Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 devices and printers (“RFID”) and real-time location systems (“RTLS”); specialty printers for barcode labeling and personal identification; fixed industrial scanning and machine vision; 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, RFID and RTLS offerings, and 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, 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 second quarter, our advanced location technology solutions business, which is primarily comprised of RFID devices and RTLS offerings, moved from our EVM segment into our AIT segment contemporaneous with a change in our organizational structure and management of the business. We have reported our segment results reflecting this change, including historical periods, on a comparable basis. This change does not have an impact on the Consolidated Financial Statements.

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.

Third Quarter 2023 Financial Summary and Other Recent Developments

• Net sales were $956 million in the current quarter compared to $1,378 million in the prior year.

• Operating loss was $12 million in the current quarter compared to operating income of $202 million in the prior year.

• Net loss was $15 million, or $(0.28) per diluted share in the current quarter, compared to net income of $170 million, or $3.26 per diluted share in the prior year.

• Net cash used in operating activities was $145 million in the current year compared to net cash provided by operating activities of $221 million in the prior year.

As anticipated, our current quarter results reflect a broad-based moderation of demand across our core product offerings. Demand declines were most pronounced in our mobile computing and printing businesses within our EVM and AIT segments, respectively, as we believe many of our customers are absorbing significant capacity built-out over recent years, while also experiencing tighter capital spending budgets. This, coupled with a general trend of distributors reducing inventory levels, has negatively impacted our current year results. We expect these trends to continue into 2024. We are partially mitigating the financial impacts of operating headwinds through a combination of targeted list price increases and operating cost management. 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 compared to the prior year.

As a result of the impacts on our business discussed above, the Company expanded the scope of its 2022 Productivity Plan and initiated a U.S. employee voluntary retirement plan (“VRP”) during the second quarter. The total cost of these programs, consisting primarily of employee severance and other benefits, is expected to be at least $105 million with $94 million incurred to date, including $58 million and $82 million recorded for the three and nine months ended September 30, 2023, respectively. All such costs are classified within Exit and restructuring on the Consolidated Statements of Operations. The actions under these programs are expected to be substantially completed by the end of 2023 with the related obligations substantially settled by the first quarter of 2024. The programs are expected to impact greater than 7% of our global employee base and are estimated to result in annualized net cost savings, primarily within Operating expenses, of approximately $100 million.

Results of Operations

Consolidated Results of Operations

(amounts in millions, except percentages)

			Three Months Ended																								Nine Months Ended
			September 30, 2023						October 1, 2022						$ Change						% Change						September 30, 2023						October 1, 2022						$ Change						% Change
Net sales:
Tangible products			$	729					$	1,164					$	(435)					(37.4)		%				$	2,885					$	3,630					$	(745)					(20.5)		%
Services and software			227						214						13						6.1		%				690						648						42						6.5		%
Total Net sales			956						1,378						(422)						(30.6)		%				3,575						4,278						(703)						(16.4)		%
Gross profit			427						628						(201)						(32.0)		%				1,675						1,939						(264)						(13.6)		%
Gross margin			44.7		%				45.6		%										(90) bps						46.9		%				45.3		%										160 bps
Operating expenses			439						426						13						3.1		%				1,268						1,670						(402)						(24.1)		%
Operating (loss) income			$	(12)					$	202					$	(214)					(105.9)		%				$	407					$	269					$	138					51.3		%

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

			Three Months Ended																								Nine Months Ended
			September 30, 2023						October 1, 2022						$ Change						% Change						September 30, 2023						October 1, 2022						$ Change						% Change
North America			$	517					$	690					$	(173)					(25.1)		%				$	1,884					$	2,103					$	(219)					(10.4)		%
EMEA			269						456						(187)						(41.0)		%				1,086						1,477						(391)						(26.5)		%
Asia-Pacific			106						158						(52)						(32.9)		%				382						459						(77)						(16.8)		%
Latin America			64						74						(10)						(13.5)		%				223						239						(16)						(6.7)		%
Total Net sales			$	956					$	1,378					$	(422)					(30.6)		%				$	3,575					$	4,278					$	(703)					(16.4)		%

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

			Three Months Ended																								Nine Months Ended
			September 30, 2023						October 1, 2022						As a % of Net sales												September 30, 2023						October 1, 2022						As a % of Net sales
						2023						2022												2023						2022
Selling and marketing			$	138					$	149					14.4		%				10.8		%				$	445					$	452					12.4		%				10.6		%
Research and development			127						143						13.3		%				10.4		%				403						428						11.3		%				10.0		%
General and administrative			88						92						9.2		%				6.7		%				256						288						7.2		%				6.7		%
Settlement and related costs			—						—						NM						NM						—						372						NM						NM
Amortization of intangible assets			26						39						NM						NM						78						107						NM						NM
Acquisition and integration costs			2						1						NM						NM						4						19						NM						NM
Exit and restructuring costs			58						2						NM						NM						82						4						NM						NM
Total Operating expenses			$	439					$	426					45.9		%				30.9		%				$	1,268					$	1,670					35.5		%				39.0		%

Consolidated Organic Net sales decline:

			Three Months Ended						Nine Months Ended
			September 30, 2023						September 30, 2023
Reported GAAP Consolidated Net sales decline			(30.6)		%				(16.4)		%
Adjustments:
Impact of foreign currency translations (1)			1.0		%				2.0		%
Impact of acquisitions (2)			—		%				(0.7)		%
Consolidated Organic Net sales decline (3)			(29.6)		%				(15.1)		%

(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)For purposes of computing Consolidated Organic Net sales decline, amounts directly attributable to business acquisitions are excluded for twelve months following their respective acquisitions.

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

Third quarter 2023 compared to third quarter 2022

Total Net sales decreased $422 million or 30.6% compared to the prior year reflecting declines in both of our segments resulting from a broad-based moderation of demand for our core products as well as a reduction of inventory levels at our distribution customers. Current year Net sales of both segments included the benefit of targeted list price increases, partially offset by the negative effects of foreign currency changes. Prior year EVM Net sales were negatively impacted by supply chain bottlenecks associated with our North America distribution center transition. Excluding the effects of currency changes, the decrease in Consolidated Organic Net sales was 29.6%.

Gross margin decreased to 44.7% for the current year compared to 45.6% for the prior year. As compared to the prior year, Gross margin was higher in our AIT segment and lower in our EVM segment. Both segments, particularly AIT, benefited from

lower premium freight and component part costs compared to the prior year, which were more than offset by volume deleveraging.

Operating expenses for the quarters ended September 30, 2023 and October 1, 2022 were $439 million and $426 million, or 45.9% and 30.9% of Net sales, respectively. Current year Operating expenses were higher than the prior year primarily due to higher Exit and restructuring costs, partially offset by lower employee incentive compensation, Amortization of intangible assets, and cost efficiencies attributed to our Exit and restructuring actions. The increase as a percentage of Net sales over the prior year also reflects the impact of expense deleveraging.

Operating loss was $12 million for the current year compared to $202 million of income in the prior year. The decrease was primarily due to lower Gross profit.

Net income decreased compared to the prior year primarily due to lower Operating income, as described above, as well as higher Other (expense), net. Other (expense) income, net was an expense of $12 million in the current year, compared to income of $20 million in the prior year. The increase was primarily due to higher interest expense associated with higher interest rates and average outstanding debt levels as well as lower interest rate swap gains in the current year.

The Company’s effective tax rates for the three months ended September 30, 2023 and October 1, 2022 were a 37.5% benefit and 23.4% expense, respectively. The change in the effective tax rate includes the impact of the discrete tax benefit recorded in the current year related to the VRP.

Diluted earnings per share decreased to $(0.28) as compared to $3.26 in the prior year due to lower Net income, partially offset by lower average shares outstanding.

Year to date 2023 compared to Year to date 2022

Total Net sales decreased $703 million or 16.4% compared to the prior year reflecting declines in both of our segments resulting from a broad-based moderation of demand for our core products as well as a reduction of inventory levels at our distribution customers. Current year Net sales of both segments included the benefit of targeted list price increases, partially offset by the negative effects of foreign currency changes. Prior year Net sales of both segments were negatively impacted by supply chain bottlenecks. Excluding the effects of currency changes and acquisitions, the decrease in Consolidated Organic Net sales was 15.1%.

Gross margin increased to 46.9% for the current year compared to 45.3% for the prior year. As compared to the prior year, Gross margin was significantly higher in our AIT segment, while Gross margin of our EVM segment was modestly lower. Both segments, particularly AIT, benefited from lower premium freight and component part costs compared to the prior year, which were partially offset by volume deleveraging.

Operating expenses for the periods ended September 30, 2023 and October 1, 2022 were $1,268 million and $1,670 million, or 35.5% and 39.0% of Net sales, respectively. Excluding the Settlement charge in the prior year, Operating expenses would have been 30.3% of Net sales. Current year Operating expenses were modestly lower than the prior year, excluding the Settlement charge, primarily due to lower employee incentive compensation, Amortization of intangible assets, and Acquisition and integration costs, partially offset by higher Exit and restructuring costs and the inclusion of operating expenses associated with recently acquired businesses. The increase as a percentage of Net sales over the prior year also reflects the impact of expense deleveraging.

Operating income increased to $407 million for the current year compared to $269 million for the prior year. The increase was primarily due to lower Operating expenses, as the prior period included the $372 million Settlement charge, partially offset by lower Gross profit.

Net income increased compared to the prior year due to higher Operating income, partially offset by higher Other (expense) income, net and income tax expense.

• Other (expense) income, net was an expense of $75 million in the current year, compared to income of $50 million in the prior year. The increase was primarily due to higher interest expense associated with higher interest rates and average outstanding debt levels as well as lower interest rate swap gains in the current year.

• The Company’s effective tax rates for the nine months ended September 30, 2023 and October 1, 2022 were 16.0% and 13.2%, respectively. The change in the effective tax rate compared to the prior year was primarily due to the impact of the discrete benefit recorded in the prior year related to the Settlement.

Diluted earnings per share increased to $5.40 as compared to $5.25 in the prior year due to higher Net income and 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 16, 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 (such as the Settlement costs in the prior year).

Asset Intelligence & Tracking Segment (“AIT”)

(amounts in millions, except percentages)

			Three Months Ended																								Nine Months Ended
			September 30, 2023						October 1, 2022						$ Change						% Change						September 30, 2023						October 1, 2022						$ Change						% Change
Net sales:
Tangible products			$	295					$	414					$	(119)					(28.7)		%				$	1,222					$	1,238					$	(16)					(1.3)		%
Services and software			29						28						1						3.6		%				83						82						1						1.2		%
Total Net sales			324						442						(118)						(26.7)		%				1,305						1,320						(15)						(1.1)		%
Gross profit			145						193						(48)						(24.9)		%				628						557						71						12.7		%
Gross margin			44.8		%				43.7		%										110 bps						48.1		%				42.2		%										590 bps
Operating expenses			101						108						(7)						(6.5)		%				341						322						19						5.9		%
Operating income			$	44					$	85					$	(41)					(48.2)		%				$	287					$	235					$	52					22.1		%

AIT Organic Net sales (decline) growth:

			Three Months Ended						Nine Months Ended
			September 30, 2023						September 30, 2023
AIT Reported GAAP Net sales decline			(26.7)		%				(1.1)		%
Adjustments:
Impact of foreign currency translations (1)			0.9		%				2.1		%
AIT Organic Net sales (decline) growth (2)			(25.8)		%				1.0		%

(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 (decline) growth is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of this item.

Third quarter 2023 compared to third quarter 2022

Total Net sales for AIT decreased $118 million or 26.7% compared to the prior year primarily due to lower sales of printing products. Current year Net sales included the benefit of targeted list price increases, partially offset by the negative effects of foreign currency changes. Excluding the impact of foreign currency changes, AIT Organic Net sales decreased by 25.8%.

Gross margin increased to 44.8% in the current year compared to 43.7% for the prior year primarily due to lower premium freight and component part costs, and price increases, partially offset by unfavorable business mix, volume deleveraging, and the negative impact of foreign currency changes.

Operating income decreased 48.2% in the current year compared to the prior year primarily due to lower Gross profit.

Year to date 2023 compared to Year to date 2022

Total Net sales for AIT decreased $15 million or 1.1% compared to the prior year primarily due to the negative effects of foreign currency changes, partially offset by targeted list price increases, and higher sales of RFID products. Excluding the impact of foreign currency changes, AIT Organic Net sales increased by 1.0%.

Gross margin increased to 48.1% in the current year compared to 42.2% for the prior year primarily due to lower premium freight and component part costs, and price increases, partially offset by the negative impact of foreign currency changes.

Operating income increased 22.1% 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																								Nine Months Ended
			September 30, 2023						October 1, 2022						$ Change						% Change						September 30, 2023						October 1, 2022						$ Change						% Change
Net sales:
Tangible products			$	434					$	750					$	(316)					(42.1)		%				$	1,663					$	2,392					$	(729)					(30.5)		%
Services and software			198						186						12						6.5		%				607						566						41						7.2		%
Total Net sales			632						936						(304)						(32.5)		%				2,270						2,958						(688)						(23.3)		%
Gross profit			282						435						(153)						(35.2)		%				1,047						1,382						(335)						(24.2)		%
Gross margin			44.6		%				46.5		%										(190) bps						46.1		%				46.7		%										(60) bps
Operating expenses			252						276						(24)						(8.7)		%				762						846						(84)						(9.9)		%
Operating income			$	30					$	159					$	(129)					(81.1)		%				$	285					$	536					$	(251)					(46.8)		%

EVM Organic Net sales decline:

			Three Months Ended						Nine Months Ended
			September 30, 2023						September 30, 2023
EVM Reported GAAP Net sales decline			(32.5)		%				(23.3)		%
Adjustments:
Impact of foreign currency translations (1)			1.1		%				2.0		%
Impact of acquisitions (2)			—		%				(1.0)		%
EVM Organic Net sales decline (3)			(31.4)		%				(22.3)		%

(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 EVM Organic Net sales decline, amounts directly attributable to business acquisitions are excluded for twelve months following their respective acquisitions.

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

Third quarter 2023 compared to third quarter 2022

Total Net sales for EVM decreased $304 million or 32.5% compared to the prior year primarily due to lower sales of mobile computing products (contributing the majority of the total decrease) and data capture products, which were partially offset by higher sales of services and software. Current year Net sales included the benefit of targeted list price increases, substantially offset by the negative effects of foreign currency changes. Excluding the impacts of foreign currency changes, EVM Organic Net sales decline was 31.4%.

Gross margin decreased to 44.6% in the current year compared to 46.5% for the prior year primarily due to volume deleveraging, inventory-related charges, and the negative impact of foreign currency changes, partially offset by price increases, higher service and software margins, and lower premium freight and component part costs.

Operating income for the current year decreased by 81.1% compared to the prior year primarily due to lower Gross profit, partially offset by lower Operating expenses.

Year to date 2023 compared to Year to date 2022

Total Net sales for EVM decreased $688 million or 23.3% compared to the prior year primarily due to lower sales of mobile computing products, which were partially offset by higher sales of services and software, and contributions from our recent acquisitions. Current year Net sales included the benefit of targeted list price increases, substantially offset by the negative effects of foreign currency changes. Excluding the impacts of foreign currency changes and acquisitions, EVM Organic Net sales decline was 22.3%.

Gross margin decreased to 46.1% in the current year compared to 46.7% for the prior year primarily due to volume deleveraging, the negative impact of foreign currency changes, and inventory-related charges, partially offset by pricing and favorable business mix, and lower premium freight and component part costs.

Operating income for the current year decreased by 46.8% compared to the prior year primarily due to lower Gross profit, partially offset by lower Operating expenses.

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):

			Nine Months Ended
Cash flow (used in) provided by:			September 30, 2023						October 1, 2022						$ Change
Operating activities			$	(145)					$	221					$	(366)
Investing activities			(49)						(941)						892
Financing activities			140						470						(330)
Effect of exchange rates on cash balances			(2)						(2)						—
Net decrease in cash and cash equivalents, including restricted cash			$	(56)					$	(252)					$	196

The change in our cash and cash equivalents balance during the nine months ended September 30, 2023 compared to the prior year is reflective of the following:

• $366 million of operating activities primarily due to higher cash payments for inventory purchases, income taxes, interest, the Settlement, and Exit and restructuring actions, partially offset by favorability in the timing of customer collections and lower employee incentive compensation payments.

• $892 million of investing activities primarily due to cash payments for the acquisition of Matrox in the prior year.

• $330 million of financing activities primarily due to increased borrowings in the prior year as a result of the Company refinancing its long-term credit facilities, partially offset by lower common stock repurchases in the current year.

Company Debt

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

			September 30, 2023						December 31, 2022
Term Loan A			$	1,684					$	1,728
Revolving Credit Facility			477						50
Receivables Financing Facilities			119						254
Total debt			$	2,280					$	2,032
Less: Debt issuance costs			(3)						(4)
Less: Unamortized discounts			(4)						(5)
Less: Current portion of debt			(152)						(214)
Total long-term debt			$	2,121					$	1,809

In May 2022, the Company refinanced its long-term credit facilities by entering into its third amendment to the Amended and Restated Credit Agreement, which increased the Company’s borrowing under Term Loan A from $875 million to $1.75 billion and the Company’s borrowing capacity under the Revolving Credit Facility from $1 billion to $1.5 billion, extended the maturities of the facilities to May 25, 2027, and replaced LIBOR with SOFR as the benchmark reference rate.

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 first quarter of 2023, 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 September 30, 2023, the Term Loan A interest rate was 6.67%. 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 September 30, 2023, the Company had letters of credit totaling $11 million, which reduced funds available for borrowings under the Revolving Credit Facility from $1,500 million to $1,489 million. As of September 30, 2023, the Revolving Credit Facility had an average interest rate of 6.65%. 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 facilities as secured borrowings. The Company’s first facility allows for borrowings of up to $180 million and matures on March 19, 2024. The Company’s second facility allows for borrowings of up to $100 million and matures on May 13, 2024.

As of September 30, 2023, the Company’s Consolidated Balance Sheets included $530 million of gross receivables that were pledged under the facilities. As of September 30, 2023, $119 million had been borrowed and was classified as current. Borrowings under the facilities bear interest at a variable rate plus an applicable margin. As of September 30, 2023, the facilities had an average interest rate of 6.80%. Interest is paid monthly on these borrowings.

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 transfers certain receivables to banks without recourse as part of its credit and cash management activities. Such transfers are accounted for as sales and the related receivables are removed from the Company’s balance sheet. 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. The Company has two Receivables Factoring arrangements. One arrangement allows for the factoring of up to €150 million of uncollected receivables originated from the EMEA and Asia-Pacific regions. In the current quarter, the Company amended its second arrangement to allow the factoring of uncollected receivables originated from the Europe, Middle East, and Africa (“EMEA”) region from up to $25 million to $50 million. Otherwise, the amendment did not substantially change the terms of the arrangement.

As of September 30, 2023 and December 31, 2022, there were a total of $72 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 $82 million and $130 million of obligations that were not yet remitted to banks as of September 30, 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 Cash flows from financing activities on the Consolidated Statements of Cash Flows.

See Note 15, 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 nine months of 2023, the Company repurchased 194,319 shares of common stock for approximately $52 million. As of September 30, 2023, the Company has cumulatively repurchased 3,517,602 shares of common stock for approximately $1.1 billion, resulting in a remaining amount of share repurchases authorized under the plans of $893 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:

			Nine Months Ended
			September 30, 2023																		October 1, 2022
			AIT						EVM						Total						AIT						EVM						Total
Significant customers as a % of Net sales			18		%				27		%				45		%				16		%				30		%				46		%

These customers accounted for 50% of accounts receivable as of September 30, 2023. No other customer accounted for more than 10% of total Net sales during the period ended September 30, 2023.

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 decline, AIT Organic Net sales (decline) growth, and EVM Organic Net sales decline – 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.