Zebra Technologies (ZBRA) 30 Apr 242024 Q1 Earnings call transcript

Company Profile

Participants

Michael Steele	executive
William Burns	executive
Nathan Winters	executive
Jamie Cook	analyst
Damian Karas	analyst
Keith Housum	analyst
Thomas Moll	analyst
Brad Hewitt	analyst
James Ricchiuti	analyst
Joseph Giordano	analyst
Andrew Buscaglia	analyst
Brian Drab	analyst
Meta Marshall	analyst
Robert Mason	analyst
Kenneth Newman	analyst

Call transcript

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Operator

Good day, and welcome to the First Quarter 2024 Zebra Technologies Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

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

Michael Steele

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

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

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

presentation, press constant unless and this You indicated, can slide of release. find Throughout today's in on end to this reconciliations references presentation earnings otherwise year-over-year our sales currency at and are the performance basis. a

presentation our results conclude Winters, Bill second Burns, our progress and outlook. will then strategic This of detail begin our Nathan Officer. remarks year Bill Financial will discussion and will actions. the our Bill Nathan Officer; include vision. discuss will additional financials and Chief with quarter advancing provide prepared quarter Chief on full first from and with a Executive our on

remarks, prepared the take Bill questions. will Following and Nathan your

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

William Burns

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

quarter last first a decline our to and in in continued and began impacted quarter which was our in end expected, As markets broad-based softness regions, second the profitability. experience year, we by resulting of across performance sales double-digit

the However, quarter. a to as modest from see sequential we improvement fourth beginning we are recovery in saw demand

the upside navigating a take broad-based encouraged to particularly That a current result, approach for the are by we We quarter. agile to continue drove are order the an we large as yet environment. which said, better-than-expected And recovery. seeing the not activity,

profitability, our result in categories. margin. improved software gross a product sales Services actions with and improvement We helping spot in also sequential and to quarter offset delivered year-on-year profitability restructuring all declines quarter the sales bright across as were improved and a the another of of

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

with recover. on actions We the markets and to as end pleased are we previously have drive our sales improve our announced progress growth profitability made

to million be restructuring midyear. operating savings track Our $XXX net on of deliver is annualized completed plans to

supply the improvement On drive in working and ongoing long-term made to commitments our front, driven renegotiation our we down our by with substantial component supply capital manufacturers. inventories work contract of

tactical accelerate and reallocation We initiatives, strategic to resources have of growth. both also driven including sales

year for the free our outlook Given on progress are and sales, cash flow. margin actions, our full raising we

over to I XXXX will discuss turn now revised and financial QX the our call outlook. Nathan review our to results

Nathan Winters

Bill. you, Thank

a P&L regions, our decreased Let's X. under the were as spot on of major retail XX.X% in In all start Software customers sizes. Slide with with support Services product driven bright contract QX, a the with quarter, declines units growth and increased software categories wins. sales across by and

driven Our & XX.X% Asset declined Tracking primarily by Intelligence printing. segment

mobile & with segment Visibility sales outperformance XX.X% Enterprise computing. declined relative in Mobility

QX From higher and a realized had sales region perspective, modest we QX in by destocking continued XX% sequential the were Pacific declines in China. year-end improvement Asia Our by as led their total steepest process than saw demand. sales weakness completed distributors

XXX from margin first a year decrease XX.X%, point basis percent and quarter offset year, mitigated operating of supply improvement lower Adjusted volumes. adjusted of from incremental were to was sales. increased prior higher million resulted a approximately XX.X% basis software the in as savings $XX chain all The a restructuring net actions. partially gross This sequential premium impact by quarter and versus XX our margins XXX which and delevered EBITDA by point of from the XXX Adjusted cycling in points basis of deleveraging costs expense margin basis supported by prior points services expenses QX. the in sales

Non-GAAP per the a decline, contributed XX% $X.XX, adjusted offset Interest to year-over-year by expense decrease. share tax was rate. diluted earnings a lower

approximately of to of adjusted to facility Slide we our EBITDA quarter begin we to providing million on at the range. flow of slightly capacity We X.Xx $XXX top on credit end, is target cash leverage above X. the Turning from And ended flexibility. now as free inventory ratio, cash balance revolving flow which generated and net quarter end debt realize ample of had billion our the $X.X reducing We sheet as benefits levels.

Let's now turn to our outlook.

year. quarter For in This product and retail modest improvement of major compares. we EVM prior mobile mobile e-commerce. X% segment across to a QX, particularly second We to to opportunities, easier backlog compared the expect categories, demand solid the for growth computing pipeline computing between with X% we outlook entered in assumes and decrease as our sales a returning trends cycle the and with and

to slightly incentive expense. sales driven in XX% by of range $X.XX from lower normalized be supply be expense with compensation benefit margin from deleveraging We lower the actions restructuring diluted the share earnings and per costs, to volume anticipate expected EBITDA by offset above to QX Non-GAAP premium $X.XX. adjusted chain are

sales our profitability end markets have raised stabilized. full We progress our year, on the as for actions drive have reflecting and guide to our

in we with recovery $XX.XX to the in growth be sales final momentum broader large $XX free our the be a XX%. for expect And including is year, impact X% between the X% additional the for there year, $XX.XX. our per payment the would now partners of diluted to EBITDA factoring settlement and the now share now we margin second from see flow regarding expect the to in approximately customers before year of in cash to and half at like recovery. earnings orders adjusted optimism in expected million, least We $XXX of Non-GAAP Although million quarter. to expected are range be

reference in conversion cash prioritizing have additional With that, sheet assumptions paydown X. Bill. call We improving have will I modeling to back Slide in been shown on Please inventory rightsizing and and debt been making the turn term. near progress balance our the

William Burns

Thank you, Nathan.

to go-to-market machine well from remain to Zebra for real provider of on premier we and to positioned test a look solutions navigating and advanced empowers innovative workers analytics capabilities, to through we in focused prescriptive We solutions more through trends continue ecosystem. as workflows benefit our change automation, As customers. time comprehensive execute a elevating automate portfolio artificial effectively our Zebra and longer including by be secular term, intelligent constant intelligence. learning, digitize

and serve workflows at their modernizing on markets. increase Manufacturing end range broad March, customers, and XX, As our Chain leverage across Slide We see productivity our better partners, a shoppers to showcase enterprises In chain. patients. of to across broader optimize supply of and portfolio collaboration and solutions that are you customers our along trade with the solutions the workflows expanded MODEX Supply show, Zebra, empower our

inventory cases. key where supply become address consumer expectations for outcomes The Machine of and have production we provided capacity we such solutions many with capabilities enhanced we complex as to the operations deliveries. Managing chain one vision increased agility to event use and our featured quality, has opportunity emerging utilization. visibility an how same-day improve demonstrate was

wins. to market build few a our continue with We notable presence

transaction enhance machine large vision to European Zebra documents. invested A of state-owned efficiency thousands company logistics inspections speed of and the bonds cameras recently of in and government

as into This manufacturer Additionally, our as Zebra quality approach. At to and well leading frame machine journey than processes. patient Conference, and is partners and bedside solutions accurate point-of-care sorting control their check-in HIMSS, more manual significantly grabbers, vision cameras solution faster how the the our product incorporate an Healthcare demonstrated Global previous trace. track medical from and our Asian the and improve equipment

Maryland the work clinical cloud Additionally, includes software. communications how System University mobile which computers our our Health shared they utilizing of are and platform,

labeling to with secure a this network, win health system electronic processes. printers, Zebra's ease its implemented use America North specimen noticeable call reputation helps win. departments. enhancing improvements thousands like tracking also of out These I'd integrate printers of organizational record across a specifically for with the recently facilitating Zebra who hospital and

for retail, European enhancing a to our Recent Zebra demonstrate printers The labeling mobile to with to improve associates markdown, wins retailer online price customers asset visibility, their replace Zebra new thousands devices The customer computers shoppers. their plans selected and improving and computers order-picking legacy pair mobile productivity, from in driving their mobile of the are experience competitor. how processes.

enhanced in wasted time Zebra computers The of tracking department mobile this chain store of fulfillment thousands resulting with the incorporating our misplaced centers, device North software. retailer experienced resources. software, America-based in stores and and retail by Prior deployment issues devices

their stores. solution improve thousands and grocer American has and computers mobile software. installed North implemented communication cloud work enhance with operational of is additional management a efficiency expanded Zebra streamline inventory expected within to employee base associates, of our Additionally, units The among their

XX, we that to constraints, our for track chain mandates long-term as value and drive real-time Slide and resource support visibility, expect growth and secular expectations. highlight On These trace trends customers. we for consumer supply Zebra increased include labor we

customers are innovation discuss digitize day to end our Chicago We positive automate for I leadership how at across headquarters and our our Nathan markets. be joined XX members outcomes drive by May other on workflows will where an near and team hosting business of to we

In remains our closing, in Zebra, as conviction for look opportunity business long-term forward we a the strong. to

end us cost continue our well our while are profitable innovative actions portfolio our as customers and our of with through markets recover. to our elevate strategic role positioning solutions growth for We go-to-market

will I now it to Mike. back hand

Michael Steele

Instructions] [Operator

Operator

The Instructions] comes first [Operator Truist Cook question Securities. with of the line Jamie from

Jamie Cook

And you relative guess quarter quarter? the my guide were me, The first freight the then cost? I first question. just just year-over-year. guess in call And freight second then particular, quarter margins how the you margins, Nice the in sorry, much up which how in gross can what's implied guided lower quarter. last helped EVM the struck question, to I out

just decline And on help the could improvement if the margin understand drove sales wondering so gross I'm what us you there?

Nathan Winters

Yes.

take I'll Jamie, that. So,

given chain premium operational the QX, was So particularly year-on-year the we -- the actions just fully costs and the the through, point price cycling about between if the for X you neutralize improvement freight that supply in it now increases. look

about benefit So quarter. year-on-year, that of the X was point in

QX other both driving well and the as saw volume software well the some service relative strength as Along guide in say the in in think, quarter. relative to with and our slightly there, benefit is, we strength is both profitability the was from which the I'd as favorable sequentially the primarily as higher which EVM, drivers Yes, the I for mix.

Jamie Cook

continues, that sales your to think growth we I mean, that what's you ex-FX? in preventing the in activity you If guess talked then in quarter, larger a follow-up, just the guide? conservatism And isn't that reflect the continues, the X% which that in guidance about of from sorry, some that guidance X% order relative sales obviously -- I would how putting if in the the and guide, about to would

Nathan Winters

Yes.

we in the through think remainder improvement we've QX of mobile which drove as and year, the the we're driving what X% computing I X%. for stated, raise to seen beat particularly as see retail, well some the the expecting in year for full from in demand, come as to

to to sizes still waiting the, at in larger deployments, And quarter. the would in phases QX million $X through. we which we deal of million to full yet still seen in year so some we've way QX, that look the the are to in as of I'd think separate similar maintain But come large expect say, and very kind see, the strength of deployment. range, mega the not what was of The to which just let's is similar what's the the trajectory, terms that's relative run some initial we'd of I coming about $X say deals, first orders looks have still they through mega look rate to that QX, from

year carry guide, larger So you the through the uptick that's the not in of that terms the what in but and remainder of inflected see for deployments.

Operator

from Damian Karas comes UBS. question with next The

Damian Karas

customers sort wondering you if some in little X elaborate back right, large just If which elaborate maybe base X larger a customer of you placing the you activity, like larger end as could these is order to larger your quantity and regions spoke? you on could orders general, just start are markets or or that which kind activity? give of was orders us of you this any I provide well? bit project bring seeing are seeing of you're detail and rather a sense, Could large a maybe

William Burns

and wrapped Yes. kind we've into and of as -- really particularly improvement 'XX, year. in overall. as stabilize it's And computing, seen to entered we I'd it's in say their up overall modest QX been mobile order they've activity been demand in we've specific seen and retail large

better-than-expected the to year. results we by continue throughout in demand progress And sales certainly in we're expect modest result. QX we'd the So encouraged as as a improvement

the is HX lapping -- activity primarily the prior through driven However, growth destocking by that is seen. we've there

the We're beyond think So like momentum anticipated, of the activity were place cycle as Both seen first I seeing the visibility COVID. is through order we're what overall, those so with we'd be computing in it to is first that we we've in far. mobile retail. see seeing more to impacted recovery. And and what coming

I like a And move from in and before think it call broad-based kind it we'd see other T&L retail recovery. to verticals of to manufacturing we'd

Damian Karas

half. orders. but Guidance then guys question little maybe have of of, spoken just guidance, just like kind a probability follow-up conversion, those bit of the half? large half projects you a this sequentially of of in hitting first your for Could That's know some really just sort you're of you ask of on lack what sales that helpful. I assuming a you a the funnel really right, to comparable us to tell funnel, And conversion kind has back differently. second

Nathan Winters

I grounded last quarters. the based and orders Yes, experienced the rates on of the velocity, what as second channel in I'd through conversion mentioned -- well say out X really terms the today, see seeing call what half, earlier, as both we've terms the we're would sold of I being in that now over it, we the as

again, what aligned assumed say experienced we've second than rates experienced X the pipeline But past lower quarters. on based conversion what our half. I'd on the would with we have in still over historically we

we're customers. commitments There's around a that firm optimism, those. not given think we're lot the is, deployment mega discussions yet from to a big an assuming, difference kind I making assumption around just of we've of our see

remains for half have look committing we're in of play because uncertainty they way move seeing to second appropriate and projects what market. terms out the the to first guide the the think ensuring the those experiencing for budget year, you the forward look the available similar We very we're that half in really that's But in see year. the and the or that that's and what

Operator

Research. Housum Northcoast The from comes next Keith question with

Keith Housum

of versus the a now, terms region, the challenged And here? bit obviously, In to performance little us Asia is perhaps just And expand Pacific little of compared bit right you rest China understand but underperformed I and the on more that the company. please? perhaps short-lasting? color pressures a just And what you're area, in about seeing for expectations be longer can lasting

William Burns

Keith, Yes. I it's mean, Bill.

I all to think that QX was continued demand overall, the regions. impact by the soft of performance across

So I think we start there.

I as quarter. computing, clearly in bright saw mobile really some services software said, that and the outperformance in spots we we've was relative the think in and

We've overall would for some Zealand. as again, seen in and the again, more declines Asia in regions China having you market. retail, except longer probably look see recovery say to larger orders China. spots China would pretty I Australia impacted same, said, much Asia continued through was, New the the the in I that in a we say bright

So was the market. for Asia positive that a

I see to of China. think continue opportunities outside we

investments So there. Asia manufacturing and in Southeast India the with

Japan to We think us challenging continue to forward. continue places. investments that we lower moving as the share we we're opportunity there and as longer-term see making remain China I have than there, But other a expect for

Keith Housum

in guidance little reason EBITDA, bit the Nathan, how EBITDA follow-up, second versus you've about quarter? And parts margins just a lower a a terms think Sequentially, the for All adjusted XQ decline should bit XQ. and moving in little as the we the right. of for adjusted given in

Nathan Winters

slightly is just driven which the our inventories, by but in our business, of in XX.X% accretive that software performed physical so where Keith, probably QX. above QX from retail higher XX%, entirely seasonally down when as platform is margins, mentioned, retailers recall, the their focuses. really they've at cycle seasonality given timing That's the and of which counts guide you QX you

the characterize with from year how the adjustment the guide is QX fairly is the that's in And So to it. way QX. into QX going line we've structured it I'd full

cost some just the some mix and bit better coming start of the in well by the in bit a remainder -- a little the as think giving earlier, us of actions as was confidence in of of year. I revenue benefited year the of QX benefits

QX then where our line and but the is we the with software entirely -- in to expected So out driven play sequential by decline business. of retail year the seasonality

Operator

Moll from Tommy The next comes question Stephens. with

Thomas Moll

retail regarding are there end particular, In side? e-commerce this the and any markets, any context you anecdotes us your but the some that You've some some provide. in the could seeing I phase absorption past. from the end on overbuilding finally other side, of signs omnichannel on wanted you e-commerce on ask of to years Are detail of given hitting for

William Burns

retail talked we're signs, would right? QX spending retail relatively And I say and Yes. across outperformed, We that modest we've as QX. overall, about already. saw seeing year-end some encouraging

kind Some it absorbed buy the begin again, to as customers of you've Tommy. capacity and referenced, clearly have

that place really months also We've the XX begin to over seen of took so, last year last come back. some pushouts and the or in

seen So long we the those will come we've of those customers What and mostly ready for about the initiating we've full deployment. to X back. of projects projects Phase a seen really projects commit those to we not and expected is quite talked time, as

larger let's roll time So full have start and that would in been immediately, later conservative, over out we've year. that the a with the it orders of rollouts project, seen now past but deployment kind larger, deployments complete in even more the and

that have a be recovery. continue we So to there'll confidence

and that manufacturing care, and followed recover health we seeing think I out. we're T&L play anticipated would retail first, by and

what first and anticipated, also would computing that's seeing. mobile as well, we're we it And be

e-commerce. being are in think is retail, to T&L, even capacity orders but I is, come mobile really back manufacturing, and bright a doing recovery. before off, spots today than measured we retail, and more it way. that of uptick So are bring of and those we're used seeing want we retail and see a projects in more more back, activity, That what beginning to order vertical markets the broad-based computing the they're retailers And the call very

Thomas Moll

helpful. That's

curious on sounds follow-up, first currently? channel noise wasn't what's in levels. a to on perspective any channel It hand your there in destocking But view from really wanted inventory the the ask days I As I'm about like the a how many quarter.

do think some that you imply below at does historically, be sit is? we if what And need level there restock? And today to a historic that may point

Nathan Winters

Tom, that Yes, measure the QX to I support is global think the somewhat ending on to basis that current QX, in a demand. days-on-hand inventories channel exit normalized the

So we'd go if that by there's takes the a puts product and basis, region global I'd range and say within you families. on expect

ago. months So I where to we were X think nice improvement X a just from

And distribution changes think, full impact the as in said, levels. inventory in in terms the you year I meaningful -- assumed or changes the relative guide in no quarter of

Operator

Brad comes with The from next Fargo. question Hewitt Wells

Brad Hewitt

a I year. visibility X space positive deferrals feels project generally kind talked color guess, months be across visibility how versus like visibility the just direction, to any looks It and in how would from just last history helpful. you relative sort trending describe has on your of but So a return of pipeline overall of some about would your of ago? you been the

William Burns

orders overall, customer that -- expect I'd we'd say overall. to continued that orders resume

we're we've e-commerce other of Tommy's the about say been That's far. talked to and been with think would on as again, built kind that's more, macroeconomy, seen that retail I verticals I across customers opposed the we viewed that that capacity so I across as around the the as close as our absorbing question, focused of just certainly out. previously customers, other as trusted of order we see progress abating a year. as to and staying this them help would picking each verticals will verticals the momentum partner through We're the uncertainty up well.

installed We're base, growing right? We've got solutions. large a

new to continuing as cases. customers use So and with new our work of on well. solutions we're Kind

that in So would back. see come We we deployments want manufacturing overall, and to retail. anticipated I starting across kind We that large T&L. anticipated say of of more to

said, kind -- to But a certainly of more size deals run the deals, bit. come I rate projects. like have say, I of would customers around we'd overall, different some As it of our we're to There's mid-tier back been timing engagement see in of with uncertainty encouraging. so remains and

I that overall. reflected Nate outlook I covered our think think in earlier. it's year-end And

Nathan Winters

You in pipeline see where deals are at the stage. it the in of terms deal in the

versus in qualify to where you validate see the them So secure. like we'd more

earlier the years. point we'd in funnel, in relative at the the stages this where it than particularly to prior see seen So what half, year like to or second maybe in we've of

Brad Hewitt

That's Okay. helpful.

retail to QX. some that of the be quantify that think that then uptick that pushed Would retail magnitude you to I the revenue talked you convert when guys had activity order QX large end orders expected deferral? about of the the inclusive you that that at a Or able into you separate And was to of side, the bucket? were year-end in spending? on of was some

William Burns

would and retailers I the whether their into quarter. year-end or spending that truly first years that it's say year-end differently, across

we So orders both I an bridge annual typically think basis. on see that

much a QX retail have need So their customers from they year-end that perspective. was don't think I as move product as much between before QX there and just

even encouraging to orders I measured. again. start QX to I And us, to those those all whether think And beginning signs, to are are think more QX would again, see I the say it want we or that that continue was buy momentum. retailer of

You it it's moving was know those project, year-end we continued forward, we phase a projects will. but and of -- so believe first to I and what they spending, see the mean, want it was

the as much others and in December just some in year-end, the true quarter. activity QX that, say ended in of So as retail first I customers would around movement really where nothing normal QX, XX

Operator

from The Ricchiuti Jim comes Company. & Needham next with question

James Ricchiuti

-- the seeing of retail, that Maybe comment about recovery Is the that is in activity business? also the part Did to market? in it. I you you're impacting missed seeing ports you're SMB the

William Burns

that to again, rate SMB run in seen, think mid-tier we've fall large opportunities. I would business. I of And in more kind this say recovery would

progress we're the business get partners our and I will continue think optimism our on clearly to and the through year. part of second half seeing better distributors. That

I seen we've in this in orders we have not which at run across business, category. think in SMB But uptick the seen falls mid large moment, rate the really

would not on So I optimism partners, more I'd of there's yet. see the part think say want I say our to but that. we of that

large or pull As typically the retail first first back, are to seeing decline orders to the first the now we're was and to recover. recover, it first to

And rate I that will it, call think SMB, business and follow. mid-tier run

James Ricchiuti

would more distribution level the Got RFID the activity it. How on the like center into characterize to of side business the moving in activity, seeing see we're you're you the the of it starting package business? you? customer How would side business, with big sounds the you in RFID the out quarter, just T&L delivery of that trends and characterize for

William Burns

and verticals retail now, Yes. seeing and it clearly where across opportunities multiple clearly, supply track trace in an originally retail see would and focused just and chain. RFID, not as say opportunity apparel, we we're was I across

inside You airports baggage airlines transportation mentioned and tracking work in tools logistics, with with over. in parcel and tracking the progress manufacturing

So a we're quick-serve restaurants. seeing, different series applications whole of

set of RFID and retailers doing the what are of across to smart Clearly, others today. large solutions they're at and in deepest multiple things Zebra like the broadest the RFID in causing verticals. and Walmart package market move along to industries UPS or ahead continue initiatives move has look

that utilized or whether then and to -- our software our for locates handheld and So reads we labels mobile industrial printers, our readers, fixed printed through and printers. it's

portfolio So few over we've the past growth seen across strong the years.

tag to continue that more make to development tags. accuracy efficient the the with the rerate in of see that new types fact We across the the continue being that technologies greater reading drivers the of improve

we're being seeing today think these I different more available software serving markets. applications of

of We're that excites from I manufacturing, perspective, of tags more those of follow the of readers tags, overall, all at the sold us certainly is that is source right? So customer the the tags, being and think that of adoption allow tags number our of going fact that -- tags number environment. point the items idea in clearly, applications tagging to of what

to about remain this to and we going RFID. see excited we're So think continue space growth I across overall,

Operator

is Giordano next The Cowen. question Joe with TD from

Joseph Giordano

know in in I you out next your year, are of increase like XXXX? Like should into hesitant installed be like immediate But base the considering aftermath you as big get still, COVID. the -- is happened play cycle lay times. to a just capital people said in thinking kind that of couple Just we of for large-scale like refresh

William Burns

those out are they year, to computers that want ahead as opportunities, are move a happen well of And customers of large pipeline I talking worked the I've across have the really is I'd a you're as the healthy sales essential customers retail goods-based that say ultimately, moving in first more on products. across our kind year in really e-commerce. refresh that in those operation, across lot think that to signs mobile cycle, that see their we'd mobile start, pandemic. And clearly, recovery. computing like this of to as think -- capacity overall to about that teams build customers. refresh from what multiple with overall. see manufacturing healthy be a through a idea into next bit us seeing economy a as I begun described. of computing in see and focused absorb we'd more economy capacity, during in but as our the have cycles. you mobile services-based to certainly we're EMC got We've said And to the with are that already, of of T&L We'd couple And generations the that times like

base refresh larger a for is it's there that's cycle ever than environment. mobile in deployed been devices clearly, their people out that is The applications more embedded So there.

larger. is base installed the So

different to will a is those continue customer cycle. on refresh So every and

So think specific about or that I postal retailer. provider country you're a environment larger G&L a talking a whether in a or

scale, seen probably even like more What happen of Nate as about, orders larger in size been I rolling time. kind they've have out so large over places been as that We'd retail, these in in expect T&L. same smaller been and we talked thing will deals, is mega in measured haven't described have that

be I recovery. overall a time. to going a but take And base got strong it's we refresh, it will So to think to measured feel continue I that think we've

Joseph Giordano

get then good strong. seems key shifting kind maybe flow pay your stopped. deterioration but recovery, markets, just the to we magnitude like you enough. was has looks here. balance Fair data Cash at of see With it of It to quickly. sheet debt And least back the some

appetite of an for of this? out increase on recovery to your buybacks as there leverage is come So kind you a

Nathan Winters

Yes.

a we at As to the flexibility the we leverage within the we roll range. ratio, range, back QX X.Xx like mentioned, with slightly ample above That last target begins year. have feel you we through little particularly so of over revolver. the Today, finished as quarter move

As given you just do particularly paydown buybacks leverage and plan the current we the ratios progresses, debt but second the interest the in mentioned, we year are debt reassess environment, rate half. prioritizing to as

Operator

Buscaglia comes The Andrew with BNP from next Paribas. question

Andrew Buscaglia

to you want check just the I commented -- on on So guidance.

does talking looking lift step similar the sales? wondering rate then comment the looking on I'm sequential about in you're It seasonally. like what about seem QX seeing to to You're margin more QX, some it what's like just Because behind QX. on clarify, down margins? you're a And that. -- seems in run expecting like

Nathan Winters

absolutely you're right. No, Yes.

we from expect do revenue go on on an year. uptick as comment we through in was the margin perspective, QX a QX the similar to So --

just normal like through typical a is actions what in we you QX, funding holidays, as similar and just bit to the that tends phasing well last get seasonal taxes you into that as -- in the of get say between downtick cost talked quarter cycle timing our, of project Some just early be about as just of some be part and the QX, with late a of into it spend. of terms which call, so things, coming this will incremental of QX payroll to little

to and there no that need improvement terms there's actions magic the I -- into So QX think from order take to we in QX. in bullet QX deliver of sequential

Andrew Buscaglia

the question, been M&A into a What Joe's flow heading maybe now? I your It's software then about is bit. along lately. cash story you you think And of Okay. improving, lines helping nice. raised the has it

see So you what's as it the deals? environment with like

William Burns

would say overall. I'll Yes, our that, priority Nate. to organic growth continues I that first take be

really much. assets M&A and areas. are you've We're synergistic acquiring our as expansion portfolio to kind philosophy hasn't targeting I adjacent changed today, adjacent think and these clearly us clearly of our that seen

strong obviously, a that sheet, that here. have over balance time could support We

the short think bar the we're term, a environment leverage the macro as that debt there's -- I higher today. at in given and clearly

and look I continue to So out there. inquisitive think what's be we'll

I term, just think have in products opportunity the higher it portfolio, and short I it's and to strategic the I to an see add be solutions And think think that we as our hurdle. marketplace. in that we a

Operator

Drab question William Brian next Blair. comes from with The

Brian Drab

just I to one clearly, want So thing. clarify

seeing mean than recovery seeing you're at the that that you're comes and T&L where yet that before you said way not manufacturing is in play manufacturing T&L. the those retail -- clearly, point So you this X this back expected you retail or in that recovery recovery just in categories? Are stronger does and and retail, out to

William Burns

is during market relationship a versus that say pandemic their built the we're trends T&L would clearly say again, not in got markets. capacity I strong that still see services-based the both remains I by still economy. think out. to out proposition again strong automation once seeing would take uncertainty. And things manufacturing in it across clearly, buy say I supply continuing resilient and built customers actions a economy capacity the value Overall, and chains. -- to invest that like of continue operations would we'll to to they're traceability that But overall. I are think will opportunity there Yes, I as they yet. absorbing and us. buy is goods-based customers are an the optimize our say manufacturing I would for impacted continue We've And broader them that overall, T&L. is

based spending uncertainty. on seen Those a nature the we've away, but themes haven't gone just of conservative

represents manufacturing as markets there's I is those us, manufacturing, we've that an for an say kind demand for opportunity us. that And new robotics of recover. our strengthens So like a machine offering planning that for so got T&L solutions automation, underpenetrated vision, unlike there our opportunity us. within would

we've So also sales manufacturing. resources to additional -- and this through shifted

I term. was retail recover. because we decline. of that lots us we've first say the see manufacturing recover. got be when follow. does an expected to manufacturing a we across strong as it opportunities So and would And it I the will continue area It's T&L think to to T&L, relationships first but opportunity longer for there will focus

Brian Drab

way. could then wonder a I I this ask if question Okay. And

have what and the X that talk core the for adjacencies categories? expected high good and terms where markets You low of single you're categories, used expecting it respectively. your I'm longer-term frame wondering, and slide X you those you about you for growth digit, and in growing mid-single, next in can those in expansion year, the just double that outlook

William Burns

and I'd has to is say, would up. is the say that end predict first. hard to mobile overall going it's -- where overall, computing become each core I recovering

a I different dynamic. think has each

things connected tablets that categories a in mobile like services software last be circle and will that to would if opportunity. I to that, and So of an say, to computing. continue category, I be our RFIDs business you like closely of overall. kind had the positive things think in will quarter QX the and in expansion think others that

more Machine like recurring challenged in with vision down. the term So I think manufacturing that's short and been being revenue-based. areas has semiconductor

each So I by varies it think segment.

and gives takes each. I think in there's

first, will still computing the the but mobile others core think recover. I down,

software be its a I still think infancy. spot, the will robotics bright short rate And I spots. term, in was bright RFID the but adjacencies, at vision and machine others in challenge think

that I just think across will but of going those, I -- time. It's frames mixed different kind recover think time to it's be all for each. over So

Operator

Meta question Morgan comes next The with from Stanley. Marshall

Meta Marshall

to I some cycle any question computing coming we just kind these the as mobile printing this you of trends But about up? replacement of think the kind and think cycles in of alluded of kind renewal between earlier in call.

care touched maybe haven't an been That's on you the market. you a then guys. health clearly And second, area for of expansion

investment that progress any made on kind opportunity? that's Just of or been

William Burns

and a mobile say we talked kind would that and showing I'd say of printing, has fair in compare computing a challenges first quarter 'XX, amount. clearly but ago, talked Yes. we of declines, in I as for chain difficult we saw recovery supply in stabilized QX. DCS as broad-based abate that signs through the as that we was saw expected, about areas. now printing first both in a There year QX both those

So lot ago. scanners in we and a quarter year shipped the of a printers

were compares the pretty tough. So

broader overall, we within health budgets productivity be clearly providers would within care, macroeconomic the about. on say clearly in we particularly manufacturing, trends, them safety. appealing conditions patient specifically, to then that which which allows care scanning to by tighter kind that I the health and to margins would computing of same certainly efficient, care, and talked challenged Specific and expect health I the but would recovery printing solutions I would we see printing still that softer follow that overall. to by would margins health impacted by market stabilized is to enhance care drive in say more say We'd clearly in as continue mobile tight

see us. We care is home for opportunity health an

we're our of some partners So seeing market. address clearly that

example opportunities. an health tablets care of So as home around think

trade we'd well our see optimism optimism. in So into show other manufacturing we real earlier. turn the The the of that the point like verticals I largest and retail to on was we're we in think at retail. the script I of QX. like were we've show, like T&L, that in mentioned seeing which We attended think seen see orders HIMSS in more But our and optimism customers just as partners

Operator

Rob next question comes from The with Mason Baird.

Robert Mason

of rate year, if for in to of sales there it side maybe put the relative could a of the the I just finer just haven't expectations a just times, up of you've on business, would large guide see Bill, context yet. necessarily -- you your to the you -- seen on touched the run the guide point couple signs the recovery want X% overall there deal business? X% to

William Burns

our that flat. relatively say probably would I Yes, thought is

expected first. we think large I to deals recover

We run recover expect we've talked about as already. rate after in mid-tier to

our where more we're progression, want see to optimism part our on I think anything this of think, than area, of lot more a distributors kind the just else. there's I and we at. been of and in partners That's

we're typically thing mid-tier of first then run recovery. We deals I tail. run rate because the to are -- in going is same And large decline and think rate followed to the see longer by kind and that

We it haven't yet. seen

was better seeing. year. So I think the challenge the through that's that, the we're visibility I wish

there, the or what our to visibility from recovery and consequent rate of see mid-tier that we haven't the guiding the more perspective, think need guide, to I And just after it. everybody is we kind seen in with out of is seem just run to we're and be optimism a the We worse. there, go And really turn yet. see it to happen opportunities wants

Nathan Winters

Yes.

QX that's those categories. seeing that's different how in say uptick. of of on X Rob, what today we to think, based terms that you we all different all of of an the Again, because guide terms across just see point the business categories across overall dramatic was kind trajectory of I appropriate revenue. what you we're said a to flat, play when the Flat, seeing feel without inflection it. in the right X That

Robert Mason

placeholder as guidance slotted tell have Nathan, the Yes. you follow-up, the us for reduction debt the you Understood. could for And then is year? just what a into

Nathan Winters

would the cash I down, debt would the -- little debt cash of assume either pay will flow in of vast a million of some $XXX go to modest free go but that at rate, the maybe bit majority the interest in majority vast cash pay. to held terms

Operator

Newman comes with Capital The Ken Markets. next from KeyBanc question

Kenneth Newman

you've operating some I I Most been on side. the to that's significant but Obviously, back ask easier very and volume half, the questions of just for think higher-level wanted asked, a comparisons longer-term just leverage got implied have my on mostly question.

the rate or operating higher you've returning tell? run more environment, just early what run EBITDA on? in is normalized we operating that that rate the all executed cycles? Or you the how think given to that about leverage Would towards initiatives a we've past seen structurally think about cost-out you than margins, too maybe As still think do incremental

Nathan Winters

Yes.

for with correlated is margin highly or -- obviously, the still think the like. so And early what framework scale volume in the the last mentioned, us, target volume in actions as coupled above too the the baseline restructuring that can along XX% grow year. tell looks and And increased back expansion we we was to of we get to half I to the throughout with took second from there. with that really, As leverage exactly terms

expect. these say time, Fundamentally, we've out. changed Over markets terms of little like scale inherently going emerging the software in have to I'd higher what machine or vision quarter we XX% be at quarter we'd you bit business of as gross to decrementals some that incremental new would a a quarter, historically, margin. greater in, hasn't look normal that in expect

that's perspective. until it best probably sequential the But get some both as way a settles as I normalcy think now from dust to to about think well year-on-year a and the we

Operator

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

William Burns

in and great at partners weeks. everyone. a investors you. positioning day, and X stronger-than-expected to to the the Have Yes. of We I'd start and look growth to like for second our Innovation to employees year. analysts year Thank in return our seeing the forward thank the to Zebra half Day

Operator

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

now may You disconnect.

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