Zebra Technologies 10-Q 2022-04-02

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 2, 2022

OR

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

			For the transition period from to

Commission File Number: 000-19406

Zebra Technologies Corporation

(Exact name of registrant as specified in its charter)

Delaware			36-2675536
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

3 Overlook Point, Lincolnshire, IL 60069

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (847) 634-6700

Securities registered pursuant to Section 12(b) of the Act:

Title of each class						Trading Symbol(s)						Name of exchange on which registered
Class A Common Stock, par value $.01 per share						ZBRA						The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

			Large accelerated filer			☒			Accelerated filer			☐
			Non-accelerated filer			☐			Smaller reporting company			☐
									Emerging growth company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 29, 2022, there were 52,513,827 shares of Class A Common Stock, $.01 par value, outstanding.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

QUARTER ENDED APRIL 2, 2022

TABLE OF CONTENTS

						PAGE
PART I - FINANCIAL INFORMATION						3
Item 1.			Consolidated Financial Statements			3
			Consolidated Balance Sheets as of April 2, 2022 (unaudited) and December 31, 2021			3
			Consolidated Statements of Operations (unaudited) for the three months ended April 2, 2022 and April 3, 2021			4
			Consolidated Statements of Comprehensive Income (unaudited) for the three months ended April 2, 2022 and April 3, 2021			5
			Consolidated Statements of Stockholders’ Equity (unaudited) for the three months ended April 2, 2022 and April 3, 2021			6
			Consolidated Statements of Cash Flows (unaudited) for the three months ended April 2, 2022 and April 3, 2021			7
			Notes to Consolidated Financial Statements (unaudited)			8
			Note 1: Description of Business and Basis of Presentation			8
			Note 2: Significant Accounting Policies			8
			Note 3: Revenues			9
			Note 4: Inventories			10
			Note 5: Business Acquisitions			10
			Note 6: Investments			10
			Note 7: Fair Value Measurements			10
			Note 8: Derivative Instruments			12
			Note 9: Long-Term Debt			14
			Note 10: Accrued Liabilities, Commitments and Contingencies			15
			Note 11: Income Taxes			16
			Note 12: Earnings Per Share			17
			Note 13: Accumulated Other Comprehensive Income (Loss)			17
			Note 14: Accounts Receivable Factoring			18
			Note 15: Segment Information & Geographic Data			19
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			20
			Overview			20
			Results of Operations			22
			Results of Operations by Segment			24
			Liquidity and Capital Resources			26
			Significant Customers			28
			Safe Harbor			28
			New Accounting Pronouncements			29
			Non-GAAP Measures			29
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			29
Item 4.			Controls and Procedures			29
PART II - OTHER INFORMATION						31
Item 1.			Legal Proceedings			31
Item 1A.			Risk Factors			31
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			32
Item 6.			Exhibits			33
Signatures						34

PART I - FINANCIAL INFORMATION

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

			April 2, 2022						December 31, 2021
			(Unaudited)
Assets
Current assets:
Cash and cash equivalents			$	141					$	332
Accounts receivable, net of allowances for doubtful accounts of $1 million each as of April 2, 2022 and December 31, 2021			808						752
Inventories, net			469						491
Income tax receivable			14						8
Prepaid expenses and other current assets			137						106
Total Current assets			1,569						1,689
Property, plant and equipment, net			271						272
Right-of-use lease assets			133						131
Goodwill			3,266						3,265
Other intangibles, net			437						469
Deferred income taxes			226						192
Other long-term assets			227						197
Total Assets			$	6,129					$	6,215
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt			$	183					$	69
Accounts payable			691						700
Accrued liabilities			459						639
Deferred revenue			397						380
Income taxes payable			69						12
Total Current liabilities			1,799						1,800
Long-term debt			913						922
Long-term lease liabilities			122						121
Deferred income taxes			4						6
Long-term deferred revenue			318						315
Other long-term liabilities			67						67
Total Liabilities			3,223						3,231
Stockholders’ Equity:
Preferred stock, $.01 par value; authorized 10,000,000 shares; none issued			—						—
Class A common stock, $.01 par value; authorized 150,000,000 shares; issued 72,151,857 shares			1						1
Additional paid-in capital			487						462
Treasury stock at cost, 19,367,014 and 18,736,582 shares as of April 2, 2022 and December 31, 2021, respectively			(1,331)						(1,023)
Retained earnings			3,778						3,573
Accumulated other comprehensive loss			(29)						(29)
Total Stockholders’ Equity			2,906						2,984
Total Liabilities and Stockholders’ Equity			$	6,129					$	6,215

See accompanying Notes to Consolidated Financial Statements.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share data)

(Unaudited)

			Three Months Ended
			April 2, 2022						April 3, 2021
Net sales:
Tangible products			$	1,207					$	1,153
Services and software			225						194
Total Net sales			1,432						1,347
Cost of sales:
Tangible products			681						591
Services and software			114						101
Total Cost of sales			795						692
Gross profit			637						655
Operating expenses:
Selling and marketing			152						134
Research and development			137						140
General and administrative			99						82
Amortization of intangible assets			33						26
Acquisition and integration costs			4						1
Total Operating expenses			425						383
Operating income			212						272
Other income, net:
Foreign exchange gain			8						2
Interest income, net			30						2
Total Other income, net			38						4
Income before income tax			250						276
Income tax expense			45						48
Net income			$	205					$	228
Basic earnings per share			$	3.86					$	4.26
Diluted earnings per share			$	3.83					$	4.22

See accompanying Notes to Consolidated Financial Statements.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

			Three Months Ended
			April 2, 2022						April 3, 2021
Net income			$	205					$	228
Other comprehensive income (loss), net of tax:
Changes in unrealized gains on anticipated sales hedging transactions			5						32
Foreign currency translation adjustment			(5)						(3)
Comprehensive income			$	205					$	257

See accompanying Notes to Consolidated Financial Statements.

**ZEBRA TECHNOLOGIES CORPOR

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Overview

Zebra Technologies Corporation and its subsidiaries (“Zebra” or the “Company”) is a global leader respected for innovative Enterprise Asset Intelligence (“EAI”) solutions in the automatic identification and data capture solutions industry. We design, manufacture, and sell a broad range of products and solutions, including cloud-based software subscriptions, that capture and move data. These products and solutions include mobile computers; barcode scanners and imagers; radio frequency identification device (“RFID”) readers; specialty printers for barcode labeling and personal identification; real-time location systems (“RTLS”); related accessories and supplies, such as self-adhesive labels and other consumables; and related software applications. We also provide a full range of services, including maintenance, technical support, repair, managed and professional services, as well as various workflow optimization solutions, including cloud-based software subscriptions and robotic automation solutions. End-users of our products, solutions and services include those in the retail and e-commerce, manufacturing, transportation and logistics, healthcare, public sector, and other industries within the following regions: North America; Europe, Middle East, and Africa (“EMEA”); Asia-Pacific; and Latin America.

Our customers have traditionally benefited from proven solutions that increase productivity and improve asset efficiency and utilization. The Company is poised to drive, and capitalize on, the evolution of the data capture industry into the broader EAI industry, supported by technology trends including the Internet of Things (“IoT”), ubiquitous mobility, automation, cloud computing, and the increasingly on-demand global economy. EAI solutions offer additional benefits to our customers including real-time, data-driven insights that improve operational visibility and drive workflow optimization.

The Company’s operations consist of two reportable segments that provide complementary offerings to our customers: Asset Intelligence & Tracking (“AIT”) and Enterprise Visibility & Mobility (“EVM”).

*•*The AIT segment is an industry leader in barcode printing and asset tracking technologies. Its major product lines include barcode and card printers, supplies, including temperature-monitoring labels, and services.

• The EVM segment is an industry leader in automatic information and data capture solutions. Its major product lines include mobile computing, data capture, location solutions, RFID, fixed industrial scanning and machine vision, services, and workflow optimization solutions. Our workflow optimization solutions include cloud-based software subscriptions, retail solutions, and robotic automation solutions.

In the first quarter of 2022, the location solutions offering, which provides a range of RTLS and services that generate on-demand information about the physical location and status of high-valued assets, equipment, and people, moved from our AIT segment into our EVM segment contemporaneous with a change in our organizational structure and management of the business. We have reported our results reflecting this change, including historical periods, on a comparable basis. This change did not have an impact to the Consolidated Financial Statements.

Recent Developments

Russia and Ukraine War

We are closely monitoring Russia’s invasion of Ukraine, which remains an evolving and uncertain situation. On March 5, 2022, we announced the suspension of our business operations in Russia. Neither Russia nor Ukraine comprises a material portion of our business, and therefore, the war thus far has not had a significant effect on our results of operations. Additionally, the war has not significantly affected our ability to source supplies or deliver our products and services to our customers in the surrounding EMEA region. However, the implications of this war may expand beyond the current scope, potentially resulting in significant adverse impact on our business.

COVID-19 Outbreak

The global coronavirus (“COVID-19”) pandemic continues to evolve. Governmental agencies, to varying degrees, have imposed, and continue to impose, several protocols and regulations restricting activities of individuals in an effort to limit the spread of COVID-19 when rates of infection rise, with some relaxation of these measures when infections rates are relatively low. We have implemented a number of measures in an effort to protect our employees’ health and well-being over the course of the pandemic tailored to address the local impacts, including having the majority of office workers work remotely during the height of the pandemic and high risk times and gradually returning to offices as restrictions are lifted when risks decrease,

limiting employee travel, and implementing more strenuous health and safety measures for hosting and attending in-person industry events. Throughout the pandemic, distribution centers and repair centers have remained open at varying capacity levels to ensure continued support to our customers, many of whom provide essential goods and services to communities. As governments ease their restrictions, our employees have been coming back to work in our offices in a controlled approach, with modified business practices, including, when appropriate, masking and social distancing protocols consistent with government regulations, vaccine verification, health screening, office capacity restrictions and tracking and tracing protocols where applicable, provision of personal protective equipment, increasing air exchange/ventilation and extensively and frequently disinfecting our workspaces.

While customer demand has remained strong, the limited availability of certain product components has resulted in lengthened lead times and higher input costs, including freight, and in some cases, has impacted our ability to meet customer demand. The Company expects input costs to remain elevated for some period of time, which we believe will be partially mitigated through higher pricing where permitted by market conditions. The limited availability of certain component parts may continue to negatively impact our ability to meet forecasted customer demand. The Company’s 2021 sales and profitability, particularly in the first half of the year, benefited from pent-up demand from customers who we believe had previously delayed purchases due to the pandemic, as well as the resulting acceleration of the underlying trend to digitize and automate workflows.

Acquisitions

Matrox Imaging: On March 14, 2022, the Company entered into a definitive agreement to acquire Matrox Electronic Systems, Ltd., a developer of advanced machine vision components and systems. The purchase price of approximately $875 million is expected to be funded with a combination of cash on hand and financing from our credit facility. The transaction is subject to customary closing conditions and is expected to close mid 2022. The acquired business will become part of the EVM segment.

Antuit.ai: On October 7, 2021, the Company acquired Antuit Holdings Pte. Ltd. (“Antuit”) for $145 million in cash, net of cash acquired. Antuit is a provider of demand-sensing and pricing optimization software solutions for retail and consumer products companies. Through this acquisition, the Company expands its portfolio of software solution offerings to customers in these industries by combining Antuit’s platform with its existing software solutions and EVM products. The operating results of Antuit are included in the EVM segment.

Fetch: On August 9, 2021, the Company acquired Fetch Robotics, Inc. (“Fetch”) for total purchase consideration of $301 million, which consisted of $290 million in cash paid, net of cash acquired, and the fair value of the Company’s existing minority ownership interest in Fetch of $11 million, as remeasured upon acquisition. Fetch is a provider of autonomous mobile robot solutions for customers who operate in the manufacturing, distribution, and fulfillment industries, enabling customers to optimize workflows through robotic automation. Through this acquisition, the Company intends to expand its automation solution offerings within these industries. The operating results of Fetch are included within the EVM segment.

Adaptive Vision: On May 17, 2021, the Company acquired Adaptive Vision Sp. z o.o. (“Adaptive Vision”) for $18 million in cash, net of cash acquired. Adaptive Vision is a provider of graphical machine vision software with applications in the manufacturing industry, as well as a provider of libraries and other offerings for machine vision developers. The operating results of Adaptive Vision are included within the EVM segment.

Results of Operations

Consolidated Results of Operations

(amounts in millions, except percentages)

			Three Months Ended
			April 2, 2022						April 3, 2021						$ Change						% Change
Net sales:
Tangible products			$	1,207					$	1,153					$	54					4.7		%
Services and software			225						194						31						16.0		%
Total Net sales			1,432						1,347						85						6.3		%
Gross profit			637						655						(18)						(2.7)		%
Gross margin			44.5		%				48.6		%										(410) bps
Operating expenses			425						383						42						11.0		%
Operating income			$	212					$	272					$	(60)					(22.1)		%

Net sales to customers by geographic region were as follows (amounts in millions, except percentages):

			Three Months Ended
			April 2, 2022						April 3, 2021						$ Change						% Change
North America			$	699					$	673					$	26					3.9		%
EMEA			500						490						10						2.0		%
Asia-Pacific			149						120						29						24.2		%
Latin America			84						64						20						31.3		%
Total Net sales			$	1,432					$	1,347					$	85					6.3		%

Operating expenses are summarized below (amounts in millions, except percentages):

			Three Months Ended
			April 2, 2022						April 3, 2021						As a % of Net sales
						2022						2021
Selling and marketing			$	152					$	134					10.6		%				9.9		%
Research and development			137						140						9.6		%				10.4		%
General and administrative			99						82						6.9		%				6.1		%
Amortization of intangible assets			33						26						NM						NM
Acquisition and integration costs			4						1						NM						NM
Total Operating expenses			$	425					$	383					29.7		%				28.4		%

Consolidated Organic Net sales growth:

			Three Months Ended
			April 2, 2022
Reported GAAP Consolidated Net sales growth			6.3		%
Adjustments:
Impact of foreign currency translation (1)			0.1		%
Impact of acquisitions (2)			(1.0)		%
Consolidated Organic Net sales growth (3)			5.4		%

(1)Operating results reported in U.S. Dollars are affected by foreign currency exchange rate fluctuations. Foreign currency translation impact represents the difference in results that are attributable to fluctuations in the currency exchange rates used to convert the results for businesses where the functional currency is not the U.S.

Dollar. This impact is calculated by translating the current period results at the currency exchange rates used in the comparable prior year period, inclusive of the Company’s foreign currency hedging program.

(2)For purposes of computing Organic Net sales growth, amounts directly attributable to the acquisitions of Adaptive Vision, Fetch and Antuit are excluded for twelve months following their respective acquisitions.

(3)Consolidated Organic Net sales growth is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of this item.

First quarter 2022 compared to first quarter 2021

Total Net sales increased $85 million or 6.3% compared to the prior year as our customers continue to digitize and automate their workflows. EVM Net sales growth was partially offset by a decline in AIT Net sales. Current year Net sales of both segments included the negative effects of supply constraints, which were particularly pronounced in AIT. Prior year Net sales of both segments benefited from pent-up demand from customers who we believe delayed purchases in fiscal 2020 due to the COVID-19 pandemic. Excluding the effects of acquisitions and currency changes, the increase in Consolidated Organic Net sales was 5.4%.

Gross margin decreased to 44.5% for the current quarter compared to 48.6% for the prior year. Gross margins were lower in both of our segments primarily due to higher premium freight and component part costs, as well as unfavorable business mix, which were partially offset by higher support service margins.

Operating expenses for the quarters ended April 2, 2022 and April 3, 2021 were $425 million and $383 million, or 29.7% and 28.4% of Net sales, respectively. The increase in Operating expenses over the prior year was primarily due to the inclusion of operating expenses and amortization of intangible assets associated with recently acquired businesses, as well as increased marketing program activities and employee travel as in-person activities resumed. These increases were partially offset by timing of research and development program activity, as well as lower employee incentive-based compensation.

Operating income decreased 22.1% to $212 million for the current quarter compared to $272 million for the prior year. The decrease was due to lower Gross Profit and higher Operating expenses.

Net income decreased 10.1% compared to the prior year due to lower Operating income and a higher effective income tax rate, which were partially offset by favorability in Other income, net as follows:

• Other income, net was $38 million in the current year compared to $4 million in the prior year primarily due to higher interest income and foreign exchange gains in the current year. The current year interest income benefited from a $34 million gain on interest rate swaps compared to an $8 million gain in the prior year.

• The Company’s effective income tax rate for the three months ended April 2, 2022 and April 3, 2021 was 18.0% and 17.4%, respectively. The increase in the effective rate was primarily due to reduced benefits from share-based compensation deductions, partially offset by an increased benefit from a higher foreign-derived intangible income deduction.

Diluted earnings per share decreased to $3.83 as compared to $4.22 in the prior year primarily due to lower Net income, partially offset by lower average diluted shares outstanding.

Results of Operations by Segment

The following commentary should be read in conjunction with the financial results of each operating business segment as detailed in Note 15, Segment Information & Geographic Data in the Notes to Consolidated Financial Statements. To the extent applicable, segment results exclude purchase accounting adjustments, amortization of intangible assets, acquisition and integration costs, impairment of goodwill and other intangibles, and exit and restructuring costs.

Asset Intelligence & Tracking Segment (“AIT”)

(in millions, except percentages)

			Three Months Ended
			April 2, 2022						April 3, 2021						$ Change						% Change
Net sales:
Tangible products			$	370					$	407					$	(37)					(9.1)		%
Services and software			24						22						2						9.1		%
Total Net sales			394						429						(35)						(8.2)		%
Gross profit			154						207						(53)						(25.6)		%
Gross margin			39.1		%				48.3		%										(920) bps
Operating expenses			94						96						(2)						(2.1)		%
Operating income			$	60					$	111					$	(51)					(45.9)		%

AIT Organic Net sales growth:

			Three Months Ended
			April 2, 2022
AIT Reported GAAP Net sales growth			(8.2)		%
Adjustments:
Impact of foreign currency translation (1)			0.1		%
AIT Organic Net sales growth (2)			(8.1)		%

(1)Operating results reported in U.S. Dollars are affected by foreign currency exchange rate fluctuations. Foreign currency translation impact represents the difference in results that are attributable to fluctuations in the currency exchange rates used to convert the results for businesses where the functional currency is not the U.S. Dollar. This impact is calculated by translating the current period results at the currency exchange rates used in the comparable prior year period, inclusive of the Company’s foreign currency hedging program.

(2)AIT Organic Net sales growth is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of this item.

First quarter 2022 compared to first quarter 2021

Total Net sales for AIT decreased $35 million or 8.2% compared to the prior year primarily due to lower sales of printing products, particularly within our North America region, which were partially offset by higher sales of supplies. Current year Net sales included the negative effects of supply constraints; while prior year Net sales benefited from pent-up demand from customers who we believe delayed purchases in fiscal 2020 due to the COVID-19 pandemic. Excluding the impact of foreign currency changes, AIT Organic Net sales declined 8.1%.

Gross margin decreased to 39.1% for the current quarter compared to 48.3% for the prior year, primarily due to higher premium freight and component part costs, as well as unfavorable business mix and volume leverage.

Operating income decreased 45.9% in the current quarter compared to the prior year period. The decrease was primarily due to lower Gross profit.

Enterprise Visibility & Mobility Segment (“EVM”)

(in millions, except percentages)

			Three Months Ended
			April 2, 2022						April 3, 2021						$ Change						% Change
Net sales:
Tangible products			$	837					$	746					$	91					12.2		%
Services and software			201						175						26						14.9		%
Total Net sales			1,038						921						117						12.7		%
Gross profit			483						451						32						7.1		%
Gross margin			46.5		%				49.0		%										(250) bps
Operating expenses			294						260						34						13.1		%
Operating income			$	189					$	191					$	(2)					(1.0)		%

EVM Organic Net sales growth:

			Three Months Ended
			April 2, 2022
EVM Reported GAAP Net sales growth			12.7		%
Adjustments:
Impact of foreign currency translation (1)			0.1		%
Impact of acquisitions (2)			(1.2)		%
EVM Organic Net sales growth (3)			11.6		%

(1)Operating results reported in U.S. Dollars are affected by foreign currency exchange rate fluctuations. Foreign currency translation impact represents the difference in results that are attributable to fluctuations in the currency exchange rates used to convert the results for businesses where the functional currency is not the U.S. Dollar. This impact is calculated by translating the current period results at the currency exchange rates used in the comparable prior year period, inclusive of the Company’s foreign currency hedging program.

(2)For purposes of computing EVM Organic Net sales growth, amounts directly attributable to the acquisitions of Adaptive Vision, Fetch and Antuit are excluded for twelve months following their respective acquisitions.

(3)EVM Organic Net sales growth is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of this item.

First quarter 2022 compared to first quarter 2021

Total Net sales for EVM increased $117 million or 12.7% compared to the prior year primarily due to higher sales of mobile computing products (contributing the majority of the total increase), data capture products, and support services across all regions. In addition, our recent acquisitions contributed to the growth of Services and software sales in the current year. Current year Net sales included the negative effects of supply constraints; while prior year Net sales benefited from pent-up demand from customers who we believe delayed purchases in fiscal 2020 due to the COVID-19 pandemic. Excluding the impacts of acquisitions and foreign currency changes, EVM Organic Net sales growth was 11.6%.

Gross margin decreased to 46.5% in the current quarter compared to 49.0% in the prior year, primarily due to higher premium freight and component part costs, as well as unfavorable business mix, which were partially offset by higher support service margins.

Operating income for the current quarter decreased 1.0% compared to the prior year period. The decrease was due to higher Gross profit, which was partially offset by higher Operating expenses.

Liquidity and Capital Resources

The primary factors that influence our liquidity include the amount and timing of our revenues, cash collections from our customers, cash payments to our suppliers, capital expenditures, repatriation of foreign cash, acquisitions, and share repurchases. Management believes that our existing capital resources, inclusive of available borrowing capacity on debt and other financing facilities and funds generated from operations, are sufficient to meet anticipated capital requirements and service our indebtedness. The following table summarizes our cash flow activities for the periods indicated (in millions):

			Three Months Ended
Cash flows provided by (used in):			April 2, 2022						April 3, 2021						$ Change
Operating activities			$	54					$	224					$	(170)
Investing activities			(19)						(23)						4
Financing activities			(220)						(181)						(39)
Effect of exchange rates on cash balances			(2)						(2)						—
Net (decrease) increase in cash and cash equivalents, including restricted cash			$	(187)					$	18					$	(205)

The change in our cash and cash equivalents balance during the three months ended April 2, 2022 compared to the prior year period is reflective of the following:

• The decrease in cash provided by operating activities compared to the prior year was primarily due to higher incentive compensation payments, higher accounts receivable balances reflecting the timing of customer transactions within the period, and lower operating profitability, partly offset by lower inventory levels.

• Cash used in investing activities was comparable to the prior year. The Company had lower payments for the purchases of long-term investments, partly offset by higher capital expenditures.

• The increase in cash used in financing activities was primarily related to $305 million of share repurchases, partly offset by net borrowings of $105 million in the current period compared to net debt repayments of $156 million in the prior period.

Company Debt

The following table shows the carrying value of the Company’s debt (in millions):

			April 2, 2022						December 31, 2021
Term Loan A			$	875					$	888
Revolving Credit Facility			10						—
Receivables Financing Facilities			216						108
Total debt			$	1,101					$	996
Less: Debt issuance costs			(3)						(3)
Less: Unamortized discounts			(2)						(2)
Less: Current portion of debt			(183)						(69)
Total long-term debt			$	913					$	922

Term Loan A

The principal on Term Loan A is due in quarterly installments, with the next quarterly installment due in June 2022 and the majority due upon the August 9, 2024 maturity date. The Company may make prepayments, in whole or in part, without premium or penalty, and would be required to prepay certain outstanding amounts in the event of certain circumstances or transactions. As of April 2, 2022, the Term Loan A interest rate was 1.49%. Interest payments are made monthly and are subject to variable rates plus an applicable margin.

Revolving Credit Facility

The Company has a Revolving Credit Facility that is available for working capital and other general business purposes, including letters of credit. As of April 2, 2022, the Company had letters of credit totaling $7 million, which reduced funds available for borrowings under the Revolving Credit Facility from $1 billion to $993 million. As of April 2, 2022, the Revolving Credit Facility had an average interest rate of 1.69%. Upon borrowing, interest payments are made monthly and are subject to variable rates plus an applicable margin. The Revolving Credit Facility matures on August 9, 2024.

Receivables Financing Facilities

The Company has two Receivables Financing Facilities with financial institutions that have a combined total borrowing limit of up to $280 million. As collateral, the Company pledges perfected first-priority security interests in its U.S. domestically originated accounts receivable. The Company has accounted for transactions under its Receivables Financing Facilities as secured borrowings. The Company’s first Receivables Financing Facility allows for borrowings of up to $180 million and matures on March 19, 2024. The Company’s second Receivable Financing Facility allows for borrowings of up to $100 million and matures on May 16, 2022.

As of April 2, 2022, the Company’s Consolidated Balance Sheets included $692 million of receivables that were pledged under the two Receivables Financing Facilities. As of April 2, 2022, $216 million had been borrowed, of which $121 million was classified as current. Borrowings under the Receivables Financing Facilities bear interest at a variable rate plus an applicable margin. As of April 2, 2022, the Receivables Financing Facilities had an average interest rate of 1.36%. Interest is paid on these borrowings on a monthly basis.

See Note 9, Long-Term Debt in the Notes to Consolidated Financial Statements for further details related to the Company’s debt instruments.

Receivables Factoring

The Company currently has two Receivables Factoring arrangements, pursuant to which certain receivables are sold to banks without recourse in exchange for cash. One arrangement allows for the factoring of up to $25 million of uncollected receivables originated from the EMEA region. The second arrangement allows for the factoring of up to €150 million of uncollected receivables originated from the EMEA and Asia-Pacific regions. Transactions under the Receivables Factoring arrangements are accounted for as sales under Accounting Standards Codification 860, Transfers and Servicing of Financial Assets, with the sold receivables removed from the Company’s balance sheet. Under these Receivables Factoring arrangements, the Company does not maintain any beneficial interest in the receivables sold. The banks’ purchase of eligible receivables is subject to a maximum amount of uncollected receivables. The Company services the receivables on behalf of the banks, but otherwise maintains no significant continuing involvement with respect to the receivables. Sale proceeds that are representative of the fair value of factored receivables, less a factoring fee, are reflected in Net cash provided by operating activities on the Consolidated Statements of Cash Flows, while sale proceeds in excess of the fair value of factored receivables are reflected in Net cash used in financing activities on the Consolidated Statements of Cash Flows.

As of April 2, 2022 and December 31, 2021, there were a total of $68 million and $24 million, respectively, of uncollected receivables that had been sold and removed from the Company’s Consolidated Balance Sheets.

As servicer of sold receivables, the Company had $116 million and $141 million of obligations that were not yet remitted to banks as of April 2, 2022 and December 31, 2021, respectively. These obligations are included within Accrued liabilities on the Consolidated Balance Sheets, with changes in such obligations reflected within Net cash used in financing activities on the Consolidated Statements of Cash Flows.

See Note 14, Accounts Receivable Factoring in the Notes to Consolidated Financial Statements for further details.

Share Repurchases

On July 30, 2019, the Company announced that its Board of Directors authorized a share repurchase program for up to an aggregate amount of $1 billion of its outstanding shares of common stock. The share repurchase program does not have a stated expiration date. The level of the Company’s repurchases depends on a number of factors, including its financial condition, capital requirements, cash flows, results of operations, future business prospects and other factors its management may deem relevant. The timing, volume, and nature of repurchases are subject to market conditions, applicable securities laws and other factors and may be amended, suspended or discontinued at any time. Repurchases may be effected from time to time through open market purchases, including pursuant to a pre-set trading plan meeting the requirements of Rule 10b5-1(c) of the Securities Exchange Act of 1934. During the first three months of 2022, the Company repurchased 648,875 shares of common stock for approximately $305 million. As of April 2, 2022, the Company has cumulatively repurchased 1,944,616 shares of common stock for approximately $608 million under the plan, resulting in a remaining amount of share repurchases authorized under the plan of approximately $392 million. Subsequent to the first quarter, the Company has repurchased 274,166 shares of common stock for approximately $108 million through April 29, 2022.

Significant Customers

The Company has three customers, who are distributors of the Company’s products, services and solutions, that individually accounted for more than 10% of total Company Net sales for the periods presented. In the aggregate, the approximate percentage of our segment and Company total Net sales was as follows:

			Three Months Ended
			April 2, 2022																		April 3, 2021
			AIT						EVM						Total						AIT						EVM						Total
Significant customers as a % of Net sales			14.3		%				28.7		%				43.0		%				19.0		%				32.6		%				51.6		%

These customers accounted for 55.8% of accounts receivable as of April 2, 2022. No other customer accounted for more than 10% of total Net sales during the periods ended April 2, 2022 and April 3, 2021, or more than 10% of total outstanding accounts receivables as of April 2, 2022.

Safe Harbor

Forward-looking statements contained in this filing are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995 and are highly dependent upon a variety of important factors, which could cause actual results to differ materially from those expressed or implied in such forward-looking statements. When used in this document and documents referenced, the words “anticipate,” “believe,” “intend,” “estimate,” “will,” and “expect” and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements but are not the exclusive means of identifying these statements. The forward-looking statements include, but are not limited to, the Company’s financial outlook for full year of 2022. These forward-looking statements are based on current expectations, forecasts and assumptions, and are subject to the risks and uncertainties inherent in the Company’s industry, market conditions, general domestic and international economic conditions, and other factors. These factors include:

• Market acceptance of the Company’s products, services and solution offerings and competitors’ offerings and the potential effects of emerging technologies and changes in customer requirements,

• The effect of global market conditions, including the North America; EMEA; Latin America; and Asia-Pacific regions in which we do business,

• The impact of changes in foreign exchange rates, customs duties and trade policies due to the large percentage of our sales and operations being outside the U.S.,

• Our ability to control manufacturing and operating costs,

• Risks related to the manufacturing of the Company’s products and conducting business operations in non-U.S. countries, including the risk of depending on key suppliers who are also in non-U.S. countries,

• The Company’s ability to purchase sufficient materials, parts, and components as well as our ability to provide services and software to meet customer demand, particularly in light of global economic conditions,

• The availability of credit and the volatility of capital markets, which may affect our suppliers, customers, and ourselves,

• Success of integrating acquisitions,

• Our ability to attract, retain, develop, and motivate key personnel,

• Interest rate and financial market conditions,

• Access to cash and cash equivalents held outside the U.S.,

• The effect of natural disasters, man-made disasters, public health issues (including pandemics), and cybersecurity incidents on our business,

• The impact of changes in foreign and domestic governmental policies, laws, or regulations,

• The outcome of litigation in which the Company may be involved, particularly litigation or claims related to infringement of third-party intellectual property rights, and

• The outcome of any future tax matters or tax law changes.

We encourage readers of this report to review Part II, Item 1A, “Risk Factors” in this report for further discussion of issues that could affect the Company’s future results. We undertake no obligation, other than as may be required by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances, or any other reason after the date of this report.

New Accounting Pronouncements

We do not expect any recently issued accounting pronouncements to have a material impact to our consolidated financial statements.

Non-GAAP Measures

The Company has provided reconciliations of the supplemental non-GAAP financial measures, as defined under the rules of the Securities and Exchange Commission, presented herein to the most directly comparable financial measures calculated and presented in accordance with GAAP.

These supplemental non-GAAP financial measures – Consolidated Organic Net sales growth, AIT Organic Net sales growth, and EVM Organic Net sales growth – are presented because our management evaluates our financial results both including and excluding the effects of business acquisitions and foreign currency translation, as applicable. Management believes that the supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of our business from period to period and trends in our historical operating results. These supplemental non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with the GAAP financial measures presented.

There were no material changes in the Company’s market risk during the quarter ended April 2, 2022. For additional information on market risk, refer to Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in the Annual Report on Form 10-K for the year ended December 31, 2021.

Management’s Report on Disclosure Controls

Our management is responsible for establishing and maintaining adequate disclosure controls as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management assessed the effectiveness of our disclosure controls as of April 2, 2022. Based on this assessment and those criteria, our management believes that, as of April 2, 2022, our disclosure controls were effective.

Changes in Internal Controls over Financial Reporting

During the quarter ended April 2, 2022, there have been no changes in our internal controls that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Inherent Limitations on the Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent or detect all errors and all fraud. A control system, no matter how

well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within Zebra have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

In September 2021, Honeywell filed patent infringement lawsuits against Zebra in multiple jurisdictions, including the International Trade Commission and Federal District Court in the Western District of Texas in the United States, as well as foreign courts in the United Kingdom, Germany and China. Honeywell has made substantially similar allegations of patent infringement in all cases filed. The technology addressed in the various actions generally includes aspects of data capture, barcode reading, and scanning. The allegedly infringing Zebra products identified in the actions are described as barcode scanners, mobile computers with barcode scanning capabilities, scan engines, and components thereof. The remedies sought in these lawsuits include damages and injunctive relief. The same Zebra products and technology are implicated in all of the lawsuits. Zebra is vigorously defending against these infringement allegations. In February 2022, Zebra filed patent infringement lawsuits against Honeywell in multiple jurisdictions, including the International Trade Commission and Federal District Court in the Eastern District of New York in the United States, as well as foreign courts in the United Kingdom, Germany and China. Zebra’s allegations against Honeywell in each case vary based on the underlying technology in the Zebra patent that is alleged to have been infringed by Honeywell. The technology addressed in the various actions includes scan engine functionality generally, distance scanning, power management and security. The Honeywell products that are accused of infringing Zebra’s patents in the various actions include scan engines and components thereof, barcode scanners, mobile computers, RFID printers and other wireless devices. The remedies sought in these lawsuits include damages and injunctive relief.

See Note 10, Accrued Liabilities, Commitments and Contingencies in the Notes to Consolidated Financial Statements included in this report.

In addition to the other information included in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2021, and the factors identified under “Safe Harbor” in Part I, Item 2 of this Quarterly Report on Form 10-Q, which could materially affect our business, financial condition, cash flows, or results of operations. The risks described in the Annual Report are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently considers immaterial also may materially adversely affect its business, financial condition, and/or operating results. There have been no material changes to the risk factors included in our Annual Report for the year ended December 31, 2021, other than as described below.

The Company has substantial operations and sells a significant portion of our products, solutions and services outside of the U.S. and purchases important components, including final products, from suppliers located outside the U.S., many of whom with operations concentrated in China. Shipments to non-U.S. customers are expected to continue to account for a material portion of Net sales. We also expect to continue the use of third-party contract manufacturing services with non-U.S. production and assembly operations for our products.

Risks associated with operations, sales, and purchases outside the United States include:

• Fluctuating foreign currency rates could restrict sales, increase costs of purchasing, and affect collection of receivables outside of the U.S.;

• Volatility in foreign credit markets may affect the financial well-being of our customers and suppliers;

• Violations of anti-corruption laws, including the Foreign Corrupt Practices Act and the U.K. Bribery Act, could result in large fines and penalties;

• Adverse changes in, or uncertainty of, local business laws or practices, including the following:

• Imposition of burdensome tariffs, quotas, taxes, trade barriers, or capital flow restrictions;

• Restrictions on the export or import of technology may reduce or eliminate the ability to sell in, or purchase from, certain markets;

• Political and economic instability may reduce demand for our products or put our non-U.S. assets at risk;

• Limited intellectual property protection in certain countries may limit recourse against infringement on our products or may cause us to refrain from selling in certain geographic territories;

• Staffing may be difficult including higher than anticipated turnover;

• A government-controlled exchange rate and limitations on the convertibility of currencies, including the Chinese Yuan;

• Transportation delays and customs related delays may affect production and distribution of our products;

• Geopolitical uncertainty or turmoil could negatively affect our operations or those of our customers or suppliers;

• Difficulty in effectively managing and overseeing operations that are distant and remote from corporate headquarters; and

• Integration and enforcement of laws varies significantly among jurisdictions and may change over time.

Further, the war between Russia and Ukraine and the global response to this war could have an adverse impact on our business and results of operations. On March 5, 2022, we suspended our business operations in Russia. While this suspension has not had, and is not expected to have, a material impact on our operating results, it is not possible to predict the broader or long-term consequences of the war between Russia and Ukraine, which may include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, cybersecurity conditions, currency exchange rates, financial markets and energy markets. Such geopolitical instability and uncertainty could have a negative impact on our ability to sell and ship products, collect payments from and support customers in certain regions, and could increase the costs, risks and adverse impacts from supply chain and logistics challenges.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth information with respect to repurchases of the Company’s common stock for the three months ended April 2, 2022:

Period						Total Number of Shares Purchased						Average Price Paid per Share						Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)						Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) (1)
January 1, 2022 - January 29, 2022						299,576						$	512.38					299,576						$	543
January 30, 2022 - February 26, 2022						349,099						432.50						349,099						392
February 27, 2022 - April 2, 2022						200						400.03						200						392
Total						648,875						$	469.37					648,875						$	392

(1)On July 30, 2019, the Company announced that its Board of Directors authorized a share repurchase program for up to an aggregate amount of $1 billion of its outstanding shares of common stock. Repurchases may be effected from time to time through open market purchases, including pursuant to a pre-set trading plan meeting the requirements of Rule 10b5-1(c) of the Securities Exchange Act of 1934. The program does not have a stated expiration date.

31.1			Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
31.2			Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
32.1			Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2			Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101			The following financial information from Zebra Technologies Corporation Quarterly Report on Form 10-Q, for the quarter ended April 2, 2022, formatted in Inline XBRL: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Stockholders’ Equity; (v) the Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements. The instance document does not appear in the interactive data file because Inline XBRL tags are embedded in the iXBRL document.
104			The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended April 2, 2022, formatted in Inline XBRL (included in Exhibit 101).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			ZEBRA TECHNOLOGIES CORPORATION
Date: May 3, 2022			By:						/s/ Anders Gustafsson
									Anders Gustafsson
									Chief Executive Officer
Date: May 3, 2022			By:						/s/ Nathan Winters
									Nathan Winters
									Chief Financial Officer