Zebra Technologies Announces Fourth-Quarter and Full-Year 2024 Results

LINCOLNSHIRE, Ill.--(BUSINESS WIRE)--Zebra Technologies Corporation (NASDAQ: ZBRA), a global leader in digitizing and automating frontline workflows, today announced results for the fourth quarter and full year ended December 31, 2024. “Our teams executed well, delivering results that exceeded our outlook. Strong year-end spending by our North American retail customers drove our fourth quarter outperformance,” said Bill Burns, Chief Executive Officer of Zebra Technologies. “As we enter 2025, our backlog supports solid first quarter growth. For the remainder of the year, we remain cautious in our growth outlook as our customers navigate an uncertain environment including a dynamic global trade, geopolitical, and macro-economic backdrop. We remain well positioned to drive sustainable profitable growth while extending our lead in the industry with innovative solutions that digitize and automate workflows across the supply chain." $ in millions, except per share amounts 4Q24 4Q23 Change FY24 FY23 Change Select reported measures: Net sales $ 1,334 $ 1,009 32.2 % $ 4,981 $ 4,584 8.7 % Gross profit 648 448 44.6 % 2,413 2,123 13.7 % Gross margin 48.6 % 44.4 % 420 bps 48.4 % 46.3 % 210 bps Net income 163 17 858.8 % 528 296 78.4 % Net income margin 12.2 % 1.7 % 1050 bps 10.6 % 6.5 % 410 bps Net income per diluted share $ 3.14 $ 0.31 912.9 % $ 10.18 $ 5.72 78.0 % Select Non-GAAP measures: Adjusted net sales $ 1,334 $ 1,009 32.2 % $ 4,981 $ 4,584 8.7 % Organic net sales growth 31.6 % 8.1 % Adjusted gross profit 650 450 44.4 % 2,422 2,129 13.8 % Adjusted gross margin 48.7 % 44.6 % 410 bps 48.6 % 46.4 % 220 bps Adjusted EBITDA 295 155 90.3 % 1,047 824 27.1 % Adjusted EBITDA margin 22.1 % 15.4 % 670 bps 21.0 % 18.0 % 300 bps Non-GAAP net income $ 208 $ 89 133.7 % $ 701 $ 508 38.0 % Non-GAAP earnings per diluted share $ 4.00 $ 1.71 133.9 % $ 13.52 $ 9.82 37.7 % Net sales were $1,334 million in the fourth quarter of 2024 compared to $1,009 million in the prior year. Net sales in the Enterprise Visibility & Mobility ("EVM") segment were $886 million in the fourth quarter of 2024 compared to $663 million in the prior year. Asset Intelligence & Tracking ("AIT") segment net sales were $448 million in the fourth quarter of 2024 compared to $346 million in the prior year. Consolidated organic net sales for the fourth quarter of 2024 increased 31.6% year over year, with a 33.1% increase in the EVM segment and 28.8% increase in the AIT segment. Fourth-quarter 2024 gross profit was $648 million compared to $448 million in the prior year. Gross margin increased to 48.6% for the fourth quarter of 2024 compared to 44.4% in the prior year. The increase was primarily due to volume leverage. Adjusted gross margin was 48.7% in the fourth quarter of 2024, compared to 44.6% in the prior year. Operating expenses increased in the fourth quarter of 2024 to $423 million from $374 million in the prior year primarily due to higher employee incentive compensation associated with financial performance and increased investments in the business. Adjusted operating expenses increased in the fourth quarter of 2024 to $373 million from $312 million in the prior year. Net income for the fourth quarter of 2024 was $163 million, or $3.14 per diluted share, compared to net income of $17 million, or $0.31 per diluted share, in the prior year. Non-GAAP net income for the fourth quarter of 2024 increased to $208 million, or $4.00 per diluted share, compared to $89 million, or $1.71 per diluted share, in the prior year. Adjusted EBITDA for the fourth quarter of 2024 increased to $295 million, or 22.1% of adjusted net sales, compared to $155 million, or 15.4% of adjusted net sales, in the prior year due to higher gross profit and lower operating expense as a percentage of adjusted net sales. Balance Sheet and Cash Flow As of December 31, 2024, the company had cash and cash equivalents of $901 million and total debt of $2,183 million. For the full year 2024, net cash provided by operating activities was $1,013 million and the Company made capital expenditures of $59 million, resulting in free cash flow of $954 million. The Company made share repurchases under its existing authorization of $47 million and had net debt payments of $43 million. Outlook First Quarter 2025 The company expects net sales to grow between 8% and 11% compared to the first quarter of 2024. This expectation includes an approximately 1 point unfavorable impact from foreign currency translation. Adjusted EBITDA margin for the first quarter of 2025 is expected to be approximately 21%, which includes approximately $7 million gross profit impact from recently announced Mexico and China import tariffs. Non-GAAP diluted earnings per share are expected to be in the range of $3.50 to $3.70. Full Year 2025 The Company expects net sales to grow between 3% to 7% compared to 2024. This expectation assumes a 130 basis point unfavorable impact from foreign currency translation. Adjusted EBITDA margin is expected to be between 21% and 22%, which includes approximately $20 million gross profit impact from recently announced Mexico and China import tariffs net of planned mitigation actions. Non-GAAP diluted earnings per share are expected to be the range of $14.75 to $15.25. This assumes an adjusted effective tax rate of approximately 17%. Free cash flow is expected to be at least $750 million. This outlook does not include any projected results from the previously announced acquisition of Photoneo, which is expected to close during the first quarter of 2025. The Company does not provide a reconciliation for non-GAAP estimates on a forward-looking basis 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 the most directly comparable forward-looking GAAP financial measure as discussed under the "Forward-Looking Statements" caption below. This would include 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. 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. Conference Call Notification Investors are invited to listen to a live webcast of Zebra’s conference call regarding the company’s financial results. The conference call will be held today 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) provides the tools to help businesses grow with asset visibility, connected frontline workers and intelligent automation. The company operates in more than 100 countries, and our customers include over 80% of the Fortune 500. Designed for the frontline, Zebra’s award-winning portfolio includes hardware, software, and services, all backed by our 50+ year legacy and global partner ecosystem. Follow Zebra on our blog and LinkedIn, visit our newsroom and learn more at www.zebra.com. 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 offerings and competitors' offerings, and the potential effects of emerging technologies and changes in customer requirements. The effect of global market conditions, and the availability of credit and capital markets volatility may have adverse effects on Zebra, its suppliers and its customers. In addition, natural disasters, man-made disasters, public health issues (including pandemics), and cybersecurity incidents may have negative effects on Zebra's business and results of operations. Zebra's ability to purchase sufficient materials, parts, and components, and ability to provide services, software and products to meet customer demand could negatively impact Zebra's results of operations and 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 may also have an adverse impact on results. Foreign exchange rates, customs duties and trade policies may have an adverse effect on financial results because of the large percentage of Zebra's international sales. The impacts of changes in foreign and domestic governmental policies, regulations, or laws, as well as the outcome of litigation or tax matters in which Zebra may be involved are other factors that could adversely affect Zebra's business and results of operations. The success of integrating acquisitions could also adversely 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 Zebra's 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 certain risks, uncertainties and other factors that could adversely 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 EBITDA,” “Adjusted EBITDA margin,” “Adjusted EBITDA % of adjusted net sales,” “adjusted gross margin,” “adjusted gross profit,” “adjusted net sales,” “adjusted operating expenses,” “EBITDA,” “free cash flow,” “non-GAAP diluted earnings per share,” “non-GAAP earnings per share,” “non-GAAP net income,” “organic net sales,” and “organic net sales growth (decline).” 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 prior year period as well as removing realized cash flow hedge gains and losses from both the current and prior year periods. The company believes these measures should be considered a supplement to and not in lieu of the company’s performance measures calculated in accordance with GAAP. ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions, except share data) December 31, 2024 2023 Assets Current assets: Cash and cash equivalents $ 901 $ 137 Accounts receivable, net of allowances for doubtful accounts of $1 million each as of December 31, 2024 and 2023, respectively 692 521 Inventories, net 693 804 Income tax receivable 20 63 Prepaid expenses and other current assets 134 147 Total Current assets 2,440 1,672 Property, plant and equipment, net 305 309 Right-of-use lease assets 167 169 Goodwill 3,891 3,895 Other intangibles, net 422 527 Deferred income taxes 512 438 Other long-term assets 231 296 Total Assets $ 7,968 $ 7,306 Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $ 79 $ 173 Accounts payable 633 456 Accrued liabilities 503 504 Deferred revenue 453 458 Income taxes payable 36 7 Total Current liabilities 1,704 1,598 Long-term debt 2,092 2,047 Long-term lease liabilities 155 152 Deferred income taxes 57 67 Long-term deferred revenue 304 312 Other long-term liabilities 70 94 Total Liabilities 4,382 4,270 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 669 615 Treasury stock at cost, 20,645,798 and 20,772,995 shares as of December 31, 2024 and 2023, respectively (1,900 ) (1,858 ) Retained earnings 4,860 4,332 Accumulated other comprehensive loss (44 ) (54 ) Total Stockholders’ Equity 3,586 3,036 Total Liabilities and Stockholders’ Equity $ 7,968 $ 7,306 ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data) Three Months Ended Twelve Months Ended (Unaudited) December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023 Net sales: Tangible products $ 1,085 $ 780 $ 4,016 $ 3,665 Services and software 249 229 965 919 Total Net sales 1,334 1,009 4,981 4,584 Cost of sales: Tangible products 561 453 2,100 2,012 Services and software 125 108 468 449 Total Cost of sales 686 561 2,568 2,461 Gross profit 648 448 2,413 2,123 Operating expenses: Selling and marketing 151 136 600 581 Research and development 138 116 563 519 General and administrative 107 78 381 334 Amortization of intangible assets 24 26 104 104 Acquisition and integration costs 3 2 6 6 Exit and restructuring costs — 16 17 98 Total Operating expenses 423 374 1,671 1,642 Operating income 225 74 742 481 Other income (loss), net: Foreign exchange gain (loss) 11 (4 ) 5 (2 ) Interest expense, net (27 ) (64 ) (98 ) (133 ) Other expense, net (1 ) (4 ) (14 ) (12 ) Total Other expense, net (17 ) (72 ) (107 ) (147 ) Income before income tax 208 2 635 334 Income tax expense (benefit) 45 (15 ) 107 38 Net income $ 163 $ 17 $ 528 $ 296 Basic earnings per share $ 3.17 $ 0.32 $ 10.25 $ 5.75 Diluted earnings per share $ 3.14 $ 0.31 $ 10.18 $ 5.72 ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Year Ended December 31, 2024 2023 Cash flows from operating activities: Net income $ 528 $ 296 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 172 176 Share-based compensation 89 55 Deferred income taxes (94 ) (36 ) Unrealized gain on forward interest rate swaps (31 ) (9 ) Other, net 14 3 Changes in operating assets and liabilities: Accounts receivable, net (181 ) 249 Inventories, net 105 50 Other assets 9 (25 ) Accounts payable 176 (365 ) Accrued liabilities 131 (97 ) Deferred revenue (13 ) 12 Income taxes 68 (168 ) Settlement liability (45 ) (180 ) Cash receipts on forward interest rate swaps 86 26 Other operating activities (1 ) 9 Net cash provided by (used in) operating activities 1,013 (4 ) Cash flows from investing activities: Purchases of property, plant and equipment (59 ) (87 ) Proceeds from sale (purchases) of short-term investments 5 (4 ) Purchases of long-term investments (3 ) (1 ) Net cash used in investing activities (57 ) (92 ) Cash flows from financing activities: Proceeds from issuance of debt 651 440 Payments of debt (694 ) (245 ) Payment of debt issuance costs, extinguishment costs and discounts (9 ) — Payments for repurchases of common stock (47 ) (52 ) Net payments related to share-based compensation plans (30 ) (8 ) Change in unremitted cash collections from servicing factored receivables (61 ) (18 ) Net cash (used in) provided by financing activities (190 ) 117 Effect of exchange rate changes on cash and cash equivalents, including restricted cash (3 ) — Net increase in cash and cash equivalents, including restricted cash 763 21 Cash and cash equivalents, including restricted cash, at beginning of period 138 117 Cash and cash equivalents, including restricted cash, at end of period $ 901 $ 138 Less restricted cash, included in Prepaid expenses and other current assets — (1 ) Cash and cash equivalents at end of period $ 901 $ 137 Supplemental disclosures of cash flow information: Income taxes paid $ 124 $ 252 Interest paid inclusive of forward interest rate swaps $ 55 $ 111 Certain prior period amounts included in Net cash provided by (used in) operating activities have been reclassified to conform with the current period presentation. ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES RECONCILIATION OF ORGANIC NET SALES GROWTH (DECLINE) (Unaudited) Three Months Ended December 31, 2024 AIT EVM Consolidated Consolidated Reported GAAP Net sales growth 29.5 % 33.6 % 32.2 % Adjustments: Impact of foreign currency translations (1) (0.7 )% (0.5 )% (0.6 )% Consolidated Organic Net sales growth 28.8 % 33.1 % 31.6 % Twelve Months Ended December 31, 2024 AIT EVM Consolidated Consolidated Reported GAAP Net sales (decline) growth (0.2 )% 13.7 % 8.7 % Adjustments: Impact of foreign currency translations (1) (0.7 )% (0.5 )% (0.6 )% Consolidated Organic Net sales (decline) growth (0.9 )% 13.2 % 8.1 % (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 the current period results at the currency exchange rates used in the comparable prior year period as well as removing realized cash flow hedge gains and losses from both the current and prior year periods. ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP GROSS MARGIN ($ in millions) (Unaudited) Three Months Ended December 31, 2024 December 31, 2023 AIT EVM Consolidated AIT EVM Consolidated GAAP Reported Net sales $ 448 $ 886 $ 1,334 $ 346 $ 663 $ 1,009 Reported Gross profit 223 425 648 159 289 448 Gross Margin 49.8 % 48.0 % 48.6 % 46.0 % 43.6 % 44.4 % Non-GAAP Adjusted Net sales $ 448 $ 886 $ 1,334 $ 346 $ 663 $ 1,009 Adjusted Gross profit (1) 224 426 650 160 290 450 Adjusted Gross Margin 50.0 % 48.1 % 48.7 % 46.2 % 43.7 % 44.6 % Twelve Months Ended December 31, 2024 December 31, 2023 AIT EVM Consolidated AIT EVM Consolidated GAAP Reported Net sales $ 1,647 $ 3,334 $ 4,981 $ 1,651 $ 2,933 $ 4,584 Reported Gross profit 793 1,620 2,413 787 1,336 2,123 Gross Margin 48.1 % 48.6 % 48.4 % 47.7 % 45.6 % 46.3 % Non-GAAP Adjusted Net sales $ 1,647 $ 3,334 $ 4,981 $ 1,651 $ 2,933 $ 4,584 Adjusted Gross profit (1) 796 1,626 2,422 789 1,340 2,129 Adjusted Gross Margin 48.3 % 48.8 % 48.6 % 47.8 % 45.7 % 46.4 % (1) Adjusted Gross profit excludes 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 Twelve Months Ended December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023 GAAP Net income $ 163 $ 17 $ 528 $ 296 Adjustments to Cost of sales(1) Share-based compensation 2 2 9 6 Total adjustments to Cost of sales 2 2 9 6 Adjustments to Operating expenses(1) Amortization of intangible assets 24 26 104 104 Acquisition and integration costs 3 2 6 6 Share-based compensation 23 18 101 60 Exit and restructuring costs — 16 17 98 Total adjustments to Operating expenses 50 62 228 268 Adjustments to Other income (expense), net(1) Amortization of debt issuance costs and discounts 1 1 2 3 Investment loss — — 6 1 Foreign exchange (gain) loss (11 ) 4 (5 ) 2 Forward interest rate swap loss (gain) — 25 (31 ) (9 ) Total adjustments to Other (expense) income, net (10 ) 30 (28 ) (3 ) Income tax effect of adjustments(2) Reported income tax expense (benefit) 45 (15 ) 107 38 Adjusted income tax (42 ) (7 ) (143 ) (97 ) Total adjustments to income tax 3 (22 ) (36 ) (59 ) Total adjustments 45 72 173 212 Non-GAAP Net income $ 208 $ 89 $ 701 $ 508 GAAP earnings per share Basic $ 3.17 $ 0.32 $ 10.25 $ 5.75 Diluted $ 3.14 $ 0.31 $ 10.18 $ 5.72 Non-GAAP earnings per share Basic $ 4.04 $ 1.72 $ 13.62 $ 9.88 Diluted $ 4.00 $ 1.71 $ 13.52 $ 9.82 Basic weighted average shares outstanding 51,542,093 51,366,299 51,494,957 51,378,051 Diluted weighted average and equivalent shares outstanding 51,986,818 51,687,374 51,879,709 51,710,962 (1) Presented on a pre-tax basis. (2) Represents adjustments to GAAP income tax expense commensurate with pre-tax non-GAAP adjustments (including the resulting impacts to U.S. BEAT/GILTI provisions), as well as adjustments to exclude the impacts of certain discrete income tax items and incorporate the anticipated annualized effects of current year tax planning. ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES GAAP to NON-GAAP RECONCILIATION TO EBITDA ($ in millions) (Unaudited) Three Months Ended Twelve Months Ended December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023 GAAP Net income $ 163 $ 17 $ 528 $ 296 Add back: Depreciation (excluding exit and restructuring costs) 18 17 68 69 Amortization of intangible assets 24 26 104 104 Total Other expense, net 17 72 107 147 Income tax expense (benefit) 45 (15 ) 107 38 EBITDA (Non-GAAP) 267 117 914 654 Adjustments to Cost of sales Share-based compensation 2 2 9 6 Total adjustments to Cost of sales 2 2 9 6 Adjustments to Operating expenses Acquisition and integration costs 3 2 6 6 Share-based compensation 23 18 101 60 Exit and restructuring costs — 16 17 98 Total adjustments to Operating expenses 26 36 124 164 Total adjustments to EBITDA 28 38 133 170 Adjusted EBITDA (Non-GAAP) $ 295 $ 155 $ 1,047 $ 824 Adjusted EBITDA % of Adjusted Net Sales (Non-GAAP) 22.1 % 15.4 % 21.0 % 18.0 % FREE CASH FLOW Twelve Months Ended December 31, 2024 December 31, 2023 Net cash provided by (used in) operating activities $ 1,013 $ (4 ) Less: Purchases of property, plant and equipment (59 ) (87 ) Free cash flow (Non-GAAP)(1) $ 954 $ (91 ) (1) Free cash flow, a non-GAAP measure, is defined as Net cash provided by (used in) operating activities in a period minus purchases of property, plant and equipment (capital expenditures) made in that period.

Zebra Technologies Announces Fourth-Quarter and Full-Year 2024 Results

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