First-Quarter Financial Highlights
- Strong first-quarter net sales of
$1,066 million; year-over-year growth of 9.1%
- Net income of $115 million and net
income per diluted share of $2.12
- Non-GAAP diluted EPS increased 14%
year-over-year to $2.92
- Adjusted EBITDA increased 10.3%
year-over-year to $225 million; and adjusted EBITDA margin expanded
20 bps year-over-year to 21.1%
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, 2019.
“Our first quarter results were driven by solid execution and
strong demand for our leading portfolio of solutions. We
outperformed in data capture and mobile computing and managed costs
well,” said Anders Gustafsson, chief executive officer of Zebra
Technologies. “We are increasing our 2019 sales and profit outlook
based on our solid start to the year and recent acquisition of
Temptime Corporation. We remain focused on our enterprise asset
intelligence vision to drive innovative solutions for our
customers.”
$ in millions, except per share amounts
1Q19
1Q18 Change Select
reported measures: Net
sales $ 1,066 $ 977 9.1 % Gross profit 501 465 7.7 % Net income 115
109 5.5 % Net income per diluted share $ 2.12 $ 2.01 5.5 %
Select Non-GAAP measures: Organic net sales growth 7.9 % Adjusted
gross profit 503 466 7.9 % Adjusted gross margin 47.2 % 47.7 % (50)
bps Adjusted EBITDA 225 204 10.3 % Adjusted EBITDA margin 21.1 %
20.9 % 20 bps Non-GAAP net income $ 160 $ 138 15.9 % Non-GAAP
earnings per diluted share $ 2.92
$ 2.56 14.1 %
Reported (GAAP) results
Net sales were $1,066 million in the first quarter of 2019
compared to $977 million in the first quarter of 2018. Net sales in
the Enterprise Visibility & Mobility ("EVM") segment were $709
million in the first quarter of 2019 compared with $625 million in
the first quarter of 2018. Asset Intelligence & Tracking
("AIT") segment net sales were $357 million in the first quarter of
2019 compared to $352 million in the prior year period.
First-quarter 2019 gross profit was $501 million compared to $465
million in the comparable prior year period. Net income for the
first quarter of 2019 was $115 million, or $2.12 per diluted share,
compared to net income of $109 million, or $2.01 per diluted share,
for the first quarter of 2018.
Adjusted (Non-GAAP) results
Consolidated net sales were $1,066 million in the first quarter
of 2019 compared to $977 million in the prior year period, an
increase of 9.1%. Consolidated organic net sales growth for the
first quarter was 7.9% reflecting solid growth in APAC, EMEA and
North America. First-quarter year-over-year organic net sales
growth was 11.6% in the EVM segment and 1.2% in the AIT
segment.
Consolidated adjusted gross margin was 47.2% in the first
quarter of 2019, compared to 47.7% in the prior year period. This
decrease was primarily due to unfavorable business mix. Adjusted
operating expenses increased in the first quarter of 2019 to $297
million from $282 million in the prior year period primarily due to
investments to accelerate organic growth as well as inclusion of
expenses from recently acquired Xplore Technologies and Temptime
Corporation.
Adjusted EBITDA for the first quarter of 2019 increased to $225
million, or 21.1% of adjusted net sales, compared to $204 million,
or 20.9% of adjusted net sales, for the first quarter of 2018
primarily due to lower operating expenses as a percentage of net
sales.
Non-GAAP net income for the first quarter of 2019 was $160
million, or $2.92 per diluted share, compared with $138 million, or
$2.56 per diluted share, for the first quarter of 2018.
Balance Sheet and Cash Flow
As of March 30, 2019, the company had cash and cash
equivalents of $61 million and total debt of $1,744 million.
Free cash flow in the first quarter was $27 million. The company
generated $42 million of operating cash flow and incurred capital
expenditures of $15 million. The company had net borrowings of $146
million, primarily to fund the acquisition of Temptime
Corporation.
Outlook
Second Quarter 2019
The company expects second-quarter 2019 net sales to increase
approximately 7% to 9% from the second quarter of 2018. This
expectation includes an approximately 250-300 basis point additive
impact from recently acquired businesses, and an approximately 50
basis point negative impact from foreign currency translation.
Adjusted EBITDA margin is expected to be in the range of 20% to
21% for the second quarter of 2019. Non-GAAP earnings per diluted
share are expected to be in the range of $2.80 to $2.95. This
assumes an adjusted effective tax rate of approximately 16% to
17%.
Full Year 2019
The company expects full-year 2019 net sales to increase
approximately 5% to 8% from 2018. This expectation includes an
approximately 2 percentage point positive impact from recently
acquired businesses, and an approximately 50 basis point negative
impact from foreign currency translation.
Adjusted EBITDA margin is expected to be in the range of 21% and
22% for the full-year 2019, favorable to 2018.
For the full-year 2019, the company expects to generate free
cash flow of at least $625 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
first quarter of 2019. The conference call will be held today,
Tuesday, Apr. 30, 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 the front line of business in
retail/ecommerce, manufacturing, transportation and logistics,
healthcare and other industries to achieve a performance edge. With
more than 10,000 partners across 100 countries, we deliver
industry-tailored, end-to-end solutions that intelligently
connect people, assets and data to help our
customers make business-critical decisions. Our
market-leading solutions elevate the shopping experience, track and
manage inventory as well as improve supply chain efficiency and
patient care. Ranked on Forbes’ list of America’s Best Employers
for the last three years, Zebra helps our customers capture their
edge. 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 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,” “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
(In millions, except share data)
March 30, 2019
December 31, 2018
(Unaudited) Assets Current assets: Cash and cash equivalents
$ 61 $ 44 Accounts receivable, net of allowances for doubtful
accounts of $2 million and $3 million as of March 30, 2019 and
December 31, 2018, respectively 488 520 Inventories, net 510 520
Income tax receivable 21 24 Prepaid expenses and other current
assets 62 54 Total Current assets 1,142 1,162
Property, plant and equipment, net 257 249 Right-of-use lease asset
110 — Goodwill 2,567 2,495 Other intangibles, net 311 232 Long-term
deferred income taxes 97 114 Other long-term assets 92 87
Total Assets $ 4,576 $ 4,339 Liabilities and
Stockholders’ Equity Current liabilities: Current portion of
long-term debt $ 131 $ 157 Accounts payable 457 552 Accrued
liabilities 275 322 Deferred revenue 222 210 Income taxes payable
61 60 Total Current liabilities 1,146 1,301 Long-term
debt 1,605 1,434 Long-term lease liabilities 102 — Long-term
deferred income taxes 1 8 Long-term deferred revenue 178 172 Other
long-term liabilities 77 89 Total Liabilities 3,109
3,004 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 305 294 Treasury
stock at cost, 18,176,120 and 18,280,673 shares as of March 30,
2019 and December 31, 2018, respectively (611 ) (613 ) Retained
earnings 1,803 1,688 Accumulated other comprehensive loss (31 ) (35
) Total Stockholders’ Equity 1,467 1,335 Total
Liabilities and Stockholders’ Equity $ 4,576 $ 4,339
ZEBRA TECHNOLOGIES CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In millions, except share data)
(Unaudited)
Three Months Ended March 30,
2019 March 31, 2018 Net sales: Tangible
products $ 924 $ 839 Services and software 142 138
Total Net sales 1,066 977 Cost of sales: Tangible products 471 423
Services and software 94 89 Total Cost of sales 565
512 Gross profit 501 465 Operating expenses: Selling
and marketing 122 120 Research and development 111 101 General and
administrative 76 71 Amortization of intangible assets 28 23
Acquisition and integration costs 4 2 Exit and restructuring costs
1 4 Total Operating expenses 342 321
Operating income 159 144 Other expenses: Foreign
exchange loss (3 ) — Interest expense, net (24 ) (11 ) Other, net
(1 ) — Total Other expenses, net (28 ) (11 ) Income before
income tax 131 133 Income tax expense 16 24 Net
income $ 115 $ 109 Basic earnings per share $ 2.14 $
2.04 Diluted earnings per share $ 2.12 $ 2.01
ZEBRA TECHNOLOGIES CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(In millions)
(Unaudited)
Three Months Ended March 30,2019
March 31,2018 Cash flows from operating
activities: Net income $ 115 $ 109 Adjustments to reconcile net
income to net cash provided by operating activities: Depreciation
and amortization 47 43 Amortization of debt issuance costs and
discounts 1 2 Share-based compensation 10 10 Deferred income taxes
(10 ) (2 ) Unrealized loss/(gain) on forward interest rate swaps 8
(12 ) Other, net 1 (1 ) Changes in operating assets and
liabilities: Accounts receivable, net 28 9 Inventories, net 23 6
Other assets (10 ) (7 ) Accounts payable (97 ) (12 ) Accrued
liabilities (94 ) (74 ) Deferred revenue 18 19 Income taxes 2 22
Other operating activities — 4 Net cash provided by
operating activities 42 116 Cash flows from investing
activities: Purchases of property, plant and equipment (15 ) (18 )
Acquisition of businesses, net of cash acquired (179 ) — Proceeds
from sale of long-term investments 10 — Purchases of long-term
investments — (2 ) Net cash used in investing activities
(184 ) (20 ) Cash flows from financing activities: Payments of
long-term debt (37 ) (95 ) Proceeds from issuance of long-term debt
183 — Other financing activities 15 3 Net cash
provided by/(used in) financing activities 161 (92 ) Effect
of exchange rate changes on cash (2 ) (2 ) Net increase in cash and
cash equivalents 17 2 Cash and cash equivalents at beginning of
period 44 62 Cash and cash equivalents at end of
period $ 61 $ 64 Supplemental disclosures of cash
flow information: Income taxes paid $ 22 $ 2 Interest paid $ 16 $
26
ZEBRA TECHNOLOGIES CORPORATION AND
SUBSIDIARIES
RECONCILIATION OF ORGANIC NET SALES
GROWTH
(Unaudited)
Three Months Ended March 30, 2019
AIT EVM Consolidated Reported GAAP
Consolidated Net sales growth 1.4 % 13.4 % 9.1 % Adjustments:
Impact of foreign currency translation(1) 1.0 % 0.8 % 0.9 % Impact
of acquisition(2) (1.2 )% (2.6 )% (2.1 )% Organic Net sales growth
1.2 % 11.6 % 7.9 % (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, 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. (2) For purposes of computing
Organic Net sales, amounts directly attributable to the Xplore
acquisition (included in our consolidated results beginning August
14, 2018) and the Temptime acquisition (included in our
consolidated results beginning February 21, 2019) will be excluded
for 12-months following the acquisition date.
ZEBRA TECHNOLOGIES CORPORATION AND
SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP
GROSS MARGIN
(In millions)
(Unaudited)
Three Months Ended March 30, 2019
March 31, 2018 AIT EVM
Consolidated AIT EVM
Consolidated
GAAP
Reported Net sales $ 357 $ 709 $ 1,066 $ 352 $ 625 $ 977 Reported
Gross profit (1) 184 318 501 183 282 465 Gross Margin 51.5 % 44.9 %
47.0 % 52.0 % 45.1 % 47.6 %
Non-GAAP
Adjusted Net sales $ 357 $ 709 $ 1,066 $ 352 $ 625 $ 977 Adjusted
Gross profit (2) 184 319 503 183 283 466 Adjusted Gross Margin 51.5
% 45.0 % 47.2 % 52.0 % 45.3 % 47.7 % (1) Fiscal 2019
consolidated results include corporate eliminations related to
business acquisitions that are not reported in segment results. (2)
Adjusted Gross profit excludes 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 March 30,
2019 March 31, 2018 Net income $
115 $ 109 Adjustments to Cost of sales(1) Purchase
accounting adjustments 1 — Share-based compensation 1 1
Total adjustments to Cost of sales 2 1
Adjustments to Operating expenses(1) Amortization of intangible
assets 28 23 Acquisition and integration costs 4 2 Share-based
compensation 12 10 Exit and restructuring costs 1 4
Total adjustments to Operating expenses 45 39
Adjustments to Other expenses, net(1) Amortization of debt issuance
costs and discounts 1 2 Investment loss 1 — Foreign exchange loss 3
— Forward interest rate swaps loss/(gain) 8 (12 )
Total
adjustments to Other expenses, net 13 (10 ) Income tax
effect of adjustments(2) Reported income tax expense 16 24 Adjusted
income tax (31 ) (25 )
Total adjustments to income tax (15 )
(1 ) Total adjustments 45 29
Non-GAAP Net
income $ 160 $ 138 GAAP earnings per share
Basic $ 2.14 $ 2.04 Diluted $ 2.12 $ 2.01
Non-GAAP earnings per share Basic $ 2.96 $ 2.59
Diluted $ 2.92
$ 2.56 (1) Presented on a pre-tax basis. (2)
Represents adjustments to the GAAP income tax expense commensurate
with pre-tax non-GAAP adjustments and to exclude the impacts of
certain discrete income tax items.
ZEBRA TECHNOLOGIES CORPORATION AND
SUBSIDIARIES
GAAP to NON-GAAP RECONCILIATION TO
EBITDA
(In millions)
(Unaudited)
Three Months Ended March 30,
2019 March 31, 2018 Net income $ 115 $
109 Add back: Depreciation 19 20 Amortization of intangible assets
28 23 Total Other expenses, net 28 11 Income tax expense 16
24 EBITDA (Non-GAAP) 206 187
Adjustments to Cost of sales Purchase accounting adjustments 1 —
Share-based compensation 1 1 Total adjustments to
Cost of sales 2 1 Adjustments to Operating expenses
Acquisition and integration costs 4 2 Share-based compensation 12
10 Exit and restructuring costs 1 4 Total adjustments
to Operating expenses 17 16 Total adjustments to
EBITDA 19 17 Adjusted EBITDA (Non-GAAP) $ 225
$ 204 Adjusted EBITDA % of Adjusted Net Sales 21.1 %
20.9 %
FREE CASH
FLOW
Three Months Ended March 30, 2019
March 31, 2018 Net cash provided by operating
activities $ 42 $ 116 Less: Purchases of property, plant and
equipment (15 ) (18 ) Free cash flow (Non-GAAP)(1) $ 27 $ 98
(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: https://www.businesswire.com/news/home/20190430005131/en/
InvestorsMichael Steele, CFA,
IRCVice President, Investor RelationsPhone: + 1 847 793
6707msteele@zebra.com
MediaTherese Van RyneDirector,
Global Public RelationsPhone: + 1 847 370 2317therese.vanryne@zebra.com
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