Earnings call transcript Q2 2023

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Operator

Good day, and welcome to the Second Quarter 2023 Zebra Technologies Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be opportunity to ask questions. Please note this event is being recorded.

to Investor conference Relations. like Steele, to now President, Vice would turn over the Mike I Please ahead. go

Mike Steele

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

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

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

recently earnings You sales of months XX can otherwise find the on exclude slide reconciliations acquisition. acquired each to release. following from currency at our growth, the presentation businesses end and Throughout constant for in press references and a unless the presentation, this year-over-year indicated, our basis today's results

Additionally, in Intelligence note now results release. RFID solutions Tracking quarterly schedule we of includes earnings a since Appendix included our segment segment that have the our recast Asset and XXXX and our press in

This will financials Executive Bill XXXX Officer; detail will the presentation Winters, additional Burns, our our discuss conclude second Officer. Nathan Financial advancing remarks Chief prepared provide our Chief Enterprise outlook. on Asset with results. will Bill our Then and our on quarter progress Nathan Bill revised will with and begin from include made Intelligence vision.

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

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

Bill Burns

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

impacted markets. customer behavior end spending results quarter cautious were across second weakening by and demand Our our

reduction drivers difficult to some we that as spend control us, impact, the taking cost we the a actions initiatives. our demand are are discussing can what as these certainly greatest results including expanded While to today well we'll environment, disappointing having are in the time

per diluted year decrease, adjusted we a a the quarter, year. from non-GAAP basis of from XX% a margin point XX sales of decline and and $X.XX, of share EBITDA the decrease the XX% earnings billion, prior realized $X.X a prior XX.X%, For

On Let our their and industry discussed me demand slows. broader the CapEx context. softening tightened customers now we spending device call, quarter in IT last put these of budgets results as

cautious During accelerated our our the and all regions. by saw of customers vertical more second those across behavior sizes end as spending we trends markets quarter,

While sales our capacity transportation inventory weakest all they demand as end markets was levels, have decline. retail the in of dynamics distributors for e-commerce declined, XX% reducing during on pandemic. out are focus customers QX their approximately exacerbated and which our These by absorbing build been and many logistics accounted

inventory of distribution been channel demand working driving recovered, has and have slowed, aggressively lead holding the down Our has increased. cost has as product capital end user times

economy IT Although to been including very most have correlated most indicators years goods two with following industry global mobile underperformed key than the have This the metric our macro has certain relevant and strong where spending. have year-to-date device of indicators accelerated more been sales economy, demand. declines weaker, significantly become particular services resilient, computing has

were capture, and the spots RFID, supplies, data across software in Growth quarter. services bright

EPS gross steps swift and taking improved growth is and needed the margin us action to market our improve enable cost margin perspective, are profitability achieve and flow. number EBITDA environment our profitable position outlook free current a From and controls a we quarter. of deliver us In to second for to cash

in with continue environments. automate $XX on digitize as increasing million to and actions additional underpenetrated and prior address our include the to incremental reducing key intensified since our actions and industry operating These their net an and including focus of closely XXXX, that work to we growth savings as our customers drive summarizes restructuring update, mitigate organization, spending actions the annualized impacts. X we our to exit continue challenges across accelerating Slide have markets,

as incorporates Our demand near-term market, a across expanded restructuring in buyer slowdown revised mobile of the deceleration actions. distributors, year our full-year end computing as the including destocking significant markets, outlook in reduction well our and partial a benefit

this and XXXX. we visibility not are in environment, recovery limited our in a assumptions cautious expecting our in Given

and managing the our our reset our markets expect go-to improved and continue sales We'll uncertain an to recover. We of this near-term agile take drive cost resources profitability shift approach structure of growth as environment. market end to to through

details will on to turn review XXXX financial outlook. and provide now Nathan call over our to our the I QX results revised additional

Nathan Winters

Bill. you, Thank

an and Let's on XX.X% on the sales the X. Slide XX% basis. currency QX, P&L with decreased were acquisitions In net start of and organic lower including impact

Tracking by results. offset particularly year RFID Our strengthen segment and Asset flat, in a printing decline as in strong prior was was Intelligence lapped and supplies we

& Visibility decline Mobility by solutions. driven offset segment a Enterprise in XX.X%, data declined growth partially in capture by sales mobile computing, sharp

and Additionally, we across rates. drove service organic attach with growth service software strong

EMEA our declined sales by driven Europe. declines Eastern in pronounced across sales declined America, Sales North mobile with regions XX% broad-based computing. double-digit in XX%. weakness decreased In

Asia-Pacific India Latin decreased sales with And and partially by in in sales X%, Japan growth Australia. by and Mexico. driven and growth offset Brazil XX% decreased China America

primarily Adjusted supply by costs premium de-leveraging FX. unfavorable partially basis favorable chain to gross increased and margin in XXX business expense mix pricing, offset points due to XX%, and lower

we recovering past see headwinds the to of gross the We over couple are margins experienced from years. pleased inflationary

offset savings million. they're of annualized actions as over is to total controls. previous deleveraged that points cost $XX our expenses and to sales, drive of as soften, savings as restructuring expected incentive plans that net demand percent incremental see expense announced partially Note, the $XX lower we annual compensation past year, we million operating taken basis implemented. Including XXX by Adjusted a operating began are net cost

was $X.XX, margin improved operating Increased by offset by gross per to XX de-leveraging XX.X%, decline Non-GAAP partially EBITDA expense share decrease offset outstanding. adjusted expense driven fewer basis partially interest by earnings quarter a a decrease. point year-over-year Second diluted XX% margin. the shares contributed was

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

quarterly to flow cash in incentive prior negative previously compensation a to higher of use partially settlement free due $XX for of announced unfavorable taxes cash XXXX, greater And inventory. are $XXX capital payments, For of networking payments. due XXXX, million offset to which period, QX conclude scheduled the to and lower million payments of by the primarily was first half of year

In repurchases of a million X.Xx had of debt net half adjusted end capacity leverage and invested our we of first range is EBITDA $X.X of portfolio. billion credit approximately million target which the on X.Xx at $XX our share of ended and facility. $X made quarter XXXX, the venture in below our also top We the to ratio, revolving

component years. the on highlight freight and supply to market we us premium actions impact capacity On costs gross past freight on have taken purchases products The impact. price we along and reduce rates of and X.X Slide spot with to chain cost our increase redesign X, enabled the the margin the over have avoid improving

$X to In prior QX, than the $XX and pre-pandemic as quarter. incremental we year the compared incurred an baseline million supply of million chain costs premium lower

As mitigated, key we to have is been lever margin believe the will fully enter the third these quarter, recovery. which we costs

now outlook. turn our to Let's

their As be sharp which we seeing continues third trends. of enter product distributors the by most demand quarter, we to our to lower inventory recalibrating across broad-based amplified are offerings, declines

double-digit XX% QX to by are adjusted expected QX of XX% diluted and higher expense Non-GAAP XX% outlook our from by cycling We in be product of decline sales be compared of period. $XX one-third range $X.XX with year. from margin anticipate $X. the core partially declines distributor for destocking gross between year approximately million sales supply decline. between across prior is chain and EPS Our EBITDA de-leveraging assumes categories to XX% each of offset lower expected to to prior accounting costs driven to margin volume, This premium the the in

year. full-year significantly expecting XX% we a the Given and sales demand second continues decline this end This through our half QX our markets the we across sales of QX our the challenging outlook, significant remainder reducing seeing enter with uncertainty environment. We're results in declines XX%. as continued broad-based the trajectory in assumes environment, are the between

of XX%. full-year expect approximately margin adjusted We EBITDA

as early trajectory our will our of significantly early implemented cost business. volumes plan partially expect most increased on the long-term actions by the structure We de-leveraging QX. offset from align be to continue sales reduction with reduced benefits to of actions cost expectations We by

now free in year the for and positive to earnings given cash second be the lower expectations. half, flow but negative sales We expect

to flow will cash Our in R&D of charges, due regulation increased change impacted expected previously and be $XXX million taxes cash by payments. new restructuring settlement announced

on We rightsizing times focused on continue component to be have as sheet balance normalized. lead inventory our

due our to inventory However, outlook. sales expect lowered we in now reduction XXXX minimal

by X modeling have the mix. expected achieving on XXX% long-term one due is reference over favorable focused incentive to our Please plan. Slide of XX. metrics assumptions in tax are Note cash which XXXX non-GAAP shown rate on improved a we cycle, compensation We our additional geographic that point conversion

to call our Asset discuss I'll how we're Bill that, back With the turn vision. advancing Enterprise to Intelligence

Bill Burns

Thank you, Nathan.

the near-term, trends digitize our long-term, solutions the pressured our essential to sales and While secular are remain are operations, workflows markets. we from automate customers' our and to benefit well-positioned served across over to

our on solutions portfolio. through by Enterprise as vision Intelligence our Asset advancing provider We Zebra are premier focused elevating compelling a

such by analytics. software need scarcity with By constant labor our the effectively tasks utilizing in effectively to as workforce to can navigating and change address improve learning our We prescriptive their machine transforming real operational challenges, complex near execute driven productivity. and workflows the solutions, empower more time, of including insights proven advanced capabilities Zebra's by customers

Now XX. propositions would These key computing, and over I Slide trends, long-term. the and mobility which growth customer artificial cloud mega intelligence. to turning Zebra's value automation, several highlight supports to like and include

trends, their growth help to mega Zebra on take these rely customers drive advantage strategies. which key of Our them

Slide critical enterprise computers front As to you of mobile line on can business. the see XX, are Zebra's

is and key and value excited a resource about their our our a roadmap customers way proposition. can We Labor that innovation is advance advance launches solution our scarce new operations. technology leveraging are

serve Our our increase expanding of patients enabling markets. better and solutions use across customers, cases and productivity and number empower shoppers, collaboration enterprises end to by and

cases significantly Zebra refreshes mobile should to investment technology enterprise use has Our the the expanded due installed past several perforation rebound of in computing the reprioritized. over as base solutions or and years

our that these growth. a evolving advancing $X.X Slide XX, our and drivers are profitable needs few offerings On Zebra are and for for we growth billion long approaching expected to annualized them. highlight serve a are we customers scale sales be to of Collectively, have continue capabilities runway to as areas

advanced in leader are through RFID. a solutions location we First,

growth We driving real-time inventory in importance accuracy. years of the with recent double-digit been strong heightened have

a throughout supply solutions. chain, We our which announced addressing use expanding an of RFID growth now the with provider, the for are previously long-term large set cases opportunity logistics win global transportation including highlights

investments for long-term is accretive and EBITDA Second, machine our us growth we positions growth. in margins, business, our to believe vision well which

has manufacturing We continue markets, in Strong vehicle scale including certain in attractive industry. partially efforts to distribution, the weakness and to invest diversify offset end further go-to-market semiconductor in in innovation and warehouse subcategories. and growth electric

An key of ease auto example solutions a in on recent with been more our is U.S.-based win of transitioning to the electric differentiator processes our production. disruption flexible was success with a market use of its global has who manufacturer modernize the the as auto to manufacturer capitalized the solutions. The vehicle

our to profitability EBITDA for to platform demand for including location large to staffing lastly, wins in and And company. goods notable to software expected become are we collaboration workforce tools, improve and migration and offerings, software Recent and bank cloud-based consumer workforce workflow inventory forecasting include margin at our XXXX. a offerings planning. a packaged communication America software of management, accretive are solution task The optimization our North solution retail America North enable demand our taking actions a include visibility management

business our closing, in conviction remains long-term In unchanged. our

success to the While taking digitize from to actions portfolio our to our position trends customers improve to automate solutions well-positioned through the continue comprehensive the benefit over with workflows. in and needed near-term, us in and long-term, current position future. and for elevate to we're believe customer environment the is spend work while secular profitability pressured We'll of we both

will now I it Mike. hand to back

Mike Steele

Bill. Thanks,

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

Operator

[Operator Instructions].

go Please question comes first Moll from Stephens. Tommy ahead. with Our

Tommy Moll

you profile, these one point. think second could where there need the dig trajectory parcel. for And bit. ask of the at most going that part that on in anything widespread profile because Bill, how examples and be forward. the Thank high And you have reset that reset you e-commerce certainly long little other sense how referenced to end are fairly Do to there's known any to I wanted would highlight user trends is maybe well this I appears of I high helpful well. including this? as do But you. a maybe

Bill Burns

Yes.

I they is the that service and seen transportation through in And absorbing we're logistics in our weaker other we've we've that retailer and into than is we've even pandemic, e-commerce in resulting economy the the economy, which extends that more capacity past, about seeing softness that of that markets. think talked the clearly but bought largest customers into overall seen customers beyond our now the said well. is the market as spread really as what we've the customers just to goods e-commerce other retail

But right? obviously specific slowing focused we've company to indicators, seen of that guess question, what's goods the is said, and to I that this it been on the of is industrial think good I idea that right? talk right? all really I services. And a your about their slowing, And maybe recently logistics macroeconomic they've detrimental that's overall a Clearly look, not volumes, think large because example is economy

rates less, from been e-commerce in really It's out a the logistics being also buying this down to then goods well, to slowing delivery purchases industry package detrimental right? entire which global has consumers the slowdown pandemic volume levels of overall driven transportation interest of of coming as perspective. reset And trade. by Inflation of the

e-commerce seeing excess it is eventually more. say they and and it and retail, out much economy we're slows, goods wouldn't as come additional this what as as now, in So buy capacity they built will capacity We're they players. seeing I for need back the have in really,

parcel with transportation but into logistics, need. markets But it into other as We're move they've seeing got well. also spread what delivery for they today,

quarter as large orders seen customers in We've down talked As large we and well. into move you about first and know, slowing of customers. that smaller mid-tier

customer seen, why and be then it. as we the So some goods environment. as years it's will across the seen back back, us. buy come two now use than more more past. we've is of in decline in computing We're people but pressured come not this the know mobile seeing within our the see right demand especially And marketplace capacity strong buy we demand now ultimately, that very short-term. excess seeing you their as because indicators had we're we'll in They is that from and inflection that's than being macro base entire at clearly And really our into the point, think they broad-based absorbed And it the will it. more services, of point we're seeing

Tommy Moll

implied Is of which an it here. Bill, the the looking second is you at from that somewhere fourth just quarter those think ranges question visibility mid-single-digit mentioned too? it inflection implication my and point, to for that mid-points like range have unpack at just and the in point is Is the inflection XQ it Thank theme or a using quarter. anything the quarter the an here for want revenue just you that not that's full-year, basis. fourth guidance impacting in little on a want on but what to to mid-points, there you percentage you steps maybe your I third on I'm within some bit. the there's revenue is quarter And in looks to XQ? you assume what's can least ranges, up you. depends third the and disproportionately,

Bill Burns

the than would we do we say clearly as believe that see and perspective in QX, for But combination QX think seeing a a begin destocking full-year, that guide, at through QX. in you're continue approach we velocity we are trends where and an right? demand our And it'll in from deteriorate the we'll for booking answers I to that, continue QX the basically of there is about you a QX, really that more overall, for Kind and remain and QX. probably we've the from guide Yes. QX taken why that We'll distribution looked continue that perspective, sales full-year. same

uptick opportunities just of conversion year-end lower end you levels to oversize demand these recovery But slow. our for we've of our quarter. that significantly historical -- reason because seeing of fourth our a by in than the destocking removed of customers. is large pipeline continues distributors orders in push-outs year-end expectations that really assuming really an see We're at because inventory effect we're their within levels the there as And

out need sales And inventory. that less they're distribution, -- that when demand hand our hold the end need slows, from when slows. less to ultimately oversize of think specific I they effect So on buy days They and less they out. because selling see an a we in inventory us

were seeing QX. we're quarter, of we the in destocking less fourth in So than

have the their capital's The destocking gone that up. fact also by times driven of is and cost delivery our shortened

lower So that there's end inventory quarter. and in slowed to pressure a we're fourth of demand as their those inventory seeing less is bit on levels and really

really we're predominantly So is in to QX inventory of ultimately based right seeing. seeing see do QX distributors QX XXXX. expect of between and that's inflection are year-end -- believe difference around. levels destocking for end really and really And point is the the We in seeing the on inventory we and levels. trajectory But with that we're seeing what in demand the the the exit an our QX bottom process

we distributors the then for and destocking the being at are half we second taking exit that year, right place the really So our see seeing the levels year. through as demand

Operator

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

Damian Karas

of your destocking talked markets just environment across for I a about change it just that moving are think do sales have customers. customers over extent you your feeling uniformly little are end constraints, mean, do Bill, the end facing customers bit the declines across lot better to maybe you and their pressures chains kind budgetary demand of here? or past really drivers the are what all now elaborate Is kind you the supply all impacts, that you the past productivity, distribution about and a end some your could customers eased almost globe? of on biggest think but few months

Bill Burns

start QX Joe this to look back in demands. spending saw have of the macro again, industry And in two accelerated we and talked that and EMEA years in global I'll in particular really as our I'll those we we see factors broader our trends in softening but add broader expected seen on our from and within well. more China really strong we can impact products customers, as cautious Maybe out and call, jump of Yes. COVID slower if we've really that more Really, demand of And seen then for we China part May of as after China. solutions. recovery economic about we weakness, haven't

it more Retail a trend that, project projects about other number worked as question we've industries increased We're pandemic, in driving and the broad earlier seen our really push-outs from capacity, an QX. is well as across of size. perspective we Tommy's being they're reduced on seeing but we've talked well, way as absorbing or those of as coming through as e-commerce, that out but bit little a

industry and demand that and like as And say this we're seeing slowdown. trends talk a around Joe seeing end in device demand, computing market, really that same we're element ultimately years spending distribution it, IT demand. one now really is we our really the That's our is will of would IT trend little impact is the mobile it but strong bit that seeing that driving the dynamics to see after what's device two but spending -- this seeing is I clearly we're which biggest of destocking that we're is about of end ultimately that inventory really, correlated that across Zebra, of slowed, overall, that's the about that, distribution more

it's we in. competition, across Joe our IT but jump devices continue levels disappointing But but to and broad-based market, clearly expect that wants demand an through to end really outperform to from maybe

Joe Heel

additional of a Yes. Maybe if color. bit little

have better customers business declines rate what's us small, were customers the run call understand direct of deals than track, because larger see we course, we and declines we the large helps we our it. larger contact And with mid-tier this happening would in in individual first, our our as to there. that So and

hundreds Now accelerated before what of this a of you in cases have of millions pushed the lot those, behavior dollars those some first quarter. examples or I'll of but as some we've do that been have the into disappeared the deals give deals in seeing has second half future I of is altogether. out

we've tripled. America, for in has the So, to example, the that first North seen push-outs amount of quarter relative

going Now said, what's right? QX, grocer few let just see to this At driving can came you I we beginning a the happening, of examples, -- right? us to what's you me So give want and a you and had who do of do they $X your million through mistake. I the to QX. to midway deal beginning, QX in we're sorry, going my in worth And we're quarter it buy mobile QX, I'm computers. said this the said, not at

So buy beginning in they this. the said, want now the QX. do we want quarter deal of to this through in midway QX we And to than they came at rather said QX,

example So push-out. we of would good call a a what

revenue computers, also we the said, we them over grocer came of another who but over million of do worth distributed, that the take mobile $X $X the our to buy at was of equally mobile to we which course, they're of million they next quarter computers. buy want going delays and And beginning But had want these now to quarters trajectory. five indicating

when. the of QX who came We to buy also and us wanted We'll right the budgets a do been at now do but during I beginning I can't this had my anymore. cut. to retailer said, project it the quarter can't tell in million $X future, have sometime you and DIY

examples revenue they to us, indicate impact that diminishes three to under are when budgets our that our out that's Hopefully that revenue. they're extend our from are pressure these buy and QX extent which trying customers' different So all the helpful.

Damian Karas

Yes. That's very all helpful.

what firm like maybe you've actually you of could seen us canceled? proportion tell So orders

Joe Heel

directly. that answer can I

no orders canceled. had have no firm or We virtually

orders to pipelines. describing our not you were backlogged taken already canceled. seen was movements Generally, I we've that we what in or have of all So

Damian Karas

Got it.

-- to gross I bright then And it. the Appreciate the recovery. spot in the quarter be margin Okay. seems

or we gross XX% for there upside run margin so and given thinking be vision Amer's possibly some and now road? portfolio assets margin rate is your of should So forth, gross with is machine appropriate down the the [ph] to

Nathan Winters

you bright was first This the I'd spot had second haven't say of level a mentioned, euro we margin was bit in since gross quarter XX%, XXXX a as more a is and we half revenue at Nathan. hitting that which the Again, the when achieved $X.XX.

So obviously redesigning the bright the costs spot work the in team negligible the the the quarter, including ocean. $X products supply second and back all printer half then premium million getting the we to on our to the year reduction as chain enter nice in by of capacity down due

So again, think we good feel gross about I margin.

is including move the be assuming there's going the quarter-to-quarter size, us that There have remainder that the that's based gross a -- level. stays is fluctuations, new is to a think a baseline. with as we FX I on tailwinds other dynamic of we But margin. deal the large lack current that's through it year, will benefit XX% of one helping deals its at

right So just general there'll fluctuations dynamics. mix I as and I'd business say think the but with be quarter-to-quarter that's watermark,

Operator

Our Company. comes Needham go Ricchiuti with Please Jim question ahead. next from &

Jim Ricchiuti

All right. Thank you.

it sounds implied think conditions worsening America. outlook and we you're guidance the for at about some least as So geographically QX, like in expecting QX the North

QX, second year? was into in the distribution decline looks way geographic the that Just how half of the the to we organic if about think the is at what look

Nathan Winters

any of Yes. color bookings guide and Bill what mentioned sales the Maybe then we the just I on little recovery and is is move quarter regional we to just recent some of the your velocity more by the not guide give through enter the the can most assuming point earlier, on read to as the as and supported a we're bit dynamics or quarter. type

see really all you across say our that So I'd geographies.

comps the it's -- being in you if tougher think mobile for they're similarities very region, of computing look business by impacted across like So year-on-year print. terms I at that the each similar

How that continue removing So the what is the through again, opportunities we to across into right through end to the third ensure what the of we've velocity upside as half. effectively and quarter? done said, similar of regions seeing in have very I'd the dynamics build that are second And the markets? from fourth here, quarter we're or that the say each the is but does we baseline go some

Jim Ricchiuti

assume areas business making relative for have the and business, for what assumptions the your presumably the areas slowing up bright data in better. kind does that bright And little been you you of of supply you? a guidance are the spots, service that spot recurring But have more a bit that, RFID highlighted capture holds these been of

Bill Burns

across would I a applications, say continue Yes. growth see multiple that, spot retail. be not to and RFID continues bright to just

and software clearly think business Temptime acquisition as Our supplies Services year. in we an business compare continues broader supplies will be in half. Data capture in second to is be positive from not well. the second bright tougher just RFID half perspective, spots a but a our

challenging with fair remain the half chain is take second in and XXXX, numbers overall seeing across in businesses, compares cycling in years. think tough comparison in print data at growth you still I from supply strong which a you prior you're those in that through as seeing half the still that what from see first in dynamic -- chain across availability place supply look you're amount seeing So of solutions still were variation so XXXX capture

half. solutions tough second just data in compare So is a capture

Operator

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

Meta Marshall

this I'm guess improve. do to cycles, slowdown seeing in slowdown devices the is just seen sense into impact I time those mobile new I lengthening market. refresh some just cases? over in context, use a to which markets think guess the of just new in Great. to elongating yourself you're you Thanks. putting just as and greatest trying hardware you the builds or with refresh IT prepared cycles We've get business,

this cases? is builds new more new of to may more or so be And just lengthening impact just cycles or macro refresh use permanent kind that

Bill Burns

elongated are the business hold clearly I so strong devices think only remember technology in to people refresh demand They and at seeing long last in frontline more tough workers. we say, as those the hands we're two got you've those of off assets moment. lot the can would a the And are put over decisions has making using refreshes. the cycles, years

go that So will devices those be refresh. of refresh a they that when to higher devices they number

-- to built In and across a for our where still even they're the more. they the of transportation and markets. hands devices they've seeing in logistics us devices, hands, our continue pandemic the all customers they've in of a got frontline to We're eventually of retail to short-term, work will and buy lot underserved vertical they through devices great through workers capacity still consuming bought there's but more e-commerce those opportunity

Joe talk more little that. about can about a And bit

think collaboration, seeing for devices mobile retail there's plenty I workers that we're our AI devices So leveraging devices. and more your our for instance, visibility, software, for spots on new of applications bright still leveraging, leveraging information communication, and within retail our with and

the the Joe, want to demand. add short-term that? in challenges And continue So you despite longer-term do trends to

Joe Heel

set that of sales of extension not underline that we're think diminishing cycles specifically any use would I a cases in the way. I Yes. an seeing is

almost it's In opposite. fact, think I the

customers all solutions the earlier So during our this use gave sales can what Zebra fact discovering in devices with the is cycles. use examples we're And more they their for were how seeing examples of that extending cases. and I period they're

the the are of like store and devices flexible goods use cases. store the new being seeing advising where we're And communication we're to or because customers to that they have. use find fueling cases we're in in course products checkout more on So releasing that added

I the right? example, alive very an cases of payment elongation directly take new just sales For and say well. cycles, devices, our use would clearly are So it's released on we to ability

Meta Marshall

-- should Got -- it. just And expect any maybe Is those part mindful you some just that is supply you any the anything you cash be do noted renegotiating expected restructuring? as we of to agreements. of with be there charges or were

Bill Burns

But supply part we'll Not to renegotiating Meta the cash the No. right of not as of terms decision that the as not with the as short obviously economic those working any for and team's part on restructuring, the restructuring one demand included and -- is of the agreements charges. But in maximize work of part it's sure long-term. each those make -- changes.

Operator

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

Tyler Hutin

taking morning. Thanks Good for This questions. Hutin my Tyler Brian. is for on

Bill Burns

Hi, Tyler.

Tyler Hutin

believe starting if you mentioned benefit expect you due before, I would off was softening wondering and may pricing, with full-year what just growth. volume changed just in the have I has even more Hi, from to that

you is us for pricing? benefit there give can any So expectation full-year a -- from

Nathan Winters

with the the expect recent market. stick X bit be in points. price pricing into benefit previous actions the second than It's hold those most higher a we're that quarter. our the late we effect So guide to increases around actually full-year and in went little But seeing

the about points again it's for X say I'd So year.

and broad-based And I -- constantly it's that something to markets that in the specific the are very we operate were because broad-based, market. decline very actions, targeted actions. in. I think ensure the we Again, at just most say we're and competitive any industry across the monitor in of our share maintain not again wouldn't to part these targeted position pricing to volume related ensure there's products And these the where to opportunity of we market of each is the and

Tyler Hutin

for demand just products, like cetera? the you be that. seeing volume XXXX? opportunities an the Thank up? Okay. has been to picks when you're following-up, Thank And this with sales you. in you that describe unexpected will contribution can And et your supplemental that what government And other

Joe Heel

Heel. This is Joe Yes.

been and the of world we a governments And multiple the increasing put levels So resources we saw has level part of this. different and State and we around commensurately there us increased an of American course, that have And we've into the local course, opportunity are have North there. that. government been some demand that. working been seeing of of with growth largest time. the Where is have for area for

there. outfitting cars the state But have example, handhelds successful our have business federal we've where with our forces been Specifically governments. for with in been tablets devices parking their and enforcement recently extended and police with is staple engagement mobile or of printers

of contracts. large course are very some there And

we You course, in those of U.S. defense that outside to of situation that we with the little levels and the we've of some that operations. bit provide types behind the in to important. And a same logistics the with can the an are in geopolitical increasingly some of in see interest seen find increase of contracts governments enhance particular and those solutions do in ourselves needing has areas logistics in governments And

Operator

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

Keith Housum

could the -- hoping morning Good was guys. unpack I you

Bill Burns

Good Keith. morning,

Keith Housum

we're previously commentary bit or previously previously bought. they overbought, on color that the little digestion more the a regarding digesting I but bought. guys are perhaps customers they Are two was just I e-commerce hoping what mean, questioning they Certainly, of probably guess that what I the could one you digesting commentary. ROI they aware people experienced? the the unpack

Bill Burns

mean, I -- that, benefit the to at I our the that they're are not in all. beyond that clearly they're for seeing extends Keith, seeing their They're e-commerce environment. devices What instance. is questioning ROI really critical mission parcel Yes, delivery of

that they've T&L seeing you that. delivery, parcel much going capacity, e-commerce assuming to look result said kind pre-pandemic to of was the our and resetting of it the kind as in at be entire stronger growth we're what out build than saying around So are of they customers industry's if rates, that down

in I would they say need the cases. they absorbing so devices most wouldn't it's say bought what in have, they've I beyond retail,

project, ahead they in need. for a Now, they they because have some devices knew right? what bought needed cases, They but chain bought just of challenges, they that most ahead supply the

pressure like their that there's they on continuing of environments. environments they're to leveraging to what other question those devices use they're applications from just CapEx I to making ultimately purchasing budget they'd think have tough And IT, their buy more, either within but others and -- CFOs earlier spending new macro or today and decisions instead a because the in certain and

the growth seeing Joe increase see ultimately using some we'll a chain bought So over saw cases, I we just they add demand leveraging want challenges. because in supply In anymore. today some of from it's and need may that think significant what to demand they and something. slow capacity. But other they cases ahead here. last we're two it's In have years then in don't and now cases

Joe Heel

few an which to So many new buy it trajectory, expectation make means if just Maybe of give you associates stores a our in examples, right? growth retailer, have again many you're devices or will how you in me open. with you a let a typically concrete, how will store, your

lower. certain And retailers trajectory that seen gave change a trajectory, so examples for of they've growth and that those planned earlier I had then growth and some

here's an additional gear says, do customers it expectation for That's with ROI so into anything hand at of about working lower hasn't don't simply but on the thing And have done one a for they I have And the And not example ready hearing. them, of result, we're that already through has the type and it's I'm where changed a then pages which exactly with ROI, really for as literally orders until just it four through customers deals individual I we demand. look demand of lower they translating purchases the have trajectory, see they're us, looking where right? think this. to QX.

Keith Housum

I appreciate right. All that.

can progressing? and robotics commentary is same vision the any offer follow-up, that's issues a how perhaps machine segment, you the extending on As to

Bill Burns

Matrox, software And machine acquired optical the We that fixed Vision, like good recognition. acquired character in capabilities organically we vision same end developed industrial which low we Adaptive No. gave about in solutions range we at business. When us the feel of things time around our scanning.

sales to that We're making We their heavily hadn't all seeing when working. industry. to as diversification go-to-market that diversify a the investments they private base were Ultimately, semiconductor in company. weighted all diversify we has know And smaller slowed. that it. was along acquired really we we're the But is the customer knew our Matrox made to that they objective that

when on things electric the diversification battery in within broader T&L, business. the vehicle the business, into manufacturing manufacturing, like opportunities, which electric were pharmaceuticals, the the we well we're we're of us semiconductor also working. challenges is so really traction driving push that as with of a Our acquiring into short-term, And vehicles, for e-commerce focus work despite aware into seeing

as just I'd say think our perspective, I for well days. in paying today solutions at We've customers it's investments robotics transport. pallets off goods got early organic that working From space. are moving

marketplace We transported small growth have on business applications. hospital e-commerce orders picking was early robots OEMing owning delivering that one the beyond a but of of robots We're since it's that invested we've different expected today. time. it large and a goods in our in We're that pharmaceuticals. takes areas some business goods there's environments just just smaller being multiple in But transport, still sized in the trajectory days. It's

You early with got customers. pilots to do

You beyond got and to growth prove that. in you see the ROI ultimately and deployments

So just at a about we moment. robotics okay business. feel small It's the

Operator

question comes go Joe Our TD from Giordano next Please with Cowen. ahead.

Joe Giordano

that but every kind consumer has really hasn't just guess industrial we that to people up the has I -- everything been data push-out step the about pretty takeaway picture, the happened. the and happening granted the consumer's been recession the wanted that of horrible, commentary resilient or saw been coming of like, isn't kind changing. I Just economy, guess if and customers I big square we your hear, back,

from who people you're thought? commentary as of what kind So leveraged are getting do bad consumers that maybe aren't how like, with your you to hearing those as directly square who customers

Bill Burns

buying I mean, more more know the every think right? doing I to and I I travel clearly people are than on, to in COVID, every I'm right? trip seeing looking goods. you, a about this past. the saying, seeing it, holding that. I economy customers perspective, you're but coming flights we this, point vacation get matter They're more of expensive service that seeing think it -- seat's I take was out we're it are up, mean, They're look, of flight that's But that cost really from I the I in or go people goods summer. the don't It's going to more no taken, going I'm are whether think experiences. a is do slowdown for think

buy Joe yourself retailers mentioned retailers, the have it example. as therefore of right, sales new have from interest down up, I think rates is DIY and gone people an housing as less do the gone

that of they're lot COVID instead. goods experiences for a on during bought their spending people think I So now homes

we're reset a rate to seeing growing, that flows traditional pandemic, the seeing So e-commerce. I it's while we parcels up, think more in we're how to economy where delivered high then which is the still through off goods many as saw we're from hold broader purchases growth now back that decline, e-commerce has through seeing and very think the I have

all slowed retail brick-and-mortar so this. customers And are going much retail as that the to is -- Joe I sell and of expectations within has our role that a the how in think said, playing they

that around the in think environment. it's services goods versus I really macro

Joe Giordano

on did couple said here, this multi-tasking they're of comment a on can a calls And kind you what at Matrox growth in you quarter if specifically I'm and but where already apologies year-to-date? maybe

Bill Burns

Yes.

weighted happy So towards business the vision. I our that it with the that, acquisition, think We knew earlier Vision with the Adaptive machine in heavily we've that we're that acquisition I the call vision we progress machine Matrox of and made organic in said purchased semiconductor. when was investing

all we the big vehicle machine and for of that e-commerce fixed users have logistics, to transportation vision Joe into electrical is pharmaceutical, markets scanning. one objectives expanding our of and And marketing manufacturing, focus industrial on semiconductor beyond teams are

And early in and area. wins progress that seeing we're

scanning headwinds business associated happy overall, with the and pretty we're that results It's machine the closely I vision our good think excited far we're about despite progress with overall. semiconductor. to the so we're So seeing adjacent business

Operator

Brad Our Research. comes Please ahead. next go with Hewitt Wolfe question from

Brad Hewitt

my good question. and taking for morning, Hi, thanks

Bill Burns

Absolutely.

Brad Hewitt

I'm in half rates is that from and you what's embedded here? curious conversion guidance properly and your in on if further confidence second of derisked could full-year drives terms then also project what elaborate guide the deferrals, more any your pipeline

Bill Burns

So maybe I'll start.

most So the, for it's the guide you recent by again, look half, second sales the one, embedded supported the what's at in velocity. if

orders opportunities lower we've in the discussed that conversion the earlier assuming due significantly If had we pipeline used call. of than are rates we've our of on you look, continued to push-outs historically

large impact on assumption type not the much the the a assuming year. impact again, other think the any this we're assuming deployments we overall similar within But end destocking again, of conversion through I year-end again, size as So quarter, that -- of in rate you the channel. other kind which of lower include important year-end. is fourth is of deals. type spending is assumption And of potential approach the which And typically to we're or there's new we the the we're see have not velocity having those

Joe Heel

the deployments I'd say mission products, to half, use and other second economy serve again. a so And as long goods they're from really look better time they customers perspective, the capacity will get we'll excess on customers. the they macro the purchased our right, they beyond, look as we where over they've off of in our see can will probably, or environments begin hold environment only to buy critical their

we that long-term that So proposition our I think see value customers. our very remains strong with

expansion see adjacencies again core will from across to as we core markets, those all our of markets Our our continue grow relationships all our strong things remain environment and and to macro the we'll of created over grow demand made the couple to purchases years our the continue they've through that work some again. the -- last improve, they've of and customers and investments

Brad Hewitt

the trend seeing in also, your what second run guidance shift I'm expect how business then And the second year. rate helpful. curious from any your in of half? and the to That's Okay. rate you're half does assume a you mix of run softening that business in negative And

Bill Burns

Yes.

particularly our year. And run June. of So continues of May saw we we assuming so -- of into velocity half in second kind we're that again, the remainder reduction and as the we trajectory in QX, said of through late the business earlier, the rate

no also fourth you of why that's year-on-year deterioration, in see in challenging, third the of the more comps is kind of type get why go than improvement. incremental further the decline as see not fourth quarter the into which say but So quarter. And increase any year-on-year terms the greater you the you definitely I'd in quarter

continues of through tougher year. to improvement velocity comps as assumed the end Just that that the as move we the no get that,

Operator

with Mason Rob from comes ahead. question next Baird. Please go Our

Rob Mason

rate slower. run the followed like looks project business large it mean, I has business So the

whenever the about would rate this I'm just also particular but to perhaps recovery that happens, scenario, is -- I out follow but has overrepresented in you that's year -- in indicated happened curious next it the business think changed typically my pattern, or the earlier you if run expect business looking a retail's up project, it might into you be. the in retail larger what's project not impression that maybe large or I'm sure think dynamic?

Bill Burns

Yes.

large what The So a it same to but seen an seen quickly the the you to recovers, I mid-tier the don't said, and -- that see business that's you we've then deals here. that that how rate to we'd do And trajectory. rate quarter follow as first we've you expect historically as run seen is run recover second and has than recovery to longer-term and of more or we reverse expect then think is it, first large effect first run large see recover, rate as mid-tier. clearly you would you've and and the see decline historically certainly slowed are large the pronounced in in and likely we mid-tier in in typically deals that but in in see swings deals right?

Rob Mason

a a And were a pause are as a feeling before how just multiple you that if then of becomes inventory greater follow-up, at quarters, And about obsolescence point? this Understood. last long risk risk. to pause, Nathan,

Nathan Winters

entered the think better we the obviously, inventory as -- expecting on -- year. we would were I overall, Look, we results

our in. the has a committed our to that It's challenge the are volume with think in control as volumes continued doing everything working I reduce team coming decline. obviously to though is the suppliers

it and coming supply when of we're have down that we the to in. kind chasing So relates inventory -- chasing inbound

there's kind I different. But it's I like of a rate that's in business. business, technology in of again so -- at when our not look primarily run type think we where volume E&O, I have supply, high risk But always

So returns, when for have we volume the it. components the

this products So is of The products product and for type majority we or vast kind have one-off mainstream in isn't our portfolio. SKUs of -- portfolio. unique around the kind

value. burn so And volume their the as component that again, inventory, through recovers, and we'll that's

at, If you in is where increase components. the primary look it's at

again the to most flexibility SKUs, in given have that flex us that which partners. that Tier goods, finished fully we of isn't this manufacturing different between customers increase components So different at sitting is gives our X

Operator

with from Credit question last Guy ahead. Please comes go Our Suisse. Hardwick

Guy Hardwick

trying comments on sort business. dissect runway Just channel of and your inventories

you accounted I QX. it's of a And you a at rate in continues said Nathan, that -- kind for then third the think destocking. guidance similar by I of channel but in QX, think said

So your any of I kind very of kind at indicators yet? just -- of the you're be into there what you will stabilization been the the channel what there destocking the channel? has latest wondering are any view continue seeing mean, I what been if next the of year? year? terms mean, -- from signs end in And of the inventories Has is could not, where sellout

Nathan Winters

Yes.

kind that of similar demand, our So the that so from assumptions the assumes the that it to business of XX% QX of the maybe velocity if Then destocking -- just velocity and guidance at quarter. clarify, have look the in for the you impact outsize again, quarter, fourth so to third third you similar of is channel so QX. includes

in and is we the that's So of our fourth -- to the do as revenue improvement destock and much not sequential between again really the in driver as the QX plan differential. quarter that QX

level So where slate of a so go its and rate run the balance kind enter be channel we our year the clean expectation into expect appropriately to both the we that days on balances in the so with inventory is as will business normalized XXXX exit the distributors in at XXXX. with set hand that that trajectory we we the we have

Guy Hardwick

on inventories inventories, we kind Would it if be of expect of in take be say or terms elevated you view relative would three channel hand? levels? year a on levels back XXXX to channel pre-pandemic still mean, I four to to days XXXX,

Nathan Winters

Yes.

So different again, points. two

the the we from increased. of in as three stayed our that's a plan. to partners years and as boundaries increased two I we our Again, absolute and part channel a over measure days have we've last think incentive that business, the on -- within balance always revenue their dollars partners hand, as relatively on

the But -- And to partners product are now volume's And of by family we our days time have that declining lot ensuring levels with business. and those they are. again, on those vary our inventory -- support what hand declining. of spent a needs right by balances the the we business region that the

clean to more decline corrected again, fourth, than today, late here and We're the going then a sheet. velocity bit in little XXXX that so we're with saw that the range go So quarter. a just into given we little we in that a bit third higher the get again in second the

Operator

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

Bill Burns

Yes.

While is to over long-term, customers we and in benefit well-positioned from are secular our the pressured spend that digitize our automate trends certainly believe near-term, within environments. we workflows to

our their To success. thank and day, partners, customers, our great support everybody. to and just I'd dedication up, employees wrap like a Have to for over long-term

Operator

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

disconnect. now may You

Zebra Technologies (ZBRA) 1 Aug 232023 Q2 Earnings call transcript