ZBRA - Earnings call transcript Q3 2017 | Zebra Technologies Corporation

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Operator

Good day, and welcome to the Third Quarter 2017 Zebra Technologies Earnings Release Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mike Steele, Vice President, Investor Relations. ahead. go Please

Michael Steele

thank and joining us. Good you morning for

of inform of we include statements certain XXXX. I These Harbor forward-looking Act the Litigation to begin, need you provisions Safe made the current which statements subject that Private of are Securities uncertainties Reform future and Before are differ factors statements, contained could that uncertainties to results the company's company's on expectations events the subject reflect to of this call filings and concerning Securities Commission. cause A materially. these in the discussion and detailed and is to a factors actual with number Exchange

will business During we make this describe to as performance. non-GAAP call, financial we measures reference

earnings our financials slide and You end include Leonetti, at our can Financial Executive find Today's of presentation. prepared GAAP Gustafsson, Chief reconciliations slide made and our drivers by today's release and Officer, then of remarks of press on in conclude progress the quarter discussion detail the strategic fourth Zebra's our sector. more e-commerce provide presentation results. on the Olivier the to will with call discussing in conference Officer. begin Olivier and and and discuss outlook. Anders Anders will will of Chief Anders from results highlights recent our quarter an will retail our update on priorities and key positioning third non-GAAP the

of take Senior our President your Heel, Global as will Joe remarks, Vice prepared the questions. join Sales, Following us we

references being currency results. sales exclude growth year-over-year our for XXXX results archived and This LAN's divested presentation, October one will at include investors.zebra.com, Through wireless on sales the be LAN from there presentation a are our through As XXXX. constant wireless our is website basis reported least at business this simulcast year. on a and financial reminder, to

to the Now call I over Anders. turn will

Anders Gustafsson

Thank for you joining you, everyone, morning Good us. Mike. and thank

year. margin including results, $X.XX, point third X%, increase million last to of which of XX% our year-on-year market XXX their across adjusted delivered on leadership by provide of our into quarter, customers all our XX.X%, $XXX team In growth metrics slide of the EBITDA innovative Each quarter you non-GAAP delivered Latin America. with exceeded from five, see a organic of them adjusted EPS a continued increased net our was extend led solutions range. achieved As and nearly solid and growth sales we improvement, an operations. guidance to basis these regions EMEA and that We visibility

growing with and strength capture, saw growth lines all channel. quarter average. reflected the the computing also across printing, mobile company data The product strength in We each above broad-based the in

acquisition our outlook. in as Olivier now I to With and turn well discuss as results in detail accomplished the In exiting agreements addition, we service our we while strong backlog larger to related fourth to as opportunities, this greater financial will executing a build on the that, pipeline transition over of review our fourth continued quarter. to We our resulting debt to Enterprise remaining restructuring quarter call all the entered position plan.

Olivier Leonetti

Thank Anders. you,

Let walk us a P&L. begin with the through

of capture grew and segments on sales our our of regions. X.X%. retail were of industry-leading computing Enterprise strength growth solutions. and location you Zebra with data across and growth are with its portfolio. continues solutions, sales in four in results slide including growth. our slightly X.X% services segment our see can sales Sales portfolio, to X.X% the solid Android-powered segment each services momentum tiered in supplies. Mobile third visibility with higher Investments solid offerings, As applications, into translating by printing Pre-transaction the driven Zebra reporting increased our refresh seven, all quarter, in increased expansion

printing and X%, Asia-Pacific were regions, driven in broad-based in and mobile our products. EMEA Sales We traction products. growth across up X%. to was capture, computing, America North mobile printing strength increased data sales sales X%. Turning computing by saw in

higher on prior-year grew to region in our to in-sourcing most As sales. into XXX period, sales support the legal imposed and healthcare, related are reminder, China. the offset experiencing lower the particular of repair imported of with China impacted were discussed mainly as increased reflects as well quarter, a throughout printers sales in negatively improvement The regional the we price by the were partially Adjusted distributors a compensation offset last by a improvement of quarter due American computing reduction as was consider million concession Consolidated consolidation $X favorable distribution as We printing business Australia. term the expenses softness imported margin was the associated and of business due prior-year to previously operations. into incentive long exception and of duties operating where, is to in we improved gross cost point million partially last from the in strength from saw year on data capture our We $X factors North a a point tailored price China in mix. adjusted mentioned XX good offering. and temporarily services capture products increased team X%. with Latin printer product data basis business exceptionally prior-year our and declined This quarter. professional sales costs of expense the higher America in driver China centers go-to-market businesses. mobile growth period. supply These performance. changes chain plan to products progress percentage due and fees, higher of making previously sales We basis by strong concessions

in XX% sharp were million the also $XX third from costs EPS. EBITDA in prior-year Non-GAAP $X.XX the adjusted driven expenses. lower QX, increased was higher Lower the XXX This to the diluted period. in margin was per by operating in increase down from prior-year XX.X%, share profit gross period. $X prior-year a and non-GAAP increase Integration quarter, of from point basis period. earnings the an contributed XXXX quarter increase interest to expenses million Third

we As all transition Anders July. Motorola with remaining Solutions service late agreements in exited mentioned,

In restructuring Turning approximately drive to redeemed to lower $XXX annual July, of arrangements, average financing million We an receivable than slide which a X savings. redeem comprehensive the million senior reduce of more a accounts senior August, $XX facility. and we by cost through our of plan, debt will reminder, plan on announced points our percentage interest remaining X.XX% Xth notes. rate eight, as the million in $XXX interest notes December we including securitization

cash nine, as debt of had to sheet. slide Turning sheet balance the $X.X quarter, the balance now third billion highlights the we flow and of the end on of on

due This our build prior-year on debt in line $XXX decrease down year-to-date, was which primarily basis, capital of mainly temporary QX, shipped In a working to a path a build a third related essentially Slide October. cost period. our was temporary high QX, million expectations. cash financial XX of the million was to principal end were in than and less year-to-date a in We which borrower much net due This debt needs. million Free and anticipation one-time inventory of restructuring deleveraging. shows net backlog paid million the strong to to $XX $XXX $XX with have through the we significant flow quarter. of of

to and excess cash top debt. priority down is cash for balances Our flow pay

of debt the acquisition from down of quarter, close as third net end which more of X.X is X the adjusted of late XXXX. Our to as times the EBITDA than in was the times ratio Enterprise

mid-XXXX. Our to than of ratio strong X free continue in and by less confidence cash profitable profile a times growth achieving flow us provide debt leverage

outlook on our to slide turn Let's XX.

between For the fourth we in quarter and to expect be XXXX, the growth of X% sales net X%. adjusted

This increase net EBITDA range margin an X impact This percentage prior-year be of gross quarter positive wireless is percentage to rate large excludes to translation higher point adverse expect the lower growth from growth LAN. to We an slightly impact XX%, sales approximately to Fourth X% and margin in foreign assumes point adjusted between from orders. organic due and currency XX% flat expected X%. XXXX anticipated mix a from of period. expectation X the

as $X.XX. we sales. to to prior-year a adjusted the diluted $X is operating EPS expenses percentage to be be favorable Additionally, of of Non-GAAP period expect and range the in expected

at the by EBITDA, as lower reduced of higher million pay cash XXXX, well For as expect on hand. $XXX expenditures year to down expenses, capital full which supported we is to integration lower debt, continue least

is Following fourth the a significant and working third a trend is inventory capital in reversing significant expected increase be to the quarter, through cash the of quarter. source

compensation You With expenses. XX progress adjustment to can will on stock-based turn I assumptions to strategic see that, on modeling other interest Anders full year the priorities. back to and call with discuss our slide XXXX modest

Anders Gustafsson

quarter. made you, outlook Olivier. in pleased for Overall, third the with we the our and quarter fourth progress Thank the are

our upon we As are you several drive on industry value. and areas build see shareholder slide focused leadership XX, to on

scale, extending innovation solutions First, in customers partners. enterprise leadership visibility our and with relationships our and we are through

or asset platform. will Second, we Zebra's a on our moment. trends are intelligence and update deep knowledge cloud EAI technology capitalizing enterprise of on workflows advancing you key and progress I in by our vision our of leveraging

extending markets of and team. have our we the entire focus further in thanks we dedication milestones the Zebra are by achieved Third, lead on the final we integration, Enterprise the laser-focused serve. the With to accomplished, that

enhance capital improving Our profitability, is strength structure. flow fourth our area Zebra's of and further financial optimizing to focus increasing cash by

costs will X target continue restructuring integration and Lower costs flow a achieve as profitable less We rate debt of profile interest ratio flexible to growth subside. debt mid-XXXX. should structure combined leverage times with by capital a enable driving are run sales our cash to and improve us than

key Zebra capitalizing proliferation turning smart devices. and Now XX, on to the in cloud slide is mobility, trends of computing,

reduce view in Our analyzed front-line actionable the information, and unprecedented products processes. devices enable in and including then to into and operations. of to friction entire employees business This about enterprise. workflows, location, and sends insight to status real-time insights information EAI provides provide digital a productivity smart infrastructures framework This improved assets, is

the knowing basis. a enterprise vision as customers on critical Savanna, and data sensors, powers including and strategy our platform, and be offering. on such visualization the solutions services sensors analytics, SmartPack to by printers provisioning, among is well innovative others. It as Trailer offerings, applications. physical component Zebra our of grade and softer this applications of enterprise what's can solutions, through analyzing cloud-based, Savanna outcomes intelligent visibility capture brings as analytics Our mobile with overall analytics on infrastructures behind computing, our focuses data that our These only world specialty and asset data-driven visibility workflow and and portfolio optimized but smart in infrastructures, include services. real-time also our a devices broad, and interconnects intelligence actions new solutions. from happening our not

analytics Trailer maximize operations empowering utilization. As doors, is reminder, dock of thousands has solution, SmartPack managers on our software capacity installed which a to been cargo

more secure additional developing by the want empowering accessible demand efficiencies software lower have the makes expedited of ecosystem in for applications driving Zebra. opportunities for how into choice We our their initiative This real-time market. an providing XX developers are In consumer a traditional chain. patients data-driven more manufacturers systems. five leverage in markets. quality to goods, partner selected a now the vertical access platform ERP marketplace delivery. how us they partners serve the to the flexibility independent and key and in Increased we and solutions growth QX, increasing including enterprise to are platforms cost, that we of at care highlights to uniquely shoppers customers. convenience are applications demands as and integrate our Retail in platform bring Savanna other first positions value of EAI Hospital across to Slide at purchase broadly data marketplace Savanna higher

in each customers in uniquely experts operational enterprise We our serve. are these are help vertical workflows address the because to challenges market positioned we we

on we've I where and serve over Now slide Retail would had sales year. we the turning update is sector. an currently vertical to to growth strong largest e-commerce the the provide past market retail XX, like and

from a their retail with recently For IHL many the the retail study retailers the on perform and IT years, growth. dive The the five-year X,XXX the input impact findings in support held Zebra's and sector anticipated in visibility broad We commissioned we to leading range driving than efficiency North role and important was privately The solutions. trends of more leading with scope of a consultancy, retailers Group, Zebra America have this and transformational themes period and a key deep XXXX a helping through played into for a Europe. public study of XXXX. comprehensive discussions enhance through

from First, retail a the evolving to been dynamic multi-channel sector a brick mortar-only and has model. more model

and the most store in expansion and As quickly. sub-sectors. most value The in leaders is who navigate our proposition investing growing it e-commerce volume and their continues shift transformation The to Omni Zebra, market both with e-commerce transforms, channel the grow growing to successfully. our allows are more retailers sales and the And to sector channel net business. benefits count Zebra customers e-tailers this second,

Our to we as core expected sales technologies are to provide industry. grow the business relevant

Newer further solutions upside. outside of core provide our

provide channel real-time sales due Zebra to Additionally, a net benefit e-commerce those incremental necessary to tracking the to intensity successfully. workflows execute increased

have because our sub-sectors closings trends and is of to to vertical a business slide the Only Zebra's expected these two-thirds taking account retail e-tailers. have mass we in sales; sales. approximately which coverage You'll three the large-scale most include the trends of most media positive sub-sectors to merchants, where in serve the that where XX nine three are been store impact continue the our see for declining core grocery on and receive have place. and net business These sub-sectors, largest it we presence retail have in

demonstrates For tools connected of enable instance, include delivery, nearly an and to can efficiency, has a accuracy, retail three multi-channel operations delight fulfillment retailers is Key and during Overall, in inventory who past to the in of to delivery. technologies, mobile optimize the success raised these which more the is shoppers. the winners that bar losers options to from customers to study retailers retailers direct enabler at fulfillment. multi-channel things same-day experience, in is become investments are to what for they strive for The and drivers the shoppers e-commerce from strive global doing competition and providing unique. right for Technology fulfillment the initiatives meet associate, growing as transformational the delivery. their growth experiences including success increased computers we investment to that our most The of needs all and in-store Adoption trend technologies technologies and including effective store of key in store, see empower basis in for separates in-store capabilities, XX% store needed click-and-collect and speed various retailing, raising five represents retail, of of of closings serve retailers majority demonstrates that year. a sub-sectors the bar. Zebra we not in-store e-commerce is are the the of retail right meet

and We sectors, in same demands and are logistics seeing other the transportation including healthcare.

solutions succeed to to in all We customers all successful well environment. In will I executing fast-changing quarter. another and these for these continue to -- provide thank a closing, help delivering of want the Zebra team

a finish year. call hand QX We are on to track to deliver and a the Mike. solid With that, strong back I'll to the

Michael Steele

you to that and Anders. question of one the to limit so now Thanks, follow-up as many yourself you we Q&A. open We ask to one can get We'll as that possible. call

Operator

Needham The Ricchiuti now will go question-and-answer with Instructions] Jim Company. We begin session. comes the Please ahead. [Operator first from & question

Jim Ricchiuti

Hi, morning. Good thank you.

if you sounds follow-up I of or the shipments in verticals given is, perhaps you're wondering my the some was major may quarter. that's could wonder in question like additional but color on anticipating if You you. provide it that. elaborate what's And driving large some information, that have this retail you made and presumably QX vertical, the and Thank in on have could some I

Anders Gustafsson

Yeah. Thank you.

long we of and retail. a growth year had across a a I'll verticals, and secular and for be over opportunity them. are study Zebra on we growing recent capitalize start a -- at there type started I and helping Retail vertical time. take mortar is for mortar execute e-tailers e-commerce on to on growth and going the we give that Omni several a products -- for the competitive fuel drivers and solid able vertical strategies. some we think, across had all strong script, to channel. is The are very verticals to it and years has growth you us. we that all had talked transformation, technology from trying We more we our the substantial the verticals, the Firstly shift lot of all to have we our about to past retail I on but their specific on of validates brick to believe strong -- of the Brick solutions believe is embracing this growth been growth through color If with for and set

new historically. market, So we transition product to the we overall good than have on Android are of were their a much traction. the And their and number more essential we in aided also today -- strategies launches are executing attractive seeing we by

SmartLens, MPXXXX retailers know, a substantial I but RFID some very I value have ones. the We the and of can -- for have very that tends a a checkout. Omni see Also to scanners all newer little other retail, propositions solutions frictionless we like do more And for are personal and as drive think the to lumpy. that helps a you some towards shopper, in bioptic asked, strong refreshes, be you also go verticals. couple more through channel

that's The healthcare, key electronic fastest medical growing growth in adoption of for vertical. been in driver healthcare records. our the So has

focused healthcare, spaces safety Our been value of efficiency, of the but the our for quality in we care proposition that can with care historically and primarily in improving also have augment patients. around

building compelling, earlier and this more So specific it from seeing year, product think. those some new we're healthcare makes and scanner, momentum it TCXX We the I DSXXXX introductions. that much launched products good

also. have asset I'll e-commerce growth it's but more of launched of new ramping do flexible market. the trends tracking seeing now us. predominantly secular some has transportation attractive T&L, the US, in to last from outside lastly homes. which global delivery is a people's certainly and logistics much more US of lastly, And We're benefiting for We to solid a signs been parcel hospitals, starting around more becoming And growing strong affordable products historically, here, transition at impact show also think in T&L. collaboration the vertical maybe the healthcare a this meaningful for introduced TCXXx helping and new quarter, we both Android in also, having end nicely the see with We to year, we and of last TCXX the year, and I are GE beginning a and of Healthcare drive

upside have provides trailer We to SmartPack also. and industry leadership business solutions compliance, T&L also which like some the demonstrates new our in location and

Jim Ricchiuti

shipments. just that And to there you and any QX, Thanks. some large alluded retail on if in is you're on Is strength seeing, that the color that?

Anders Gustafsson

was based that. think that I than more broad

the started we we So to able to satisfy early. quarter good wanted position and with backlog that be demand

we inventory to but was it So also, but more that, extra that do some not built some Certainly customers able just retail. was retail be that up to in broad-based.

Jim Ricchiuti

Thank you.

Operator

question go comes Lakes Rodgers of Please Great from next Jason Review. ahead. The

Jason Rodgers

I growth. think provide drove and that ask quarter wanted morning. legacy in good that quarters. if about the detail organic was you Wonder sustainable what very how that coming Yes, the on in to in is strength strong the Zebra could more you

Anders Gustafsson

had very performance. good we Yeah,

business supplies up and printing digits. Our was mid-single

a products new portfolio more coming. have We today have and we product strong

have think different probably to the products the of cross-sell kind existing trying I been Zebra the customers. printer us of products the biggest into one to beneficiary of going all

our of differentiators about itself what's one it have us now printers Link-OS can in We some, network a on. applications more going our We citizen. think, run a which on printers can I lot environment, the smart makes a is differentiator, things the enables communicate and to which have software unique products;

our QX, to consider We're all well or the We've is printers interconnect QX, Another for attractive Connect very some ZTXXX the a that new Automation's at choice in have. Network able of have the market do the more an This upside. business us ecosystem. printers direct are in enables top to -- also. their differentiator application us ZTXXX. received end beginning they with partner lots and us good of Those well distributors to the printers Rockwell supplies still have be line for be us continues launched of markets. both them. with for developing and new -- of relationships is into under-penetrated of the now new we tabletop we And to for It's the been --

Jason Rodgers

China? what And expand for then if if China, fourth the I you could just there should about improve what earlier on on could ask said and results to taking question quarter steps expecting we you be a in

Anders Gustafsson

Yeah.

some was China, 'XX. So of of sales, But performance had half performance very we're overall, is do a -- outside in about by improving. by some our but India. easier in improvement China in see Japan our had progress Australia, and capture we quarter, Chinese printing. was We on trend -- was specifically go-to-market we lower less a coming is the with as this strong comp impact duty of softness strong in printing it We had helped for China we making also, certainly Asia plan mitigating, data market. it the Asia than in an is out and down comprehensive are feel and first, XQ the did good tailored Asia-Pac but remember, we're of -- led but that products

So growth we improving will we trend continue do a driver on us. an we that expect are for believe to long-term China be and

Jason Rodgers

you. Thank

Operator

Please question of Blair. next Drab comes from Brian go The William ahead.

Brian Drab

Anders. morning, for my question. Good taking morning. Thanks good Hey,

Anders Gustafsson

morning. Good

Brian Drab

me rate people be. here what call figure the on sense should longer-term of trying kind the including that out some I are think I to growth

row. we back XXXX about As then as cited, and a at was three that that the cited positive for think, and those had context great we've you thinking of study, this then And organic about in 'XX that quarters talked I throughout flat, in you and you. revenue study the trends year, look about of series in 'XX growth a you

an put finer products, to in trends you try are your the view? in in talking you just point on your Was XXXX those maybe actually that or lot changed year but of are cited know inflection -- a study I what favor? new in XXXX a has you could accelerating? So about

Olivier Leonetti

going to I'm So take this question. Brian,

a to still growth have we last have the rate long-term few Certainly, we X%. to we about grow the that year. that is going we a beat claim, we that's are of can growth years. the indicated at over all, reasons. this behind company before cycle company, to of believe we're of the And that the number over due X% and this few first This as been achieving So

and to trends to compete allowing our market this also set ability due is strong in market quarter. and which better of every compete our First, and us product to solutions, better

Regarding have not go a We able close going in a the XXXX, to we those few which a explained going our going to markets. the last, question today, the to in our XXXX, company company performance various market to, is but are adjacent deliver avenues the we a year. feel going strong or of but into things either not this we're to growth And am believe core we levers grow to alluded today, a provide guide regarding you details growth. be we're year. of The bit I optimistic about believe of solid be next different. to

us. and line two, that end the market, an as solutions behind of strong compete to translating a believe have also had is increased of company a ability we integration as of line First, we products Enterprise is now and top set improvements. into the have the bottom either best We and or Motorola company

Anders Gustafsson

it to a of also. add words couple I'll

growing to to revenues are an to in more is also And have solutions essential this. our -- And more benefited more can An to and technology -- retailers we the relevant I enabler that their be of asked be and much a just and growth them them today. we example be think their help look grow disproportionately would constructively for Omni going connected how you to portfolio we do such of channel invest sense store to timely broad to much execute retail having or store generally associates X% retail enable much by e-commerce. to is engage on how, their X%, wants technology able at then that's much are to is their They strategies per disproportionately X%. expect and in device what up like grow looking grow retailers with product how as as count at kind you customers. if benefiting revenues, X% that more of and and to

you comfortable to with a and overall through grow our that will cycles. -- revenue that growth that to some share, and drive think across us X% feel this all X% expectation I should combine So we industries continue we help

Brian Drab

all that's both margins. Olivier question more on just Thanks the And Okay, really you. helpful. of one for maybe

that margins quarter. mentioned, having to I'm tailwind? now not third FX a now? generates the headwind. over XX% a You've on I'm reached essentially the was the impact company a of if Can ago, you Thanks. I the is things. in Is years years, that what and target know this two sure margin what that wondering, last you few secondly, be margin transitioning it's the been set a And impact couple consistently above EBITDA down road?

Olivier Leonetti

question. answer So to first your me let

of improve So XX% not we the we we believe said us set in margin the to also increase are and would of an have through have EBITDA a updating also we strong a that, margin margin to rate, the gross which help to target gross long-term XX%. believe solutions, margin, company believe have our Having leverage we products either operating OpEx we we ability lever, rate and we lever. have also

the productivity we company. is integration have behind across enhance now us, to the ability the As

over positive. range, So the no to but the commitment vectors be are

Regarding obviously positive FX, trend. a it's

X point growth goodness the driving look prepared is If quarter. in -- FX a remarks, my you at percentage

are Now we hedging.

of know, about you enter XX% into as is currency As we exposure hedged the a quarter.

and due some bottom of Brian. that mainly line, in it, but but So you to don't quarter the of pricing, was margin have to the our of full quality the the benefit operational strength efficiencies

Brian Drab

Okay. very you. and Anders. Olivier Thanks Thank much,

Operator

of next Stanley. go question comes Morgan ahead. from James The Please Faucette

Meta Marshall

Hi, for this James. is Meta Marshall

deeper the or bit kind implied just -- Just margins, expected. in guide gross in of to gross margin bit the weaker margin gross on a was dig little little maybe than QX a

kind still a think Thanks. know should expected in levers of have how and so think -- is kind margins those just I of effects mentioned gross QX? about or a being carryover you in we maybe bit should how about of And less than but we XXXX, improve China that to guys little

Olivier Leonetti

-- So at in margin looking we gross term the margin are of dollars.

So if to it's the dollar you last year. at look relative increasing QX, in margin

into indeed actually read at of quarter. have larger If the rate, margin and profile due it's the rate will had. It's pleased too we a the margin wouldn't of which you bids than impact company, much are look particular mix lower I but what we to in with the rate, a

Meta Marshall

then -- on forward? And kind of up or those when Is now any strategy into plan forward, leverage hedging point, was there to is much place that change I the a hedging to Thanks. to the the kind bit, is of change your there know just weakening little dollar follow put going any higher. it. going strategy is Got were there

Olivier Leonetti

The net answer is no.

We that have believe is than We the lever improve actually the growth company complicated to rather plan. the hedge the and we having a very compete boilerplate best maximize of profitability programs. hedging to way

term being So in of FX contemplated no programs. change

Meta Marshall

pass I'll it Thanks. Great. on. Okay.

Operator

ahead. comes The of from Paul next question Coster Please go JPMorgan.

Paul Coster

Yes. taking questions. my Thanks for

services, like wrong it the talk business first a doesn't driving about bit the one, So all maybe the it what be really us look Savanna it hardware? me model it's revenue Anders, and going attached something I've to is tied to to is? software you Because Is through can little got there. but

Anders Gustafsson

available at large of to and physical edge that and world the both. generating had I have products this some the OVS, connecting products using of this. a number we're the leveraging now these are been to like but a have and obviously we the partners other of of data lot platform forth bit of MotionWorks Savanna making world data. well, we first, for as large amounts and of that LS, doing the are guess, It's in so And data applications this, digital network a our

and provide So to it's workflows of workflows. insights the for deep our and from for all frictionless to actionable more edge a get data that way the more understanding at we combine insights with enable the vertical us

Joachim Heel

Perhaps is comment. I'll a Joe this -- add Heel.

of platform. this this five partners make large for us as the -- you of the to models available those business the be of revenue we drive partners just, And spring. could broadly said our first use more one that expect We've data terms in to services to available a on hand, In the and introduced remarks, in future. that partners we a the the will number we envision, that partners those in platform expect stream all will can to

reside, The model. and other one entering business on applications of a applications platform that could right, can is it's those the also a be into space which

Paul Coster

right? fit it's into perspective, But So product will a open from standard this anyone's hardware platform? an

Anders Gustafsson

south to connect into side. connect of can into on We we on Yeah. interface, all the and easier any at the sensors it any type north bound make applications type -- Savanna all the of -- but and also

space be into sure Savanna could our make to standard de-facto network at for to you when generating want in a applications. can that standard, to of want the we able be various So real insights data a, devices we actionable say, to the connect drive edge

Paul Coster

the about to industrial unrelated really that, Things Internet of space. is question it's follow-up but My Okay. inside

sensors a looks happening it intention of move something that Can or space your here lines mobile inside sensors to not? into whether readers. is in-line like you me between sort and IoT embedded and are the So to your talk more us production to about like collision

Anders Gustafsson

start as employees. IoT that's in data bit say workflows leverages think friction that reduce front-line to higher maybe we level and little I'll of a solutions company an for ourselves developing

So do. that's essence we're trying kind to of the that

it found able So revenue deliver haven't front-line do you other that is from we companies people it efficiency, physical -- very we real connect to see Most differentiated doing the outcomes, that as data. at to data center, the what combine digital our a the helping help have access the about hard world we something the improve data defensible really those deep really for understanding that have efficiently tend we're edge the access who their can not greater can talking don't by at world, can capturing more connect the markets employees various they workflows that the that perform or insight to when in strategy. a or we with or and to, that from the tasks markets of services. IoT, is -- EAI get they verticals, from analytics be that then data see are and that we access those data to We to it's are able better. lot way help companies growth can we combine us It as to -- to be the improved edge. And to And But to of here. vertical in specific edge. workflows do gain in to companies very

Joachim Heel

two perhaps addition us reference about. heard earlier other One is things talk to you've

types are understand we other and to can the example, right, sensors with access there. or with for been has mentioned those bring long done, partner infrastructures, example, sensors IoT can for tradition I this mentioned a has out well there we you large used we very I of ecosystems in to healthcare, there the fixed Rockwell, complements that of we And that complement excuse firms, as infrastructures lot have of in. earlier, that with types of firms, IoT ours we if me, think GE Zebra, those of manufacturing that think, mobile that take capabilities access a it's to partnering

think be I it mix. a So will

Anders Gustafsson

Yeah.

Paul Coster

Thank you. Okay.

Operator

Keith Northcoast go from Housum question next The comes ahead. Research. Please of

Keith Housum

Great, thanks. good or Good gentlemen. afternoon morning

give you strength. of color printer certainly expected. the helped at what quarter, well and very that compare drivers there ever, Was when we you of or look introduction As some that can it's printer third year? printer of better than this the we drive the around segment, performed last industrial any from the year, guys to new specific you think best actually last some for it's quarter the growth I printers Was

Anders Gustafsson

color can I'll start and some Joe then here. provide additional

strength this was thing quarter. I business think the there drove printer one that no of the

I think we have a very of strong portfolio products.

we continue but catalyze We high-end printers to that. on a which based new it the printing I but still and come the -- are those, value resurgence have we new using printers enable we see And intelligently do, adders into around can looking more to we those. differentiators for capabilities that great their unique have business Network Connect generally tabletop are our the networking think ecosystem our out, also refresh customers for revenues, applications in are saw I we think tabletop Rockwell's that and Link-OS to who us. products, added as in those And to they the had things as that helped

regions So us performance growth was think four and -- of but us today. engine for another we underrepresented across are as one area for very where good the and that we is broad-based supplies a otherwise, all

Joachim Heel

I that attention there perhaps drivers I if could to. some, Keith, add, think, a paid are Yeah. also we have of mundane lot

we a regions in and On the think to manufacturing handle us our in of PartnerConnect the terms think positive compete. course pricing pricing has Especially we we've after also but there, economic particular one introduced of paid we the some we very execution, good we program to year printers. a seen attention be over have where on we hand, now benefited last fine-tuned things the like I of growth some have and to in resurgence lot of need

lot a spent training. money have of We on

our changes printing, that resident ensure people with printing knowledge on have I have particular, drive structures that to Those teams. number all the areas and have and been say, printer terms to to specific through been in us. a really of sales For of growth of sales go-to-market -- focus our in our certification we're deep have now we example, in for people, all investing people our our engineers in sales all and gone And made have broadly of all been program of in capabilities. wanted covered trained printing is of our

Keith Housum

guess, and then be on for headwind the in-sourcing gross of impact the as that servicing. expect Got margins? the on long was gross that you noted And look changing had margins at guys issues our we services, we guess, Thanks. I the can then slightly to, and I here, you. quarter how the gears, What margin for servicing supply chain gross a

Olivier Leonetti

So an to had believe outsource the North of to orientated. an QX over actually -- should Keith, a for in trend one the from is increase of but time. They we short-term this services are increase transition expected bottom is are due are you in model nature The is model mainly to temporary going we forward. I line in-source We increase the margin services and phenomena margin to company. the this lever as to America, expect and exceptional said,

Anders Gustafsson

the of about I of by in-sourced North the in XX% quarter. think we volume third end repair had America the

smaller about of probably at expect into till QX, -- year. will have you -- that be end where we get the QX a be things we would to when longer once of to do we done. it XX% the tail of And kind you expect you'll We when

Keith Housum

Great. Thank you.

Operator

question from comes of Sachs. Matt Please Goldman next ahead. The Cabral go

Matthew Cabral

I is I why in capital Yeah. cash. wanted in you a into it's a been saw that use where in to Thank working third quarter, inventory detail you. little a Olivier, dig bit the up but this row more meaningful around quarter additional of the trends appreciate the the ticked pretty the quarter.

picture second in one. Just a sequentially. to cash a managing big is, use guess, year-to-date. there at why you looking change question bigger if inventory. So then I the a business? been such the guess I quickly, it's up just curious just underlying And stepped in strategically visibility are something changed how DSOs has of been

than drove what and in if wondering anymore is. was that, third linearity the Just back typically it weighted quarter half

Olivier Leonetti

Right.

be ready in the and at -- QX, in of indicated happened we as first So consequence what reaffirming, a be what not working the let the at what capital know, we'd would the we for all, at is of quarter are on better and a read term remarks. start debt least expect wouldn't DSO then to company, because, objective is QX in And as bill will this to the from you the be had but is orders, million I happened, I today working point, start of strong by of year, to capital cash, the that which backlog third including the problem. we of confirming question, a ship standpoint. much actually part end high-class into for is for too much this your In of use opening quarter inventory is shipped, happening but strong, also would be impact of we The XXX But enhanced. of inventory my key me pay in a this to wanted is your which business for of linearity Matt.

in We dynamics. business aggregate are in targeting quartile the over today term be to top time short-term see some performance to working and due short-term capital you company impacts of

Matthew Cabral

right. All you. Thank from all That's me.

Operator

The next Spinola question go of ahead. comes from Wells Fargo. Please Andrew

Andrew Spinola

trends against growth to that ScanSource about your data compared one share just competition, organic direct the if ask, type up. says have the that been or the the wondering it's integrated know And at anything. just in your growth. was digit if mid-single that I to wanted company has anything I selling going I potential now percentage flattish says Thanks. that you're relevant segment gone you're having if that gains point, as but are maybe of sales an more

Anders Gustafsson

but I how much can say we we I comment -- in with channel we QX. that ScanSource be ScanSource got about through very careful and obviously our can to well revenues performed business, overall on think the

for a business to do time long has business ScanSource we them with our with up. a continue good partners a ScanSource -- in and and QX we So been was of lot us for

Andrew Spinola

understand percentage of if I sell to long-term And go to has margin. that -- if on trying guess, I company, starts goes up. an where sort if was Anders, that your of as as integrated gross revenue that I question, impact just going direct with wonder was any you your

Joachim Heel

is Joe Heel. this So

is Our percentage it up. believe It year strategy that to of our gone about last we has go been it has up. revenue not for and direct XX% not

through to continuously is our of amount strategy partners. business we Our do that the increase

has the American I share confirm at our the what least that distribution, we market data think -- would in North hypothesis believe That's other that the data increased. we indicate. can

Anders Gustafsson

the have worked deal whim our with and it say, or margin do impact on if negative the don't -- We the we deals to to on it than tends improve prices community. if direct, because a the a them those very support lose and deal, will to We at we be Yeah. try to right take relationships partners a something. take rather -- on loyal partners very -- have don't channel

Joachim Heel

Exactly.

Andrew Spinola

you Got Thank it. much. very

Operator

Jeremie from ROBO comes Capron question next go of ahead. Please Global. The

Jeremie Capron

Good my morning. for taking question. Thanks

mobile in past called strong portfolio, you and pretty of portfolio talk with across due the evolve and and about computing, year, agility innovation level two wonder out next you had sales of many of of supplies to printers, new products You've expect refresh much entire introductions rate the your could momentum or the in the new I that solutions the to terms and if you introduction. how past year. the in over of year product

Anders Gustafsson

-- innovation call, Yeah. but -- key little of don't behind bit part Zebra. we blood right? see products I we kind because the circumspect more the as on of we have life we new of not to We our announce a be tend earnings talk maybe to about, can think, a it, product philosophy I

of tech new our a and are need fresh to set and We customers. compelling solutions offers value company have a that we to

we will to we sure we talk that make compelling So have our solutions that new customers always can about.

to portfolio need our said be like next growth that also. -- more from but like within there to think feel is that -- we month EAI more accelerate adjacent, would products some are the in or bring next very type core portfolio here to will in year, very, core today, sorry, solutions the I is refreshed strong. also still market I we some next There and

innovation proposition market. be see value and key part ourselves to continue our of we we to how a So in differentiate certainly the

Jeremie Capron

very much. you Thank

Operator

Eastman of ahead. go Robert from last Please question Richard W. Baird. come will The today

Richard Eastman

morning. Yes. Good

Just legacy, bit not margin a but business? Zebra maybe -- margin On at be down. the that the channel through would the sales the kind rate question XX.X Zebra explain maybe Could product thinking. is the what to for more gross quick was gross a And the light legacy of Obviously run we're issue bring little you profit very margin and the there gross what just there? in why, is for see you there question. channel a of

Olivier Leonetti

this take me let So one, Rich.

increased China duty remarks. So opening year-on-year dollars have the in we normalize I look you even the -- my for if you dollars, mentioned look if at actually that

dollar line we of portfolio could based orders on managing or The the you're that So a of within influenced quarter orders. are basis. and product a large to mix business alluding really be rate between upon the the orders smaller and mix line in particular

influenced answers consolidation. cost in slightly Zebra we So or being also around effects to trend. center higher in transition the in-source, outsource legacy other also had that from positive in I talked addition, because revenue was about of you supply would And distribution and that some also margin of margin services note also printer the the the quarter.

over We time. for I much in into enhanced margin So should read the too the this deliver -- Zebra. and all we wouldn't margin rate products particular dollars quarter think margin legacy

Richard Eastman

most sales printer is vast sales, of the go direct? majority they printer they do of or go channel through your Well, -- the your

Anders Gustafsson

The vast printer majority of our direct. sales go

direct. larger but some of them are We we deals, have very these less there large with customers where deal overall

Sorry, sorry.

Joachim Heel

vast of the channel. goes sales So majority the printer through our

Anders Gustafsson

sorry. Yeah, mistake. My

Joachim Heel

Yeah. average our printer. direct Relatively Through than goes the in channel. little, less

Anders Gustafsson

you. Thank

Richard Eastman

the trying -- or to there Okay. I'm played And margin is to standpoint channel to is number the here? from maybe build gross understand, in program that gross just there anything just anything that margin, inventory a again, quarter in that

Anders Gustafsson

that the margin. I or printing are no. gross would printing say channel made affect changes we've to There the recently that no particularly program

the some operational a I mix of think simply matter it's factors. as Olivier and of the said,

Joachim Heel

little maybe freight higher be the thing a than that get air a higher one freight were to Some that -- was little and normal. or would inventory

Richard Eastman

that inventory side? okay. Okay, particular inventory side -- quarter, that side the just Was anomaly? Just it impact flow that made staging question side line, I inventory that had, particular an and scanner the in on any on of printer area the any that the can then somewhat or here build. for strong fourth just ahead MC cash instance, or -- one mobile of And the computing product

Olivier Leonetti

broad-based a of products. portfolio the it's strength No, in

impacted So another. not one line than being more of business

Richard Eastman

right. you Thank much. Okay. All very

Anders Gustafsson

Thank you.

Operator

This I Steele closing any turn back would to for concludes to our over question-and-answer conference like session. Mr. remarks. the

Michael Steele

Have a Thank you day. all us. for great joining

Operator

presentation. now for has concluded. Thank attending today's you conference The

disconnect. now may You

Zebra Technologies (ZBRA) 7 Nov 172017 Q3 Earnings call transcript