Company Announcements

Zebra Technologies Announces Third-Quarter 2022 Results

Third-Quarter Financial Highlights

  • Net sales of $1,378 million; year-over-year decrease of 4.0%
  • Net income of $170 million and net income per diluted share of $3.26
  • Non-GAAP diluted EPS decreased 9.5% year-over-year to $4.12
  • Adjusted EBITDA decreased 6.7% year-over-year to $291 million

LINCOLNSHIRE, Ill.--(BUSINESS WIRE)--Nov. 1, 2022-- 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 third quarter ended October 1, 2022.

“We are recovering from supply chain challenges related to persistent component shortages and the transition to our new North American distribution center. These challenges, along with certain large customer projects being deferred, impacted product shipments exiting the quarter, resulting in lower-than-expected sales and profitability," said Anders Gustafsson, Chief Executive Officer of Zebra Technologies.

"Customer demand and our order pipeline generally remain solid, yet we have been seeing softening demand and elongated sales cycles since late in the third quarter. We are taking a cautious approach to our Q4 sales outlook and expense management, while working to right-size our working capital levels in the coming quarters. We have also initiated meaningful actions to improve our supply chain. Despite these near-term challenges, we are well positioned to benefit from secular trends to digitize and automate workflows in a labor constrained and increasingly on demand economy.”

$ in millions, except per share amounts

3Q22

3Q21

Change

Select reported measures:

 

 

 

Net sales

$

1,378

 

$

1,436

 

(4.0%)

Gross profit

 

628

 

 

646

 

(2.8%)

Gross margin

 

45.6

%

 

45.0

%

60 bps

Net income

 

170

 

 

199

 

(14.6%)

Net income margin

 

12.3

%

 

13.9

%

(160) bps

Net income per diluted share

$

3.26

 

$

3.69

 

(11.7%)

 

 

 

 

Select Non-GAAP measures:

 

 

 

Adjusted net sales

$

1,378

 

$

1,436

 

(4.0%)

Organic net sales growth

 

 

(3.2%)

Adjusted gross profit

 

631

 

 

648

 

(2.6%)

Adjusted gross margin

 

45.8

%

 

45.1

%

70 bps

Adjusted EBITDA

 

291

 

 

312

 

(6.7%)

Adjusted EBITDA margin

 

21.1

%

 

21.7

%

(60) bps

Non-GAAP net income

$

215

 

$

245

 

(12.2%)

Non-GAAP earnings per diluted share

$

4.12

 

$

4.55

 

(9.5%)

Net sales were $1,378 million in the third quarter of 2022 compared to $1,436 million in the third quarter of 2021. Net sales in the Enterprise Visibility & Mobility ("EVM") segment were $963 million in the third quarter of 2022 compared with $1,058 million in the third quarter of 2021. Asset Intelligence & Tracking ("AIT") segment net sales were $415 million in the third quarter of 2022 compared to $378 million in the prior year period. Consolidated organic net sales for the third quarter decreased 3.2%. Third-quarter year-over-year organic net sales decreased by 8.8% in the EVM segment and increased by 12.4% in the AIT segment.

Third quarter 2022 gross profit was $628 million compared to $646 million in the prior year period. Gross margin increased to 45.6% for the third quarter of 2022 compared to 45.0% in the prior year period. The increase was primarily due to favorable business mix and lower premium supply chain costs partially offset by unfavorable foreign currency changes. Adjusted gross margin was 45.8% in the third quarter of 2022 compared to 45.1% in the prior year period.

Operating expenses increased in the third quarter of 2022 to $426 million from $409 million in the prior year period, primarily due to expenses associated with recently acquired businesses partially offset by lower incentive compensation expense. Adjusted operating expenses increased in the third quarter of 2022 to $356 million from $354 million in the prior year period.

Net income for the third quarter of 2022 was $170 million, or $3.26 income per diluted share, compared to net income of $199 million, or $3.69 per diluted share, for the third quarter of 2021. Non-GAAP net income for the third quarter of 2022 decreased to $215 million, or $4.12 per diluted share, compared to $245 million, or $4.55 per diluted share, for the prior year period.

Adjusted EBITDA for the third quarter of 2022 decreased to $291 million, or 21.1% of adjusted net sales, compared to $312 million, or 21.7% of adjusted net sales for the third quarter of 2021 due to lower gross profit and higher operating expenses.

Balance Sheet and Cash Flow

As of October 1, 2022, the company had cash and cash equivalents of $81 million and total debt of $2,170 million.

For the first nine months of 2022, the company generated $221 million of operating cash flow and made capital expenditures of $51 million, resulting in free cash flow of $170 million. The Company made business acquisitions of $878 million, $655 million of share repurchases under its existing authorization, and had net debt proceeds of $1,175 million.

Outlook

The company expects fourth quarter 2022 adjusted net sales to change (2)% to 1% from the prior year period. This expectation includes an approximately 2 point additive impact from recently acquired businesses, and an approximately 4 point negative impact from foreign currency translation.

Adjusted EBITDA margin for the fourth quarter of 2022 is expected to be approximately 22-23%. Non-GAAP earnings per diluted share are expected to be in the range of $4.50 to $4.80. This assumes an adjusted effective tax rate of approximately 17-18%.

Free cash flow is now expected to be at least $400 million, reflecting lower profitability and elevated inventory, and inclusive of the anticipated $135 million of previously announced settlement payments.

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) empowers organizations to thrive in the on-demand economy by making every front-line worker and asset at the edge visible, connected and fully optimized. With an ecosystem of more than 10,000 partners across more than 100 countries, Zebra serves customers of all sizes – including 84% of the Fortune 500 – with an award-winning portfolio of hardware, software, services and solutions that digitize and automate workflows. Supply chains are more dynamic, customers and patients are better served, and workers are more engaged when they utilize Zebra innovations that help them sense, analyze and act in real time. Zebra recently expanded its industrial automation portfolio with its Fetch Robotics acquisition and increased its machine vision and AI software capabilities with the acquisitions of Adaptive Vision, antuit.ai and Matrox Imaging. Zebra is #42 on Newsweek’s list of America’s 100 Most Loved Workplaces, #42 on Fast Company's list of the Best Workplaces for Innovators and #79 on Forbes’ list of America’s 500 Best Midsize Employers. Learn more at www.zebra.com or sign up for news alerts. Follow Zebra’s Your Edge blog, LinkedIn, Twitter 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 our business and results of operations. Our ability to purchase sufficient materials, parts, and components, as well as our ability to provide services, software and products to meet customer demand could negatively impact our results of operations and customer relationships. Profits and profitability may 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 impact on results. Foreign exchange rates, customs duties and trade policies may have an effect on financial results because of the large percentage of our 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. The success of integrating acquisitions could also 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 our 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 the risks, uncertainties and other factors that could 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,” “EBITDA,” “Adjusted EBITDA,” “Adjusted EBITDA margin,” “Non-GAAP diluted net income,” “Non-GAAP diluted earnings per share,” “free cash flow,” "organic net sales," “organic net sales growth,” 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)

 

 

October 1,

 

December 31,

2022

 

2021

 

(Unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

81

 

 

$

332

 

Accounts receivable, net of allowances for doubtful accounts of $1 million each as of October 1, 2022 and December 31, 2021

 

804

 

 

 

752

 

Inventories, net

 

814

 

 

 

491

 

Income tax receivable

 

11

 

 

 

8

 

Prepaid expenses and other current assets

 

161

 

 

 

106

 

Total Current assets

 

1,871

 

 

 

1,689

 

Property, plant and equipment, net

 

272

 

 

 

272

 

Right-of-use lease assets

 

172

 

 

 

131

 

Goodwill

 

3,891

 

 

 

3,265

 

Other intangibles, net

 

659

 

 

 

469

 

Deferred income taxes

 

304

 

 

 

192

 

Other long-term assets

 

279

 

 

 

197

 

Total Assets

$

7,448

 

 

$

6,215

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Current portion of long-term debt

$

144

 

 

$

69

 

Accounts payable

 

835

 

 

 

700

 

Accrued liabilities

 

675

 

 

 

639

 

Deferred revenue

 

401

 

 

 

380

 

Income taxes payable

 

18

 

 

 

12

 

Total Current liabilities

 

2,073

 

 

 

1,800

 

Long-term debt

 

2,017

 

 

 

922

 

Long-term lease liabilities

 

150

 

 

 

121

 

Deferred income taxes

 

78

 

 

 

6

 

Long-term deferred revenue

 

323

 

 

 

315

 

Other long-term liabilities

 

150

 

 

 

67

 

Total Liabilities

 

4,791

 

 

 

3,231

 

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

 

542

 

 

 

462

 

Treasury stock at cost, 20,336,198 and 18,736,582 shares as of October 1, 2022 and December 31, 2021, respectively

 

(1,702

)

 

 

(1,023

)

Retained earnings

 

3,850

 

 

 

3,573

 

Accumulated other comprehensive loss

 

(34

)

 

 

(29

)

Total Stockholders’ Equity

 

2,657

 

 

 

2,984

 

Total Liabilities and Stockholders’ Equity

$

7,448

 

 

$

6,215

 

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share data)

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

October 1,

 

October 2,

 

October 1,

 

October 2,

2022

 

2021

 

2022

 

2021

Net sales:

 

 

 

 

 

 

 

Tangible products

$

1,164

 

 

$

1,240

 

 

$

3,630

 

 

$

3,585

 

Services and software

 

214

 

 

 

196

 

 

 

648

 

 

 

575

 

Total Net sales

 

1,378

 

 

 

1,436

 

 

 

4,278

 

 

 

4,160

 

Cost of sales:

 

 

 

 

 

 

 

Tangible products

 

632

 

 

 

687

 

 

 

1,998

 

 

 

1,896

 

Services and software

 

118

 

 

 

103

 

 

 

341

 

 

 

305

 

Total Cost of sales

 

750

 

 

 

790

 

 

 

2,339

 

 

 

2,201

 

Gross profit

 

628

 

 

 

646

 

 

 

1,939

 

 

 

1,959

 

Operating expenses:

 

 

 

 

 

 

 

Selling and marketing

 

149

 

 

 

148

 

 

 

452

 

 

 

430

 

Research and development

 

143

 

 

 

141

 

 

 

428

 

 

 

422

 

General and administrative

 

92

 

 

 

85

 

 

 

288

 

 

 

259

 

Settlement and related costs

 

 

 

 

 

 

 

372

 

 

 

 

Amortization of intangible assets

 

39

 

 

 

29

 

 

 

107

 

 

 

81

 

Acquisition and integration costs

 

1

 

 

 

6

 

 

 

19

 

 

 

11

 

Exit and restructuring costs

 

2

 

 

 

 

 

 

4

 

 

 

 

Total Operating expenses

 

426

 

 

 

409

 

 

 

1,670

 

 

 

1,203

 

Operating income

 

202

 

 

 

237

 

 

 

269

 

 

 

756

 

Other income (loss), net:

 

 

 

 

 

 

 

Foreign exchange gain (loss)

 

 

 

 

(4

)

 

 

5

 

 

 

(3

)

Interest income (expense), net

 

21

 

 

 

(5

)

 

 

48

 

 

 

(10

)

Other (expense) income, net

 

(1

)

 

 

 

 

 

(3

)

 

 

(1

)

Total Other income (expense), net

 

20

 

 

 

(9

)

 

 

50

 

 

 

(14

)

Income before income tax

 

222

 

 

 

228

 

 

 

319

 

 

 

742

 

Income tax expense

 

52

 

 

 

29

 

 

 

42

 

 

 

96

 

Net income

$

170

 

 

$

199

 

 

$

277

 

 

$

646

 

Basic earnings per share

$

3.28

 

 

$

3.72

 

 

$

5.29

 

 

$

12.08

 

Diluted earnings per share

$

3.26

 

 

$

3.69

 

 

$

5.25

 

 

$

11.98

 

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

 

Nine Months Ended

 

October 1,

 

October 2,

2022

 

2021

Cash flows from operating activities:

 

 

 

Net income

$

277

 

 

$

646

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

158

 

 

 

136

 

Share-based compensation

 

70

 

 

 

58

 

Deferred income taxes

 

(115

)

 

 

(6

)

Unrealized gain on forward interest rate swaps

 

(92

)

 

 

(17

)

Other, net

 

4

 

 

 

1

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable, net

 

(58

)

 

 

(107

)

Inventories, net

 

(293

)

 

 

75

 

Other assets

 

(68

)

 

 

(25

)

Accounts payable

 

127

 

 

 

(2

)

Accrued liabilities

 

(101

)

 

 

42

 

Deferred revenue

 

27

 

 

 

101

 

Income taxes

 

3

 

 

 

(67

)

Legal Settlement Liability

 

270

 

 

 

 

Other operating activities

 

12

 

 

 

1

 

Net cash provided by operating activities

 

221

 

 

 

836

 

Cash flows from investing activities:

 

 

 

Acquisition of businesses, net of cash acquired

 

(878

)

 

 

(307

)

Purchases of property, plant and equipment

 

(51

)

 

 

(38

)

Purchases of long-term investments

 

(12

)

 

 

(24

)

Net cash used in investing activities

 

(941

)

 

 

(369

)

Cash flows from financing activities:

 

 

 

Payment of debt issuance costs, extinguishment costs and discounts

 

(8

)

 

 

 

Payments of long-term debt

 

(210

)

 

 

(277

)

Proceeds from issuance of long-term debt

 

1,385

 

 

 

21

 

Payments for repurchases of common stock

 

(655

)

 

 

(25

)

Net payments related to share-based compensation plans

 

(14

)

 

 

(48

)

Change in unremitted cash collections from servicing factored receivables

 

(28

)

 

 

(22

)

Net cash provided by (used in) financing activities

 

470

 

 

 

(351

)

Effect of exchange rate changes on cash and cash equivalents, including restricted cash

 

(2

)

 

 

 

Net (decrease) increase in cash and cash equivalents, including restricted cash

 

(252

)

 

 

116

 

Cash and cash equivalents, including restricted cash, at beginning of period

 

344

 

 

 

192

 

Cash and cash equivalents, including restricted cash, at end of period

$

92

 

 

$

308

 

Less restricted cash, included in Prepaid expenses and other current assets

 

(11

)

 

 

(1

)

Cash and cash equivalents at end of period

$

81

 

 

$

307

 

Supplemental disclosures of cash flow information:

 

 

 

Income taxes paid

$

152

 

 

$

169

 

Interest paid

$

34

 

 

$

25

 

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

RECONCILIATION OF ORGANIC NET SALES GROWTH

(Unaudited)

 

 

Three Months Ended

 

October 1, 2022

 

AIT

 

EVM

 

Consolidated

Reported GAAP Consolidated Net sales growth

9.8 %

 

(9.0) %

 

(4.0) %

Adjustments:

 

 

 

 

 

Impact of foreign currency translation (1)

2.6 %

 

3.0 %

 

2.9 %

Impact of acquisitions (2)

— %

 

(2.8) %

 

(2.1) %

Consolidated Organic Net sales growth

12.4 %

 

(8.8) %

 

(3.2) %

 

 

 

 

 

 

 

Nine Months Ended

 

October 1, 2022

 

AIT

 

EVM

 

Consolidated

Reported GAAP Consolidated Net sales growth

2.8 %

 

2.6 %

 

2.8 %

Adjustments:

 

 

 

 

 

Impact of foreign currency translation (1)

1.5 %

 

1.8 %

 

1.6 %

Impact of acquisitions (2)

— %

 

(2.0) %

 

(1.5) %

Consolidated Organic Net sales growth

4.3 %

 

2.4 %

 

2.9 %

(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.

(2)

For purposes of computing Organic Net sales growth, amounts directly attributable to the acquisitions of Adaptive Vision, Fetch, Antuit, and Matrox are excluded for twelve months following their respective acquisitions.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP GROSS MARGIN

(In millions)

(Unaudited)

 

 

Three Months Ended

 

October 1, 2022

 

October 2, 2021

 

AIT

 

EVM

 

Consolidated

 

AIT

 

EVM

 

Consolidated

GAAP

 

 

 

 

 

 

 

 

 

 

 

Reported Net sales (1)

$

415

 

 

$

963

 

 

$

1,378

 

 

$

378

 

 

$

1,058

 

 

$

1,436

 

Reported Gross profit (1)

 

179

 

 

 

449

 

 

 

628

 

 

 

165

 

 

 

481

 

 

 

646

 

Gross Margin

 

43.1

%

 

 

46.6

%

 

 

45.6

%

 

 

43.7

%

 

 

45.5

%

 

 

45.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net sales

$

415

 

 

$

963

 

 

$

1,378

 

 

$

378

 

 

$

1,058

 

 

$

1,436

 

Adjusted Gross profit (2)

 

180

 

 

 

451

 

 

 

631

 

 

 

166

 

 

 

482

 

 

 

648

 

Adjusted Gross Margin

 

43.4

%

 

 

46.8

%

 

 

45.8

%

 

 

43.9

%

 

 

45.6

%

 

 

45.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

October 1, 2022

 

October 2, 2021

 

AIT

 

EVM

 

Consolidated

 

AIT

 

EVM

 

Consolidated

GAAP

 

 

 

 

 

 

 

 

 

 

 

Reported Net sales (1)

$

1,255

 

 

$

3,023

 

 

$

4,278

 

 

$

1,221

 

 

$

2,945

 

 

$

4,160

 

Reported Gross profit (1)

 

528

 

 

 

1,411

 

 

 

1,939

 

 

 

571

 

 

 

1,394

 

 

 

1,959

 

Gross Margin

 

42.1

%

 

 

46.7

%

 

 

45.3

%

 

 

46.8

%

 

 

47.3

%

 

 

47.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net sales

$

1,255

 

 

$

3,023

 

 

$

4,278

 

 

$

1,221

 

 

$

2,945

 

 

$

4,166

 

Adjusted Gross profit (2)

 

529

 

 

 

1,415

 

 

 

1,944

 

 

 

573

 

 

 

1,398

 

 

 

1,971

 

Adjusted Gross Margin

 

42.2

%

 

 

46.8

%

 

 

45.4

%

 

 

46.9

%

 

 

47.5

%

 

 

47.3

%

(1)

Consolidated results include corporate eliminations related to business acquisition purchase accounting adjustments that are not reported in segment results.

(2)

Adjusted Gross profit excludes business acquisition purchase accounting adjustments and 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

 

Nine Months Ended

 

October 1,

 

October 2,

 

October 1,

 

October 2,

2022

 

2021

 

2022

 

2021

Net income

$

170

 

 

$

199

 

 

$

277

 

 

$

646

 

Adjustments to Net sales(1)

 

 

 

 

 

 

 

Purchase accounting adjustments

 

 

 

 

 

 

 

 

 

 

6

 

Total adjustments to Net sales

 

 

 

 

 

 

 

 

 

 

6

 

Adjustments to Cost of sales(1)

 

 

 

 

 

 

 

Share-based compensation

 

3

 

 

 

2

 

 

 

5

 

 

 

6

 

Total adjustments to Cost of sales

 

3

 

 

 

2

 

 

 

5

 

 

 

6

 

Adjustments to Operating expenses(1)

 

 

 

 

 

 

 

Amortization of intangible assets

 

39

 

 

 

29

 

 

 

107

 

 

 

81

 

Acquisition and integration costs

 

1

 

 

 

6

 

 

 

19

 

 

 

11

 

Settlement and related costs

 

 

 

 

 

 

 

372

 

 

 

 

Share-based compensation

 

28

 

 

 

20

 

 

 

70

 

 

 

64

 

Exit and restructuring costs

 

2

 

 

 

 

 

 

4

 

 

 

 

Total adjustments to Operating expenses

 

70

 

 

 

55

 

 

 

572

 

 

 

156

 

Adjustments to Other income (expense), net(1)

 

 

 

 

 

 

 

Amortization of debt issuance costs and discounts

 

 

 

 

 

 

 

4

 

 

 

2

 

Investment gain

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Foreign exchange loss / (gain)

 

 

 

 

4

 

 

 

(5

)

 

 

3

 

Forward interest rate swap (gain) / loss

 

(39

)

 

 

1

 

 

 

(84

)

 

 

(4

)

Total adjustments to Other income (expense), net

 

(39

)

 

 

4

 

 

 

(85

)

 

 

 

Income tax effect of adjustments(2)

 

 

 

 

 

 

 

Reported income tax expense

 

52

 

 

 

29

 

 

 

42

 

 

 

96

 

Less: Adjusted income tax expense

 

(41

)

 

 

(44

)

 

 

(139

)

 

 

(160

)

Total adjustments to income tax

 

11

 

 

 

(15

)

 

 

(97

)

 

 

(64

)

Total adjustments

 

45

 

 

 

46

 

 

 

395

 

 

 

104

 

Non-GAAP Net income

$

215

 

 

$

245

 

 

$

672

 

 

$

750

 

 

 

 

 

 

 

 

 

GAAP earnings per share

 

 

 

 

 

 

 

Basic

$

3.28

 

 

$

3.72

 

 

$

5.29

 

 

$

12.08

 

Diluted

$

3.26

 

 

$

3.69

 

 

$

5.25

 

 

$

11.98

 

Non-GAAP earnings per share

 

 

 

 

 

 

 

Basic

$

4.15

 

 

$

4.59

 

 

$

12.82

 

 

$

14.03

 

Diluted

$

4.12

 

 

$

4.55

 

 

$

12.73

 

 

$

13.91

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

51,834,236

 

 

 

53,418,055

 

 

 

52,387,838

 

 

 

53,449,239

 

Diluted weighted average and equivalent shares outstanding

 

52,157,852

 

 

 

53,866,559

 

 

 

52,756,631

 

 

 

53,911,813

 

(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

 

Nine Months Ended

 

October 1,

 

October 2,

 

October 1,

 

October 2,

2022

 

2021

 

2022

 

2021

Net income

$

170

 

 

$

199

 

 

$

277

 

 

$

646

 

Add back:

 

 

 

 

 

 

 

Depreciation (excluding exit and restructuring)

 

16

 

 

 

18

 

 

 

51

 

 

 

54

 

Amortization of intangible assets

 

39

 

 

 

29

 

 

 

107

 

 

 

81

 

Total Other (income) expense, net

 

(20

)

 

 

9

 

 

 

(50

)

 

 

14

 

Income tax expense

 

52

 

 

 

29

 

 

 

42

 

 

 

96

 

EBITDA (Non-GAAP)

 

257

 

 

 

284

 

 

 

427

 

 

 

891

 

 

 

 

 

 

 

 

 

Adjustments to Net sales

 

 

 

 

 

 

 

Purchase accounting adjustments

 

 

 

 

 

 

 

 

 

 

6

 

Total adjustments to Net sales

 

 

 

 

 

 

 

 

 

 

6

 

Adjustments to Cost of sales

 

 

 

 

 

 

 

Share-based compensation

 

3

 

 

 

2

 

 

 

5

 

 

 

6

 

Total adjustments to Cost of sales

 

3

 

 

 

2

 

 

 

5

 

 

 

6

 

Adjustments to Operating expenses

 

 

 

 

 

 

 

Acquisition and integration costs

 

1

 

 

 

6

 

 

 

19

 

 

 

11

 

Settlement and related costs

 

 

 

 

 

 

 

372

 

 

 

 

Share-based compensation

 

28

 

 

 

20

 

 

 

70

 

 

 

64

 

Exit and restructuring costs

 

2

 

 

 

 

 

 

4

 

 

 

 

Total adjustments to Operating expenses

 

31

 

 

 

26

 

 

 

465

 

 

 

75

 

Total adjustments to EBITDA

 

34

 

 

 

28

 

 

 

470

 

 

 

87

 

Adjusted EBITDA (Non-GAAP)

$

291

 

 

$

312

 

 

$

897

 

 

$

978

 

 

 

 

 

 

 

 

 

Adjusted EBITDA % of Adjusted Net Sales

 

21.1

%

 

 

21.7

%

 

 

21.0

%

 

 

23.5

%

FREE CASH FLOW

 

 

Nine Months Ended

 

October 1,

 

October 2,

2022

 

2021

Net cash provided by operating activities

$

221

 

 

$

836

 

Less: Purchases of property, plant and equipment

 

(51

)

 

 

(38

)

Free cash flow (Non-GAAP)(1)

$

170

 

 

$

798

 

(1)

Free cash flow is defined as Net cash provided by 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.

 

Investors
Michael Steele, CFA, IRC
Vice President, Investor Relations
Phone: + 1 847 793 6707
msteele@zebra.com

Media
Therese Van Ryne
Senior Director, External Communications
Phone: + 1 847 370 2317
therese.vanryne@zebra.com

Source: Zebra Technologies Corporation