Exhibit 99.1
Zebra Technologies Announces
2015 First Quarter Financial Results
High growth of legacy Zebra products and positive momentum in
Enterprise combine for strong first quarter results and positive outlook
Lincolnshire, Ill., May 13, 2015—Zebra Technologies Corporation (NASDAQ: ZBRA) today reported that net sales for the three months ended April 4, 2015, were a record $893.2 million, compared with $288.3 million for the first quarter of 2014. The GAAP net loss for the first quarter was $25.3 million, or $0.50 per share, compared with net income of $41.6 million, or $0.82 per diluted share, for the first quarter of 2014.
Summary Financial Performance (Unaudited)
| 1Q15 | 1Q14 | Change | ||||||||||
GAAP net sales (in mils) | $ | 893.2 | $ | 288.3 | 209.8 | % | ||||||
Gross margin (%) | 45.8 | 51.3 | (5.5) pts. | |||||||||
GAAP net income (loss) (in mils) | $ | (25.3 | ) | $ | 41.6 | NM | ||||||
GAAP diluted earnings (loss) per share | $ | (0.50 | ) | $ | 0.82 | NM | ||||||
Non-GAAP net income (in mils) | $ | 72.4 | $ | 48.8 | 48.3 | % | ||||||
Non-GAAP diluted earnings per share | $ | 1.39 | $ | 0.96 | 44.7 | % | ||||||
Adjusted EBITDA (in mils) | $ | 152.2 | $ | 70.6 | 115.7 | % | ||||||
Note: A Reconciliation of Non-GAAP financial information to GAAP information is available in the financial tables in this release.
Non-GAAP Financial Results(unaudited)
For the first quarter of 2015, non-GAAP net income was $72.4 million, or $1.39 per diluted share, compared with $48.8 million, or $0.96 per diluted share, for the first quarter of 2014. Adjusted EBITDA for the first quarter of 2015 were $152.2 million, versus $70.6 million for the 2014 first quarter. The company’s calculation of non-GAAP net income 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, and amortization of intangible assets. The calculation also adjusts for a $27.2 million foreign exchange loss on unhedged net monetary assets. Please refer to the tables included in this press release for a reconciliation of GAAP to non-GAAP financial results.
“We started the year with strong, positive momentum, as business activity remained high specifically in North America and Europe,” stated Anders Gustafsson, Zebra’s chief executive officer. “Our partners and customers are responding enthusiastically to our greatly expanded portfolio of solutions and capabilities, and our enhanced focus on giving them improved visibility into their assets, transactions and people for better enterprise asset intelligence. During the quarter we also made material progress on achieving our cost-synergy targets, pursuing growth initiatives and integrating Zebra with the Enterprise business acquired from Motorola Solutions in October. The favorable business trends are continuing into the second quarter, as Zebra is well positioned to benefit over the long term from the convergence of technology trends in the Internet of Things, mobility and cloud computing.”
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Discussion and Analysis – First Quarter
| • | Net sales increased 209.8% from the comparable quarter a year ago. The Enterprise business acquired from Motorola Solutions contributed $561.6 million to 2015 first quarter sales, including a reduction in sales for purchase accounting adjustments of $5.6 million related to service contracts acquired with the Enterprise business. Sales of legacy Zebra totaled $331.6 million, up 15.0% from $288.3 million for the first quarter of 2014. The effect of movements in foreign currency, net of hedges, reduced sales on legacy Zebra by $2.4 million. |
| • | Gross margin for the first quarter of 2015 of 45.8%, compared with 51.3% for 2014, reflects the changing mix of products and services sold during the quarter, including Enterprise products which generally have lower gross margins than legacy Zebra products. Cost of sales for the first quarter of 2015 includes a purchase accounting increase of $800,000. The combination of the purchase accounting adjustments to sales and cost of sales reduced gross margin by 0.4 percentage points. |
| • | Operating expenses for the first quarter of 2015 of $389.7 million, increased by $295.2 million from the prior year’s first quarter, primarily as a result of the Enterprise acquisition. Operating expenses for the first quarter of 2015 include $37.5 million in acquisition, integration, exit and restructuring costs, versus $5.2 million for the prior year, and $67.6 million in amortization of intangible assets, compared with $2.7 million for the first quarter of 2014. |
| • | The company incurred a foreign exchange loss of $27.2 million related to changes in the valuation of net monetary assets. In addition, a net forward interest rate swaps gain of $1.7 million reflects a change in interest rates. |
| • | Interest expense of $51.0 million reflects the increase in debt related to funding the acquisition of the Enterprise business from Motorola Solutions, and includes $4.6 million in amortization of debt issuance cost and discount. |
As of April 4, 2015, Zebra had cash of $329.5 million, accounts receivable of $637.9 million, inventories of $405.5 million, and long-term debt of $3.1 billion.
Second Quarter Outlook
Zebra announced its financial forecast for the second quarter of 2015. The company expects net sales within a range of $865 million to $895 million. This forecast incorporates an expectation of year-over-year growth of 9% to 13% in constant currency, on a proforma basis. Non-GAAP diluted earnings are expected in the range of $1.00 and $1.25 per share. Adjusted EBITDA are forecast within a range of $130 million and $145 million for the second quarter of 2015.
Conference Call Notification
Investors are invited to listen to a live webcast of Zebra’s conference call discussing the company’s financial results for the first quarter of 2015. The conference call will be held at 9:00 a.m. Eastern Time today. To listen to the call, visit the company’s website athttp://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 second quarter of 2015 stated in the paragraph above captioned “Second 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,” “estimate,” 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.
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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: | Media: | |
| Douglas A. Fox, CFA | Robb Kristopher | |
| Vice President, Investor Relations | Director, Corporate Communications | |
| and Treasurer | and Public Relations | |
| + 1 847 793 6735 | + 1 847 793 5514 | |
| dfox@zebra.com | rkristopher@zebra.com |
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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
| April 4, 2015 | December 31, 2014 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 329,534 | $ | 393,950 | ||||
Investments and marketable securities | — | 24,385 | ||||||
Accounts receivable, net | 637,953 | 670,402 | ||||||
Inventories, net | 405,469 | 394,176 | ||||||
Deferred income taxes | 116,707 | 122,772 | ||||||
Income tax receivable | 60,340 | 12,988 | ||||||
Prepaid expenses and other current assets | 68,971 | 53,377 | ||||||
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Total current assets | $ | 1,618,974 | $ | 1,672,050 | ||||
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Property and equipment at cost, less accumulated depreciation and amortization | 270,228 | 255,092 | ||||||
Goodwill | 2,482,528 | 2,489,510 | ||||||
Other intangibles, net | 961,704 | 1,029,293 | ||||||
Debt issuance cost | 28,919 | 29,785 | ||||||
Other assets | 92,277 | 93,121 | ||||||
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Total assets | $ | 5,454,630 | $ | 5,568,851 | ||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 284,730 | $ | 326,524 | ||||
Accrued liabilities | 371,106 | 421,070 | ||||||
Deferred revenue | 225,112 | 196,213 | ||||||
Current portion of long-term debt | — | 7,522 | ||||||
Income taxes payable | 14,903 | 4,518 | ||||||
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Total current liabilities | $ | 895,851 | $ | 955,847 | ||||
Long-term debt | 3,144,177 | 3,182,962 | ||||||
Long-term deferred tax liability | 192,544 | 199,853 | ||||||
Long-term deferred revenue | 107,687 | 115,847 | ||||||
Other long-term liabilities | 88,373 | 74,434 | ||||||
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Total liabilities | $ | 4,428,632 | $ | 4,528,943 | ||||
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Stockholders’ equity: | ||||||||
Preferred stock | — | — | ||||||
Class A Common Stock | 722 | 722 | ||||||
Additional paid-in capital | 160,305 | 147,090 | ||||||
Treasury stock | (629,403 | ) | (634,664 | ) | ||||
Retained earnings | 1,510,010 | 1,535,307 | ||||||
Accumulated other comprehensive loss | (15,636 | ) | (8,547 | ) | ||||
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Total stockholders’ equity | 1,025,998 | 1,039,908 | ||||||
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Total liabilities and stockholders’ equity | $ | 5,454,630 | $ | 5,568,851 | ||||
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See accompanying notes to consolidated financial statements.
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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
| Three Months Ended | ||||||||
| April 4, 2015 | March 29, 2014 | |||||||
Net sales | ||||||||
Net sales of tangible products | $ | 755,322 | $ | 261,892 | ||||
Revenue from services and software | 137,862 | 26,376 | ||||||
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Total net sales | 893,184 | 288,268 | ||||||
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Cost of sales | ||||||||
Cost of sales of tangible products | 385,370 | 130,449 | ||||||
Cost of services and software | 98,292 | 9,881 | ||||||
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Total cost of sales | 483,662 | 140,330 | ||||||
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Gross profit | 409,522 | 147,938 | ||||||
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Operating expenses: | ||||||||
Selling and marketing | 122,106 | 35,416 | ||||||
Research and development | 96,417 | 22,857 | ||||||
General and administrative | 66,136 | 28,391 | ||||||
Amortization of intangible assets | 67,589 | 2,672 | ||||||
Acquisition and integration costs | 26,331 | 4,927 | ||||||
Exit and restructuring costs | 11,169 | 267 | ||||||
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Total operating expenses | 389,748 | 94,530 | ||||||
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Operating income | 19,774 | 53,408 | ||||||
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Other income (expense): | ||||||||
Investment income gain (loss) | (197 | ) | 421 | |||||
Foreign exchange loss | (27,191 | ) | (292 | ) | ||||
Forward interest rate swaps gain | 1,689 | — | ||||||
Interest expense | (50,965 | ) | (18 | ) | ||||
Other, net | (1,273 | ) | 26 | |||||
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Total other (expense) income | (77,937 | ) | 137 | |||||
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Income (loss) from continuing operations before income taxes | (58,163 | ) | 53,545 | |||||
(Benefit) income taxes expense | (32,866 | ) | 11,939 | |||||
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Net (loss) income | $ | (25,297 | ) | $ | 41,606 | |||
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Basic earnings (loss) per share | $ | (0.50 | ) | $ | 0.83 | |||
Diluted earnings (loss) per share | $ | (0.50 | ) | $ | 0.82 | |||
Basic weighted average shares outstanding | 50,667 | 50,402 | ||||||
Diluted weighted average and equivalent shares outstanding | 50,667 | 50,974 | ||||||
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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
(Unaudited)
| Three months ended | ||||||||
| April 4, 2015 | March 29, 2014 | |||||||
Net (loss) income | $ | (25,297 | ) | $ | 41,606 | |||
Other comprehensive income (loss): | ||||||||
Unrealized gains (losses) on anticipated sales hedging transactions, net of tax | 1,690 | 613 | ||||||
Unrealized gains (losses) on forward interest rate swaps hedging transactions, net of tax | (7,051 | ) | — | |||||
Unrealized holding gains (losses) on investments, net of taxes | (16 | ) | 148 | |||||
Foreign currency translation adjustment | (1,712 | ) | (167 | ) | ||||
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Comprehensive (loss) income | $ | (32,386 | ) | $ | 42,200 | |||
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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
| Three Months Ended | ||||||||
| April 4, 2015 | March 29, 2014 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | (25,297 | ) | $ | 41,606 | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 79,703 | 9,003 | ||||||
Amortization of debt issuance cost and discount | 4,559 | — | ||||||
Share-based compensation | 8,796 | 2,966 | ||||||
Excess tax benefit from share-based compensation | (1,492 | ) | (395 | ) | ||||
Deferred income taxes | 6,887 | 18 | ||||||
Unrealized loss on forward interest rate swaps | (1,689 | ) | — | |||||
All other, net | (144 | ) | 12 | |||||
Changes in assets and liabilities, net of businesses acquired: | ||||||||
Accounts receivable, net | 28,232 | (4,793 | ) | |||||
Inventories, net | (24,656 | ) | 1,663 | |||||
Other assets | (13,330 | ) | 2,419 | |||||
Accounts payable | (27,075 | ) | (2,435 | ) | ||||
Accrued liabilities | 9,002 | (9,670 | ) | |||||
Deferred revenue | 26,846 | 682 | ||||||
Income taxes | (36,876 | ) | 8,146 | |||||
Other operating activities | 2,130 | 533 | ||||||
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Net cash provided by operating activities | 35,596 | 49,755 | ||||||
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Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (25,522 | ) | (2,374 | ) | ||||
Acquisition of businesses, net of cash acquired | (48,805 | ) | — | |||||
Proceeds from sale of long-term investments | 1,748 | — | ||||||
Purchases of long-term investments | 168 | (405 | ) | |||||
Purchases of investments and marketable securities | (739 | ) | (151,817 | ) | ||||
Maturities of investments and marketable securities | — | 15,996 | ||||||
Proceeds from sales of investments and marketable securities | 25,108 | 72,206 | ||||||
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Net cash used in investing activities | (48,378 | ) | (66,394 | ) | ||||
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Cash flows from financing activities: | ||||||||
Payment of debt | (50,000 | ) | — | |||||
Proceeds from exercise of stock options and stock purchase plan purchases | 8,199 | 4,936 | ||||||
Excess tax benefit from equity-based compensation | 1,492 | 395 | ||||||
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Net cash provided by (used in) financing activities | (40,309 | ) | 5,331 | |||||
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Effect of exchange rate changes on cash | (11,325 | ) | (95 | ) | ||||
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Net decrease in cash and cash equivalents | (64,416 | ) | (11,403 | ) | ||||
Cash and cash equivalents at beginning of period | 393,950 | 62,827 | ||||||
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Cash and cash equivalents at end of period | $ | 329,534 | $ | 51,424 | ||||
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Supplemental disclosures of cash flow information: | ||||||||
Income taxes paid, net | $ | 4,841 | $ | 3,304 | ||||
Interest paid | 26,706 | — | ||||||
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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL SALES INFORMATION
(Amounts in thousands)
(Unaudited)
SALES BY PRODUCT CATEGORY
| Three Months Ended | ||||||||||||||||||||
Product category | April 4, 2015 | March 29, 2014 | Percent Change | Percent of Net Sales 2015 | Percent of Net Sales 2014 | |||||||||||||||
Hardware | $ | 688,070 | $ | 198,388 | 246.8 | 77.1 | 68.9 | |||||||||||||
Supplies | 67,252 | 63,504 | 5.9 | 7.5 | 22.0 | |||||||||||||||
Service and software | 137,862 | 26,376 | 422.7 | 15.4 | 9.1 | |||||||||||||||
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Total net sales | $ | 893,184 | $ | 288,268 | 209.8 | 100.0 | 100.0 | |||||||||||||
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SALES BY GEOGRAPHIC REGION
| Three Months Ended | ||||||||||||||||||||
Geographic region | April 4, 2015 | March 29, 2014 | Percent Change | Percent of Net Sales 2015 | Percent of Net Sales 2014 | |||||||||||||||
Europe, Middle East and Africa | $ | 290,544 | $ | 91,439 | 217.7 | 32.5 | 31.7 | |||||||||||||
Latin America | 53,286 | 25,640 | 107.8 | 6.0 | 8.9 | |||||||||||||||
Asia-Pacific | 106,383 | 37,967 | 180.2 | 11.9 | 13.2 | |||||||||||||||
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Total International | 450,213 | 155,046 | 190.4 | 50.4 | 53.8 | |||||||||||||||
North America | 442,971 | 133,222 | 232.5 | 49.6 | 46.2 | |||||||||||||||
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Total net sales | $ | 893,184 | $ | 288,268 | 209.8 | 100.0 | 100.0 | |||||||||||||
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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
(Amounts in thousands, except per-share data)
(Unaudited)
| Three Months Ended | ||||||||
| April 4, 2015 | March 29, 2014 | |||||||
Net (loss) income | $ | (25,297 | ) | $ | 41,606 | |||
Income tax (benefit)/expense | (32,866 | ) | 11,939 | |||||
Share-based compensation expense | 8,796 | 2,966 | ||||||
Acquisition and integration costs | 26,331 | 4,927 | ||||||
Exit and restructuring costs | 11,169 | 267 | ||||||
Purchase accounting adjustments | 6,426 | — | ||||||
Foreign exchange loss | 27,191 | 292 | ||||||
Amortization of intangible assets | 67,589 | 2,672 | ||||||
Non-cash interest expense | 4,559 | — | ||||||
Unrealized gain on interest rate swaps (gain) loss | (1,689 | ) | — | |||||
Tax effects | (19,764 | ) | (15,832 | ) | ||||
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Total adjustments | $ | 97,742 | $ | 7,231 | ||||
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Non-GAAP net income | $ | 72,445 | $ | 48,837 | ||||
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GAAP (loss) earnings per share | ||||||||
Basic | $ | (0.50 | ) | $ | 0.83 | |||
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Diluted | $ | (0.50 | ) | $ | 0.82 | |||
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Non-GAAP earnings per share | ||||||||
Basic | $ | 1.40 | $ | 0.97 | ||||
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Diluted | $ | 1.39 | $ | 0.96 | ||||
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Basic weighted average shares outstanding | 51,725 | 50,402 | ||||||
Diluted weighted average and equivalent shares outstanding | 52,271 | 50,974 | ||||||
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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
GAAP to NON-GAAP RECONCILIATION
(Amounts in thousands, except per-share data)
(Unaudited)
| Three Months Ended | ||||||||
| April 4, 2015 | March 29, 2014 | |||||||
Income from continuing operations to EBITDA and Adjusted EBITDA | ||||||||
Net (loss) income | $ | (25,297 | ) | $ | 41,606 | |||
Income tax (benefit) expense | (32,866 | ) | 11,939 | |||||
Total other expense (income) | 77,937 | (137 | ) | |||||
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Operating income (loss) | $ | 19,774 | $ | 53,408 | ||||
Depreciation | 12,114 | 6,331 | ||||||
Amortization of intangible assets | 67,589 | 2,672 | ||||||
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EBITDA (Non-GAAP) | $ | 99,477 | $ | 62,411 | ||||
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Acquisition and integration costs | 26,331 | 4,927 | ||||||
Purchase accounting adjustments | 6,426 | — | ||||||
Exit and restructuring costs | 11,169 | 267 | ||||||
Share-based compensation expense | 8,796 | 2,996 | ||||||
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Adjusted EBITDA (Non-GAAP) | $ | 152,199 | $ | 70,571 | ||||
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10