Zebra Technologies 10-Q 2024-09-28

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 September 28, 2024

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 October 22, 2024, there were 51,580,028 shares of Class A Common Stock, $.01 par value, outstanding.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

QUARTER ENDED SEPTEMBER 28, 2024

TABLE OF CONTENTS

						PAGE
PART I - FINANCIAL INFORMATION						3
Item 1.			Consolidated Financial Statements			3
			Consolidated Balance Sheets as of September 28, 2024 (unaudited) and December 31, 2023			3
			Consolidated Statements of Operations (unaudited) for the three and nine months ended September 28, 2024 and September 30, 2023			4
			Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended September 28, 2024 and September 30, 2023			5
			Consolidated Statements of Stockholders’ Equity (unaudited) for the three and nine months ended September 28, 2024 and September 30, 2023			6
			Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 28, 2024 and September 30, 2023			8
			Notes to Consolidated Financial Statements (unaudited)			8
			Note 1: Description of Business and Basis of Presentation			9
			Note 2: Significant Accounting Policies			9
			Note 3: Revenues			10
			Note 4: Inventories			11
			Note 5: Investments			11
			Note 6: Exit and Restructuring Costs			11
			Note 7: Fair Value Measurements			11
			Note 8: Derivative Instruments			13
			Note 9: Long-Term Debt			15
			Note 10: Leases			17
			Note 11: Accrued Liabilities, Commitments and Contingencies			17
			Note 12: Income Taxes			18
			Note 13: Earnings (Loss) Per Share			18
			Note 14: Accumulated Other Comprehensive (Loss) Income			19
			Note 15: Accounts Receivable Factoring			19
			Note 16: Segment Information & Geographic Data			20
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
			Overview			21
			Results of Operations			22
			Results of Operations by Segment			24
			Liquidity and Capital Resources			26
			Significant Customers			29
			Safe Harbor			29
			New Accounting Pronouncements			30
			Non-GAAP Measures			30
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			30
Item 4.			Controls and Procedures			30
Item 5.			Other Information			34
PART II - OTHER INFORMATION						31
Item 1.			Legal Proceedings			31
Item 1A.			Risk Factors			32
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			34
Item 6.			Exhibits			35
Signatures						36

PART I - FINANCIAL INFORMATION

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

			September 28, 2024						December 31, 2023
			(Unaudited)
Assets
Current assets:
Cash and cash equivalents			$	676					$	137
Accounts receivable, net of allowances for doubtful accounts of $1 each as of September 28, 2024 and December 31, 2023			642						521
Inventories, net			639						804
Income tax receivable			67						63
Prepaid expenses and other current assets			109						147
Total Current assets			2,133						1,672
Property, plant and equipment, net			302						309
Right-of-use lease assets			173						169
Goodwill			3,895						3,895
Other intangibles, net			447						527
Deferred income taxes			501						438
Other long-term assets			239						296
Total Assets			$	7,690					$	7,306
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt			$	89					$	173
Accounts payable			533						456
Accrued liabilities			490						504
Deferred revenue			432						458
Income taxes payable			18						7
Total Current liabilities			1,562						1,598
Long-term debt			2,080						2,047
Long-term lease liabilities			162						152
Deferred income taxes			66						67
Long-term deferred revenue			304						312
Other long-term liabilities			95						94
Total Liabilities			4,269						4,270
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			653						615
Treasury stock at cost, 20,609,801 and 20,772,995 shares as of September 28, 2024 and December 31, 2023, respectively			(1,871)						(1,858)
Retained earnings			4,697						4,332
Accumulated other comprehensive loss			(59)						(54)
Total Stockholders’ Equity			3,421						3,036
Total Liabilities and Stockholders’ Equity			$	7,690					$	7,306

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												Nine Months Ended
			September 28, 2024						September 30, 2023						September 28, 2024						September 30, 2023
Net sales:
Tangible products			$	1,019					$	729					$	2,931					$	2,885
Services and software			236						227						716						690
Total Net sales			1,255						956						3,647						3,575
Cost of sales:
Tangible products			526						419						1,539						1,559
Services and software			116						110						343						341
Total Cost of sales			642						529						1,882						1,900
Gross profit			613						427						1,765						1,675
Operating expenses:
Selling and marketing			151						138						449						445
Research and development			141						127						425						403
General and administrative			96						88						274						256
Amortization of intangible assets			29						26						80						78
Acquisition and integration costs			1						2						3						4
Exit and restructuring costs			4						58						17						82
Total Operating expenses			422						439						1,248						1,268
Operating income (loss)			191						(12)						517						407
Other (loss) income, net:
Foreign exchange (loss) gain			(9)						6						(6)						2
Interest expense, net			(31)						(16)						(71)						(69)
Other expense, net			(2)						(2)						(13)						(8)
Total Other expense, net			(42)						(12)						(90)						(75)
Income (loss) before income tax			149						(24)						427						332
Income tax expense (benefit)			12						(9)						62						53
Net income (loss)			$	137					$	(15)					$	365					$	279
Basic earnings (loss) per share			$	2.65					$	(0.28)					$	7.09					$	5.44
Diluted earnings (loss) per share			$	2.64					$	(0.28)					$	7.04					$	5.40

See accompanying Notes to Consolidated Financial Statements.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

			Three Months Ended												Nine Months Ended
			September 28, 2024						September 30, 2023						September 28, 2024						September 30, 2023
Net income (loss)			$	137					$	(15)					$	365					$	279
Other comprehensive income (loss), net of tax:
Changes in unrealized (losses) gains on sales

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Overview

We are a global leader in the Automatic Identification and Data Capture (“AIDC”) industry. The AIDC market consists of mobile computing, data capture, radio frequency identification devices (“RFID”), barcode printing, and other workflow automation products and services. The Company’s solutions are proven to help our customers and end-users digitize and automate their workflows to achieve their critical business objectives, including improved productivity and operational efficiency, optimized regulatory compliance, and better customer experiences.

We design, manufacture, and sell a broad range of AIDC products, including: mobile computers, barcode scanners and imagers, RFID readers, specialty printers for barcode labeling and personal identification, real-time location systems (“RTLS”), related accessories and supplies, such as labels and other consumables, and related software applications. We also provide machine vision and robotics automation solutions; a full range of services, including maintenance, technical support, repair, managed and professional services; as well as cloud-based software subscriptions. 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 North America; Europe, Middle East, and Africa (“EMEA”); Asia Pacific; and Latin America.

We continue to advance our Enterprise Asset Intelligence (“EAI”) vision: every asset and front-line worker visible, connected, and fully optimized. Through continual innovation, we have expanded beyond the traditional AIDC market to transform activities such as factory production, packages moving through a supply chain, retail shopping, and the hospital patient journey. Data from enterprise assets, including status, condition, location, utilization, and preferences, is analyzed in the cloud to provide prioritized actionable insights. As a result, our solutions enable enterprises to “sense, analyze, and act” more effectively to optimize their activities.

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.

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.

Third Quarter 2024 Financial Summary and Other Recent Developments

• Net sales were $1,255 million in the current quarter compared to $956 million in the prior year.

• Operating income was $191 million in the current quarter compared to an operating loss of $12 million in the prior year.

• Net income was $137 million, or $2.64 per diluted share in the current quarter, compared to a net loss of $15 million, or $(0.28) per diluted share in the prior year.

• Net cash provided by operating activities was $707 million for the nine months ended September 28, 2024 as compared to net cash used in operating activities of $145 million for the nine months ended September 30, 2023.

In the current quarter, we saw the continuation of a modest recovery in demand trends that began to broaden across both of our segments. Our third quarter revenues and profitability improved from the first half of the year, and particularly as compared to the prior year which was negatively impacted by broad-based demand declines and distributor inventory reductions. We expect these trends to continue into the fourth quarter.

The Company completed its actions under the 2022 Productivity Plan in the third quarter. Total charges associated with the 2022 Productivity Plan and the U.S. voluntary retirement plan (“VRP”), which was completed in 2023, were $127 million, including $4 million recorded in the current quarter. The costs of these actions are classified within Exit and restructuring on the Consolidated Statements of Operations. Together, these programs have impacted over 9% of our global employee base and are expected to result in annualized net cost savings of approximately $120 million, primarily within Operating expenses. The Company has realized $110 million in net savings to date, with $50 million in 2023 and an incremental $60 million in the first nine months of 2024.

Results of Operations

Consolidated Results of Operations

(amounts in millions, except percentages)

			Three Months Ended																								Nine Months Ended
			September 28, 2024						September 30, 2023						$ Change						% Change						September 28, 2024						September 30, 2023						$ Change						% Change
Net sales:
Tangible products			$	1,019					$	729					$	290					39.8		%				$	2,931					$	2,885					$	46					1.6		%
Services and software			236						227						9						4.0		%				716						690						26						3.8		%
Total Net sales			1,255						956						299						31.3		%				3,647						3,575						72						2.0		%
Gross profit			613						427						186						43.6		%				1,765						1,675						90						5.4		%
Gross margin			48.8		%				44.7		%										410 bps						48.4		%				46.9		%										150 bps
Operating expenses			422						439						(17)						(3.9)		%				1,248						1,268						(20)						(1.6)		%
Operating income (loss)			$	191					$	(12)					$	203					1,691.7		%				$	517					$	407					$	110					27.0		%

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

			Three Months Ended																								Nine Months Ended
			September 28, 2024						September 30, 2023						$ Change						% Change						September 28, 2024						September 30, 2023						$ Change						% Change
North America			$	628					$	517					$	111					21.5		%				$	1,839					$	1,884					$	(45)					(2.4)		%
EMEA			405						269						136						50.6		%				1,204						1,086						118						10.9		%
Asia-Pacific			132						106						26						24.5		%				362						382						(20)						(5.2)		%
Latin America			90						64						26						40.6		%				242						223						19						8.5		%
Total Net sales			$	1,255					$	956					$	299					31.3		%				$	3,647					$	3,575					$	72					2.0		%

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

			Three Months Ended																								Nine Months Ended
			September 28, 2024						September 30, 2023						As a % of Net sales												September 28, 2024						September 30, 2023						As a % of Net sales
						2024						2023												2024						2023
Selling and marketing			$	151					$	138					12.0		%				14.4		%				$	449					$	445					12.3		%				12.4		%
Research and development			141						127						11.2		%				13.3		%				425						403						11.7		%				11.3		%
General and administrative			96						88						7.6		%				9.2		%				274						256						7.5		%				7.2		%
Amortization of intangible assets			29						26						NM						NM						80						78						NM						NM
Acquisition and integration costs			1						2						NM						NM						3						4						NM						NM
Exit and restructuring costs			4						58						NM						NM						17						82						NM						NM
Total Operating expenses			$	422					$	439					33.6		%				45.9		%				$	1,248					$	1,268					34.2		%				35.5		%

Consolidated Organic Net sales growth:

			Three Months Ended						Nine Months Ended
			September 28, 2024						September 28, 2024
Reported GAAP Consolidated Net sales growth			31.3		%				2.0		%
Adjustments:
Impact of foreign currency translations (1)			(0.7)		%				(0.5)		%
Consolidated Organic Net sales growth (2)			30.6		%				1.5		%

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

Third quarter 2024 compared to third quarter 2023

Total Net sales increased by $299 million or 31.3% compared to the prior year reflecting growth in both of our segments. The prior year period was negatively impacted by declines in broad-based demand and actions taken by distributors to reduce their on-hand inventory levels. Excluding the effects of currency changes, Consolidated Organic Net sales increased by 30.6%.

Gross margin increased to 48.8% for the current year compared to 44.7% for the prior year. As compared to the prior year, Gross margin was higher in both of our segments which benefited from volume leverage in the current year.

Operating expenses for the quarters ended September 28, 2024 and September 30, 2023 were $422 million and $439 million, or 33.6% and 45.9% of Net sales, respectively. Current year Operating expenses were lower than the prior year primarily due to lower Exit and restructuring costs and incremental savings largely attributed to our Exit and restructuring actions, partially offset by higher incentive compensation. The decrease as a percentage of Net sales compared to the prior year reflects the impact of expense leveraging.

Operating income was $191 million for the current year compared to an operating loss of $12 million in the prior year. The increase was due to higher Gross profit and lower Operating expenses.

Net income increased compared to the prior year primarily due to higher Operating income, as described above, partially offset by higher Other expense, net. The increase in Other expense, net was primarily due to interest rate swap gains in the prior year and unfavorable changes in Foreign exchange (loss) gain as compared to the prior year.

The Company’s effective tax rates for the three months ended September 28, 2024 and September 30, 2023 were 8.1% expense and 37.5% benefit, respectively. The change in the effective tax rates year over year was primarily due to increased foreign income taxed favorably in the U.S. for the current year, while the prior year included a discrete tax benefit related to the VRP.

Diluted earnings per share increased to $2.64 as compared to $(0.28) in the prior year due to higher Net income.

Year to date 2024 compared to Year to date 2023

Total Net sales increased $72 million or 2.0% compared to the prior year reflecting growth in our EVM segment that was largely offset by a decline in our AIT segment as the recovery in demand trends benefited EVM earlier in the current year than AIT. Excluding the effects of currency changes, Consolidated Organic Net sales increased by 1.5%.

Gross margin increased to 48.4% for the current year compared to 46.9% for the prior year. As compared to the prior year, Gross margin was higher in our EVM segment and lower in our AIT segment.

Operating expenses for the nine months ended September 28, 2024 and September 30, 2023 were $1,248 million and $1,268 million, or 34.2% and 35.5% of Net sales, respectively. Current year Operating expenses were lower than the prior year primarily due to lower Exit and restructuring costs and incremental savings largely attributed to our Exit and restructuring actions, partially offset by higher incentive compensation.

Operating income was $517 million for the current year compared to $407 million in the prior year. The increase was due to higher Gross profit and lower Operating expenses.

Net income increased compared to the prior year primarily due to higher Operating income, as described above, partially offset by higher Other expense, net. The increase in Other expense, net was primarily due to unfavorable changes in Foreign exchange (loss) gain as compared to the prior year and a long-term investment loss in the current year.

The Company’s effective tax rates for the nine months ended September 28, 2024 and September 30, 2023 were 14.5% and 16.0%, respectively.

Diluted earnings per share increased to $7.04 as compared to $5.40 in the prior year due to higher Net income.

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.

Asset Intelligence & Tracking Segment (“AIT”)

(amounts in millions, except percentages)

			Three Months Ended																								Nine Months Ended
			September 28, 2024						September 30, 2023						$ Change						% Change						September 28, 2024						September 30, 2023						$ Change						% Change
Net sales:
Tangible products			$	382					$	295					$	87					29.5		%				$	1,115					$	1,222					$	(107)					(8.8)		%
Services and software			28						29						(1)						(3.4)		%				84						83						1						1.2		%
Total Net sales			410						324						86						26.5		%				1,199						1,305						(106)						(8.1)		%
Gross profit			199						145						54						37.2		%				570						628						(58)						(9.2)		%
Gross margin			48.5		%				44.8		%										370 bps						47.5		%				48.1		%										(60) bps
Operating expenses			116						101						15						14.9		%				338						341						(3)						(0.9)		%
Operating income			$	83					$	44					$	39					88.6		%				$	232					$	287					$	(55)					(19.2)		%

AIT Organic Net sales growth (decline):

			Three Months Ended						Nine Months Ended
			September 28, 2024						September 28, 2024
AIT Reported GAAP Net sales growth (decline)			26.5		%				(8.1)		%
Adjustments:
Impact of foreign currency translations (1)			(0.7)		%				(0.6)		%
AIT Organic Net sales growth (decline) (2)			25.8		%				(8.7)		%

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

Third quarter 2024 compared to third quarter 2023

Total Net sales for AIT increased $86 million or 26.5% compared to the prior year primarily due to higher sales of printing products (contributing the majority of the total increase) and RFID products. Excluding the impact of foreign currency changes, AIT Organic Net sales increased by 25.8%.

Gross margin increased to 48.5% in the current year compared to 44.8% for the prior year primarily due to favorable business mix and volume leverage, partially offset by higher freight rates.

Operating income increased 88.6% in the current year compared to the prior year due to higher Gross profit, partially offset by higher Operating expenses.

Year to date 2024 compared to Year to date 2023

Total Net sales for AIT decreased $106 million or 8.1% compared to the prior year primarily due to lower sales of printing products. Excluding the impact of foreign currency changes, AIT Organic Net sales decreased by 8.7%.

Gross margin decreased to 47.5% in the current year compared to 48.1% for the prior year primarily due to volume deleveraging, higher inventory-related charges, and unfavorable business mix.

Operating income decreased 19.2% in the current year compared to the prior year primarily due to lower Gross profit.

Enterprise Visibility & Mobility Segment (“EVM”)

(amounts in millions, except percentages)

			Three Months Ended																								Nine Months Ended
			September 28, 2024						September 30, 2023						$ Change						% Change						September 28, 2024						September 30, 2023						$ Change						% Change
Net sales:
Tangible products			$	637					$	434					$	203					46.8		%				$	1,816					$	1,663					$	153					9.2		%
Services and software			208						198						10						5.1		%				632						607						25						4.1		%
Total Net sales			845						632						213						33.7		%				2,448						2,270						178						7.8		%
Gross profit			414						282						132						46.8		%				1,195						1,047						148						14.1		%
Gross margin			49.0		%				44.6		%										440 bps						48.8		%				46.1		%										270 bps
Operating expenses			272						252						20						7.9		%				810						762						48						6.3		%
Operating income			$	142					$	30					$	112					373.3		%				$	385					$	285					$	100					35.1		%

EVM Organic Net sales growth:

			Three Months Ended						Nine Months Ended
			September 28, 2024						September 28, 2024
EVM Reported GAAP Net sales growth			33.7		%				7.8		%
Adjustments:
Impact of foreign currency translations (1)			(0.7)		%				(0.4)		%
EVM Organic Net sales growth (2)			33.0		%				7.4		%

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

Third quarter 2024 compared to third quarter 2023

Total Net sales for EVM increased $213 million or 33.7% compared to the prior year primarily due to higher sales of mobile computing (contributing the majority of the total increase) and data capture products. Excluding the impacts of foreign currency changes, EVM Organic Net sales increased by 33.0%.

Gross margin increased to 49.0% in the current year compared to 44.6% for the prior year primarily due to volume leverage, lower inventory-related charges, and favorable business mix.

Operating income for the current year increased by 373.3% compared to the prior year due to higher Gross profit, partially offset by higher Operating expenses.

Year to date 2024 compared to Year to date 2023

Total Net sales for EVM increased $178 million or 7.8% compared to the prior year primarily due to higher sales of mobile computing products, and services and software, partially offset by lower sales of data capture products. Excluding the impacts of foreign currency changes, EVM Organic Net sales increased by 7.4%.

Gross margin increased to 48.8% in the current year compared to 46.1% for the prior year primarily due to primarily due to favorable business mix and higher service and software margins, volume leverage, lower inventory-related charges, and lower freight rates.

Operating income for the current year increased by 35.1% compared to the prior year due to higher Gross profit, partially offset by higher 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 provided by (used in):			September 28, 2024						September 30, 2023						$ Change
Operating activities			$	707					$	(145)					$	852
Investing activities			(42)						(49)						7
Financing activities			(127)						140						(267)
Effect of exchange rates on cash balances			—						(2)						2
Net change in cash and cash equivalents, including restricted cash			$	538					$	(56)					$	594

The change in our cash and cash equivalents balance during the nine months ended September 28, 2024 compared to the prior year is primarily due to the following:

• $852 million change in operating activities primarily due to lower cash payments for inventory purchases and the reduction of overall inventory levels, lower income tax, legal settlement, and employee incentive compensation payments, higher cash receipts on interest rate swaps attributed to the termination of those agreements, as well as overall improved operating profits.

• $267 million change in financing activities primarily due to current year net debt repayments as a portion of the recently issued Senior Notes was utilized to reduce total debt, compared to net borrowings in the prior year.

Company Debt

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

			September 28, 2024						December 31, 2023
Term Loan A			$	1,575					$	1,684
Senior Notes			500						—
Revolving Credit Facility			—						413
Receivables Financing Facilities			108						129
Total debt			$	2,183					$	2,226
Less: Debt issuance costs			(11)						(2)
Less: Unamortized discounts			(3)						(4)
Less: Current portion of debt			(89)						(173)
Total long-term debt			$	2,080					$	2,047

Term Loan A

The principal on Term Loan A is due in quarterly installments, with the next quarterly installment due in the second quarter of 2026 and the majority due upon maturity in 2027. 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 September 28, 2024, the Term Loan A interest rate was 6.60%. Interest payments are made monthly and are subject to variable rates plus an applicable margin.

Senior Notes

In the second quarter, the Company completed a private offering of $500 million senior unsecured notes (the “Senior Notes”) with a 6.5% fixed interest rate. The net proceeds of the issuance, after deducting debt issuance costs which were deferred, were approximately $492 million. The Senior Notes mature on June 1, 2032, and interest is payable semi-annually in arrears in June and December of each year, commencing on December 1, 2024. The Company has the option or could be required to prepay certain outstanding amounts in the event of certain circumstances or transactions.

The Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by certain of Zebra’s existing and future subsidiaries. The Senior Notes contain covenants that, among other things, limit the ability of Zebra to: (i) grant or incur liens; (ii) have its subsidiaries guarantee debt without becoming guarantors; and (iii) merge or consolidate with another company or sell all or substantially all of its assets.

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 28, 2024, the Company had letters of credit totaling $10 million, which reduced funds available for borrowings under the Revolving Credit Facility from $1,500 million to $1,490 million. As of September 28, 2024, the Revolving Credit Facility had an average interest rate of 6.19%. 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 Facility

As of September 28, 2024, the Company has a Receivables Financing Facility with a borrowing limit of up to $180 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 this facility as secured borrowings. During the first quarter of 2024, the Company amended this facility to extend the maturity to March 19, 2027 but otherwise did not substantially change the terms of the facility.

As of September 28, 2024, the Company’s Consolidated Balance Sheets included $618 million of gross receivables that were pledged under the facility. As of September 28, 2024, $108 million had been borrowed, of which $89 million was classified as current. Borrowings under the facility bear interest at a variable rate plus an applicable margin. As of September 28, 2024, the facility had an average interest rate of 5.89%. 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 does not maintain any beneficial interest in the receivables sold. 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 September 28, 2024 and December 31, 2023, there were a total of $7 million and $56 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 $77 million and $112 million of obligations that were not yet remitted to banks as of September 28, 2024 and December 31, 2023, 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 an incremental $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 May 2022 share repurchase program does not have a stated expiration date. In the fourth quarter of 2022, the Company completed its original authorization of $1 billion in share repurchases. 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 2024, the Company repurchased 50,304 shares of common stock for approximately $16 million. As of September 28, 2024, the Company has cumulatively repurchased 459,318 shares of common stock for approximately $123 million, resulting in a remaining amount of share repurchases authorized under the May 2022 program of $877 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 28, 2024																		September 30, 2023
			AIT						EVM						Total						AIT						EVM						Total
Significant customers as a % of Net sales			18		%				38		%				56		%				18		%				27		%				45		%

These customers accounted for 56% of accounts receivable as of September 28, 2024. No other customer accounted for more than 10% of total Net sales during the period ended September 28, 2024.

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 2024. 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 on 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 (decline), 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 September 28, 2024. 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, 2023.

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 September 28, 2024. Based on this assessment and those criteria, our management believes that, as of September 28, 2024, our disclosure controls were effective.

Changes in Internal Control over Financial Reporting

During the quarter ended September 28, 2024, 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 11, 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, 2023, 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, 2023, other than as described below.

Our indebtedness could adversely affect our business. Our indebtedness could have important consequences, including the following:

• We may experience difficulty in satisfying our obligations with respect to our existing indebtedness or future indebtedness;

• Our ability to obtain additional financing for working capital, capital expenditures, acquisitions, or general corporate purposes may be impaired;

• We may be unable to create liens on certain assets to secure debt;

• Our subsidiary guarantors may not have sufficient assets or cash flow to allow them to guarantee new debt and existing debt;

• We may be at a competitive disadvantage with reduced flexibility in planning for, or responding to, changing conditions in the industry, including increased competition; and

• We may be more vulnerable to economic downturns and adverse developments in the business.

Any or all of the above events or factors could have an adverse effect on our results of operations and financial condition. The risks that we face based on our outstanding indebtedness may intensify if we incur additional indebtedness or financing obligations in the future.

We expect to fund our expenses and to pay the principal and interest on our indebtedness from cash flow from operations. Our ability to meet our expenses and to pay principal and interest on our indebtedness when due depends on our future performance and ability to collect cash from our customers, which will be affected by financial, business, economic, and other factors. We will not be able to control many of these factors, such as economic conditions in the markets where we operate and pressure from competitors.

If our business does not generate sufficient cash flows from operations or if future borrowings are not available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs, we may need to refinance all or a portion of our indebtedness on or before the maturity thereof, sell assets, reduce or delay capital investments, or seek to raise additional capital, any of which could have a material adverse effect on our operations. In addition, we may not be able to effect any of these actions, if necessary, on commercially reasonable terms or at all. Our ability to restructure or refinance our indebtedness will depend on the condition of the capital and debt markets and our financial condition at such time. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict business operations. The terms of anticipated or future debt instruments may limit or prevent us from taking any of these actions.

If there were an event of default under any of the agreements relating to our outstanding indebtedness, the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable immediately. We cannot assure you that our assets or cash flow would be sufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon an event of default. Further, if we are unable to repay, refinance or restructure our indebtedness under our secured debt, the holders of such debt could proceed against the collateral securing that indebtedness. In addition, any event of default or declaration of acceleration under one debt instrument could also result in an event of default under one or more of our other debt instruments. As a result, any default by us on our indebtedness could have a material adverse effect on our business and could impact our ability to satisfy the obligations in respect of our indebtedness. In addition, an event of default would likely result in a reduction of our credit rating, which could harm our ability to access additional capital on commercially reasonable terms or at all.

If we experience a significant disruption in our IT systems, our business, reputation, and operating results could be adversely affected. Our business processes depend on our IT systems, and the IT systems and processes of third parties to provide solutions and services, maintain financial records, retain sensitive data such as intellectual property, proprietary business information, and data related to customers, suppliers, and business partners, process orders, manage inventory, process shipments to customers and operate other critical functions. Disruptions to our IT systems from system failures, shutdowns, implementation of new operational systems or software or upgrades to existing systems and software, and other events, including disruptions at our cloud computing, server, systems, and other third party IT service providers, could interfere with our operations, interrupt order processing and shipments, damage customer and business partner relationships, and negatively impact our reputation. Any such event could have a material adverse effect on our business, reputation, operating results and financial condition, and no assurance can be given that our efforts to reduce the risk of such events will be successful.

Defects or errors in the Company’s software products, or third party software included in or upon which our products, solutions and services rely, could harm our reputation, result in significant cost to us, and impair our ability to market such products. Our software, third party software included on our products, solutions or services, or servers and infrastructure may contain undetected errors, defects, or bugs. Although we have not suffered significant harm from any errors, defects, or bugs, we may discover significant errors, defects, or bugs in the future that we may not be able to correct or correct in a timely manner. Any future errors, defects, or bugs found in such software, solutions, services or infrastructure may result in delays in, or loss of market acceptance of, our products, solutions or services; inability to deliver our products, solutions or services; diversion of resources; injury to reputation; increased service and warranty expenses; and payment of damages; which could have a material adverse effect on our financial results.

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 September 28, 2024:

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)
June 30, 2024 - July 27, 2024						—						$	—					—						$	893
July 28, 2024 - August 24, 2024						14,081						314.93						14,081						889
August 25, 2024 - September 28, 2024						36,223						327.81						36,223						877
Total						50,304						$	324.20					50,304						$	877

(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. In the fourth quarter of 2022, the Company completed its original authorization of $1 billion in share repurchases. 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. As of September 28, 2024, the Company has cumulatively repurchased 459,318 shares of common stock for approximately $123 million, resulting in a remaining amount of share repurchases authorized under the May 2022 program of $877 million.

None of our directors or executive officers had in effect, adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the third quarter of 2024.

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 September 28, 2024, 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 September 28, 2024 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: October 29, 2024			By:						/s/ William J. Burns
									William J. Burns
									Chief Executive Officer
Date: October 29, 2024			By:						/s/ Nathan Winters
									Nathan Winters
									Chief Financial Officer