ZBRA - Earnings call transcript Q1 2020 | Zebra Technologies Corporation

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Operator

Good day, and welcome to the Q1 2020 Zebra Technologies Earnings Conference Call. All participants will be in a 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

Mike Steele

expectations Reform I made begin, to inform on Commission. that could Securities to with you results assumptions and materially safe These the Before our filings due this need call statements Litigation Private the on to provisions subject Securities statements risks current of are are uncertainties. certain XXXX. harbor we of Exchange and to are and based Act in and forward-looking Actual the differ subject factors and discussed

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

You our at in the find to and today’s this of non-GAAP slide presentation. can results reconciliations of end release earnings press GAAP

Olivier Leonetti, Chief Anders are will advance our quarter our our begin our Enterprise the Officer. include first with we our with Intelligence remarks will in will and discuss and to presentation on Then outlook. additional markets. Gustafsson, detail prepared Anders end trends provide seeing and conclude vision Olivier our financials will results. Anders Financial This Officer; from Chief Asset Executive opportunities

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

on investors.zebra.com our website year. and acquired this acquisition. our for at presentation otherwise throughout be unless XX following are one currency the and on months Profitect to least Temptime will is simulcast at exclude each Cortexica, This constant indicated, archived presentation, growth sales year-over-year results Also, from recently being a basis references and the there businesses for

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

Anders Gustafsson

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

of employees, to top priority health customers that and would I and this at our First, time to partners. say is our wellbeing like

live to workers, so work sacrificing of and all personal to safely us of especially We safety, those can this through time. frontline continue grateful challenging are that all their the

keep repair of on doing are in warehouses the also To the are that our solutions and you. supply chains their heroes stores, frontline to say other all front help our customers, hospitals, are and of employees that we and central essential products as Many normal serving safely on efficiently. possible. Those jobs build of and parts customers’ Zebra grocery the lives those lines as heroes, delivery vehicles, thank supporting our

had The per reflect quarter to financial decrease contracted this results We the published X%. EBITDA from sales and start challenging margin a morning We share of year. first decline a $X.XX, we net by strong environment. points of X% a diluted the a XXX Adjusted earnings which non-GAAP XX.X%, to basis We key realized and and of February late significant and played temporary into delays, year restrictions a evolved the generally as experienced supplying global out a March late distribution in closure January in of of including disruption Americas. pandemic. center product a manufacturing chain our quarter on the transportation supply expectations; goods, prior however, COVID-XX

steps We products extraordinary our to around produce mission took and world. to critical the customers supply

and agile, pivoting bold quickly our closely Our take situation team the monitor was action. to resources

customer meet expedite plans America to chartered product to to delivery China and commitments. we North example, from Europe For

our quarter, Despite returning now to China a normal efforts, in book unable backlog we best to high actions. fulfill were and we in is QX. the through resulting we have order Production our supply entered completely as stabilized chain mitigating in global

channel soft the COVID-XX been already challenges, trends that weak were supply chain to exasperating addition we to softer trade very globally sales and the with China saw tensions. In demand through due had

like customers. few e-commerce cases needs address to highlight even worldwide omni-channel, the However, customers. in more to this environment, any solutions utilized supporting QX our I in and used necessary critical our evolving changing their In wins become a environment, our solutions healthcare. of notable enterprises would have for

mobile printers pickup, a pharmacy tagging. series mass largest world’s store number cases, our online front of of merchants shelf XX,XXX to the and use store of address One fulfillment, purchased ZQX including of

TCX computers several large have their Additionally, e-tailers growing business. win With is series player with hiring printing e-commerce mobile takeaway are been thousand year additional to and we COVID-XX, and follows solutions. in a scanning last this of deployed we working our exponentially. them demand on Asia. competitive They staff This

series healthcare, NHS In solutions computers identification Nurses healthcare We the Nightingale patients arrange have virtual visits to NHS our supported an between we also patients. and in flow their the temporary been installed COVID-XX ones. at provided and the UK. of using hospital supporting TCX loved mobile

and As expected, margin heavily QX weighed transitory effects on gross tariffs expenses shipping expedited EPS. and of

this expense volume. sales We have mitigate to actions decisive drove operating lower impact which taken leverage, despite

We macroenvironment. remain due challenging take and these appropriate agile continue as pressured action to are to results

will I that, QX Olivier over to financial outlook. discuss our call now and results review to turn With our the

Olivier Leonetti

Thank you, Anders.

acquisition. first walk Let the P&L Net X. sales the less quarter, organic us and X% currencies basis X.X% of through on than Slide before declined the impacts an in on

growth supply sales generally the approximately globally. seven points. caused impacts decline, we in to demand sales that of our believe our pandemic COVID-XX performed we The and consolidated market Despite are percentage

delayed & most Visibility into supply largest decreased center of impacted distribution the Our in by Mobility that The COVID-XX mobile sales channel. chain was impact computers North was X.X%. American Enterprise sales Anders the referenced, the temporary shipments segment disruption and which closure

managed the by segments with We Asset growth driven a relative product and retail rates Zebra increased strength primarily over Tracking sales services the professional saw XX sales months. solid of solutions. X.X% attach segment in across on business, Intelligence & and last in solid increased printing both

business Our solutions in to due Locations a pause lower was project spending.

printing to strength mobile offset growth categories. EMEA sales other was relative major all America, regions, computing, in Turning by particular sales with were to Central X%, increased and in strength challenges mobile declining our due in Europe. chain flat, We saw COVID-XX supply computing services. North in

Latin by supply computing XX%, China largely sales down chain of Sales decline. top mobile tensions. in to America sales impacted of in our XX% softness Pacific most by the original driven led by XX%, disruption. trade impacts China declined sales, COVID-XX region continued Asia due declined on was driving lower

order basis contracted margin mix. gross driven freight tariffs primarily Adjusted unfavorable well by to X XX.X%, List XXX large as and expedited as point

prior declined sales. expenses year cost compensation, the million the improvement XX as lower expenses by improved basis points from operating percentage businesses. management partially and prudent offset This to $X of and inclusion Adjusted due from was incentive of primarily a acquired period recently

a XX.X%, per from First entirely earnings basis point margin. quarter margin expedited tariffs We share period adjusted decrease X% lower and EBITDA drove of decrease a freight year-over-year driven of negative was gross the expense. effects the inclusive $X.XX XXX from non-GAAP transitory of prior impact diluted $X.XX, by

on to $XX leaving flow lower generated the sheet times ratio. QX. in the shares now primarily Slide under authorization. We flow working net million to due remaining free This $XXX From cash capital. We of balance Turning and of X. higher in than EBITDA of was at highlights period, use cash $XXX the million the a debt debt-to-adjusted leverage modest repurchased quarter capacity the million of ended X.X perspective, QX, we prior

X. Slide to Turning

navigate We global well are we equipped are that facing. unprecedented environment to the

increasingly As revolver. levels mission-critical is of shape We in our balance end-markets. sheet I our debt just mentioned, solutions, deliver excellent and under million with diverse capacity $XXX low

and distribution. to model driving business volume party to outsourcing product due of third sales the highly majority all has capital-light structure Our manufacturing variable cost of our a vast

expenditures We sales. than and cash a typically a X.X% less strong free have flow with profile flexible also of capital cost structure

of times. in record use have to profitability in various a flow in a We the preserving actions capacity take also track and challenging our scenarios, for We business that position. cash preserving improve playbook investments appropriate competitive

to turn our outlook. us Let

and now to outlook particularly withdrawing due challenging forecast, expected full to flow. low independent year, than quarters flow. announced our We COVID-XX, we for actions feedback customers. visibility the to and are research our last profitability sales, would we net and partners metrics based to on address we be Given be these which margin expect three cash market cost and our adjusted EBITDA free and from cash QX lower QX macroeconomic year

than the to reinforcement our preserve In that rebounds. acting this to business prioritize scenario much so stick we culture. financial operational market that stronger we extensive of It of have freed investments, is competition our environment, levers the profitability pull. This principles no strategic many we the are that swiftly and imperative us to to can enabled while and doing to harm we planning identified done as

driven we quarter second a mentioned, the Anders chain with supply backlog temporary disruptions entered by strong As pandemic. the from

weakness as levels. all our As affecting globe. spread, of pronounced market end more distributors is calibrating through our geographies across the are the the The run rate in virus inventory third party has major impact is business channel

net and impact pressures currency assumes acquisitions outlook we XX% from one recent elevated in foreign changes. impact between positive basis an QX these approximately expect and percentage sales to XX approximately from point negative and uncertainty, an These XX%. Given point decline

a gross $X of X between XX% be and believe EBITDA from assumes million $X QX operating List disruption impact lower million to XX%, adjusted would chain reflecting expenses approximately and the lower margin supply from We COVID-XX. and mitigate which margin cost tariffs

these XXX Collectively, it EPS $X.XX. Non-GAAP to expected is to to range EPS impact points of margin I in approximately items, be diluted basis by $X.XX expect transitory by $X.XX. and the

X. Please other on Slide reference assumptions XXXX modeling

XXX On Slide products the impacts XX, the imported tariffs anticipated U.S. the to we provide to on an Zebra from update Section on

footprint Malaysian We due our delays on despite facility. COVID-XX, our track are by generally particularly global mid-XXXX, sourcing in to modest diversify to some

mitigating expected and to also concentration our immediate adds initiative computers mobile geographic have In of printers. is substantially that our ramping the It last effective List X became tariffs September, we Vietnam, benefit been expectations. This mitigate risk. our impacting

volumes manufacturing currently work million $XX to the are capital of with our onetime U.S. pretax move half in partners charges These to of in first to most plus to result We $XX expenditures. lines production approximately XXXX, contract broader Asia. in of continue approximately order actions of our million expected to replicate

quarter, gross tariffs first by In profit the impacted $X negatively million.

launch to impact QX of China. of this expect as we $X to supply sources decline alternate in million outside We

call back discuss will to and Anders the Enterprise to With that, vision market I Intelligence turn trends. Asset our

Anders Gustafsson

how customers. Slide value Olivier. enhancing the highlights Thank our we for are you, proposition XX

empowering Our are solutions effectively. more workers technology and edge to as their next their do give trust that to solutions with most we level. critical and frontline job than operations with by bring the them the companies equip Zebra their to even ever facilities the mission-critical Industry-leading today

and as can to of food or like access frontline to distribution optimized such to a chain from We a that retail unmatched data satisfy across associates supply have or availability. ensuring big issues We safety workflows hospital, the to broad operational demands increasing ensuring of base. are global e-commerce installed understanding more are uniquely product deep in because range and vast our positioned problems bed the this challenge turns we address inventory address modernizing maintain store centers localized

vision Enterprise our bringing been for to have Asset Intelligence customers. life We our

condition, their their them trailer doing assets understand their barcode, identify this device their enabling such and in so with capacity temperature, RFID that assets to next workers as solutions action by security, our best the and We can vertical-specific Locate vision. through computer frontline real-time. are and take

acting the by hold. sensing, hardware, in augmented on technologies, as economy transformation from and have for workflows all has that business together. software processes manual enriched and have into massive and frontline intelligent are of undergone Methods bring it the evolved data analyzing taken edge on-demand past operational that years including Inefficient purpose-built solutions

edge those Businesses the their their put operation at all They and are near generate safer and demanding to now can entire run they are so of to uncertain take information it volumes work real-time. points smoother, information about large in data operations that effectively and of is smarter. happening what disparate how of

help in investing data capabilities performance been workflows that in leverage gain our a a area our and We software in remain advantage. better solutions their to advancing customers top and services priority. orchestrate Investments have real-time this

are trends growth the technological remain we markets ones the increasingly an primary in XX, economy. environment, in in challenging markets highlight this Exciting depending are pressured customers and Slide these longer-term mixed on said, that improve That we we their vertical are demand evolving On new to as on capabilities serve. subsector. seeing

others we the are Many the for while essential pandemic be dramatically In primary may care, of need our increases that capacity, acute serve. customers the business. is care temporarily businesses, health deemed various which additional for area closed

care and elective are hospitals, as have labs until provide parts scale to solutions of Our many quickly and a efficient in care notice. and slowdown further purpose-built suite enabling mandates health noncritical Other government of care locations facilities have safe paused procedures care. drive-through and testing health seen pop-up

to and transactions our grocers of retail serving rely the omnichannel more e-tailers customer fulfillment business retailers Buy X/X Pick technology Store as Approximately and consumers E-commerce are essential Many homes. our Online merchants, who have in purchasing needs. their mass increased their is navigate Up on from execute In effectively.

retailers who are and orders certain department stay-at-home purchases. heavily reliant and apparel are in-store further distancing social stores However, impacting on

restrictions which challenged logistics our such as parcel rental volume specialty pressuring segments from of delivery, goods, solutions. In is drives demand tensions the challenges facing industry. car increased incremental sector certain severely purchasing trade driving Conversely, and The today manufacturing deemed space, have government-mandated distribution additional orders is and discrete and providers transportation and increased online manufacturers, airlines, for households stay-at-home passenger with as the auto, has been nonessential. aviation and many are global

these producing companies, as with remain are medical idle some manufacturing, been of our less by created segments food said, have customers ventilators, process solutions. Many pharmaceutical That and equipment their and essential impacted. within like operations such utilizing

position we focusing that leadership serving to are we on closing, our the strategy confident In and rebounds. continued in our last. and innovation, business extend By crisis sound and fundamentals as market needs are not that customers’ market our expect this will investment

the over to call Mike. Now I’ll back hand

Mike Steele

Anders. Thanks,

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

Operator

you. Thank

We [Operator now begin will first question Please today’s Andrew the Buscaglia comes Berenberg. with question-and-answer ahead. Instructions] go And from session.

Andrew Buscaglia

question. to on wanted sales touch I your Hey, guide. for taking Thanks guys. QX my

good as seemed quarter, okay You seemed you Asia though it into sales and quarter. backlog America – your had a this the to North be

is a beyond just So haven’t hit concern there of Asia? I’m of the backlog? you that, quite just function And outside this regions of effect other wondering, is your this seen a

Anders Gustafsson

morning. good Andrew,

a the to business the length the of we QX or the history to are impact on COVID-XX. have the an question the you if when the rebounding visibility as impact of also either economy. company We And lot various stay pegged due basically a the at home and a the what mark restarts. today recent in of over And is come. we see business lower And of a quickly to the we of current study have stimulus packages, economy past, of

specifically, obviously only we QX, to believe comes what we COVID, is due it see competitive strong today we a in when Now to the impact are position.

we shares. a see in adjusting on distributors, mainly the QX, standpoint being pronounced And We We example, we quarter. an for backlog part have believe have seen is inventory. today strong impact we the through the from a rate, that, top level distribution. partners gained entering business of more line And run going which our had

bad have proposition, is to we well see But today in going be works going this we’re on. So times, we believe what value we a manage and and to which good strong Andrew. ready this downturn,

Andrew Buscaglia

your EBITDA then margin. And guidance for Okay.

I this some behind think What’s – it sequentially? of bit of where that Directionally, margin being margins was – a of people guidance? really were That’s function expecting. a gross sort up ballpark. ahead is what’s your

Anders Gustafsson

so pandemic, points, the – look point EBITDA the of X.X%, by at run the lost or course, so points. being you then of the points decline XXX is basis balance management expense. a the will impacting due margin midpoint, of tariffs to So at to if at due with margin XXX associated with EBITDA, year-on-year items, about basis if mainly rate look freight mix. either And XXX one-off you is basis associated so our

So if revenue revenue today, run at bid we have you of look we rate, bids, rate between rate run disaggregate and than margin declining. seen the is if the much run higher and

for now a rate However, increasing and been few the have run sequentially margin for bid profile quarters.

see OpEx revenue going able impact standpoint, you at and constant believe proportion a proportion is last the largely to CXX. an impact in being due margin we the and play to retain From tariff to as of profitability relative what or large So margin be – year. to we’re the of a OpEx

Andrew Buscaglia

you. Thank it. Okay. Got

Operator

today Paul question And go from ahead. Coster JPMorgan. next Please at our comes

Paul Coster

I’ve taking for my two. thanks Yes, question. got

take in can give think for that more is, destock. we know the one us do you is, XQ that? on first any it a I can now thoughts you USPS quantify The quarter way? them your you phenomenon expect question will And to in to channel Is like and in Or sounds the guidance? do than one throw it that latest the you that as And the projects? second

Anders Gustafsson

will morning, Good Yes. ones. these of I Paul. both take

per First, expectations. on USPS as contract USPS. continues our

about before, in multiyear biggest We of certainly this we’ve is proud our As a it, contract. history. talked very feel

I our strength and value proposition the think our the of highlights of strength relationships.

they respective the Zebra – teams, to Both engaged. team, work together. Our teams our USPS the continue and very team closely are very sides

there’s will So our or no in any out pushed expectations from signs this way. side that be

gated up majority the be as moved expect when begin will last deliveries have or carriers deployed by stop backend XG point, our or do that in at we the new end ramping to ramping to the that expect said XXXX of of need QX, U.S. the we in devices. service. – do orders of to will And As the quarter QX. we And all kind is in by off assume USPS call,

We some have so cases, current orders, framework an additional same received within new orders beyond units. new the use XX,XXX for but

look continues earnest. And So, to with forward USPS to for in the to be good. we us starting certainly deploy business

the other on be holding it’s normal are the going at would within on then basis, distribution our inventory. the don’t who high being means more are destocking We to And the then as tend in down, goes short one perspective, see disti they much on downturn activity. type quarter have the don’t in buy is that days a we to adjust of be their when which global particularly, And say moment low, days channel, a they What to that see one tends normal. of be from inventory I to or out the early a partners it band ones a hold considered hand to who on the sales hand, term.

in some partners, will our level – the there maintain have inventory or hand we same will run the maintain days distis assuming of be which rate that on here of cause you. inventory. for lesser a Thank reduction level are So you and

Operator

Research. ahead. Keith And our comes Northcoast from with go next Please question Housum

Keith Housum

guys. in around Anders terms are understand of back XXXX, you And since what me interpretation you business one that XXXX. thoughts in how, morning think changed. are I Good your the some customers now your then? are responding how level you give your that that’s Can same few been of your back of we has of But fear the I great guys the was recession guess, customers is had now? there reacting? of how

Anders Gustafsson

I a crisis. crisis XXXX drivers different – the very there’s think for this versus the obviously,

say today as much now are say, probably customers and sub vertical our on back business I’d the not So kind well, it are in. segment very of – which up or depends of you

concerns I liquidity, XXXX think in about and customer so has every forth.

have a we of bit and a not. Here have have

apparel, So if super, They stores. delivery e-tailer, busy. are well. you’re some more you And doing you might super a very you a healthcare, a be retailer of your mass in selling or all down shut businesses, grocer, brick-and-mortar are merchant, having of the if are

a started behavior and month on future They engaging I’d were oriented operations around from it sure more three back work-from-home their and the making start us – to the took they to and come projects. two, last to themselves probably to were when in continue run. current think I’d But very last working weeks both of customer with focused customers on I get say scramble for say just orders – adapt started of kind to enacted to perspective, organized our new be kind the environments. the

good perceive recession. confidence. feels or going we more to make long, engage the out concerned come they – customers don’t have sessions sure And how And trying like a our and they continue with are use or I with of maybe to of our conferencing we it to as are overall this how bit Maybe that video make customers. be have to

Keith Housum

I I again, it, clarify heard in has And percentage your your of like Got then, think thank what essential to but this of do you. think, customers? you script, some done you can business

Anders Gustafsson

interesting all but it necessarily people business there buying e-tailers. our those essential. deemed is specifically, if trends as you our mass We are merchants, at much. look some seen not the home, didn’t thirds retail of which And grocers there we’ve that Yes, entire goes as are talk the business, store largest about to two vertical, to adjusted from from and visiting

that’s Up was. to popular. consumer to up Up become have In And exponentially. has So materially, what Grocery Buy up that Online more In Buy unlikely gone a back much Store is Pick gone Store I but behavior it Pick work Online has volumes think

have think I consumers of that they like. shopping learned now way new a

take we Then pop-up the and of if hospitals, business activities, have, you tied the but able been has do obviously drive-through say, smaller of essential just our we acute facilities deemed that’s majority to and that Covid-XX patients to care number forth. specifically. of a healthcare facilities move, that there look care, in. come have test of But would is our And part parts to elective care the business that of healthcare so part to be of scaling non-essential, there’s existing care I been

I business Within good really drivers work all deliveries sure last type good last the say a the have the way to that economy, that’s supply delivery mile more from of here of the of the devices. households for – making don’t part tend our so food, part e-commerce. many I logistics, delivery to – have us also can’t and but essential percentage to obviously today number, transportation have is a mile chains of essential that a a to I’d pharmaceuticals,

car But so and businesses so rental the hand, companies helpful. aviation, are that And transportation been that’s under like other of a logistics pressure. auto, other on forth lot we see

there, nonessential. And the aviation I’d such make discrete They of less lastly, X% revenues. than goods, up our lot manufacturers, of manufacturing, total specialty say and as auto, a

essential are pharma would deemed for most, manufacturing like food companies say, While us. I and process

Joe Heel

well, important secular digitization we forward. are trends we that the we important, actually tracking, current is going think additional going E-commerce, are trends think serving. workflow, those as the more that of would Keith, believe even we be situation point, An which accelerate to

Anders Gustafsson

our do our necessary all for Yes, customers across solutions end the really that point we frontline I empower we to have as markets. become the see workers more that think,

their from are people who delivery the hospital, a perform cannot in a these They or have to be store So, home. grocery duties truck.

trends the helping So around I automation accelerate digitization, crisis industries. to the across think is

Operator

And our Company. from Ricchiuti today go Needham next Please Jim with question comes & ahead.

Jim Ricchiuti

a healthcare, the have that I a put – investments Good the it about I and essential you. your e-commerce, another Slide Is that’s and retail, comment the morning. thank benefit are vertical where to of in those fair to are markets? maybe been in business haves the on pressures you half terms that you first seen Hi essential the question half potentially talk areas that year? some increasing addition nots, recessionary – the the net the that we’ve in wanted go you in say way, expect in had traditional that to anticipating second if just as seeing that you of that of to in XX falls it Anders, parts Or off the channels. of back about would components, that whether it’s

feel I as business you full sense I’m QX. can’t give trying get I’m how year, just from just a that trying some to QX get to the – change for essential might but for to think guidance

being I challenging you alluded quarter. Olivier, a particularly to think QX,

Olivier Leonetti

Yes.

we operate and do short for a several operates, would guidance to is here. real the stop more So the say quarter in that world of how I not our long-term of activity. change we trying us is a on color but we’re expectations full this give to going year or – a But

the business the QX and vertical And and on very will it world a then robust QX. impact expect certainly is of say diversified follow. to have we a across very how lines, rebounds benefits I’d one So we geographies. for us we have markets depending that product business, we quickly

value use times, equipment are And in and that. to trade times, tend they expanding, help in for them OpEx investing business CapEx. to propositions tougher work right. to Good do our times, times bad tend the and In customers they our are good our they

hurricane of seeing, this at before. – the to been now the efficiencies. the the than try they us they more very year Say, being get eye right businesses busy are had here, essential use we So many to are obviously, of

they just can not are sure new I having of use up today making technology, about behaving solutions. very up bandwidth on is the think operations and, their how but creatively focused how to the that they to they scale think very are generally necessarily scale leverage

the little bit think down will come I a more. that when settles world

who come Customers businesses are as operating them say, out to their we and how that talking people and the automation of to we that help engaged their are operations, had of them, we shut have drive down figure today, to stay sure more not back. can digitization still make they

out more we – to and we them. So much ones are the essential feel to are how that in active the But – that we scale all the have. both we figure running customers to want engage are that with obviously, their businesses in looking

Joe Heel

Heel mentioned Anders and concept central you extent Joe have Jim, about a is the to something The earlier, described haves also customers. that me certain Let the that speaking. add nots within the it applies

which procedures corresponding and you also are in activity investments moment and have off example, customers, also us. healthcare you activity for hospitals are funding, making So, therefore of But are have put which elective receiving lot a is COVID-related of and at being the attention, from that being postponed. course

retailers, Within earlier, like robot with around Pick activities being see solution we you that we of example, Store, showcased but a for In Buy are things Up those paused. Online automation lot introduced

still with customers. the those drop are longer solutions. remotely The in Now those a term not news seeing customers we’re engaging among that us off on good yet confidence is

future. sectors And not expect have that so those part we in that will essential the continue in even

Operator

comes today Stanley. next with And Marshall Meta go from our question ahead. Morgan Please

Erik Lapinski

like But any can much I you the Or for may Thanks Eric potential seen from you of part down on most how orders? projects. cancellations guess, help seen staying be of could kind off Meta. it like taking of sounds a for you’ve pushing for the on just is question. with question just impacted? this potential the most contextualize, scaling the customers have maybe Hi, reason some our customers, conversations maybe us, Maybe of of size

Anders Gustafsson

limited So today push number we’ve seen of only outs. a

as We of it. or cancellations have seen scaling any you any down orders, not put

the all. I customers ones today and think – at operating that out are be not tends pushed to that have the

Erik Lapinski

it. how think pace share flow uptick of may then be the Got just understanding on on maybe should focused kind forward? opportunistic? about should preservation you kind gears continue repurchases, you bit. And helpful. at of quarter. price That’s the On Like Would just we a Or cash the changing lower looking capitalize more to we the there? in be moving expect share

Olivier Leonetti

flow the strong generation free cash this believe we during as I cash protect can downturn. about the as the of we the of flow of the So said, feel even we we company, majority said, company

Now business be to the shares organically of outstanding. the it’s allocation worth shares, is about in our to for or $XXX of million X% inorganically. cash so either We priority bought invest going

stage, business this at in investing mainly the going So buyback not and we are priority. would be be a to

be totally Now the it’s but off going priority. table, not a to not

Operator

And our W. next Please Richard go question Baird. today at Eastman ahead. comes Robert from

Richard Eastman

to give it some Is much morning impacted And of supply downtime. revenue up? had have this you you perhaps could sense Malaysian I’m little kind may a a and closure do Olivier the that issues facility could assuming was how chain bit first a just maybe quarter? just you – you And the that subcontractor some us – of in the good speak perhaps you you. expand Yes, which Could thank quarter? just and facility, on had

Anders Gustafsson

details. I’ll start fill this can with and Olivier think I some out help then

little things. than partners on go So China highlighted our expected, call, It there took you have contract to would the has was the say. Since on returned our until side we a COVID-XX normal. supply that our partly And supply back dependent located. QX it on chain, I longer would but an was where largely were impact then of if manufacturing

So they and two-week manufacturing quarter, over return capacity. forth. our had through to XX% a working workers were by quarantine end of But the the at contract Chinese periods, all so partners

bit a but came think I it they slower, So back became little back.

a that to no people. the more there Malaysia think, as people up up help after agile Chinese I Monday quarter Vietnam We our to But also we to supposed creative. quite were to and obviously in do And then the lunar we Year. was And facilities. to and allowed timing set the New it were, teach and ramp tried were little both challenged travel

So video, and people to as and via we in were facilities in as well set Malaysia we sitting so video we Vietnam that doing, them China watching teach people what up have could.

manufacture same And Vietnam It impact to very based Law The very to while have Malaysia of impact had China started nicely. up that little modest Marshall on manufactured got expected, and then tariffs using our off could. the facility get QX, vast now instead. it slow, we we try Malaysia I of facility that similar of make and was running. that we up as as China get number had come from facility a much or out majority China, everything think, diverted in products as perspective. We’ve to that the has But on shutdown on in It printers same techniques the implemented. but the we’re the

expect we demand precious. is guide reflected are going chain to you us. in largely our for many, what that going QX some behind be see And forward, issues And supply

Joe Heel

I think had QX in the order. agile QX. excellent very being a make They’ve sure impact actually to all that and issues job is call an chain dynamic and Yes, working situation to supply – of minimal out these our in on done

Richard Eastman

issues as that receivables a credit then – any the question, that there credit you issues are within a there are so inventory, follow-up are virus but watching carefully? any don’t we watching of – or you hold lot are And just

Joe Heel

capital, time spending So are DSO, obviously of we working on most particularly. a lot

So – we again, we cash to about capital. of And feel we our flow our sheet and cases, strong strong way competitive about strong of sheet, our working no. balance the feel the the feel about position is balance strength the company. And want in increase free we the our use, answer far, to selected

balance from sheet. credit this navigate issues, to so through no standpoint our particular So we using help our far want a difficult partners and time to

Olivier Leonetti

our thing thing to resell to add think, is maybe is partners, just on our benefits their products. some business one And us color I this. here that, One that more

they if off So cut are supply from

products, goes if our products, business get access our away. they to of their can’t

strong current that they So us and to to from sure can make our there pay partners do is incentive stay business. to continue a

Operator

William Drab Blair. next with question from Please today ahead. Brian comes Our go

Brian Drab

stance? could way terms make, entering that to a compare Thanks that good that typical with, And with talk the if say, Can backlog? any you maybe two I a like second for quarter. quarter Hi, quantify wondering Do you first that. doubled us morning. you and you you’re typically weeks enter to taking quarter that us give was a in or three to my have help there’s backlog some trying of questions. the

Olivier Leonetti

was So the slightly of out this the the of ordinary. to of due the And entering size size we dispatch center was the mentioned. issues some higher quarter not backlog

one of to our about day had at center that end a down quarter, and we shut $XX million of below. So for about was the dispatch the

So of ordinary. Nothing that be the the also of would out part opening backlog.

Anders Gustafsson

do as, first well Yes, it business through you can continued the think of quarter. the to

$XX was So distribution that Americas And normal. America million that or was the center of that order one the ship flow out thing the the couldn’t QX. additional flipped North into we

Brian Drab

smaller have Okay, I thought. that than seems would

mean that’s that’s additional other you of to I that revenue entering enough on, So so XQ? of source is There out. X% for backlog no like call

Anders Gustafsson

of out the Nothing ordinary. of significance

Brian Drab

other was this, you it did then Okay. do just Was illness think center I an a did facility, decision this about was the risk – And forward that in with centers can there distribution you And shut why distribution that going potentially was or there? to why if state-driven a Thanks. curious, facilities? that down? is have and that talk

Anders Gustafsson

a So this COVID-XX. case and of there outsourced was was facility, an

But actions and sure and take before hours more small forth anybody we to spacing entire that between and as worked infected, out impact lot team put that had facility. a if ran team had drastic would dramatic, A, came get it XX little make for making C, had the back pretty we to so a actions that in slower. to down only started then, shut even people B, they not some and of a taking So sure we

were So have impact expect had happen to again, it the if in much first something it quarter. I would less like to that than

very right. Another The and one, quarter reasons, size ended at is also, of up backend strong. slowly started start chain for the which supply obvious loaded the was

ever to quarter, shipment than standpoint that the days was had a distribution worth in confident lot of we is going of a the ship be before. center today mitigated going few much day from forward. are more So to we largely But and last a the risk

very those We risks plans mitigate now. have good to

Operator

Please ahead. Jeff final Capital. from with comes Kessler go question And our today Imperial

Jeff Kessler

you. Thank

you’ve XXXX? they on mentioned update so, not of three or them whether what year just were that could in or is And role and they have in played made have Could the into original briefly discussion. later investment that going the You part acquisitions play us on you the not if forward?

Olivier Leonetti

So I assume and Profitect about you Temptime, Cortexica. talked

Jeff Kessler

Yes.

Olivier Leonetti

Yes.

it’s don’t all topical So we goes say are Temptime on world. the of we They the well. one the for lot have in and beginning very – a time-temperature goes yet today, Obviously, – It made in of on three visual solutions. monitoring I’d although vaccine performing manufactured of designed the developing great was first a XXXX. vaccines vials COVID-XX. them

Jeff Kessler

question. Kind why asking the of I’m

Olivier Leonetti

Yes.

what data sources, controlled. when a can did variety be of that sure of AI in critical So we our more last able detect primarily store and They analytics on able in have we that what quality how temperature to that’s on be this. retail, prescriptive as being having we and And vaccine that do dependent do physical that controlled taking to solutions lots the from acquisition in they with are to retailers and a contact ensure June year. errors machine others to the and the offer be the to rectify to to make that assess and anomalies. today transportation happens trying and have Profitect with they quickly was of I’d stores, are less inputs even second of using different – WHO that can figure to presence the say learning, out obviously in

vision And the kind the business, was at the a that competency is of so is year, acquired really smaller focused lastly, this stream. less which with the the of computer the mostly Cortexica, product to that team company intent or – end of our revenue leverage last we

engaging So great they our are active skill they’ve a been with they our around been And very have but great vision capabilities EMA building team, particularly, sets. also addition out solutions. our – robot, in to computer very

Jeff Kessler

has Okay. quick. Thank program. be do you. It My with partner will follow-up to is your

period is you they for of product flows and question in of nothing tweaks don’t You and mentioned them sell. about you that in essentially, time chain provide if this some channel going and in have as have made have program your ebbs any ebbs to decreasing flows your during increases that the The supply you’ve partners some and for seen through that been – folks others? into are

partner And what your program call if have you and it, to for to efficient both been you more you? want doing too, them with it make

Anders Gustafsson

question an Joe is this for think I excellent Heel. Yes,

Joe Heel

flyer and certain the a are that you And programs, the of also we with program, or some help we had frequent in requests partner financially like we’ve program already our those announced – think have from have that for in elements can it a terms, with year. but training, program lot technically we’re many that are like both them of levels. partners we program you So in it the where terms, an reach we additional program, have of extending to essentially adjusting particular,

We rebates. earn can a are when to partners you earn also to that targets. thresholds reach changing the business environment the do in the adjusting some of in that their would partners need order are typical response things These their to

and it their quite the to will received think I far businesses because achieve still partners at targets. the able different means operate been levels well that it’s their so be And

Operator

question-and-answer like Gustafsson to this remarks. turn gentlemen, for any the and final Mr. Ladies the over conference I’d concludes session. back to

Anders Gustafsson

are thank like remain We the to I safe, Be time. would through this partners Yes. supporting working who to you. challenging Thank employees, customers frontline. our committed everyone. and you

Operator

call. Thank conference you. concludes This today’s

may And disconnect day. You a now have wonderful lines. your

Zebra Technologies (ZBRA) 28 Apr 202020 Q1 Earnings call transcript