The two ranges that moved
Motorola Solutions closed the second quarter with revenue up 13 per cent at 3.1 billion dollars. GAAP diluted earnings per share were 3.33 dollars, up 10 per cent, and non-GAAP earnings per share 4.41 dollars, up 24 per cent. By segment, Products and Systems Integration sales grew 15 per cent and Software and Services sales grew 10 per cent.[1]
The same release moved two forecast ranges upward. Full-year revenue guidance went from approximately 12.8 billion dollars to approximately 12.975 billion dollars. In the Motorola Solutions guidance the non-GAAP earnings per share range rose from 16.87 dollars to 16.99 dollars up to 17.62 dollars to 17.72 dollars. One quarter's result is being converted into a commitment covering the two quarters still to come.[1]
How fast the book converts
The basis for that commitment is the ending backlog of 15.6 billion dollars, up 1.5 billion dollars or 11 per cent from a year earlier. A backlog is a signed claim on future revenue: unlike the quarter's sales it does not settle at once but converts as deliveries are made. That line in the Motorola Solutions release is the source of the visibility to raise guidance in August.[1]
A growing order book can mean stronger demand or slower delivery, since the same order left waiting longer also raises the total. What separates the two readings is whether the book moves together with revenue. In the same quarter Motorola Solutions repurchased 326 million dollars of stock, paid 201 million dollars in dividends, invested 55 million dollars in capital expenditure and signed an agreement to acquire D-Fend Solutions for 1.5 billion dollars. If revenue grows in the next quarter while the ending backlog holds at or above 15.6 billion dollars, the book is being replenished rather than drawn down; if it falls, the raised guidance rests on consuming the remaining orders faster.[1]