Zebra(US:ZBRA)2025-05-21 13:35Summary of Zebra Technologies (ZBRA) FY Conference Call - May 21, 2025 Company Overview - Company: Zebra Technologies (ZBRA) - Event: FY Conference Call - Date: May 21, 2025 Key Points Revenue Growth Guidance - 2025 Revenue Growth Guidance: Expected to be between 3% to 7% [3][4] - Q1 Performance: Achieved high end of guidance with strong demand trends [3] - Q2 Guidance: Mid single-digit growth anticipated [3] - Customer Project Delays: No significant delays reported due to tariff uncertainties [3][4] Market Conditions and Customer Sentiment - Tariff Impact: Ongoing monitoring of macroeconomic conditions and customer plans due to tariff uncertainties [4][5] - Customer Conversations: Discussions with CIOs indicate tariffs are a primary concern but have not significantly impacted project timelines [5][6] Demand Trends by Vertical - Vertical Performance: Accelerated growth across verticals, with manufacturing showing high single-digit growth, lagging behind other sectors [9][10] - Digitization and Automation: Customers are focusing on digitizing workflows and improving operational efficiency [9][10] Large Order Activity - Large Orders: Currently below 2021 and 2022 peak levels, with customers still absorbing previous deployments [12][13] Tariff Math and Pricing Strategy - Tariff Costs: Estimated impact of $70 million for the year, with $50 million offset by pricing increases [16][17] - Price Increases: A 10% price increase implemented across most products to mitigate tariff impacts [20][21] - Demand Elasticity: No significant demand changes observed post-price increase, but monitoring continues [24] Long-term Growth and Market Position - Long-term Growth Target: Committed to 5% to 7% organic growth over the cycle [38] - Installed Base: Mobile computing installed base is 35% higher than in 2019, indicating growth potential [43] Margin and Profitability - EBITDA Margin Guidance: Expecting a 50 basis points contraction due to tariffs, but core margins remain strong [44][45] - Record Gross Margins: Achieved the best gross margin since the Motorola acquisition [45] Machine Vision and Software Business - Machine Vision Growth: Excitement around the machine vision business as a long-term growth driver, especially post-acquisition of Fotoneo [48][49] - Software Integration: Launch of WorkCloud Sync to enhance software offerings and integrate with mobile computing [51][52] Capital Allocation and M&A Strategy - Free Cash Flow: Generated over $1 billion in free cash flow over the last four quarters, allowing for active capital return [53] - M&A Criteria: Focus on strategic fit, synergies, and cultural alignment for potential acquisitions [56] Inventory Management - Channel Inventory: Currently working through $50 million to $100 million of excess inventory, with plans to normalize levels by 2026 [64][65] Additional Insights - Sourcing Strategy: Aiming to reduce reliance on China for imports, currently at 30%, with plans to further decrease [30][31] - Production Flexibility: Leveraging third-party manufacturers to maintain flexibility in production locations [36][35] This summary encapsulates the key insights and data points from the Zebra Technologies FY Conference Call, highlighting the company's current performance, market conditions, and strategic outlook.