nasdaq 39th investor · rfid handheld and first enterprise digital assistant (eda) initial public...
TRANSCRIPT
Nasdaq 39th Investor
Conference
London
Olivier Leonetti, CFO
December 4, 2018
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, 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. 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 6.9”w
Zebra: Compelling Investment
Opportunity
3
• Innovation & Expertise
• Industry Leadership
• Capitalizing on Megatrends
• Global Reach and Scale
• Attractive Earnings Expansion
• ZEBRA TECHNOLOGIES3
ZEBRA TECHNOLOGIES
Five Decades of Innovation
8First All-touch
Android Inventory
Solution
First Rugged
RFID Handheld
and First
Enterprise Digital
Assistant (EDA)
Initial
Public
OfferingFounded 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
First
Android-
based
Enterprise
Wearable
Computer
Migration Path to
Modem OS (Android)
for Legacy Windows
Applications
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
4
Industry Leader Serving Enterprises Globally
ZEBRA TECHNOLOGIES5
5
Latin America
North
America
EMEA
Asia
Pacific
Retail &
Ecommerce
Transportation &
Logistics
Manufacturing
Healthcare
OtherAsset
Intelligence
and
Tracking
Enterprise
Visibility
and
Mobility
Sales By Geography Sales By Vertical Market Sales By Segment
$4.1BGlobal Sales
~7,000 Employees Worldwide
~4,300US & Int’l Patents Issued
and Pending
10,000+ Channel Partners
Worldwide
Note: Sales data TTM through 3Q18
Market Leadership and Segment Sales Breakdown
ZEBRA TECHNOLOGIES
Asset Intelligence & Tracking (AIT) Enterprise Visibility & Mobility (EVM)
#1 Market Share in Barcode Printing (~ 40%)#1 Market Share in Enterprise Mobile Computing (~ 45%)
and Data Capture Solutions (~ 30%)
Sales: $1.4B Sales: $2.7B
Printing
Services
Supplies
Enterprise Mobile
Computing
Data Capture
Services
Location Solutions and
Zebra Retail Solutions Note: Sales data TTM through 3Q18
6
Enabling Visibility at the Enterprise Edge
ZEBRA TECHNOLOGIES
Manufacturing HealthcareRetail/
E-Commerce
Transportation
& Logistics
7
ZEBRA TECHNOLOGIES
SENSE ANALYZE ACT
Savanna
Data
Intelligence
Platform
Real-Time Analytics
Identification.
Status.
Location.
Condition.
Apply Insight to
Enable the Best Next Move
Operational Visibility Services
Zebra Enables Enterprise Asset Intelligence
8
Successfully Navigating An Evolving Marketplace
ZEBRA TECHNOLOGIES
9
MYTHS FACTS
Mobile computing
devices commoditizing
1. Source: Retail Transformation Study (IHL Services Group and Peerless Insights) commissioned by Zebra Technologies, October 2017
Barcodes becoming
obsolete
Retail sector is in
decline and shift to
ecommerce hurts Zebra
• Retail sector is not declining, it’s transforming, benefitting Zebra (1)
• Total retail/ecommerce sales show increasing trend (~ 3%)
• Retail model evolving to better serve shoppers; omnichannel use cases expanding
• Zebra’s customers are market leaders investing in our technology
• Technology has become the basis of competition in retail and other sectors
• Zebra’s purpose-built enterprise mobile computers address the unique demands of the
enterprise environment
• We offer superior manageability and security with the highest customer ROI, and lowest
total cost of ownership, for a wide variety of use cases
• Superior support services and lifecycle value proposition is unmatched
• Barcoding remains the most prevalent means of asset track & trace visibility
• Additional use cases for barcoding continually emerging for automated data collection
• Offers the most compelling return on investment for many use cases
• Zebra has the broadest portfolio of various sensing technologies and implements cost-
effective tailored solutions
ZEBRA TECHNOLOGIES
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7.5” h x 7.4”w
Megatrends Driving Use
Case EvolutionNEW
• IoT
• Enterprise Mobility
• Cloud Computing
• On-demand economy /
shift to e-commerce
• Shift from task workers
to knowledge workers
NEW
TRADITIONAL
TRADITIONAL
10
A Leader in Attractive Markets
ZEBRA TECHNOLOGIES
Mobile Computing
Data Capture
Barcode Printing
Support Services
Expansion
$15B+Faster growth markets
than the core
Core
~ $9B3-4% industry
growth
Extending our leadership position in core
markets
Evolving the portfolio into solutions
Organic and inorganic opportunities in
underpenetrated and faster-growth
adjacencies
$24B+ Addressable Market Opportunity
4-5% Annualized organic sales growth
11
Achieving Strong Profitable Growth Post Enterprise Acquisition (1)
ZEBRA TECHNOLOGIES
FY15 FY16 FY17YTD
3Q18
Organic Net Sales Growth(2,3)
+7.5% +0.4% +6.5% +11.9%
Adjusted EBITDA Margin 16.2% 17.5% 18.6% 20.5%
Non-GAAP EPS Growth NM +10% +27% +68%
Free Cash Flow $0M $303M $428M $412M
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. Excludes revenue from the wireless LAN business, which was sold on October 31, 2016. Excludes revenue from Xplore Technologies, which was acquired on
August 14, 2018. FY15 organic net sales growth uses estimated historical 2014 Enterprise (acquired Oct. 2014) sales.
12
$3.25B$3.09B
$2.70B
$2.25B
$1.91B
2014 2015 2016 2017 3Q 2018
Excellent Progress on Acquisition Debt Reduction
>$1.3 Billion of Debt Principal Paydown
ZEBRA TECHNOLOGIES
4.8x
Leverage
4.1x
Leverage
3.2x
Leverage
2.2x
Leverage
Achieved Net-Debt-to-Adjusted EBITDA
Target: 2.0x–2.5x
NOTE: Total debt before unamortized discounts and debt issuance costs.
13
IMAGE AREA
7.5” h x 6.9”w
Zebra: Compelling Investment
Opportunity
14
• Innovation & Expertise
• Industry Leadership
• Capitalizing on Megatrends
• Global Reach and Scale
• Attractive Earnings Expansion
• ZEBRA TECHNOLOGIES 14
ZEBRA TECHNOLOGIES
Q & A
Appendix
ZEBRA TECHNOLOGIES 16
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.
17
ZEBRA TECHNOLOGIES
GAAP to Non-GAAP Reconciliation – Organic Net Sales Growth
Nine Months Ended
September 29, 2018
Reported GAAP Consolidated Net sales growth 14.3 %
Adjustments:
Impact of foreign currency translation (1) (2.1 )%
Impact of Xplore acquisition(2) (0.3 )%
Organic Net sales growth 11.9 %
(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) will be excluded for 12-months following
the acquisition date.
18
ZEBRA TECHNOLOGIES
GAAP to Non-GAAP Reconciliation – Organic Net Sales Growth
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.
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.
(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
19
ZEBRA TECHNOLOGIES
GAAP to Non-GAAP Reconciliation – EBITDA
20
ZEBRA TECHNOLOGIES
GAAP to Non-GAAP Reconciliation – EBITDA
21
ZEBRA TECHNOLOGIES
GAAP to Non-GAAP Reconciliation – EBITDA
Operating income $ 37
Depreciation
Amortization of intangible assets
EBITDA (Non-GAAP)
Adjustments to Net sales
Purchase accounting adjustments
Total adjustments to Net sales
Adjustments to Cost of sales
Purchase accounting adjustments
Share-based compensation
Total adjustments to Cost of sales
Adjustments to Operating expenses
Acquisition and integration costs
Impairment of goodwill and other intangibles
Share-based compensation
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
22
ZEBRA TECHNOLOGIES
GAAP to Non-GAAP Reconciliation – Net Income Nine Months Ended
September 29,
2018 September 30,
2017
Net income (loss) $ 306 $ 13
Adjustments to Net sales(1) Purchase accounting adjustments — 3
Total adjustment to Net sales — 3
Adjustments to Cost of sales(1) Purchase accounting adjustments 1 —
Share-based compensation 3 2
Total adjustments to Cost of sales 4 2
Adjustments to Operating expenses(1) Amortization of intangible assets 71 151
Acquisition and integration costs 8 50
Legal Settlement 13 —
Share-based compensation 37 25
Exit and restructuring costs 9 10
Total adjustments to Operating expenses 138 236
Adjustments to Other expenses, net(1) Debt extinguishment costs — 49
Amortization of debt issuance costs and discounts 13 30
Gain on Sale of Investments (1 ) —
Foreign exchange loss (gain) 5 (2 )
Forward interest rate swaps gain (24 ) (1 )
Total adjustments to Other expenses, net (7 ) 76
Income tax effect of adjustments(2) Reported income tax expense (benefit) 70 (3 )
Adjusted income tax (82 ) (74 )
Total adjustments to income tax (12 ) (77 )
Total adjustments 123 240
Non-GAAP Net income $ 429 $ 253
GAAP earnings per share
Basic $ 5.72 $ 0.25
Diluted $ 5.64 $ 0.25
Non-GAAP earnings per share Basic $ 8.02 $ 4.78
Diluted $ 7.92 $ 4.72
Non-GAAP weighted average shares outstanding (3)
Basic 53,516,859 52,964,066
Diluted 54,237,553 53,631,499
(1) Presented on a pre-tax basis.
(2) Represents the adjustment to the GAAP basis tax provision commensurate with non-GAAP adjustments.
(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.
23
ZEBRA TECHNOLOGIES
GAAP to Non-GAAP Reconciliation – Net Income
Net income (loss) $ 17 $ (137 ) $ (158 )
Adjustments to Net sales(1)
Purchase accounting adjustments
Total adjustment to Net sales
Adjustments to Cost of sales(1)
Purchase accounting adjustments
Share-based compensation
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
Share-based compensation
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
Income tax effect of adjustments(2)
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,
24
ZEBRA TECHNOLOGIES
GAAP to Non-GAAP Reconciliation – Free Cash Flow
Nine Months Ended
September 29,
2018
Net cash provided by operating activities $ 460
Less: Purchases of property, plant and equipment (48 )
Free cash flow (Non-GAAP)(1) $ 412
(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.
25
ZEBRA TECHNOLOGIES
GAAP to Non-GAAP Reconciliation – Free Cash Flow
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
26
27
Contact
For questions, email [email protected]
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.