First-Quarter Financial Highlights
- Net sales of $1,175 million; year-over-year decrease of
16.4%
- Net income of $115 million and net income per diluted share of
$2.23
- Non-GAAP diluted EPS decreased year-over-year to $2.84
- Adjusted EBITDA decreased year-over-year to $234 million
- On track with $120 million annualized net expense savings from
our Exit and Restructuring plans
Zebra Technologies Corporation (NASDAQ: ZBRA), an innovator at
the edge of the enterprise with solutions and partners that enable
businesses to gain a performance edge, today announced results for
the first quarter ended March 30, 2024.
“While our first quarter results continued to be impacted by
broad-based softness across our end markets, we realized
improvement in demand from the fourth quarter of 2023. Our teams
executed well, driving significant sequential improvement in
profitability, resulting from our cost restructuring actions and
improved gross margin.” said Bill Burns, Chief Executive Officer of
Zebra Technologies.
“Our increased 2024 outlook reflects a better-than-expected
start to the year with modest recovery in demand and progress on
our cost actions. We continue to be well positioned to extend our
lead in the industry with our innovative solutions and remain
focused on digitizing & automating our customers’ operations to
solve their biggest challenges.”
$ in millions, except per share
amounts
1Q24
1Q23
Change
Select reported measures:
Net sales
$
1,175
$
1,405
(16.4
%)
Gross profit
563
667
(15.6
%)
Gross margin
47.9
%
47.5
%
40 bps
Net income
115
150
(23.3
%)
Net income margin
9.8
%
10.7
%
(90) bps
Net income per diluted share
$
2.23
$
2.90
(23.1
%)
Select Non-GAAP measures:
Adjusted net sales
$
1,175
$
1,405
(16.4
%)
Organic net sales decline
(16.8
%)
Adjusted gross profit
565
668
(15.4
%)
Adjusted gross margin
48.1
%
47.5
%
60 bps
Adjusted EBITDA
234
301
(22.3
%)
Adjusted EBITDA margin
19.9
%
21.4
%
(150) bps
Non-GAAP net income
$
147
$
204
(27.9
%)
Non-GAAP diluted earnings per share
$
2.84
$
3.94
(27.9
%)
Net sales were $1,175 million in the first quarter of 2024
compared to $1,405 million in the prior year. Net sales in the
Enterprise Visibility & Mobility ("EVM") segment were $783
million in the first quarter of 2024 compared to $883 million in
the prior year. Asset Intelligence & Tracking ("AIT") segment
net sales were $392 million in the first quarter of 2024 compared
to $522 million in the prior year. Consolidated organic net sales
for the first quarter decreased 16.8% year-over-year, with a 11.8%
decrease in the EVM segment and 25.3% decrease in the AIT
segment.
First quarter 2024 gross profit was $563 million compared to
$667 million in the prior year. Gross margin increased to 47.9% for
the first quarter of 2024 compared to 47.5% in the prior year. The
increase was primarily due to lower premium supply chain costs and
improved software and service margins, partially offset by volume
deleveraging. Adjusted gross margin was 48.1% in the first quarter
of 2024 compared to 47.5% in the prior year.
Operating expenses decreased in the first quarter of 2024 to
$404 million from $442 million in the prior year, primarily due to
the impact of restructuring actions. Adjusted operating expenses
decreased in the first quarter of 2024 to $348 million from $384
million in the prior year.
Net income for the first quarter of 2024 was $115 million, or
$2.23 per diluted share, compared to net income of $150 million, or
$2.90 per diluted share, for the prior year. Non-GAAP net income
for the first quarter of 2024 decreased to $147 million, or $2.84
per diluted share, compared to $204 million, or $3.94 per diluted
share, for the prior year.
Adjusted EBITDA for the first quarter of 2024 was $234 million,
or 19.9% of adjusted net sales, compared to $301 million, or 21.4%
of adjusted net sales for the prior year primarily due to higher
operating expense as a percentage of revenue, partially offset by
higher gross margin.
Balance Sheet and Cash Flow
As of March 30, 2024, the Company had cash and cash equivalents
of $127 million and total debt of $2,093 million.
For the first three months of 2024, net cash provided by
operating activities was $125 million and the Company made capital
expenditures of $14 million, resulting in free cash flow of $111
million. The Company had net debt payments of $133 million.
Cost Initiatives
As previously announced, the Company is executing on its 2024
Productivity Plan and the Voluntary Retirement Plan to generate
cost efficiencies. Together, these Exit and Restructuring plans are
expected to generate approximately $120 million of net annualized
cost savings. After realizing approximately $50 million of
operating expense savings in 2023 and an incremental $25 million in
the first quarter of 2024, the Company continues to expect
approximately $60 million of incremental savings for the full year
2024.
The total charges associated with the Exit and Restructuring
plans are expected to be approximately $130 million. Total charges
of $120 million have been incurred through the first quarter of
2024, with the remaining charges expected to be substantially
complete by mid-2024.
Outlook
Second Quarter 2024
The Company expects second quarter 2024 net sales to decrease
between 1% and 5% compared to the prior year. Foreign currency
translation is expected to have an approximately 50 basis point
favorable impact.
Adjusted EBITDA margin for the second quarter of 2024 is
expected to be slightly above 19%. Non-GAAP diluted earnings per
share are expected to be in the range of $2.60 to $2.90.
Full Year 2024
The Company expects full year 2024 net sales growth between 1%
and 5% compared to the prior year. Foreign currency translation is
expected to have a negligible impact.
Adjusted EBITDA margin for the full year 2024 is expected to be
approximately 20%. Non-GAAP diluted earnings per share are expected
to be in the range of $11.25 to $12.25. This assumes an adjusted
effective tax rate of approximately 17%.
Free cash flow is expected to be at least $600 million and is
inclusive of our final $45 million settlement payment in the first
quarter.
The Company does not provide a reconciliation for non-GAAP
estimates on a forward-looking basis where it is unable to provide
a meaningful or accurate calculation or estimation of reconciling
items and the information is not available without unreasonable
effort. This is due to the inherent difficulty of forecasting the
timing or amount of the most directly comparable forward-looking
GAAP financial measure as discussed under the "Forward-Looking
Statements" caption below. This would include items that have not
yet occurred, are out of the Company’s control and/or cannot be
reasonably predicted, and that would impact diluted net earnings
per share. For the same reasons, the Company is unable to address
the probable significance of the unavailable information.
Forward-looking non-GAAP financial measures provided without the
most directly comparable GAAP financial measures may vary
materially from the corresponding GAAP financial measures.
Conference Call Notification
Investors are invited to listen to a live webcast of Zebra’s
conference call regarding the Company’s financial results. The
conference call will be held today at 7:30 a.m. Central Time (8:30
a.m. Eastern Time). To view the webcast, visit the investor
relations section of the Company’s website at
investors.zebra.com.
About Zebra
Zebra (NASDAQ: ZBRA) helps organizations monitor, anticipate,
and accelerate workflows by empowering their frontline and ensuring
that everyone and everything is visible, connected and fully
optimized. Our award-winning portfolio spans software to
innovations in robotics, machine vision, automation and digital
decisioning, all backed by a +50-year legacy in scanning,
track-and-trace and mobile computing solutions. With an ecosystem
of 10,000 partners across more than 100 countries, Zebra's
customers include over 80% of the Fortune 500. Newsweek recently
recognized Zebra as one of America's Most Loved Workplaces and
Greatest Workplaces for Diversity, and we are on Fast Company's
list of the Best Workplaces for Innovators. Learn more at
www.zebra.com or sign up for news alerts. Follow Zebra’s Your Edge
blog, LinkedIn, X and Facebook, and check out our Story Hub: Zebra
Perspectives.
Forward-Looking Statements
This press release contains forward-looking statements, as
defined by the Private Securities Litigation Reform Act of 1995,
including, without limitation, the statements regarding the
company’s outlook. Actual results may differ from those expressed
or implied in the company’s forward-looking statements. These
statements represent estimates only as of the date they were made.
Zebra undertakes no obligation, other than as may be required by
law, to publicly update or revise any forward-looking statements,
whether as a result of new information, future events, changed
circumstances or any other reason after the date of this
release.
These forward-looking statements are based on current
expectations, forecasts and assumptions and are subject to the
risks and uncertainties inherent in Zebra’s industry, market
conditions, general domestic and international economic conditions,
and other factors. These factors include customer acceptance of
Zebra’s offerings and competitors' offerings, and the potential
effects of emerging technologies and changes in customer
requirements. The effect of global market conditions, and the
availability of credit and capital markets volatility may have
adverse effects on Zebra, its suppliers and its customers. In
addition, natural disasters, man-made disasters, public health
issues (including pandemics), and cybersecurity incidents may have
negative effects on Zebra's business and results of operations.
Zebra's ability to purchase sufficient materials, parts, and
components, and ability to provide services, software and products
to meet customer demand could negatively impact Zebra's results of
operations and customer relationships. Profits and profitability
will be affected by Zebra’s ability to control manufacturing and
operating costs. Because of its debt, interest rates and financial
market conditions may also have an adverse impact on results.
Foreign exchange rates, customs duties and trade policies may have
an adverse effect on financial results because of the large
percentage of Zebra's international sales. The impacts of changes
in foreign and domestic governmental policies, regulations, or
laws, as well as the outcome of litigation or tax matters in which
Zebra may be involved are other factors that could adversely affect
Zebra's business and results of operations. The success of
integrating acquisitions could also adversely affect profitability,
reported results and the company’s competitive position in its
industry. These and other factors could have an adverse effect on
Zebra’s sales, gross profit margins and results of operations and
increase the volatility of Zebra's financial results. When used in
this release and documents referenced, the words “anticipate,”
“believe,” “outlook,” and “expect” and similar expressions, as they
relate to the company or its management, are intended to identify
such forward-looking statements, but are not the exclusive means of
identifying these statements. Descriptions of certain risks,
uncertainties and other factors that could adversely affect the
company’s future operations and results can be found in Zebra’s
filings with the Securities and Exchange Commission, including the
company’s most recent Form 10-K and Form 10-Q.
Use of Non-GAAP Financial Information
This press release contains certain Non-GAAP financial measures,
consisting of “adjusted net sales,” “adjusted gross profit,”
“adjusted gross margin,” “EBITDA,” “Adjusted EBITDA,” “Adjusted
EBITDA margin,” “Adjusted EBITDA % of adjusted net sales,”
“Non-GAAP net income,” “Non-GAAP earnings per share,” “Non-GAAP
diluted earnings per share,” “free cash flow,” “organic net sales,”
“organic net sales decline,” and “adjusted operating expenses.”
Management presents these measures to focus on the on-going
operations and believes it is useful to investors because they
enable them to perform meaningful comparisons of past and present
operating results. The company believes it is useful to present
non-GAAP financial measures, which exclude certain significant
items, as a means to understand the performance of its ongoing
operations and how management views the business. Please see the
“Reconciliation of GAAP to Non-GAAP Financial Measures” tables and
accompanying disclosures at the end of this press release for more
detailed information regarding non-GAAP financial measures herein,
including the items reflected in adjusted net earnings
calculations. These measures, however, should not be construed as
an alternative to any other measure of performance determined in
accordance with GAAP.
The company does not provide a reconciliation for non-GAAP
estimates on a forward-looking basis (including the information
under “Outlook” above) where it is unable to provide a meaningful
or accurate calculation or estimation of reconciling items and the
information is not available without unreasonable effort. This is
due to the inherent difficulty of forecasting the timing or amount
of various items that have not yet occurred, are out of the
company’s control and/or cannot be reasonably predicted, and that
would impact diluted net earnings per share, the most directly
comparable forward-looking GAAP financial measure. For the same
reasons, the company is unable to address the probable significance
of the unavailable information. Forward-looking non-GAAP financial
measures provided without the most directly comparable GAAP
financial measures may vary materially from the corresponding GAAP
financial measures.
As a global company, Zebra's operating results reported in U.S.
dollars are affected by foreign currency exchange rate fluctuations
because the underlying foreign currencies in which the company
transacts change in value over time compared to the U.S. dollar;
accordingly, the company presents certain organic growth financial
information, which includes impacts of foreign currency
translation, to provide a framework to assess how the company’s
businesses performed excluding the impact of foreign currency
exchange rate fluctuations. Foreign currency impact represents the
difference in results that are attributable to fluctuations in the
currency exchange rates used to convert the results for businesses
where the functional currency is not the U.S. dollar. This impact
is calculated by translating current period results at the currency
exchange rates used in the comparable period in the prior year,
rather than the exchange rates in effect during the current period.
In addition, the company excludes the impact of its foreign
currency hedging program in the prior year periods. The company
believes these measures should be considered a supplement to and
not in lieu of the company’s performance measures calculated in
accordance with GAAP.
ZEBRA TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(In millions, except share
data)
March 30,
2024
December 31,
2023
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
127
$
137
Accounts receivable, net of allowances for
doubtful accounts of $1 each as of March 30, 2024 and December 31,
2023
599
521
Inventories, net
705
804
Income tax receivable
36
63
Prepaid expenses and other current
assets
160
147
Total Current assets
1,627
1,672
Property, plant and equipment, net
304
309
Right-of-use lease assets
166
169
Goodwill
3,894
3,895
Other intangibles, net
501
527
Deferred income taxes
455
438
Other long-term assets
312
296
Total Assets
$
7,259
$
7,306
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt
$
272
$
173
Accounts payable
467
456
Accrued liabilities
437
504
Deferred revenue
456
458
Income taxes payable
11
7
Total Current liabilities
1,643
1,598
Long-term debt
1,815
2,047
Long-term lease liabilities
151
152
Deferred income taxes
66
67
Long-term deferred revenue
304
312
Other long-term liabilities
111
94
Total Liabilities
4,090
4,270
Stockholders’ Equity:
Preferred stock, $.01 par value;
authorized 10,000,000 shares; none issued
—
—
Class A common stock, $.01 par value;
authorized 150,000,000 shares; issued 72,151,857 shares
1
1
Additional paid-in capital
629
615
Treasury stock at cost, 20,751,889 and
20,772,995 shares as of March 30, 2024 and December 31, 2023,
respectively
(1,858
)
(1,858
)
Retained earnings
4,447
4,332
Accumulated other comprehensive loss
(50
)
(54
)
Total Stockholders’ Equity
3,169
3,036
Total Liabilities and Stockholders’
Equity
$
7,259
$
7,306
ZEBRA TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In millions, except per share
data)
(Unaudited)
Three Months Ended
March 30,
2024
April 1,
2023
Net sales:
Tangible products
$
929
$
1,170
Services and software
246
235
Total Net sales
1,175
1,405
Cost of sales:
Tangible products
498
618
Services and software
114
120
Total Cost of sales
612
738
Gross profit
563
667
Operating expenses:
Selling and marketing
148
161
Research and development
138
146
General and administrative
81
99
Amortization of intangible assets
26
26
Acquisition and integration costs
1
—
Exit and restructuring costs
10
10
Total Operating expenses
404
442
Operating income
159
225
Other income (loss), net:
Foreign exchange gain
3
1
Interest expense, net
(17
)
(37
)
Other expense, net
(3
)
(4
)
Total Other expense, net
(17
)
(40
)
Income before income tax
142
185
Income tax expense
27
35
Net income
$
115
$
150
Basic earnings per share
$
2.24
$
2.92
Diluted earnings per share
$
2.23
$
2.90
ZEBRA TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended
March 30,
2024
April 1,
2023
Cash flows from operating activities:
Net income
$
115
$
150
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
43
44
Share-based compensation
17
18
Deferred income taxes
(21
)
(20
)
Unrealized (gain) loss on forward interest
rate swaps
(13
)
13
Other, net
1
2
Changes in operating assets and
liabilities:
Accounts receivable, net
(80
)
33
Inventories, net
98
26
Other assets
(9
)
(27
)
Accounts payable
13
(212
)
Accrued liabilities
(28
)
(82
)
Deferred revenue
(9
)
22
Income taxes
43
5
Settlement liability
(45
)
(45
)
Other operating activities
—
(3
)
Net cash provided by (used in) operating
activities
125
(76
)
Cash flows from investing activities:
Purchases of property, plant and
equipment
(14
)
(16
)
Proceeds from sale of short-term
investments
3
—
Purchases of long-term investments
—
(1
)
Net cash used in investing activities
(11
)
(17
)
Cash flows from financing activities:
Payments of long-term debt
(284
)
(119
)
Proceeds from issuance of long-term
debt
151
191
Payments for repurchases of common
stock
—
(15
)
Net (payments) proceeds related to
share-based compensation plans
(3
)
5
Change in unremitted cash collections from
servicing factored receivables
9
8
Other financing activities
3
—
Net cash (used in) provided by financing
activities
(124
)
70
Effect of exchange rate changes on cash
and cash equivalents, including restricted cash
(1
)
(1
)
Net decrease in cash and cash equivalents,
including restricted cash
(11
)
(24
)
Cash and cash equivalents, including
restricted cash, at beginning of period
138
117
Cash and cash equivalents, including
restricted cash, at end of period
$
127
$
93
Less restricted cash, included in Prepaid
expenses and other current assets
—
(8
)
Cash and cash equivalents at end of
period
$
127
$
85
Supplemental disclosures of cash flow
information:
Income taxes paid
$
3
$
54
Interest paid
$
30
$
24
ZEBRA TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
RECONCILIATION OF ORGANIC NET
SALES DECLINE
(Unaudited)
Three Months Ended
March 30, 2024
AIT
EVM
Consolidated
Reported GAAP Consolidated Net sales
decline
(24.9
)%
(11.3
)%
(16.4
)%
Adjustments:
Impact of foreign currency translations
(1)
(0.4
)%
(0.5
)%
(0.4
)%
Consolidated Organic Net sales decline
(25.3
)%
(11.8
)%
(16.8
)%
(1)
Operating results reported in U.S. Dollars
are affected by foreign currency exchange rate fluctuations.
Foreign currency translation impact represents the difference in
results that are attributable to fluctuations in the currency
exchange rates used to convert the results for businesses where the
functional currency is not the U.S. Dollar. This impact is
calculated by translating the current period results at the
currency exchange rates used in the comparable prior year period,
inclusive of the Company’s foreign currency hedging program.
ZEBRA TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
RECONCILIATION OF GAAP TO
NON-GAAP GROSS MARGIN
(In millions)
(Unaudited)
Three Months Ended
March 30, 2024
April 1, 2023
AIT
EVM
Consolidated
AIT
EVM
Consolidated
GAAP
Reported Net sales
$
392
$
783
$
1,175
$
522
$
883
$
1,405
Reported Gross profit
184
379
563
258
409
667
Gross Margin
46.9
%
48.4
%
47.9
%
49.4
%
46.3
%
47.5
%
Non-GAAP
Adjusted Net sales
$
392
$
783
$
1,175
$
522
$
883
$
1,405
Adjusted Gross profit (1)
185
380
565
258
410
668
Adjusted Gross Margin
47.2
%
48.5
%
48.1
%
49.4
%
46.4
%
47.5
%
(1)
Adjusted Gross profit excludes share-based
compensation expense.
ZEBRA TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
RECONCILIATION OF GAAP TO
NON-GAAP NET INCOME
(In millions, except share
data)
(Unaudited)
Three Months Ended
March 30,
2024
April 1,
2023
GAAP Net income
$
115
$
150
Adjustments to Cost of sales(1)
Share-based compensation
2
1
Total adjustments to Cost of
sales
2
1
Adjustments to Operating expenses(1)
Amortization of intangible assets
26
26
Acquisition and integration costs
1
—
Share-based compensation
19
22
Exit and restructuring costs
10
10
Total adjustments to Operating
expenses
56
58
Adjustments to Other income (expense),
net(1)
Amortization of debt issuance costs and
discounts
—
1
Investment loss
—
1
Foreign exchange (gain)
(3
)
(1
)
Forward interest rate swap (gain) loss
(20
)
7
Total adjustments to Other (expense)
income, net
(23
)
8
Income tax effect of adjustments(2)
Reported income tax expense
27
35
Adjusted income tax
(30
)
(48
)
Total adjustments to income tax
(3
)
(13
)
Total adjustments
32
54
Non-GAAP Net income
$
147
$
204
GAAP earnings per share
Basic
$
2.24
$
2.92
Diluted
$
2.23
$
2.90
Non-GAAP earnings per share
Basic
$
2.86
$
3.97
Diluted
$
2.84
$
3.94
Basic weighted average shares
outstanding
51,387,570
51,420,536
Diluted weighted average and equivalent
shares outstanding
51,790,501
51,748,069
(1)
Presented on a pre-tax basis.
(2)
Represents adjustments to GAAP income tax
expense commensurate with pre-tax non-GAAP adjustments (including
the resulting impacts to U.S. BEAT/GILTI provisions), as well as
adjustments to exclude the impacts of certain discrete income tax
items and incorporate the anticipated annualized effects of current
year tax planning.
ZEBRA TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
GAAP to NON-GAAP
RECONCILIATION TO EBITDA
(In millions)
(Unaudited)
Three Months Ended
March 30,
2024
April 1,
2023
GAAP Net income
$
115
$
150
Add back:
Depreciation (excluding exit and
restructuring)
17
17
Amortization of intangible assets
26
26
Total Other expense, net
17
40
Income tax expense
27
35
EBITDA (Non-GAAP)
202
268
Adjustments to Cost of sales
Share-based compensation
2
1
Total adjustments to Cost of sales
2
1
Adjustments to Operating expenses
Acquisition and integration costs
1
—
Share-based compensation
19
22
Exit and restructuring costs
10
10
Total adjustments to Operating
expenses
30
32
Total adjustments to EBITDA
32
33
Adjusted EBITDA (Non-GAAP)
$
234
$
301
Adjusted EBITDA % of Adjusted Net Sales
(Non-GAAP)
19.9
%
21.4
%
FREE
CASH FLOW
Three Months Ended
March 30,
2024
April 1,
2023
Net cash provided by (used in) operating
activities
$
125
$
(76
)
Less: Purchases of property, plant and
equipment
(14
)
(16
)
Free cash flow (Non-GAAP)(1)
$
111
$
(92
)
(1)
Free cash flow, a non-GAAP measure, is
defined as Net cash provided by (used in) operating activities in a
period minus purchases of property, plant and equipment (capital
expenditures) made in that period. This measure does not represent
residual cash flows available for discretionary expenditures as the
measure does not deduct the payments required for debt service and
other contractual obligations or payments for future business
acquisitions. Therefore, we believe it is important to view free
cash flow as a measure that provides supplemental information to
our entire statements of cash flows.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240430818948/en/
Investors Michael Steele, CFA, IRC
Vice President, Investor Relations Phone: + 1 847 518 6432
InvestorRelations@zebra.com
Media Therese Van Ryne Senior
Director, External Communications Phone: + 1 847 370 2317
therese.vanryne@zebra.com
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