Item 1. Consolidated Financial Statements

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 hedging			(16)						23						(6)						24
Foreign currency translation adjustment			9						(7)						1						(2)
Comprehensive income			$	130					$	1					$	360					$	301

See accompanying Notes to Consolidated Financial Statements.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except share data)

(Unaudited)

						Class A Common Stock Shares						Class A Common Stock Value						Additional Paid-in Capital						Treasury Stock						Retained Earnings						Accumulated Other Comprehensive Loss						Total
Balance at December 31, 2023						51,378,862						$	1					$	615					$	(1,858)					$	4,332					$	(54)					$	3,036
Issuances of treasury shares related to share-based compensation plans, net of forfeitures						21,312						—						(3)						—						—						—						(3)
Shares withheld to fund withholding tax obligations related to share-based compensation plans						(206)						—						—						—						—						—						—
Share-based compensation						—						—						17						—						—						—						17
Net income						—						—						—						—						115						—						115
Changes in unrealized gains and losses on sales hedging (net of income taxes)						—						—						—						—						—						9						9
Foreign currency translation adjustment						—						—						—						—						—						(5)						(5)
Balance at March 30, 2024						51,399,968						$	1					$	629					$	(1,858)					$	4,447					$	(50)					$	3,169
Issuances of treasury shares related to share-based compensation plans, net of forfeitures						170,023						—						(27)						3						—						—						(24)
Share-based compensation						—						—						31						—						—						—						31
Net income						—						—						—						—						113						—						113
Changes in unrealized gains and losses on sales hedging (net of income taxes)						—						—						—						—						—						1						1
Foreign currency translation adjustment						—						—						—						—						—						(3)						(3)
Balance at June 29, 2024						51,569,991						$	1					$	633					$	(1,855)					$	4,560					$	(52)					$	3,287
Issuances of treasury shares related to share-based compensation plans, net of forfeitures						22,369						—						—						—						—						—						—
Share-based compensation						—						—						20						—						—						—						20
Repurchase of common stock						(50,304)						—						—						(16)						—						—						(16)
Net income						—						—						—						—						137						—						137
Changes in unrealized gains and losses on sales hedging (net of income taxes)						—						—						—						—						—						(16)						(16)
Foreign currency translation adjustment						—						—						—						—						—						9						9
Balance at September 28, 2024						51,542,056						$	1					$	653					$	(1,871)					$	4,697					$	(59)					$	3,421

=

						Class A Common Stock Shares						Class A Common Stock Value						Additional Paid-in Capital						Treasury Stock						Retained Earnings						Accumulated Other Comprehensive Loss						Total
Balance at December 31, 2022						51,451,500						$	1					$	561					$	(1,799)					$	4,036					$	(66)					$	2,733
Issuances of treasury shares related to share-based compensation plans, net of forfeitures						29,784						—						5						—						—						—						5
Shares withheld to fund withholding tax obligations related to share-based compensation plans						(504)						—						—						—						—						—						—
Share-based compensation						—						—						18						—						—						—						18
Repurchase of common stock						(55,811)						—						—						(15)						—						—						(15)
Net income						—						—						—						—						150						—						150
Changes in unrealized gains and losses on sales hedging (net of income taxes)						—						—						—						—						—						(3)						(3)
Foreign currency translation adjustment						—						—						—						—						—						3						3
Balance at April 1, 2023						51,424,969						$	1					$	584					$	(1,814)					$	4,186					$	(66)					$	2,891
Issuances of treasury shares related to share-based compensation plans, net of forfeitures						75,271						—						(6)						1						—						—						(5)
Shares withheld to fund withholding tax obligations related to share-based compensation plans						(28,795)						—						—						(9)						—						—						(9)
Share-based compensation						—						—						2						—						—						—						2
Repurchase of common stock						(138,508)						—						—						(37)						—						—						(37)
Net income						—						—						—						—						144						—						144
Changes in unrealized gains and losses on sales hedging (net of income taxes)						—						—						—						—						—						4						4
Foreign currency translation adjustment						—						—						—						—						—						2						2
Balance at July 1, 2023						51,332,937						$	1					$	580					$	(1,859)					$	4,330					$	(60)					$	2,992
Issuances of treasury shares related to share-based compensation plans, net of forfeitures						26,506						—						—						1						—						—						1
Shares withheld to fund withholding tax obligations related to share-based compensation plans						(159)						—						—						—						—						—						—
Share-based compensation						—						—						19						—						—						—						19
Net loss						—						—						—						—						(15)						—						(15)
Changes in unrealized gains and losses on sales hedging (net of income taxes)						—						—						—						—						—						23						23
Foreign currency translation adjustment						—						—						—						—						—						(7)						(7)
Balance at September 30, 2023						51,359,284						$	1					$	599					$	(1,858)					$	4,315					$	(44)					$	3,013

See accompanying Notes to Consolidated Financial Statements.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

			Nine Months Ended
			September 28, 2024						September 30, 2023
Cash flows from operating activities:
Net income			$	365					$	279
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			130						132
Share-based compensation			68						39
Deferred income taxes			(62)						(35)
Unrealized gain on forward interest rate swaps			(31)						(34)
Other, net			12						3
Changes in operating assets and liabilities:
Accounts receivable, net			(120)						228
Inventories, net			161						7
Other assets			5						(25)
Accounts payable			79						(402)
Accrued liabilities			68						(79)
Deferred revenue			(34)						(12)
Income taxes			25						(134)
Settlement liability			(45)						(135)
Cash receipts on forward interest rate swaps			86						20
Other operating activities			—						3
Net cash provided by (used in) operating activities			707						(145)
Cash flows from investing activities:
Purchases of property, plant and equipment			(41)						(48)
Proceeds from sale of short-term investments			2						—
Purchases of long-term investments			(3)						(1)
Net cash used in investing activities			(42)						(49)
Cash flows from financing activities:
Payment of debt issuance costs, extinguishment costs and discounts			(9)						—
Payments of debt			(694)						(221)
Proceeds from issuance of debt			651						469
Payments for repurchases of common stock			(16)						(52)
Net payments related to share-based compensation plans			(27)						(8)
Change in unremitted cash collections from servicing factored receivables			(35)						(48)
Other financing activities			3						—
Net cash (used in) provided by financing activities			(127)						140
Effect of exchange rate changes on cash and cash equivalents, including restricted cash			—						(2)
Net increase (decrease) in cash and cash equivalents, including restricted cash			538						(56)
Cash and cash equivalents, including restricted cash, at beginning of period			138						117
Cash and cash equivalents, including restricted cash, at end of period			$	676					$	61
Less restricted cash, included in Prepaid expenses and other current assets			—						—
Cash and cash equivalents at end of period			$	676					$	61
Supplemental disclosures of cash flow information:
Income taxes paid			$	90					$	227
Interest paid inclusive of forward interest rate swaps			$	3					$	80

Certain prior period amounts included in Net cash provided by (used in) operating activities have been reclassified to conform with the current period presentation.

See accompanying Notes to Consolidated Financial Statements.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 Description of Business and Basis of Presentation

Zebra Technologies Corporation and its subsidiaries (“Zebra” or the “Company”) is a global leader providing innovative Enterprise Asset Intelligence (“EAI”) solutions in the automatic identification and data capture solutions industry. We design, manufacture, and sell a broad range of products and solutions, including cloud-based software subscriptions, that capture and move data. We also provide a full range of services, including maintenance, technical support, repair, managed and professional services. End-users of our products, solutions and services include those in retail and e-commerce, manufacturing, transportation and logistics, healthcare, public sector, and other industries. We provide our products, solutions and services globally through a direct sales force and an extensive network of channel partners.

Management prepared these unaudited interim consolidated financial statements according to the rules and regulations of the Securities and Exchange Commission for interim financial information and notes. As permitted under Article 10 of Regulation S-X and the instructions of Form 10-Q, these consolidated financial statements do not include all the information and notes required by United States Generally Accepted Accounting Principles (“GAAP”) for complete financial statements, although management believes that the disclosures made are adequate to make the information not misleading. These interim financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

In the opinion of the Company, these interim financial statements include all adjustments (of a normal, recurring nature) necessary to fairly present its Consolidated Balance Sheet as of September 28, 2024, the Consolidated Statements of Operations, Comprehensive Income and Stockholders’ Equity for the three and nine months ended September 28, 2024 and September 30, 2023, and the Consolidated Statement of Cash Flows for the nine months ended September 28, 2024 and September 30, 2023. These results, however, are not necessarily indicative of the results expected for the full fiscal year ending December 31, 2024.

Note 2 Significant Accounting Policies

For a discussion of our significant accounting policies, see Note 2, Significant Accounting Policies within Part II, Item 8. “Financial Statements and Supplementary Data” in the Annual Report on Form 10-K for the year ended December 31, 2023. There have been no changes to our significant accounting policies since our Annual Report on Form 10-K for the year ended December 31, 2023.

Note 3 Revenues

The Company recognizes revenue to depict the transfer of goods, solutions or services to a customer at an amount that reflects the consideration which it expects to receive for providing those goods, solutions or services.

Revenues for tangible products are generally recognized upon shipment, whereas revenues for services and solution offerings are generally recognized over time by using an output or time-based method, assuming all other criteria for revenue recognition have been met. Revenues for software are recognized either upon delivery or over time using a time-based method, depending on how control is transferred to the customer. In cases where a bundle of products, services, solutions and/or software are delivered to the customer, judgment is required to select the method of progress which best reflects the transfer of control.

Disaggregation of Revenue

The following table presents our Net sales disaggregated by product category for each of our segments (in millions):

			Three Months Ended
			September 28, 2024																		September 30, 2023
Segment			Tangible Products						Services and Software						Total						Tangible Products						Services and Software						Total
AIT			$	382					$	28					$	410					$	295					$	29					$	324
EVM			637						208						845						434						198						632
Total			$	1,019					$	236					$	1,255					$	729					$	227					$	956
			Nine Months Ended
			September 28, 2024																		September 30, 2023
Segment			Tangible Products						Services and Software						Total						Tangible Products						Services and Software						Total
AIT			$	1,115					$	84					$	1,199					$	1,222					$	83					$	1,305
EVM			1,816						632						2,448						1,663						607						2,270
Total			$	2,931					$	716					$	3,647					$	2,885					$	690					$	3,575

In addition, refer to Note 16, Segment Information & Geographic Data for Net sales to customers by geographic region.

Performance Obligations

The Company’s remaining performance obligations relate to services and software solutions. The aggregated transaction price allocated to remaining performance obligations for arrangements with an original term exceeding one year was $1.24 billion and $1.13 billion, inclusive of deferred revenue, as of September 28, 2024 and December 31, 2023, respectively. On average, remaining performance obligations as of September 28, 2024 and December 31, 2023 are expected to be recognized over a period of approximately two years.

Contract Balances

Progress on satisfying performance obligations under contracts with customers related to billed revenues is reflected on the Consolidated Balance Sheets in Accounts receivable, net. Progress on satisfying performance obligations under contracts with customers related to unbilled revenues (“contract assets”) is reflected on the Consolidated Balance Sheets as Prepaid expenses and other current assets for revenues expected to be billed within the next twelve months, and Other long-term assets for revenues expected to be billed thereafter. The total contract asset balances were $13 million and $16 million as of September 28, 2024 and December 31, 2023, respectively. These contract assets result from timing differences between billing and satisfying performance obligations, as well as the impact from the allocation of the transaction price among performance obligations for contracts that include multiple performance obligations. Contract assets are evaluated for impairment and no impairment losses have been recognized during the three and nine months ended September 28, 2024 and September 30, 2023, respectively.

Deferred revenue on the Consolidated Balance Sheets consists of payments and billings in advance of our performance. The combined short-term and long-term deferred revenue balances were $736 million and $770 million as of September 28, 2024 and December 31, 2023, respectively. During the three and nine months ended September 28, 2024, the Company recognized $107 million and $374 million in revenue, which was previously included in the beginning balance of deferred revenue as of December 31, 2023. During the three and nine months ended September 30, 2023, the Company recognized $100 million and $349 million in revenue, which was previously included in the beginning balance of deferred revenue as of December 31, 2022.

Note 4 Inventories

The categories of Inventories, net are as follows (in millions):

			September 28, 2024						December 31, 2023
Raw materials (1)			$	270					$	403
Work in process			3						4
Finished goods			366						397
Total Inventories, net			$	639					$	804

(1) Raw material inventories primarily consist of product components as well as supplies used in repair operations.

Note 5 Investments

The carrying value of the Company’s long-term investments, which are included in Other long-term assets on the Consolidated Balance Sheets, was $110 million and $113 million as of September 28, 2024 and December 31, 2023.

During the nine months ended September 28, 2024 and September 30, 2023, the Company paid $3 million and $1 million, respectively, for the purchase of long-term investments. Net gains and losses related to the Company’s long-term investments are included within Other expense, net on the Consolidated Statements of Operations. There were no net gains or losses during the three months ended September 28, 2024. The Company recognized net losses of $6 million during the nine months ended September 28, 2024. Net gains and losses were not significant for the three and nine months ended September 30, 2023.

Note 6 Exit and Restructuring Costs

Total charges associated with the 2022 Productivity Plan, which was completed in the third quarter of 2024, and the U.S. voluntary retirement plan, which was completed in 2023, were $127 million incurred to date, including $4 million and $17 million recorded during the three and nine months ended September 28, 2024. The costs of these plans are classified within Exit and restructuring on the Consolidated Statements of Operations. The Company’s remaining payment obligations of $5 million, are reflected within Accrued liabilities on the Consolidated Balance Sheets.

The rollforward of the liability associated with Exit and restructuring activities is:

Balance as of December 31, 2023			$	22
Exit and restructuring charges			17
Non-cash utilization			(4)
Cash payments			(30)
Balance as of September 28, 2024			$	5

Note 7 Fair Value Measurements

Financial assets and liabilities are measured using inputs from three levels of the fair value hierarchy in accordance with Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into the following three broad levels:

• Level 1: Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs (e.g. U.S. Treasuries and money market funds).

• Level 2: Observable prices that are based on inputs not quoted in active markets but corroborated by market data.

• Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs. In addition, the Company considers counterparty credit risk in the assessment of fair value.

The Company’s financial assets and liabilities carried at fair value as of September 28, 2024, are classified below (in millions):

			Level 1						Level 2						Level 3						Total
Assets:
Investments related to the deferred compensation plan			$	41					$	—					$	—					$	41
Total Assets at fair value			$	41					$	—					$	—					$	41
Liabilities:
Foreign exchange contracts (1)			$	1					$	14					$	—					$	15
Liabilities related to the deferred compensation plan			41						—						—						41
Total Liabilities at fair value			$	42					$	14					$	—					$	56

The Company’s financial assets and liabilities carried at fair value as of December 31, 2023, are classified below (in millions):

			Level 1						Level 2						Level 3						Total
Assets:
Forward interest rate swap contracts (2)			$	—					$	83					$	—					$	83
Investments related to the deferred compensation plan			41						—						—						41
Total Assets at fair value			$	41					$	83					$	—					$	124
Liabilities:
Foreign exchange contracts (1)			$	1					$	6					$	—					$	7
Forward interest rate swap contracts (2)			—						28						—						28
Liabilities related to the deferred compensation plan			41						—						—						41
Total Liabilities at fair value			$	42					$	34					$	—					$	76

(1)The fair value of the foreign exchange contracts is calculated as follows:

• Fair value of forward contracts associated with forecasted sales hedges is calculated using the period-end exchange rate adjusted for current forward points.

• Fair value of hedges against net assets denominated in foreign currencies is calculated at the period-end exchange rate adjusted for current forward points unless the hedge has been traded but not settled at period-end (Level 2). If this is the case, the fair value is calculated at the rate at which the hedge is being settled (Level 1).

(2)The fair value of forward interest rate swaps is based upon a valuation model that uses relevant observable market inputs at the quoted intervals, such as forward yield curves, and is adjusted for the Company’s credit risk and the interest rate swap terms.

Note 8 Derivative Instruments

In the normal course of business, the Company is exposed to global market risks, including the effects of changes in foreign currency exchange rates and interest rates. The Company uses derivative instruments to manage its exposure to such risks and may elect to designate certain derivatives as hedging instruments under ASC Topic 815, Derivatives and Hedging (“ASC 815”). The Company formally documents all relationships between designated hedging instruments and hedged items as well as its risk management objectives and strategies for undertaking hedge transactions. The Company does not hold or issue derivatives for trading or speculative purposes.

In accordance with ASC 815, the Company recognizes derivative instruments as either assets or liabilities on the Consolidated Balance Sheets and measures them at fair value. The following table presents the fair value of its derivative instruments (in millions):

			Asset (Liability)
									Fair Values as of
			Balance Sheets Classification						September 28, 2024						December 31, 2023
Derivative instruments designated as hedges:
Foreign exchange contracts			Accrued liabilities						$	(14)					$	(6)
Total derivative instruments designated as hedges									$	(14)					$	(6)
Derivative instruments not designated as hedges:
Forward interest rate swaps			Prepaid expenses and other current assets						$	—					$	34
Forward interest rate swaps			Other long-term assets						—						49
Foreign exchange contracts			Accrued liabilities						(1)						(1)
Forward interest rate swaps			Accrued liabilities						—						(12)
Forward interest rate swaps			Other long-term liabilities						—						(16)
Total derivative instruments not designated as hedges									$	(1)					$	54
Total net derivative (liability) asset									$	(15)					$	48

The following table presents the net gains (losses) from changes in fair values of derivatives that are not designated as hedges (in millions):

			Gains (Losses) Recognized in Income
									Three Months Ended												Nine Months Ended
			Statements of Operations Classification						September 28, 2024						September 30, 2023						September 28, 2024						September 30, 2023
Derivative instruments not designated as hedges:
Foreign exchange contracts			Foreign exchange (loss) gain						$	(7)					$	1					$	(5)					$	(3)
Forward interest rate swaps			Interest expense, net						—						23						31						34
Total net (loss) gain recognized in income									$	(7)					$	24					$	26					$	31

Activities related to derivative instruments are reflected within Net cash provided by (used in) operating activities on the Consolidated Statements of Cash Flows.

Interest Rate Risk Management

The Company is exposed to market risk associated with interest rate payments on its borrowings under a term loan (“Term Loan A”), Revolving Credit Facility, and Receivables Financing Facilities, which bear interest at variable rates plus applicable margins. The Company manages its exposure to changes in interest rates by issuing both fixed and variable rate borrowings as well as periodically utilizing interest rate swaps to economically hedge interest rate exposure based on current and projected market conditions.

In the second quarter, the Company terminated all of its interest rate swap agreements, none of which were designated as hedges, resulting in a $77 million cash receipt that is classified within Cash flows from operating activities on the Consolidated Statements of Cash Flows. Total cash receipts for the nine months ended September 28, 2024 were $86 million. See Note 9, Long-Term Debt for further details related to the Company’s borrowings and interest rate exposure.

Credit and Market Risk Management

Financial instruments, including derivatives, expose the Company to counterparty credit risk of nonperformance and to market risk related to currency exchange rate and interest rate fluctuations. The Company manages its exposure to counterparty credit risk by establishing minimum credit standards, diversifying its counterparties, and monitoring its concentrations of credit. The Company’s counterparties are commercial banks with expertise in derivative financial instruments. The Company evaluates the impact of market risk on the fair value and cash flows of its derivative and other financial instruments by considering reasonably possible changes in interest rates and currency exchange rates. The Company continually monitors the creditworthiness of the customers to which it grants credit terms in the normal course of business. The terms and conditions of the Company’s credit policies are designed to mitigate concentrations of credit risk.

The Company’s master netting and other similar arrangements with the respective counterparties allow for net settlement under certain conditions, which are designed to reduce credit risk by permitting net settlement with the same counterparty. We present the assets and liabilities of our derivative financial instruments, for which we have net settlement agreements in place, on a net basis on the Consolidated Balance Sheets. If the derivative financial instruments had been presented gross on the Consolidated Balance Sheets, the asset and liability positions would have not been significant as of September 28, 2024 and December 31, 2023.

Foreign Currency Exchange Risk Management

The Company conducts business on a multinational basis in a variety of foreign currencies. Exposure to market risk for changes in foreign currency exchange rates arises primarily from Euro-denominated external revenues, cross-border financing activities between subsidiaries, and foreign currency denominated monetary assets and liabilities. The Company manages its objective of preserving the economic value of non-functional currency denominated cash flows by initially hedging transaction exposures with natural offsets and, once these opportunities have been exhausted, through foreign exchange forward and option contracts, as deemed appropriate.

The Company manages the exchange rate risk of anticipated Euro-denominated sales using forward contracts, which typically mature within twelve months of execution. The Company designates these derivative contracts as cash flow hedges. Unrealized gains and losses on these contracts are deferred in Accumulated other comprehensive income (loss) (“AOCI”) on the Consolidated Balance Sheets until the contract is settled and the hedged sale is realized. The realized gain or loss is then recorded as an adjustment to Net sales on the Consolidated Statements of Operations. Realized amounts reclassified to Net sales were $2 million and $6 million of losses for the three months ended September 28, 2024 and September 30, 2023, respectively. Realized amounts reclassified to Net sales were $4 million of gains and $16 million of losses for the nine months ended September 28, 2024 and September 30, 2023, respectively. As of September 28, 2024 and December 31, 2023, the notional amounts of the Company’s foreign exchange cash flow hedges were €622 million and €485 million, respectively. The Company has reviewed its cash flow hedges for effectiveness and determined that they are highly effective.

The Company uses forward contracts, which are not designated as hedging instruments, to manage its exposures related to net assets denominated in foreign currencies. These forward contracts typically mature within one month after execution. Monetary gains and losses on these forward contracts are recorded in income and are generally offset by the transaction gains and losses related to their net asset positions. The notional values and the net fair values of these outstanding contracts were as follows (in millions):

			September 28, 2024						December 31, 2023
Notional balance of outstanding contracts:
British Pound/U.S. Dollar			£	2					£	11
Euro/U.S. Dollar			€	183					€	80
Euro/Czech Koruna			€	16					€	17
Japanese Yen/U.S. Dollar			¥	274					¥	685
Singapore Dollar/U.S. Dollar			S$	19					S$	14
Mexican Peso/U.S. Dollar			Mex$	166					Mex$	144
Polish Zloty/U.S. Dollar			zł	39					zł	116
Net fair value of liabilities of outstanding contracts			$	1					$	1

Note 9 Long-Term 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

As of September 28, 2024, the future maturities of debt are as follows (in millions):

2024 (3 months remaining)						$	89
2025						—
2026						88
2027						1,506
2028						—
Thereafter						500
Total future maturities of debt						$	2,183

All borrowings as of September 28, 2024 were denominated in U.S. Dollars.

The estimated fair value of the Company’s debt approximated $2.2 billion as of both September 28, 2024 and December 31, 2023, respectively. These fair value amounts, developed based on inputs classified as Level 2 within the fair value hierarchy, represent the estimated value at which the Company’s lenders could trade its debt within the financial markets and do not represent the settlement value of these liabilities to the Company. The fair value of debt will continue to vary each period based on a number of factors, including fluctuations in market interest rates as well as changes to the Company’s credit ratings.

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.

The Company’s borrowings described above include terms and conditions that limit the incurrence of additional borrowings and require that certain financial ratios be maintained at designated levels.

As of September 28, 2024, the Company was in compliance with all debt covenants.

Note 10 Leases

During the nine months ended September 28, 2024, the Company recorded $36 million of right-of-use (“ROU”) assets obtained in exchange for lease obligations primarily related to the extension of existing leases and the commencement of a new office facility lease.

Future minimum lease payments under non-cancellable leases as of September 28, 2024 were as follows (in millions):

2024 (3 months remaining)						$	16
2025						46
2026						39
2027						32
2028						30
Thereafter						83
Total future minimum lease payments						$	246
Less: Interest						(44)
Present value of lease liabilities						$	202
Reported as of September 28, 2024:
Current portion of lease liabilities						$	40
Long-term lease liabilities						162
Present value of lease liabilities						$	202

The current portion of lease liabilities is included within Accrued liabilities on the Consolidated Balance Sheets.

Note 11 Accrued Liabilities, Commitments and Contingencies

Accrued Liabilities

The components of Accrued liabilities are as follows (in millions):

			September 28, 2024						December 31, 2023
Incentive compensation			$	134					$	47
Unremitted cash collections due to banks on factored accounts receivable			77						112
Payroll and benefits			63						83
Customer rebates			50						40
Current portion of lease liabilities			40						42
Warranty			26						27
Interest payable			20						2
Freight and duty			15						10
Exit and restructuring			5						22
Settlement			—						45
Other			60						74
Accrued liabilities			$	490					$	504

Warranties

The following table is a summary of the Company’s accrued warranty obligations (in millions):

			Nine Months Ended
			September 28, 2024						September 30, 2023
Balance at the beginning of the period			$	27					$	26
Warranty expense			19						21
Warranties fulfilled			(20)						(22)
Balance at the end of the period			$	26					$	25

Contingencies

The Company is subject to a variety of investigations, claims, suits, and other legal proceedings that arise from time to time in the ordinary course of business, including but not limited to, intellectual property, employment, tort, and breach of contract matters. The Company currently believes that the outcomes of such proceedings, individually and in the aggregate, will not have a material adverse impact on its business, cash flows, financial position, or results of operations. Any legal proceedings are subject to inherent uncertainties, and the Company’s view of these matters and their potential effects may change in the future. The Company records a liability for contingencies when a loss is deemed to be probable and the loss can be reasonably estimated.

Note 12 Income Taxes

The Company’s effective tax rate for the three and nine months ended September 28, 2024 was 8.1% and 14.5%, respectively, compared to 37.5% benefit and 16.0% expense for the three and nine months ended September 30, 2023. In the current periods, the variance from the 21% federal statutory rate was primarily due to the generation of tax credits and the favorable impacts of foreign earnings subject to U.S. taxation, offset partially by U.S. State income taxes and foreign rate differentials. In the prior periods, the difference was primarily due to a discrete tax benefit from the U.S. voluntary retirement plan, U.S. tax credits, and the favorable impacts of foreign earnings subject to U.S. taxation.

Note 13 Earnings (loss) Per Share

Basic net earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of diluted common shares outstanding. Diluted common shares outstanding is computed using the Treasury Stock method and, in periods of income, reflects the additional shares that would be outstanding if dilutive share-based compensation awards were converted into common shares during the period.

Earnings (loss) per share (in millions, except share data):

			Three Months Ended												Nine Months Ended
			September 28, 2024						September 30, 2023						September 28, 2024						September 30, 2023
Basic:
Net income (loss)			$	137					$	(15)					$	365					$	279
Weighted-average shares outstanding (1)			51,567,216						51,336,645						51,480,812						51,380,876
Basic earnings (loss) per share			$	2.65					$	(0.28)					$	7.09					$	5.44
Diluted:
Net income (loss)			$	137					$	(15)					$	365					$	279
Weighted-average shares outstanding (1)			51,567,216						51,336,645						51,480,812						51,380,876
Dilutive shares (2)			350,839						—						364,760						336,855
Diluted weighted-average shares outstanding			51,918,055						51,336,645						51,845,572						51,717,731
Diluted earnings (loss) per share			$	2.64					$	(0.28)					$	7.04					$	5.40

(1) In periods of a net loss, restricted stock and performance share awards, which are participating securities, are excluded from weighted-average shares outstanding.

(2) In periods of a net loss, all unvested share-based awards are anti-dilutive and therefore excluded from diluted shares.

Anti-dilutive share-based compensation awards are excluded from diluted earnings (loss) per share calculations. There were 1,621 and 61,240 shares that were anti-dilutive for the three and nine months ended September 28, 2024, respectively. There were 446,331 and 250,025 shares that were anti-dilutive for the three and nine months ended September 30, 2023, respectively.

Note 14 Accumulated Other Comprehensive (Loss) Income

Stockholders’ equity includes certain items classified as AOCI, including:

• Unrealized gain (loss) on sales hedging which relates to derivative instruments used to hedge the exposure related to currency exchange rates for forecasted Euro sales. These hedges are designated as cash flow hedges, and the Company defers income statement recognition of gains and losses until the hedged transaction occurs. See Note 8, Derivative Instruments for more details.

• Foreign currency translation adjustments which relates to the Company’s non-U.S. subsidiary companies that have designated a functional currency other than the U.S. Dollar. The Company translates the subsidiary functional currency financial statements to U.S. Dollars using a combination of historical, period-end, and average foreign exchange rates. This combination of rates creates the foreign currency translation adjustment component of AOCI.

The changes in each component of AOCI during the nine months ended September 28, 2024 and September 30, 2023 were as follows (in millions):

						Unrealized gain (loss) on sales hedging												Foreign currency translation adjustments						Total
Balance at December 31, 2022						$	(11)											$	(55)					$	(66)
Other comprehensive income (loss) before reclassifications						16												(2)						14
Amounts reclassified from AOCI(1)						16												—						16
Tax effect						(8)												—						(8)
Other comprehensive income (loss), net of tax						24												(2)						22
Balance at September 30, 2023						$	13											$	(57)					$	(44)
Balance at December 31, 2023						$	(5)											$	(49)					$	(54)
Other comprehensive income (loss) before reclassifications						(3)												1						(2)
Amounts reclassified from AOCI(1)						(4)												—						(4)
Tax effect						1												—						1
Other comprehensive income (loss), net of tax						(6)												1						(5)
Balance at September 28, 2024						$	(11)											$	(48)					$	(59)

(1) See Note 8, Derivative Instruments regarding the timing of reclassifications to operating results.

Note 15 Accounts Receivable 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.

The Company has a Receivables Factoring arrangement that was amended in the current quarter to limit the factoring of uncollected receivables originated from the EMEA and Asia-Pacific regions from €150 million to €75 million, which will revert to €150 million in the fourth quarter if not further amended. Otherwise, the amendment did not substantially change the terms

of the arrangement. In the current quarter, the Company terminated its other arrangement, which allowed for the factoring of uncollected receivables originated from the EMEA region up to $50 million.

During the nine months ended September 28, 2024 and September 30, 2023, the Company received cash proceeds of $816 million and $1,077 million, respectively, from the sales of accounts receivables under its factoring arrangement. 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.

Note 16 Segment Information & Geographic Data

The Company’s operations consist of two reportable segments: Asset Intelligence & Tracking (“AIT”) and Enterprise Visibility & Mobility (“EVM”). The reportable segments have been identified based on the financial data utilized by the Company’s Chief Executive Officer (the chief operating decision maker or “CODM”) to assess segment performance and allocate resources among the Company’s segments. The CODM reviews adjusted operating income to assess segment profitability. 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. Segment assets are not reviewed by the Company’s CODM and therefore are not disclosed below.

Financial information by segment is presented as follows (in millions):

			Three Months Ended												Nine Months Ended
			September 28, 2024						September 30, 2023						September 28, 2024						September 30, 2023
Net sales:
AIT			$	410					$	324					$	1,199					$	1,305
EVM			845						632						2,448						2,270
Total Net sales			$	1,255					$	956					$	3,647					$	3,575
Operating income (loss):
AIT(2)			$	83					$	44					$	232					$	287
EVM(2)			142						30						385						285
Total segment operating income			225						74						617						572
Corporate (1)			(34)						(86)						(100)						(165)
Total Operating income (loss)			$	191					$	(12)					$	517					$	407

(1)To the extent applicable, amounts included in Corporate consist of business acquisition purchase accounting adjustments, amortization of intangible assets, acquisition and integration costs, impairment of goodwill and other intangibles, and exit and restructuring costs.

(2)AIT and EVM segment operating income includes depreciation and share-based compensation expense. The amounts of depreciation and share-based compensation expense are proportionate to each segment’s Net sales.

Information regarding the Company’s operations by geographic area is contained in the following tables. Net sales amounts are attributed to geographic area based on customer location.

Net sales by region were as follows (in millions):

			Three Months Ended												Nine Months Ended
			September 28, 2024						September 30, 2023						September 28, 2024						September 30, 2023
North America			$	628					$	517					$	1,839					$	1,884
EMEA			405						269						1,204						1,086
Asia-Pacific			132						106						362						382
Latin America			90						64						242						223
Total Net sales			$	1,255					$	956					$	3,647					$	3,575