ZBRA - Earnings call transcript Q2 2020 | Zebra Technologies Corporation

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Operator

Good day, and welcome to the Second Quarter 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

you Thank us today. Good for morning. joining

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

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

begin prepared reconciliations You from Chief our Anders advancing Officer; end the find today’s and additional financials are of Anders earnings and to our on release Executive markets. our Chief the with Olivier of quarter can include will conclude seeing non-GAAP end trends results This in Olivier progress Financial second remarks our GAAP our presentation. will provide will Intelligence Officer. results. in this vision Gustafsson, detail Enterprise at and Anders Asset with slide discuss Leonetti, our press will and we Then presentation outlook. our in

Sales, one the acquired archived is for be at recently currency at and us growth being are website our year-over-year Heel, Vice the the our XX remarks, our sales to this indicated, following for basis prepared on investors.zebra.com references each there Also, Following Joe presentation, on as and your results exclude This throughout least simulcast businesses constant months acquisition. President presentation will of questions. Senior take Global join from year. we unless otherwise a will

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

Anders Gustafsson

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

all to and workplaces our wellbeing our many for safe. I emphasize have commenced keep am be am the Zebra health and QX, and I pandemic. remotely and partners, medical the professionals to priority customers our of the each our our ability for teams serve frontline the of In well communities many executed and continue me employees pandemic. remained reopening to teams who see inspiring customers' plans, particularly our our working including employees, and of grateful I customers of of workers, serve that very would top keep partners. through agile It has and and continues like of to the First, us the very our effectively moving other rally to peak proud while business forward. our been to through of

XX.X%, this strengthened have points the workflows we $X.XX, to EBITDA crisis. second decrease financial term a secular reflect XX%. the of the basis accelerated realized sales non-GAAP prior results with longer prospects peak a environment of challenging as margin year. published morning quarter decline contracted a as QX, diluted digitize XXX and trends XX% Adjusted from per earnings the we Although, and by navigated have through Zebra's pandemic. of net In we which share of the automate

America Latin weakness levels. end particularly business, and pronounced our rate spread was in affected market our run major all required our our The to regions. virus geographies, the of Asia-PAC inventory their distributors impact reduce As most which

bright computing was outperformed. growth the services relatively spot sales enterprise However, and in mobile

the preserve the environment, pandemic margin discretionary costs profitability enterprise the Despite costs flow. challenging and we diligently anticipated. shipping premium prioritizing had with been to Zebra. managed than We to customers Although, our have due impacted across gross cash spend more company

our would markets their well year. digitize of their demand printing from QX expanded supporting retailer purchasing on a significantly Their Our curbside their critical XX,XXX multiple front-of-store prior mobile to of some customers strategy and pickup to printers and competitor's increasing worker replaced is strong improvement a as home highlight supporting I leading solutions Large pandemic. to printing. aisle cases, central A the wins shift use volume in with operations, large stationary use printers. as the was by during enabler label address to vertical expected cases. are including notable use cases to relationship order improve key us like over across productivity

to secured a also a federal retail competitive win with We takeaway mobile more computers. than X,XXX commissary deploy

printers Our wide curbside large ramp point-of-care providing their solution to were needs cases, and clinical range satisfy scanners, support multiple communication including of by treat as We to they a COVID patients. enables mobile this a to beds X,XXX organization use customer to healthcare pickup. computers, pleased and added hospital quickly

USPS deploying TCX we expected, to in Additionally, late Series computers carriers mobile began postal as QX.

to We deployment expect XXXX. the the majority in occur of

avoid collaborate continue further sourcing essential the lines outlook. on improvement will I these am that, in and completed that to drive the needs diversification tariffs customers Asia despite our now to product it outside support pandemic. over imports. results we Replicating U.S. I China workflows. supply their have and We of into chain our enables call to mitigates Olivier modest global our our their to substantially discuss and with delays review pleased risk, to to due us initiative, production financial With turn QX broader

Olivier Leonetti

you, Thank Anders.

Let we outperform on is Net to XX.X% our these we challenging the Despite of in believe market environment. acquisitions. before us decline, the currencies that walk sales continue in declined the which the P&L XX% slide second and six. sales through impact quarter,

Anders the As volume large mentioned, prior was period. order than stronger

in Our data channel, and business and which sharp performance impacted decline disproportionately untimely a to was printing midsize the capture. to small due

that are healthy inventory We levels are encouraged out been have sales and trends distributor improving.

services computing decreased Our X.X%. mobile grew Enterprise and revenue Mobility & relatively outperformed. sales Visibility segment We

environment, Tracking has outperformer. well sales the relative was past performed attach XX over and each with been the Intelligence XX.X%. professional Printing and supplies a by with recessionary months. strong rates Asset declined services double-digits. driven impacted most Services global segment decreasing Managed product growth by Our particularly &

pandemic. solutions location project the extremely soft to Solutions in due pause due Zebra and Our Retail were offerings to activity

COVID-XX two and services mix, impact two Mexico. from impact mitigation offset to investments $XX China and North and We to original where but was largest freight Asia-Pacific achieved services from regions. sales XX%. the Europe. impacts. of declined cost, business were in in Korea points year points declined with period contracted bright management other operating EMEA declined gross declined import growth the while mobile prudent of declined macroeconomic driven QX, the cost basis hard XX quarter development and are XX.X%, to Sales computing. declined XX%. slight primarily unfavorable and and go-to-market hit million premium were Adjusted relative by by in XX%, strength XXX our improved Adjusted sequentially of in region delivering able of incentive encompass growth expenses results. and by this In compensation. basis margin geographies Northern margin. This Central the decline. Japan was solid our have saw the double-digits improved China improvement to grew a and projects. our We due from to in America primarily outperformer. exception particularly preserving the contributor points America from pandemic computing and our and prior partially Services by as sales improved X%. driven research sales. We COVID factors was sales Turning spots lower tariffs, been percentage points to accomplish -- All Latina sales mobile

effects driven by transitory earnings XXX $X.XX point gross drove tariffs. We deleted or EBITDA impact basis was from from of entirely decrease XX% freight expense prior XX.X%, $X.XX, margin negative the a lower quarter the shares is margin. a per year-over-year of decrease, Second of and which $X.XX period, non-GAAP inclusive premium

highlights on the working due $XXX Turning the generated a now to million to flow period, primarily of slide cash and This the double seven. lower than and XXXX. more flow free use first was prior program. factoring of accounts cash our receivable balance of expanded sheet capital half We in

investment $XX in modest mobile QX, in times debt in EBITDA market warehouses. Robotics, the leverage debt ended for Locus at we leader ratio, us we financial robots the net made to autonomous provides quarter ample Additionally, a X.X flexibility. the adjusted a From incremental which fulfillment perspective, million

eight. Turning to slide

environment. unprecedented navigating this successfully been have global We

As for is investment. shape and our lower levels of our availability balance with under in sheet business I $XXX million revolver, capacity ample just mentioned, excellent debt allowing

flexible times. as we advantage free allows cash profitability flow Our and in in cash us preserve a profile model, investment The cost strong reliable challenging cash through capital business competitive structure us environment. and business prioritize flow flow to light the gives generation any

our phase and a of We us from in believe the turn sales quarter outlook. to QX the improve Let the third profitability trends the half year. recovery in impact the to solid We to We and the entered with pandemic. backlog. Zebra second expect peak remain was

net expectation premium QX changes. margin, a pipeline of We sales decline trend. in expected We approximately as business prioritize and is sequential have order is to X%, business. mix rebounds. equates $X.XX. harm lower activity these We market impact. on strategic outlook operating The XX%, reflecting building is Non-GAAP Based we currency XX so $X.XX be million assumes range and QX increase deal would basis factors, EPS freight $X.XX approximately to This margin X% to the nicely. QX no which in transitory foreign EBITDA expense. adjusted point us cost while between This continue the an expenses freight that to we of lower preserve doing $X gross investment approximately larger would seen our impact expect EPS profitability enabled an stronger from improvement to from the and to meaningful the negative diluted to assumes premium emerge which believe higher be and

nine. of modeling few that, market the Enterprise in from call to slide acquisition other back see Anders Note any will strategic to discuss our will the can discuss does assumptions You end Asset vision projected trends. acquisition and pending Anders that outlook With include Intelligence moments. on I reserves a our the Reflexis. turn not

Anders Gustafsson

Olivier. you, Thank

of close the and Combining excited complementary is leading we which us opportunity to are Prescriptive by the Reflexis the intelligent platform with associate expect hospitality Reflexis and communication the early We and for a offerings, service, unique this execution to banking provider QX. management, Connect store to retail, solutions morning, experience. Reflexis provides leading food market task software announce workforce unify Zebra including Zebra's industries. Analytics acquisition Workforce

healthcare. in that a higher the XX will this than The not vertical Zebra's our is footprint in markets, growth such average. expect substantial expertise profile points margin which only Slide XXXX, approximately recurring as our gross market three-year how fits provider. scale vision. building how illustrates million highlights corporate into as and we vertical are next go-to-market of sales slide doubled a solutions Zebra's $XX also Reflexis revenue high capabilities but key broader XX drive and We in over with business a retail, other synergies, period acquisition

on transforming us vast better our customers are edge. from frontline understanding technologies, and to workflows us data real-time the real-time. our disparate base to with services machine data that of of challenges install access Increasingly near asking to drive their solutions business computer from deep operational large frontline as data top put by points actions at performance to work Our in unmatched products. software advantage. orchestrate volumes generated and leverage It complex in data of them vision invest information captured data frontline amassing workers emerging and our learning. sensing, to are to help the acting solve workflows to are uniquely help that from our such Enterprises and gain their of and a for analyzing is positions operational and to Methods priority

fully Our value Zebra cases we solutions, of be proposition enables capabilities inventory This wide software did so enhancing workflows offerings evolving enhanced intelligent they for to addressing they suite Prescriptive MotionWorks our solutions can edge Analytics, and collaboration we Zebra a will their customers including the variety and use by our optimized. combined solutions. our with when across business. are how demonstrate of worker SmartX be fuel are customer's physical Reflexis'

serve. of an a to example, all curbside For associates mobile our through acquisition, delivering such Ultimately, order of Zebra we receiving we set applications. provide of prioritization the equipping Connect truck Reflexis Analytics with in Workforce stocking across markets vertical broader can integrated their Prescriptive data find expect when primary extending highlight as even and On slide tasks shelves, dynamic greater while customers we value this activities, that a XX computers. with driven

is our about opportunities excited term to increasingly last customers challenging critical improvement environment, technological capabilities in Zebra and end the depending growing global in Since an demand a are as driven the sector. is are mixed remains our care update, it on We although this healthcare, In vertical, clinical our area we on still serves. their primary in seeing fastest picture improve markets, economy. our are quarterly longer

their evolves. hospitals the solutions as healthcare pandemic capacity help needs Our flex

is investment mile transportation and In buy have their been those continues growth heavily parts are most Our and to solutions Many have are fulfillment. emerge global to elective testing volumes pharmaceutical in the the such car capacity. drive far vision and Asset business rental brick as their efficient omni-channel providers, in the to safe through term, been the discretionary journey into transactions facilities Approximately and on stores the prioritizing we we tensions. specialty with food companies, goods Longer the entire within increased aviation, to the segments our drive our increased in have passenger sales. needs, The impacted confident addressing which online and logistics apparel been position. retail care. are environment care that reliant continuing on last to of during Enterprise e-commerce E-commerce demand By through distribution at in Intelligence a this In challenged customer's Conversely, are for mortar e-tailers for being of focus two-thirds manufacturers from strong challenging provide have competitive drive been manufacturing, believe solutions. to heart mass dramatically critical labs and crisis. auto to to been activity and trade from current less and expect impacted. and continues resuming merchants, the our favorable our we airlines, space, visibility delivery, Department yet Zebra. of be technology used Discrete our advancing increased manufacturing through grocers, is has the fundamentals reopening resuming. retailers patient are and in and and are and process navigating successfully particularly procedures have who closing, pickup in Non-critical need environment this business pandemic. doors, crisis sound. will COVID-XX which and parcel sector strategy stronger industry our and store for and

the trends be term as accelerate optimistic We our prospects longer continue digitize with pandemic. automate regarding workflows very and to to secular

Now, I'll hand Mike. call the back over to

Mike Steele

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

Operator

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

Andrew Buscaglia

I If bit. guidance into little your Hey, dig guys. a

EBITDA So, could QX it guidance I'm a hard that margin. having like time with your In feel for higher. getting to be that, XX% I

top bit wouldn't little better that? there. can't I'm So, that's margin. correct with and on implies much what much I'm gross in And little about kind a do Premium if sales why there, is, bit confirm than talk or there better freight It's you why -- where costs or was It you if a of you're it to in can it expansion stuff you expect it not really wondering, your line guide expected. I where margins.

Olivier Leonetti

Andrew. Good morning, Yeah.

right. you're So,

the around margin We be XX%. EBITDA expect quarter to in

as OpEx factors. revenue rate decline of will gross proportion margin to should -- So, decline should and a two due year-on-year

would First, mentioned impact plenum freight, quarters. quarter. but for higher of be about large that the point deals mainly in the that quarter, two had level in also We the now of

will QX in improving. an our impacted last, like-for-like We the growing that to believe increase been is keep starting We basis, point trend business important margin the increasing. deal large that business, by very has rate believe this to point number been actually not will business that's And run is one. grow has and and and on expected year-on-year rate run and QX pandemic. doing well, Our in mainly

Andrew Buscaglia

Okay.

be margins the So, sequentially up. gross will

Olivier Leonetti

Correct.

Andrew Buscaglia

if just additional orders. you beyond Can just You talk Like, Anyway talked strong yeah, that? visibility your or sounds about what it orders that? you on like you quantify then, can have a backlog, some potentially larger could And QX some backlog. some you large mentioned provide you your -- to commentary there? is

Olivier Leonetti

solid strong deals. by larger considering but QX high driven was entered It the a of position. overall with was We backlog environment, quite proportion Yeah. the that

customers, orders lot the then a prior the case the seen I we And gives of our gave T&L And in -- this also great investments. know to obviously, we've in retail they the accelerate their of and if you deal So, larger particularly confidence QX. give start quarter. that don't comments of a in us, for any further Joe, outlook have us here.

Joe Heel

and Well, backlog Olivier we said. a position, have as Anders strong

some future our will backlog building so Some we how for to multi-quarter, but relatively backlog too strong quarters, have of be. do the quarter it's are early already determine future projects

Olivier Leonetti

is -- good. the say for pipeline to correct QX it's But

So way for at to for profitability guide And we're Too relative market moment that be encouraged we not a the of reasons. an QX. obvious Andrew, final a seems recovering. and standpoint course, comment, the from will many we the of standpoint improvement feel about uncertainties the But kind to that be believe giving, QX. QX revenue

Andrew Buscaglia

All right. Olivier. Thank you,

Operator

ahead. is next Please Ricchiuti The Jim & from of go Needham question Company.

Jim Ricchiuti

good A we've you it brick -- coming store this, market, of indications the this. bit you've could the gone I talk -- as little start about retail, seen doing whatnot. things from have business? pandemic on a I'm through mortar I changing impact see is And you talk out the in morning. terms out like in and question early we and of behavior. see in e-commerce, to What wondering things of mean, some if assume that the ship do seeing your Hi, you customer I you if as just changes and the could

Anders Gustafsson

frontline are we Yeah. have I'd more they our our end become for empower our solutions were this across all critical uniquely than say positioned even And environment, workers markets. in to before. customers

and has probably automation. of the markets, digitization say a secular that trends all all our four spans I markets. crisis think accelerating And been key vertical I'd vertical around number So

seen grocers, up our buy enabling, And we've e-tailers, dig growth particularly to base large mass in revenues, store. but online just grocery you in the about across of materially ability pickup-in-store of across I'd before, were If in been the significant. -- on bit online little certainly U.S. in and particularly do buy -- a customer two-thirds grocers retail, on quite grocers, are omni-channel scaling has deeper but in at invest Europe a which say business, part the the but our certainly U.S. pickup their particularly merchants

that big has change. a So been

a has niche application online being across buy now to say gone a we're the before at downturn, the And in can't they during and that more expand. think board or I that of now who bit pickup e-commerce recognizes on be that more segments of before businesses reliant purchases think to the a needs say XXX% side from in in-store I omni-channel store were grow struggling mainstream. I'd or customers everybody that their retail

more and their spending QX. So, one of to more we we had -- respond to to more situations business and in giving to kind the like see people of part how omni-channel able attention be

Joe Heel

two This speaking. I speaking, online and also besides, pickup-in-store, not productivity a the store, and Generally can is for or think Maybe only one warehouses. Hill premium retailers buy Joe the the add are things. at but resiliency our at

less on helps improving a of in Locus in an are increasing workers productivity have And solutions that retail, when to the which that solutions. made resiliency we their Robotics, warehouse. contact trend so, example, also like in free improve going extends this And in investments to incidents, including the for types be also to are things reliance there where do tasks, warehouses, we there's

here with example, or interaction as contact are retail of And will contracts features BOPIS that stay, to for there it's free. opposed elements One transactions contact interaction we is payment kiosks to of workers. the free free think that be the of other

retail. those in are trends few generally seeing we're that So, that a other benefit us

Jim Ricchiuti

talk maybe your is And you had -- some it to? set my -- within the this customer Reflexis. solution you. can that Thank And does is on follow-up you is How is concentration have where long question any holes? there And Reflexis some that fill areas known you them? in of acquisition

Anders Gustafsson

Yeah.

the them we've business. been each time. been We've insights every partner Asset very about for some worker with transaction helps a real-time very drive known team for that Reflexis much quite Zebra. are And in a this excited Intelligence augment at The and dialogue that Enterprise empowering of Zebra addition to vision So to with about of Reflexis time. action. our the has premier the other of long IC transaction edge

leverages So, of our this our and entirely with is our consistent broader assets software And it vision. existing hardware. some

So, workers if actions Workforce our data that think Zebra too. Reflexis' and can ensure the of augment have Reflexis communicating at ways looks which to the of drive efficient of Analytics, insights one to sorts you the right to glean can all sources person now right that the platform action employees Prescriptive time. way actions, be more engine get we And Connect driving right fuel the of a between at of and

Olivier Leonetti

And level concentration, during in of customer asset a Reflexis towards performing and has a well Jim, been extremely sales of the has concentration low few terms of pandemic. customers, the

Anders Gustafsson

It's we customers. most -- serve retail obviously,

lot So, to and opportunity great And of us the we across a think some there's portfolio. do there's for up-selling cross-selling overlap.

operated had open. or Reflexis some but slowdowns, lockdown, and you customer at how one-sixth were About If partial fully specifically now open the and shutdown, of has their shutdowns normal. are one-sixth two-thirds of performed like during base look customers were the

Operator

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

Paul Chung

Hi. for questions. Good Thanks for Paul my is morning. on taking Chung Coster. This

And I a we -- gross of longer acquisition So, your term, strategy structural a kind to continue? mostly expect it's gross just a we have of Should margins departure follow-up. a if should typical XX% follow-up about kind shift on your step-up the your to to a Reflexis. so as of if And of think we from as current It's somewhat software. evolves? kind expect of software margins

Anders Gustafsson

companies Enterprise Enterprise our rapidly have near it Intelligence in vision. the growth Reflexis is align leadership our the how think the And a approach in the core for consistent years. as or think, to from in have -- we've broader very identifying, our thought that some or Asset grow don't how or executed with think don't core fits -- talked few acquisition over the Asset into time I accelerate I we first, last that we our about of accelerating the Reflexis expand we So, either vision. our departure adjacencies business, of driving Intelligence acquiring of big with about strategy

Software has including of and bigger acquisitions become acquisitions. now a software have bigger The it. part last been pure Reflexis three

Although, thing than building more that's I'm not and any be saying we're And going only software the by assets and internally, that it's the means, our more on software that, for focusing to -- capabilities. engineers are future, even two-thirds but more engineers. we of software are

that So, as and important solution to hardware deliver integrated software how software we between part as offering is customers, clearly if software. a value or standalone of even a our a very is more

Olivier Leonetti

the as margin part the of We the impact not have but the only will overall business, believe also the hardware I asset on the because of will that mean, business increase indeed well. it of because software, it's

from very So, margin synergic a and standpoint. revenue

Paul Chung

Have channels, view? your then you. liquidity And how about? concerns kind we've maybe seen just SMB kind pick smaller reopen? you Thank And demand of see also given your in start channels, impact time in Great. pricing are kind in some some your July the that Okay. been the hearing of business players does to on of consolidation up of starting some over you as to

Anders Gustafsson

our -- them but SMB to it's rate not. seen first, but tend I rate and and signs and have -- I'll guess, Yeah. necessarily as run as in we which afterwards. business of But stabilization improvement they're the kind comment Joe talk let run also about same, we being of same, not the here

deemed shutdown. by SMB rate SMB Most business, more shutdown part therefore, and seeing hit manufacturers we we but more SMB run are the our and growth. And return was harder were outlook that's harder. think not healthy I also Now, sequential them to were segment the companies or have of essential

that We make also work channel. we -- inventory our our hard that levels say maintained healthy within to sure we

a in QX, went out sales sales little numbers went in down more. bit down when So,

markets end position growing indicate. numbers as expands. we're start them healthier the the than our So, were somewhat sales But a would economy in now to with

Joe Heel

it's is Two improve. as run in rate including several half have bit growth U.S., of a regions, too additional to that the rate. the And countries as a comments. Whereas our our in sustained Europe, improvement. we nearly seeing for are run the are Remember in in in U.S. early But, business Asia, that still Asia, business in say outside we of seeing well example, we

in themselves, to Second, early terms has our -- that It may among are it but among of would stronger we been seeing. been channels business our say it fair is at channel consolidation, than it of be larger to least be has partners. smaller the too partners our is speak a what that but

Paul Chung

you. Thank

Operator

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

Keith Housum

products deals of see strong. are prioritization the that what Good might environment? of are you you Anders, guess hold or hear finding morning, because off seeing the I Or gentlemen. projects I up they large holding pushed are any than being Glad better to that the other projects? large guess, these deals current for

Anders Gustafsson

customer. larger dependent future We type have push the quarters of on deals seen more than into

if be that to push in They into future altogether would bigger retailers some shutdown on the QX. tended they quarters. books had So, had orders to

Another often be example will in-store say, fashion focus apparel requires around, and retailers. which RFID, more on more activities or also

had their our facilities and offset we're that really solutions other customers' had scale shutdown. customers had up -- with were operating by anything to implement into of getting with to the that's deal and been increased get pushed. to do to operations would So, business But setup that the that go where to part the we as

Keith Housum

as edge solutions you discuss importantly? solutions you services the during guess right during at quarter. edge services I managed you how I do But Savanna then if And the the grew the progress versus can the intelligent think, that. look most the see like quarter with I were to Great growth? Great. solutions, did heard those intelligent had

Anders Gustafsson

Yeah.

I think, software our solutions well. -- many of our did very

those If able we Zebra without go customers customers and new QX, win able Analytics, at, to several say, example, implement we as were look were to in an site. you having on and Prescriptive actually to win

So that and software forth, intelligent be a other require pushed not was having pilots of onsite we're we growing But tended that. to of solutions they out, expected. like edge solution the and so that benefits one the way had proof-of-concepts,

Keith Housum

Great. Thank you.

Operator

is The Meta ahead. go Morgan question Stanley. of from next Marshall Please

Erik Lapinski

This team. grocery you with customers to period I you digestion do following Meta. question. investments back Or the those Thanks our drivers been the for sort or e-commerce Hi, some think continue Maybe making? recovers? taking Erik go do the retail that of scale for we some of you quickly. economy given the just kind just expect to is could had mean, side of noted, any investments of kind as have they of the on that

Anders Gustafsson

I'd we've retail plus our last or in say customers larger really help their -- that The operations. in scale are Yeah. existing quarter the to orders seen the

not -- not like it's ahead So, that. they're necessarily building anything or

or catch a the somehow don't there's profiles pause with use of for generally, trying for with scale have they are cases customers they where So, different they or the those than on applications. say, devices many to, I existing the obviously others. them revenues see But number to and they basically and deployed. deploy or just up But into need headcount have in they line side deploy have catch operations what

Erik Lapinski

and there? That's some factor those half kind to impact of gross in it. the deals. follow-up the larger as then should And of just up into really the margins Was to quick initial impacts from a just expecting first shipments maybe Got a of maybe And USPS gross very ramp next margin year? returning helpful. a shipments be to the of kind we also similar

Olivier Leonetti

so order. majority the QX said to shipped USPS the so we next ramping shipped rate, year, is about at half was But an USPS the But in So, And run before, probably of not material to it have margin of the QX. be lower course, deals of rate. usually order USPS end as going in relatively the have talk the margin, quarter, quarter. will impact USPS large the had next order company This of of and a year. today. first we're would large

Erik Lapinski

Thank you. helpful. Got it. That's

Operator

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

Brian Drab

next Hi. figure. you've extent. million $XX going XXXX comes manufacturing I'll be XXXX, out quarter. what EPS next quarter, you the ask in back as comp, million can't was first maybe first incurring taking questions. present with have down that situation some and this simultaneous Was And year. just the incentive estimate in year? in out premium And what $X remember -- And assess about that well? freight guess, this of second year premium discussed But for this there other in example, million are in -- costs or the of Thanks the my this I and apologize there's you're question in in one move about be the What freight $XX trying likely associated that know just adjusted other we're in won't quarter. of There's as the that likely costs on. third for costs freight I costs year. moment. I freight that quarter the in adjusted XXXX if you're the to won't other I costs to year premium calls China the premium present in coming for is total expecting But the at of

Olivier Leonetti

points cover let this. the key -- try me it's to So, on

So, cost, if in out supply diversifying and of are in forward, chain did supply our look we at, amazing terms job of chain you transitory our now China. done going an

done. this forward. So, not going is And tariff to impact to have any going work we're due

obviously, that's So QX of P&L. part not forward and

impact have end the going believe to year. number this basis should my -- of stop So will premium we worth of towards about decrease the We're going that forward. freight I that And that's $X million trend to XX about point that remarks now mentioned in margin rate, points two. QX. one. number due prepared in Point some

So that OpEx. second comes would item. be a When it to

We keep was the have that We'll revenue in as been to able and year. OpEx doing adjust OpEx manage declining.

number have be be today, Now you We keep mention a in we want of some business would reductions, are to so. are It to well. which asking, those investing as OpEx do because the premature permanent? we going to believe

Brian Drab

follow-up. model I XXXX? the What so we total I'm can Okay. if at And the costs, Olivier, XXXX. is then just But transitory estimate can driving what's -- for

you third $X million You're quarter, quarter. the you $XX out in called million out second in called not the --

Olivier Leonetti

Yeah.

Brian Drab

in going in for be year What costs -- like also million, in range costs, model those -- shouldn't that year costs or something, of we expect to like like this there's including it that seems and and that tariff $XX shouldn't X we X, next total.

Olivier Leonetti

Yeah.

take Your is QX number can in one extent freight is In believe by And one about And of about two large was and maybe I after freight transitory point. will the this QX point. to the in impact about onwards. to costs tariff right. impact if as was was we be we we Tariff those be after call premium well. of a that transitory. QX all mean, the I That details call Premium QX, that give the points. about and will you take impact today. phasing gone

Brian Drab

good. Sounds

to Thank Okay. you. later. you I'll talk

Brian Drab

Thank you.

Operator

The Please Robert W. question from go [Operator Richard of next Instructions] comes ahead. Baird. Eastman

Richard Eastman

Yeah.

of of looking EBIT here. adjusted I'm of quarter the thought obviously at cost, the costs, that's of similar in tariff freight some And line the kind was Just probably decremental the the kind here at line absorbing fingers offset the decrementals, about by in kind costs second decremental But of And of some -- some the is transitory into presumably the then, that these reductions. here, -- and the quarter? the crossed XX% of third number? with fourth run decline maybe OpEx out quarter XX%. Is

Olivier Leonetti

You're right, Rich.

over impact that as a QX believe the impact level. largely which going quarter. question you look of OpEx profitability look in I about to will indicated QX, and and those stop margin, you to believe then large earlier margin. an that proportion trends QX we're revenue into bid going we would QX. increase we at mix, quarters two to enter we're today, QX gross But have That's if of during the those certainly same the fourth of same scale be terms why will in we in at as If to able And in terms relative

Richard Eastman

Okay.

easier business maybe being quick thoughts Thought in through much then that AIT. got as a channel? the run appears around what that, you. And Okay. just business I is to simply how more view cyclicality it for defer just do printer I the it to couple on that given the purchases side of printer a a on of of just rate business? mean, in be the impacted you defer the printer, general, business printer more maybe of kind is the payback Or quarters.

Anders Gustafsson

run Yeah. has manufacturing is It of The supports more customers. -- of a more higher its and business much revenue stream. part rate as SMB printer proportion

to of base to of kits. well. COVID-XX get emerging slowdowns. say existing opportunities COVID-XX or for start did more that to all to more QX. particularly there for events. hard business little vaccines. in a customer hit vaccine, Temptime was at business, for printing they was its the hit. And -- a opportunities we Card if very a things sorts Asia-PAC we drivers' see And dig markets -- we shutdowns deeper, to look later if you see is QX. weren't solutions vial printing, once they manufacturing lot But card Badges grew events licenses, for we So, a profile and particularly QX things employees, test resurface monitoring Obviously, were printing I'd continue do do And in exposed supplies were in that the the -- into our in doing portfolio we our support harder. had strong of proper

positions. channel making We the also that had appropriate sure inventory worked here on

channel, hand the stable. kept did we days in So, but just reduce on inventory the

the coming the first grow this we're position the this line now in with we out we in how half with economy gained of do we year. But where grows. actually believe of healthy printing can a business that So, in share inventory

share. So, some all believe our based gained we we on data actually points, that

Richard Eastman

Okay.

Joe Heel

printing rebounding In is China, than further businesses. one And data our faster point just business other our that. on

an will likely there you gives this positive end back come trend that indication a cycle. the is that at So that of

Richard Eastman

I see.

All right. good. Thank Very Okay. you.

Operator

The question Imperial Jeff comes last Capital. of from Kessler

Jeff Kessler

question. Thank you Thank you. for taking my

acquisitions, niche to to the actually it you $X were some Firstly, the billion you announced, new call you've TAM. of you speak of market regard also your the and developed years $XX gave to last of these a you some in the you acquisition expanded particularly affecting. to this in -- size to of out also market you appears but of you've the a now internally, that software It years just ago? the with or total area. where of if with how niche, number play can the marketplace you directly with -- just AIDC that ago, regard Can you've Clearly, relative that -- total you can discuss couple are available a are with that want affecting that that just couple billion

Anders Gustafsson

So, tablets, -- size $XX incremental have and to had we've we've us size right? in in around an will market our RFID. being from talked size took total in that about our those some supplies, adjacent core include $XX billion billion we $XX markets of that adjacent billion and The billion markets markets, $XX

large. because are -- retailer every if TAM market they markets. of a were core it's solutions there our is deploy is by, software -- a you our Our TAM higher is -- say it very, not the to very It's the growing what new. to say, and difficult little And no on today, many calculate -- could TAM faster it than be quite substantial but a would the planet that it, it's

So, growth and cross-sell clearly, addressable high us to also our where this to get markets up-sell. synergies markets able by expands we participate and positions attractive in additional being

Jeff Kessler

of And before and in third fourth it you're fact much are a is a of the operate into is the in about that? all parts from more half follow-up recovering where be of at in of in is be And if this the its and virus gets relative seem and want Okay. until perhaps of year state seem and first least somewhat importantly, about there's fact here. this parts the recovering mess you've in U.S.? the vaccine of to normal to going call maybe half the the of to of together, the pace. U.S. actually geographic basically Europe type year faster, time at in at talking the and still in How it improvement And based talked that you maybe the -- or that helping the to shift is business Europe some Asia virus of more percent and to -- your allows to -- Is business. some that But act pie not the of is, in they COVID-XX to recovery we kind United your remains Asia parts quarter? the you States, Asia second a

Olivier Leonetti

in is and improving I America. outside But well. summarized it think relative the regions QX all North recovery see the QX. QX We main you to

absolutely You're right.

Jeff Kessler

Okay.

Joe Heel

demand they in think, substantial America half, North deals American have large increased having have products customers with previously. I from a are North Although, us the that been that number for of the centric, we second buying

even And recovery so, that stronger think, the be mix run though rate I much, our will outside overall particular U.S. the in not of the shift will deal on

Jeff Kessler

Great. I Thank it. much. very you appreciate

Operator

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

Anders Gustafsson

you. Thank Yeah.

the our and Stay team everyone. And Reflexis transaction. thank who forward in So, welcoming would to the frontline working wrap are partners to to we once up, safe this I the looking like customers time. we're also challenging during employees, close

Operator

concluded. for presentation. Thank you now is conference attending The today’s

now may disconnect. You

Zebra Technologies (ZBRA) 28 Jul 202020 Q2 Earnings call transcript