Financial Performance - Net sales for Q1 2025 were $1,308 million, an increase of 11.3% year-over-year from $1,175 million in Q1 2024[5] - Gross profit for Q1 2025 was $645 million, up 14.6% from $563 million in Q1 2024, with a gross margin of 49.3%[6] - Net income for Q1 2025 was $136 million, or $2.62 per diluted share, representing an 18.3% increase from $115 million, or $2.23 per diluted share, in Q1 2024[8] - Non-GAAP net income increased to $208 million for Q1 2025, or $4.02 per diluted share, compared to $147 million, or $2.84 per diluted share, in the prior year[8] - Adjusted EBITDA for Q1 2025 was $292 million, a 24.8% increase from $234 million in Q1 2024, with an adjusted EBITDA margin of 22.3%[9] - Total net sales for the three months ended March 29, 2025, increased to $1,308 million, a 11.3% growth compared to $1,175 million for the same period in 2024[28] - Gross profit for the same period rose to $645 million, up from $563 million, reflecting a gross margin of 49.3%[28] - Net income for the three months ended March 29, 2025, was $136 million, compared to $115 million in the prior year, resulting in a basic earnings per share of $2.64[28][36] - The adjusted gross margin improved to 49.6% from 48.1% year-over-year[34] - Adjusted EBITDA for Q1 2025 reached $292 million, compared to $234 million in Q1 2024, reflecting a 24.8% growth[40] - Adjusted EBITDA margin improved to 22.3% in Q1 2025, up from 19.9% in Q1 2024[40] Future Outlook - The company expects Q2 2025 sales growth between 4% and 7% compared to the prior year[11] - Full year 2025 sales growth is maintained at 3% to 7% compared to the prior year[13] - Adjusted EBITDA margin for the full year is expected to be between 20% and 21%, including approximately $70 million in U.S. import tariff expenses[14] - Free cash flow for the full year 2025 is expected to exceed $700 million[15] Cash Flow and Investments - Cash and cash equivalents at the end of the period were $879 million, down from $901 million at the beginning of the period[30] - The company invested $62 million in acquisitions during the three months ended March 29, 2025[30] - Free cash flow for Q1 2025 was $158 million, significantly higher than $111 million in Q1 2024, marking a 42.3% increase[42] - Net cash provided by operating activities increased to $178 million in Q1 2025, compared to $125 million in Q1 2024, a rise of 42.4%[42] Expenses and Liabilities - Research and development expenses increased to $151 million, compared to $138 million in the same period last year[28] - Total current liabilities decreased to $1,581 million from $1,704 million, primarily due to a reduction in accounts payable and accrued liabilities[28] - Total liabilities decreased to $4,273 million from $4,382 million, indicating a stronger balance sheet position[28] - Total adjustments to operating expenses in Q1 2025 amounted to $52 million, compared to $30 million in Q1 2024, indicating a 73.3% increase[40] - Share-based compensation in operating expenses rose to $49 million in Q1 2025 from $19 million in Q1 2024, a substantial increase of 157.9%[40] - Total other expenses increased to $30 million in Q1 2025, up from $17 million in Q1 2024, representing a 76.5% rise[40] - Income tax expense for Q1 2025 was $29 million, compared to $27 million in Q1 2024, a 7.4% increase[40] - Depreciation and amortization expenses remained relatively stable, with depreciation at $17 million and amortization at $24 million in Q1 2025[40] Share Repurchase - The company repurchased $125 million in shares during the first quarter of 2025[4] Organic Growth - The company reported an organic net sales growth of 11.9% after adjusting for foreign currency translations and acquisitions[32]

Core Viewpoint - Zebra Technologies Corporation (ZBRA) is expected to report first-quarter 2025 results on April 29, with revenue estimates of $1.28 billion, reflecting a 9% growth year-over-year, and adjusted earnings of $3.60 per share, indicating a 26.8% increase from the previous year [1]. Revenue Estimates - The consensus estimate for the Enterprise Visibility & Mobility segment's revenues is $852 million, representing an 8.8% increase from the year-ago figure [3]. - The Asset Intelligence and Tracking segment is projected to generate revenues of $434 million, indicating a 10.7% growth compared to the previous year [4]. Earnings Performance - Zebra Technologies has a strong earnings surprise history, outperforming consensus estimates in the last four quarters with an average surprise of 9.3% [2]. - The earnings estimate has remained stable over the past 60 days, suggesting consistent analyst expectations [2]. Challenges - Despite strong demand in various markets, Zebra Technologies faces challenges from high costs and expenses, including labor shortages and increased raw material costs, which are expected to negatively impact the bottom line [5]. - The company's operations are also affected by foreign exchange headwinds, particularly due to a stronger U.S. dollar impacting overseas business [6]. Earnings Prediction - The current Earnings ESP for Zebra Technologies is 0.00%, indicating no expected earnings beat, as both the Zacks Consensus Estimate and the Most Accurate Estimate are at $3.60 [8]. - The company holds a Zacks Rank of 4 (Sell), which further diminishes the likelihood of an earnings surprise this quarter [8].

Core Insights - Intelligent Product Solutions (IPS) has joined Zebra Technologies' PartnerConnect program as a Registered Alliance Partner, focusing on software solutions development and systems integration [1][2][3] - The partnership provides IPS with access to Zebra's innovative portfolio, training, and marketing benefits, enhancing collaboration opportunities within the Zebra ecosystem [2][3] Company Overview - IPS is a subsidiary of Forward Industries (NASDAQ: FORD) and specializes in product design and engineering, particularly in MedTech and wearable technology [4] - The company serves leading brands in consumer electronics and medical devices, including Neuvotion, Google, Verizon, and Zebra Technologies [4]

Core Viewpoint - Zebra Technologies Corporation (ZBRA) is facing significant challenges due to rising costs, high debt levels, and foreign exchange issues [1][5][6][8]. Group 1: Financial Performance - ZBRA's cost of sales increased by 22.3% year over year in Q4 2024, primarily due to high raw material costs [5]. - Selling and administrative expenses rose by 11% year over year, contributing to the overall increase in costs [5]. - The company's long-term debt reached $2.09 billion at the end of Q4 2024, with a compound annual growth rate (CAGR) of 18.9% over the past five years [6]. - Interest expenses in Q4 were notably high at $98 million [6]. Group 2: Debt Management - In Q2 2024, ZBRA completed a $500 million offering of senior notes due June 1, 2032, with a fixed interest rate of 6.5% [7]. - While this offering may assist in reducing some loan obligations, it is expected to increase the overall debt balance [7]. Group 3: Market Exposure and Risks - ZBRA operates in various regions, including North America, EMEA, Asia-Pacific, and Latin America, which exposes the company to geopolitical risks [8]. - Ongoing conflicts, such as those between Russia & Ukraine and Israel & Iran, may adversely affect business operations [8]. - A stronger U.S. dollar could negatively impact ZBRA's performance in overseas markets [8].

Acquisition Overview - Zebra Technologies Corporation (ZBRA) has recently completed the acquisition of Photoneo, a leader in the 3D machine vision solutions industry [1] - Photoneo, based in Slovakia, specializes in robotic vision and intelligence solutions, known for its high-resolution 3D cameras [2] Strategic Rationale - The acquisition aligns with Zebra Technologies' strategy to enhance its business and product portfolio [3] - By integrating its advanced sensors and AI-based image processing with Photoneo's technology, ZBRA aims to improve its 3D machine vision solutions [3][4] Market Position and Financials - Zebra Technologies has a market capitalization of $15.7 billion and currently holds a Zacks Rank of 5 (Strong Sell) [5] - The company has faced challenges due to high costs, with a 22.3% year-over-year increase in cost of sales in Q4 2024 [5] - As of the end of 2024, ZBRA's long-term debt stood at $2.09 billion, with cash and cash equivalents of $901 million [6] Stock Performance - ZBRA's shares have declined by 20.9% over the past month, compared to an 18.8% decline in the Manufacturing - Thermal Products industry [7] - The Zacks Consensus Estimate for ZBRA's 2025 earnings has decreased by 4.1% to $15.30 per share in the last 30 days [7]

Core Viewpoint - Zebra Technologies Corporation (ZBRA) has underperformed in operational performance, primarily due to rising costs of sales and high debt levels [1][5][6]. Company Overview - Zebra Technologies, based in Lincolnshire, IL, is a leading provider of enterprise asset intelligence solutions in the automatic identification and data capture solutions industry globally. The company offers a diversified portfolio that includes cloud-based subscriptions and a full range of services such as maintenance, repair, technical support, and managed and professional services [2]. Financial Performance - ZBRA currently holds a Zacks Rank of 5 (Strong Sell). Over the past three months, the stock has declined by 23.5%, aligning with industry trends [3]. Cost Challenges - The company has faced significant cost increases, with the cost of sales rising by 22.3% year-over-year in Q4 2024 due to high raw material costs. Additionally, selling and administrative expenses increased by 11% year-over-year, which may adversely affect profitability if these trends continue [5]. Debt Levels - Zebra Technologies has experienced a compound annual growth rate (CAGR) of 18.9% in long-term debt over the past five years, reaching a total of $2.09 billion by the end of Q4 2024. The company's cash and cash equivalents stand at $901 million, which is not sufficient given the high interest expenses of $98 million in Q4 [6]. Recent Financing Activities - In Q2 2024, the company completed a $500 million offering of senior notes due June 1, 2032, with a fixed interest rate of 6.5%, payable semi-annually. While this offering will help reduce a portion of its term loan, it will also increase the overall debt balance [7]. Geopolitical Risks - ZBRA operates in various regions, including North America, EMEA, Asia-Pacific, and Latin America, making it susceptible to political, environmental, and geopolitical issues. Ongoing conflicts, such as those between Russia & Ukraine and Israel & Iran, may negatively impact business operations. Additionally, a stronger U.S. dollar could adversely affect overseas business performance [8].

Business Operations and Growth - The company has expanded operations and customer offerings, leading to increased complexities in the business [75]. - Future growth depends on the ability to identify and successfully acquire businesses at appropriate prices, with macroeconomic factors potentially influencing acquisition opportunities [76]. - The company expects substantial operations outside the U.S., with a significant portion of net sales coming from non-U.S. customers [88]. - The company relies on third-party dealers, distributors, and resellers to sell its offerings, and their failure to effectively promote these offerings could negatively impact financial results [113]. - The company has outsourced portions of its operations, which limits control and exposes it to risks from outsource partners [111]. Risks and Challenges - The company faces risks in managing integration of acquisitions, which may result in unforeseen operating difficulties and expenditures [77]. - Geopolitical turmoil, such as the war between Russia and Ukraine, could limit the company's ability to sell offerings and impact financial results [84]. - The company relies on third-party intellectual property, which may pose risks if relationships with these parties are not maintained [92]. - Emerging issues related to AI development could lead to legal or regulatory actions that may harm the company's reputation [93]. - AI technologies are complex and expensive to develop, with potential risks related to data privacy and security [94]. - The company faces competition from other firms developing AI technologies that may be superior or more cost-effective [95]. - Compliance with evolving AI regulations, such as the European Artificial Intelligence Act, could impose significant costs on the company [96]. - The company is exposed to risks under large, multi-year contracts, including technological, financial, and cybersecurity risks [108]. - The company may incur liabilities from product failures due to design or manufacturing defects, which could have material adverse effects on financial results [101]. - The company faces risks from defects or errors in its software offerings, which could harm its reputation and result in significant costs [102]. - The company is subject to catastrophic loss from natural or man-made disasters, which could disrupt operations and adversely impact financial condition [106]. - The company is at risk of financial difficulties from third-party dealers, distributors, or resellers, which could negatively impact financial results [114]. - The company sources some components from sole-source suppliers, increasing vulnerability to supply chain disruptions and price fluctuations [116]. - Disruptions in supply chains or significant price increases could negatively impact the company's operations and financial results [117]. - The company faces risks from trade policy changes and tariffs, particularly with significant imports from countries like China, which could adversely affect financial performance [121]. - Foreign exchange rate fluctuations, especially with currencies like the Euro and British Pound, could negatively impact reported results and cash flows [123]. - Economic downturns could lead to reduced demand for offerings, impacting cash flow and potentially requiring asset write-downs [127]. - The company’s indebtedness may limit operational flexibility and increase vulnerability to economic downturns [130]. - The company incurs ongoing remediation obligations and disposal costs related to environmental laws, which have become more stringent over time [138]. - Increased public awareness of climate change issues may lead to additional costs and restrictions on manufacturing practices and product designs [142]. - The company is subject to complex tax regulations across multiple jurisdictions, impacting the evaluation and estimation of uncertain tax positions [237]. - Compliance with personal data handling laws may result in increased costs and legal claims against the company [136]. - The unfavorable outcome of litigation or administrative actions could materially affect the company's financial condition or results of operations [137]. Financial Performance - Total net sales for 2024 reached $4,981 million, a 8.7% increase from $4,584 million in 2023 [245]. - Gross profit for 2024 was $2,413 million, up from $2,123 million in 2023, reflecting a gross margin improvement [245]. - Net income for 2024 increased to $528 million, compared to $296 million in 2023, representing a 78.4% year-over-year growth [248]. - Basic earnings per share rose to $10.25 in 2024, up from $5.75 in 2023, indicating strong profitability growth [245]. - Total assets increased to $7,968 million in 2024, compared to $7,306 million in 2023, marking an 9.1% growth [243]. - Current assets grew significantly to $2,440 million in 2024, up from $1,672 million in 2023, a 45.8% increase [243]. - Total liabilities increased to $4,382 million in 2024, compared to $4,270 million in 2023, reflecting a 2.6% rise [243]. - Research and development expenses for 2024 were $563 million, up from $519 million in 2023, indicating continued investment in innovation [245]. - The company reported a comprehensive income of $538 million for 2024, compared to $308 million in 2023, showing strong overall performance [248]. - Cash and cash equivalents surged to $901 million in 2024, a significant increase from $137 million in 2023, highlighting improved liquidity [243]. - Net cash provided by operating activities was $1,013 million in 2024, a significant recovery from a net cash used of $4 million in 2023 [254]. - Total revenues for the year ended December 31, 2024, were $4.981 billion, an increase from $4.584 billion in 2023, reflecting a growth of approximately 8.7% [297]. Acquisitions and Investments - The acquisition of Matrox Electronic Systems Ltd. was completed for a total purchase price of $881 million, with $639 million recorded as goodwill [306][308]. - The identifiable intangible assets acquired from Matrox were valued at $297 million, with customer relationships accounting for $232 million of that total [309]. - The Company has entered into an agreement to acquire Photoneo for approximately €60 million, expected to close in Q1 2025 [311]. - The Company incurred acquisition-related costs of $6 million in 2024, $6 million in 2023, and $21 million in 2022, primarily for transaction and advisory fees [310]. Debt and Financial Instruments - As of December 31, 2024, approximately $1.7 billion of the total $2.2 billion debt outstanding had interest determined by reference to a variable rate index [225]. - A one percentage point increase or decrease in interest rates would increase or decrease annual interest expense by approximately $17 million [225]. - The company is exposed to foreign exchange risk in approximately 176 countries, with a one percentage point increase or decrease in exchange rates relative to the U.S. Dollar potentially impacting pre-tax income by approximately $1 million [227]. - The Company reported a total net gain of $35 million from derivative instruments not designated as hedges in 2024 [327]. - The fair value of the Company's total derivative assets was $72 million as of December 31, 2024, compared to $124 million in 2023 [322]. - The Company completed a private offering of $500 million senior unsecured notes with a fixed interest rate of 6.5% in the second quarter of 2024 [339]. - The average interest rate for the Revolving Credit Facility as of December 31, 2024, was 5.68% [341]. - The Company was in compliance with all debt covenants as of December 31, 2024 [345]. Operational Metrics - The remaining performance obligations as of December 31, 2024, were valued at $1.19 billion, up from $1.13 billion in 2023, indicating a growth of about 5.3% [299]. - The total contract asset balances were $11 million and $16 million as of December 31, 2024 and 2023, respectively, showing a decrease of 31.3% [300]. - The combined short-term and long-term deferred revenue balances were $757 million and $770 million as of December 31, 2024 and 2023, respectively, reflecting a decrease of 1.7% [301]. - The Company recognized $455 million, $432 million, and $399 million in revenue from deferred revenue during the years ended December 31, 2024, 2023, and 2022, respectively, showing a consistent increase in revenue recognition [301]. Environmental and Regulatory Compliance - The Company reported realized gains of $11 million for the year ended December 31, 2024, and losses of $15 million for the year ended December 31, 2023, from foreign exchange cash flow hedges [331]. - The Company completed its annual goodwill impairment testing, with estimated fair values exceeding carrying values by at least 150% [313]. - Total amortized intangible assets decreased from $527 million in 2023 to $422 million in 2024, with amortization expense of $104 million for both 2024 and 2023 [314]. - The Company adopted ASU No. 2023-07, which requires retrospective disclosure of significant segment expenses, but it did not impact the results of operations or financial condition [288]. - The Company provided warranty coverage ranging from one to five years depending on the product category, indicating a commitment to product quality [278].

Financial Data and Key Metrics Changes - In Q4 2024, Zebra Technologies reported sales exceeding $1.3 billion, representing a 32% year-over-year increase [8] - Adjusted EBITDA margin improved to 22.1%, a nearly 7% increase compared to the previous year [8] - Non-GAAP diluted earnings per share reached $4, more than double the prior year [8][14] - For the full year, free cash flow generated was $954 million, with a free cash flow conversion rate of 136% [15] Business Line Data and Key Metrics Changes - The Enterprise Visibility & Mobility segment sales increased by 33%, while the Asset Intelligence & Tracking segment grew by 29% [12] - Services and software recurring revenue businesses experienced solid growth in Q4 [12] Market Data and Key Metrics Changes - North America sales grew by 36%, driven by strong retail mobile computing demand [13] - EMEA sales increased by 24%, with notable strength in Northern Europe [13] - Asia-Pacific sales rose by 30%, led by Australia, New Zealand, and India, with modest improvement in China [13] - Latin America saw a 40% sales growth, particularly strong in Brazil [13] Company Strategy and Development Direction - Zebra Technologies aims to capitalize on trends to digitize and automate workflows, focusing on innovative solutions including AI-based machine vision and self-service kiosks [24][25] - The company is pursuing strategic acquisitions, such as the pending purchase of Photoneo for approximately EUR 60 million, to enhance its 3D machine vision capabilities [16][26] - Continued investment in R&D, approximately 10% of sales, is central to maintaining industry leadership [25] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the outlook due to an uncertain global trade and macroeconomic environment [11][20] - The first quarter sales growth guidance is projected between 8% and 11%, reflecting favorable comparisons but also accounting for a negative impact from foreign exchange [17] - Full-year sales growth is expected to be between 3% and 7%, with a 130 basis points unfavorable impact from foreign exchange [20] Other Important Information - The company anticipates a net impact of approximately $20 million on gross profit in 2025 due to recently announced tariffs [22] - Zebra has diversified its supply chain sourcing beyond China, reducing exposure from 85% to about one-third [96] Q&A Session Summary Question: Larger project activity in Q4 and its impact on Q1 guidance - Management noted that Q4 saw larger projects return, driven by stronger-than-expected year-end spending from retail customers [38] Question: Tariff response and pricing actions - Management confirmed that price increases are expected to be announced shortly to mitigate the impact of tariffs [43] Question: Visibility beyond Q1 and assumptions for large deals - Management indicated that while there is solid backlog, visibility beyond Q1 is lower than usual due to market uncertainties [46][50] Question: Inventory levels with channel partners - Management stated that inventory levels are balanced, with good positioning as they exited the year [53] Question: Full-year guidance and visibility comparison to last year - Management acknowledged that the current lack of visibility is driven by uncertainties in global trade policy, impacting budget commitments [60] Question: AI opportunities and competition - Management views AI as an opportunity to empower frontline workers and enhance product offerings [67][72] Question: Recent acquisition and capital allocation plans - Management expressed excitement about the Photoneo acquisition and indicated continued interest in M&A to advance their strategy [75][77] Question: Trends in Europe and China - Management reported strong growth in Northern Europe but noted challenges in manufacturing, particularly in Germany [83][85] Question: Refresh activity and RFID performance - Management confirmed strong sales growth in RFID and ongoing opportunities across various sectors [104][106]

Core Insights - Zebra Technologies Corporation (ZBRA) reported fourth-quarter 2024 adjusted earnings of $4.00 per share, exceeding the Zacks Consensus Estimate of $3.95, and significantly up from $1.71 per share in the same quarter last year [1] - Total revenues for the quarter reached $1.33 billion, surpassing the consensus estimate of $1.31 billion, and reflecting a year-over-year increase of 32.2% [2] Financial Performance - For the full year 2024, ZBRA reported net revenues of $4.98 billion, an increase of 8.7% year over year, with adjusted earnings of $13.52 per share, up 37.7% year over year [3] - The Asset Intelligence & Tracking segment saw revenues rise 29.5% year over year to $448 million, exceeding the Zacks Consensus Estimate of $441 million [4] - The Enterprise Visibility & Mobility segment's revenues totaled $886 million, up 33.6% year over year, also surpassing the consensus estimate of $871 million [5] Margin and Cost Analysis - In the fourth quarter, Zebra Technologies' cost of sales was $686 million, a 22.3% increase year over year, while total operating expenses rose 13.1% to $423 million [6] - The company reported a net income of $163 million compared to $17 million in the year-ago period [6] Balance Sheet and Cash Flow - At the end of the fourth quarter, Zebra Technologies had cash and cash equivalents of $901 million, up from $137 million at the end of December 2023, while long-term debt increased slightly to $2.09 billion [7] - In 2024, the company generated net cash of $1.01 billion from operating activities, a significant increase from $4 million cash used in the previous year, with free cash inflow amounting to $954 million [8] Guidance - For the first quarter of 2025, ZBRA expects net sales to increase by 8-11% year over year, with adjusted earnings per share projected in the range of $3.50-$3.70 [9] - For the full year 2025, the company anticipates net sales growth of 3-7% year over year and adjusted earnings between $14.75-$15.25 per share, with free cash flow expected to be at least $750 million [10]

Financial Performance - Zebra Technologies reported quarterly earnings of $4 per share, exceeding the Zacks Consensus Estimate of $3.95 per share, and significantly up from $1.71 per share a year ago [1] - The company achieved revenues of $1.33 billion for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 1.81% and up from $1.01 billion year-over-year [3] - Over the last four quarters, Zebra has consistently surpassed consensus EPS and revenue estimates [2][3] Market Performance - Zebra shares have declined approximately 8.6% since the beginning of the year, contrasting with the S&P 500's gain of 2.9% [4] - The current Zacks Rank for Zebra is 4 (Sell), indicating expectations of underperformance in the near future [7] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $3.48 on revenues of $1.26 billion, and for the current fiscal year, it is $15.95 on revenues of $5.3 billion [8] - The estimate revisions trend for Zebra is currently unfavorable, which may impact future stock performance [7] Industry Context - Zebra operates within the Manufacturing - Thermal Products industry, which is currently ranked in the bottom 7% of over 250 Zacks industries [9] - Historical data indicates that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1 [9]