ZBRA - Earnings call transcript Q3 2021 | Zebra Technologies Corporation

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Operator

Good day, and welcome to the Third Quarter 2021 Zebra Technologies Earnings Conference Call. All participants will be in listen-only mode. [Operator Intsructions]. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. to of conference Investor like Steele, to now President Vice Relations. would turn over the Mike I Please go ahead.

Mike Steele

our zebra.com Good morning, for presentation on This Quarter at conference at and welcome to is Zebra's least one being archived will be and Third year. call. website there investors. simulcast

assumptions discussed Actual forward-looking differ results Our and materially are in to subject due on based are statements factors our could filing. SEC risks expectations to current and and uncertainties.

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

You remarks Nathan and can outlook. This for financials begin then the conclude Executive basis our currency progress on year-over-year additional on at XX Anders Winters, the Anders made will unless Anders with Gustafsson, our detail Throughout reconciliations presentation are Asset our Nathan in third end each prepared constant our businesses will include indicated, slide Chief Enterprise fourth quarter Officer. results find this and discuss our months following of our exclude today's vision. references otherwise presentation quarter provide with Financial release. Officer, growth a the to results Intelligence will from sales earnings will and acquisition. from press on acquired presentation, advancing Chief recently the

remarks, Revenue Following Officer, take will Joe Chief prepared Heel, our we the questions. join us your as

as X to over it to Anders. hand turn I let's Slide Now

Anders Gustafsson

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

broad-based third quarter for delivered exceptional exceeded outlook, by Our that demand team our supported our solutions. results robust,

a prior strong adjusted XX% realized of earnings improvement. an XX% increase EBITDA we per year-over-year flow. a share of sales free or XX.X%, from Non-GAAP on basis point the of basis. adjusted growth and the net XXX% diluted quarter year cash An XX% $X.XX, margin organic For

business growth double-digit profit mix, to costs. X Favorable strong solutions margin their despite with regions Our and service software freight economy. realized particularly in and us We on-demand and margins to our automate are escalating prioritizing investment gross in growth workflows our sales across an enabled in increasingly digitize EMEA. global customers higher all expand

modalities shipments Our supply mitigate alternative impact leveraging teams have the been transport continued diligently of to industry-wide and chain of challenges. expediting

operating We to sustainable, invest drive growth. profitable initiatives while in to also scaled continuing expenses

I call to our QX the over detail will outlook. now more that, results discuss For in turn Nathan our review to financial and QX

Nathan Winters

Thank you, Andres.

all on In Let's increased solutions net X. broad-based XX.X%, our the currency on the basis, for of reflecting of slide QX, impact XX.X% start sales with an P&L demand including sizes. and acquisitions adjusted organic customers from and

in margins. expenses premium sales primarily points XX higher in as further were in return America, we moment. improved favorable continue business. business the we by high prioritize including computing, Note and sales XX% in services basis strong and will a realized XX% margin particularly by driven XX.X%, computing. Latin North Our grew partially in a significant we mobile growth double increased strength discuss increased and basis intelligence sales particular offerings. all software. regions continuing in growth sales including mobile which investments in percentage offset America APAC and XXX digits. major strong increased and four XX% and China. XX.X%, with as charges, increased with grew All enterprise grew services. EMEA that of benefits segment, geographies, gross printing strength solutions to across its growth while supplies, visibility offerings, double-digit mobile with with expanded And service mix, growth most also points sales across driven tracking asset mobility XX% sales supplies, by to double-digit freight software operating computing. segment exceptional all XX.X% recovery across major Adjusted Adjusted These

the from margin $X.XX or EBITDA adjusted operating was and $X.XX. per increase reflecting rate. higher of year interest expense share prior leverage. a from expense XX% basis a point increase earnings drove margin quarter diluted We favorable tax Third non-GAAP period was year-over-year gross and XX.X%, benefited XXX% lower

the flow now highlights higher on $XXX months million to flow was We balance $XXX XXXX. first and to X. sheet the of free increased due through slide year, prior generated This of profitable cash Turning the than X million cash growth. primarily

solutions provides strong. We net advance ended we leverage modest debt remains more XXXX, times in to sheet manufacturing invested to $XX perspective, million ratio, balance and flexibility. portfolio Our warehouse. intelligent adjusted X and of $XXX automation the in the than X.X of investments leverage companies. first In at million X From acquire which our a made to debt adaptive us vision we Fetch QX ample EBITDA Robotics venture months a

by on In tariffs addition, of $XX well transitory chain and as the costs expenditures made million primarily we repurchases. capital slide we related $XX of as the expedited On China million pandemic, caused multiyear share show of impact due supply freight to bottlenecks imports. X, to

In parts freight commitments. Tier incremental meet rates, elevated -pandemic air chain. to to chain to compared supply continues shipping as million, well per increased customer $XX kilo, cost from freight in premium modalities customer prior higher higher which environment. pre to ocean freight, $XX X This Our an as take our includes costs measures to all of costs QX, Global of year. extraordinary than for shift to are the were challenging across delivery incurred million satisfy exceptionally demand team a component to costs our significant we expedite supply manufacturers

we spot a impact. to are QX, freight the translates negative For in on expect approximately which market, point gross $XX higher margin we X% million premium of seeing now costs based rates the

freight capacity as freight improves. premium costs supply abate and to expect component We

to Let's now our turn outlook.

We product a This to strong contraction point lead assumes earlier. the order impact inventory expect prior anticipate from also slightly is our year higher EBITDA premium sales changes. and consumer We're to which quarter adjusted look X% backlog expect in assumes experiencing from expectations. and with XX% discussed EPS increases to Non-GAAP became additive to for margin Despite XX%, X% QX expense, in increase operations to sales outlook satisfy largely due the a we expected by significantly availability, as and diluted price we acquisitions pipeline I uneven margin effective their extended robust fourth be of and to to is demand freight component automate than to net Our broad-based supported higher adjusted times enterprises September. solutions foreign which increasing currency offset between be gross that $X.XX. which inflation, range $X.XX year-over-year.

profitability. due free turn and advancing to discuss on the Intelligence markets, how Asset in of call X. be shown our to new reference we flow We back least for acquisition to our are $XXX modeling Antuit assumptions slide Please that, spotlights Vision additional our with I outlook existing higher-than-expected Enterprise have will at million healthcare With on and to increased the cash year Anders vertical. our

Anders Gustafsson

across Thank of you, navigate Nathan. their a portfolio industry-leading am front of Slide scarce demand return performance. we operational chain automate By transforming XX customers, the our businesses illustrates how and workflows, labor to across and achieve investment. variety challenges. line is the levels our customers implement and help solutions, I are our closely to on Human with digitize and complex address strengthening taking can we challenges resource. of By encouraged by our to a that services. business business products, actions supply end-markets maximize software, leveraging by teams bold higher Zebra's partners of the collaborating solutions

that and intelligence. have driven we advanced Our how nearly through constant the in navigating the price, X the Antuit's consumer October, forecasting its acquired customers ensures powered AI it's ordering, inventory, whether at approximately product right online in-store In fulfilled innovative $XXX at by or near optimal solutions utilizing retail shopping. illustrates period. doubling prescriptive which real-time, solution do right complements million and artificial including sales together time, over change the a empower smart software million supply more their count, Antuit insights as our of generated year integrated workforce to Intelligence the software Slide workforce cutting-edge vision, Enterprise across such the business jobs offering to high-margin XX XXXX, connect, their prescriptive machine effectively and suite, and by increase to Zebra performance further inventory chain. reflexes, Asset This advance software-as-a-service solutions, $XX analytics, in labor workflow Vision. the works demand approximately of for capabilities, analytics, our

will that demands fulfillment. suite advantage software margins they execution, and down growing our can increase customers competitive omni-channel help the silos navigate planning Our and increased between of them a break as revenue giving

execution that to are slide consumers service a highlight to recent workflows. enabling end Zebra improving India, our partner effectively supermarket retail, to more to key across our levels. Zebra's and mobile to of our e-commerce I improved providing shopping We ECXX and omni-channel would input TCXX demonstrate optimize In wins as turning with mobile is a solution. Zebra in compete against how XX. omni-channel and Businesses fulfillment provide enabling their like also larger online. few largest personal solutions more productivity retailer experience competitors. and shop We're improved markets its Japanese an secured recently a with chain computers customer printers global local win-to-date Now help computing

included retailer include several Competitive home of long-range in mobile broader a and functionality. their noise point our leading network item the to best-in-class XX,XXX Key best-in-class ecommerce use be of durability. a locationing, for improvement mobile seamless enterprise Over number win cancellation, this cases will computers quarters, leading stores. deploying associates differentiators next imaging, TCXX connectivity, and sale,

leading for as full compliance. inserted mobile instant and A into This inventory computers well also log store driving deploying group TC-XX collaboration solution software transportation increase Connect productivity, This will which their to improve Company retailer associated and mobile a logistics to as X,XXX times, our truck associate delivery the functionality regulatory associate desktop and have and also enables track will is Workforce communication. store service solution, Our drivers to American accuracy, cases. to is when cradles. deploying computers workstation as loading used North

patient we XX, Slide address Zebra automate highlight challenges. solutions to and using healthcare and digitize as providers journey labor the Turning how to are

in mobility highlights published and recently Study next clinical of increase healthcare expects to the XX% Our year. in Vision IT, that decision-makers spending

cases, order inventory XX,XXX including range than pharmacy, that Zebra recent X,XXX strategic exciting win nursing, some wins use sites wide patient selected labor are enable to recently shortages A XXX European value XX,XXX Hospitals care. They hospitals. bedside of across efficient approximately tools with have secured an Zebra's patient surgery, the real-time multi-year risk. and hospital more care. public scanners more by event unique our TCXX nurses and demonstrate software a nursing leading reduces a prioritize including worse recently takeaway placed We that of hospitals care. customer printers provide burden XXX our to proposition. and to administrative facing safety a made also and mobile management. of on solutions, provide healthcare U.S. the which provider wristbands, We tracking recognized computers to for at system patient allows staff, pandemic, puts rollout This of large the for Eastern a

Our and value of customer tracking costs proposition this includes also real-time medicine. of supplies, equipment, to

solution omni-channel which a patient need trends time growing closing, who's benefit the equipment by technology business, management. unnecessary healthcare and Bluetooth been track accelerated including for that replacement improves medical the Additionally, adoption, purchases. pandemic Healthcare relationship long-standing time and dedicated reduced and solution across utilization for encompass the more shopping GE our searching experience. equipment, utilizes the chain, This supply increase Zebra for digital also prevents desire trace Zebra's driving asset can is with has In care. to equipment Zebra's have beacon asset medical for Caregivers

and Our markets expansion are markets our core prospects new scale to vibrant bright. are

We profitable through long-term about supply significant ever are we transitory, That continue said, as challenges. growth navigating be industry-wide to excited prospects. our as chain steadily

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

Mike Steele

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

Operator

now question sample answer. [Operator momentarily begin this pause will we We Instructions] our time, the to and roster. will At

The first question today comes go ahead. please with from Stephens, Tommy Moll

Tommy Moll

my taking questions. for thanks and Morning,

Anders Gustafsson

morning. Good

Tommy Moll

and synergistic two in be acquisition, wanted if had mind. couple wondered buckets Antuit highlight your to on I really portfolio could in a I -- I which ways it start of with you might your Anders,

First, of terms dollars got you've just go-to-market you capabilities, more robust against it. more can in scale, robust R&D put

But or there? and us terms you've rather given adjacencies for you hardware customer augmented the the capabilities versus would able business? of a so what and software will I'm if portfolio have stand platform be to highlight -- you would in deliver portfolio what solution opportunities with what just to also fit, pure a deliver Antuit standalone other a as the got software what done So

Anders Gustafsson

our data to feeds. basically framework quick be. act anything call. for what points. and But better to much execution a weather, retail the around will from trends each synergistic their Enterprise customers improving companies. and give of happening insights offers this traditional this through And customers, in Antuit Asset try is that Analyze And take in we as Act demand consumer do to and about for sensing And determine But they this And is what's that first, can real-time. talked go analyze this those our solution this, The -- us models. the they you store much you Intelligence our in-store be enabling to to than sales with media. social Yeah. demand and lots very of I'll to products Vision. use very the say as around part our It well here. different some Sense-Analyze-Act augment solutions of real-world, our is sense our in it helps this very on information, in solution

COVID software --take take side you better where generate quicker able with like for Antuit's example our Reflexis where ' our other adjust environment. new Reflexis solution. very this Antuit's synergistic task on an actions and to If we're will insights the when algorithms it's And management particularly offerings, to happened,

of they replenish of So can back the of the to other something to move store -- the from front be chain. go supply parts store and or inventory

is broader as with as much solution, very with software So synergistically it works devices. our our well

better can And customers more from. AI this strategic with be and Antuit generate as we more solutions insights to So will solutions level we derive its set broader than to our Antuit have algorithms of analyze to our our more and mobile into insights computers Zebra position to executive customers put of and will people a that have customers, individually. access partner

this fits strategy. think well therefore, we our that with broader So very

Tommy Moll

Thank you.

Joachim Heel

Heel. other Joe One addition, this is

packaged executives customer that retail about you think targets. and mentioned goods. is merchandising you in the set, in It go-to-market If Antuit primarily

not to Of strong course, should very to way us scale offering the goods, for us benefit Antuit's a of conversely, give a in position the have so but ability us described will Antuit the into general, just that our that further packaged offerings segment retail is the And but we packaged expand to our give in goods. Anders offering. Antuit stronger a in leverage

Tommy Moll

the margin. offered follow-up headwinds I pivot you've freight again, wanted around trajectory And for the you That's both. helpful. Thank very and to the premium my to there. the appreciate we transparency

for following. we're looking So My at And $XX million QX. question the really is

in If week-to-week changing how the of is progressing basis. realization terms taken, the some on side, about pricing you day-to-day both it's got the or and also on cost you've of the think of dynamic presumably then you've fourth quarter actions a

better a quarter, If that how the than do real-time? that see is it outlook here you exit end think you for the where all you I about quarter versus up shaping think or above little the in rate you'll XX% once probably the gave, through full feel rolls things does like likely quarter it was average

Nathan Winters

to the Hi, start with just Tommy. quarter. fourth Maybe

here, -- so you X as points be prior component That to we'll we down is favorable mix price. the the well underlying And points as offset prices as offset freight but mentioned the over year, well from premium product raised service a pricing in XX%. above As improved X just mentioned, have by that's little margin you business the so as as margin. unit improvement slightly

would And through logistics to how something do and we the -- out. something say we impacts play at we'll are quarters XXXX. expect freight think first see and it's that from as But to of when the meaningful we're assess I benefit play continuing to moderate terms that's of So we're I'd a where a how transitory today. monitor managing I in start the see out day-to-day, week-to-week. half say from perspective, we

Tommy Moll

targeting are the correct? to the I'm input just Nathan, hearing really freight. than And of It you rather Am more I here. pricing sure actions the like make sounds product inflation you aspect tracking

Nathan Winters

correct. That's

this the We assess have out. expenses, transitory that's to not we'll to as prices raise something offset but plays continue freight premium

Tommy Moll

the insight Great. back. it I'll Appreciate and turn

Operator

ahead. Our next question from Berenberg, go with please Andrew Buscaglia comes

Andrew Buscaglia

supply Guys, just it question parts across most securing general, continue you in margins. issue How manage for customers industrial next companies seems broadly were is constraint around in that year. And your that on able and products. to of the will constraints then into

in I about the of things So on cost, are guess -- wondering you manage but to what of just doing you of parts. talked that side securitization is terms freight

Anders Gustafsson

Yeah. I'll the start here. higher level

partners year. customer -- now times And lead broader past feedback our you wrapped strong traditional we this can have with our we customers And able managing has we our always And the these sure we demand industry-wide double-digits fast so been and while customers if that partners, we've at our to prioritized on than I'd make growth. the And very from to competition. look commitments. not chain supply better rammed are been working have our challenges, over backdrop, very due based and needs say and to deliver meet year-over-year meeting

to news news get some is sort some environment say, for parts others, impacted looking highly than if or shortages to of and secure the on more has out -- than some get, we of dynamic industry parts, more day others. the get that devices more the our how Specifically some we're next a than semiconductor This other parts. we while good parts availability on pricing at and challenging we

to mitigate resiliency particular I'd us. assembly working on our less of much -- teams out plant. been these we to all volume across move to QX So with exceptional how for outbreaks. Asia job issues. between plants chain new of a instance, on Starting supply been it And built dependent very our we've a COVID in have based done any -- is Southeast in working well for environment very say dynamic by figure But so plans putting we're had more angles

we a So way to that trust leverage was us. great

We so 're get alternative our we get to on our to our that to we also worked that supply. appropriate of redesigning qualify of with engage make a with really team components as semiconductor working engineering part exposed parts suppliers share, sure hard our devices large having new limited not fair we are allocations to or and

ensure I that these how environment. possible by customer our expect But we're to play it's to dynamic with component our well it's a mid-XXXX said, improvement the doing But gradual conversations things as It's our meet the difficult on So all we based can needs here. as to on of going say exactly as we I'd predict suppliers, out. side.

Andrew Buscaglia

that's Yeah, helpful. Okay.

You who that right constraints line of stand well the of do fire these very managed has out in someone issue. as and you're

it On How thought would moderating a issue, seeing be like the that does thought in that to I -- in going. to demand you have your -- And side, the or any of bit sales I little much supply you sort related So is AIT that sound capabilities of the think keep constraint place are I that higher. demand?

Anders Gustafsson

and First, I'll the helping portfolio and our solutions, to automate operations. and is the digitize vibrant, adjacent that say opportunities and have. business products across we're core we innovation their we And expansion about the excited continue very entire very drive we're customers of

We we strength was Printing very in across of we had the delivered manufacturing, printers. mostly its tends particular solid in a for very deploy regions across specifically which -- to growth tabletop up Now solid printing. had portfolio. printing, most

printing and a Vietnam both that Southeast strong disproportionately saw component say Asia was but -- rate challenges it's through chain supply had from based shutdown also our on to and of of includes our But China. also fair had by assembly to that to channel. impacted COVID the we was We business smaller shift main to lot volume that almost in the issues, run plant

about the of So probably that very we printing. gained strong that little very regions was out we We believe Certainly all our printing. very and growth for gain launched to share printer, Temptime -- lot in AIT in done share. that segments bit better, still portfolio a quarter. across That's still in the we good quarter a Soho also in it continue QX, off a took but of we could've start. excited it supplies we And some here good that. and capacity had our to includes new was year-to-date But

Andrew Buscaglia

Anders. Thanks,

Operator

Our go Co, ahead. next Ricchiuti and from comes Needham with question Jim please

Jim Ricchiuti

the to and wondering the and you affecting characterize I'm morning. whether to their how themselves would by wondering elsewhere a bottlenecks Anders, if impacted logistics for go being you that I'm -- projects business. Good component are supply your going also impacted highlighted what being extent you projects customers business timelines constraints, challenges, wins could is large nice the when forward. chain these by are that's few

Anders Gustafsson

normal demand, is sure to our think so to have order we Heel, with demand as impact projects our they saw truly as -- with say have But run-rate we've see make run seen partners And particularly as what of our business customers, here. -- do continues with, has rates worked continue between satisfy customers what gone We strong any customers larger supply we and start the maybe our you versus versus And moderated, To Joe more business but seen any color mix the well. can clearly as chain issues. our in that larger what them to to customers, based bit I or we all we've back we growth historically really true here? have year-over-year. saw and line well a customers our from on roll-out large want additional be the risk we schedules customers are previously. hard in us our to need we But in what to a that what don't buys do understand would our our might what large think to channel ago. on customers large year more can

Joachim Heel

you what said. echo would I Yeah,

quarter. we this on even seen extraordinary large wins elsewhere. due And had We in businesses bottlenecks parts have have past not in to customers any some our delay

we double-digit including As know, but multiple as are extremely here some in projects had business the in there, large large somewhat and geographies. well, nearly the growth projects lumpy wins you nice

with pleased it. very we're So

Jim Ricchiuti

Got a costs And next you're relates wondering the I'm just how should of year we it. out over the looking beginning things half operating expectations, several normalize. on some components I first and the incurring. the be your thinking appreciate expense as colour freight about next it quarters. Only follow-up to of unusual your to levels because are to

have occur trade We and from the cost this back benefited mindful I'm quarters. just again, layered year shows to if wondering next in might presumably some of starting have you we need to temporary be over being savings several

Anders Gustafsson

Hi, Jim.

into I spend, think different we discretionary say no on other I'd we find mitigate of next trade the and offsets and it's expect peak shows expect efficiencies to go within usual, as the do in And than in we'll it's we we impact to we'll any year. fair managed to some some to as travel that and the variable year year, up. still incremental say costs incur. into minuses, that go pluses of next grow particularly despite that those But as

Jim Ricchiuti

back you. Thank jump it. I Got the will in queue.

Operator

from comes Marshall go Stanley. question Please with next Our Meta ahead. Morgan

Meta Marshall

also on QX, active Thanks. to customers labor ask still a of lot first in with shortage. a retail be we're but question maybe know seasonality. I a as wanted Great. your to just dealing I tend

further then And kind Clearly, So success healthcare. far And been has what of seeing this your you're QX. maybe perceptions second just question. the a of within in as highlighting any as seasonality go-to-market you you Are for your you you of success Thanks. continued that that to would think guys. the a partnerships or accelerate that area could explore traditional able use opportunity?

Anders Gustafsson

seasonality, Joe and slight here I'll has extra to some ask think and I'll in But but would quarter-over-quarter color similar this QX Meta, year seasonality QX. normally we first this seen, also. been to on you. Thank increase into what start provide then Heel I have a

So strong and very difference from That don't huge in Joachim meaningfully seasonality not demand has comment changed and broad-based. Obviously, perspective. has think second. the that that demand on that profile. certainly But helps a overall I a on the been

dedicated be the every you but On the healthcare, period sales have necessary a fastest-growing largely sales time. our expect traditional part said healthcare dedicated sales healthcare we're continue look organization, and up quarter not if -- has week, last we been years a of health And to on yeah, but and we over care partners. our first to leveraging would I we team vertical our longer fastest-growing several it we team a over built vertical our have within have

If manufacturing you send the to hospital, that's take them -- solutions expert different, somebody the who's in is and different. are language

So have also resellers, of that specialized, us we organization Joe? We more can. we number capability lose partners, as a go-to-market have as and large to and it have really regular make warrants specialized sure but and we both partners ISVs Joe? other to help robust

Joachim Heel

the I'm sorry, following. add you're lucky that respectively points this is Joe Heel. I would to those each of

have right? course, retailers with exist additional are further On shortages we those. advance, been working supply the us in They're seeing, ordering seen anticipate have of that in and the the seasonality, thing the is that one to chain

further plan we so how that So that them can means on. in to to advance and comply

Our that pulled of seasonality is their forward regard. in reflection

is go-to-market the in to healthcare resources. years. we Andrew as characterize go-to-market think Two building and of out use of one yes a investment we have areas routes that we said, those particular, we that terms the specialized over partners market other average our higher been have in there, and have In own last than things our few that I

that -- set to then of important more, electronic partner is with course second helped our We let's OEMs They're more have own therefore fragmented investments in have say, resources strong need determine those And also to And important in need segment, course. our made those partners, and very one for with And seat in health we those areas. of with, that learned participate some healthcare. customers in partnerships as a with would we important. the ISVs very in in form healthcare we customer the have that present formed we our us which that And well. this that's is -- present There is our being we alliances and set OEMs. and in that which are particular growth hospitals, together to records more non-traditional include partners, more are we've expand learned ISVs.

Anders Gustafsson

There's X more point in this.

We the The more as greater enabled to And requirements. robust get the greater mentioned Joe with us the their more if year. we pulling quarters we worked and next have it's is But pipeline we our been gives customers but us backlog pipeline constraints look I and retailers, chain would, enter now, they've backlog greater visibility than -- into particularly not better as have demand. into like have forward future, supply look -- look -- our into we visibility. we've robust, with normally visibility we are at

Meta Marshall

Great, thank you.

Operator

next question from Please ahead. JPMorgan. Chung with Paul go comes Our

Paul Chung

Hi, for my question. thanks taking

So f to there, margin the profile we we mentioned some these margins, a see half a continues follow-up of margins. maybe mid that should costs, temporary on mix normalized bit? of freight X can as costs software expect your product have maybe maybe in further accelerate think we in you you more fade about costs are And expansion when second EBITDA just 'XX some this come that follow-up? but back, XXs range, is a percent

Anders Gustafsson

Yeah, Paul.

our at have back look you a driving profitable growth. if driving, we of record track track think I of record

and XX% EBITDA can we where We cost higher. will the increase. We basis go from XXXX, XXX points that's transitory around margin the do year believe exit a despite improvement exited

entering done. we're new that be gross scaling achieve business, team year, margins the with beyond continuing productivity we the that. markets that vision this improve particularly abates. to margins have industrial along transitory whether many traditionally fixed EBITDA the mentioned the or software to through expect We higher We as and We're markets. machine richer operational have the margin, levers efficiencies always one, to which do driving freight margin Again, -- we've across

Paul Chung

software adaptive Reflexis, leverage on are continue what and Thanks. free as much the forward mix, levels looking you good. expansion good then Antuit, higher-margin those are well. And portfolio the then Where expand priority for software expect is And flow to we mentioned your place. vision in in comfortable driving cash moving to as level well. so quarter flexibility continue. Fetch, Inorganic your a quite really pretty is you paid Debt with? you

going. an you on is update that provide how business If could

Anders Gustafsson

I'll M&A for us. side start M&A priority this. on the continues be to a of

opportunities. for EEI we're opportunities targeting to digitizing and do Antuit, the select the And extract easily supply high-growth see recent take. to them in strategy advance advance workflows balance set. -- We on do about would part M&A useful provide us our truly We're pleased of We more to acquisitions industrial vision are a well. said, accelerate outlook have Vision that's broadly. our customers way can industrial at QX it they M&A as acquired to fixed look our Vision change quite you bolt-on sheet as as and we Asset Adap-division, see software or in solutions for some business strong Adaptive as in that excited Enterprise able vision the digital fixed well M&A Vision. our support acquisitions Intelligence that scanning Then acquisitions their they solution scanning images and and as our and certainly design workflows. in We automating and that more from vector as Fetch, be that our help we growth. solutions machine back with their information for And a We of machine to very

our it's -- is it that implement and so vision sure solutions helps our machine to an to solution And an than our easier competitors. integral make are part ease of

one value of propositions. it's So our

market. the that excited far And very so we're about entry into overall

Paul Chung

you. Thank

Operator

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

Brian Drab

wondering, like where tough good it's and that a markets while really markets where any impact where incremental momentum such end by see just the of not we'll really end the delayed growth the maybe pandemic With in it end comp as get to a Anders, you a XXXX end Hey, I'm sales, yet pandemic, healthcare has market in to been going, do rental there stimulated market see a in markets car any COVID related great have relates or the that 'XX? going and for be to growth are where sales markets, of drive to took morning. number headwind it's

Anders Gustafsson

How The all themes priority efficiency solutions. over line to all our cross improve business The how type to number customers' our enterprises across and that's say pandemic geographies. front from reduced drive our to a is markets, worker to high really I'd secular to markets businesses and and has digitize of around supporting implement automate and trends of helping those the friction end workflows. accelerated

but So did hit is would be broad-based healthcare This admit early healthcare I pretty that a they only -- was, it picture. any -- of shutdown. wouldn't XXXX rebounded environment during largely traditional this. there's COVID that and levels. taking any the I acute, provider, care truly don't it from say now this for or really and was COVID, if by see wasn't -- they think surpassing care We on And that market has can't think we're acute of Was hampered hard. their business patients lagging became meaningful

Brian Drab

any and I Anders, asked I just question you're whereas at don't as in, as hasn't you incremental about now forward. kick where can you right look wanted and excited do the market okay, the guess, interject end I it to. to say, going clearly I say see I growth But to-date end that's think starting markets where

Joachim Heel

would something? say to me like Anders, you

Anders Gustafsson

provide maybe was ideas. of certainly to for will our can -- is of we Hospitality on then that within there coming recovering for I'll areas comments nicely. And you Yeah, Joe and and you of one -- that will we hospitality see other largely a that's a hospitality. other have some part just I shutdown couple and in see market I Joe, be pipeline and kick extra can is do this that Heel, number COVID segment and take that starting highlight some back most opportunities are color. see the just think

Joachim Heel

of not Yes. expect. mention perhaps might was X to you I that one. going X is Hospitality

Another one longer that manufacturing, has really been where benefits to continue curve is nicely. recovering which a has expect we

But there's bit, they one that. to there. seeing for expect in not might been And You that sidelines a that continue, been this that third they're the of that doing market has are many now saw the And Android. of but be already the you we quarter, recovered think on that much has yet pandemic, not from have customers recovery to the Japanese a to during would a be Japan particular, the migrated pandemic. Japan.

that opportunity is extending there into year. we strongly next market So is a believe the there

Brian Drab

of And is what percentage revenue in Japan roughly today?

Anders Gustafsson

stream it's It's upside us. part but of a small a revenue today, for opportunity nice our

Joachim Heel

Right.

Brian Drab

and of from shy that size revenue do that that know in the then but down just 'd software. when and software growth percentage historically clarity I or making Any Where you the by are there's are the in total that And since comment from give in X% an of aided many margins you you of being higher terms comments or by acquisitions road. being last software. margin give you're -- just could Okay. question if curious Are sales the update away don't of helpful. you business? been XX% the to saying able us on you quantification aided the envision margin so be software software, being or overall software on any higher on

Anders Gustafsson

of the perspective. we percentage don't a a organic out mix. business right of expect it's and business, at haven't software, -- from growth. a except again have and date we turned we set particularly to But year to in of to a of priority of an sales core look continue by it's it M&A what get small, and to have than for our suite driver Obviously want terms -- an the we build terms into or the faster in offerings we a of stated of haven't it's over of aspiration organically you the mid single-digit the grow portfolio SaaS in as target If percent the we a terms what's time, still Company to the area of business

Brian Drab

my for Thanks question. taking

Operator

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

Keith Housum

Good morning, on quarter. a and congratulations guys, good

to challenges to or not if Is and the and a chain still that peaking supply chain we're once revisit to you it? way there are sure quite a want slow the now have on yet supply peaked Just work again. feeling perhaps it through challenges recovery quite you're

Anders Gustafsson

of parts challenges different supply chain are here. There

about we've the talked semiconductor bit Now, a issues. little

that also side, more -- would to have I on would airfreight. I I ocean think into We and would and that freight freight issues get that XXXX. half the of first the we logistics as we quicker expect around moderate expect recovery

was that we're improvement, not will this So it I area capacity think. be goes at be gradual from whatever is to probably that I COVID. there peak it a to constraints, but today prior It it and binary a rates think what in will improvement

I On as think we we the think it Does to -- expect worse, any earlier, expect but we mentioned gradual help? mid-XXXX. component I a get wouldn't again, I side, that would by improvements

Keith Housum

playing here resolved, then it the And with the it does. issue. primarily a you does It but is like X got different issues chips whack-a-mole, Great. you and and are or to side, maybe seem issue popping like that component you've up is go

Anders Gustafsson

it semiconductor side, think largely move it's around. on but the does I

a secure steps. on up was backing -- we So bit

that So next then of part, on the part other a before higher. in some were -- solving part. certain we have more. But even much number that's would one pops And so we we today on normal even this, quarter But is COVID, parts up. to when allocation started, parts one before define we for work need every or week that

of But well it's been a so suppliers it them complex sure frequency we've the closely what and we our and do process allocate that think that the agreements, parts let or proper work signed and sure lead much to make make So far. so I try supply we allocation -- we but semiconductor longer managing greater. our they to that true times on are the with we've are requirements parts know agreements, number is so a but long-term very when get and to price forth consideration very

Keith Housum

least part a software, over a got to to appreciate for now year. Great. it. you've over moving the And at then I for flex

going force of these and a direct forward? do terms the a your primarily you same things how direct then the and is sales different force? does have a as of some you still together how envision -- deal software In is regular Antuit And go-to-market approach or sales, to as it sales it the

Anders Gustafsson

But teams some a For provide exchange broader broader can our sales dedicated sides set Heel or we our -- within -- Joe here have set Reflexis then and portfolio, go-to-market start up I'll software -- also. organization. software

the do qualify selling to lot start to then in some experts our be traditional the a of you of our and and can management account more to So software technical of conversation, teams think would part account the able degree, bring activities.

we So we dedicated is of knowledge or -- have the and more and with sure part insights. of but a into make -- right level organization the that depth

but expertise portfolio direct resellers are our here. interested we as our we initially we able the of system in largely We to we a represent dedication also the type sure Antuit and because us to make somewhat focus us account services. Antuit, sales accounts and the portfolio expanding team here teams keeping size, broader we are well again, today, integrators as to are we number Antuit access who specifically, participate doing be working with side. But to software go-to-market now, want and in with leveraging in keep to separate there's the of have partner that. are this doing And other of working with predict implementation And Joe.

Joachim Heel

well. nothing you said think I have it to I add.

Anders Gustafsson

Okay.

Keith Housum

Great.

Anders Gustafsson

good. It's

Keith Housum

Appreciate Thanks, guys. it. Great.

Operator

Our comes Karas Please go from next UBS. ahead. with Damian question

Damian Karas

morning, Good guys. Hey.

Anders Gustafsson

Morning.

Nathan Winters

Morning.

Damian Karas

a I think ground. of you've covered lot

just is this elaborate did that seeing you up catching on could outside particular To computing are just of or in driving You end some markets, computing, particular are highlight in most Europe? or extent, that's in strength there mobile what a that. that matter notably driving mobile any Maybe I Europe projects think customers, Europe. strength you're

Anders Gustafsson

far expect Europe. exceed overall, transformation as customers to revenue chain to But been very and and about some large segments. accounts. regions extra smaller year. drive And just exceed growth our revenues as are the but from We this this, of as continue great growth all able again Joe growth can And to deliver say our strategic end seen start product is as we've guidance to the been able digital on us talked moderator also we our our double-digit both a good customers as strategies, on a across which we've in And that to industry. QX range. we're continued strong aggressively a with think as still the well each which a pleased with our see enterprise share pipeline pursuing provides of demand I'd colors being then QX strong I'll performance, our our the issues healthy our basically expectations first backlog supply entered causing we in take have visibility I we on high we And based we've clearly add and XXXX. into are to I

also Specifically saw for driven think was the Europe, were across vertical and in strength quarter strong Europe comments? say impacted was computing transportation and business I and fantastic printing think product nearly for us. a growth we further chains. Joe, strength mobile in by of supply regions some and logistics. From a attractive was while I very EMEA services -- we particular strong our And perspective, was add retail obviously more -- verticals any all particularly services saw with all wins the that very sub large by postal

Joachim Heel

supply bit available a was have. strength to that us the Yes. of I Europe would say we an that's that trying get the mix perhaps optimal the customers of in artifact to little of

par. than much If strength you Europe more will exactly one and America North on the over you is look quarter, pretty see that

say. one-quarter a we're seeing equal was over strength X artifact quarters here. both So of in This X more or I'd

Damian Karas

could that quarter I on on expect update (ph) out? ITC case would you these on us IBRA really How the last an litigation. play investors. just this. maybe helpful. that's Understood, the guess -- I have give you actions against we've the headlines do pending And taken to since all matters and And Honeywell's some seen questions

Anders Gustafsson

I'd have to And much defend the to me have of competitions that we portfolio And intellectual taking as lead laser-focused industry. we our we to of remind plan commenting share we ongoing like I'd the extending and a property will lot -- the remain clearly on in our not broadest beat our marketplace. deepest First, it's of and everybody to a on the like so here. positions of also have a market and But litigation, hard as color, vigorously policy provide for color we here.

Damian Karas

Okay, guys. lot great. a Appreciate it. Thanks

Anders Gustafsson

Thank you.

Operator

Mason comes last -- question well, from Our ahead. Please question Baird. from comes with next Rob our go

Rob Mason

backlog morning, large curious if might maybe was I and just growth run quarter. both deal the as well between sounds you well, as you Good on that but quarter ground if of backlog job comment weighted -- channel strong, each might waited how covered. curious how though your -- out. be has then as by was A business, how both I mentioned delineate been could the was strong could like were and just nice -- well. have both the you rate lot business It that you I those one And channels. on sides, during

Anders Gustafsson

-- you take Yeah, to Joe? the this? have I'll on want lead do Joe,

Joachim Heel

I sure. can like. Yeah, the take you if lead

in past. quarter, direct our the mix the past So was than channel in slightly higher

channel be So had percentage we the than over high as in goes the channel remains more bit But our that in is so little continues a our our business strong. channel to very extremely And business. backlog our of than to rather range. direct strategy XX% centricity, -- our our business

and backlog building hear. we for you entered a current into we've quarter, as strong already the we're to be quarters, future not As again might backlog very had surprised

Rob Mason

distinguish deal a draw you large favor or the channel? the Does that backlog Can versus distinction?

Joachim Heel

yes. Generally,

Rob Mason

year. as last Same

Joachim Heel

was backlog this Generally, Yes. productive. more

Rob Mason

One that wins were that or commented that nice particular, quarter. account you a a number I'm takeaway? of U.S. incumbent improvement the And competitive just you in curious, the a that during Okay. was -- win. the was home then in on

Joachim Heel

were case, the we incumbent. In this

Anders Gustafsson

a were Android implementation. an refresh incumbent of We earlier the and there was

Rob Mason

question legacy with curious, on just -- larger those is headed are determination to And a it's more I That's refreshes curious that make so, stronger lifespan if now the a can I'm your installs? -- the just Android if I'm life your you starting Android maybe the devices see U.S. guess then versus one fairing recall broadly around early was devices. you home the of of how was Yeah. where win maybe with large in in headed And think had retailer I -- I you improvement I or because

Anders Gustafsson

Yeah.

adopters higher. now platform innovation we definitely a customers of Android with Android the little refreshing faster that second-generation Microsoft. than it of level is our is of early cycle on are number were to a upgrading devices was refresh bit So Android. And seeing or The the for

think Android applications processor versions more and and And combined speed run our frequent more can of require you putting they devices, is new the an So faster coming quite that to more on with memory, also properly. example. number memory the to out tend more that of as customers so drives

to So that number upgrade what we and what customers our they pace at with refresh there's are saw want -- platforms. faster a the things a older than of causing portfolio Microsoft to

Rob Mason

of to -- that there mentioned and curious just going of broader order magnitude to? you could if you customer. as well, And that's their set a you could speak user is I'm an

Anders Gustafsson

back higher. aspiration our for say, of deeper customers, much, every connected and it's get Vision would talked from we when into particularly virtually estimate X/X Yes, to of have the over we now store that talk XX% to markets, our about penetration Study, digitally think And our retail mobile a of vertical to but is a access definitely I today associates certainly and next device. it all to devices few years in did expectation retail value have retail years. much a there be where healthcare. up they bring about similarly, I we operations. priority, how end customers' to that having roughly was couple an is a And our to much XX% be worker healthcare, of in The And aware

Rob Mason

taking for the Thanks Great. questions.

Operator

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

Anders Gustafsson

And also extraordinary our just constrained partners thank warm of on employees, like our and like recover supply a to customer demand everyone. as maximizing wish safety have customers business, to And you day, Thank we wrap profit top focused and in to are in up, the would while Antuit unprecedented employees to growth be I to partners, continues serve the to welcome a and their to the the for We efforts they would drive team. and or environment. a from priority great pandemic. our health

Operator

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

You may disconnect. Goodbye. now

Zebra Technologies (ZBRA) 2 Nov 212021 Q3 Earnings call transcript