Second-Quarter Financial Highlights
- Strong net sales of $896 million, above
the company’s guidance range
- Net income of $17 million and diluted
EPS of $0.32
- Non-GAAP net income of $80 million and
non-GAAP diluted EPS of $1.51
- Adjusted EBITDA increased 10%
year-over-year to $159 million; and adjusted EBITDA margin expanded
140 basis points year-over-year to 17.7%
- Retired $160 million of debt principal
($240 million year-to-date)
Zebra Technologies Corporation (NASDAQ: ZBRA), the market leader
in rugged mobile computers, barcode scanners and barcode printers
enhanced with software and services to enable real-time enterprise
visibility, today announced results for the second quarter ended
July 1, 2017.
“Our solid second quarter results reflect excellent execution by
our team and strong demand for Zebra’s solutions. Sales exceeded
our expectations led by exceptional performance in mobile
computing. Profitable growth and disciplined cost management drove
earnings per share near the top end of our guidance range,” said
Anders Gustafsson, chief executive officer of Zebra Technologies.
“Given these results, we expect our full year organic sales growth
to be at the top end of our prior outlook. Additionally, our robust
free cash flow will allow us to pay down at least $300 million in
debt principal in 2017, despite up-front costs associated with the
recently announced successful refinancing efforts. With the
integration of the Enterprise business complete, we’ll continue to
focus on extending our leadership position in growing markets and
driving profitable growth.”
$ in millions, except per share amounts
2Q17
2Q16 Change Select
reported measures: Net
sales $ 896 $ 879 1.9 % Gross profit 411 406 1.2 % Net income
(loss) 17 (45 ) 137.8 % Net earnings (loss) per diluted share $
0.32 $ (0.88 ) 136.4 % Select Non-GAAP measures: Adjusted
net sales $ 897 $ 882 1.7 % Organic net sales growth 6.4 % Adjusted
gross profit 413 409 1.0 % Adjusted gross margin 46.0 % 46.4 % (40)
bps Adjusted EBITDA 159 144 10.4 % Adjusted EBITDA margin 17.7 %
16.3 % 140 bps Non-GAAP net income $ 80 $ 59 35.6 % Non-GAAP
earnings per diluted share $ 1.51
$ 1.17 29.1 %
Reported (GAAP) results
Net sales were $896 million in the second quarter of 2017
compared to $879 million in the second quarter of 2016. Net sales
in the Enterprise segment were $584 million in the second quarter
of 2017, compared with $577 million in the second quarter of 2016.
Legacy Zebra segment net sales were $313 million in the second
quarter of 2017 compared to $305 million in the second quarter of
2016. Second quarter 2017 gross profit was $411 million compared to
$406 million in the comparable prior year period. Net income for
the second quarter of 2017 was $17 million, or $0.32 per diluted
share, compared to a net loss of $45 million, or ($0.88) per
diluted share, for the second quarter of 2016.
Adjusted (Non-GAAP) results
Consolidated adjusted net sales were $897 million in the second
quarter of 2017 compared to $882 million in the second quarter of
2016, an increase of 1.7%. Consolidated organic net sales growth
for the second quarter was 6.4% reflecting growth across all
regions, most notably North America and Latin America.
Second-quarter year-over-year organic net sales grew 7.9% in the
Enterprise segment and 3.7% in the Legacy Zebra segment.
Adjusted gross margin for the quarter was 46.0%, compared to
46.4% in the prior year period. The decrease was primarily due to
changes in business mix. Adjusted operating expenses decreased in
the second quarter to $274 million from $282 million in the prior
year period, reflecting the company's continued focus on improving
operating efficiency, controlling expenses, and the divestiture of
the wireless LAN business.
Adjusted EBITDA for the second quarter of 2017 was $159 million,
or 17.7% of adjusted net sales compared to $144 million, or 16.3%
of adjusted net sales for the second quarter of 2016, primarily due
to higher gross profit and lower operating expenses.
Non-GAAP net income for the second quarter of 2017 was $80
million, or $1.51 per diluted share, compared with $59 million, or
$1.17 per diluted share, for the second quarter of 2016.
Balance Sheet and Cash Flow
As of July 1, 2017, the company had cash and cash
equivalents of $95 million and total long-term debt of $2.4
billion.
Free cash flow was $181 million in the first six months of 2017.
The company generated $203 million and incurred capital
expenditures of $22 million. For the first six months of 2017, the
company made $240 million in term loan payments and $70 million in
scheduled cash interest payments.
Outlook
Third Quarter 2017
The company expects third-quarter 2017 adjusted net sales to
change approximately (1)% to 2% from adjusted net sales of $906
million in the third quarter of 2016. The company expects organic
net sales growth of approximately 2% to 5% in the third quarter.
This expectation excludes a 4 percentage point adverse impact from
wireless LAN business sales and 1 percentage point positive impact
from foreign currency translation.
Adjusted EBITDA margin is expected to be approximately 18% to
19% for the third quarter 2017, favorable to the prior year period.
Non-GAAP earnings per diluted share are expected to be in the range
of $1.65 to $1.85, assuming an effective tax rate in the low- to
mid-20% range.
Full Year 2017
The company expects approximately 3% to 6% organic net sales
growth for the full year 2017, which is at the higher end of our
prior outlook. This expectation excludes a 3 percentage point
adverse impact from wireless LAN business sales and assumes minimal
foreign currency impact. The company expects organic net sales
growth to moderate through 2017 considering year-over-year
comparisons.
Adjusted EBITDA margin is expected to be in the range of 18% to
19% for the full year 2017, an improvement compared to the full
year 2016.
For the full year 2017, the company expects to make debt
principal payments totaling at least $300 million.
Conference Call Notification
Investors are invited to listen to a live webcast of Zebra’s
conference call regarding the company’s financial results for the
second quarter of 2017. The conference call will be held today,
Tuesday, Aug. 8, 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
With the unparalleled operational visibility Zebra (NASDAQ:
ZBRA) provides, enterprises become as smart and connected as the
world we live in. Real-time information – gleaned from visionary
solutions including hardware, software and services – gives
organizations the competitive edge they need to simplify
operations, know more about their businesses and customers, and
empower their mobile workers to succeed in today’s data-centric
world. For more information, visit www.zebra.com or sign up for our news alerts. Follow us on LinkedIn, Twitter and
Facebook.
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 hardware and software products and competitors’ product
offerings, and the potential effects of technological changes. The
continued uncertainty over future global economic conditions, the
availability of credit and capital markets volatility may have
adverse effects on Zebra, its suppliers and its customers. In
addition, a disruption in our ability to obtain products from
vendors as a result of supply chain constraints, natural disasters
or other circumstances could restrict sales and negatively affect
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
will also have an impact on results. Foreign exchange rates will
have an effect on financial results because of the large percentage
of our international sales. The outcome of litigation in which
Zebra may be involved is another factor. The success of integrating
acquisitions, including the Enterprise business, could also affect
profitability, reported results and the company’s competitive
position in it 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.
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,” “Non-GAAP net income,” “Non-GAAP
earnings per share,” “free cash flow,” “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, for certain currencies, 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 both
the current year and 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
(UNAUDITED)
(In millions, except share data)
July 1, December
31, 2017 2016 Assets Current assets: Cash
and cash equivalents $ 95 $ 156 Accounts receivable, net of
allowances for doubtful accounts of $3 527 625 Inventories, net 414
345 Income tax receivable 65 32 Prepaid expenses and other current
assets 35 64 Total Current assets 1,136 1,222
Property, plant and equipment, net 273 292 Goodwill 2,464
2,458 Other intangibles, net 380 480 Long-term deferred income
taxes 124 113 Other long-term assets 68 67
Total
Assets $ 4,445 $ 4,632
Liabilities and
Stockholders’ Equity Current liabilities: Accounts payable $
436 $ 413 Accrued liabilities 314 323 Deferred revenue 214 191
Income taxes payable 19 22 Total Current liabilities
983 949 Long-term debt 2,418 2,648 Long-term deferred income taxes
2 3 Long-term deferred revenue 122 124 Other long-term liabilities
108 116
Total Liabilities 3,633 3,840
Stockholders’ Equity: Preferred stock, $0.01 par value;
authorized 10,000,000 shares; none issued — — Class A common stock,
$0.01 par value; authorized 150,000,000 shares; issued 72,151,857
shares 1 1 Additional paid-in capital 234 210 Treasury stock at
cost, 19,397,578 and 19,267,269 shares at July 1, 2017 and December
31, 2016, respectively (622 ) (614 ) Retained earnings 1,256 1,240
Accumulated other comprehensive loss (57 ) (45 )
Total
Stockholders’ Equity 812 792
Total Liabilities
and Stockholders’ Equity $ 4,445 $ 4,632
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In millions, except share data)
Three Months Ended
Six Months Ended
July 1, 2017 July 2, 2016
July 1, 2017 July 2, 2016 Net
sales: Net sales of tangible products $ 779 $ 753 $ 1,514 $ 1,469
Revenue from services and software 117 126 247
259 Total Net sales 896 879 1,761 1,728 Cost of sales: Cost
of sales of tangible products 408 387 787 762 Cost of services and
software 77 86 162 170 Total Cost of
sales 485 473 949 932 Gross profit 411
406 812 796 Operating expenses: Selling and marketing 114 112 223
225 Research and development 99 95 195 188 General and
administrative 68 77 143 151 Amortization of intangible assets 52
60 102 119 Acquisition and integration costs 19 34 46 70 Exit and
restructuring costs 1 5 5 10 Total
Operating expenses 353 383 714 763
Operating income 58 23 98 33 Other (expenses) income: Foreign
exchange gain (loss) 2 (5 ) 1 (3 ) Interest expense, net (40 ) (49
) (81 ) (99 ) Other, net (1 ) (2 ) (1 ) (3 ) Total Other expenses
(39 ) (56 ) (81 ) (105 ) Income (loss) before income taxes 19 (33 )
17 (72 ) Income tax expense (benefit) 2 12 (8 ) (1 )
Net income (loss) $ 17 $ (45 ) $ 25 $ (71 ) Basic
earnings (loss) per share $ 0.33 $ (0.88 ) $ 0.49 $ (1.38 ) Diluted
earnings (loss) per share $ 0.32 $ (0.88 ) $ 0.48 $ (1.38 )
Basic weighted average shares outstanding 51,996,353 51,533,236
51,928,911 51,405,373 Diluted weighted average and equivalent
shares outstanding 53,128,657 51,533,236 53,037,956 51,405,373
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In millions)
Six Months Ended July 1,
July 2, 2017 2016 Cash flows from
operating activities: Net income (loss) $ 25 $ (71 ) Adjustments to
reconcile net income (loss) to net cash provided by operating
activities: Depreciation and amortization 141 154 Amortization of
debt issuance cost and discount 10 11 Share-based compensation 15
12 Excess tax benefit from share-based compensation Deferred income
taxes (10 ) 3 Unrealized gain on forward interest rate swaps (1 )
(2 ) Other, net 2 4 Changes in operating assets and liabilities:
Accounts receivable, net 104 43 Inventories, net (68 ) 35 Other
assets 15 21 Accounts payable 22 51 Accrued liabilities (30 ) (74 )
Deferred revenue 20 4 Income taxes (35 ) (61 ) Other operating
activities (7 ) (6 ) Net cash provided by operating activities 203
124 Cash flows from investing activities: Purchases
of property, plant and equipment (22 ) (35 ) Purchases of long-term
investments — (1 ) Net cash used in investing activities (22
) (36 ) Cash flows from financing activities: Proceeds from
issuance of long-term debt — 68 Payment of long-term debt (240 )
(213 ) Proceeds from exercise of stock options and stock purchase
plan purchases 7 5 Taxes paid related to net share settlement of
equity awards (5 ) (6 ) Excess tax benefit from share-based
compensation — — Net cash used in financing
activities (238 ) (146 ) Effect of exchange rate changes on cash (4
) 7 Net decrease in cash and cash equivalents (61 ) (51 )
Cash and cash equivalents at beginning of year 156 192
Cash and cash equivalents at end of year $ 95 $ 141
Supplemental disclosures of cash flow information: Income
taxes paid $ 43 $ 52 Interest paid $ 70 $ 99
ZEBRA
TECHNOLOGIES CORPORATION AND SUBSIDIARIES RECONCILIATION OF
ORGANIC NET SALES GROWTH
(UNAUDITED)
(In millions, except share data)
Consolidated Organic
Net Sales Growth
Three Months Six Months
Ended Ended July 1, July 1, 2017
2017 Reported GAAP Consolidated Net sales growth 1.9 % 1.9 %
Adjustments: Impact of Wireless LAN Net sales(1) 3.9 % 4.0 % Impact
of foreign currency translation(2) 0.8 % 1.0 % Corporate,
eliminations (3) (0.2 )% (0.2 )%
Consolidated Organic Net sales
growth 6.4 % 6.7 %
Organic Net Sales
Growth by Segment
Three Months Six Months Ended
Ended July 1, July 1, 2017 2017
Reported GAAP Net sales growth Legacy Zebra Reported GAAP Net sales
growth 2.6 % 2.6 % Adjustments: Impact of foreign currency
translations(2) 1.1 % 1.1 %
Legacy Zebra Organic Net sales
growth 3.7 % 3.7 %
Enterprise Reported GAAP Net sales growth 1.2 % 1.2 % Adjustments:
Impact of Wireless LAN Net sales(1) 6.0 % 6.3 % Impact of foreign
currency translation(2) 0.7 % 1.0 %
Enterprise Organic Net sales
growth 7.9 % 8.5 % (1) The Company
sold the wireless LAN business in October 2016. We are excluding
the impact of the net sales of this business in the prior year
period when computing organic net sales growth. (2)
Operating results reported in U.S. dollars are affected by 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, for certain
currencies, the current period results at the currency exchange
rates used in the comparable prior year period, rather than the
exchange rates in effect during the current period. In addition, we
exclude the impact of the company’s foreign currency hedging
program in both the current and prior year periods. (3)
Amounts included in Corporate, eliminations consist of purchase
accounting adjustments not reported in segments related to the
Enterprise Acquisition in October 2014.
ZEBRA
TECHNOLOGIES CORPORATION AND SUBSIDIARIES RECONCILIATION OF
GAAP TO NON-GAAP NET INCOME
(UNAUDITED)
(In millions, except share data)
Three Months Ended Six
Months Ended July 1, July 2, July
1, July 2, 2017 2016 2017
2016 Net income (loss) $ 17 $ (45 ) $ 25 $ (71
) Adjustments to Net sales(1) Purchase accounting adjustments 1
3 2 6
Total adjustment to Net
sales 1 3 2 6
Adjustments to Cost of sales(1) Share-based compensation 1
— 1 1
Total adjustments to Cost of
sales 1 — 1 1
Adjustments to Operating expenses(1) Amortization of
intangible assets 52 60 102 119 Acquisition and integration costs
19 34 46 70 Share-based compensation 7 2 15 10 Exit and
restructuring costs 1 5 5 10
Total
adjustments to Operating expenses 79 101
168 209 Adjustments to Other
expense (income)(1) Amortization of debt issuance cost and discount
6 6 10 11 Foreign exchange (gain) loss (2 ) 5 (1 ) 3 Forward
interest rate swaps gain (1 ) (1 ) (1 ) (2 )
Total adjustments
to Other expense (income) 3 10
8 12 Income tax effect of
adjustments(2) Reported Income tax expense (benefit) 2 12 (8 ) (1 )
Adjusted income tax expense (23 ) (22 ) (44 ) (41 )
Total
adjustments to income tax (21 ) (10
) (52 ) (42 ) Total adjustments
63 104 127 186
Non-GAAP Net
income $ 80 $ 59
$ 152 $ 115 GAAP
earnings (loss) per share Basic $ 0.33
$ (0.88 ) $ 0.49 $ (1.38 ) Diluted $ 0.32 $
(0.88 ) $ 0.48 $ (1.38 ) Non-GAAP earnings per share Basic $
1.54 $ 1.18 $ 2.93 $ 2.25 Diluted $
1.51 $ 1.17 $ 2.87 $ 2.18 Basic
weighted average shares outstanding 51,996,353 51,533,236
51,928,911 51,405,373 Diluted weighted average and equivalent
shares outstanding 53,128,657 52,114,954 53,037,956 52,971,905
(1) Presented on a pre-tax basis. (2) Represents the
adjustment to the GAAP basis tax provision commensurate with
non-GAAP adjustments.
ZEBRA TECHNOLOGIES CORPORATION AND
SUBSIDIARIES GAAP to NON-GAAP RECONCILIATION
(UNAUDITED)
(In millions)
EBITDA
Three Months Ended Six
Months Ended July 1, July 2, July
1, July 2, 2017 2016 2017
2016 Net income (loss) $ 17 $ (45 ) $ 25 $ (71
) Depreciation 20 17 39 35 Amortization of intangible assets
52 60 102 119 Total Other expense 39 56 81 105 Income tax expense
(benefit) 2 12 (8 ) (1 )
EBITDA (Non-GAAP)
130 100 239 187
Adjustments to Net sales Purchase accounting
adjustments 1 3 2 6
Total
adjustments to Net sales 1 3
2 6 Adjustments to Cost of sales
Share-based compensation 1 — 1 1
Total adjustments to Cost of sales 1 —
1 1 Adjustments to Operating
expenses Acquisition and integration costs 19 34 46 70 Share-based
compensation 7 2 15 10 Exit and restructuring costs 1 5
5 10
Total adjustments to Operating
expenses 27 41 66
90 Total adjustments to EBITDA 29
44 69 97
Adjusted EBITDA (Non-GAAP) $
159 $ 144 $ 308
$ 284 Net income (loss) % Net
sales 1.9 % (5.1 )% 1.4 % (4.1 )% Adjusted EBITDA % of Non-GAAP
Sales 17.7 % 16.3 % 17.5 % 16.4 %
FREE CASH
FLOW
Six Months Ended July 1,
July 2, 2017 2016 Net cash provided by
operating activities (GAAP) $ 203 $ 124 Less: Purchases of
property, plant and equipment (22 ) (35 ) Free cash flow (Non-GAAP
measure)(1) $ 181 $ 89 (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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170808005410/en/
Zebra Technologies CorporationInvestors:Michael Steele, CFA, IRCVice President,
Investor RelationsPhone: + 1 847 793 6707msteele@zebra.comorMedia:Therese Van RyneDirector, Global Public
RelationsPhone: + 1 847 370 2317therese.vanryne@zebra.com
Zebra Technologies (NASDAQ:ZBRA)
Historical Stock Chart
From Mar 2024 to Apr 2024
Zebra Technologies (NASDAQ:ZBRA)
Historical Stock Chart
From Apr 2023 to Apr 2024
