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spk13: Earlier today, we announced the acquisition of Videotech, a global supplier of compliant fixed video cameras. Moving next to our segment results, Q1 products and system integration sales were $1.1 billion, up 9%, driven by anticipated strong growth in video and better supply availability in LMR. Revenue from acquisitions in the quarter was $7 million, and currency headwinds were $8 million. Operating earnings were 96 million or 8.7% of sales, down from 12.9% in the prior year, driven by the $50 million of higher semiconductor costs and higher freight costs previously mentioned, partially offset by higher sales. Some notable Q1 wins and achievements in this segment include an over $60 million nationwide P25 order for Taiwan National Police, 20 million of p25 upgrade orders for los angeles unified school district a 14 million dollar tetra upgrade for the israeli railways 11 million p25 expansion for a large u.s customer and a five million dollar video order for a large u.s public school system moving next to our software and services segment q1 revenue was 789 million up four percent from last year revenue from acquisitions was 10 million and currency headwinds were also 10 million. Growth in this segment was driven by video security and command center software, while LMR services was approximately flat, as expected, due to the impact of a tough comp related to customers' P25 system upgrades that were concentrated in the first quarter of 2021 due to the COVID delays throughout 2020 and the impact of unfavorable FX. Operating earnings were $278 million, or 35% of sales, down 170 basis points from last year, driven by a change in year-over-year mix and higher M&A operating expenses, partially offset by higher sales. For the full year, we still expect software and services revenue growth of 10%. And we expect operating margins that are comparable to last year, with the dilutive impact of recent M&A offset by pricing and improved operating leverage. Some notable Q1 highlights in the segment include $27 million command center software order for a customer in Latin America, a $20 million US federal multi-year service contract orders, $8 million command center software record management order for the city of Phoenix, and an $8 million services agreement with the city of Chicago. During the quarter, we grew our video security and access control software revenue by 28%. And subsequent to the quarter end, we launched the Public Safety Threat Alliance, a cybersecurity information sharing and intelligence hub for the public safety community. Looking next at our regional results, North America Q1 revenue was 1.3 billion, up 10% on growth across all three technologies. International Q1 revenue was 587 million, flat versus last year with growth in video security and command center software offset by a decline in LMR due to FX. We saw growth in Latin America and Asia PAC while Europe was slightly down, primarily due to FX. Moving to backlog, ending backlog with a Q1 record of 13.4 billion, up 19% or 2.1 billion compared to last year, driven by the airwave extension recorded in the fourth quarter of 21, and increased demand across all three technologies sequentially backlog was down 115 million driven primarily by the airwave and esn revenue burn during the quarter partially offset by growth in lmr and video products software and secure software and services backlog was up 1.3 billion compared to last year driven by the airwave extension and a 320 million increase multi-year services and software backlog in North America. Sequentially backlog was down $221 million or 2%, driven primarily by revenue recognition for Airwave and ESN during the quarter and typical order seasonality in North America. Products and SI backlog was $852 million compared to last year and up $106 million sequentially, driven primarily by strong LMR and video demand in both regions. We entered the year with a record backlog position and approximately 2.2 billion of our beginning backlog in the product segment was scheduled to be delivered in 2022 with over two thirds of this amount expected to be delivered in the first half. We saw continued strong demand for new orders during the quarter with a record Q1 orders total that included comprehensive pricing actions we implemented across our portfolio in January. We expect these new orders at higher prices together with higher volumes in the second half to lead to a significant profitability ramp throughout the year. Turning to our outlook, we expect Q2 sales to be up between 4% and 5% with non-GAAP EPS between $1.83 and $1.88 per share. This assumes approximately 50 million of FX headwinds, a diluted share count of approximately 173 million shares, and an effective tax rate of 22 to 23%. It also includes 50 million of year-over-year increased costs that we described on our last earnings call related to elevated material costs for semiconductor supply from secondary markets. For the full year, we are maintaining our prior revenue guidance of 7% growth and non-GAAP EPS guidance between $9.80 and $9.95 per share. despite the significant strengthening of the U.S. dollar since our last call. We now expect FX to be a headwind of $170 million for the year, up $110 million from our prior guidance. This outlook now assumes a diluted share count of approximately 173 million shares based on the timing of our share repurchases in the year and an effective tax rate of 21 to 21.5%. Additionally, our full-year operating cash flow guidance for approximately $1.9 billion and full-year OPEX expectations of approximately a $100 million increase over last year are also unchanged, inclusive of the new acquisitions we announced offset by targeted reductions we're making. Before I turn the call back to Greg, I wanted to reiterate some of the proactive measures we've been taking to navigate this dynamic environment. Amid strong demand, we've taken further pricing actions across various parts of our portfolio, which we expect to benefit our second half of the year. We remain cost disciplined with targeted OPEX costs planned while funding our recent acquisitions. We are strategically investing in inventory to maximize the parts availability to fulfill the strong demand that we're seeing. And finally, we continue to be good stewards of capital maintaining a strong balance sheet to be opportunistic and deploying capital on acquisitions and shareholder returns. I would now like to turn the call back to Greg.
spk04: Thanks, Jason. I thought I would end with a few thoughts on the business. First, business remains really strong despite the ongoing macroeconomic and semiconductor challenges. We had record Q1 orders and sales that drove results above our expectations We ended the quarter with our highest Q1 ending backlog ever, and our higher growth businesses and video security and command center software continue to grow at a multiple of their overall markets. Second, our healthy balance sheet and durable cash flow provides us with the flexibility to be opportunistic in our deployment of capital. During the quarter, we closed two additional acquisitions I'm excited about. Tetra Ireland, the provider of Ireland's nationwide digital radio service, for first responders is a business we've had our eye on for a while, actually, and it adds to our strong LMR managed services business. And AVA Security, a scalable, secure, and flexible cloud solution provides customers with the benefits of an enterprise-grade video security solution while minimizing the physical footprint of their security infrastructure. AVA complements our on-prem offerings in fixed video security and provides us with the flexibility to meet our customers where they are with options for both cloud or on-prem solutions. And finally, while the macroeconomic environment remains turbulent, I like our position. We're a leader in the markets we serve. We provide need to have solutions that are critical for customers. We continue to invest heavily in R&D and all of this provides us with the ability to take continued pricing actions to manage higher cost pressures. Additionally, we have strong predictable cash flows that allows us to continue to invest in our growth businesses while simultaneously returning capital to shareholders in the form of share repurchases and dividends. I'll now turn the call back over to Tim.
spk08: Thank you, Greg. Before we begin taking questions, I'd like to remind callers to limit themselves to one question and one follow-up to accommodate as many participants as possible. Operator, would you please remind our callers on the line how to ask a question?
spk09: The floor is now open for questions. If you have a question or comment, please press star 1 on your telephone keypad. If for any reason you would like to remove yourself from the queue, please press star 2. We do ask that while you pose your question, please pick up your handset to provide optimal sound quality. Thank you. The first question is from Keith Wholesome with North Coast Research. Your line is now open.
spk12: Good afternoon, guys. I appreciate the opportunity here. It sounds like you guys have been able to navigate the supply chain challenges fairly well. I noticed you guys said the $50 million is an extra cost for the first quarter. But can you guys talk about the supply, the visibility into supply for the rest of the year? Obviously, there's been a lot of upheaval, things going on in Shanghai recently. But any updated thoughts on where supply chain stands today?
spk04: Hey, Keith, I think our view of supply chain is it's pretty much unchanged from where it was a quarter ago. It's still very challenging. We go through week by week negotiations and discussions with critical suppliers on allocations. On the good news side, I think we were more successful in Q1 getting some critical parts sooner than expected. And I think that drove and informed our overperformance in Q1. The overall environment around semiconductor constraints remains challenging. I think, Keith, realistically, we expect those challenges to exist throughout the rest of 2022.
spk13: And, Keith, you mentioned the 50 million in Q1. It's another 50 million in Q2. So as we set out the year and described in the last call, A hundred million is elevated costs that we're incurring to buy these parts at a premium in the first half. But the second half is only twenty million. That's in part driven by the elevated cost that we faced last year. So the comp. But secondly, in terms of our supply and what our teams are doing to increase the number of substitutable parts, the engineering and quality teams are doing a good job in finding alternative parts and doing well in that. And we've also shifted to air as our primary means of freight. That's what's elevating our freight costs a little bit to get the parts in a timely fashion.
spk04: So semiconductor constraints largely unchanged, as Jason dimensionalized, although freight has incrementally gotten worse as we shift more ocean to air. And the overall cost is higher than was anticipated. on our last call, but anticipated and included in our full year guidance.
spk12: Gotcha. Just as a follow-up, you guys had a really strong first quarter for bookings. Is there a capability, despite the challenges, are you able to get enough supply to get over and above your guidance if the demand was there?
spk13: I mean, yeah, I mean, our guidance, our guidance for the quarter and a year is a compilation of the demand and then match to the supply that we have and foresee in terms of delivery. So nothing's changed there. We over performed in Q1 largely because we were able to get the supply and allocate it purposely to parts of the portfolio like public safety that are important to customers. They also happen to have slightly higher ASPs.
spk12: Gotcha. Thanks, guys.
spk13: Good luck.
spk09: Thanks, Keith. Thank you, Keith. The next question is from the line of George Nodder with Jefferies. You may proceed.
spk14: Hi, guys. Thanks very much. I guess I wanted to just quiz you on the full year guidance. You're keeping the 7%, but it seems like there's a lot of moving parts in there, and I'm just wondering how it all kind of nets out. So you have $110 million of additional FX headwinds You've got a bunch of new M&A deals in here. Pricing has gone up. I guess I'm wondering what it looks like when you kind of peel all that back. Is your guidance better or worse than maybe you thought three months ago?
spk13: You mentioned 110 in FX. That's absolutely correct. The incremental M&A that we've acquired since we last talked is 60 million.
spk04: Additionally, of net new revenue in the period.
spk13: Additionally, in terms of you mentioned price, we're absolutely looking at that and have made some changes across the portfolio. And the third item is favorable mix. So what we where we prioritize and allocate our supply to.
spk04: And, you know, we acquired Ava and Ava is about 10 cents dilutive. to EPS for the full year. So net-net, we've got incremental headwinds, as you talked about, George, of FX, incremental headwinds with freight, some M&A, higher costs than our last call. But that's balanced out by favorable mix, particularly as we index toward higher tier shipments. We continue to take pricing actions. I think tax rate will be a little bit better. Share count will be lower. So all in all, and by the way, at the end of the day, I think demand is as strong or maybe even stronger today than it was back in February.
spk14: Got it. And then just continuing on that, could you give us a sense for the magnitude of the pricing increases? And I think you said January was the time you instituted those. Is that correct? And then when do you think those will be fully in the model?
spk13: So we've been looking at price for a number of quarters. The most recent ones were January. I mentioned on the call that the backlog that we began the year with was 2.2 billion. That's largely going to fuel the first half. So the orders January onward are going to fuel the second half. And that's where our most recent pricing actions are. When I think about products, the segment, in terms of what's driving the growth we expect this year for our product segment of mid-single digit growth. Within LMR, the driver is largely price and mix favorability. And then within video, which is the higher growth part, it's price and volume that are driving the growth we expect there.
spk05: Got it. All right. Super. Thank you very much. Thanks, George.
spk09: Thank you, George. The next question is from the line of Paul Silverstein with Cowan. Your line is now open.
spk05: Paul, please check to ensure you are not muted.
spk10: My apologies. Guys, I apologize if you answered this in your prepared remarks, but with the improvement in some of your key sectors in your professional, in your PCR business, are you seeing that translate to an improved outlook? Hospitality has obviously improved significantly. Oil and gas prices are up, albeit I'm not sure how much that's improved that industry, but are you seeing any improvement there?
spk13: So with PCR, we expect it to grow this year mid-single digits. It was flat in Q1. The demand for PCR is very robust. The limiting or gating item is supply around PCR. So Jack, if you want to talk about markets.
spk03: Paul, I think that the two markets that we've seen the most profound rebound kind of post-COVID have been air, transportation, and hospitalities. I think the next to follow will be commercial real estate as we get people back to work in major cities. We're starting to see upgrades even in our building. We'll see upgrades on the communications front there, but it's really been air, and hospitality this year.
spk10: For my follow-up, I appreciate you just increased prices, but everybody's citing stepped-up component costs. Any thoughts you can share on longer-term margins, where they go, and what time frame on the gross line?
spk13: Sure. So headline inflation, we're navigating it like all companies and have been planning for a significant inflation number that we've been seeing. We have two unique cost inflation items that we believe are temporal. One, we're paying a premium for semiconductors that aren't available directly from the manufacturer and getting them through alternative secondary markets. That's 120 million that is in the P&L this year as we get after that critical supply. Secondly, the freight levels that were occurring this year are also air rates are frankly high. They got higher after the Ukraine invasion, and they remain high. So those are two temporary items that we're navigating around, as well as general inflation.
spk04: Yeah. And Paul, I would also say that taking all those things into account, we still expect full-year gross margins to be comparable for MSI and operating margins
spk09: uh to be slightly up for full year 2022. great i appreciate it thank you thank you paul the next question is from the line of meta marshall with morgan stanley your line is now open great thanks um maybe starting you know i noticed you guys
spk01: talked about strong order activity kind of across the board but just wanted to get a sense of was there any changes by region so anything notable in the Europe region maybe more specifically maybe start with that and then I have a follow-up question sure about it I think so is it replies to Europe first of all I just want to remind you half of our revenue in Europe is actually recurring revenue so think large-scale managed service businesses in q1
spk03: Internationally, we're up 3% in constant currency, so really the FX headwind that Jason alluded to really impacted Europe to the greatest extent. But I would say this, our challenges in Europe and really, quite frankly, in international are not demand-related. Demand remains very robust. It remains very robust in Europe, not only in video security and access control, but our command center software as well as our land mobile business. So I think the biggest challenge, I would say, is really currency right now.
spk04: And Meta, just as a footnote, as it relates to Russia, contextually, we've exited that market. It was pretty de minimis for us to begin with. Full year revenue on Russia last year was $25 million. So we've exited that market. We don't have Corolla Solution employees in that theater any longer. So just as a footnote, I thought that could be helpful as well.
spk01: Perfect, very helpful. And then maybe just on the, I just want to get a sense of, you know, you guys obviously spoke to growing backlog, just how much of the growing backlog as a result of supply chain challenges and inability to ship versus just some longer term contracts coming in? Thanks, and that's it for me.
spk13: The majority of our backlog is from direct customers, governments, agencies, thousands of customers who order as their procurement cycles permit them, and so we believe that to be a very strong signal for their demand. We also have a channels business where channel inventories are very low, and our channel partners are placing orders on us to replenish that inventory. So our demand signal from both our direct customers and our indirect customers is pretty clean, and as Jack mentioned, is growing in both sides of the business.
spk01: Perfect. Thanks. Congrats, guys.
spk09: Thanks, Mehta. Thank you, Mehta. The next question is from the line of Sam Badry with Credit Suisse. Your line is now open.
spk02: Great. Thank you. I was hoping you could elaborate on ARPA contribution. I know you guys put, you know, a couple of sentences or a sentence in your press release. Can you just walk us through contribution from explicitly ARPA that you guys are estimating?
spk03: Hey Sam, it's Jack. First of all, I want to, we've said it before, but it's important to first of all point out that ARPA will be a multi-year phenomenon. So our team is actually, when we look at our pipeline, which is our sales funnel, we've actually seen a three-time increase over this period last year. So that's great. And a lot of that is really directed at the $350 billion in state and local, which really We've never had a problem as it relates to we're in need to have business, but what it really does is it draws clarity to how those deals get funded. And so we'll be in that for the next two and a half, three years. The second area where it's been very helpful is with our fixed video security and access control business, particularly around the education vertical where people are really trying to bring kids back to school, trying to make sure those places are safe, actually investing in things like concealed weapons technology with our evolved partnership as well. So we think the money that's pointed, which is $170 billion there, will benefit us over the course of the next three years as well.
spk02: Got it. And then just as a follow-up, maybe for you, Jack, again, any update on body-worn camera or fixed cameras that go on to the vehicles, like first responder vehicles? Can you give us an update on that and growth rates or any kind of comments on market share? Sure.
spk03: Absolutely. So first of all, as it relates to body worn, I talked about last year from a market share context. Last year, we doubled our orders in 2021, doubled our orders in a market that certainly didn't double. So we felt like we took share. As it relates to Q1 2022, our orders were up double digit. And I think most importantly, they were up double digit against a comp whereby last year we grew 65% in orders in Q2. And I think the only thing I'd add is we announced our as-a-service offer last year, and we've actually seen acceleration in customers' willingness to choose the cloud there. So we've said before we think that the market wants an alternative. We've got good relationships. Internationally in North America, our team continues to fight for their fair share and then some.
spk07: Just to add to that, we launched the M500 last year. It started shipping last year. a few months ago, a little bit earlier this year. The M500 we consider to be a significant leap up from our prior generation, the 4RE. And it builds upon a lot of the goodness that the 4RE had and 4RE from the WatchGuard legacy really has evolved with a lot of customer feedback. Critically for the M500, we have added some significant new AI capabilities. This is a platform that's really meant to deliver AI capabilities At launch, we launched it with two capabilities, effectively officer and passenger safety, but in addition, ALPR as well. And the ALPR stream actually contributes to the other sets of ALPR cameras we have in our portfolio. These feed into one of the largest, the industry's largest license plate databases that we have. Right now, we're exceeding 50 billion plate reads. And to give you an idea of the rate at which it gets refreshed, In Q1 of this year, we accounted for about 2.4 billion plate reads. And to give you an understanding of the frequency at which we're growing here, compared to the previous year, we doubled the plate reads. So overall, from a mobile video standpoint and an ALPR standpoint, we're doing fantastic.
spk05: Thank you. Thank you, Sam.
spk09: The next question is from the line of Ben Bolin with Cleveland Research. Your line is now open.
spk16: Thanks for taking the question. Good afternoon, everyone. The first question, I was hoping you could share any thoughts around customer priorities with respect to command center software and refresh and just talk to any execution you're seeing, how you think you're doing, how it's developing, kind of where it's going. And then I had a follow-up for Greg.
spk07: Sure. So the first point is that we are growing faster in the market. We're taking market share. Over half of our orders last quarter in Q1 were suite orders. Effectively, we either added on to existing bundles or customers bought more than one. And Jason mentioned two of our large opportunities in his bit. The LA Unified School District, they bought our CAD and record solution. But not only are we seeing synergies now with our software suite, but one of the key reasons to buy there was location data integration from our LMR side as well. And that had a profound impact in that opportunity. The City of Phoenix opportunity that Jason mentioned was driven by the national incident-based reporting criteria that the city needed to comply with. And that, along with the fact that we're now integrating with the AWARE solution for real-time situational awareness, that added a lot of synergy to that opportunity as well. We had our summit in April, and the summit was the largest software summit we have ever had in Motorola history. 1,600 attendees, over 300 classes and user group sessions. We had representation across all user types going from call to case closure. There's some important themes that we hit there. The first was the fortification theme, and really what resonated there was cybersecurity. We talked about the Public Safety Threat Alliance that we launched quite recently. And as a consequence of us talking about the Public Safety Threat Alliance, within the first two weeks of the creation of it, we've had over 50 members sign up to be part of that, and we expect that to rapidly increase. We also talked extensively about our innovations in user experience, given the user that were represented there. As an example, some of the AI capabilities that we talked about there really resonated with our customers. Smart transcription is something that we have talked about previously, but smart transcription has become more than just a speech to text transcription, but it really has become an application platform for us that we have built alongside our customers. So not only is transcription a second pair of years that makes sure that the call taker doesn't miss anything, we have now been able to add capabilities where smart transcription allows the call taker to benefit from the experience of other callers who have responded to similar sorts of events. So to be able to search for similar calls that others have responded to and for them to be better informed in responding to new types of events. So smart transcription has actually become an experience base for existing customers. On top of that, based upon customer feedback, we've added capabilities for supervisors to know when to support a call taker during a call as well. And lastly, we're also extending this to now recognizing when call takers are under stress. Smart transcription as a capability has really expanded our capacity to add applications for our Command Central software suite. And the last part that I'll mention here is that mobile has become a significant part of what we have talked about as well. We've invested heavily in mobile CC Responder. Command Central Responder has now both an iOS and an Android instance supporting our on-prem and our cloud installs, hybrid being a key priority there. And with our customer in Western Australia, we recently launched a CarPlay application that was done in collaboration with Apple and the Western Australia Police. And this is the very first public safety application to be launched for CarPlay. All of this, by the way, very much consistent with our hybrid strategy, and we're seeing a fair amount of traction there.
spk16: That's great. Thanks for all that color. The follow-up for you, Greg. When you step back and kind of look at the world and, you know, clearly we're in a surplus demand environment. And at some point, you know, supply starts to catch up. But I'm interested in how you think about monitoring the inbound orders and ensuring that, you know, customers aren't running out there and placing a lot of orders, maybe with multiple vendors, perhaps ordering more than they need and just kind of taking what comes first. How do you think about that? Obviously, I think it's more PCR related, but just curious any thoughts you have there.
spk04: And that's it for me. Thank you. Ben, I was just going to say the last part that you said. I think it is more PCR related. I think the way we do that is I think Malloy and John Zadar during this time work really closely with the channel partners, particularly in North America, on prioritization, on active conversations, on transparency, on what they really need versus what they may think they want to try to eliminate any kind of artificial forecasting. So I think it's a reflection of the relationships we have with the channel partners. And I have to tip my hat to John Zadar, who runs that organization under Malloy. I think the way you sort through that is the efficacy and the authenticity, the conversations with the partners during these tough times. And I think Malloy and his team are doing that.
spk03: Correct. The only thing I'd add to that is, and you're right, the PCR channel, by the way, it's also important to note that a lot of our partners carry one brand, so they're not putting orders in against the second one. The second thing is government customers don't have the wherewithal, meaning they have a limited budget. They're not able to cut multiple purchase orders against the same budget line item. So we wouldn't have any inflation and orders on there. There's an end customer within for instance cook county if it's the highway department or the sheriff's department they've got line item 32 is one million dollars they can't spend that twice so we know that there's clarity of funding there thanks thanks ben thank you ben the next question is from bahad najam will loot capital your line is now open
spk06: Thank you for taking my question. I had two clarifications first before I could get to my question. What was the FX headwind in the quarter? And also, you highlighted about $170 million in FX headwinds to the revenue, but I'm assuming there is a benefit to the OPEX line. So can you maybe tell us what benefit you're seeing on the OPEX from the FX?
spk13: So the answer to the first question is within the quarter was $18 million at FX. And on FX in general, we have some offsets within OPEX to mitigate the effects of the gross margin dollars lost. So there's some relief, if you will, on OPEX. But in total, the $110 million degradation from last call to this call comes with an OE impact that we are mitigating through price, through cost targets, and through allocation to higher mix.
spk06: Got it. I wanted to ask you on the component shortages. Maybe if you can double click on that and maybe provide us a color of what has improved, what has not improved, what's gotten worse. Maybe you can give us a bit of clarity what your line of sight is. You're clearly thinking that things will improve, but can you just give us a color on what portfolio is getting most impacted by component shortages?
spk04: Yeah, Fahad, I would say as it relates to semiconductor constraints, because that's really what we're referring to, I don't think we see it improving. I think we see it as a constant challenge throughout the remainder of 2022. What improved in Q1 was successfully navigating and negotiating and getting some increased allocation on some key parts with some key suppliers that moved it from Q2 into Q1 that allowed us to overperform the way we did top and bottom in Q1. I would say the semiconductor constraint environment remains unchanged, i.e. still challenging. We think it'll be through the remainder of the year. It is primarily around land mobile radio, but quite frankly, video security is not immune completely either, but we are managing those accordingly.
spk06: Within the LMR portfolio, are you seeing a more adverse impact on your higher margin PCR and LMR for APEX Next portfolio? It's kind of what? within your LMR portfolio being more adversely impacted or is it all universal?
spk04: Excuse me. I think the part of LMR that's the most challenged is PCR because we have a lot of common semiconductor parts that go into all types of radios. So we are working closely with customers around favorable mix, in particular North America, and oftentimes higher tier devices that allow us to ship those and fulfill those orders quicker than others. So the main part of the LMR portfolio I think that feels it the most acutely is probably PCR.
spk13: The only thing I'd add on the high tier and Apex, Apex Next is the complexity of those products and the joint engineering we do and the supply lines we have for semiconductors are unique to those products and we're doing a good job in getting the security of that supply line. So there are some commonalities, but also some uniqueness and our key suppliers in public safety LMR are doing a good job of getting us what we need.
spk12: I appreciate the answer. Thank you.
spk04: Thank you, Fahad.
spk09: Thank you, Fahad. The next question is from the line of Louis DiPalmo with William Blair. Your line is now open.
spk15: Greg, Jason, Jack, and Mahesh, good afternoon from sunny Chicago.
spk04: Louis, how you doing? Finally sunny.
spk15: Doing great. Thank you for taking my question. The William Blair team heard very positive commentary about open path solutions at the commercial real estate tech conference in San Diego. So I was wondering, can you discuss your growth strategy for access control in general? And also, I wanted to note that during the quarter, it seemed that Stanley sold its access technologies division for $900 million. And related to your strategy, do you expect to be as active with access control acquisitions as you have been with video acquisitions? Thanks.
spk03: Okay, Louie, I'll start, and Mahesh may want to color in some lines. I think first of all, as it relates to fixed video security and access control, we've taken a premise and a look at the market to say we want to make sure we meet our customers for where they are. So it started with Avigilon, which is an on-prem end-to-end solution. We've invested in Avigilon cloud services, but they had a legacy access control business as well. Actually, that business was actually the highest growth within the Avigilon portfolio at one point in time. But we really saw a move to cloud and mobility, particularly as people want smartphones capability to access a building instead of an old key card. And I would also tell you that OpenPath has outkicked its business case due to the fact that there's a shortage on card readers right now, like a lot of things in the hardware. So that's really accelerated the growth into the cloud for OpenPath. So I think you will hear a lot of good things. The other piece with OpenPath, as I said, is it's cloud native, which is different to the most. So we think we've got a pretty good strategy as it relates to both in terms of a buyer wants a cloud solution or OpenPath. I mean, not the cloud solution or an on-prem solution. Mahesh, anything you want to add to that?
spk07: Yeah, I think the OpenPath team launched the video intercom reader as well. And that sort of is a signal in terms of the convergence between video and access control more broadly. If you look at the architecture of OpenPath, cloud-native with endpoints on-prem, like readers, but also the ability to tackle existing readers, support a migration from on-prem to cloud. AVA is a very similar model as well, where it can be either entirely cloud-native or support a mix in between as well. The combination of AVA and OpenPath gives us the opportunity to converge many of the security and access control use cases and expand that ecosystem. So we see a strong solution there that's end-to-end for security needs.
spk15: Great. That's perfect. That's it for me. Thanks, everyone.
spk09: Thanks, Louis. Thank you, Louis. The next question is from the line of Jim Suva with Citigroup. Your line is now open.
spk11: Thank you. A question for Greg, Greg, on your prepared comments, you mentioned improved funding. Is that coming from the stimulus plans or from property taxes? And the reason why I ask is, you know, a lot of property taxes, or at least where I am here in Silicon Valley, California get reassessed each year. So people are kind of bracing for a big property tax inflow, maybe in six or nine months from our big property tax hit in six or 12 months from now. So I would assume that a lot of your budgets are more to stimulus or maybe travel and tourism improving as opposed to real estate property taxes. And if so, does that mean that there's still kind of a second round of improved funding that's coming in?
spk03: Hey, Jim, it's Jack. Maybe I'll take that one. So we look at, if you remember, there's really three primary budgets excluding federal stimulus. And those are operating expense budgets that are annualized. So those things pay for things like maintenance, replacement of radios, those kind of things. That's the first piece of it. The second of which is actually 911 funding. So a lot of what a lot of the portfolio or command center software budgets, those get set and those monies are allocated in a different way. So it's a different funding stream. The third, as you said, are real estate and property taxes. There's more of an ebb and flow to those things. And quite frankly, historically, We don't see a big uptick in those things because public safety need to have not a nice to have those are prioritized an annual basis and it's really capital or operating expense and it's 911. Now what's really benefited us as I pointed out earlier and you heard Greg and his prepared remarks is the 350 billion for state and local and 170 billion directed at schools. Those are new funding that's created new opportunities in all aspects of our portfolio.
spk13: In terms of state and local budget cycles, and I'll remind everyone, we have thousands of customers in North America. A common changeover in year is around July 1. So they will look at available funds as well as stimulus and set their priorities. So we'll see what those budgets look like. But all indications are with the backstop of funding, that'll continue.
spk03: To get real technical, there's also splot taxes, which are specialized purchase things. And they do special taxes or raise money for countywide systems as well. That's the only kind of one off.
spk11: Great. Thank you so much for the details and clarifications. Congratulations.
spk09: Jim. Thank you, Jim. This concludes our question and answer session. I will now turn the floor over to Mr. Greg Brown, chairman and chief executive officer for any additional comments or closing remarks.
spk04: Yeah, I just want to close. Thank you for that opportunity. I want to close by thanking all of the Motorola Solutions people around the world for their commitment, resolve, perseverance in what was a strong Q1. Despite the fluid and dynamic environment, you know, demand, it just remains exceptionally strong. The customer funding environment remains robust. We continue to make investments in software and video. And as Jason and others outlined this call, we continue to take action to offset higher costs. I would just say this. Macroeconomic turbulence and uncertainty presents opportunity. And we will continue to deploy capital against the backdrop of those opportunities that present themselves. Thank you for joining us. We look forward to talking to you again in a few months. And again, to all the Motorola people, thank you, thank you, thank you.
spk05: Much appreciated.
spk09: Ladies and gentlemen, this does conclude today's teleconference. A replay of this call will be available over the internet in approximately two hours. The website address is www.motorolasolutions.com slash investor. We thank you for your participation and ask you please disconnect your lines at this time.
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