Zebra Technologies Announces 2015 Second Quarter Financial Results

Strong Sales Growth and Execution Drive Second Quarter Results

Lincolnshire, Ill., August 11, 2015─Zebra Technologies Corporation (NASDAQ: ZBRA) today reported that net sales for the three months ended July 4, 2015, were $889.8 million, compared with $288.4 million for the second quarter of 2014. The GAAP net loss for the second quarter was $76.3 million, or $1.50 per share, compared with GAAP net income of $27.6 million, or $0.54 per diluted share, for the second quarter of 2014.  

Summary Financial Performance (Unaudited)

$ in millions except per share data

2Q15

2Q14

Change

GAAP net sales

     $  889.8

    $  288.4

        208.5%

Gross margin (%)

          44.2

          49.3

        (5.1) pts.

 

 

 

 

GAAP net (loss) income

     $  (76.3)

    $    27.6

            NM

GAAP (loss) earnings per share

     $  (1.50)

    $    0.54

            NM

 

 

 

 

Non-GAAP net income

     $   53.3

    $    47.0

          13.5%

Non-GAAP earnings per share

     $   1.05

    $    0.92

          14.1%

 

 

 

 

Adjusted EBITDA

     $ 131.5

    $    67.0

          96.5%


Note: Reconciliations of GAAP to Non-GAAP financial results are available in the financial tables in this release.

Non-GAAP Financial Results (unaudited)

For the second quarter of 2015, non-GAAP net income was $53.3 million, or $1.05 per share, compared with $47.0 million, or $0.92 per diluted share, for the second quarter of 2014. Adjusted EBITDA for the second quarter of 2015 were $131.5 million, versus $67.0 million for the second quarter of 2014. The company’s calculation of non-GAAP results adjusts for certain items on a tax-effected basis, including stock-based compensation expense, acquisition and integration costs, exit and restructuring costs, purchase accounting adjustments, amortization of intangible assets, and foreign exchange gains or losses. Please refer to the tables included in this press release for reconciliations of GAAP to non-GAAP financial results.

“As we continue to execute our strategy as One Zebra, demand globally in mobile computing, scanning, and printing, bolstered top-line sales growth for the quarter,” stated Anders Gustafsson, Zebra's chief executive officer. “With an industry-leading portfolio and close collaboration with channel partners and end users, we continue to differentiate ourselves with innovative solutions that help customers gain greater visibility into their operations and achieve higher levels of growth, efficiency and service.”

Discussion and Analysis – Second Quarter

  • Net sales of $889.8 million, including a reduction of $4.4 million for a purchase accounting adjustment related to service contracts acquired with the Enterprise business, increased 208.5% from the comparable quarter a year ago. The Enterprise business acquired from Motorola Solutions accounted for $573.4 million of sales in the quarter, excluding the purchase accounting adjustment noted above. Sales of legacy Zebra were $320.8 million, up 11.2% from $288.4 million in the second quarter of 2014. The effect of movements in foreign currency, net of hedges, reduced legacy Zebra sales by $9.7 million. 
  • Gross margin for the second quarter of 2015 of 44.2% includes an increase to costs of sales associated with purchase accounting adjustments, costs associated with the rebranding of Motorola product, as well as other costs not expected to recur. The purchase accounting adjustments and other cost factors negatively impacted gross margin percentage by approximately 1.1 percentage points. Compared to the 49.3% gross margin in the second quarter of 2014, gross margin percentage also reflects a change in mix associated with the sale of Enterprise products which generally have a lower gross margin than pre-transaction Zebra products and the impact of foreign currency movements, net of hedges.
  • Operating expenses for the second quarter of 2015 of $406.7 million, increased by $297.6 million from the prior year’s second quarter, primarily as a result of the Enterprise acquisition. Operating expenses for the second quarter of 2015 include $49.1 million in acquisition, integration, exit and restructuring costs, versus $20.7 million for the prior year, as well as $63.7 million in amortization of intangible assets, compared with $2.7 million for the second quarter of 2014.
  • The company incurred a foreign exchange gain of $11.3 million related to changes in the valuation of net monetary assets. In addition, a net forward interest rate swaps loss of $1.7 million reflects a change in interest rates.  Investment income was $1.6 million.
  • Interest expense of $49.3 million is related to debt funding for the acquisition of the Enterprise business from Motorola Solutions, and includes $5.1 million in amortization of debt issuance cost and discount.
  • Debt repayments in the quarter were $80 million, bringing total year-to-date repayments to $130 million.
  • As of July 4, 2015, the company had cash of $204.9 million, accounts receivable of $631.1 million, inventories of $404.5 million, and long-term debt of $3.0 billion.

Third Quarter Outlook

The company expects net sales in the third quarter of 2015 to be within a range of $900 million to $930 million. This forecast reflects an expectation of year-over-year growth of 4% to 7% in constant currency, on an estimated historical basis. Non-GAAP diluted earnings are expected in the range of $1.10 and $1.35 per share. Adjusted EBITDA are forecast within a range of $135 million and $150 million. 

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 second quarter of 2015. The conference call will be held at 8.30 A.M. Eastern Time today. To listen to the call, visit the company’s website at http://www.zebra.com.

Forward-looking Statement

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 financial forecast for the third quarter of 2015 stated in the paragraph above captioned “Third Quarter Outlook.” Similarly, statements herein that describe the transaction between Zebra and Motorola Solutions including, its financial impact, and other statements of management’s beliefs, intentions, or goals are also forward-looking statements. 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. 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, 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, including the Enterprise business of Motorola Solutions, 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 and increase the volatility of our financial results. 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, readers are referred to Zebra’s Form 10-K for the year ended December 31, 2014.

About Zebra Technologies

Zebra (NASDAQ: ZBRA) makes businesses as smart and connected as the world we live in. Zebra tracking and visibility solutions transform the physical to digital, creating the data streams businesses need in order to simplify operations, know more about their business, and empower their mobile workforce. For more information, visit www.zebra.com/possibilities.

Use of Non-GAAP Financial Information

This press release contains certain non-GAAP financial measures, consisting of “EBITDA,” “Adjusted EBITDA,” “Non-GAAP net income” and “Non-GAAP earnings per share” in addition to measure our operating performance. 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. Reconciliations of Operating Income to EBITDA, EBITDA to Adjusted EBITDA, and GAAP net income to Non-GAAP net income are included in the financial schedules contained in this press release. These measures, however, should not be construed as an alternative to any other measure of performance determined in accordance with GAAP.

Contact:                        

Investors:
Dean Lindroth
Vice President, Finance
Phone: +1-847-793-5653
dlindroth@zebra.com

Media:
Therese Van Ryne
Director, Global PR and Industry Analyst Relations
Phone: +1-847-370-2317 
therese.vanryne@zebra.com

Download the full PDF.