Earnings Call Transcript - MSI Q2 2025

Operator, 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 posted on the Motorola Solutions Investor Relations website. Additionally, a webcast replay of this call will be available on our website within 3 hours after the conclusion of this call. The website address is www.motorolasolutions.com/investor. I would now like to introduce Mr. Tim Yocum, Vice President of Investor Relations. Mr. Yocum, you may begin your conference.

Tim Yocum, Vice President of Investor Relations

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 differences can be found in today's earnings news release and the comments made during this conference call in the Risk Factors section of our 2024 annual report on Form 10-K for 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.

Gregory Q. Brown, Chairman and CEO

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 S&S 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 the results and outlook before I return for some final thoughts.

Jason J. Winkler, Executive Vice President and CFO

Thank you, Greg. Revenue for the quarter grew 5% and was above our guidance with growth in all 3 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. For the first half of the year, operating cash flow was a record $783 million, up 39% versus the first half of 2024. For the full year, we're raising our operating cash flow expectations to $2.75 billion, up 15% from last year and is inclusive of $75 million of transaction fees related to the Silvus acquisition as well as incremental interest to finance 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. Subsequent to the quarter end, we closed the Silvus 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 to our segment results in Products and SI, sales of $1.7 billion was flat compared to the year prior, while operating earnings of $442 million or 26.7% of sales was comparable inclusive of additional tariff costs and the continued investments in video during the current year, offset by lower material costs. 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 P25 system upgrade for the state of Michigan, a $15 million fixed video order for a U.S. 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 3 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 S&S include a $44 million command center order for a U.S. state and local customer, a $29 million 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 U.S. federal customer. Looking next at our regional results. North America Q2 revenue was $2 billion, up 6% on growth in all 3 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 $902 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 3 technologies and the impact of foreign currency, partially offset by revenue recognition for the U.K. 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 Silvus transaction. First, when we announced the transaction in May, we shared the strong financial profile of Silvus with expectations of $475 million of full year '25 revenue at approximately 45% adjusted EBITDA margin. Our full year outlook assumes $185 million of revenue contribution from Silvus representing the stub period following the transaction closed yesterday. It also assumes that Silvus will be slightly dilutive for EPS in Q3 and neutral for 2025. Second, as it relates to our 3 technologies, we are expanding our LMR technology category to include Silvus under the new name of Mission Critical Networks, or MCN. With the inclusion of Silvus, 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 Silvus and the financing plan I described earlier, all 3 rating agencies have affirmed our BBB level ratings. We maintain a balanced maturity profile with approximately 8 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 Silvus, providing us flexibility to deliver on our capital allocation framework, which includes share repurchases as well as additional acquisitions. With that, I'd like to turn the call back to Greg.

Gregory Q. Brown, Chairman and CEO

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 SVX, 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 U.S. 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 Silvus, 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 has 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 BRINC 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 access 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 in 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 5 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 in 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 Silvus 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 Silvus, 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 Silvus 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, I'll turn the call over to Tim and open it up to questions.

Tim Yocum, Vice President of Investor Relations

Thank you, Greg. Operator, could you please remind our callers on the line how to ask a question?

Operator, Operator

The first question is from Joseph Cardoso with JPMorgan.

Joseph Lima Cardoso, Analyst

Greg, maybe I just wanted to start off. Last quarter, you put out this mid-$3 billion product backlog target for year-end. Based on the Q2 orders, it looks like you're well on track to achieve that. Can you take a moment to talk about, on a product level, where you're seeing this growth in the product orders across your portfolio? It sounds like the P25 devices are doing well. You mentioned a couple of deals on the base stations as well as anything else that you think is really driving the momentum there. And as you think about that target you put out for the year and how you're feeling about momentum tracking towards that, particularly, any update given that Silvus is now under your umbrella?

Gregory Q. Brown, Chairman and CEO

So Joe, regarding the target of mid-$3 billion in product backlog that I mentioned last quarter, if anything, I feel as good, I actually feel better about that. Just to be clear, that figure did not include anything associated with Silvus. So I still feel very good about the mid-$3 billion expectation, even better than I did in May. And you're right, coming out of Q2 with 27% record orders, with 10% of that in products, 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 D-Series and APX consoles. I mentioned, we've also had strong fixed video orders and one of the largest government orders we've ever had in regards to Silent Sentinel. So it was a multiproduct strength. 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 my confidence in the mid-$3 billion target or slightly better.

Joseph Lima Cardoso, Analyst

I appreciate the thoughts there. Sounds wonderful. For my second question, it's more of a big picture question. It's been a little more than a month since we've had the Beautiful Bill get passed, and there are various programs in Europe that are aiming funds towards areas that seem ripe for Motorola, particularly now with Silvus involved. I'm curious, as you look across these opportunities, where are you feeling most excited about both in the U.S. and internationally? Is there any difference in opportunities between the two areas? Additionally, how do you think investors should view the timing around these opportunities materializing for Motorola? Are you seeing any of these opportunities trickling into your orders today?

Gregory Q. Brown, Chairman and CEO

Starting with Silvus, we love Silvus. We have spent a lot of time on it as a team. I've heard from some people that said this opportunity looks too good to be true, and we have put a lot of effort into it. We love the fact that it's a market leader. It's been tested in terms of efficacy, performance, and scale, especially in Ukraine. We expect Silvus to grow about 20% in 2026. It's EPS neutral for the stub period this year, and we expect it to be at least $0.20 accretive in 2026. I appreciate that Silvus powers a number of defense and military drone platforms, including Anderol and AeroVironment, and it's certified with over 100 leading manufacturers. In terms of revenue contribution, particularly regarding Ukraine and Silvus, we mentioned that Ukraine is expected to contribute less than 15% of overall revenues this year, and we anticipate that Ukraine revenue for Silvus next year will be even less than that. I like the fact that it's driven by a wide base of U.S. defense, excluding Ukraine and unmanned systems, and I expect there will be a lot of attention and interest from European allies to invest in technologies that I believe Silvus will be front and center for.

John P. Molloy, Executive Vice President and COO

Sure, Joe. The One Big Beautiful Bill is funding over the next four years, so it's a four-year horizon, and it's good news for Motorola. From a DoD standpoint, the increased funding of $150 billion is beneficial, and it's even better now that we've acquired Silvus, alongside the defense, border, and unmanned systems trajectory. Additionally, there's $70 billion for customs and border customers as well as ICE, another $75 billion, much of which is directed at refreshing technology, both video, secure communications, and services. The last piece, which may have been underappreciated, is for our enterprise customers. We can tap into accelerated depreciation of CapEx, allowing us to engage with manufacturing, health care customers, and similar sectors regarding refreshing their network, utilizing some of the tax benefits available. We're excited about the One Big Beautiful Bill. With its signing on July 4 and a 90-day window, we expect some funding to kick in early in Q4 this year, which is reflected in our guidance.

Operator, Operator

The next question is from the line of Andrew Spinola with UBS.

Andrew Carl Spinola, Analyst

I want to follow up on the question about Silvus. Many have been trying to understand the rationale for acquiring Silvus. It reminds me a bit of the Avigilon acquisition where the reasoning wasn't clear initially, yet it became a significant part of public safety. Are you viewing Silvus in a similar light? Do you imagine this technology becoming integral to public safety and incorporated into your LMR technology long term, or is it opening a new business line with further investments in defense technology? How should we unpack this?

Gregory Q. Brown, Chairman and CEO

Yes, Andrew, I view it in two ways. First, I'm enthusiastic about the fact that it's a market leader. This acquisition gives us exposure to a market we don't participate in currently: unmanned systems in the air, on land, and at sea. It's a new opportunity for us. However, it's also data-centric. It's about providing ad hoc high-speed infrastructure-less mobile and data/ video communications. We see applications in defense, border security, and mission-critical deployments, particularly in conflict zones. Moreover, I see it as complementary to our LMR and video capabilities. We lead in land mobile radio infrastructure and devices, and this acquisition allows us to lead in infrastructure-less ad hoc networks. As both Silvus and our heritage in LMR have a radio frequency or RF focus, I see a 1+1=3 proposition, expanding our reach into new markets. This is a fantastic product, and I think one limitation on their growth is their ability to expand outside the United States, something we'll manage given our global footprint.

Mahesh Saptharishi, Executive Vice President and CTO

Besides building highly resilient communication, another critical factor is Silvus's spectrum monitoring capability, which is significant in the context of drones, allowing us to detect drones not just through radar but also via RF. This enhancement positions us uniquely in the drone detection space. Furthermore, Silvus’s data-oriented communication platform allows any IP-enabled device, including cameras, to be attached, presenting future growth opportunities.

John P. Molloy, Executive Vice President and COO

I've discussed our strategy, particularly regarding our border security focus. Silvus creates a bridge between our LMR and video Mission Critical Networks, allowing us to enhance security at borders while driving opportunities in video.

Operator, Operator

The next question is from the line of Keith Housum with Northcoast Research.

Keith Michael Housum, Analyst

I'd like to shift gears to the new base station you introduced. It's been about 12 years since the last base station launch. Is there pent-up demand which could act as a growth driver?

John P. Molloy, Executive Vice President and COO

You're correct, Keith. It has been roughly 12 years since the last base station was launched. The D-Series, which we're discussing, offers several advantages including better capacity, improved coverage, and reduced energy consumption, addressing customer feedback in energy efficiency while introducing redundancy with low earth orbit capabilities. We've already seen significant wins, particularly with states like Ohio and Michigan. Our statewide, county-wide, and citywide networks require refreshing, indicating a multi-year growth opportunity driven by customer demand. This also extends to our cybersecurity services and new software monetization services.

Mahesh Saptharishi, Executive Vice President and CTO

The hardware refresh offers an opportunity. Our customers are already using software agreements to stay current. This hardware refresh will enhance our long-term benefits and future revenues.

Keith Michael Housum, Analyst

Appreciate the insights. On the backlog, given the focus on backlog recently, how does its composition compare to the disaggregation of revenue you provided?

Mahesh Saptharishi, Executive Vice President and CTO

Most backlog within Software and Services, particularly, comes from LMR. Thus, LMR significantly contributes to our service and software backlog due to our long-term contracts established over the years. This is a key insight regarding our backlog composition. As we began the year, we anticipated that quick turnaround would accelerate, which it has, evident in our record Q2 orders and products' 10% growth, which we expect to continue in the second half.

Operator, Operator

The next question is from the line of Tim Long with Barclays.

Timothy Patrick Long, Analyst

I have two quick ones. First, about SVX and its early momentum, how do you envision revenue ramp and the potential impact on the upgrade cycle for APX NEXT?

Gregory Q. Brown, Chairman and CEO

On SVX, orders are surpassing our expectations. We are not exclusively selling a product but rather an ecosystem. SVX connects with the APX NEXT, which has been upgraded to a dual-banded device, enhancing its functionality. The SVX serves as a vital information hub, integrating situational awareness and eliminating the need for a separate body camera, as we've received orders from over 30 agencies, primarily those who don’t currently rely on a Motorola body camera.

Mahesh Saptharishi, Executive Vice President and CTO

Regarding our international body-worn camera business, we're making significant headway with agencies in Romania, Scotland, France, Bulgaria, and various in the U.K. so our performance continues to be robust worldwide.

Gregory Q. Brown, Chairman and CEO

By aligning SVX with APX NEXT, we bolster our application service business by enhancing attachment rates, ultimately creating a new category as a body-worn assistant, rather than just a camera.

Jason J. Winkler, Executive Vice President and CFO

In our video business, we see strong growth driven by the cloud platform of Alta. Orders are outpacing sales, and while we're managing the deferred revenue transition effectively, we haven't detailed a specific number this year as we aim for significant growth in the cloud segment.

Meta A. Marshall, Analyst

A couple of smaller questions for me. On the software transition, particularly on the video side, is there any meaningful headwind to revenue growth? Additionally, any update on APX NEXT adoption rates?

Jason J. Winkler, Executive Vice President and CFO

On cloud adoption in video, we continue to see the fastest growth within our cloud platform. Although we're managing the deferred revenue transition, the cloud segment remains on a strong growth path. Regarding APX NEXT, we achieved double-digit order growth in Q2.

John P. Molloy, Executive Vice President and COO

We've noticed a greater than 90% attachment rate for radio and application services annually with each APX NEXT radio, further driving our application service business.

Amit Jawaharlaz Daryanani, Analyst

I have two questions. First, operating margins exceeded expectations. Can you comment on tariff headwinds and how durable the margin levers are?

Gregory Q. Brown, Chairman and CEO

Gross margins rose on higher S&S sales and operating margins improved due to mix benefits. We estimate this year's tariff impact to be around $80 million, down from $100 million, attributed to mitigations and adjustments. The operating margin expansion seen did not stem materially from tariffs but was more aligned with our core operations.

Jason J. Winkler, Executive Vice President and CFO

A quarter ago, we indicated that gross margins would be comparable for the year. We now expect them to improve year-over-year, forecasting about 100 basis points expansion overall.

Gregory Q. Brown, Chairman and CEO

Our improvement is driven not only by Silvus but also the core business's performance. I feel confident given the long-term criticality and demand for our LMR networks, and I'm excited about exiting Q2.

Amit Jawaharlaz Daryanani, Analyst

How do you see your positioning to address the growing focus in the unmanned systems market? How big do you believe this market can become?

Gregory Q. Brown, Chairman and CEO

We see the TAM for unmanned systems at about $3 billion, and with the addition of Silvus, we expect it to be one of the fastest-growing sectors, potentially doubling in the next four years.

Mahesh Saptharishi, Executive Vice President and CTO

Regarding our drone strategy, we focus on three elements: drone as a first responder, communication integration with BRINC for first responder scenarios, and drone detection capabilities leveraging Silvus's advanced monitoring features. We anticipate significant growth driven by these initiatives.

Operator, Operator

The next question is from the line of Ben Bollin with Cleveland Research Company.

Benjamin James Bollin, Analyst

Could you compare the Silvus sales motion to your existing sales processes? Any initial thoughts on how your current teams can adapt and accelerate this?

John P. Molloy, Executive Vice President and COO

Silvus' sales motion has excelled with a limited team focused mainly in the U.S. and some international bases. They've employed a direct sales approach focusing on strategic selling processes. As we move forward, we plan to invest in local resources in allied countries and bolster our sales teams to optimize this opportunity, akin to our past success in the video sector.

Benjamin James Bollin, Analyst

What are your thoughts on U.S. states closing their fiscal year in June? How are budgets shaping up for fiscal '26?

John P. Molloy, Executive Vice President and COO

The budget situation looks very promising for fiscal '26. Given record Q2 orders and our raised annual guidance, we have a renewed perspective on state and local budgets, and we can affirm a strong outlook, bolstered by the increase in property taxes, sales taxes, and other stable revenues.

Operator, Operator

The next question is from Tomer Zilberman from Bank of America Securities.

Tomer Zilberman, Analyst

What are your thoughts on the core LMR business? With a historical growth range of 1%-3%, you mentioned the recent growth of 3%-4%. Are these patterns sustainable long term based on the trends you've echoed regarding the APX NEXT and SVX ecosystems?

Gregory Q. Brown, Chairman and CEO

As Jason noted, we are rebranding LMR as Mission Critical Networks. We expect it to sustain mid-single digit growth this fiscal year. While it’s too early to comment on '26, we're optimistic about the strong Q2 orders and better confidence in our product backlog, particularly as we transition toward quick-turn services and recurring revenues.

Tomer Zilberman, Analyst

As a follow-up, your guidance includes Silvus contributions, but can you specify the expected contributions for Q3 versus Q4? Specifically regarding the stub period?

Gregory Q. Brown, Chairman and CEO

We anticipate Silvus will generate around $185 million in revenue during the remaining five months. While we haven't broken down Q3 contributions specifically, it can be computed using the number of weeks remaining in the stub period.

Operator, Operator

Our final question today is from the line of Louie DiPalma with William Blair.

Michael Louie D DiPalma, Analyst

Greg, Jason, Jack, Mahesh, Tim, and ViQi, congrats on closing Silvus. Does Silvus provide a competitive edge for your drone-as-a-first-responder offering, especially since most Silvus revenue is battlefield-oriented?

Mahesh Saptharishi, Executive Vice President and CTO

In the near term, spectrum limitations in North America hinder our immediate utilization of Silvus technology within drone operations. However, the integration of Silvus's spectrum monitoring capabilities significantly enhances our ability to detect and support DFR operations—notably beyond radar measurements. We believe as we navigate the spectrum challenges, there remains a growth opportunity.

Gregory Q. Brown, Chairman and CEO

There have been cases where public safety agencies in the U.S. have secured spectrum waivers, allowing Silvus to play a pivotal role in those instances. I appreciate the potential there.

John P. Molloy, Executive Vice President and COO

We must also consider border security, where Silvus facilitates our LMR and video capabilities to enhance security measures at borders and drive further opportunities.

Gregory Q. Brown, Chairman and CEO

At this point, I'd like to thank everyone at Motorola and our partners for their contributions. I'm thrilled with our strong Q2 performance and significant growth across various metrics, including strong order performance. Based on this solid foundation, we increase our top and bottom line guidance and operating cash flow expectations despite headwinds such as tariffs and rising interest expenses. I'm excited about the future of our partnership with Silvus, and I believe we are well-positioned moving forward. Looking forward to speaking with you all again in three months. Thank you.

Operator, Operator

This concludes our question-and-answer session. A replay of this call will be available over the Internet within 3 hours. Website address is www.motorolasolutions.com/investor. We thank you for your participation and ask that you please disconnect your lines at this time.