MSI
#<UNK>, this is <UNK> <UNK>.
When we think about North America, <UNK> talked about we were pleased with Q4 and Q1.
By the way coming up that our backlog position is better.
A big piece of that backlog position improvement is in multi-year services, which is also good for future upgrades and what we do, but our product backlog is also up.
The backlog aged in to year is actually stronger than it was at this point last year.
We're seeing the improvement that we thought we would see in North America.
When you look at North America in general, overall state and local spend and revenues are up.
IT spend is up.
Federal seems to be returning to a little bit more normal predictability for us.
We were up slightly last year, as I talked to you about in the last call.
While we were down slightly in first quarter, we still have got some good orders and we're building backlog and we think we'll have modest growth for the full year.
So we have good visibility, good activity throughout North America.
We are encouraged by the activity we're seeing from customers in North America.
I think in Q1, the growth primarily was device driven, which I think reflects our commentary around narrow banding as purchasing returns to more normalized states.
Well, from a capital structure standpoint, what I'd say is, obviously, we've been very aggressive in returning capital.
We've returned $3.1 billion over the last 11 months.
Almost all of the proceeds from the Zebra transaction have been returned to shareholders.
We did $2.1 billion just in the last two quarters.
I like the fact that the share basis contracted 39% in just over three years, so I think we've been good stewards of capital.
We purchased $650 million back at $66 and change.
At today's levels we absolutely see the stock is even more attractive today.
I think there will be opportunities for us to pursue that moving forward.
We are in a net debt position, and we said we would move to that position.
We are pleased that coming out of Q1 we're in it.
So I think our balance sheet has a lot of flexibility that affords us options moving forward.
Just to remind you, we did over $200 million of expense reduction last year, and we're run rating to $150 million to $175 million this year.
While we clearly have a benefit from FX, the overwhelming majority of those reductions are non-FX.
I'd say 75%, roughly, are reductions, 25% as being the beneficiary of FX.
We're getting after the costs.
And with the opportunity as a pure-play company, we're restructuring reconfiguring, eliminating bureaucracies and redundancies and duplications in footprint.
I'm really proud of the team, and we'll continue to move forward on that.
Yes, this is <UNK> <UNK>.
We implemented our Real-<UNK>e Crime Center in St.
Louis, which as we've talked about in the past, it's about a $5 billion SAM for us.
We've got probably about 12 new deals that we've actually signed in the first quarter, and the reception by customers really continues to be positive.
As <UNK> talked a little bit about, the video analytics, body-worn cameras, is really part of that overall solution.
That's right.
It's really our overall Smart Public Safety Solution, so storage, video analytics.
Our Public Engines acquisition is part of that, data analytics as well.
I think it's fair to say, obviously, that's relatively small today.
What's important though is customers, many, would like to do business with one provider.
So while there's a variety of different products, to the extent, we, if we have the land mobile radio system and we can extend the relationship, the sales resources, the technical people, into the command center and do in hardware and/or software, and potentially storage, it's a logical extension of what we do that I think generally will help our growth profile.
The only other comment I'd have is that, these are really software-based solutions, recurring revenue model, so they go on for 5 to 10 years.
It's really part of our overall Public Safety LTE solution combined with our Smart Public Safety Solutions, as we've said, are very complement to reach one another.
Yes.
Yes.
First half is unchanged to our prior expectations.
Q1 performed a little better, but the first half remains unchanged.
This is <UNK>.
<UNK>, we really are not.
So far as we look at the piece, we've made some slight price adjustments in certain places, but in general we are not seeing any competitive disadvantages.
Certainly, the economic pressures in Latin America are putting tension on price power for them to purchase, but as far as competitive pressures on pricing, we're not really seeing any.
It's indicative of the backlog position we're in.
We've signed multiple multi-year agreements and services backlog has been growing, so the comment just indicated that there will be a movement to services.
It will make up more of our revenue in the services margin.
Although operating margin is very, very similar, services margin is a little bit lower than our product margin.
That was the entire comment.
I mean at the end of the day, we think this is a good thing.
It's a favorable trends.
Having a higher mix of multi-year services is good.
Having annuity-based revenue is good.
Having a long-term relationship with the customer is good, because we still, irrespective of the mix, which I think is what we just are formally acknowledging over time as a future trend, we think that's a very positive thing to enable and further cement the relationships we have with our customers domestically and internationally.
Having said all that, we still think that we can, with a lower cost structure, improve operating leverage and from an operating margin standpoint, maintain or increase the operating margins and cash generation that's associated with the profile of the business in aggregate.
Just to clarify, as <UNK> said, product margins are generally comparable.
We expect them to remain comparable for the balance of the year.
Gross margin pressure is services oriented as expected in Q1 and Q2 i.
e.
first half, i.
largely driven by Norway and some large products.
We expect the services gross margin to increase in the second half and generally normalize in the mid 30%s.
Just to tag on just one quick second, what we have said, and what <UNK> just said, is product profile, really unchanged.
But, we expect our services business to grow faster than our product business, in general.
And so that would lead to this longer-term trend.
It's not necessarily something you're going to see in the next two, three, or four quarters, but over time that would be the case.
Thanks.
As mentioned at the outset, we made a number of forward-looking statements during the call.
This includes outlooks on sales, gross margins EPS, OpEx, EBITDA other income and expense, and operating cash flow, as well as effective and cash tax rates, the impact of currency, Public Safety LTE and LMR, regional growth acquisitions, capital return and buybacks, as well as backlog.
Thanks for joining us, and we'll talk to you soon.
