Motorola Solutions (MSI) Q1 2012 Earnings Call April 25, 2012 8:00 am ET Executives Shep Dunlap - Gregory Q. Brown - Chairman, Chief Executive Officer, President and Chairman of Executive Committee Edward J. Fitzpatrick - Chief Financial Officer and Executive Vice President Mark F. Moon - Executive Vice President of Sales and Field Operations Analysts Jeffrey T. Kvaal - Barclays Capital, Research Division Alkesh Shah - Evercore Partners Inc., Research Division Craig Hettenbach - Goldman Sachs Group Inc., Research Division Deepak Sitaraman - Crédit Suisse AG, Research Division Tavis C. McCourt - Morgan Keegan & Company, Inc., Research Division Ehud Gelblum - Morgan Stanley, Research Division Peter Misek - Jefferies & Company, Inc., Research Division Matthew Thornton - Avian Securities, LLC, Research Division Dale Wettlaufer - Morningstar Inc., Research Division Keith M. Housum - Northcoast Research Presentation Operator
We have posted our earnings presentation and press release at motorolasolutions.com/investor. These materials also include GAAP to non-GAAP reconciliations for your reference. As always, I encourage you to review these materials.A number of forward-looking statements will be made during this presentation. Forward-looking statements are any statements that are not historical facts. These forward-looking statements are based on the current expectations of Motorola Solutions, and we can give no assurance that any future results or events discussed in these statements will be achieved. Any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Forward-looking statements are subject to a variety of risks and uncertainties that could cause our actual results to differ materially from the statements contained in this presentation. And with that, I'd like to turn it over to Greg. Gregory Q. Brown Thanks, Shep. Good morning, and thank you for joining us today. Q1 highlighted another record quarter for Motorola Solutions as we achieved strong sales growth, improved operating leverage and returned significant capital to shareholders through our share repurchase program and quarterly dividend. The most recent quarter included a number of significant product and solution launches that continue to demonstrate our unwavering commitment to deliver the best mission-critical solutions to our public safety and enterprise customers. This morning, we reported record first quarter sales of $2 billion, an increase of 7% from Q1 of last year. On a GAAP basis, net earnings were $0.50 per share from continuing operations compared to $1.07 in the year-ago quarter. Non-GAAP net earnings from continuing operations were $0.59 per share compared to $0.54 per share in Q1 of last year, a 9% increase. And for the remainder of the call, we'll reference non-GAAP financial results unless otherwise noted.
Our Government business revenues increased 11%. North America, Asian Latin America all experienced double-digit growth, but we were also pleased to see growth in EMEA. Operating margins in the Government business improved 260 basis points year-over-year, due to strong sales growth across our portfolio and another quarter of disciplined cost management.In our Enterprise business, sales declined 2% from the year-ago quarter, including an anticipated iDEN decline of $31 million. Growth in this business, excluding iDEN was 3%. This increase was a result of growth across our portfolio as customers continue to select our solutions. Regionally, both North America and Asia had strong results, while EMEA was down slightly as we expected in comparison to an extraordinarily strong Q1 of 2011. On the capital allocation front, we continue to make significant progress in our initiatives and path to net debt that we spoke about at our financial Analyst Meeting last month. During Q1, we paid $70 million in dividends and repurchased $1.4 billion in MSI stock, bringing the total repurchase amount to approximately $2.5 billion since the program was announced in July of last year. I'll now turn it over to Ed Fitzpatrick to discuss our financial results in more detail. I'll then return to discuss operational highlights and provide additional commentary and perspective on our overall business performance. Edward J. Fitzpatrick Thanks, Greg. Q1 was another quarter of strong growth in operating leverage. Along with revenue growth of 7%, our disciplined expense management yielded an increase of operating earnings of 9% despite a $13 million increase in U.S. pension expense. We saw broad-based revenue growth in our Government business with record first quarter sales of $1.3 billion, an increase of 11% in the prior year. Operating margin in the Government business improved 260 basis points, driven mainly by sales growth and continued leverage.
The Enterprise business declined 2% to $655 million, driven by unanticipated iDEN decline of approximately $31 million. Excluding iDEN, Enterprise posted growth of 3% as a result of growth across the broader portfolio. Operating margin in the Enterprise business declined 360 basis points. The decline was primarily attributable to iDEN. Increased pension and foreign currency expenses also impacted operating margins.Read the rest of this transcript for free on seekingalpha.com