ZBRA - Earnings call transcript Q2 2022 | Zebra Technologies Corporation

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Operator

Good day, and welcome to the Second Quarter 2022 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

year. welcome presentation and investors.zebra.com second conference least quarter will Good being to simulcast This X at for is archived at on call. be morning there Zebra’s our and website

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

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

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

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

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

Anders Gustafsson

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

solid quarter challenging second environment. results delivered team a Our in macro

Latin growth from QX. realized a Asia Pacific all workflows. nicely America realized major decline strong which including from We non-GAAP nearly North earnings prior the increase a realized demand double-digit EMEA, in across we of challenge in XXX where margin sales X% we $X.XX, point XX.X%, For our strong recovered sales growth of for Customer year. growth We on a per America basis and diluted adjusted quarter, and solutions remains offerings printing and a digitize the automate prior comparisons. of slight share and decrease, X% and EBITDA in

corporate Our markets and and the e-commerce average. health than faster manufacturing, end care, retail each grew

navigated the purchase actions teams enabled more certain particularly our Our COVID long-term generate us secure supply, products to China for and agreements lockdowns printers. redesign successfully to and

We range scaled our that to more our to to now invest while performance second guidance growth was quarter initiatives. prudently on our will over are our in our drive to we continuing expenses supply profitability, Overall, revised to discuss adjusted and our of challenges. expectations, call high-end turn near QX well also team exceeded executed EPS operating outlook. detail pleased sales efforts our review and mitigate XXXX Nathan chain that, With the in results our as financial the I

Nathan Winters

Anders. Thank you,

we including the as on an QX, X.X%. acquisitions, organic start adjusted impact basis P&L greater of than increased had supply of and sales a the Let's certain products X. net on with In Slide and X.X%, we currency secured anticipated.

mobile and X.X% Visibility growth as strong in & strong solutions in demand. printing realized growth levels & including critical Intelligence tablets with QX. ruggedized by increased RFID segment, sales capture printing to as record and supplies Asset data Enterprise Tracking Our of solutions. secured we computing Mobility solid recovery driven in increased components satisfy customer in as better X.X%, segment We both a particularly well

the regions. growth impact growth attractive driven strong particularly XX%, our exiting solid strong drive and also inclusive growth We of four rates March. in and offerings. attached of We mobile EMEA computing software in continue to and increased three of sales Russia services software strong with service printing, across in realized by

growth decreased in Pacific XX% to grew America North in And Asia particular increased XX% sales strength America supply exceptional sales with sales due India. Latin X% in constraints. with Mexico.

due XX margin higher improved basis mobile prior margin. of particularly We declined offset in higher operating points. to year. by supply gross period, of premium recovery and QX year Adjusted import and tariff to Adjusted the volumes percent XX% China as in strong last sales a service costs partially software chain points sales computing cycled XXX also basis expenses

count Second prior year one-time the taxes. share charge, X.X% and per share quarter a point quarterly eight a quarter, agreement Note, be lower margin was non-GAAP diluted XXX XX.X%, decrease increase will which $X.XX, resulting $XXX out a EBITDA the held over paid basis into settlement adjusted in year-over-year that earnings we entered period. installments. from by in Non-GAAP lower was million a

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

which use our the of to growing shifted available flow, our and $XX was $XXX free incentive as align million working borrowing payments lower balance China From the first optimize to higher mentioned. our XXXX, last of a XXXX settlement capacity lockdowns; our half the significantly the capital given exceptional generated as primarily period to quarterly to the with sales million payment announced, in business due previously related capital later structure. we initial than cash have we year due to For of higher compensation a volume performance; just I increased installment the to perspective, sheet

quarter announced provides facility We million including $XXX of ample inorganic from billion flexibility X, us adjusted at and to sequentially a improved organic for debt the peak and debt from recent X.Xx that ratio. share costs have well leverage incremental highlight a chain Imaging, share perspective acquisition authorization. we supply through ended our Matrox EBITDA premium investment, repurchases repurchases net On comfortable credit QX, the levels. new as $X as made in recently and we leverage Our Slide

our product long-term the enabled working successfully market. spot Our components, us for reduce has which negotiating purchases team and to redesigns, has in including agreements supply critical been avenues all

continue $XX of incremental in costs a neutral to $XX gross improvement million what compared had supply chain million, environment, as to In impact we steady closely chain we million pre-pandemic In approximately seeing QX which year-over-year total, been the which $XX net margin a anticipated expected have of are in is to was impact supply We our QX prior baseline, had pricing. combined and we which incurred the items monitor. in QX, favorable year-on-year outlook. premium to be of transitory unfavorable

turn to now pipeline a our sales second half year strong by ended healthy demand We the solutions. quarter of with broad Let's for outlook. supported backlog based the and our

improvement output, experiencing We steady sales however, availability a in growth our of be lead have and manufacturing extended parts. times been continues by certain to component limited

also to has growth shipments by X organic to points stopping Our been in approximately X impacted Russia March. after

both sales due foreign also products reduce X% expedited to a our negative translation. We're our growth assuming profitability. and businesses QX, shift printer to we a impact point costs, recently actions point currency improve shipments, which impact freight X a from limiting For to to to and from ocean are range growth of X% additive and air acquired QX will X

prior As to an XX%, Non-GAAP global be both a the increase are from of $X.XX. to which Euros. in diluted and is denominated adjusted in our prior approximately XX% approximately sales We quarter. is anticipate range EPS reminder, of margin to $X.XX EBITDA year QX be expected

For are inclusive reaffirming outlook year with the XXXX, Russia. of X% between of full a our exiting we range impact sales X% the growth and

margins X. basis margin XX%, now adjusted from negative impact approximately translation. and that, additive XXX of are point advancing Please XXX of Anders the assuming reference primarily anticipate prudently settlement assumptions foreign call also We options to I impact we the EBITDA and businesses are how from cash currency acquired basis the recently to With vision. year We point the of shown Intelligence full which we will We a our free XXXX to shift Asset least the discuss to cost the second dollar. guide the turn investments. year, Slide expect are to of $XXX due improve related expected operating freight our to continue half payments. for prior manage reduced end have additional primarily be to year back as and on now due significantly low our Enterprise $XXX expenses in at approximately Profit lower to stronger modeling we U.S million flow million

Anders Gustafsson

Thank you, Nathan.

of monitor macro as we are entering in volatile second position half year the of We strength the closely global a environment. the

by workflows since operational with transforming impacts. how sustainable, track and the are investments the mitigate cash growth. chain line business solutions, supply automate of that across By leading drive bold front a actions proven digitize the challenges industry seeing our while magnified I portfolio services. customers Slide are leveraging we to their profitability the have we XX of our We have preserving can teams illustrates complex any been and record strong pandemic. am in by demand our flow and continued the and protecting taking software address encouraged Zebra's profitable our environment, products, of effectively business which

we with our we and As with our elevated our compelling expanded industry have in solutions, portfolio have our strategic position extended customers. lead

to serve always engage customers who our the with relationships drive globe our And augment capabilities, us partners across we plus excited Our partners trusted enabling worldwide. XX,XXX to with value. are more

on which challenges new excited about are We focuses Zebra other and solving Accenture, global complex alliance our operational in markets strategic solutions. with end retail with

and strategies benefits other be productivity, We that service by advance can to are our of throughout drive inventory workflows among accuracy enterprise. variety and levels, to the automating a collaborating customer realized customers digitizing

supplied and of demands RFID stores X,XXX strive the with supermarket using associates XX, ensure tablets global loaded major placement real Slide a meet and to RFID to increasing trailers with help productivity more cases, key time of across a around and store the Europe, This and as multiyear efficient phones. our In covering U.S several faster highlight vehicle the service another warehouse, lines use drive of chain expects this to displacing Zebra before as package end in and across recent Zebra have pickup goal. the optimize computers use established double consumers. accurate across product moving front would from trailers RFID their turning on longstanding most warehouses, each years execution its X,XXX added and expanding cell than solutions its customer sites. its than improved a in workflows and are ago, its into as solutions, results end-to-end zero technology to selected augment truck win, the use wrong towards mobile it curbside scanners better had Zebras multiple automate company Several and enterprise recent relationship win rollout cases, exceptional flagging food also large expansion and ensuring business major I customer addressed than printers and subsequently yard, real additional cases. store A deep integral the Zebra other This of throughout in packages. location. Now fleet click additional other process. to trust scanners partner the Zebra operator A time, to digitize back in like cases, more wins waste they trucks, workflows. challenges. through the customer is availability, transportation computers Zebra markets. assist leaves relationship implemented for consumer computers to including loading to product a the its penetration of packages and mobile convenience of checking mobile its in many our they businesses with benefits our in and inventory printers, technology RFP management logistics more to more Zebra over using use collect has Zebra The merchandising price

operating partner with very care autonomous in early at solutions, of ring vision Additionally, of trade use mobile robots. June, pick warehouse to recent pleased the purchase their the machine to automated of the cases expansion scanners our use ensure fixed the for them staff be and making warehouse We and wrist in a U.S Matrox collaborated pack product and Detroit. join to most progress their applications health efficiency distributor their we customer warehouse equipping system. close in their significant scanning, industrial e-supporting Imaging improve also and [ph] and show associates. We're expanded with to in Android markets, the Zebra Zebra on

deploying of to add We business. comprehensive Rakuten. Imaging help key been vision us win third-party And an specialized machine partners are combined excited scale also Robot automate, to another our many our recent solution, integrated have with we we at Mobile are about solutions, Fetch logistics leading channel which Maersk, Autonomous Matrox excited portfolio logistics company. highlighted At Fulfillment provider with along we

delivery, from and for the very chain AMR solutions waste actions strong automate supply have to and their Fetch begin In removal. excited us The need our challenges chain be as spare material to the volatile cases enterprises solutions. wide digitize conveyance labor [ph] for we deficit closing, and have our we escalated about growth automotive care our traction use continue and challenges conveyance Additionally, macro parts supply recover monitor operations and prospects movement supply to global environment. with to enabled [ph] in health continues industry

tailored solutions broadest We have help strategies. their portfolio our customers the of to advance

will hand call back I Mike. Now over to the

Mike Steele

Anders. Thanks,

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

Operator

[Operator Moll go Tommy Instructions] of from Our first Stephens. question ahead. is Please

Tommy Moll

Good morning, and questions. taking you for thank my

Anders Gustafsson

morning. Good

Nathan Winters

morning. Good

Tommy Moll

discussion Anders, markets. I omni-channel of wanted the to with start a e-commerce end and

we there volumes still. be seem Your the there's mixed from from strong can underlying tell same been key what At to the some some pretty players there. time, headlines of

feel still confirm can end guidance tell in those you business or see on market? seeing second the you anything in it Thank Does customers you've from growing Are you. markets you terms do about fundamentals? Does half? deteriorate what to anecdotally, that curious, can of just the healthy? extent that end you provided, across that us I'm pace the grow? the of The continue it So the

Anders Gustafsson

comparisons. average do strong and their much how Yes, here. to which demand future -- transform of in that workflows customer current bit continue we try give Retail which give sense digitize and which QX to that's customers very technology and grew still of our momentum to see We just also can necessary solutions increased faster and say the that our the vertical than the I strong we driving first, -- and here. QX I'll resources driving to I start bit look accelerate prior But as businesses. is our corporate in omni-channel workers of trends is try more at automate straining to frontline a a e-commerce retailers performance for continues that then markets. implementations, all investments in little I'll little -- and across as the for color continue you saw empower are automation to to on in and how

to environment, their remain this ahead to us. But particularly to the you We've in associated for base, along verticals. there I a and our publicly equip their a strong. execute implementing visibility technology to continue the say -- although use And retailers playing are their retail and customers pickup, If to accuracy several line their those look about that like volatility transformation. like There our as labor helps strategic talked to have more essential in on retail who as investments -- optimization in positioning And workflow in recently delivery are where pipelines I drive maintain with and see catch Microsoft challenging within go-to-market install buyer software the of most reduce need to is elevate also at And helps environment, in visions which investments diversified warehouse up retailers store, intend some and require a constrained they investments solutions investment try with or on as new computers, as expanding use cases actual the and are partnerships in very to each mobile solutions. customers they vertical quite strategies. we cases a would expanded productivity, have also more attractive service with very are also customer that ours, customer improve inventory well levels. with of other their Google that few cycle, and e-commerce we their a certainly are say own refresh productivity curves.

that say portfolio that base. to have, overly some of it's year pulling we testament it's I with healthy proceeding But that not customer But feels and customers value the we more customer this healthily -- of and I that that, any most have a their we the would I'd continue a allows noteworthy with us a be is one plans. grow hope they're that as this investing on to back of us bit. there large a dependent these to normal despite are for like So helps. customers also are and our customer. And diversified that cyclicality say, diversified some

Tommy Moll

It does. wanted a pivot you the gave. you. Thank outlook to margin as follow-up, I to that And

basis. So this is on an adjusted EBITDA

quarter. XX% the quarter, fourth level. And just then for XX% second a the north Guidance at quarter for full well number look you reported is, roughly in You've third implied the at the again based XX%. on if it's year, what's of

by chain expect margin drivers the supply might QX curious a Or I'm it just your you So outlook. the chain expenses to just what would supply from better? improvement else? something be assuming, implied to Thank is it price you. Is be. there -- there is elevated QX here incremental is get And

Anders Gustafsson

but chain nearly quarter offset X in -- supply is improvement neutral the portfolio, the and from Yes, first offset XX%, the of I'd mix. last points some say year. from improvement by strong at you increase our chain you impact executed up And year-on-year, months, year-on-year. when seeing as from gross as last FX QX you the points just FX, deal you that, across if QX second well a And forecasting it's quarter, -- above overall Sequentially pricing the in we're dig underlying margin but by X unfavorable taking as from X get improvement solid what that's look have Tommy, it's the bps traction XX parity. we're into if costs benefits, supply slightly flat premium volume where leverage, guide look premium that's over costs, the the slightly as we've of over from

that's QX to dynamic. of QX your kind So

see two improvement we overall are by here driven quarter One increase supply reduce chain the actions in dynamics. at quarter, continued flat benefit If in print third you the you'll a taking the as premium to in relatively sequentially profile. revenue really get on you be of ocean freight, as OpEx look that in in the the quarter, for as fourth costs, rate air increased moving terms is volume well nice revenue fourth -- leverage would

being other almost the is bit So leverage the overall position. driver half continued a cost with half -- in volume improvement

Operator

Andrew The Please next question ahead. of is Buscaglia Berenberg. go from

Andrew Buscaglia

guys. morning, good Hey,

Anders Gustafsson

Good morning.

Andrew Buscaglia

to that question. margin I -- So like on

saw the higher and the in Just costs what you quarter of throughout costs. supply freight wondering terms chain

relative really of quarter $XXX it things characterize that Your would your imply to hadn't expectations? how guidance would went how or million you seems the changed,

Anders Gustafsson

Yes.

chain supply think the of from sequential both profile. cost first XX% X% quarter, So in a higher in on revenue the profile reduction the we I saw second first costs the quarter a

So I that think, how had our second in guidance we quarter. relative played sequentially, we're we improvement the the expected seeing out for and anticipated things

those If the a on trend the relatively as stated ship get cost the noted And fourth the the they down first the to ocean we some expect were second hold continue quarter. prices. as the I a half market printer cost get that the the of of year. components you to purchases air. ocean And The fraction larger on to before, we the at of driver able expect the benefit to primary filling throughout QX. it to increased elevated up of first on benefit to that we managing we to improve continuing costs again, look held we And the pipeline in printers start versus quarter the flat to -- as and in spot was the in was kilo, some output shipping critical really And as of we real those our second it's improvement And throughout the the what we at is key through from from now driver that of per half that throughout quarter. March saw elevated the were second reduce year. to

Andrew Buscaglia

Yes.

Okay.

Okay, question on the great. AIT And segment. a

lag you as And that are really broadly, pre-financial growth? the there But So segment seeing to if and Are surprised that going me estimates great if [indiscernible] the it, pandemic slowing that I segment we crisis. positively in GDP you where understand a that margin might deteriorate -- here and is follows that back forward? performance. GDP foresee what do really look

Anders Gustafsson

Well, solutions say major nice product product workflows. drive labor across helping today automate all our we to inflationary That's across our our and and portfolio. first, continue all categories shortages talk critical to as much digitize our about are drove they and that, innovation I'd more are QX that fighting to we the And pressure. customers customers all the growth categories that here in -- are

And had print more here, a For had than strong see ever more shipping from very historically. manufactured to continue challenging done we've in we recover and and more we backlog supply QX. record normal return to QX printers We specifically quarter did QX and and also ocean nice or revenues we do we growth QX, recovery to delinquent any the the in expect backlog on QX. levels and sold to in start situation in

-- long As to a the we we period steadily maybe printing has over faster for of able last a many be gaining years, an attractive have do share by going forward over I see see And that growth no And points, printers percentage continue couple grown we reason having to -- profile. has shouldn't to also. GDP time. continue than at been of why least we’ve

we drive. give good And and I'll here. some the about also So our to the should growth portfolio positioning and able perspectives feel Joe, be to I printing ask

Joe Heel

market be for important, And would expanding of cases in beyond one use towards examples. use that. another SOHO I is pure expansion, a have we might be case also point entry can evidence into segment our continue you to a be us beyond we would the I'll track for that increasingly a expansion, becoming and grow continue and One expand GDP example, help areas to trace pharmaceuticals, would Yes. GDP. growth. in printer two can example, where Andrew, those in opportunities give

in opportunities we think have GDP. I to volatilities a weather So

Operator

ahead. from of Please go Morgan question next is The Stanley. Erik Lapinski

Erik Lapinski

regions detail to growth regional in quarter. like saw is Hi, the little on understand particularly team. quarter. International different growth Thanks on for drivers some just investment varying you taking question, strong ask my different the a I'd and of more of for their phases cycle. are bit and in the congrats

seeing Are growth driving the in similar in trends certain driving quarter? Pacific EMEA, it's you that there or strength saw region are a vertical whether on So Asia basis? in the you verticals each

Anders Gustafsson

that common there's a and themes across all say and if and I'd across all trends strong look workflows, us is the all transformation, around for certainly verticals. driver across you some digital automate at or regions meeting digitizing

So services wins. global we considering Russia a retail I’d impact that revenues strong very from had single-digit We European profiles a the performance forth. you in has shipments in or there's a Europe, say each very lot as which particularly also driving number different mobile verticals of I'd a at noteworthy suspending if particularly commonality, what's slightly in we strong, product as or EMEA of what far on that region perspective. EMEA, say March. saw so are was attractive great low strongest, were But was secured computers and And quarter, look percent from and print, to

if Asia you of Pac, shutdown particularly for the of in I'd say the good also strong part think a quarter. very performance, China

were actually say we across hardware had that solid very seeing the computing wins scanning. based second a had And China, year. last in impact prior and Joe, of data was The though digits, we strong very the for we constraints down were see Now recovered saw really move very double-digit service impacted some revenues. We you America chain recycled weeks. over X strong equity. very biggest comparisons, and just nice in strong see our attractive across India year And some into supply with single as low year. I we China caption particularly is half quite We so was and in we're to would nicely growth very timing. strong in were did to know, demand. saw maybe And growth here also lockdown on we recovery now mobile did record strong X But in add? all anything which growth and broad We USPS don’t and our verticals, rate North we core even and results have strength for some by pleased or allocations, America, printing business. run North QX in on

Joe Heel

would on we supply have the is I the distribution we emphasize based that demand QX a market. of shortest not path get underlying in but that in reflective only to of more reflective saw times that regional much supply Yes, of allocated of growth how into the situation, shortage we

Erik Lapinski

thinking share maybe in any repurchases you're allocating to M&A or the capital quarter similar bit were Got it. on the cash Thanks, cash about Was priorities -- follow-up. there Or actually has on drag that's Joe. successful. I just higher-than-expected. allocation, quarter settlement, modest been a think was to about how over But last a think going That could Honeywell also if But the be and little we my in normal? as change ask maybe flow? obviously, capital should you've your flow. we

Anders Gustafsson

into as way both the have remain inorganic, opportunities with those nice positions We a us enter levels will as to we comfortable that and in think gives second lot a To in priorities we we debt return of flexibility the of next both year. normal, were cash overall similar flexible priorities to and repurchases and share the to shareholders. investment business continue exciting organic, capital half

overall So year. go as the approach I'd say half in the no second we change capital the allocation of into

Erik Lapinski

you. Thank

Operator

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

Brian Drab

across board. you for orders of maybe versus are what sense for from Hi, hearing trying us, to seem now under the large just first run is investors because lines how product get to questions. some that's just that's visibility, the really they in what thanks can a cautious, right you And the remind business? challenges for times different lean a in end these rate But, there taking question, but markets? if lead know might we're bit the little my general, and for soon Just will

Anders Gustafsson

the are reviews a their our looking the if customers, by profiles year already prior in into visibility pipeline, and the so on larger detailed for start their outlook, based large and market, of part So, varies at December our But kind November, of you certainly having our we through and about forth. investment it some customer going degree year. to

what for stay pipeline to those or can the So work they a exploratory there expect commit pipeline Obviously, of a in them our and reseller we visibility have closely sales is good we And close it's are from And those. phase. with good the deals to we a that we very more we so we always partners year, in tend they but have to XX are they change, round, months we perspective more can they are, than do changes. see are develop to we to to out. that qualify for feel the if something

to we good pretty a So tend have on that. handle

such of have also which so some statistically that, helps. volume we differentiation diversity from get transactions, We or large a

we're signal not know, we we on Joe, -- over to necessarily I one do you any don't want overly that, comment -- read add wouldn't So here. anymore? don’t

Joe Heel

I Yes, remind right. would we I just that a first, have mean, still record backlog,

giving had visibility We for customers our our about business. the year's a to their So least than force, in what's has of visibility pandemic orders. is at to that thing to customers quarters, cases, of expectations worth very before, their it a new with orders. now be us some demand dominant have One the some for visibility next we is up driven forthcoming more still better of terms much much even in with driving good that

bit ahead again will enjoying at we're quarters visibility We'll in as -- moment, cases. becomes supply that's But relax more little So a much better the see. that available. whether many

Anders Gustafsson

has velocity pretty bookings the this say year. remained I'd stable And

So it's strong. very

of or We a recession haven't predict a seen evidence slowdown.

Joe Heel

Yes.

Brian Drab

I and -- big issue, all it's settlement. sensitive dynamics make know there? big, it to that a the a And legal just but the if at pretty very that can large does guess scanner like And comments for going you that’s helpful. can, all, as you it's any line? That's seems thanks. Okay, product competitive deal. ask you wondering, primarily what settlement, because around the And related the can it's a to then I And very with comment line. product happened can change I just forward large

Anders Gustafsson

that a that our last We just enjoy agreement. of confidential on $XXX quarterly year, started say much number this is Honeywell And impact did business. can we royalty going or both qX to this eight payments. forward, size what patent free quarter. of here lawsuits wish size that. of We a cross regarding future settle them But with we there's And from a in infringement. relative the you should so free, alleged means us we right. over million, a you're license, first, no the royalty paid of have agreed very pay remember payment installments competing reflecting It's of So a

much market that bigger, are our much is that larger. We

competitive competitive and So that a that portfolio, perspective, impact direct that innovation. an positioning I on but a about feel our We has from having our impact. good very don't see

certainly customers Our direction. our our resonate with vision and

are. where good we about feel So we

Operator

from Chung is The Please next Morgan. question of Paul JP go ahead.

Paul Chung

taking Hi, question. thanks for my

your unchanged. So cash of guide, just end kind EBITDA though on was your at guide, for it's settlement the flow low free adjusting the

your levels of kind cash to on of execution free So and kind trend talk about move you flow, cap how we expectations working into of 'XX? as could the

Nathan Winters

you mean, working China Yes, the go -- our, free around quarters year. in timing. half the from a the capital with has decrease of at obviously history, the -- revenue to highest given expect think, sales, our of one that relative we June the higher getting drag collection flow, and on I the of to in in second ship. of on that into was China of in And into so delay as half particularly the first for products use I out we the And second just again, a our normalize of what the we if lockdown. the timing of really as half second cash expect quarter was look

XXX. over This over driver cycle. And cash -- you if over XXX say, as And normalize flow be you XXX% go of increase last XX%. a overall XXXX so big I year around years, We've the several that'll conversion target year. would that's XXX% flow to for last settlement in cash the over second a we the if back a of half to the been the free year go we

next XXX% I forever. say that back we that what obviously So can't But think, again, above year is XXX% range to a target. you recover we'd closer expect

of of a couple of little year outperformance in years. a is past this the So for catching up bit the

Paul Chung

understand guidance margin Can you. kind Got And we question of you the margins? here impact but kind on FX and kind modest some you year, expect gross here. us another high freight XQ help Should costs from progression dynamic? of a lapping then of on more gross for You mentioned some have last year. the QX of versus both OpEx QX from of

the quarter. gross the [indiscernible] points we XXX maybe for pace the to do how year year basis maybe think So margins for down last then OpEx similar full about

I that quarter-on-quarter? Thank Was think you flat. said you.

Nathan Winters

to on chain both improve perspective able that'll of through if half as OpEx a at then the be similar as remain a and And relatively dollars thus I'd scaling the QX, Yes, lower XX%. go from as will as expect quarter, actually and into quarter from scaling you'd perspective, gross of we as gross margin And think fourth remain to around expect some we flat head the we'll similar rate from OpEx EBITDA an get you perspective margin we're we costs be and into terms supply look OpEx the improvement -- go the say QX margin. fourth as at I -- total costs, we second look year. of a relatively the some of to the nice in rate both to gross

quarter. of we some So third the as through those fourth be and the play dynamics

Operator

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

Keith Housum

guys. little to a bit I X% was guidance third morning, quarter to X%. of Good unpack more a hoping -- second your your

Nathan, your ocean guidance? limiting can guys of impacting you guidance of line toward that the you referenced is to actually guys more guess that freight. are your you I in growth that, the movement I move of how much think, -- terms so there top

Nathan Winters

again quarter you a QX strong to said said around bookings we're X% X% backlog with organic we this, X%, we the entering again, look growth. at If

around about we're of considering actions year of in as really the to quarter points compare to weeks to shift in moving takes deliver as the premium obviously from and get well to the the a loss X few taking product as So necessary Russia X results QX. print perspective. nice before are a are the well that the timing extra over that prior sometimes ocean, avoid And, air as costs late again, some for strong quarter so a

be And long-term, in So rebuild you have at and big obviously into head value some that think trade business we we into really late for that's next a be around, well. off to this is benefit as impact will September will the and delivered point And as that as funnel. October. the versus right what QX year driver

anticipate what of still quantify is. to sales how we month fourth freight exactly some the here in out working terms of plans limiting tough much we're But, really that's get again, to ocean. that onto the the the So And over to advantage take next of volume those to that quarter where growth push that lower to we're costs.

Keith Housum

Okay.

Nathan Winters

cost and looking clear But profile. supply chain the at have coverage, we that this it's our therefore, -- we're optimizing order have we what is do

Keith Housum

Right.

impact higher this not are So Or quarter for this have not impacting [multiple third in your you if that would guide, then speakers]? move? your orders been the does is saying growth

Nathan Winters

improve the to QX That’s conscious the order right. right. to profiles going That's fourth quarter. decision the to in cost limit growth are Yes,

Keith Housum

it. got Okay,

Nathan Winters

a see growth. on line strength that It's relative a also for driver of QX you top QX why rep versus

Keith Housum

Right.

by third the ocean end be then entire move the will the quarter? to So of the complete

Nathan Winters

say third the next the I'd in of building year pipeline a we're go end fourth the by healthy into the we so position. quarter, in It'll quarter. No, as be

Operator

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

Jim Ricchiuti

to early market. Matrox I tends acquisition. to a that to bit Hi, how the wonder you're you. be in of thank trends the machine vision little you're industrial business? it's And sensitive I would days economic making vision in the the part progress know And more But you. I wonder with you that how -- be viewing cycles. tends characterize the machine Thank demand

Anders Gustafsson

Matrox We early in closed on June.

months to well. is encouraged, into partner we have from industrial us. to by the so, going The I'd to scanning we're comprehensive and both of customers months. they've for positive helped and integration the And create fixed continuing out a The say first have very X very solutions feedback machine we portfolio network. X build vision been our very and are this

scanning can So to portfolio, scanning have that's portfolio. fixed how great to with they partners portfolio. to started really machine up from vision for perspective being story vision from the our See great Matrox add sign a industrial they opportunities see able their of more fixed would many to of the to we solutions industrial around value add that their so industrial same machine have a the fixed opportunity they address customers our equally and

So I where meshing very about feel any we well. the very, good are think And very are culture and further? Joe

Joe Heel

on has able because the add from we are manufacturing provides outlook them customers good introduce different, companies. growth and perhaps And well, again And is particular. to two therefore very would T&L now us diversification a between sort I and of the through refocused those sector, to the we two Matrox of the in sector, the to in with Yes, following continue perspective. is the cyclicality complement some opportunity there. them strength

a strength we're that's So building on.

Anders Gustafsson

basis, has And course. similarly relative Matrox a strong backlog of on have a there's as also we

Jim Ricchiuti

Thank you.

can that a that -- terms both size having of us, over Just that But of call and in change business. the general, applications? for both -- follow-up And as which of the the types I the parts are the business? business, question growth straddles you out profile know strong several wonder, give rate of it RFID, areas you don't the I in you seeing last quarters. is both break the on you calling out of

Nathan Winters

now been around of when I and had has QX a been our with in RFID has we a work in seen us part digits digits couldn't know momentum portfolio years RFID do the in solidly we've quite a market. -- for little We growth really directly it's toss But double strong while. for for very great XXXX Yes, and customers. think several with and go double

So it's our of still part it a a of part portfolio, growing is but relatively small it.

it. also publicly around to announce drive momentum greater helping like UPS, You've plans is seen and which RFIDs around some Walmart large companies

or primary first around well. RFID vertical the visibility, inventory area the really the around some been checkout has retail deploy to So as

is health care, a something we've -- not it's U.S globally and world RFID also So seeing is and seen this transportation not anymore are this we across logistics, a say, into but phenomenon Joe the expand manufacturing, -- color?

Joe Heel

areas. you've think of covered all the I

Operator

Baird. question Mason The Please ahead. go of from Rob is next

Robert Mason

Yes, good morning.

around EBITDA question the as quick in long headwind a into going to think should there, to you're being acquisition one did reference Just on years Matrox not deep we see next that about the start and margins if Matrox so recent as Matrox. well acquisition. you're to full invest margin reference continue there? you that -- move the to case? guiding but the we how The on we year that's FX, Should EBITDA as How extent

Nathan Winters

half, I is if margin. Yes, guidance think Matrox accretive overall second you at the look to our EBITDA for the

than that's but the offset more just FX relative size the of was So given it with impact and -- impact.

we pay perspective, headwind So particularly from EBITDA the with it's from rated. we an the not EPS as neutral from a -- debt debt it's an cost. until But down

FX. offset but -- than was But accretive the So partially that more headwind outlook. from the guide, from EBITDA last from again, with it an was

Robert Mason

Okay.

clarifying you stay continue logistics may print down costs into Okay. or continue your as then transportation logistic mode, they XXXX-ish, I and on just to expect side, cost just again, And come right -- now, looks to like just those The seeing will quarter. we the into should what as the the down, logistics costs that. for fourth referenced, premium trend maybe based decline you're on will that be the Nathan? realigning would Thanks

Nathan Winters

into market second we things spot one we half. three QX of of is in if direct saw limiting with our if we do amount on the as which And think look at to that's of control, I the from buy the it the the QX work suppliers. those are what benefits is one break you Yes, components, we can you the --

we to So decline. to expect that continue

that a ocean, did to was in of begin kind price near there's anytime increase Moving to can future, underlying until at don't the you'd per not again, in see rate the see capacity while rate the that in the to reason we least, you increase the pricing offset with expect think I'd to print that cost capacity, significant or to part increase. that -- a kilo July, improvement that's of improve. control air another global thing I is say we're expecting we we'd improve.

So that's action. driving we and QX the other pricing into get of some margin the as benefit QX as overlays the of the

see we for that's material variables I expect improve the of capacity. see So air continue improvement that to again, And around expect something don't the the can control to rate, to two side. reason changing one until and three underlying kind of in price increase you the our that on

Robert Mason

Very good. you. Thank

Operator

of Damian Please UBS. The is Karas from next go ahead. question

Damian Karas

Hey, good morning, everyone.

Just increasing follow-up ship product. seem key it I bit. passenger business, a does travel cost the your you and on the was for that Because, past consumer And margin ask wanted getting to up to to a a you've profile. is in changes travel how Nathan, picking know improved mentioned

this change curious, change? structural more you you business? So Or be that more really -- tactical making the as decision a is ocean permanent transient are kind to shipment would around a the of just

Nathan Winters

how ocean that's shipped of we've [indiscernible] to before can think it large moving last the the printing, quarter The tabletop or are desktop printer third historically you year.

So weight. of XX% XX%, that ocean relative just on we given shipped its

the of primarily cheaper versus those So portfolio to irregardless given air shipped were it's so size those air, on always and air products. ocean where of apart. of that's put on rest density the the rates rates, and again via air been The has

year, with I’d to modes half we the of So, this -- go back as transportation, second normal our of going of the modes we're shift here say to normal

Anders Gustafsson

Just on putting lead printers reason we started times. on that. The on one long air more a comment based was

is ocean as we think U.S., prioritize bit. expectations move was on to But so us. increase. we've started it air In to constraints supply will in part that But benefit say of the a customer of where soon back passenger air that's a of make to don't increase big and and Kong let's capacity, And So say, and capacity, we bottleneck looking be more I you're I travel customer was hear, seen Europe, certainly Hong always the intent the out sure a there think in, to add demand. is. chain seeing ease China, could up meeting do the to to slight as biggest

Damian Karas

to so clarify, spoke actions Got to you it. any haven't plan And Got increases kind of further still to? any that taken pricing or it. you pricing rounds further the of take previously just three It's actions.

Nathan Winters

I at went just to That's …? necessary. The into this monitor don’t effect month. any if to know, right. And beginning last you additional of Joe, again, continue the we'll want one

Joe Heel

I last of this was beginning just July. saying month,

Nathan Winters

July beginning of of me, excuse -- Beginning July.

Operator

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

Anders Gustafsson

customers up, and employees and better-than-expected just thank wrap deliver our would to extraordinary To a QX their for like efforts I results. to serve partners

warm to focus the on needs continue customers everyone. markets. we our would also mission Matrox critical And a We expansion like wish vibrant and Thank welcome scaling prioritizing our to you team. to Imaging

Operator

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

You disconnect. may now

Zebra Technologies (ZBRA) 2 Aug 222022 Q2 Earnings call transcript