baird global industrial conference · 2019-11-07 · baird global industrial conference november 7,...

ZEBRA TECHNOLOGIESZEBRA TECHNOLOGIES

Baird

Global Industrial Conference

November 7, 2019

Safe Harbor Statement

Statements made in this presentation which are not statements of historical fact are forward-looking statements and are

subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Actual results may differ

from those expressed or implied in the company’s forward-looking statements. Zebra may elect to update forward-looking

statements but expressly disclaims any obligation to do so, even if the company’s estimates change. 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, 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 it

industry. These and other factors could have an adverse effect on Zebra’s sales, gross profit margins and results of

operations. 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. In particular, please refer to Zebra’s

latest filing of its Form 10-K and Form 10-Q. This presentation includes certain non-GAAP financial measures and we refer to

the reconciliations to the comparable GAAP financial measures and related information.

ZEBRA TECHNOLOGIES 2

IMAGE AREA

7.5” h x 7.4”w

Zebra: Compelling

Investment Opportunity

ZEBRA TECHNOLOGIES3

• Innovation & Expertise

• Industry Leadership

• Capitalizing on Megatrends

• Global Reach and Scale

• Diversified Customer Base

• Attractive Earnings Expansion

ZEBRA TECHNOLOGIES

Evolution to Solutions Provider

8First All-touch Android

Inventory Solution

First Enterprise

Digital Assistant

(EDA)

Initial

Public

Offering

Founded as Data

Specialties by Ed

Kaplan and Gary Cless

First Barcode

Printer First Laser-

Scannable

Two-

dimensional

Barcode

First Wearable

Computer First Smart

Environment

for Thermal

Printers

Rebranded the

company as

Zebra

TechnologiesMotorola Solutions’ Enterprise Business

Merg

ers

& A

cq

uis

itio

ns

Researc

h &

Develo

pm

en

t

First Mobile RFID

Printing Solutions

First Handheld

Laser Barcode

Scanner

Savanna

Data

Intelligence

Platform

(Zebra Retail Solutions)

1969 1982 1986 1991 1997 2004 2008 2013 2015 2017 2018 2019

. .

4

Workforce Connect

Enterprise

Communications

.

Zebra Ventures

.

ZEBRA TECHNOLOGIES5

Retail &

Ecommerce

Transportation &

Logistics

Manufacturing

Healthcare

OtherAsset

Intelligence

and

Tracking

Enterprise

Visibility

and

Mobility

$4.4BGlobal Sales TTM 3Q19

~7,400 Employees Worldwide

~4,400US & Int’l Patents Issued

and Pending

10,000+ Channel Partners

Worldwide

Latin America

North

America

EMEA

Asia

Pacific

Sales by Geography Sales by Vertical Market Sales by Segment

Industry Leader With Global Diversified Customer Base

Market Leadership

#1 Market Share in Barcode Printing (>40%)#1 Market Share in Enterprise Mobile Computing (~50%)

and Data Capture Solutions (~ 30%)

Segment Sales1: $1.47B Segment Sales1: $2.96B

Printing

Services

Supplies

Enterprise Mobile

Computing

Data Capture

Services

Location Solutions and

Zebra Retail Solutions

6

1 Trailing twelve months through 3Q19

Enterprise Visibility & Mobility (EVM)Asset Intelligence & Tracking (AIT)

Source: VDC, Internal Estimates, Public Financials

ZEBRA TECHNOLOGIES

Savanna

Data

Intelligence

Platform

Real-Time Analytics

Identity | Location | StatusApply Insight to

Enable the Best Next Move

Zebra Enables Enterprise Asset Intelligence

SENSE ANALYZE ACT

Our Competitive Differentiation = Hardware + Software + Cloud

7

ZEBRA TECHNOLOGIES

Advancing Our Enterprise Asset Intelligence Vision

Act

Sense

Analyze

Identity | Location | Status

Real-Time Analytics

Direct Best Next Move

8

Improving Global Health Computer Vision

Recent Examples Area of Opportunity

Machine Learning /

Artificial Intelligence

Intelligent

Automation

Developer Partner Ecosystem

Framework

A Technology Leader in Attractive Markets

ZEBRA TECHNOLOGIES

Expansion

$15B+Faster growth markets

than the core

$25B+ Addressable Market Opportunity

9

Expansion

$15B+Faster growth markets

than the core

Mobile Computing

Data Capture

Barcode Printing

Support Services

Core

~ $10B3-4% industry

growth

Evolving the portfolio into solutions

Organic and inorganic opportunities in

underpenetrated and faster-growth

adjacencies

4-5% annualized organic sales growth

Extending our leadership position and

penetration in core markets

Capitalizing on key megatrends including

IoT, Cloud Computing, Mobility, Intelligent

Automation and On-Demand Economy

Achieving Strong Profitable Growth (1)

ZEBRA TECHNOLOGIES

FY15 FY16 FY17 FY18 YTD 3Q19

Organic Net Sales Growth(2,3,4)

+7.5% +0.4% +6.5% +11.1% +5.9%

Adjusted EBITDA Margin 16.2% 17.5% 18.6% 20.7% 21.7%

Non-GAAP Diluted EPS Growth NM +10% +26% +56% +18%

Free Cash Flow (Annual) $0M $303M $428M $721M $685M(5)

Free Cash Flow Conversion (Annual)(6)

103% 113% 121% 101%(5)

1. Refer to the appendix of this presentation for reconciliations of GAAP to non-GAAP financial results.

2. Assumes constant FX to prior-year period

3. FY15 organic net sales growth uses estimated historical 2014 Enterprise (acquired Oct. 2014) sales.

4. Excludes revenue from the wireless LAN business, which was sold on October 31, 2016. Amounts directly attributable to business acquisitions are excluded for 12 months following the date

acquired.

5. Trailing twelve months through 3Q19

6. Free Cash Flow Conversion equals Free Cash Flow divided by Non-GAAP Net Income

10

Thank You

ZEBRA and the stylized Zebra head are trademarks of ZIH Corp, registered in many jurisdictions worldwide. All other trademarks are the property of their

respective owners. ©2018 ZIH Corp and/or its affiliates. All rights reserved.11

Investor Relations

[email protected]

(847) 793-5592

mailto:[email protected]

Appendix

ZEBRA TECHNOLOGIES

Use of Non-GAAP Financial Information

This presentation 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 presentation 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.

13

ZEBRA TECHNOLOGIES

GAAP to Non-GAAP Reconciliation – Organic Net Sales Growth

14

Nine Months Ended

September 28, 2019

Consolidated

Reported GAAP Consolidated Net sales growth 6.9 %

Adjustments:

Impact of foreign currency translation (1) 1.1 %

Impact of acquisitions (2) (2.1 )%

Organic Net sales growth 5.9 %

(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 n ot 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, 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 the 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), the Temptime acquisition (included in our consolidated results

beginning February 21, 2019), and the Profitect acquisition (included in our consolidated results beginning May 31,

2019) are excluded for twelve months following the respective acquisition dates.

ZEBRA TECHNOLOGIES


Twelve Months Ended

December 31, 2018

Reported GAAP Consolidated Net sales growth 13.3 %

Adjustments:

Impact of foreign currency translation (1) (1.6 )%

Impact of Xplore acquisition(2) (0.6 )%

Organic Net sales growth 11.1 %

(1) Operating results reported in U.S. dollars are affected by foreign currency exchange rate fluctuations.


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) will be excluded for 12-months following the acquisition date.

15

ZEBRA TECHNOLOGIES


December 31, 2017 December 31, 2016

Reported GAAP Consolidated Net sales growth 4.1 % (2.1)%

Adjustments:

Impact of Wireless LAN Net sales(1) 3.2 % 1.4 %

Impact of foreign currency translation(2) (0.6)% 1.3 %

Corporate, eliminations(3) (0.2)% (0.2)%

Organic Net sales growth 6.5 % 0.4 %

(1) The Company sold the wireless LAN business in October 2016. Net sales from this business are excluded 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.


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 which are related to the

Enterprise Acquisition in October 2014 and are not reported in segment results.

Twelve Months Ended

16

ZEBRA TECHNOLOGIES

GAAP to Non-GAAP Reconciliation – EBITDA

17

Nine Months Ended

September

28,

2019

September

29,

2018

Net income $ 375 $ 306

Add back:

Depreciation 55 60

Amortization of intangible assets 84 71

Total Other expenses, net 85 55

Income tax expense 44 70

EBITDA (Non-GAAP) 643 562

Adjustments to Cost of sales

Purchase accounting adjustments 6 1

Share-based compensation 3 3

Total adjustments to Cost of sales 9 4

Adjustments to Operating expenses

Acquisition and integration costs 20 8

Legal Settlement — 13

Share-based compensation 40 37

Exit and restructuring costs 2 9

Product sourcing diversification initiative 1 —

Total adjustments to Operating expenses 63 67

Total adjustments to EBITDA 72 71

Adjusted EBITDA (Non-GAAP) $ 715 $ 633

Adjusted EBITDA % of Adjusted Net Sales 21.7 % 20.5 %

ZEBRA TECHNOLOGIES


Twelve Months Ended

December 31, 2018

Net income (loss) $ 421

Add back:

Depreciation 78

Amortization of intangible assets 97

Total Other expenses, net 86

Income tax expense 103

EBITDA (Non-GAAP) 785

Adjustments to Net sales

Purchase accounting adjustments —

Total adjustments to Net sales —


Purchase accounting adjustments 3

Share-based compensation 4

Total adjustments to Cost of sales 7


Acquisition and integration costs 8

Legal Settlement 13


Exit and restructuring costs 11

Total adjustments to Operating expenses 81

Total adjustments to EBITDA 88

Adjusted EBITDA (Non-GAAP) $ 873

Adjusted EBITDA % of Adjusted Net Sales 20.7 %

18

ZEBRA TECHNOLOGIES


19

ZEBRA TECHNOLOGIES


Operating income $ 37

Depreciation

Amortization of intangible assets

EBITDA (Non-GAAP)

Adjustments to Net sales

Purchase accounting adjustments

Total adjustments to Net sales



Share-based compensation

Total adjustments to Cost of sales


Acquisition and integration costs

Impairment of goodwill and other intangibles


Exit and restructuring costs

Total adjustments to Operating expenses

Total adjustments to EBITDA

Adjusted EBITDA (Non-GAAP) $ 595

Adjusted EBITDA % of Non-GAAP sales %

EBITDA Reconciliation

69

December 31,

2015

16

16

251

357

16.2

Twelve Months

Ended

238

40

215

—

30

145

3

7

4

20

ZEBRA TECHNOLOGIES

GAAP to Non-GAAP Reconciliation – Net Income

21

ZEBRA TECHNOLOGIES

GAAP to Non-GAAP Reconciliation – Net Income Twelve Months Ended

December 31, 2018

Net income (loss) $ 421

Adjustments to Net sales(1)

Purchase accounting adjustments —

Total adjustment to Net sales —

Adjustments to Cost of sales (1)

Purchase accounting adjustments 3


Total adjustments to Cost of sales 7

Adjustments to Operating expenses (1)

Amortization of intangible assets 97

Acquisition and integration costs 8

Legal Settlement 13


Exit and restructuring costs 11

Total adjustments to Operating expenses 178

Adjustments to Other expenses, net (1)

Debt extinguishment costs —

Amortization of debt issuance costs and discounts 15

Investment (gain)/loss (10 )

Foreign exchange loss 5

Forward interest rate swaps loss/(gain) (6 )

Total adjustments to Other expenses, net 4

Income tax effect of adjustments(2)

Reported income tax expense 103

Adjusted income tax (115 )

Total adjustments to income tax (12 )

Total adjustments 177

Non-GAAP Net income $ 598

GAAP earnings per share

Basic $ 7.86

Diluted $ 7.76

Non-GAAP earnings per share

Basic $ 11.16

Diluted $ 11.01

(1) Presented on a pre-tax basis.

(2) Represents the adjustment to the GAAP basis tax provision commensurate with non -GAAP adjustments.

22

ZEBRA TECHNOLOGIES


Net income (loss) $ 17 $ (137 ) $ (158 )

Adjustments to Net sales(1)


Total adjustment to Net sales

Adjustments to Cost of sales(1)



Total adjustments to Cost of sales

Adjustments to Operating expenses(1)

Amortization of intangible assets

Acquisition and integration costs

Impairment of goodwill and other intangibles


Exit and restructuring costs

Total adjustments to Operating expenses

Adjustments to Other expenses, net(1)

Debt extinguishment costs

Amortization of debt issuance costs and discounts

Investment loss

Foreign exchange loss

Forward interest rate swaps (gain) loss ) )

Total adjustments to Other expenses, net


Reported income tax expense )

Adjusted income tax expense ) ) )

Total adjustments to income tax ) ) )

Total adjustments

Non-GAAP Net income $ 379 $ 293 $ 265

GAAP earnings (loss) per share

Basic $ 0.33 $ (2.65 ) $ (3.10 )

Diluted $ 0.32 $ (2.65 ) $ (3.10 )

Non-GAAP earnings per share

Basic $ 7.14 $ 5.67 $ 5.19

Diluted $ 7.05 $ 5.60 $ 5.08

Non-GAAP weighted average shares outstanding (3)

Basic

Diluted

(1) Presented on a pre-tax basis.

(3) In periods of loss, Non-GAAP weighted-average shares exclude restricted stock awards and performance stock awards within basic and dilutive

weighted-average share computations. Share-based compensation awards that are dilutive in nature are included within weighted-average dilutive share

computations.

52,096,036

Twelve Months Ended

(2) Represents the adjustment to the GAAP basis tax provision commensurate with non-GAAP adjustments.

(79

(101

423

(4

35

16

—

—

30

40

7

251

16

4

December 31,

2015

53,688,832 52,259,157

53,021,761 51,579,112 50,996,297

(34 (78

362 430

71 8

(105 (86

(22

105 35

1 5

(2 —

23

40 23

1 7

65 —

466

16 19

285 461

— 62

35 26

145

184 229

50 125

3 2

3

—

3 2

3 10

3 10

16

2017

December 31,

2016

December 31,

23

ZEBRA TECHNOLOGIES


24

Net income $ 136 $ 124 $ 115 $ 115 $ 490

Adjustments to Cost of sales(1)

Purchase accounting adjustments 3 2 1 2 8

Share-based compensation 1 1 1 1 4

Total adjustments to Cost of sales 4 3 2 3 12

Adjustments to Operating expenses(1)

Amortization of intangible assets 26 30 28 26 110

Acquisition and integration costs 12 4 4 — 20

Share-based compensation 11 17 12 12 52

Exit and restructuring costs — 1 1 2 4

Product sourcing diversification initiative 1 — — — 1

Total adjustments to Operating expenses 50 52 45 40 187

Adjustments to Other expenses, net(1)

Debt extinguishment costs 3 — — — 3

Amortization of debt issuance costs and discounts 4 1 1 2 8

Investment loss (gain) — (4) 1 (9) (12)

Foreign exchange loss (gain) (2) 1 3 — 2

Forward interest rate swaps loss (gain) 4 15 8 18 45

Total adjustments to Other expenses, net 9 13 13 11 46


Reported income tax expense 23 5 16 33 77

Adjusted income tax (35) (32) (31) (33) (131)

Total adjustments to income tax (12) (27) (15) — (54)

Total adjustments 51 41 45 54 191

Non-GAAP Net income $ 187 $ 165 $ 160 $ 169 $ 681

(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.

Three Months Ended

Trailing Twelve

Months Ended

September 28,

20192019

December 31,

2018

September 28,

2019

June 29,

2019

March 30,

ZEBRA TECHNOLOGIES

GAAP to Non-GAAP Reconciliation – Free Cash Flow

25

Net cash provided by operating activities $ 225 $ 153 $ 42 $ 325 $ 745

Less: Purchases of property, plant and equipment ) ) ) ) )

Free cash flow (Non-GAAP)(1) $ 211 $ 138 $ 27 $ 309 $ 685

(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.

September 28,

2019

(60

Trailing Twelve

Months Ended

(14 (15

March 30, December 31,

2019 2018

(15 (16

September 28,

2019

June 29,

2019

Three Months Ended

ZEBRA TECHNOLOGIES


Twelve Months Ended

December 31, 2018

Net cash provided by operating activities $ 785

Less: Purchases of property, plant and equipment (64 )

Free cash flow (Non-GAAP)(1) $ 721

(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 ca sh flows.

26

ZEBRA TECHNOLOGIES


Net cash provided by operating activities $ 478 $ 380 $ 122

Less: Purchases of property, plant and equipment ) ) )

Free cash flow (Non-GAAP)(1) $ 428 $ 303 $ 0

Free cash flow conversion(2) % % %

(2) Free cash flow conversion is defined as Free cash flow divided by non-GAAP Net income.

Twelve Months Ended

December 31,

2015

(122

0

(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.

(50 (77

113 103

December 31,

2017

December 31,

2016

27

baird global industrial conference · 2019-11-07 · baird global industrial conference november 7,...

Documents