Zebra Technologies Announces 2015 Fourth Quarter Financial Results

Company Provides Outlook for First Quarter and Full Year 2016

Lincolnshire, Ill., Feb. 25, 2016─Zebra Technologies Corporation (NASDAQ: ZBRA) today reported that net sales for the three months ended December 31, 2015, were $952.7 million, compared with $790.6 million for the fourth quarter of 2014. The GAAP net loss for the fourth quarter was $6.8 million, or $0.13 per share, compared with GAAP net loss of $51.7 million, or $1.02 per share, for the fourth quarter of 2014. Financial results for the 2014 fourth quarter and full year include two months of results of the Enterprise business that the company acquired on October 27, 2014.  

 

Summary Financial Highlights (Unaudited)

$ in millions except per share data

4Q15

4Q14

Change

GAAP net sales

     $   952.7

    $  790.6

          20.5%

 

 

 

 

GAAP net (loss) income

     $  (6.8)

    $   (51.7)

            NM

GAAP (loss) earnings per share

     $  (0.13)

    $   (1.02)

            NM

 

 

 

 

Non-GAAP net income

     $   78.5

    $    62.1

          26.4%

Non-GAAP earnings per diluted share

     $   1.51

    $    1.22

          23.8%

 

 

 

 

Adjusted EBITDA (Non-GAAP)

     $ 165.2

    $  145.2

          13.7%

Adjusted EBITDA (%)

          17.3%

          18.2%

       (0.9) pts.

Note: The Company’s calculation of Non-GAAP results adjust for certain items on a tax-effected basis. Please refer to the tables included in this press release for reconciliations of GAAP to Non-GAAP financial results.

Non-GAAP Financial Results (unaudited)

For the fourth quarter of 2015, sales excluding the impact of purchase accounting were $956.3 million. Non-GAAP net income was $78.5 million, or $1.51 per diluted share, compared with $62.1 million, or $1.22 per diluted share, for the fourth quarter of 2014. Adjusted EBITDA for the fourth quarter of 2015 were $165.2 million, or 17.3% of sales compared to $145.2 million, or 18.2% of sales for the fourth quarter of 2014.  

“Our strong fourth quarter results were driven by solid growth in key markets and a focus on driving profitability. In 2015, we extended our leadership in Enterprise Asset Intelligence and made significant progress on integrating the transformational acquisition of the Enterprise business,” said Anders Gustafsson, CEO of Zebra Technologies. “As we enter 2016, we remain committed to our strategic priorities of driving profitable growth, executing on cost synergies, de-levering the balance sheet and operating as One Zebra.  Our customers continue to invest in technology to improve efficiencies, and we are well positioned as their partner of choice. With a healthy pipeline of activity, we expect to gain momentum through the remainder of the year, enabling us to meet our growth goals for 2016 and longer-term.”

Discussion and Analysis – Fourth Quarter

  • Net sales were $952.7 million on a GAAP basis, and include a reduction of $3.6 million for a purchase accounting adjustment related to service contracts acquired with the Enterprise business, reflecting an increase of $162.1 million from the fourth quarter of 2014.  Excluding the purchase accounting adjustment noted above, sales in the Enterprise business accounted for $635.8 million compared to $482.2 million in the fourth quarter of 2014. Pre-transaction Zebra sales were $320.5 million compared to $314.6 million in the fourth quarter of 2014. On a constant currency basis, and excluding the purchase accounting adjustment, fourth quarter year-over-year sales growth inclusive of estimated 2014 Enterprise sales was 4% for total Zebra and 2% for Enterprise. Pre-transaction Zebra sales were up 7% in constant currency.
  • Gross margin for the fourth quarter on a GAAP basis was 44.9% including the impact of purchase accounting adjustments associated with service contracts and costs of goods sold. Excluding purchase accounting adjustments, adjusted gross margin for the quarter was 45.1%, compared to 46.6% in the fourth quarter of 2014, reflecting the change in mix associated with the sale of Enterprise products, which generally have a lower gross margin percentage than pre-transaction Zebra products, and the impact of foreign currency movements, net of hedges.
  • Operating expenses for the fourth quarter of 2015 of $405.5 million increased by $44.2 million from the prior year’s fourth quarter, primarily as a result of the Enterprise acquisition. Operating expenses for the fourth quarter of 2015 include $53.6 million in acquisition, integration, exit and restructuring costs, versus $71.7 million in the prior year quarter, as well as $61.1 million for amortization of intangible assets, compared with $46.2 million for the fourth quarter of 2014.

Balance Sheet and Cash Flow

  • As of December 31, 2015, the company had cash of $192.4 million, accounts receivable of $674.3 million, inventories of $393.8 million, and long-term debt of $3.0 billion.
  • For the full year 2015, the company made $183 million of scheduled cash interest payments and $165 million in term loan principal payments. Subsequent to the end of 2015, the company paid an additional $80 million of term loan payments.
  • For the full year 2015, the company generated $102.6 million of cash flow from operations and made capital expenditures of $114.3 million.

Outlook

Full Year 2016

The company expects full year 2016 net sales, excluding purchase accounting adjustments, to grow approximately 1% to 4% from the comparable net sales of $3,668 million for the full year 2015. This view reflects an expectation of year-over-year growth of 2% to 5% on a constant currency basis.

Adjusted EBITDA margin is expected to be in the range of 17% to 18% for the full year 2016.

The company expects to pay down at least $300 million of debt principal in 2016.

Additional full year 2016 assumptions include:

  • Realization of approximately $50 million of incremental acquisition cost synergies compared to 2015
  • Of the remaining $130-150 million of integration-related expenses and capital expenditures for 2016-2017, the vast majority are expected to be incurred in 2016
  • Capital expenditures of approximately $70-75 million, including approximately $15-20 million related to acquisition integration
  • Depreciation and amortization expense of approximately $310-315 million

First Quarter

The company expects first quarter 2016 net sales, excluding purchase accounting adjustments, to decline approximately (3)% to 0% from the comparable net sales of $899 million in the first quarter of 2015. This expectation reflects year-over-year growth of (1)% to +2% on a constant currency basis.

Adjusted EBITDA margin is expected to be in the range of 16% to 17% for the first quarter 2016. Non-GAAP earnings are expected to be in the range of $1.19 to $1.34 per share.

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 fourth quarter of 2015. The conference call will be held at 7:30 A.M. Central Time (8:30 A.M. Eastern Time) today. To view the webcast, visit the investor relations section of the company’s website at investors.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 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, including the Enterprise business, 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. 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.

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 enterprises need to simplify operations, know more about their businesses, and empower their mobile workforces. For more information, visit www.zebra.com.  

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
Mike Steele
Vice President, Investor Relations
+ 1 847 793 6707 
msteele@zebra.com

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

Download full PDF and balance sheets here.