Hey, good morning, everyone, and thank you for joining us. For our first session today in the morning, we have the CEO of Motorola, Greg Brown. Greg, thanks for joining us.
Thanks.
Always great to have you here.
Thanks for having me.
Greg, maybe wanted to start with a little bit of an open-ended question. You know, you're approaching your 20th year as CEO, a tenure that spanned across transformations, across different technologies, even different macros. maybe just starting from there, how would you characterize where we are today, both on the technology side, macro side, and how does that compare to previous points across your tenure, particularly as it relates to Motorola Solutions' positioning and prospects looking forward?
I think, without going through a history lesson, taking a step back, I think this is one of the stronger periods, from an overall demand standpoint and from a positioning and Motorola Solutions standpoint. You know, we've worked hard over the years to get the assets, the people, the end user markets curated in a way that, we're a mission-oriented company around public safety, and now I'll call it new defense or national security. I really like the assets we've been able to acquire. I love the organic development on the product side. The people in Motorola Solutions are a really good mix, Joe, of organically developed executives, as well as either newly hired or newly acquired. I think about a total addressable market as, you know, approximately $85 billion.
We're in the backdrop now as we sit here in May of 2026 against strong demand. We've had 4 consecutive quarters of double-digit order growth. I like our position in AI as Mahesh has built out organic product development in the AI designed around personas. You think about we're embedding AI in emergency workflow from incoming call to case closure and all of the points in between, whether it's a call taker, a dispatcher, a first responder, an RTCC operator, or an investigator. You ask, how do I feel about our setup and on our journey? I love our AI position, love the width and breadth of the asset portfolio in video, fixed and mobile, cloud and prem, hybrid. We meet customers where they are.
The two other things that I'm excited about is Silvus, which was our biggest acquisition for about four and a half billion dollars. Adds an addressable new market of $3 billion. Silvus is the market leader in high-end unmanned systems. It's used pretty pervasively in Ukraine, so it's a tested technology, and we're getting good traction and conversations with Silvus in other theaters. That acquisition is certainly appears at this point to be one of our best, and we'll see how it plays out. By the way, LMR, I love where we are in LMR. You know, the device refresh strategy we're on.
For the first time, we're refreshing the infrastructure side D-series, which we haven't done in 12 years. We're adding resilient layers of network protection to this, these 13,000+ networks in LMR, where your radio can do LMR, LTE, 5G, Wi-Fi, and now Starlink. An officer, we help connect regardless of their location. Even though we had negative organic revenue growth in Q1, on the LMR side, we expect that to continue in Q2. This one too, Joe.
Q2 this quarter will mark the last of the difficult comps coming out of supply chain normalization. I feel pretty good. I think gross margins for this full year will be comparable, and that's in the face of higher memory. That's in the face of some headwinds on tariff. I think our growth rate organically as a firm, we expect it to be 9%-10% in the second half of the year, driven largely by mission-critical networks. Silvus is performing, as I like to say, all lights are green on the cockpit. I really like the setup.
No, that's great to hear, lots of stuff to unpack there. If I could, maybe you talked about how you were feeling about the setup for the year or for Motorola going forward. Maybe I can flip that on the head and bring it a little bit near term. What are you hearing from customers, right? You just had your annual summit in Orlando. Where are you seeing customers prioritizing today? Which area of the portfolios is most resonating with them?
I'm glad you asked the follow-up, and I don't mean to be, this is not CEO speak. I actually feel good about the whole portfolio. I like the underlying strength we're seeing in LMR, and I like the setup for the back half of the year after we finish this difficult Q2 comp, which I think is the last in the line of difficult comps, as I mentioned. I like the Silvus demand. Look, in Q1 we grew command center 27%. Now, that was exceptionally strong due to 3 or 4 deployments on tier 1 metro deployments, but the overall funnel's great. I really like the performance in video. We guided 10%-11% this year. We came out of the gate at 16% in Q1. I was at Orlando, the software summit.
We had over 1,600 customers. There was 2 sets of customers. We had call takers and dispatchers. Remember, there's a little over 6,000 Public Safety Answering Points in the country. We are in over 60% of those with a software product. Talking to those users, their enthusiasm for what we're doing was exceptionally high. We tripled the number of breakout sessions for AI. We have the Responder AI Assist Suite, and we're the only one that have the Dispatcher AI Assist Suite. They like what we're doing. They like the ease of the use and deployment of how we're putting AI throughout emergency workflow. I had an executive session with about 40-50 chiefs. We're in a separate room unplugged.
They can ask me anything they want. We have a good back and forth. By the way, just to be anecdotal, 1 of the people, 1 of the chiefs in the room a few weeks ago, I texted last night because it looks like they will be selecting us for a competitive SVX deployment. They looked at Axon, they looked at 2 other competitors, they looked at Motorola Solutions. Given the SVX, which is the re-combined body camera, remote speaker mic AI assistant. Total cost of ownership is 50% less. 1 device. Mahesh Saptharishi team can migrate the back-end digital evidence management in a matter of weeks.
It was a very good competitive win, and I'm talking to him at 3:00 today to give him my personal reassurances around the deployment, which will be later this year. Long-winded answer. At the executive chief level, I think the conversations are strong. At the user level, call handler dispatcher, I think they're robust, and I think people appreciate, and I know first responders and police officers appreciate the resiliency that we're building in to further fortify and strengthen the criticality of LMR. It's good. It's very good.
No, got it. I mean, great to hear all that detail. Maybe just double-clicking on Silvus now. You've raised guidance multiple times. You're expanding manufacturing, which we'll touch on later. Maybe just on the demand side, can you walk us through how the pipeline has evolved since you closed the deal, how it's diversifying across customers, geos, end markets, are we really seeing demand getting pulled forward, right? I think the drone opportunity, if I was talking to anyone two years ago, they would have expected it to be more of a 2030 story. It seems like that's got pulled forward, so maybe just talk about that dynamic.
We have I think Jack Molloy and team and Babak, the founder CEO, have done a really good job. It's important, before I just mention a few metrics around Silvus, when we target that kind of acquisition, yes, it's about the addressable market. Yes, it's about the technology. Yes, it's about new defense extension, opening up a market and what that presents as a firm in terms of mission-critical, in this case, MANET networking. It's also about talent and people. Not just the founder, but the executive team, engineering, supply chain, product design. Really strong team, many of them educated out of UCLA, hence the location in L.A. I think they have fit in quite well with Motorola, with an RF radio frequency centricity and a cultural compatibility.
You take the internal talent of Motorola along with the acquired talent of Silvus. What I told them and what I tell other people that I'm talking to now that are potential M&A targets, we're a big company, but we're a small company. Yeah, we have a lot of people, 23,000, but there's a handful of people that jump on a call and make a quick decision. Babak, in this case for Silvus, I want you to be part of that team. We've doubled the sales force. We've added capital into R&D capacity. We've doubled the capacity of building Silvus product in L.A. by adding a second floor. Demand is really strong. We announced the facility in Salt Lake City, 165,000 sq ft, 200 plus new jobs in Salt Lake City.
I think that facility should come online early 2027, so we can reduce lead times and meet demand. I think demand continues to be obviously strong in Ukraine. We've gotten some initial orders as a result of the Israeli-Iranian conflict. The growth for Silvus is largely internationally driven. We have higher engagement with NATO countries. We referenced a big order in Q1, which was just under $80 million out of Germany. We've also had some orders as it relates to Silvus out of the U.K. This new warfare and these conflicts are unfortunate, obviously, in Ukraine and Iran, but you've read about it, you've seen enough about it that warfare, electronic warfare is entirely different than what it was three or four years ago. All things drone, all things navigating unmanned systems, either in the air or in the water.
Silvus is the market leader and in the sweet spot that governs these high-capacity, anti-jamming, threat detection, low probability of intercept, low probability of detect in a highly scalable, low latency environment. I think it's strong across the board.
You mentioned expanding manufacturing sales, et cetera, and you've doubled capacity thus far. Can you just talk about how you're thinking about keeping pace with the demand that you're seeing on the supply side of things? Maybe just a quick follow-up on the Salt Lake expansion.
Sure.
How are you thinking about that in terms of capacity unlock for you guys?
What people, and I'm sure you're thinking about this, right? They're saying, "Well, let me get this straight. He's doubled capacity. He's at $750 million a year. Add the square footage. What's the exponential growth in capacity? How does that inform the revenue line? Tell me what that does to my model." I wanna easy in the saddle a little bit. I think it'll reduce lead times for sure. The lead times are too long, and customers want that product quickly. It, it will be, I don't wanna give you a number. I actually don't know the exact number, but obviously it will be an exponential capacity expansion, that'll allow us to continue to meet the strong demand we're seeing.
It's a pretty robust funnel of opportunity, but the most important thing for us is we gotta reduce the lead times and get this product in the hands of customers sooner.
No, fair enough. One of the big questions I get from investors is they're just not as familiar with the Silvus business. Maybe you can just walk us through the programs that you've recently won, some context around them. What's a typical deal structure look like? How much is hardware versus software? The duration of the contract. Are you sole source? Those type of avenues in terms of how these deals kind of form and what they look like, and how should we think about year 2 and year 3 of one of these deals?
It is largely hardware. I think it's about 90%, 85% or 90% hardware, 10% or 15% software. Some come in from the U.S. Fed team here. Domestically, the majority of our growth is being derived, more than 50%. I think it's closer to 60% plus, internationally. The size of the deals dramatically differ, just like an LMR deal. It could be $2 million, it could be tens of millions. The Germany order for $78 million is multiple quarters. It's largely hardware upfront, minimal recurring afterward as you think about the dimensionalization of the rev rec. That's kind of the composition of what we're seeing. A lot of conversation with NATO countries, a lot of conversation around border protection.
Remember, Silvus is, for us, is a defense play. It is not a public safety play. There's not spectrum here in the States to use Silvus for public safety. That's okay. That wasn't contemplated when we made that acquisition. The total addressable market, we talked about being $3 billion. We expect that addressable market to double in 4 to 5 years. A lot of good growth opportunity for us. Again, I think we've raised it 3 times in terms of the annual revenue outlook, and it remains real strong, Joe, at this point. As I guided a couple of weeks ago, at $750 million. It's strong.
Got it. Can you just talk about the potential around cross-sell opportunities? Obviously, you talked about kind of entering-.
Yeah
more aggressively the defense vertical. How is that looking from a cross-sell, up-sell type of opportunity for you guys?
By the way, I didn't answer the other question fully, the first one. We sell Silvus largely direct, but we are also in over 100 OEM platforms where we are subbed into whether it's AeroVironment, Anduril or others. I like being in the reference architecture for high-end MANET against the competitive landscape.
Cross-sell.
Cross-sell. Germany is a good opportunity. Even before Silvus, Mark Kai runs our international organization, Joe Belscher runs U.S. Fed. We sell into MODs with Ministers of Defense, with the existing Motorola Solutions product category. We could sell into Italy MOD, Germany MOD, U.K. MOD. MOI is police, MOD is defense. We know a lot of the customers for NATO countries in MOD, and we have helped broker introductions of Silvus into those defense departments, Germany being a very good example, where I think cross-sell is high, and there'll be other theaters as well.
Got it. Maybe moving off Silvus, going to the broader video portfolio and just taking kind of a step back. A lot of investors come to us, and there's this perceived notion that there's a lot of increased competition, whether it's from some of your public peers or even some of the private folks, in the field. You know, maybe just can you touch on that and discuss the competitive landscape as you see it today? I have a follow-up there.
Sure. I think it's fragmented competition. It depends on what theater. Let's take the Chinese competitors first, Hikvision and Dahua. They're not a competitive threat per se for new deals in the U.S. and in North America, given the North America Defense Authorization Act, which basically prohibits Hikvision and Dahua from being procured for new procurements into the States for federal government either end user contracts or fed funds. The concern around those two companies is similar to Huawei and others, where the U.S. government is reticent to allow Chinese content, they think perhaps related to CCP, to be in comms, video surveillance, critical infrastructure. That's a favorability for us from a competitive landscape in North America. We compete against, in fixed video, primarily Axis, which is a division of Canon.
Internationally, Axis We see the Chinese competition most acutely, as you would imagine, in Asia. Axis and Verkada and Hanwha out of South Korea are the primary competitors for the remainder of theaters around the world. I think of prem and I think of cloud. We compete well in both. We believe we are taking share in cloud with Avigilon Alta growing faster than Verkada historically. We like the fact, Joe, that we can meet customers where they are. If you want a prem solution, we have that. If you want a cloud solution, we have that. If you have a hybrid environment, you may have a Unity server, which is prem-oriented, and 60 cameras, and decide the next 30 you want cloud.
We can put cloud connectors at the edge device on the camera. The customer can run a hybrid environment. I think the team, again, this is a good team where we've hired a couple of executives from the outside and from competitors, underneath Alex Castaneda, who runs North America. Came out of Zebra, knows channel, 'cause video is largely a channel sale. You have to have the right channel mix. You have to have the right channel, relationships. You have to tweak and understand compensation. I like our setup. No one has in video the width and breadth of our portfolio, not only in fixed but in mobile. Mobile being in-car, body cam, nobody has that portfolio. I think this 16% growth and really strong start in Q1 is a testament to that.
I don't see the competitive landscape, it hasn't materially changed from now versus several quarters ago. If anything, we have gotten a little stronger on the product side.
No, got it. You mentioned something there in terms of the breadth of the portfolio. You know, it does seem like anecdotally, the competitive or the broader landscape is moving to this more portfolio approach that you guys have been doing for a while now. I guess, what are you seeing from the customer side as they look at your portfolio, particularly now with AI kind of layering and being more pervasive across the portfolio, particularly on the video side or specifically on the video side? Is that starting to resonate more?
Definitely.
Okay.
It's resonating. The customers like the choices that they have with us. They very much like AI being embedded throughout all product categories, and if you think about video or command center deployment inside the context of public safety, they love it being embedded from an end-to-end emergency workflow standpoint. I think that Mahesh, the deployment team, Todd Piett, Jahan running AI, and others, the improvements that we've made in terms of product performance, speed of deployment, better quality, I do think it's resonating.
Oh, got it. Maybe just on that point, SVX seems to be one of the products that does this convergence across multiple avenues, right? Maybe, and you mentioned already a win in the pipeline, can you just talk to what you're seeing on the demand side? One of the questions that we get a lot on the SVX product is, you know, how much of this is just speaker mic? How many of these are competitive takeouts versus greenfield opportunities?
Yep
just because of some of the subsidies that are coming through? Maybe walk us through what you guys are seeing on the.
Yeah, it's one of my favorite products that Mahesh has developed. If you think about it, let me just back up. I always, we just had a board meeting Monday, I said, when I think about what makes MSI special, what's the competitive advantage I think we bring? I think we bring 3 things. I think we think we bring balance sheet. There's a lot of bigger companies that have more cash and well-capitalized, especially in the world of AI hyperscalers. That's not what I'm talking about. When I look at the landscape of public safety competitors in that spectrum, our balance sheet is an advantage. Not just because we're only 2-to-1 net debt to EBITDA, but because we expect to generate, as an investment-grade company, $3 billion of operating cash flow.
That gives us powder and opportunity to continue to invest organically, to extend the product leads that we believe we have. It allows us to give good shareholder return. Increasing the dividend double digits, which we've historically done every year since the creation of MSI. Buy back shares. The stock dropped stairstep down after Q1. We've been aggressively buying back shares. Right as we sit here today, have bought back just under $400 million year to date. The capital allocation flexibility that the number 1 advantage of balance sheet in a public safety context affords us is consequential. The second thing that I think makes us special is I would call it brand equity, and more specifically, I mean the relationships, the stickiness of LMR, and the relationships that we provision in addition to that incumbent technology. We're not selling devices.
I've been in that movie. It's not a very pleasant movie. We're selling systems, LMR mission-critical systems that are bespoke. Infrastructure curated around that specific customer. Devices, software, encryption, monetized services built around the workflow for LAPD, NYPD, Chicago PD, Dallas Fire-Rescue Department. Disintermediation or substitution is very hard. Let's build on an ecosystem, whether it's command center or video, and integrate it and orchestrate it with these mission-critical networks that we are the best in providing. Advantage number 1, balance sheet. Advantage number 2, brand equity relationships. By that I mean the bifurcation of the incumbent systems and the relationships. The 3rd advantage is the critical networks themselves. That brings me to SVX. We're not interested in selling a device, a camera. We designed an integrated device, a multipurpose device. You don't need 2, you have 1.
What's it grounded in? It's actually grounded in mission-critical voice. Not cellular voice, which is subject to the vagaries of a cellular network that can be either congested or go out of service, but fully encrypted, always on, redundant, five nines encrypted secure voice. That device, powered by AI by the way, is doing secure voice, body video, back-end digital evidence management, and the thing, Joe, that makes it special is it is multi-source ingesting of situational awareness. It can take body video, it can take SVX video, it can take CAD information where we are a market leader.
Because it's grounded in LMR voice, it can do the radio LMR traffic recording logs and aggregate all of those multi-sources to give the best, widest view of situational awareness information to a dispatcher or an investigator at a total cost of ownership that is about half of what the other choice is. Hence, by the way, my anecdotal comment a few minutes ago to the chief I'm talking to this afternoon. He looked at those alternatives. He understood the value proposition and the difference. They have a mission-critical LMR network, a P25 network from Motorola, and I said, "You can buy another body camera. You can buy an iPod if you want. I don't know why you would." Think about it across the spectrum of what we add and provide from a full ecosystem standpoint and total cost of ownership.
We've had over 100 different customers procure the SVX. As we said in Q1, about 30 of those are also activating and provisioning the video. What I like about that is once you seed the SVX, the customer can turn the video on whenever they want. They may have a contract that's running with the other guys for 2 more years. That's okay. Seed the SVX. When that other contract's expired, you don't need to renew it. You can go right over, activate the video on the already purchased remote speaker mic, activating that second feature on video, and we move the back-end digital evidence management and migrate those customers over.
Got it. Let me just pause there and see if there's any questions in the room. Please raise your hand. There's one up front. Wait for the mic, please.
As the complexity of the business starts to grow, and it's always been fairly complex, but how do you start to think about protecting margins in the midst of that complexity?
Good question. I think that we do have a good DNA in the firm around Look, I always tell the team, revenue growth is fine. It can be A, B, or C. You gotta grow operating cash flow, you gotta grow operating margins, and you gotta hold or take share. That's what compounder companies do. We do expect operating margin expansion of 50 bps this year. By the way, that's in the face of memory cost more than doubling, little more than doubling as we updated on the earnings call. That's also with tariff headwinds of, I think it's $60 million in the first half of this year. Our team figures it out, and I'm proud of that.
By the way, even with the challenges and the vagaries around Memory cost, increased freight with the Strait of Hormuz marginally, we can largely absorb that. We also expect gross margins to still be comparable year over year, 26 over 25. While we have your word, the complexity of the business, I also see that as a lot of levers as well available to us. On. By the way, we've increased inventory. That was an intentional decision. It's running higher than it was from a working capital standpoint one year ago. Part of that is the addition of Silvus, but part of that was intentional to try to get in front of DRAM and flash memory escalation costs and pre-buy inventory. I think we dual source, we can re-engineer parts when we need to.
Also, by the way, given our market leadership, we have pricing power in certain cases. If I specifically think about video and memory cost, we've increased the prices of cameras and servers to keep pace with what's happening in the market, so we don't erode margin. I think the financial team, the operating team, the executive team understands the criticality of margins. For this year, we expect gross margins to be comparable, but continued actually, we expect operating margins to be up 100 basis points this year. I stand corrected. You were trying to give me the evil eye here. It's 100 basis points. I should know that. What else?
After you win a contract with L.A. or New York, you know, the big cities across the country, what's the max life of the radios where the entire department has to turn them over?
What's the max what?
Life of the radios where the entire department has to turn them over.
On average, a radio in North America gets replaced about every eight years. When you have a large customer like New York or L.A., it takes several years to upgrade the entire force. They pace it. Sometimes it's paced to the reflection of the budget dollars that's available to them. That's about the dimensions of the longevity of a radio, and it takes several years to upgrade.
Years and years and years. That's the other thing I like about this business. 13,000 plus land mobile radio networks. To your point, sir, thousands of contracts. There's not an overdensity or concentration from a vulnerability standpoint. They're all distributed and disseminated. They're accruing and expanding and upgrading infrastructure or a certain number of devices at a variety of different paces. That lends itself well from a lower beta standpoint. When we look at backlog and we have a sense of the agings and the durability, it provides a solid, robust platform for us to continue to grow. Thank you. Yes, sir.
You talked about hardware and software. Is there also a component to this, to the deployment to the actual user? The last part also is the aftermarket part of it, where, you know, you have units that are in need of service or what have you. What is the entire bundle of where you can harvest revenue and profit from?
Remember, as we report the firm, we have total revenue. We report it in the segments, Product and SI, Product and installation, Software and services, and then we disaggregate through the three technologies. Mission critical networks, which is LMR plus Silvus. Command center, which is all of primarily the PSAP or Public Safety Answering Point solutions, from call taker to evidentiary management, and then all things video. We can monetize the hardware price. We monetize software and services. Many of our service contracts have cost of living increases, where depending upon what inflation is, we can recover cost. We've increased surgically price where we are largely providing either a new product or larger scope.
By the way, another thing that comes to mind is we talk about these land mobile radio networks, and we talk about all the devices out there, and we record the revenue and product in S&S, software and services. There's 200,000+ devices that are using now an applications ecosystem on the radio that's not too dissimilar than what you do with your Apple App Store. It's not as sexy, it doesn't have all these applications, for mapping location over the air programming, it's $300 a year per device. We've said we expect about 300,000 of those users for Public Safety radios to be using the apps. That's another area to monetize. Implementing cybersecurity protection, another area to monetize.
You asked in the first question about the history of the firm and number one, not a consumer company, B2B. Our North Star is mission critical. Mission critical what? Mission critical networks for public safety and defense, mission critical AI embedded through emergency workflows, and getting away from individual devices where there's no competitive moat, and having a system end-to-end orientation where you can monetize, customize, and provide unique services to each customer. Under a financial envelope, revenue growth, operating cash flow growth, operating margin expansion. I think we have done reasonably well, but what excites me more is the opportunity in front of us from where we sit today.