20% sorry.

20 cent accretive in 2026. And I love the fact that, look, Silvis powers a number of defense and military drone platforms. Including Andoroll and AeroVironment, and it's certified with over 100 leading manufacturers. When I think about the revenue contribution particularly around Ukraine and Silvis, you mentioned Europe and international. We expect the revenue from Ukraine as it relates to Silvis revenue expectations this year to be less than 15% of overall revenues, and we expect Ukraine revenue for Silvis next year to be even less than that. So I like the fact that it's driven by a wide base of US defense ex Ukraine, and unmanned systems.

And I think there'll be a lot of attention and interest in European allies to invest in technologies that I think Silvis will be front and center as an opportunity. As it relates to the one big beautiful bill, and maybe Jack, wanna talk about that a little?

Jack Molloy: Sure, Joe. I think the first thing I'd address is think of the one big, beautiful bill. It's funding over the next four years. So it's a four-year horizon. And it's good news for Motorola. From a DOD standpoint, they've increased funding $150 billion, which would have been good before. But it's even better now that we've acquired Silvis. And as Greg just articulated, their defense border and unmanned systems trajectory. Also, there's money in there, another $70 billion for customs and border. Two customers two of a big customer of ours as well as ICE, another $75 billion. A lot of that funding is being directed at refreshing technology. Both video, secure communications, and services as well.

The last thing I'd say, which probably has been underappreciated is for our enterprise customers. Think of our PCR channel. The accelerated depreciation of CapEx provides them an opportunity to go talk to manufacturing health care customers, the like, and go talk about net refreshing their network and some of the tax benefits that they have. So we're excited about the one big beautiful bill. I would add the final piece of it is that timing of it given it was signed on July 4. And that there's a ninety-day window we're expecting a lot of some of that funding to actually kick in early Q4 this year and that's implied in our guide.

Joseph Cardoso: Yep. Got it. Thank you, Greg. Thank you, Jack. Appreciate all the color.

Tim Yocum: The next question is from the line of Andrew Spanola with UBS. Your line is now open.

Andrew Spanola: Thank you. I want to follow-up on the question on Silvis. The question I've gotten mostly is people are trying to understand why Silvis. And it's interesting. It reminds me a little bit about Avigilon because when you made that acquisition, it wasn't clear why you wanted to be in video. It obviously became a much bigger part of it of public safety. So are you thinking about Silvis that way? Do you see this technology becoming something much bigger to public safety? It's gonna be incorporated into your LMR technology longer term?

Or is this a new avenue that you're going down and we're gonna see you investing more in defense tech acquiring more and creating a new business line. How should we think about it?

Greg Brown: Yeah. Andrew, I think about it as I love the fact that it's a market leader. And it's a market leader that gives us exposure to a market we don't participate in today. Unmanned systems in the air, in the water, on the ground. So it's new. Having said that, it's video and data centric, so it's all about ad hoc high-speed infrastructure-less mobile and data and video communications. We see it in defense. We see it on border security. Obviously, to your point, we see it in mission-critical deployments. Primarily on the battlefield. And adjacencies where there's intense conflict. But having said that, we also see it as complementary. Complementary to LMR, and complementary to video.

We lead in land mobile radio infrastructure and devices. This gives us an opportunity to lead in infrastructure-less ad hoc mesh networks. Given both Silvis and our heritage in LMR, have a radio frequency or RF centricity, I like the fact that I think there's a one plus one equals three proposition. In terms of expansion to new markets, this is a great product. I think one of the limiting factors of their growth is their ability to reach outside The United States and capitalize on a global print footprint where like in Motorola Solutions, Molloy has people in dozens and dozens and dozens of countries.

So I think in the federal business, internationally, it's a new market but I also think of it as complementary as well. To LMR and video. And, you know, maybe you wanna talk, Mahesh, a little bit about the thinking, not just in what they do today, but some of the possibilities going forward.

Mahesh Saptharishi: So besides really offering highly resilient communication, the other element of Silvis is spectrum monitoring. And it's probably very important to talk about in the context of drones. Being able to detect drones in this case. So as part of our overall drone strategy, the ability to detect drones not just with radar, which is the most common way of detecting drones today, but also through RF. I we believe really enhances and make positions us very uniquely in that space. The other very important element about Silvis is that it's and Greg mentioned this It's data. It's data-oriented communication, and it allows for any IP device to be attached to it, including cameras.

So we believe that there's an opportunity there with cameras as well that's coming in the future.

Greg Brown: The only thing I'd add, and as we've discussed, Greg, is that similar to Motorola Solutions, our LMR business as well as our video security business, there's an opportunity to add recurring revenues by way of service. Providing just given the nature of the customer base as well.

Andrew Spanola: Perfect. Thank you very much.

Greg Brown: Thanks, Andrew.

Tim Yocum: The next question is from the line of Keith Housum with Northcoast Research. Your line is now open.

Keith Housum: A question for you on maybe a little bit off the wall here, but the base station that you guys are introducing here, don't remember perhaps last time you actually introduced a new base station here. And is there a pent-up demand here that could perhaps be a little bit more of a growth driver than some of us are thinking here?

Jack Molloy: Yeah. So you're right, Keith. It's been I think I'm gonna you're you're jogging my memory here, but I think it is been, it was probably about it was about twelve years ago that we last had our base station. But the D series, which we're talking about, does a few things. Number one, better capacity. Provides better coverage, but also it leverages less capacity. So think of it as a green base station, less energy consumption, which a lot of our customers have been asking for. It also adds a layer of redundancy with low Earth orbit capability. Extend in certain places. But, we're really pleased.

And I think as Greg said, we've got a few big wins out of the gate. We had wins in the state of Ohio. We had wins with the state of Michigan who's one of the largest LMR customers. The way to think about it, is you know, we've got a significant footprint of statewide countywide citywide networks that all need now to be refreshed. It'll be a multiyear phenomenon in terms of that growth.

The other thing to think about is this continues to build this continues to extend our capabilities and need for us to deliver more services for our comp our customers, meaning cybersecurity services, are up substantially for us this year as well as new software monetization services for the new D Series station. The last piece of it we're really pleased is the access which gives us a new dispatch console through these investments we've made. And an example of that is the city of Chicago, really proud our hometown, we went and displaced a competitor and had a significant pickup in a command center win by way of access console. So again, great opportunity for us.

I think it's multi-year horizon. But also lends itself to new service selling capabilities as well.

Greg Brown: And, Keith, most of our customers are on software agreements that keep them current and ready. What this opportunity presents is in a hardware refresh with a lot of attributes and to Jack's point, comes with yet another opportunity to sell them additional software and services around that new hardware. So we view it as benefiting us long term for sure.

Keith Housum: Great. Appreciate it. And then if I could just ask one follow-up question on the backlog. Obviously, a lot of focus on that recently. But how do we look at the backlog, makeup of Is it similar to the disaggregation of revenue you guys have in the presentation here? Or is there a different mix we should be thinking about within that backlog?

Greg Brown: Well, most of the backlog within SNS, services and software, comes from LMR. So I'd say the power hitter in our backlog contribution, particularly for SMS, is LMR because of the nature of our long-term contracts. And the services and software business that we've built over the years. That would be one indicator. And then you know, the size of LMR includes even in products it's our largest business. So I think those two things give you some insights around the makeup of backlog. And to Greg's point earlier, as we began the year, we expected quick turn, to accelerate, and it's done that.

With our record Q2 orders and 10% growth in products, and we expect that growth to continue into the second half. That's long been a part of our outlook, and our outlook's improved.

Keith Housum: Helpful. Thank you.

Greg Brown: Thanks, Keith.

Tim Yocum: The next question is from the line of Tim Long with Barclays. Your line is now open.

Tim Long: Thank you. Two quick ones if I can. Greg, you talked about SCX. And some of their early momentum on understanding it's only been out a month or so. Could you guys talk a little bit about what you think that will do from a ramp revenue ramp perspective as well as impacting maybe the upgrade cycle to APEX next? Number one. And number two, if you can talk about the video business, still strong growth there, very much driven by the software side. The hardware piece of that still kind of flat to low single-digit type of growth.

I get there's a cloud impact but maybe can you just touch a little bit on the product side there and what we could expect to see to potentially reaccelerate growth there? Thank you.

Greg Brown: Yeah. Just on the SVX and Jack and Mahesh can jump in, but as I mentioned, first of all, I'd say the orders are outpacing our expectations. That's number one. Number two, I love it because we're not selling a product per se. We're selling an ecosystem, and that's just not hyperbole. But SDX is anchored and runs off of an APEX NEXT. We upgraded that device. We upgraded it to dual-banded. To include LTE, 4G, or 5G. To get all the benefits of a dual-banded radio. And you see us enhancing that. We're driving more applications. And recurring revenue off of the APEX NEXT.

And now we have the speaker mic which is tied to every radio we sell virtually. And displaces the need for a body camera. It's kinda like if you want an iPod, buy a body camera. But if you want a multidimensional full-function device, you would just go with the SVX. And SDX is really an ingestion point that does a lot more than just body cams. Which is why I referenced earlier. It's the tipping point that ingests more information on situational awareness, AI around dispatch information around 911, audio logs around the radio P25 system, as well as the body cam video. So it does more than that and I like the early traction. It'll take time.

I also like the fact that we're right in the middle of going through FedRAMP certification process. So that continues to go well. And I'm optimistic about the timeline for that. Which will in turn open up more opportunities for us as well.

Jack Molloy: Greg, the rest of the portfolio, as I think about international in the body-worn cameras that we've been refreshing, we've made some pretty significant wins in Romania, Scotland, France, Bulgaria, a number of agencies in The UK. So our international body camera business which is not SDX, attached Apex Next, which is more North America. Right. Continues to do well. Also.

Mahesh Saptharishi: I agree. And perhaps the last thing I'll say on SVX is we believe we're creating a new category here. This is a body-worn assistant versus a body-worn camera. It's not just recording evidence. It is all about capabilities like translation. And SVX is a gateway into assist, so you can ask questions about either situational awareness questions. It's integrated to assist chat. So at the end of the day, we're creating a new category here. It's not just a body-worn camera.

Jack Molloy: And I think, Tim, the last piece of it is just related to the fixed video business. Really pleased with our Q2 performance, and I'd say refreshed portfolio largely with Alta. Alta leading the engine, meaning our cloud business driving that growth. And I think we continue to see incremental investments we make in our go-to-market team continue to expand our reach, only here in The US and in Canada, but also overseas. We've made surgical investments in Europe and in Australia, we're starting to see the benefits of those investments that we've made there as well.

Jason Winkler: And those investments continue to show up in higher software growth within video, while the category of video or the technology, we expect to grow 10 to 12%. The software portion of that continues to grow much faster.

Tim Long: Okay. Thank you, guys.

Tim Yocum: The next question is from the line of Meta Marshall with Morgan Stanley. Your line is now open.

Meta Marshall: Great. A couple of smaller for me. Just on, you know, you guys have been talking about kind of this software transition, particularly on the video side of the business. Is that any meaningful headwind to revenue growth at this point, clearly kind of helping the backlog transition? So just a question there. And then just second, kind of any update on APeX NEXT? Adoption rates? Thanks.

Jason Winkler: So on cloud adoption within video, we as Jack mentioned, we continue to see the fastest growth within our cloud platform of Alta. Orders are greater than sales. Although we're able to manage through the deferred revenue transition. We haven't outlined a number this year as to what that is. Because we're managing through it and still printing. Significant growth. So I'd say cloud is on path in video. And then the second question in terms of Apex Next adoption, Jack?

Jack Molloy: Yeah. Sure. So Apex Next, couple of things. Q2, let's start there. Double-digit order growth with Apex next. We just spoke about SVX, but it's important to note that the SVX is exclusive to the Apex Next family. Which helps which, you know, from the collaborative aspect there, benefits both SVX as well as Apex Next. The last thing that I would note that we talked about before is it's also driving our application service business. So for every Apex Next radio, and we've got greater 90% attachment rate, $300 of radio and application services, per year. So we continue to see the benefit.

I think SVX has also been a tailwind in terms customers making that conversion and looking to move from Apex original to Apex next.

Meta Marshall: Great. Thank you.

Tim Yocum: Thanks, Meta. The next question is from the line of Amit Daryanani with Evercore ISI. Your line is now open.

Amit Daryanani: Yep. Thanks. And I just have two as well. Maybe to start with, operating margins came in better than our end suite expectations. Can you just touch on, a, what the tariff headwinds were in the quarter for you folks? Then b, just what's the durability of the levers that helped the operating margins here?

Jason Winkler: Yeah. You. So gross margins were up on higher SNS sales, and operating margins were up on both margins in S and S as well as leverage elsewhere. So an update on tariffs. We are estimating that this year's tariff impact will be about $80 million, down from the $100 million. That's in part due to mitigation exercise mitigations and other things that have changed. We began seeing the tariff impact in late Q2. Most of that $80 million is in front of us in the second half. So the operating margin expansion that you saw didn't have a significant impact from tariffs. It was more core to the business on improved mix in the in S and S.

Greg Brown: And, Amit, we, a quarter ago, we said gross margins would be comparable for the year. We now expect gross margins to be up year on year. And to your point on operating margin expansion, we envision about 100 bps, 100 basis points expansion year over year.

Jason Winkler: And that improvement is coming not just from the addition of Silvis, but from also the core business. Both are helping gross margins and operating margins this year.

Amit Daryanani: Exactly. Super helpful. And then, you know, maybe just shift gears a bit. Can you just talk about how do you think you're positioned to address sort of this growing focus in the unmanned systems market as you go forward? And how big do you think this can eventually become for you folks? I get Silvis gives you a really good presence there, but I just want to understand, like, on longer term, how big do think this unmanned systems market can get? And then maybe somewhat specific, do you think Silvis enables you to participate in, like, some of the initiatives that the Pentagon has like, replicated or the DIU autonomy pushes they're making? Thank you.

Jack Molloy: Well, Amit, let me just talk about the TAM first. We see the TAM for unmanned at about $3 billion and growing, probably one of the fastest-growing TAMs we have now. With the addition of Silvis now in the portfolio. And we would expect that TAM not be surprised to double it in the next four years. And maybe just focusing a bit on drones, per se, if you think about our drone strategy right now, we have we have three elements to it. There's drone as a first responder. This is our strategic alliance with Brink. In North America. We also have a solution for international.

Given the increased FAA waivers in 2025, we see that as a significant force, and the strategic alliance with Brink, I think, is important. And we see our mission-critical networks, Silvis in particular, also integrating with Brink in that scenario. For communications, we just talked about it. I think Silvis is dominant in terms of being able to be the most resilient communication mechanisms, low probability of low probability of intercept for drones, which I think is a key driver, that continues to grow. And finally, drone detection. And forensics. We have a partnership with SkySafe and, as I mentioned before, with Silvis we have the ability to detect drones leveraging their spectrum monitoring functionality as well.

So across those three things, for drones as a specific instance of unmanned systems, that is our strategy there.

Tim Yocum: The next question is from the line of Ben Bollin with Cleveland Research Company. Your line is now open.

Ben Bollin: Good afternoon, everyone. Thank you for taking the question. The first one, I'm interested in your thoughts on what the Silvis sales motion looks like. Could you maybe compare and contrast it to your existing sales motion? And any preliminary thoughts you have on getting your existing sales teams up to speed and out there accelerating this and driving more attach? And then I have a follow-up.

Jack Molloy: Sure. So their sales motion, they've had you know, they've it's it's amazing that success that team has had. You know, when we first started a year ago, they had a relatively small sales team. That was largely focused in The US. And some of The US sales resources focused outside the Continental United States would call on bases, etcetera, in Europe and other points abroad. It's a direct sales motion largely. Given the size and the strategic level of the selling process. There's also an element of this that sells to, I think, Jason or Greg articulated, itself to the primes and the integrators, the Andurals, the AeroVironments. We're gonna so that's where it was.

Where is it gonna go? You heard Greg mention earlier, we're gonna put a pretty concerted effort to have local resources in allied countries around the world. Anywhere where we're seeing a dial-up in military exercise, we're gonna quickly be putting salespeople over there. We've already invested in channel salespeople as well. To get after new channels to sell the Silvis Manet software into those elements. And I think the last component of it is lobbying. They have had limited resources in lobbying. We have a Government Affairs Arm. In DC.

We will be looking to address not only lobbying on the hill for approves for DOD, but also lobbying into the different branch of government where I think we can articulate our story. It's US-made technology. It plays really well, I think, with where we wanna go. But yeah. So we're really excited. You know, we've run this playbook before when we got into the video space. I think it's a different playbook, a different end market, but know, it starts with just having a strategic idea of where we wanna go, where we wanna invest in I think you'll quickly see that we're gonna be making moves the next coming weeks and months ahead there.

Ben Bollin: Okay. That's great. I guess the follow-up probably more for you, Jack, I'm interested, you know, a lot of The US states closed their fiscal year, in June. How do you think budgets are coming together into fiscal twenty-six? Just any high-level thoughts on what you're hearing. I understand the orders have been exceptional. Just interested if you've got much visibility into incremental fiscal twenty-six budgets at this point. Thank you.

Jack Molloy: Yeah. Sure. So I think as you articulated record Q2 orders, We've raised our annual guide, but we just took a look because we know we now have a view to what the '26 state and local budgets look like, and the reality is we just had a we just had a went through this in detail with our strategy team a couple weeks back. The budgets look very good. So the budget situation remains very strong. You know, the other piece of it that we always think about is we're a little different because we can tap 911 funds. We get the benefit of the increase in property taxes.

Sales taxes because the reality is invite the sale the seller selling environment is still good, and then we have income tax and incomes are relatively steady. So across the board, the situation looks good, and I think you know, that really advises our confidence in the back half of '25 and beyond.

Ben Bollin: Thank you.

Greg Brown: Thanks, Ben.

Operator: Once again, if you have a question, you may press 5 on your telephone keypad. The next question is from the line of Tomer Zilberman from Bank of America Securities. Your line is now open.

Tomer Zilberman: Hey, guys. Question for you on the core LMR business. If I think about the long-term historical growth trajectory of this market, it's anywhere between 1% to 3%. In the last two quarters, you've been growing 3% to 4%, and I believe you previously guided for that. Similar type of growth rate, 34% for the rest of the year. My question more so is as we think about next year or the next two years, are these trends that you're talking about, about in regards to this ecosystem with Apex Next SVX and the other positive trends you're seeing enough to sustain these kind of above-market growth rates?

Or do you think that these trends have a long enough tail that you know, we might be more exposed to cyclical growth. You know, fluctuations of growth over the next few years.

Greg Brown: Well, from a technology standpoint, you know, we as Jason mentioned already, we are relabeling LMR to MCN, mission-critical networks. And as a result, we now expect mission-critical networks inclusive of LMR, to be mid-single digits for this fiscal year. We're obviously not gonna comment yet on '26, but I think that the strong Q2 orders print the gaining confidence in the product backlog even though it is transitioning more to a quick turn business. But our confidence is incrementally higher than it was a quarter ago. I. E, vis a vis the mid threes, I like that trend. Now remember also, we're coming off of record years last year and the year before.

So we're and as somebody earlier mentioned on the call, given the ecosystem that you just referenced, we're trying to drive more toward recurring revenue, toward more applications revenue, toward more revenue as a service. So as long as we can continue a healthy, robust company-wide revenue growth, and then continue our focus on operating expense operating leverage, improved cash flow, operating margin expansion, and continuing to build backlog particularly around multiyear services, or recurring apps revenues. That's the profile we want for the firm. So, you know, we'll come in and out of quarters. We'll come in and out of years.

But when we take a look where we are now and going forward, and I think of the long-term durability and the criticality of 13,000 networks for LMR, that compose both critical infrastructure and enterprise as well as public safety as well as North America, and international. And, again, just to come back to Silvis, I love Silvis because it's intelligent. High growth, high performance, infrastructure. It can support lots of different drone platforms. Lots of different drone manufacturers, We've had a lot of experience, and I have, in, you know, selling, quote, unquote, devices. Or commodities. You could you could call the drone market depending upon which one you define as a commodity.

We've been very purposeful to invest where we think we can differentiate where we think the revenues and the competitive advantage are sticky, and where we can build a competitive advantage in adjacency for public safety, critical infrastructure, and national security. That's the strategy we're implementing and I feel good about it. And I definitely feel good about exiting Q2 and what we need to get done between now and the end of the year. And, Tomer, as you know, will update you on next year in November.

Tomer Zilberman: Got it. Maybe as a quick follow-up, just a housekeeping question. Apologies if I missed it earlier. Your guidance raise includes a mix of the Silvis acquisition, but also core improvements. Did you break out what you expect Silvis to contribute in Q3 versus Q4? I know you have the stub period going on, so any directional direction you can give us would be helpful.

Jason Winkler: So we're flowing through the Q2 beat. We're flowing to flowing through the improvement of FX and we're articulating that Silvis is about a $185 million in the stub period of revenue for the remaining five months. Post close. We haven't specifically broken out Q3. But if you wanna use weeks, it's a pretty good approximation of where to put the $1.85.

Tomer Zilberman: Got it. Thank you.

Greg Brown: Thanks, Tomer.

Operator: Our final question today is from the line of Louis De Palma with William Blair. Your line is now open.

Louis De Palma: Greg, Jason, Jack, Mahesh, Anne, Tim, and Vicky, good afternoon, and congrats on closing Silvis.

Greg Brown: Hey, Louis. How are you doing? Thanks.

Louis De Palma: Great. I was wondering, does Silvis give you a competitive advantage for your drone as a first responder offering on the law enforcement side? Today, nearly all of Silvis's revenue is for the battlefield, but it seems you can significantly enhance their first responder capabilities, especially if that scale? Or alternatively, do you view you today view Silvis as too powerful of a solution for law enforcement? So are you gonna focus all of your efforts on the battlefield? What's the strategy there with the Silvis expansion?

Mahesh Saptharishi: Louis, I think in the near term, at least, our biggest limitation is going to be spectrum availability. In North America. Because we need to operate within a certain spectrum to be able to take advantage of Silvis's technology within drones specifically license spectrum. So we think it'll happen, but it'll happen in the future. In the meantime, the other important element of us supporting DFR operations is being able to track and being able to detect drones in airspace. And that's where spectrum monitoring comes into play. And being able to do that not just with radar, but also to do it with RF.

I think that gives us the ability to integrate that as part of our DFR program while we figure out the spectrum challenges.

Jack Molloy: And there are a couple of instances, with public safety agencies in The US that have had spectrum waivers where they've been implemented and granted still this has played a role there. Yeah. So there's more we can do.

Greg Brown: Yeah. And the other thing, think the last thing I'd say is we can't sleep on the borders because really, think as Greg said earlier, what Silvis does is Silvis basically builds a bridge to our LMR or the voice mission-critical networks to video. And they're gonna secure the borders leveraging this leveraging this technology. And with that, it's gonna pull through video opportunities for us as well.

Louis De Palma: That makes sense. And, Greg, you mentioned LEO satellite connectivity being integrated into your network. Can you elaborate further there or maybe Mahesh, are you partnering with Starlink or FirstNet via AST Space Mobile there?

Mahesh Saptharishi: So I think it's what Jack referred to in the context of our LMR infrastructure there, Louis. We will support LEO via our base stations because I think that's the better way to attack redundancy and have high bandwidth connectivity to with lower orbit satellites. And, you know, we are having conversations with all the appropriate LEO providers there to give us that flexibility.

Louis De Palma: Great. Thanks, everyone.

Greg Brown: Louis.

Operator: This concludes our question and session. I will now turn the floor over to Mr. Greg Brown, Chairman and Chief Executive Officer, for any additional comments or closing remarks.

Greg Brown: Yeah. I just want to close and say thank you to all the people at Motorola and all of our partners. Really pleased with the strong Q2 performance on revenue, earnings per share, and cash record Q2 orders, in particular, up 27% as we talked about. And as was mentioned earlier on the call, it's fairly broad-based. The performance on record orders. So that's even more foundational and gives us even more confidence.

I'm pleased with the fact that you know, mid-year here, we're able to raise top line, bottom line, and overall raising operating cash flow in the face of $80 million of tariffs, headwind the majority of which is in the back half, and in an increased interest expense as well as $75 million of fees associated with the Silvis acquisition. And expanding gross margins and expanding operating margins. So I'm excited about Q3 and Q4 and really excited about Silvis joining the firm. All the capabilities engineering, technical talent, the sales organization that's coming over as well, I think it's gonna be a great mix and a great team, and I'm excited about it.

And I look forward to talking to everybody again, in three months. Thanks for listening.

Operator: This does conclude today's teleconference. A replay of this call will be available over the Internet within three hours. Website address is www.motorola.com/investor. We thank you for your participation and ask that you please disconnect your lines at this time.