Baird Global Industrial Conference · 2019-11-07 · Baird Global Industrial Conference November 7,...
Transcript of 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
(847) 793-5592
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
GAAP to Non-GAAP Reconciliation – Organic Net Sales Growth
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.
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.
15
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
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
GAAP to Non-GAAP Reconciliation – EBITDA
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 —
Adjustments to Cost of sales
Purchase accounting adjustments 3
Share-based compensation 4
Total adjustments to Cost of sales 7
Adjustments to Operating expenses
Acquisition and integration costs 8
Legal Settlement 13
Share-based compensation 49
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
GAAP to Non-GAAP Reconciliation – EBITDA
19
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
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
Share-based compensation 4
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
Share-based compensation 49
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
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,
23
ZEBRA TECHNOLOGIES
GAAP to Non-GAAP Reconciliation – Net Income
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
Income tax effect of adjustments(2)
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
GAAP to Non-GAAP Reconciliation – Free Cash Flow
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
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
27