Chris Kutsor - Vice President of Investor Relations Gregory Brown - Chairman and CEO Gino Bonanotte - Executive Vice President and CFO Jack Molloy - EVP, Worldwide Sales and Service.

George Notter - Jefferies Timothy Long - BMO Capital Markets Vijay Bhagavath - Deutsche Bank Keith Housum - Northcoast Research Stanley Kovler - Citi Research Andrew DeGasperi - Macquarie Paul Silverstein - Cowen and company Ben Bollin - Cleveland Research George Notter - Jeffries Keith Housum - Northcoast Research.

Good afternoon, and thank you for holding. Welcome to the Motorola Solutions' Fourth Quarter 2017 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 currently posted on the Motorola Solutions' Investor Relations website.

In addition, a replay of this call will be available approximately three hours after the conclusion of this call over the Internet. The website address is www.motorolasolutions.com/investor. At this time, all participants have been placed in a listen-only mode and the line will be opened for your questions following the presentation.

I would now like to introduce Mr. Chris Kutsor, Vice President of Investor Relations. Mr. Kutsor, you may begin your conference..

Thank you and good afternoon. Welcome to our 2017 fourth quarter and full year earnings call. With me today are Greg Brown, Chairman and CEO; Gino Bonanotte, Executive Vice President and CFO; Bruce Brda, Executive Vice President, Products and Solutions; and Jack Molloy, Executive Vice President, Worldwide Sales and Service.

Greg and Gino will review our results along with commentary, and Bruce and Jack will join for Q&A portion of the call. 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 2016 annual reports on Form 10-K 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'll now turn it over to Greg..

Thanks, Chris. Good afternoon, and thanks for joining us today. I'd like to share a few thoughts about the overall business before Gino takes us to the result and the outlook. First Q4 was outstanding quarter, capping a very strong year.

We grew Q4 revenue 4% driving higher earnings and cash flow on a continued strength of our Land Mobile Radio solutions lead by North America. We see continued demand across both our government and commercial customers around the world reflected in our recent results and our record backlog.

Second, 2017 was a record year for sale operating earnings, cash flow and backlog, demonstrating the earnings power of our Land Mobile Radio platforms. In addition to growing the full year revenue 6% with growth in every region, we grew operating earnings 9% through EPS 11% and we grew operating cash flow 16%.

Finally, I'm very pleased with our competitive position moving forward, I expect our LMR platform business to provide continued growth while also driving additional manage services expansion and further differentiating our command center software strategy.

So now I'd like to turn the call over to Gino to provide additional details on Q4 results and outlook before returning to provide some final thoughts..

Thank you, Greg. Q4 results include revenue of $2 billion, up 4% from last year, and organic revenue up 2%. GAAP operating earnings were $511 million, up $108 million from last year, non-GAAP operating earnings were $576 million, up $35 million or 6% from the year ago quarter.

And operating margins were 29.4% of sales, up 70 basis points from last year. GAAP earnings per share was a loss of $3.56, up compared to earnings of the $43 in the year ago quarter. The loss reflects one-time charges of $874 million related to recent U.S. tax reform.

The charges are primarily two items $471 million related to the valuation allowance and foreign tax credits and 366 million related to the re-measurement of U.S. differed tax assets at a lower rate. Non-GAAP EPS was $2.10, up 3% from last year. Ending backlog was $9.6 billion, up $1.2 billion from last year.

Product segment backlog was up $382 million or 25% and Services segment backlog was up $860 million or 12%. For the full year revenue grew 6% with growth in every region and organic revenue grew 3%. Product segment revenue grew 3%, led by higher North America system sales and growth in commercial products.

Services revenue grew 9% with managed and support services growth in every region. Operating earnings, were $1.6 billion, up $125 million or 9% compared to 2016. Earnings per share grew 11% to $5.46. And operating cash flow was $1.3 billion up $181 million from last year.

Moving to product segment results for Q4, Q4 product sales were $1.23 billion up 1% versus the prior year, driven by growth in North America LMR systems and global commercial products. Q4 product operating income, was $425 million or 34.5% of sales up 130 basis points from last year driven by higher sales and lower OpEx.

Product backlog ended the quarter, at 1.9 billion up $382 million or 25% from last year. This is the 13th consecutive quarter of year-over-year growth. Sequentially backlog was up $140 million or 8%. The year-over-year and sequential backlog growth was driven by North America, and EMEA.

Q4 services revenue was $724 million up 10% from last year with growth in every region. Managed and support services grew 17% inclusive of $32 million from acquisitions.

Services operating income was $151 million or 20.9% of revenue, up 50 basis points from last year on higher sales and mixed to managed to support services, partially offset by OpEx from acquisitions. Services backlog ended at $7.7 billion, up $860 million from last year inclusive of airway runoff.

Sequentially services backlog is up $567 million or 8% and continued strong demand in North America, EMEA and Asia-Pacific. Total OpEx in Q4 was $397 million down $11 million or 3% from the year ago quarter, inclusive of $15 million from acquisition.

For the full year operating expenses were $1.49 billion inclusive of $45 million of OpEx from acquisitions. Other income and expense, in Q4 was $46 million compared to $41 million in the year ago quarter. In Q4 effective tax rate was 32.8% compared to 30.7% in the year ago quarter, resulting in $11 million of higher tax expense.

The full year 2017 effective tax rate was 31%. Q4 operating cash flow, was $761 million an increase of $248 million from last year, driven by higher operating earnings, as well as improved working capital. Free cash flow was $740 million up $287 million.

We ended Q4 with $1.3 billion in cash, and during the quarter we repurchased $125 million of stock at an average price of $91.95 and paid dividends of $76 million.

Capital allocation in 2017 was $1.3 billion this included $298 million of acquisitions, $370 million of dividends, $227 million of CapEx and $483 million of share repurchases at an average price of $85.32. In total our share repurchase program has retired 53% of our shares at an average cost of $58.59.

Finally, in Q1 of 2018, we're planning a debt funded $500 million pension contribution that takes advantage of the recent tax legislation. This funding pushes and further cash contributions to our U.S.

pension plan until minimally 2024 likely beyond, in addition this plant contribution grow the 2017 cash deduction at 35% versus 21% providing an NPV of approximately $60 million. Turning to our outlook, we expect Q1 revenue growth of approximately 7% and organic growth 5% including approximately $40 million from currency tailwinds.

Non-GAAP EPS is expected to be between $0.83 and $0.88 this is in current exchanges rates and an average diluted share count of approximately $169 million.

For the full year we expect revenue growth of approximately 5% with organic growth of approximately 4.5%, with currency tailwinds of approximately $130 million, non-GAAP EPS is expected to be in the range of $6.50 to $6.65. The outlook does not including the pending Airbus PlantCML or Avigilon acquisitions.

Airbus PlantCML is expected to close in Q1 and Avigilon is expected to close in Q2. Full-year operating expenses are expected to be down again by approximately $20 million, from 2917 inclusive of $20 million of OpEx from completed acquisitions and inclusive of $30 million in higher OpEx from currency headwinds.

We expect the full-year 2018 effective tax rate to be approximately 25% and our cash tax rate to remain at approximately 15% for 2018 and 2019. 2018 operating cash flow is expected to be approximately $1.4 billion excluding the $500 million debt funded pension contribution previously mentioned.

Looking at regional results; Americas grew 60% in Q4 and 70% for the full year. This broad base growth was driven by systems multiyear management support services and commercial products.

Backlog is up $915 million from last year with double-digit growth in both products and services year-over-year as customers continue to invest in there LMR solutions. The EMEA declined 2% in Q4 on the completion of a large LTE implementation in the prior year.

For 2017 EMEA was up 5% and growth in products and services and backlog is up $131 million versus last year. Asia Pac grew 1% for the quarter and 1% for the year driven by growth in both products and services. Backlog is up about $195 million, primarily on services growth. I'd also like to share some brief segment highlights.

First, in our products segments during Q4, we were awarded a $290 million contract for an LMR system in a Middle Eastern country that recently deployed a private public safety LTE system. This significant investment in LMR is the latest example of customers further validating that LTE and LMR are complementary technologies.

We also won several large LMR deals in North America during the quarter, including a $76 million P25 order for the city of Dallas, a $53 million P25 order for the city of Los Angeles, and a $39 million P25 order for the city of Toronto.

In our services segment, we continue to see demand by our customers for multi-year support contracts for their LMR systems. A few notable Q4 awards include a $197 million seven-year managed services contract extension for the Melbourne Metropolitan Radio Network in Australia.

A $40 million five-year managed services contract in Victoria, Australia, and an $18 million seven-year managed services contract with Dow Chemical. I'd also like to mention a few full year operating highlights. During 2017, we launched 85 new products while reducing our device use by 55%.

We also launched new or expanded services offerings across devices, commercial infrastructure and LTE. We completed the acquisition of Kodiak Networks, adding a carrier integrated cellular push to talk solution for mobile operators around the world.

We signed the FirstNet partnership agreement with AT&T to provide software applications, devices, and services for public safety customers on the first network. And finally, we completed the acquisition of Interexport a provider of managed services for communication systems to public safety and commercial users in Chile.

I'll now like to turn the call back over to Greg..

Thanks Gino and let me just close with a few thoughts. First, I'm very, very proud of the 2017 results we posted as a direct result of our employees' dedication and focus and efforts in delivering unmatched technology and unmatched service to our global customers, many of whom put their lives on the line every single day.

Second, I'm especially pleased with our momentum moving forward. Our record backlog reflects the continued strong demand for LMR led by North America, and we're making continued progress in growing our software and services business as well.

And finally, we announced today a definitive agreement to acquire Avigilon a leader in advanced video surveillance and analytics, adding Avigilon end to end video capabilities and analytics for our commercial and public safety customers, provides not only another key workflow stream to our solutions offering, but also significantly expands the total addressable market that we serve today, paving the way for additional future growth.

The management team here remains acutely focused on continuing to grow this firm profitably and for the long-term. And now I'll turn it back over to Chris. .

Thanks 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 others as possible.

Operator, would you please remind our callers how to ask a question?.

The floor is now open for questions. [Operator Instructions] Our first question is coming from George Notter with Jefferies. Please go ahead. .

I guess I was curious about the bigger spending environment around public safety LMR. I guess I'm thinking more about the United States, it seems like state and local tax receipt has to be very, very strong I assume that the content winds for your business.

I want to ask about federal tax receipts also, we got tax reform, I guess I am imagining the tax receipt to be lower going forward. But can you just talk about the environment and how exchanging with tax reform for your LMR business. Thanks. .

Hi George its Jack, so I guess first of all from a state and local perspective, you're spot on. I think what you’re seeing are reference the fact that North America grew in 2015, 2016 and 2017 both in terms of revenue and backlog. I think that’s testament to the strength of the demand drivers in public safety and state local.

From a federal prospective, similar story, we had a great year in 2016 and frankly we beat that slightly in 2017, the demand drivers right now in the federal government are really too fold.

We have a defense team, we're seeing continued spending in the defense around military base communications that’s been strong story and then we look at domestically here from a law enforcement and border, petrol prospective again the demand and lot of what the trump administration doing in terms of planning, those things have looked to be beneficial for us as well, we enter 2018 frankly in federal in a better backlog position that we did in 2017.

.

Our next question comes from Timothy Long with BMO Capital Markets. Please go ahead. .

First on, Greg if you could touch on FirstNet, I think last time you were talking 40 million to 60 million of revenues this year, obviously those states opted in and AT&T seems to be talking pretty aggressively about deployment.

So just talk to us a little bit about what are the changes over the last few months have meant as far as your outlook for that business for the year.

And then secondly may be for Gino, just looking at the full year guidance seems to imply gross margin down a little bit this year, could you just talk a little bit about the gross margin outlook and what might be potentially pushing that lower. Thank you. .

So, thanks for the questions, in terms of FirstNet, our role hasn’t change, we're still going to provide machine critical software applications and LMR and operability and services but to your point right now the starter pistol's been fired and it's all about subscriber load, so we're pleased that all 56 states and territories opted in but now its game on.

Our current planning actually for this year on FirstNet revenues are about 20 million to 40 million, I wouldn’t over interpretive one way or the other fact I hope is above but just from a prudent planning standpoint, I wanted to set those goal posts as more reflective of where we're today, we just don’t know what we don’t know.

The partnership with AT&T continues to work well and go well, but that's our expectation from a FirstNet standpoint at this point in time. .

Hey Kevin its Gino.

On gross margins, gross margins are expectation of 2018, gross margins are flat comparable to 2017 and in 2017 we had comparable gross margins in both the product and services segment versus the prior year and the margin reduction for MSI in total was simply a result of the mix to services and we talked about the gross margin profile in services, which includes systems integration to be slightly less than product.

So, we see 2018 margins comparable to 2017. .

Our next question comes from Vijay Bhagavath with Deutsche Bank. Please go ahead. .

Hi Greg, Gino.

So, my question is around you know Greg, when you talk to your top customers and your sales teams, what are they telling you in terms of spending intentions that unified state local agencies for this year versus last year and then what priorities are your customers assigning to software command control versus devices and networks and then quickly, you know, these events this year, like the Olympics, the World Cup soccer, would these be incremental opportunities for you to public safety? Thanks.

Just on the third point, I think that the opportunities and the events that you outlined are incorporated already into our guidance for fiscal 2018.

One of the things we referenced last time that with the natural disasters, the hurricanes, the fires in California, I also think continually reinforce and remind the absolute always on reliable criticality without substitution of land mobile radio systems.

But you know, Jack mentioned a little bit about state and local demand and federal demand just a few minutes ago and I think we see it continue to be strong. And Bruce on the command center, maybe you want to mention a few things on that front. .

Sure, thanks Vijay. If you think about the command center software applications, 911 cad, records, dispatch and then analytics around it. We are currently, we built up that portfolio through acquisition or organically and we're really going through the hard work now of integrating that into a single suite.

We have seen very good progress on cross sell activities. I'll, I'll note between Spillman and ECW as an example, they serve the same size, tier two, tier three marketplace. We've seen great progress on cross sell and we're beginning to see early suite sale, accomplishments as well.

So, we're really pleased with the progress that we're making more work to do, but so far, it's really working well. .

Thank you. Our next question comes from Keith Housum with Northcoast Research. Please go ahead..

Good afternoon guys, thanks for taking my questions. Mind if I drill down more into the acquisition you guys announced today with Avigilon, in terms of like the current customer overlap that you guys had together and it is just taking you to new markets and what do you guys need to make this acquisition versus you know, your current technology.

So, can you just provide some more color on those lines, that would be great..

Sure Keith. So, taking a step back, the strategic rationale on this is and we're pretty enthusiastic is. First of all, video surveillance and analytics is growing, it's growing rapidly. Second, the total addressable market is in well in excess of 10 or 11 billion and then some.

And third, video continues to be a growing proponent, a growing requirement of public safety customers and critical infrastructure customers that want a solution and would like Motorola to provide The thing that is especially attractive to me is this is not a commodity business, as you've seen the other actions that we've taken with the portfolio over time, I'm not interested in commodity businesses, I'm not interested in commodity margins, I like the market leader with an end to end platform orientation and we believe this end to end video surveillance, suites of analytic, video management and video storage is particularly strong.

Now we're as Gino said earlier its GPS neutral, and it's not included in our 2018 guidance but Avigilon is a public company on a Canadian Exchange and you can go back and look at their revenue growth and the kind of execution they had.

The other thing I would say is there is a lot of point solutions in this business, we’re in end to end platform choice, and we believe we have this distinct advantage where we will have when we close this acquisition around faster deployment than comparative products. And the things especially I love is the channel synergies.

So this can fit very neatly and nicely and we can take this portfolio into global public safety because they have been enterprise centric today largely, we can take it into U.S. military, we can take it into U.S.

federal, we can take it into our large direct sales force that serve enterprises in the commercial markets, so it's got very attractive channel synergies and lastly quite frankly much like mission critical communications, I think there is a growing aversion to having Chinese provider to critical video surveillance and security and I think that trend will lend itself well to us as well.

.

Our next question comes from Stanley Kovler with Citi Research. Please go ahead. .

Just wanted to ask you guys about just the trends in the backlog and how we should think about conversions even adding a lot to the backlog recently, can you help us understand what the aging is then is and how that will hit the services line on the revenue side going forward, and then I have a follow up. .

Okay great Stanley this is Gino, so the backlog increased, let's first start with 2018 aging entering into 2018, we're better aged than we were a year ago 12 months ago, the duration I think you’re getting at to the duration of backlog.

The duration on the products backlog hasn’t changed, I think you can go back and track that duration to revenue and it's been consistent for the past several years.

On the services side the duration is a little bit longer as we continue to sign multi-year agreements, I referenced seven and five-year agreements in some cases, 15 years services agreement and the duration clearly of that backlog is a bit longer. .

And as a follow up I just wanted to ask you on the Avigilon acquisition, looking back at their margin structure especially the operating margins they have, much faster revenue growth but lower margins.

How should we think about folding that business into your model? Is the revenue growing essentially offsetting margin from gross profit dollar contribution standpoint or their OpEx synergies as well? Thank you. .

So, I think it's too early to comment on, on how to think about it from a model perspective. We will update you after the close. By the way, we expect to run this business self-contained as a separate subsidiary inside of Motorola solutions.

So, we're very pleased with the structure of the organization, the talent quality, the patent portfolio, the distribution channels and we want to be very mindful that I think appropriately managed going forward this will continue on a very successful track. The data demonstrated of execution.

I think this is about building an end to end platform, adding another leg to the school for public safety, over existing distribution channels and brand by Motorola Solutions and giving them a more skill to accelerate their growth. .

Got It. Thank you. That's helpful. .

This is Gino. I'll just reiterate something Greg said a few minutes ago. The expectation of Avigilon from an NPS perspective in 2018 would be a push. It is a push as well for the PlantCML business, we expect both Plant and Avigilon to be accretive 2019 and beyond. .

Our next question comes from Andrew DeGasperi with Macquarie. Please go ahead. .

Thank you. First Greg, maybe, could you comment on ESN, we've been hearing there's some, additional delays in building out in rural areas.

And then Gino, maybe Avigilon quickly I noticed that the breakdown of revenues geographically seems to be showing a slowdown in the US, but growing very fast in Europe, in Asia, do you see the opportunity essentially a turnaround in the US business while also benefiting from those other tailwinds? Thanks..

I don't really have any current update at this point in time. I'll just simply say we've worked really closely with the UK Home Office, particularly in Q4 as they go through some of their planning and regeneration of timeline. I think that quite frankly, I thought the relationship has strengthened in the last several months.

I was out in London, either late November and December, we've had dedicated teams working very closely together and I think it'd be more appropriate for them, so let them announce any kind of changes to their schedule. What I would tell you is that we are not planning on in our 2018 guidance any material revenue contribution from ESM..

And Andrew, this is Gino, on growth and we will clearly give you more details at the TAM and certainly after close, but the only thing I’d point you to is, their compounded annual growth rate of 37%. Greg mentioned the TAM 37% from 2012 through 2016. Greg mentioned the TAM, you can see the revenue number.

So aside from just ups and downs, we absolutely see a continued growth in the Americas and I think in conjunction with our distribution organization, we see growth in revenue synergies, frankly in the rest of the world. We're very excited about the acquisition. .

Our next question comes from Paul Silverstein with Cowen and Company. Please go ahead. .

Thanks very much, I appreciate it. Greg if you can you remind us prior to the 100 plus million a quarter community and you're going to get some Avigilon, I trust video today is a fairly small -, but surveillance and analytics in total, what is the organic revenue to that. .

I think the proxy and what we said from a software perspective, command prospective, what we said publicly is approximately $300 million, now I wouldn’t disaggregated further to video that is the total number for the software business, but that’s currently where we are from a software prospective at least in the command center.

We have really the only camera business we have right now is the body-worn business which is relatively small percentage of our revenue. .

I don’t know if this where to look but from a cursory look at the numbers, it looks like Avigilon doesn’t break out hardwares and software they do one number. Any insight you can share with us in terms of that revenue stream, you're going to be bringing on how much of that its software versus the body cams. .

I think Paul, we really for that, we will get more detail at TAM and when we close and we will just aggregate it a bit more. .

But one last question if I may, it seems to be going so well, in terms of the greatest variables levers for better or worse as you look at '18 and beyond, I trust it's on the revenue line. You have done such a good job with OpEx, and it sounds like gross margin there is not a lot of room either way.

If in fact it is revenue, what would be the variables that could drive significant upside or downside in the most prominent ones. .

I would answer it this way, I mean I think we're pretty prudent to begin within in the way we guide the firm in Q1 in an annualized basis. You can never can tell of course but I think we pretty effectively risk adjusted our thinking around Q1 and the full year, both from a revenue standpoint and an EPS standpoint.

I'm particularly comforted by the performance of the record backlog and the composition of the aged backlog that Gino referenced being higher going into '18 then '17. The environment is strong right now, geopolitically, we grew in every region and it looks like we have the opportunity to grow in every region again.

And we're anchored by North America which continually performs very strongly. Second, I think I really like the performance in the low end LMR business what we also refer to as the commercial markets group. I think Molloy's team and Brda product team have performed exceptionally well there.

And were executing quite well, I mean we made changes on people, we've moved more front facing bag carrying photo carrying people to the front lines, we continue to prudently manage OpEx and I think do it a better job globally around our channel management.

Now that’s not meant to be commercial, as there is lot more work to do, but I think the foundation of growth, the durability to earnings, the visibility we have in the business, positions us quite well for 2018. .

Our next question comes from Ben Bollin with Cleveland Research. Please go ahead. .

First one, there is been some references to the better positioning of the age backlog.

I know that you will give percentage of products and service backlog you expect to recognize; can you give us that percentage now? And then my follow on, I know the company, it sounds like you've implemented a number of dedicated sales initiatives in the commercial end market pursuing specific verticals.

Could you take us through a little bit of what you've done and if you feel like there's more opportunity where you could do that in other verticals or if you're seeing additional verticals come online beyond oil and gas and heavy industry, things like that? Thank you. .

And I’ll take, this is Jack. I'll take the second half of the question related to commercial markets. I'll answer it by saying, when I previously led the North American business, I came in in 2015 and we had all of $7 million in total backlog in that market.

We had a small team, I believe it was less than 10 people, they were appointed just really at oil and gas market, which as you know, is highly cyclical. Subsequent to that, we have built a team that's gone after the utility market, which has been our highest performing market in commercial last two years in North America.

A year ago, we scaled into transportation logistics and manufacturing and we've got a sizable team really and really, been really focused at the Fortune kind of 300 level.

We think that's we play most and we've also got an incredible force multiplier in terms of our channel and they have done an outstanding job in covering the small midsize business for us in North America. Now pivot to internationally we've just stood up a commercial markets team, enterprise selling team in the Europe in the Middle East as well.

Again, oil, a large manufacturing in the couriers, there is the target and so to your point, moving from just an oil and gas practice into really a multi, a manufacturing environment where really Bruce's portfolio scales quite well. So, I think, I feel pretty good about the coverage that we've built. And I do think Gino….

We're, we're really not in a position to disclose any elements of the, of the K right now, but I wouldn't suspect anything surprising in the K, as I said, we're in a better age backlog position and that extends to both a products and services. .

Thank you. We'll go back to George Notter with Jeffries. Please go ahead. .

Hey guys, thanks a lot so letting me follow up. I guess I want to ask about the managed services initiative, certainly its very interesting for you guys and that expands the TAM around your LMR business. I saw that it was up 17% this year.

Can you just talk about some of the moving parts inside that initiative, what are customers saying, what's receptivity look like, how does the pitch kind of work for them? Thanks A lot..

George, it's Jack. So, a good question, by the way, Kelly Mark leads our global managed and support service business. I think Kelly has done a great job.

So, here’s really, if there's really an inflection point in the market that we've seen, this exists, in the last, kind of call it five to six years, historically, a good deal of our customers maintains their own network and think about these are labor union employees, they come at a pretty significant cost to the employee base.

And it was really an analog world we supplied our own parts essentially supplied all the parts around systems.

The world through P25 is pivoted to really IT based networks, a lot of third party components which has driven the sophistication and frankly the complexity of the networks, which is opened the door for us because they're so they're quite sophisticated to maintain.

The other part of it is this whole thing about having 24-hour, 24/7 maintenance and more importantly potentially looking to move on to statewide network off just having regional control your network, which has really opened the door from managed services as well.

We’ve invested knocks around the world network operations centers and so really frankly it's been a long slog in terms of North America and it's been an organic story but around the world we've also gone out as Greg and Gino outlined and acquired operators as well but all in every region grows, every region from managing supports centered will not only grow but as we kind said before grow in the mid to high single digits.

.

And can you tell me what percentage of the services business that might account for now, just as a curiosity..

40% approximately 40% to 45%. .

Certainly, our final question comes from Keith Housum from Northcoast Research. Please go ahead. .

Just a little house keeping here, in terms of the share repurchase program that you guys have, obviously some cash news at the pension contribution and the Avigilon acquisition is there any thoughts in terms of what your share repurchase activity will be in FY'18. .

As we said, good question Keith. As now that we're kind normalized the balance sheet, the capital allocation framework is we suggest it would be 50% cash flow used for either share repurchase or M&A.

Given that we plan to close, PlantCML in Q1 and Avigilon sometime in Q2 we're using cash on hand as well as short-term debt to fund the Avigilon acquisitions, so as a result our plan on share repurchase is very little in 2018 probably about a 75 million this year and that’s just to cover dilution but the remaining capital will be deployed, the remaining cash will be deployed to close those acquisitions.

.

Great make sense, and then if I seek one more here, R&D popped up here in the fourth quarter but that going forward or is just little more opportunity to invest in R&D this quarter versus what you expect for '18. .

I wouldn’t interrupt at one thing or another really it's probably really more just opportunistic although overall from an OpEx standpoint as Gino mentioned earlier we expect to drive OpEx down even further in '18 and that’s inclusive of acquisitions that have been completed already which has 20 million OpEx that becomes with it and it includes the 30 million headwinds from foreign exchange.

So, we will continue to do what we need to do, surgically but impact fully around OpEx. .

George one point of correction, managed support services is a part of the overall composition services is not 45 its actually 65 or two third of that revenue. .

Thank you. I will now turn the floor back over to Mr. Chris Kutsor, Vice President of Investor Relations, for any additional or closing remarks..

Thank you. Let me just add a quick reminder of our upcoming financial analyst day February 27 in Chicago. Information about that can be found on our investor relations website. So, with that thank you and good night. .

Ladies and gentlemen, this does conclude today's teleconference. A replay of this call will be available over the Internet in approximately three hours. The website address is www.motorolasolutions.com/investor. We thank you for your participation and ask that you please disconnect your lines at this time..