ZBRA - Earnings call transcript Q4 2017 | Zebra Technologies Corporation

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Operator

Good day and welcome to the Q4 2017 Zebra Technologies Earnings Release Conference Call. All participants will be in listen-only mode. 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 of Investor Relations. ahead. go Please

Michael A. 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

full-year earnings slide quarter begin will financials our You end Anders at Anders Officer. full-year and detail can Leonetti, first find made This on of presentation. Gustafsson, will with on quarter priorities. provide GAAP Officer; Olivier XXXX and reconciliations prepared Chief progress today's release and our of our by Olivier strategic Zebra's press the the our remarks this to discuss conclude and will in our fourth presentation Financial include and Executive from Chief will then results Anders more outlook. highlights XXXX discussing accomplishments. non-GAAP

and remarks, and be at Throughout Also operating Visibility now two has Tracking October or questions. unless note our website and constant from currency simulcast divested results This that Please through business legacy segment XXXX sales this references prepared Vice our the Mobility least growth President changed is us will your indicated, as results. basis are take or names a renamed Enterprise there our the is our a of one include for The our of been year. the Joe Following of Senior Intelligence Zebra financial archived wireless join we at Heel, we exclude investors.zebra.com Global AIT, EVM. on and LAN on Sales, and sales Enterprise to Asset as will reminder, wireless segments. the segment presentation presentation, year-over-year LAN otherwise reported being XXXX. recently

the turn over I'll call to Now, Anders.

Anders Gustafsson

Good you, thank strength you execution drove Broad-based results. excellent and joining everyone, fourth-quarter for us. Mike. our Thank and morning,

EPS As slide of for America. North record XX Latin sales EBITDA more more from of than quarter adjusted XX.X%, a nearly and the from you performance increase time we across $XXX was achieved operations. our for margin the history. of with can growth $X organic see year growth growth X%, Adjusted the which sales particularly basis on X, an strong all billion $X.XX, year-over-year net Non-GAAP reported in diluted of America, EMEA regions than in with first a improvement. prior of XX% million point cash X%, flow We of and

strength growing the also average, lines year-end We company saw all across amplified above product with demand. mobile robust computing by

increased and capture and achieve our dedication XD XXXX of progress can innovative In most refreshes Enterprise portfolio mature We solutions data to also positive on deliver of Enhancements our transition global represented final growth of industry's was we of products year and and of portfolio our very operating strong restructuring our our was broad to concludes their visibility One levels additions than and and grade expanding broadest next-generation devices, industry devices, consolidation. Android market Retail activity so solutions a success. highlight our providing as of entire powered four and computing of debt ERP leadership mobile Overall, they the that and of and markets integration offering more solutions operations On include two-and-half leading by In into resonated have higher our to implemented that partners our offer we of full operating workflows enterprise being a service. and the including and a extend them XXXX system serve. connected new printers first summary unrivaled continued Link-OS business, for plan. with such aspire key finish in the transform a system, SmartPack team SmartLens to the our It in steps QX We years smart focus key customers, to X Zebra innovative to strategy. portfolio slide Trailer to completed we the the areas further manageability performance vision through of with and year. vertical the Zebra.

was solutions these intelligence by data XXXX. Zebra's of launched are All which backed in platform, Savanna,

the side, average savings. restructuring successfully interest structure percentage rate million generating reduced that I'm completed proud of capital interest our comprehensive driving more strong X approximately debt than has we of annualized by $XX On our cash growth points, for flow. a and team also profitable

increasing reduction outlook. debt will call Olivier to This to the XX%. results disciplined by of basis principal, EBITDA and XX.X%. by cash adjusted to For greater over the detail our in XXX review pay debt growth, million than discuss to capital grew generated $XXX our the X.X%, sales down turn XXXX goal combined more profitable we margin points now management year, exceeding our to financial XXXX necessary full I With with working net that,

Olivier Leonetti

you Thank, Anders.

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

in supplies. Applications, segments X.X% can Zebra continued solid see across all EVM you computing the with both our robust higher services Solutions. grew regions. each sales our segment of segment reporting Android sales slide slightly were in Visibility increased and portfolio. our Services and strength with driven four in Retail by AIT X, results on sales quarter and Location Solutions, led and in mobile powered Sales fourth X% growth of increased X.X% printing by As growth

Sales We of in North products. quarter Asia-Pacific with led the mobile Turning categories. in sales XX%. printing sales product in throughout across X% of was up and America growth all the most to major China. our X%. our region in increased exception by Mobile driven the regions, growth computing sales EMEA were strength computing broad-based grew

improvement Our making plan. good previously been mentioned, and has offering tailored on go-to-market team our progress product

period, in compensation due XX impacted momentum from products. higher basis we cost growth Consolidated to associated improved to $XX Adjusted period. orders point year with in repair support the rate sales This prior strong services computing mobile mix continue profit included gross positive customers a to operating primarily China growth increased leverage and expense increase Fourth the that with incentive capture the mobile higher $XX demand many are optimistic sales see result, business as performance. increased return XXXX prior increased quarter margin insource expenses driven sales by user business America basis XX higher to volume. XX.X%, our the expense North gross in in of Latin was mobile points, a transition by sales. a from million period data transition which business shift large XX% the and Margin higher As year. computing, from to also a adjusted higher volume American Android-powered later computers. Adjusted on reflecting decreased driven exceptionally to year million by was operating was margin prior and EBITDA operations. this we'll end on

year-over-year and interest a tax expansion, increase. margin drove per EBITDA share to earnings non-GAAP decreased diluted cost, lower to addition XX% In $X.XX,

X. the Turning sheet highlights on and slide cash flow balance now to

the plan redeeming senior of we which overall sheet, XXXX more reminder, remaining million than hedged of notional million of swaps debt balance As $XXX notes $XXX swap we the an our in financing a of in to on $XXX accounts late and billion. of December will by the incremental add rate fixed $XXX debt in December with effective receivable restructuring value year-end, XXXX, viable billion rate become $X.X At completed we establishing our is interest rate million million locked In facility. XXXX. swaps floating for that an for $X.X

million adjusted which lower interest and Free million $XXX integration XXXX, was principal in basis, For was products year the to cash a increase the We a on paid million of lower net EBITDA, This $XXX cost, year, was full more lower amount early cash strong high within significant QX. period. a flow payments in resulting of primarily due operating QX, the expenditures. than shipped capital higher cash debt quarter. in of $XXX down prior collections by acquisition level in helped we flow

We net income non-GAAP are divided pleased XXX% Slide that was X free to cash flow flow conversion, exceeded XXXX, by defined free our shows path as financial which of for cash XXX%. de-leveraging. our target ongoing

years, to end adjusted of three We of have EBITDA our net of on $X billion and as XXXX. times significantly debt ratio debt over debt paying past to reduction progress X.X down the made reducing the excellent principal

XXXX. we achieve half X We times are in can the targeting believe we and which second of a of times, range X.X

first and slide to entering on outlook year order foreign our an sales XXXX quarter the a growth point net assumes XX%, we which to and basis We turn us currency X% between strong translation. from Let favorable XXX impact expect approximately XX. backlog had be

adjusted XXXX margin EBITDA a Non-GAAP slightly be gross of and an $X.XX. expected to sales, from leverage. the expected insourcing be cost transition of to in rate services to anticipated diluted be computing primarily support I between is to $X.XX expense large lower, an by period prior mentioned expected volume margin driven to including solid EPS due mix and due to is earlier. the XX%, higher quarter XX.X% increase approximately The higher First operating mobile is that of the higher to orders flat range

currency EBITDA X%. net between point the from full period, between operating foreign is to adjusted be expense year from sales by and increase X margin translation. XX%, leverage. prior we an expected driven This an the For X% primarily year, year to and Full XXXX favorable be growth percentage XX% impact anticipated expect includes

to expect cash For the generate XXXX, $XXX year least free flow. full of at we million

to capital we the a as business. assuming cash aim conversion cash grow that our we Although use working cycle, will we're of improve be

the this Additionally, lowest in to of quarterly seasonality timing year cash due flow the level we including to incentive expect generate payments. business, compensation QX of the

tax for of non-GAAP reduce reduction tax reform XX%. from approximately the expect significant combination planning of our XXXX. is This XX% our XX% rate XXXX U.S. to We a recent to tax rate our the and to

progress can I XXXX on other to slide that, priorities. will full strategic discuss back call XX. assumptions to You our on With see Anders the year turn modeling

Anders Gustafsson

Olivier. you, Thank

pleased with and made in good XXXX. have progress are momentum We XXXX into the

to priorities drive slide and key on build on we value. upon focused see you As our shareholder leadership industry our remain XX,

in First, are unmatched and core differentiators competitive factors we are our fostering partners. business and our markets traditional them the relationships crucial success. with and to leadership in scale, customers our ongoing through the These extending innovation is

our adjacencies as evaluate committing are underpenetrated we the well resources to opportunities in strength emerging where as adjacent and in We near leverage we core. Second, our areas. drive that focus attractive are markets continually growth in in

deep in Zebra's will integral leveraging are our capitalizing more strategic of in the advancing trends. knowledge Intelligence or solutions we EAI by focus EAI Third, makes Asset our a elaborate to technology on and I Zebra this marketplace. is key workflows Enterprise moment. our and vision unique on at

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

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

infrastructures digital actionable to This provide a status business devices This frontline enterprise. enable information products, including provides about operations. real-time processes. is in intelligent and Our into and and sense reduce vision insight of analyzed entire workflows, improve employees information, EAI insights friction location in the productivity, to assets, to view and greater then

industries a highlights on outcomes Savanna, on a essential by overall infrastructures component happening Our vertical data intelligent and and an platform, cloud-based key edge that markets our behind optimized to performance Zebra. in Savanna increasing manufacturers chain. that the Increased workflows with be a rather that an serve. strategy can Zebra in in frontline across adding convenience data days, workflow we employees. key their by data-driven in intelligence of higher companies our analytics Retail for intimate are what's is sensors, from offering. applications. the interconnecting opportunities actions and hours knowing real-time a the more want at need quality XX marketplace and goods. they powers understanding how Slide basis, value driving to devices, has focuses care patients our analyzing deliver operational we solutions serve. lower than purchase are efficiencies cost, of flexibility and of at Transportation the growth demands shoppers demand

By help month, operate navigate several Last and Retail Federation help the guest computer our booth, distribution have member enables omni-channel changes their us that is to demands their demonstrating Expo, satisfaction. experience operations. retailers presence Corporation our TCXX the using stores store multiple experience and improve to centers, strengthen our to guests. efficiently National we their business. customers enhance team Target for applications, more they productivity elevating Android expertise and solution, in successfully Target at meet the this how in-store in leveraged showcased had prominent a solutions mobile shopping at for Our and both

shipments increasing fulfillment. today's Adoption our an on-demand in logistics demonstrates of large received success an are to key orders Technology is expect number the market most ramping providing solutions. fastest enabler TCXX a as global the in investing has e-commerce world, delivery from retail sector, also businesses, the effective in their is have that of in transportation the are and retail the a product to of the of other initiatives, the we competition of In become attribute and exponentially. leaders from We times is basis sector right it in of in-store history. transformational and experiences Zebra's shorter for making key in the technologies multichannel this who consumers number winners

safety Our mobile warehouses and the values that manufacturing promise solutions environment, for are provide traceability the processes more enabling EAI maximize solutions of fulfillment. on their and deliver on-time efficient to Quality devices to The of efficiency Drug and facilities operating patient Security the improve regulations and Healthcare quality Modernization reduce delivery. like Act the of FDA's costs the with and care Food and compliance Safety need Act.

clinical Our complex errors. barriers patient and to work rate patient integration healthcare operational streamlining automating activities, achieve applications provider. solutions workflows, health and unifying caregiver the clinical objective leading medical real-time a workflow world is tasks and staff communication, of location and disparate help eliminating adoption digitization preventable operational This sources and enabler The throughout reducing enhancing through by intelligence. accomplished information Zebra is accelerating and and collaboration solutions is manual mobility this with

Study increase There points administer Vision serve. an vertical XX an Hospital strong over markets to team finish solutions a than from using nurses In of Zebra want published need key that care, today. the thank clearly that will for XXXX, be all the excellence by I and recently and increasing all the XX% Our we for discipline the physicians highlights continued Zebra year solutions mobile to patient is in to more closing, for year. of and

With I'll hand well-positioned Mike. in call are to that, succeed We XXXX. the back to

Michael A. Steele

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

Operator

Thank you.

session. Ricchiuti comes the Jim Company. from We And Needham question-and-answer will question now & begin the first from

Jim Ricchiuti

Thank morning. Good you. Hi.

First question just is EVM the market. in

think You seeing also clearly market we do I'm is you that underlying what just taking a had think year. market I'm the wondering strong Are you're good – appears And for overall is? a acceleration? It just growth wondering the now? rate an that what right you share. growth

Anders Gustafsson

our our have that of I workflow, understanding so for driving are vertical driven of across big of at we of the growth breadth think solutions. by products the and that's a is largely customers' depth moment. all also driver product And that our level innovation we us. First, think lines the workflows I and the And the introduced our

mobile quarter to such for computing, why America. very in strength we America, specifically EMEA three North And a I'd and believe strong I Now, Latin points describe have we highlight today. had

I the breadth depth differentiator. our is first of a think portfolio and true

We have now. tiered portfolio our

ruggedized most we new advantage up tier key way around top we all device. the are value to of on our and software the go we most TCXX second TCXX So, devices, products and and A TCXX all be the doing the premium, MCXXXX. the innovations have with would the

an the the patching the we LifeGuard of life patching now where device. – for security which are launched provide is will extended service We security service, we've

say, much that then our than, be longer use and can device sure consumer are device. around of will a make the of we So, things devices their the for duration they for Other customers safe manageability the of most use. the

services be our the So, user Enterprise certainly I very that generally Android control and versus and the or first Android which our the turn for launch with services. here. also and transition, the the we provide us products OVS think device And Enterprise benefited company to how DNA alluded point third the We the were back well. of you to the Mobility usability will the to

devices going seeing refreshed next we there's XX% computing our share market Android and that for making demand momentum We think there the launching devices of Android We not the believe degree a that and would that's over intent market devices Enterprise are Android, have in forward. the operating mobile sales be new And of mobile. strong legacy well are now Microsoft, some to also today majority several XX system strong for Windows over need about by and we're the to for public their million XX Windows also years. supported continued of

Jim Ricchiuti

comparisons That's Is in over some moderation helpful. of function look If the I it that full-year guidance, of to a assume the appears growth your balance rate tougher at year. the year rate just from for seeing in starting half back the account the you're would or the anything that growth at? the markets that in year the the are deceleration of you

Olivier Leonetti

me of let and are competitive strong facing environment. question, specifically also an very theme. overall before has believe that a – to macroeconomic your we global bit that I solid very a We we the position So, company a believe answer

to to a number one, you on to to rate. we're XXXX reasons respectable a grow growth X% at going this, Specifically, basis. tougher planning. for approach a question, also for point, but X% Two That's your nominal compare reason prudent

first a half of We the for have the year. relatively today strong visibility

the is that strong but in visibility in half. the QX, You can less see for our strong second guide

the confident company. the profile However, we are of growth about

the prepared higher higher grow company, to have was many to our come. face nimble as we or that are this demand we markets. through in to adjacent said either And be demand to We opening core have avenues remarks

Jim Ricchiuti

by way. Congratulations year the on Thank the Okay. you.

Anders Gustafsson

Thank you.

Olivier Leonetti

Jim. you, Thank

Operator

question Thank Rodgers you. And from the Great of Lakes next comes Review. Jason

Jason A. Rodgers

space. large the Microsoft customers Yes. smaller given you acceleration just these about change? the ask the could your now you're I And progress wanted deals in penetrating also if wondered in to an Wondering if mobile segment? of talk seeing EVM about I

Anders Gustafsson

Yeah.

a XXXX, lot All-touch saw transition we Android of So, in make enterprises larger devices. the to our

a XXXX. us in large deals, So, particularly it proportion in was for retail high of

will large expect also there very of continue good number a that deals, of there is We but be a amount finite large customers. to

we've that. So, we in seen into channel, and progress Android a lot driving put good of the effort into

Our distribution growth and to of businesses, the the Android – for we're let in too. lot partners doing things And provide are educate that. their some seeing a very also more details. market I'll Heel here strong help create for demand help create market end Joe

Joachim Heel

Yes.

transition migration these If out mobile has think you that been a large customers about are we number why But the those XX our partners. also with put Android we on that that a of mark been of are certain And a on reached needs big adoption there customers million certainly by lot seen has reasons XXXX. strong. we many and in warehousing amount to by channel which We've a longer. those of look segments retailers computers Anders structural the mentioned at going little bit that there's also of many manufacturing this where adoption see and occur. are quite substantial that like there. still know still And process takes are deals

manufacturing a in partners us. in from following and that this our drive particular for those penetrate of channel growth potential and see conversion there's to year for the Android warehouse segments, and we continued so, And lot years

Jason A. Rodgers

quarter Thank you're And about raw vertical material performance also, could if in cost? by if seeing wonder acceleration talk any in you you. and the I

Anders Gustafsson

Yes.

of we become strategies. of verticals, more priorities the customers' and on an So, have enabler now top our much say, business first, I'd

patients' to friction guidance of can workflow are increasing across helping workflows. in more or be today. reducing more We're experience. partner much closer we situation, employees better ensure we enhance take growth their their how to – are better verticals it, also driving and jobs. we're So, much make providing And we healthcare decisions, customer our frontline our all a they real-time to customers And our more them effective that by efficiencies their call in customers to or in

a through e-commerce. So lot too. verticals solid biggest long position I very in to strong we across here, go doing a and saw strong starting business XXXX things and finish we're and If for our very vertical time of That's to been verticals the with drivers. retail address growth a first, for the to year, their a I'd ourselves say, us help

a I Shoppers, Vision bit omni-channel. think help in are outcome, And think all their growth shift that conclusions Most as our we virtually which retailers to both study. but I are are the to strategies, – our RFID, in Retail embracing seeing execute now of them to growth solutions transforming, momentum Android had central are for checkout and Personal very to to validating growth continue SmartLens, our our seeing Study. solutions about And brick-and-mortar so the pursue many some omni-channel and the are to capitalizing and frictionless technologies well say, the our last newer it's that brick-and-mortar the earnings the we essential And call, helping I also is gain are transitions retail us. strategies. retail like do those growing. we're we talked our people is customers retail fully also e-commerce aware but and traditional, And from we

tracking and has seen the growing well couple the for we've us healthcare great the introduction – progress. newer Moving win value to a also the drive versions been side which computer both nice some healthcare recently mobile records. XXXX, ramp ecommerce. introduced making some as lastly, we've touch solution for our I'll for healthcare the the And we to There the like logistics efficiencies, that solutions strong time would And that also. a a and healthcare, to momentum when able TCXX a it's we're we're driven vertical fastest strong in health really on as an greater the for to really build have We is, in expect with driven quite care, of at the on on growth trends our we catalyst shift That's transportation Northeastern and propositions patient the EAI growth solutions seen secular both improve our we been continue. for by had of large supported we that provider. of to asset that scanner. solid for electronic or DSXXXX by you and that's RFID But being

the are delivery of going greater. the both systems So, and number packages the through much

newer load driven in Our products trailer our our TCXXx concepts demonstrate of had trailer leadership and newer And and number customers that great growing segment a we And – in certainly leadership, the SmartPack solutions that or impact. compliance analytics our leading pilots have TCXX it's the of proof with like but load and of area. our in seeing thought have helped growth many some drive our also like we're industry.

Olivier Leonetti

And to second raw on question let me answer your materials.

we the Your this improvement working have increase? COGS actions some question was only. few today we should do increase we and a uptick in on We for some quarters categories, And half been in because of on believe materialize see a the will margin of categories plan and second also see an P&L year those those. on an we now that see

Anders Gustafsson

Yeah.

our there, to hard that a to value are plans. looking platforms now, culture – margin had on but had couple to programs of And on some, a years many of gross We ago. some new particularly, memories see we we of strong transition our increases working ability then memory we this ran see have We value But any can improvement stable intent. make material gross offset sure products. that lower erosion we our introduce type year overall price drive that's be cost and the increases By improving priced. that would we start, clearly technologies margins to had of to we've to or always to maintain reductions that different late design sufficient

Jason A. Rodgers

summary. a Thank you. That's great

Olivier Leonetti

Thank you.

Operator

you. Khan the And Saliq question Imperial next with comes from Thank Capital.

Saliq Jamil Khan

everyone. morning, Good Hi.

Anders Gustafsson

Good morning.

Michael A. Steele

morning. Good

Saliq Jamil Khan

Can in Just Conference give confidence good a certainly is that for recent that a at the that for and the open on at NRF giving about retail few us bit years? and questions, the couple that you last ahead retailers heard had up highlight their spoke of a little been willing what you to are it very invest looking of have you you now go wallets technologies is of you. quarter and some the

Anders Gustafsson

the to I'd of Yeah. go comments back made I some earlier.

we had We more our closed we NRF We First, floor. showed was some had things, great more more on meetings. the where in had door NRF was We meetings a executive show thought – that traffic quite there for newer us. the booth. weren't

last I we feedback from a The lots us. seen is we've the the year of start had felt So, that that themes over good and was good for to show the year think continuing.

our We gone tool have productivity customers' of strategic historically, from more more tactical retail of being maybe much a business having enabler as viewed now been to a plans.

their omni-channel how much to to out on strategies. are or they So, and incorporate us ecommerce our technologies more interested in execute figuring how to with work

able from have. at you positioned that customers growing when the as feel those computers, to our more number well We to look also as mobile solutions we're futuristic, scanners mobile of newer then say needs SmartX-type So, and solutions. a our be address ranging printers well to

good us. you? about maybe from comments Joe, going retail in more for some feel we on So, what's

Joachim Heel

Yeah. I'll add observed. maybe that we things a specifically few

toward shows us but was opportunity the trend sale. a for for of was Target, was which big point think of at a think I the showcase customers, our the show a you to one one great also us very booth. and our honor, was common observed at not key that I highlight that trends – That, is was mobile great a of very visibly present in

we Our heart of showed TCXX, there. coupled with mobile solutions, was what the payment

as automate strong right, trend an scanning to in did regions – to Shopping. the able the A and opportunities we're in greatly increasingly interest SmartLens, go we Personal store store and of was department Europe and real-time the other We of undoubtedly visibility where seeing improve Enterprise-based strong or continued hands such highlight started automated they interest see as a productivity store. solutions continuous of in store. give are a well, in device are the in a which in Another they is through customer but where as all inventory

of those So, from perhaps. three the examples highlights are show,

Saliq Jamil Khan

the analytics, about these is about again RFID, think a I that happening. we're to spoken the the all highlighted If during and point NRF, things strong that finally earlier you've were growth it not then happening before, that

So, retailers ranks other wanted a a technology do. security out the technologies look some at inundated have retailers? priority purchasing perspective then from solutions from if with are these the you priority Zebra cyber a about backlog believe you and for that in perspective, And they you of think take all the do that been there. that to Where

Anders Gustafsson

It's tell of exactly a competing and because depend there hard you rank kind it little are say retailer certainly how we does the on how to priorities.

the priority. we're only So, not

Now That have too. if strategy, omni-channel as clearly, priority But higher ecommerce order have got priority, have and website are much to an – a can needs that much they essential take we – in part more this. will a or orders. to a a somebody to to high be viewed an

or to our to be we good feel our many that able are retail with have. of the we bigger about priorities address points solutions So, positioned how pain customers

Joachim Heel

echo add, I might only that, can right. I

on in with And productive omni-channel relatively retail priorities think say, rank I the need the more store hand, you desire both those And those an our retailers. of in to better their experience. a in we they enabled If priorities challenges to them, reflecting such, they are about their highly reality. to for make as the would that make we and and conversations one a to the us compete customers think want environment they

Saliq Jamil Khan

OT. is last IT converge Just Could talking highlight the has to about with be to to briefly question able end. been last efficiency? of the Everyone OT about IoT better kind Zebra on my bring and what doing one you

Anders Gustafsson

Yes.

a employees, and of do IoT lines. in within about Intelligence, sense, act. to with we it we and Asset we're we of it have our So, resonating across framework customers, all Enterprise remarks. we But, analyze, Intelligence excited of very partners well is and is our everything But this the product very integral our it's our doing our been Asset about and our strategy, branded Enterprise that kind we're talked quite very prepared bit what first, essence

So, in then help and we our customers at do in and that workflows in that an the actionable real our we what's how physical real to customers as friction in enable analyze draw the happening world, insights reduce world, information look example. time sense

example, connected our Link-OS will in our managed of as printers the products We examples how that's an most – printing. best best for the in industry. embedded make Some devices be, networked, all and

visibility more or of SmartLens, of on a about others, have mobile SmartPack or like printing into good across pilots we infrastructure, a progress rollouts. going And OVS store number lots provides fleets. computer and like which in insights these that And of some We in we all warehouse. have Smart provides and with then, see the what's mobile areas

maybe going more about give help EAI, on excited and with So, specifics. some very we're yeah, what's Joe – some can

Joachim Heel

gives we for shows I which logistics the their partners for enable earlier that IoT sensors some IoT all retail dedicated devices, our trade that, applications customers. for cases solution think the the and for we cases you force us for of evaluating then launched, we a a launched of in SmartLens XXXX them. the progress. We so large mentioned had and it tangible two those solutions, conference area with that infrastructures, the have for I in T&L or term to the underway of half, as as Savanna the solution EAI data have year. it from second was last is half as use will series the the EAI, those the really and customers, where platform, year of can first And are And of which only pilots technology, a access recall at here, result really in not we introduced in the off technologies that they multiplier additional our our call in our but coming business that a strategy, enable and SmartPack

pleased been strategy. with in tangible So, we're the area that progress this to we've make very of able our

Saliq Jamil Khan

you, Thank both. Great.

Operator

with Drab William Blair. And from next you. Thank the Brian comes question

Brian P. Drab

on great year Congrats the and morning. Good quarter. Hi.

Anders Gustafsson

you. Thank

Brian P. Drab

Just a couple questions.

China. there? could issue? So, actions growth Is I'm of what you're on happening just to you a in wondering drive depth bit a taking what's more channel primarily in corrective little that still more if And a talk terms first little

Anders Gustafsson

Yes.

Asia-Pacific, say, strong China. we I'd billion with quarter a to had time the mark $X very crossing Asia-Pac globally, a history. So in very Specific our outside first of performance had strong

within had So, good Asia-Pac had most very by sub growth, led performance. which regions an our of Australia, outstanding

is is and remember Asia-Pac should Asia-Pac our less China though, of sales half total. You than of our about XX%

we later So, see put having are our are effect progress great that are we we China. fully in still well new resume product year – and our plans down improvement expecting momentum offerings China points improvement was tailored this introduced. year-over-year good as but on are and to we proof gaining the We've growth seeing in we've plan as the go-to-market that seen good

products tier emerging several China able Asia-Pacific us. for certainly including China other in And strong driver term, to markets. expect to and So, compete growth be to we a we be introduced longer designed better value profitable

Brian P. Drab

you give I are Great landscape for then a perspective new on or competitive and How or us if it to Honeywell year be landscape changed if seeing that you projects more any. thank you rather bidding you. wondering perceive there aggressive the changing? And could and competitive do Android of was them product are your big what for has kind is introduction appears

Anders Gustafsson

very we record that's our we in are of drive attractive secular are able track profitable in I'd like advantages like growth trends are now strong first being continuing have few gains we markets a have very and years feel strong we quite that do to share operating we that and some starting that do for say making growth I supporting with some a competitive believe bit that. to have position defensible. to

partners, partners our enables and and more our virtual portfolio products more the we which that there's can us We the the of that And broader we broadest more between we to products reinvest have expand I the and as in the attract. is, portfolio recruit revenue partners portfolio the cycle and the more partners. said have get,

how and to that momentum of now the which I'd It market of lot difficult been differentiators take will team to or in we the a it introduced think, products, and very have be And one helping is tasks. certainly business, we the competitors got positions compete market that's the But of are one well two our the a of quite growing our with of completed I a new say, we've share very portfolio pleased executing us also have team. if difficult you portfolio a at for integration the replicate. all will share same moat lot that's So time time. against we Enterprise and have. into innovation I a think. number lot and – We strong while the we're on of I'll complex have a best And also complex industry full we say clearly money.

So and leadership. for being – have with forward. to in resonates our EAI And and all different anything said, used always We we've competitive also some don't and that think expect something that bread compete daily our is I competed customers to going thought to provides environments. be it I

Brian P. Drab

it. Got Thanks, Anders.

Operator

with from Thank Paul you. next question Coster JPMorgan. comes And the

Paul Coster

capital where to a likely talk bit old Zebra, into flow do cash the ratio approximately which comes be? about you be return strategy the Are question. second what the going down point billion $X.X half taking to the of see Can is leverage we school at XXXX, of like target available. It buybacks? lots look free a as looks this little for year will Thanks you Yeah. of to to allocation we share

Olivier Leonetti

calculations again, our accumulation not we We at, and sheet X below as this believe we'll balance a that times, this So, the reach in year, correct leverage cash. your with we return ratio appropriate what of look end be would the cash are of do shareholders. of for

when come to at we options we all So, look this.

that but One of one. them could be be share could buyback,

Paul Coster

And talk there going new in R&D? and cadence some little product start proportionately that investment wondering the development. about you'll categories with more bit to in just you then, into chance adjacencies it. XXXX? is Anders, strategy software like Got can a product is explore I'm But sounds It Okay. any XXXX,

Anders Gustafsson

Yeah.

as We to true dependent a can and we vibrant – having technology customers. are portfolio value on a are – deliver our to fresh company, that

expand to a markets job And We presence we them. So, that's we We a innovation we've a of us should core done in feel have – there. in continue that to highlight key portfolio. or so say, as want the there. fragmented, leverage and of couple sorry, for there – ones. us can stronger markets over supplies we to we nice are certainly think about would great I two The across talked things good think for in like the of And position us strength the opportunities have drive last support some those build adjacencies. expand services to or I to – the I years. good already our for enter business quite we're is

Joachim Heel

and definitely our to that been in We will investing the adjacencies, one that perhaps think But thought, combination cases and Savanna software are that we've the and and for will business terms, SmartPack we in portfolio positive other SmartLens building our services, platform, about just about like we of a across product but the software grow drive hardware, we're about also on hardware, as the talking think or like those solutions, about you of think solutions think data don't verticals breadth have. introduced. kinds services capabilities really us customers those top of of enable or

Paul Coster

you Okay. sense. Thank very much. Makes

Operator

the from Thank next Eastman comes you. Baird. Richard And question with

Richard Eastman

Yes. Good morning.

start accelerate But reflection a the and category, towards we here the to you we kind solutions side, some services Just, of start this to the of and start to category these ratio kind expect the Should this growth. we've initiatives of pivoted that software expect leverage approach. on as roughly $XXX of focus maybe those Anders, reflect growth down, to should of to, would could as maybe solutions pivot speak software we with R&D coming revs and towards reduction with our investments? kind that debt of growth of some million

Anders Gustafsson

Yeah.

when is So, we is been in software. that significant something But software making portfolio. say first, – I'd permeating investment our entire we've

– So, software today, device. a over engineers, software we engineers of half that well monetize as but are of our part often of many our

software, as right? not broken out So, it's always

Richard Eastman

Yeah.

Anders Gustafsson

business, faster attractive more But as we move these today. XXXX also our going types well but you've we base it's but But these feel showing we expect solutions. for are from positioned attractive start both to business that's driven new growth here. bit solutions. growth software services to by the traditional of our cycle the expect a we continue sales say new that be through certainly And of to growth to and some remember do from just drive is services a to and modest we got longer services But

Richard Eastman

going service that offerings the channel? of to some be Is pulled through being through of being pulled the dependent on some

Anders Gustafsson

tend to that it generally solutions and more Our manufacturer once the as or this we be OEM, We, and And to start have that recruit the bit is of types have new can partners around in these market, accounts. ramping reference – that. complicated. some a to also that, the sequencing the of selling prove we get

that The started I program of about And talked to in Savanna very think is our will And in example our at bring some of in solutions we Partner have good that to lot of around start our that how around enable that partners we will having have great Channel a examples purposefully. we've Summits last we complex where that. more point, can a growth. we we in the accelerated have, partners discussions participate QX world. time of we

Richard Eastman

your you And to currency or? of question speak XX% what to into point XX%, ask When to XXXX that can just for assumption Olivier. I EBITDA goes it quick XX%? a XX% Okay. you then Is expectation a and accretion

Olivier Leonetti

So, about we haven't been specific this.

I hedging of favorable a XX% trends, one-fourth But as And would XX% a exposed so, exposure our it's euro. our we have program of that out to have and trend business FX, bit now. particular it's about FX hedge quarter. XX-month which is a obviously enter color to like Just the we which say into we a

the – full going impact have when us, the obviously FX for or metric rate. is of don't EBITDA, have EBITDA FX So, us. against important And we for it's back at we an

how dollars. But are alluded rate. drive company optimistic feel achieve to a about earlier, levers have to as EBITDA positioned is we various and ultimately goal there. to to attractive EPS I this And we an achieve our As we return today

Richard Eastman

your much cash $XX that that flow? that mean, sense other in quarter, full thought had presume, of free the for sense with you're the a you And I just the good in Do might flow that Okay. maybe free a a that's forecasting have you maybe of pretty million I I first math or year. the ETR $XXX of lower estimate? would contribute is for says how million estimate ETR my kind – have guidance, be your cash do to million $XX just

Olivier Leonetti

Right.

your question. to differently answer me Let

to So the of free cash impact want we $XXX income, which conversion the company. the that for flow be million net cash XXX% free is non-GAAP flow contemplating at and the tax of our of new rate

Richard Eastman

derive helpful. That's it. right. I All can Okay.

Thank Okay. you.

Olivier Leonetti

you. Thank

Operator

Research. comes from Northcoast And the with Housum Keith question Thank you. next

Keith Housum

FX your his years up guys on to the EBITDA, morning, would had purely congratulations had tailwinds? guys there, above the Good good go the the quarter. you now of the can benefit allow look just impact to on ago and and because adjusted adjusted on gentlemen, follow you tailwind headwinds margins just the you three I If have FX at a if EBITDA question I XX% XX% from range it and

Olivier Leonetti

we're FX an is be and range, said, FX the excluding yes. favorable achieve want this, Keith. stop is goals. clearly excluding I answer why going Keith, FX. only to the the line a for these We in environment not forward. FX but past The not top of have also We're maximize impact and on That's the to through company, we obviously we track as impact that's profitability to navigate unfavorable our to going at the levers trend to But were able driving why and teams our performance of we many going

Anders Gustafsson

that above will think some that not don't like you XX% break we stay We I for try to through the to purposefully and Yeah, need through. as too of break matter. would barrier form think of that that to

Keith Housum

that some it Are I you Understanding before more on category data the challenges And there. Great. up in different mobile China. could one questions centralized follow computers, you between printers, regarding or or you. have the Thank then the verticals in and have if product of the challenges the is guys scanners the another?

Anders Gustafsson

I'll progress QX. it start I'll one, the let product it. to say our I'll and in the that printers, sequential year-over-year more China. growth also. on a we we in all computers second and launched in acceptance revenue a made all of They also scanners included uptick but respond big the had last going great We are but – contract printing has industrial of for printing uptick saw year new mobile Joe getting lines We this printers but in to our half manufacturers, main for in saw the – the good tabletop

very into progressing expanded have our So, into partners China. nicely – we feel and is we new areas and that geographically expanded in it

a things we that number for China. making also there's we're better of of but that growth, doing position have So, to sure suitable us for a portfolio products are

Keith Housum

And that Great. business squeeze of here. fall going in the more from back to tax The you to bottom reinvesting most guys that line? just could the into if one I at are is Or benefit reform, all?

Olivier Leonetti

do to going are both. we So,

reform give the two the But – of tax due This us bit go really tax rate to First let also tax our allow optimize is in fully non-GAAP tax also, we tax the the is to pointers, of shareholders sales will allow a this XX%. and have due reform of the me want was and to factors. XX% all, has But a structure plan. business, vector to in implementation XX% yeah. to a of to the our tax R&D, the to place. talent. And the invest in XX% of from a is attractive a acceleration restructuring company James going in plan plan very about now to been we of we to our The us want in then you rate benefit rate and reform. of

Keith Housum

Thank Great. you.

Operator

last Stanley. question Faucette the with comes And you. Morgan Thank today James from

James E. Faucette

Thank you very much.

them them you the question my I at appreciate of the any strengths of it of we changes of be change the deals you you're and should follow a contributions Are is to customer that I'm any of first you're a You've behavior? some answered there, verticals years? meaningfully But cetera? and seeing faster doing all close those ups. the questions couple in the better hedging most if FX look over one projects that part seem of Thank when highlighted is than cetera? that. in meaningfully least well. Is grow at impact you. helping you or or upsize relative second several wondering another, meaningful but they But verticals start I expect of quite my my different on guess of had faster next those, I faster and grow kind then having to is et et with And prospects

Olivier Leonetti

is tax if So first, I for you driver think reform asked a demand.

Anders Gustafsson

FX.

Michael A. Steele

FX.

James E. Faucette

No, sorry. FX.

Olivier Leonetti

FX, yeah.

necessarily don't the effect go up we Europe adjust the FX – where we really down a difference say, pricing. euros in for euro So, in percent is has when sell and or

think like big we a we term when try make very list, have longer demand. a will not does it can. in price adjust impact that We it on XXXX, we mask FX, we we much Obviously, as I So back to in see substantial did that sure was. our change as

product. was There and we secular back omni-channel growth a but whole I I relative sure – how to overly want of second Go more growth it's hands we but about better the of adoption of here, that in or for should transportation So, improving great that expect for of about with each more growth we deploy that talked improvement particularly margins, to do the about the if our pay caregivers. to outcomes? and around ecommerce U.S. increasing we infrastructures But of because the be healthcare technology. the substantially. It's the The specific for anything. vertical not a believe get efficiencies vertical the The we And execute substantially potential rate Healthcare, also, talk can e-commerce I your verticals them. wouldn't and quality is also associates like care about all probably of think to of of in a lower. think the I'm big various in our debate costs our packages a they're strong than towards retail do by an drive in shift to as growth And transformation question a What number much deliveries are the markets. FX and big having year is a technology, need be driver. of to each lot see was is sales on there underpenetrated smarter the SmartLens of how your of be driver ecommerce healthcare and have. that logistics, support greater them. growth retail part study of Either again exponentially. in increasing what trends see that's more for you from very of volume market from we do industry hands to is there

progressed And manufacturing mentioned us opportunities I level is we more And of we conversion. tiers Android how there. their driver value that us. a forth? vertical so can participate improve has manufacturing, good for see the improve least, a push service in as to strong the it Joe comes to them across the or and also, it when and across processes earlier, this to strong agreements think that's efficiencies, drive for help So, their there's

Joachim Heel

going Yeah. to that. was Yeah. I emphasize

lot have of I think a is sectors ahead prevalent. potential warehousing us we in of where

logistics good number that don't do right, question. effect of a dollar be it's currency. does Android-driven a U.S. We U.S. those Mexico more we example, that of us transportation, on The dollar And there's your has the the as in other in addition us. sell dollars, where expect. a weakness U.S. ones where their and some on FX are of an countries, your growth would helped that So, of secondary countries help have in manufacturing obviously – one

James E. Faucette

you. Thank Great.

Operator

over call now And our The that to Gustafsson turn Mr. question-and-answer now concludes any as was has concluded back to last you. would closing like question. I remarks. Thank and the this the conference session. for

Anders Gustafsson

and So our the in exceeded in lead XXXX, we serve targets. we extended our financial markets

customers. about encouraged of dedication everyone. And success. and great a XXXX and the our into momentum employees support hard for our and very work well-positioned have all are partners are of I we that, So, the appreciate and with day, our

Operator

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

You may now disconnect.

Zebra Technologies (ZBRA) 22 Feb 182017 Q4 Earnings call transcript