Zebra Technologies 10-Q 2023-04-01

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 1, 2023

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 25, 2023, there were 51,430,338 shares of Class A Common Stock, $.01 par value, outstanding.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

QUARTER ENDED APRIL 1, 2023

TABLE OF CONTENTS

						PAGE
PART I - FINANCIAL INFORMATION						3
Item 1.			Consolidated Financial Statements			3
			Consolidated Balance Sheets as of April 1, 2023 (unaudited) and December 31, 2022			3
			Consolidated Statements of Operations (unaudited) for the three months ended April 1, 2023 and April 2, 2022			4
			Consolidated Statements of Comprehensive Income (unaudited) for the three months ended April 1, 2023 and April 2, 2022			5
			Consolidated Statements of Stockholders’ Equity (unaudited) for the three months ended April 1, 2023 and April 2, 2022			6
			Consolidated Statements of Cash Flows (unaudited) for the three months ended April 1, 2023 and April 2, 2022			7
			Notes to Consolidated Financial Statements (unaudited)			7
			Note 1: Description of Business and Basis of Presentation			8
			Note 2: Significant Accounting Policies			8
			Note 3: Revenues			8
			Note 4: Inventories			9
			Note 5: Business Acquisitions			9
			Note 6: Investments			9
			Note 7: Exit and Restructuring Costs			9
			Note 8: Fair Value Measurements			10
			Note 9: Derivative Instruments			11
			Note 10: Long-Term Debt			13
			Note 11: Leases			14
			Note 12: Accrued Liabilities, Commitments and Contingencies			15
			Note 13: Income Taxes			15
			Note 14: Earnings Per Share			16
			Note 15: Accumulated Other Comprehensive Income (Loss)			17
			Note 16: Accounts Receivable Factoring			17
			Note 17: Segment Information & Geographic Data			18
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
			Overview			19
			Results of Operations			20
			Results of Operations by Segment			22
			Liquidity and Capital Resources			24
			Significant Customers			26
			Safe Harbor			26
			New Accounting Pronouncements			27
			Non-GAAP Measures			27
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			27
Item 4.			Controls and Procedures			27
PART II - OTHER INFORMATION						29
Item 1.			Legal Proceedings			29
Item 1A.			Risk Factors			29
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			29
Item 6.			Exhibits			30
Signatures						31

PART I - FINANCIAL INFORMATION

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

			April 1, 2023						December 31, 2022
			(Unaudited)
Assets
Current assets:
Cash and cash equivalents			$	85					$	105
Accounts receivable, net of allowances for doubtful accounts of $1 million each as of April 1, 2023 and December 31, 2022			736						768
Inventories, net			835						860
Income tax receivable			22						26
Prepaid expenses and other current assets			140						124
Total Current assets			1,818						1,883
Property, plant and equipment, net			280						278
Right-of-use lease assets			172						156
Goodwill			3,895						3,899
Other intangibles, net			604						630
Deferred income taxes			432						407
Other long-term assets			273						276
Total Assets			$	7,474					$	7,529
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt			$	215					$	214
Accounts payable			602						811
Accrued liabilities			671						744
Deferred revenue			447						425
Income taxes payable			139						138
Total Current liabilities			2,074						2,332
Long-term debt			1,880						1,809
Long-term lease liabilities			157						139
Deferred income taxes			75						75
Long-term deferred revenue			333						333
Other long-term liabilities			64						108
Total Liabilities			4,583						4,796
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			584						561
Treasury stock at cost, 20,726,888 and 20,700,357 shares as of April 1, 2023 and December 31, 2022, respectively			(1,814)						(1,799)
Retained earnings			4,186						4,036
Accumulated other comprehensive loss			(66)						(66)
Total Stockholders’ Equity			2,891						2,733
Total Liabilities and Stockholders’ Equity			$	7,474					$	7,529

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 1, 2023						April 2, 2022
Net sales:
Tangible products			$	1,170					$	1,207
Services and software			235						225
Total Net sales			1,405						1,432
Cost of sales:
Tangible products			618						681
Services and software			120						114
Total Cost of sales			738						795
Gross profit			667						637
Operating expenses:
Selling and marketing			161						152
Research and development			146						137
General and administrative			99						99
Amortization of intangible assets			26						33
Acquisition and integration costs			—						4
Exit and restructuring costs			10						—
Total Operating expenses			442						425
Operating income			225						212
Other income (loss), net:
Foreign exchange gain			1						8
Interest (expense) income, net			(37)						30
Other (expense), net			(4)						—
Total Other (expense) income, net			(40)						38
Income before income tax			185						250
Income tax expense			35						45
Net income			$	150					$	205
Basic earnings per share			$	2.92					$	3.86
Diluted earnings per share			$	2.90					$	3.83

See accompanying Notes to Consolidated Financial Statements.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

			Three Months Ended
			April 1, 2023						April 2, 2022
Net income			$	150					$	205
Other comprehensive (loss) income, net of tax:
Changes in unrealized (losses) and gains on anticipated sales hedging transactions			(3)						5
Foreign currency translation adjustment			3						(5)
Compre

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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 (“AIDC”) 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; fixed industrial scanning and machine vision; 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, RFID, fixed industrial scanning and machine vision, services, workflow optimization solutions and location solutions. Our workflow optimization solutions include cloud-based software subscriptions, retail solutions, and robotic automation solutions.

We are a market leader in our core businesses, which are generally considered to be comprised of our mobile computing and data capture products, printing products and supplies, as well as support and repair services. We continue to focus on growth opportunities within adjacent and expansion markets by scaling and integrating our recent business acquisitions, inclusive of our $881 million acquisition of Matrox Electronic Systems Ltd. (“Matrox”) in the second quarter of 2022.

First Quarter 2023 Financial Highlights and Other Recent Developments

• Net sales were $1,405 million in the current year compared to $1,432 million in the prior year.

• Operating income was $225 million in the current year compared to $212 million in the prior year.

• Net income was $150 million, or $2.90 per diluted share in the current year, compared to Net income of $205 million, or $3.83 per diluted share in the prior year.

• Net cash used in operating activities was $76 million in the current year compared to net cash provided by operating activities of $54 million in the prior year.

The impacts of global cost inflation, rising interest rates, and a stronger U.S. dollar have continued in the current year; we believe these factors have contributed to a continued elongation of the sales cycle for large order deployments as well as moderating demand. As our overall supply chain continues to recover, with improvements in both component part availability and costs of transportation, our ability to meet customer demand has improved as compared to the prior year. We believe these trends will continue in the current year to varying degrees. We have, and expect to continue to, partially mitigate the financial impacts of operating headwinds through a combination of targeted list price increases, operating cost management, as well as our ongoing foreign currency exchange and interest rate management.

In the third quarter of 2022, the Company committed to certain organizational changes and leased site rationalizations designed to generate structural cost efficiencies (collectively referred to as the “2022 Productivity Plan”). The total cost under the initial scope of the 2022 Productivity Plan, which is expected to be completed in 2023, is estimated to be approximately $25 million. Total Exit and restructuring charges associated with the 2022 Productivity Plan to date were $22 million with $10 million recorded for the three months ended April 1, 2023.

In the first quarter of 2022, we announced the suspension of our business operations in Russia. Neither Russia nor Ukraine comprises a material portion of our business; 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. We will continue to monitor this for potential future adverse impacts on our business.

Results of Operations

Consolidated Results of Operations

(amounts in millions, except percentages)

			Three Months Ended
			April 1, 2023						April 2, 2022						$ Change						% Change
Net sales:
Tangible products			$	1,170					$	1,207					$	(37)					(3.1)		%
Services and software			235						225						10						4.4		%
Total Net sales			1,405						1,432						(27)						(1.9)		%
Gross profit			667						637						30						4.7		%
Gross margin			47.5		%				44.5		%										300 bps
Operating expenses			442						425						17						4.0		%
Operating income			$	225					$	212					$	13					6.1		%

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

			Three Months Ended
			April 1, 2023						April 2, 2022						$ Change						% Change
North America			$	725					$	699					$	26					3.7		%
EMEA			443						500						(57)						(11.4)		%
Asia-Pacific			154						149						5						3.4		%
Latin America			83						84						(1)						(1.2)		%
Total Net sales			$	1,405					$	1,432					$	(27)					(1.9)		%

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

			Three Months Ended
			April 1, 2023						April 2, 2022						As a % of Net sales
						2023						2022
Selling and marketing			$	161					$	152					11.5		%				10.6		%
Research and development			146						137						10.4		%				9.6		%
General and administrative			99						99						7.0		%				6.9		%
Amortization of intangible assets			26						33						NM						NM
Acquisition and integration costs			—						4						NM						NM
Exit and restructuring costs			10						—						NM						NM
Total Operating expenses			$	442					$	425					31.5		%				29.7		%

Consolidated Organic Net sales growth:

			Three Months Ended
			April 1, 2023
Reported GAAP Consolidated Net sales growth			(1.9)		%
Adjustments:
Impact of foreign currency translations (1)			3.1		%
Impact of acquisitions (2)			(1.5)		%
Consolidated Organic Net sales growth (3)			(0.3)		%

(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 business acquisitions 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 2023 compared to first quarter 2022

Total Net sales decreased $27 million or 1.9% compared to the prior year as growth in our AIT segment was more than offset by a decline in our EVM segment. While our customers continue to digitize and automate their workflows, current year Net sales within our EVM segment were negatively impacted by fewer large order deployments. Prior year Net sales of both segments were negatively impacted by supply chain bottlenecks, which were particularly pronounced in our AIT segment. Excluding the effects of currency changes and acquisitions, the decrease in Consolidated Organic Net sales was 0.3%.

Gross margin increased to 47.5% for the current year compared to 44.5% for the prior year. Gross margin was higher in our AIT segment, while gross margin of our EVM segment was unchanged from the prior year. Both segments, particularly AIT, benefited from lower premium freight and component part costs compared to the prior year.

Operating expenses for the quarters ended April 1, 2023 and April 2, 2022 were $442 million and $425 million, or 31.5% and 29.7% of Net sales, respectively. The increase in Operating expenses over the prior year was primarily due to higher Exit and restructuring costs and the inclusion of operating expenses associated with recently acquired businesses, which were partially offset by lower Amortization of intangible assets.

Operating income increased 6.1% to $225 million for the current year compared to $212 million for the prior year. The increase was primarily due to higher Gross profit, which was partially offset by higher Operating expenses.

Net income decreased 26.8% compared to the prior year due to increased Other (expense), net, and a higher effective income tax rate, which were partially offset by higher Operating income.

• Other (expense) income, net was an expense of $40 million for the current year, compared to income of $38 million in the prior year primarily due to the current year including a $7 million loss on interest rate swaps versus a $34 million gain in the prior year as well as higher interest expense due to higher average outstanding debt levels and interest rates in the current year.

• The Company’s effective tax rates for the three months ended April 1, 2023 and April 2, 2022 were 18.9% and 18.0%, respectively. The increase in the effective tax rate compared to the prior year was primarily due to an increase in the U.K. statutory tax rate that became effective in the current year, partially offset by changes in the global mix of pretax earnings.

Diluted earnings per share decreased to $2.90 as compared to $3.83 in the prior year due to lower Net income, partially offset by lower average shares outstanding.

Results of Operations by Segment

The following commentary should be read in conjunction with the financial results of each reportable business segment as detailed in Note 17, Segment Information & Geographic Data in the Notes to Consolidated Financial Statements. To the extent applicable, segment operating income excludes business acquisition purchase accounting adjustments, amortization of intangible assets, acquisition and integration costs, impairment of goodwill and other intangibles, exit and restructuring costs, as well as certain other non-recurring costs.

Asset Intelligence & Tracking Segment (“AIT”)

(amounts in millions, except percentages)

			Three Months Ended
			April 1, 2023						April 2, 2022						$ Change						% Change
Net sales:
Tangible products			$	467					$	370					$	97					26.2		%
Services and software			24						24						—						—		%
Total Net sales			491						394						97						24.6		%
Gross profit			242						154						88						57.1		%
Gross margin			49.3		%				39.1		%										1020 bps
Operating expenses			110						94						16						17.0		%
Operating income			$	132					$	60					$	72					120.0		%

AIT Organic Net sales growth:

			Three Months Ended
			April 1, 2023
AIT Reported GAAP Net sales growth			24.6		%
Adjustments:
Impact of foreign currency translations (1)			3.8		%
AIT Organic Net sales growth (2)			28.4		%

(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)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 2023 compared to first quarter 2022

Total Net sales for AIT increased $97 million or 24.6% compared to the prior year primarily due to higher sales of printing products across all regions. Current year Net sales included the benefit of targeted list price increases, partially offset by the negative effects of foreign currency changes. Prior year Net sales included the negative effects of supply chain bottlenecks. Excluding the impact of foreign currency changes, AIT Organic Net sales increased by 28.4%.

Gross margin increased to 49.3% in the current year compared to 39.1% for the prior year primarily due to lower premium freight and component part costs, volume leverage and favorable business mix, partially offset by the negative impact of foreign currency changes.

Operating income increased 120.0% in the current year compared to the prior year due to higher Gross profit, partially offset by higher Operating expenses.

Enterprise Visibility & Mobility Segment (“EVM”)

(amounts in millions, except percentages)

			Three Months Ended
			April 1, 2023						April 2, 2022						$ Change						% Change
Net sales:
Tangible products			$	703					$	837					$	(134)					(16.0)		%
Services and software			211						201						10						5.0		%
Total Net sales			914						1,038						(124)						(11.9)		%
Gross profit			425						483						(58)						(12.0)		%
Gross margin			46.5		%				46.5		%										0 bps
Operating expenses			295						294						1						0.3		%
Operating income			$	130					$	189					$	(59)					(31.2)		%

EVM Organic Net sales growth:

			Three Months Ended
			April 1, 2023
EVM Reported GAAP Net sales growth			(11.9)		%
Adjustments:
Impact of foreign currency translations (1)			2.7		%
Impact of acquisitions (2)			(2.0)		%
EVM Organic Net sales growth (3)			(11.2)		%

(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 business acquisitions 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 2023 compared to first quarter 2022

Total Net sales for EVM decreased $124 million or 11.9% compared to the prior year primarily due to lower sales of mobile computing products largely attributed to fewer large order deployments, and unfavorable currency changes, which were partially offset by higher sales of data capture products, contributions from our recent acquisitions, targeted list price increases, and higher sales of services and software. Excluding the impacts of foreign currency changes and acquisitions, EVM Organic Net sales decline was 11.2%.

Gross margin was 46.5% in both the current and prior year. The benefits of lower premium freight and component part costs in the current year were offset by the negative impact of foreign currency changes.

Operating income for the current year decreased by 31.2% compared to the prior year primarily due to lower Gross profit.

Liquidity and Capital Resources

The primary factors that influence our liquidity include the amount and timing of cash collections from our customers, cash payments to our suppliers, capital expenditures, 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 flow (used in) provided by:			April 1, 2023						April 2, 2022						$ Change
Operating activities			$	(76)					$	54					$	(130)
Investing activities			(17)						(19)						2
Financing activities			70						(220)						290
Effect of exchange rates on cash balances			(1)						(2)						1
Net decrease in cash and cash equivalents, including restricted cash			$	(24)					$	(187)					$	163

The change in our cash and cash equivalents balance during the three months ended April 1, 2023 compared to the prior year is reflective of the following:

• $130 million operating activity outflow primarily due to higher cash payments for inventory purchases, income taxes and interest along with the current year Settlement payment, partially offset by favorability in the timing of customer collections and lower employee incentive compensation payments.

• $290 million financing activity inflow primarily due to lower common stock repurchases in the current year.

Company Debt

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

			April 1, 2023						December 31, 2022
Term Loan A			$	1,684					$	1,728
Revolving Credit Facility			215						50
Receivables Financing Facilities			204						254
Total debt			$	2,103					$	2,032
Less: Debt issuance costs			(4)						(4)
Less: Unamortized discounts			(4)						(5)
Less: Current portion of debt			(215)						(214)
Total long-term debt			$	1,880					$	1,809

Term Loan A

The principal on Term Loan A is due in quarterly installments, with the next quarterly installment due in March 2024 and the majority due upon maturity in 2027. The Company may make prepayments, as it did in the current period, 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 1, 2023, the Term Loan A interest rate was 5.91%. 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 1, 2023, the Company had letters of credit totaling $7 million, which reduced funds available for borrowings under the Revolving Credit Facility from $1,500 million to $1,493 million. As of April 1, 2023, the Revolving Credit Facility had an average interest rate of 5.90%. Upon borrowing, interest payments are made monthly and are subject to variable rates plus an applicable margin. The Revolving Credit Facility matures on May 25, 2027.

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 15, 2023.

As of April 1, 2023, the Company’s Consolidated Balance Sheets included $632 million of receivables that were pledged under the two Receivables Financing Facilities. As of April 1, 2023, $204 million had been borrowed and was classified as current. Borrowings under the Receivables Financing Facilities bear interest at a variable rate plus an applicable margin. As of April 1, 2023, the Receivables Financing Facilities had an average interest rate of 5.75%. Interest is paid monthly on these borrowings.

See Note 10, Long-Term Debt in the Notes to Consolidated Financial Statements for further details related to the Company’s debt instruments.

Receivables Factoring

The Company has 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 ASC 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 Cash flows from operating activities on the Consolidated Statements of Cash Flows, while sale proceeds in excess of the fair value of factored receivables are reflected in Cash flows from financing activities on the Consolidated Statements of Cash Flows.

As of April 1, 2023 and December 31, 2022, there were a total of $52 million and $61 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 $138 million and $130 million of obligations that were not yet remitted to banks as of April 1, 2023 and December 31, 2022, respectively. These obligations are included within Accrued liabilities on the Consolidated Balance Sheets, with changes in such obligations reflected within Net cash provided by (used in) financing activities on the Consolidated Statements of Cash Flows.

See Note 16, Accounts Receivable Factoring in the Notes to Consolidated Financial Statements for further details.

Share Repurchases

On May 17, 2022, the Company announced that its Board of Directors authorized a share repurchase program for up to $1 billion of its outstanding shares of common stock. This authorization augments the previous $1 billion share repurchase authorization which was announced on July 30, 2019. The newly authorized 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 affected 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 2023, the Company repurchased 55,811 shares of common stock for approximately $15 million. As of April 1, 2023, the Company has cumulatively repurchased 3,379,094 shares of common stock for approximately $1.1 billion, resulting in a remaining amount of share repurchases authorized under the plans of $930 million.

Significant Customers

End-users of our products, solutions and services are diversified across a wide variety of industries. We have three customers, who are distributors of the Company’s products and solutions, that individually accounted for more than 10% of our 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 1, 2023																		April 2, 2022
			AIT						EVM						Total						AIT						EVM						Total
Significant customers as a % of Net sales			16.6		%				32.8		%				49.4		%				14.3		%				28.7		%				43.0		%

These customers accounted for 53.0% of accounts receivable as of April 1, 2023. No other customer accounted for more than 10% of total Net sales during the periods ended April 1, 2023 and 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 2023. 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, our ability to provide services, software, and products 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 1, 2023. 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, 2022.

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 1, 2023. Based on this assessment and those criteria, our management believes that, as of April 1, 2023, our disclosure controls were effective.

Changes in Internal Control over Financial Reporting

During the quarter ended April 1, 2023, there have been no changes in our internal controls that have materially affected, or are reasonably likely to materially affect, our internal control 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

See Note 12, 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, 2022, 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, 2022.

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 1, 2023:

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, 2023 - January 28, 2023						55,811						$	268.75					55,811						$	930
January 29, 2023 - February 25, 2023												—						—						930
February 26, 2023 - April 1, 2023												—						—						930
Total						55,811						$	268.75					55,811						$	930

(1)On May 17, 2022, the Company announced that its Board of Directors authorized a share repurchase program for up to $1 billion of its outstanding shares of common stock. This authorization augments the previous $1 billion share repurchase authorization which was announced on July 30, 2019. 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. As of April 1, 2023, the Company has cumulatively repurchased 3,379,094 shares of common stock for approximately $1.1 billion, resulting in a remaining amount of share repurchases authorized under the plans of $930 million.

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 1, 2023, 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 1, 2023 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 2, 2023			By:						/s/ William J. Burns
									William J. Burns
									Chief Executive Officer
Date: May 2, 2023			By:						/s/ Nathan Winters
									Nathan Winters
									Chief Financial Officer