Zebra Technologies Announces Third-Quarter 2019 Results

Third-Quarter Financial Highlights

  • Third-quarter net sales of $1,130 million; year-over-year growth of 3.5%
  • Net income of $136 million and net income per diluted share of $2.50
  • Non-GAAP diluted EPS increased 19.1% year-over-year to $3.43
  • Adjusted EBITDA increased 11.7% year-over-year to $257 million; and adjusted EBITDA margin expanded 160 bps year-over-year to 22.7%

LINCOLNSHIRE, Ill.--()--Zebra Technologies Corporation (NASDAQ: ZBRA), an innovator at the edge of the enterprise with solutions and partners that enable businesses to gain a performance edge, today announced results for the third quarter ended September 28, 2019.

"In the third quarter our team executed well, drove broad-based productivity improvements, and delivered record earnings per share, which exceeded our guidance range. Sales growth in North America and EMEA was partially offset by a softer spending environment in China,” said Anders Gustafsson, Chief Executive Officer of Zebra Technologies. “Our team continues to win business with a broad range of leading enterprises as evidenced by our recently announced multi-year agreement with the United States Postal Service. Our value proposition and industry-leading portfolio of solutions are resonating with customers, providing confidence in a solid finish to the year. We continue to invest in our Enterprise Asset Intelligence vision, broadening our capabilities as a solutions provider in vibrant markets."

$ in millions, except per share amounts

3Q19

3Q18

Change

Select reported measures:

 

 

 

Net sales

$

1,130

 

$

1,092

 

3.5

%

Gross profit

535

 

505

 

5.9

%

Net income

136

 

127

 

7.1

%

Net income per diluted share

$

2.50

 

$

2.34

 

6.8

%

 

 

 

 

Select Non-GAAP measures:

 

 

 

Organic net sales growth

 

 

3.0

%

Adjusted gross profit

539

 

507

 

6.3

%

Adjusted gross margin

47.7

%

46.4

%

130 bps

Adjusted EBITDA

257

 

230

 

11.7

%

Adjusted EBITDA margin

22.7

%

21.1

%

160 bps

Non-GAAP net income

$

187

 

$

156

 

19.9

%

Non-GAAP earnings per diluted share

$

3.43

 

$

2.88

 

19.1

%

Reported (GAAP) results

Net sales were $1,130 million in the third quarter of 2019 compared to $1,092 million in the third quarter of 2018. Net sales in the Enterprise Visibility & Mobility ("EVM") segment were $757 million in the third quarter of 2019 compared with $739 million in the third quarter of 2018. Asset Intelligence & Tracking ("AIT") segment net sales were $373 million in the third quarter of 2019 compared to $353 million in the prior year period. Third-quarter 2019 gross profit was $535 million compared to $505 million in the comparable prior year period. Net income for the third quarter of 2019 was $136 million, or $2.50 per diluted share, compared to net income of $127 million, or $2.34 per diluted share, for the third quarter of 2018.

Adjusted (Non-GAAP) results

Consolidated net sales were $1,130 million in the third quarter of 2019 compared to $1,092 million in the prior year period, an increase of 3.5%. Consolidated organic net sales growth for the third quarter was 3.0% reflecting solid growth in North America and EMEA. Third-quarter year-over-year organic net sales growth was 2.7% in the EVM segment and 3.5% in the AIT segment.

Consolidated adjusted gross margin was 47.7% in the third quarter of 2019, compared to 46.4% in the prior year period. This increase was primarily due to higher productivity and cost efficiency across the business, as well as favorable business mix, partially offset by a modest impact from tariffs (customs duties). Adjusted operating expenses increased in the third quarter of 2019 to $300 million from $297 million in the prior year period primarily due to the inclusion of expenses from recently acquired businesses and investments in organic growth, partially offset by lower incentive compensation expense.

Adjusted EBITDA for the third quarter of 2019 increased to $257 million, or 22.7% of adjusted net sales, compared to $230 million, or 21.1% of adjusted net sales, for the third quarter of 2018 primarily due to higher gross margin and lower operating expenses as a percentage of net sales.

Non-GAAP net income for the third quarter of 2019 increased to $187 million, or $3.43 per diluted share, compared to $156 million, or $2.88 per diluted share, for the prior year period.

Balance Sheet and Cash Flow

As of September 28, 2019, the company had cash and cash equivalents of $33 million and total debt of $1,528 million.

Free cash flow was $376 million for the first nine months of 2019. The company generated $420 million of operating cash flow and incurred capital expenditures of $44 million.

For the first nine months of 2019, the company made payments of long-term debt of $661 million and received proceeds from the issuance of long-term debt of $593 million, resulting in $68 million net debt repayments. The company made cash interest payments of $49 million for the first nine months of 2019 as compared to $73 million in the prior year period. Additionally, the company made $20 million of share repurchases through the end of the third quarter under the $1 billion authorization announced on July 30, 2019.

Outlook

The company expects fourth-quarter 2019 net sales to increase approximately 4% to 6% from the fourth quarter of 2018. This expectation includes an approximately 1 percentage point additive impact from recently acquired businesses, and an approximately 1 percentage point negative impact from foreign currency translation.

Adjusted EBITDA margin is expected to be approximately 22% to 23% for the fourth quarter of 2019, which includes an estimated $5-10 million net incremental cost of sales attributable to Section 301 List 4 tariffs. Non-GAAP earnings per diluted share are expected to be in the range of $3.55 to $3.75. This assumes an adjusted effective tax rate of approximately 16% to 17%.

For the full-year 2019, the company expects to generate free cash flow of at least $625 million.

The company has begun diversifying the sourcing of most of its U.S. volumes out of China. This work, together with other actions the company has taken, is expected to substantially mitigate the recently enacted Section 301 List 4 tariffs by mid-2020. These actions are expected to result in up to $30 million of one-time pre-tax charges through mid-2020, plus an estimated $10-15 million of capital expenditures. The net impact to cost of sales from the recently enacted List 4 tariffs is expected to peak at $15-25 million in the first quarter of 2020 as we realize a full quarter of impact, which should moderate through mid-2020 as the company completes this initiative.

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 third quarter of 2019. The conference call will be held today, Tuesday, Oct. 29, 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 four years, Zebra helps our customers capture their edge. For more information, visit www.zebra.com or sign up for our news alerts. Participate in our Your Edge blog and 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 current period results at the currency exchange rates used in the comparable period in the prior year, rather than the exchange rates in effect during the current period. In addition, the company excludes the impact of its foreign currency hedging program in the prior year periods. The company believes these measures should be considered a supplement to and not in lieu of the company’s performance measures calculated in accordance with GAAP.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

 

 

September 28,
2019

 

December 31,
2018

 

(Unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

33

 

 

$

44

 

Accounts receivable, net of allowances for doubtful accounts of $2 million and $3 million as of September 28, 2019 and December 31, 2018, respectively

588

 

 

520

 

Inventories, net

468

 

 

520

 

Income tax receivable

76

 

 

24

 

Prepaid expenses and other current assets

66

 

 

54

 

Total Current assets

1,231

 

 

1,162

 

Property, plant and equipment, net

249

 

 

249

 

Right-of-use lease asset

117

 

 

 

Goodwill

2,618

 

 

2,495

 

Other intangibles, net

290

 

 

232

 

Long-term deferred income taxes

83

 

 

114

 

Other long-term assets

120

 

 

87

 

Total Assets

$

4,708

 

 

$

4,339

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Current portion of long-term debt

$

205

 

 

$

157

 

Accounts payable

502

 

 

552

 

Accrued liabilities

314

 

 

322

 

Deferred revenue

230

 

 

210

 

Income taxes payable

55

 

 

60

 

Total Current liabilities

1,306

 

 

1,301

 

Long-term debt

1,314

 

 

1,434

 

Long-term lease liabilities

105

 

 

 

Long-term deferred income taxes

1

 

 

8

 

Long-term deferred revenue

202

 

 

172

 

Other long-term liabilities

86

 

 

89

 

Total Liabilities

3,014

 

 

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

324

 

 

294

 

Treasury stock at cost, 18,104,739 and 18,280,673 shares as of September 28, 2019 and December 31, 2018, respectively

(663

)

 

(613

)

Retained earnings

2,063

 

 

1,688

 

Accumulated other comprehensive loss

(31

)

 

(35

)

Total Stockholders’ Equity

1,694

 

 

1,335

Total Liabilities and Stockholders’ Equity

$

4,708

$

4,339

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share data)

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

September 28,
2019

 

September 29,
2018

 

September 28,
2019

 

September 29,
2018

Net sales:

 

 

 

 

 

 

 

Tangible products

$

981

 

 

$

959

 

 

$

2,868

 

 

$

2,687

 

Services and software

149

 

 

133

 

 

425

 

 

394

 

Total Net sales

1,130

 

 

1,092

 

 

3,293

 

 

3,081

 

Cost of sales:

 

 

 

 

 

 

 

Tangible products

497

 

 

495

 

 

1,456

 

 

1,368

 

Services and software

98

 

 

92

 

 

281

 

 

271

 

Total Cost of sales

595

 

 

587

 

 

1,737

 

 

1,639

 

Gross profit

535

 

 

505

 

 

1,556

 

 

1,442

 

Operating expenses:

 

 

 

 

 

 

 

Selling and marketing

124

 

 

120

 

 

373

 

 

361

 

Research and development

110

 

 

113

 

 

329

 

 

323

 

General and administrative

78

 

 

75

 

 

244

 

 

239

 

Amortization of intangible assets

26

 

 

25

 

 

84

 

 

71

 

Acquisition and integration costs

12

 

 

6

 

 

20

 

 

8

 

Exit and restructuring costs

 

 

4

 

 

2

 

 

9

 

Total Operating expenses

350

 

 

343

 

 

1,052

 

 

1,011

 

Operating income

185

 

 

162

 

 

504

 

 

431

 

Other expenses:

 

 

 

 

 

 

 

Foreign exchange gain (loss)

2

 

 

(1

)

 

(2

)

 

(5

)

Interest expense, net

(28

)

 

(18

)

 

(85

)

 

(52

)

Other, net

 

 

 

 

2

 

 

2

 

Total Other expenses, net

(26

)

 

(19

)

 

(85

)

 

(55

)

Income before income tax

159

 

 

143

 

 

419

 

 

376

 

Income tax expense

23

 

 

16

 

 

44

 

 

70

 

Net income

$

136

 

 

$

127

 

 

$

375

 

 

$

306

 

Basic earnings per share

$

2.52

 

 

$

2.37

 

 

$

6.95

 

 

$

5.72

 

Diluted earnings per share

$

2.50

 

 

$

2.34

 

 

$

6.87

 

 

$

5.64

 

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

 

Nine Months Ended

 

September 28,
2019

 

September 29,
2018

Cash flows from operating activities:

 

 

 

Net income

$

375

 

 

$

306

 

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

 

 

 

Depreciation and amortization

139

 

 

131

 

Amortization of debt issuance costs and discounts

6

 

 

12

 

Share-based compensation

36

 

 

34

 

Deferred income taxes

 

 

17

 

Unrealized loss (gain) on forward interest rate swaps

28

 

 

(24

)

Other, net

(4

)

 

3

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable, net

(73

)

 

(93

)

Inventories, net

65

 

 

(16

)

Other assets

(20

)

 

(10

)

Accounts payable

(51

)

 

69

 

Accrued liabilities

(62

)

 

(5

)

Deferred revenue

43

 

 

28

 

Income taxes

(58

)

 

2

 

Other operating activities

(4

)

 

6

 

Net cash provided by operating activities

420

 

 

460

 

Cash flows from investing activities:

 

 

 

Purchases of property, plant and equipment

(44

)

 

(48

)

Acquisition of businesses, net of cash acquired

(255

)

 

(72

)

Proceeds from sale of long-term investments

10

 

 

2

 

Purchases of long-term investments

(21

)

 

(2

)

Net cash used in investing activities

(310

)

 

(120

)

Cash flows from financing activities:

 

 

 

Payment of debt issuance costs and discounts

(5

)

 

(2

)

Payments of long-term debt

(661

)

 

(1,307

)

Proceeds from issuance of long-term debt

593

 

 

961

 

Payments of debt extinguishment costs

(1

)

 

(1

)

Payments for repurchases of common stock

(20

)

 

 

Payments of taxes related to net settlements of equity awards, net of proceeds from exercise of stock options and stock purchase plan purchases

(36

)

 

(2

)

Other financing activities

10

 

 

 

Net cash used in financing activities

(120

)

 

(351

)

Effect of exchange rate changes on cash

(1

)

 

(6

)

Net decrease in cash and cash equivalents

(11

)

 

(17

)

Cash and cash equivalents at beginning of period

44

 

 

62

 

Cash and cash equivalents at end of period

$

33

 

 

$

45

 

Supplemental disclosures of cash flow information:

 

 

 

Income taxes paid

$

102

 

 

$

46

 

Interest paid

$

49

$

73

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

RECONCILIATION OF ORGANIC NET SALES GROWTH

(Unaudited)

 

 

 

 

 

 

 

Three Months Ended

 

September 28, 2019

 

AIT

 

EVM

 

Consolidated

Reported GAAP Consolidated Net sales growth

5.7

%

 

2.4

%

 

3.5

%

Adjustments:

 

 

 

 

 

Impact of foreign currency translation(1)

0.8

%

 

1.3

%

 

1.2

%

Impact of acquisitions (2)

(3.0

)%

 

(1.0

)%

 

(1.7

)%

Organic Net sales growth

3.5

%

 

2.7

%

 

3.0

%

 

 

 

 

 

 

 

Nine Months Ended

 

September 28, 2019

 

AIT

 

EVM

 

Consolidated

Reported GAAP Consolidated Net sales growth

4.2

%

 

8.3

%

 

6.9

%

Adjustments:

 

 

 

 

 

Impact of foreign currency translation(1)

0.9

%

 

1.1

%

 

1.1

%

Impact of acquisitions (2)

(2.6

)%

 

(1.8

)%

 

(2.1

)%

Organic Net sales growth

2.5

%

 

7.6

%

 

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 not the U.S. Dollar. This impact is calculated by translating the current period results at the currency exchange rates used in the comparable prior year period, 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 CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP GROSS MARGIN

(In millions)

(Unaudited)

 

 

Three Months Ended

 

September 28, 2019

 

September 29, 2018

 

AIT

 

EVM

 

Consolidated

 

AIT

 

EVM

 

Consolidated

GAAP

 

 

 

 

 

 

 

 

 

 

 

Reported Net sales

$

373

 

 

$

757

 

 

$

1,130

 

 

$

353

 

 

$

739

 

 

$

1,092

 

Reported Gross profit (1)

187

 

 

351

 

 

535

 

 

172

 

 

334

 

 

505

 

Gross Margin

50.1

%

 

46.4

%

 

47.3

%

 

48.7

%

 

45.2

%

 

46.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net sales

$

373

 

 

$

757

 

 

$

1,130

 

 

$

353

 

 

$

739

 

 

$

1,092

 

Adjusted Gross profit (2)

187

 

 

352

 

 

539

 

 

173

 

 

334

 

 

507

 

Adjusted Gross Margin

50.1

%

 

46.5

%

 

47.7

%

 

49.0

%

 

45.2

%

 

46.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

September 28, 2019

 

September 29, 2018

 

AIT

 

EVM

 

Consolidated

 

AIT

 

EVM

 

Consolidated

GAAP

 

 

 

 

 

 

 

 

 

 

 

Reported Net sales

$

1,100

 

 

$

2,193

 

 

$

3,293

 

 

$

1,056

 

 

$

2,025

 

 

$

3,081

 

Reported Gross profit (1)

553

 

 

1,009

 

 

1,556

 

 

528

 

 

915

 

 

1,442

 

Gross Margin

50.3

%

 

46.0

%

 

47.3

%

 

50.0

%

 

45.2

%

 

46.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net sales

$

1,100

 

 

$

2,193

 

 

$

3,293

 

 

$

1,056

 

 

$

2,025

 

 

$

3,081

 

Adjusted Gross profit (2)

554

 

 

1,011

 

 

1,565

 

 

529

 

 

917

 

 

1,446

 

Adjusted Gross Margin

50.4

%

 

46.1

%

 

47.5

%

 

50.1

%

 

45.3

%

 

46.9

%

(1)

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

 

Nine Months Ended

 

September 28,
2019

 

September 29,
2018

 

September 28,
2019

 

September 29,
2018

Net income

$

136

 

 

$

127

 

 

$

375

 

 

$

306

 

Adjustments to Cost of sales(1)

 

 

 

 

 

 

 

Purchase accounting adjustments

3

 

 

1

 

 

6

 

 

1

 

Share-based compensation

1

 

 

1

 

 

3

 

 

3

 

Total adjustments to Cost of sales

4

 

 

2

 

 

9

 

 

4

 

Adjustments to Operating expenses(1)

 

 

 

 

 

 

 

Amortization of intangible assets

26

 

 

25

 

 

84

 

 

71

 

Acquisition and integration costs

12

 

 

6

 

 

20

 

 

8

 

Legal settlement

 

 

 

 

 

 

13

 

Share-based compensation

11

 

 

11

 

 

40

 

 

37

 

Exit and restructuring costs

 

 

4

 

 

2

 

 

9

 

Product sourcing diversification initiative

1

 

 

 

 

1

 

 

 

Total adjustments to Operating expenses

50

 

 

46

 

 

147

 

 

138

 

Adjustments to Other expenses, net(1)

 

 

 

 

 

 

 

Debt extinguishment costs

3

 

 

 

 

3

 

 

 

Amortization of debt issuance costs and discounts

4

 

 

3

 

 

6

 

 

13

 

Investment gain

 

 

 

 

(3

)

 

(1

)

Foreign exchange loss (gain)

(2

)

 

1

 

 

2

 

 

5

 

Forward interest rate swaps loss (gain)

4

 

 

(6

)

 

27

 

 

(24

)

Total adjustments to Other expenses, net

9

 

 

(2

)

 

35

 

 

(7

)

Income tax effect of adjustments(2)

 

 

 

 

 

 

 

Reported income tax expense

23

 

 

16

 

 

44

 

 

70

 

Adjusted income tax

(35

)

 

(33

)

 

(98

)

 

(82

)

Total adjustments to income tax

(12

)

 

(17

)

 

(54

)

 

(12

)

Total adjustments

51

 

 

29

 

 

137

 

 

123

 

Non-GAAP Net income

$

187

 

 

$

156

 

 

$

512

 

 

$

429

 

 

 

 

 

 

 

 

 

GAAP earnings per share

 

 

 

 

 

 

 

Basic

$

2.52

 

 

$

2.37

 

 

$

6.95

 

 

$

5.72

 

Diluted

$

2.50

 

 

$

2.34

 

 

$

6.87

 

 

$

5.64

 

Non-GAAP earnings per share

 

 

 

 

 

 

 

Basic

$

3.47

 

 

$

2.92

 

 

$

9.49

 

 

$

8.02

 

Diluted

$

3.43

 

 

$

2.88

 

 

$

9.38

 

 

$

7.92

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

54,085,500

 

53,740,174

 

53,999,044

 

53,516,859

Diluted weighted average and equivalent shares outstanding

54,637,823

 

54,424,880

 

54,610,091

 

54,237,553

(1)

Presented on a pre-tax basis.

(2)

Represents adjustments to the GAAP income tax expense commensurate with pre-tax non-GAAP adjustments (including the resulting impacts to U.S. BEAT/GILTI provisions) 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

 

Nine Months Ended

 

September 28,
2019

 

September 29,
2018

 

September 28,
2019

 

September 29,
2018

Net income

$

136

 

 

$

127

 

 

$

375

 

 

$

306

 

Add back:

 

 

 

 

 

 

 

Depreciation

18

 

 

20

 

 

55

 

 

60

 

Amortization of intangible assets

26

 

 

25

 

 

84

 

 

71

 

Total Other expenses, net

26

 

 

19

 

 

85

 

 

55

 

Income tax expense

23

 

 

16

 

 

44

 

 

70

 

EBITDA (Non-GAAP)

229

 

 

207

 

 

643

 

 

562

 

 

 

 

 

 

 

 

 

Adjustments to Cost of sales

 

 

 

 

 

 

 

Purchase accounting adjustments

3

 

 

1

 

 

6

 

 

1

 

Share-based compensation

1

 

 

1

 

 

3

 

 

3

 

Total adjustments to Cost of sales

4

 

 

2

 

 

9

 

 

4

 

Adjustments to Operating expenses

 

 

 

 

 

 

 

Acquisition and integration costs

12

 

 

6

 

 

20

 

 

8

 

Legal Settlement

 

 

 

 

 

 

13

 

Share-based compensation

11

 

 

11

 

 

40

 

 

37

 

Exit and restructuring costs

 

 

4

 

 

2

 

 

9

 

Product sourcing diversification initiative

1

 

 

 

 

1

 

 

 

Total adjustments to Operating expenses

24

 

 

21

 

 

63

 

 

67

 

Total adjustments to EBITDA

28

 

 

23

 

 

72

 

 

71

 

Adjusted EBITDA (Non-GAAP)

$

257

 

 

$

230

 

 

$

715

 

 

$

633

 

 

 

 

 

 

 

 

 

Adjusted EBITDA % of Adjusted Net Sales

22.7

%

 

21.1

%

 

21.7

%

 

20.5

%

FREE CASH FLOW

 

 

Nine Months Ended

 

September 28,
2019

 

September 29,
2018

Net cash provided by operating activities

$

420

 

 

$

460

 

Less: Purchases of property, plant and equipment

(44

)

 

(48

)

Free cash flow (Non-GAAP)(1)

$

376

 

 

$

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.

 

Contacts

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

Media
Therese Van Ryne
Director, Global Public Relations
Phone: + 1 847 370 2317
therese.vanryne@zebra.com

Release Summary

Zebra Technologies Corporation today announced results for the third quarter ended September 28, 2019.

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Contacts

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

Media
Therese Van Ryne
Director, Global Public Relations
Phone: + 1 847 370 2317
therese.vanryne@zebra.com