Zebra Technologies Announces 2015 First Quarter Financial Results

Lincolnshire, Ill., May 13, 2015─Zebra Technologies Corporation (NASDAQ: ZBRA) today reported that net sales for the three months ended April 4, 2015, were a record $893.2 million, compared with $288.3 million for the first quarter of 2014. The GAAP net loss for the first quarter was $25.3 million, or $0.50 per share, compared with net income of $41.6 million, or $0.82 per diluted share, for the first quarter of 2014.

Summary Financial Performance (Unaudited)

 

1Q15

1Q14

Change

GAAP net sales (in mils)

Gross margin (%)

GAAP net income (loss) (in mils) GAAP diluted earnings (loss) per share

Non-GAAP net income (in mils) Non-GAAP diluted earnings per share

Adjusted EBITDA (in mils)

$

$ $

$ $

$

893.2

45.8

(25.3) (0.50)

72.4 1.39

152.2

$ 288.3

51.3

$ 41.6 $ 0.82

$ 48.8 $ 0.96

$ 70.6

209.8%

(5.5) pts.

NM NM

48.3% 44.7%

115.7%

Note: A Reconciliation of Non-GAAP financial information to GAAP information is available in the financial tables in this release.

Non-GAAP Financial Results (unaudited)
For the first quarter of 2015, non-GAAP net income was $72.4 million, or $1.39 per diluted share, compared with $48.8 million, or $0.96 per diluted share, for the first quarter of 2014. Adjusted EBITDA for the first quarter of 2015 were $152.2 million, versus $70.6 million for the 2014 first quarter. The company’s calculation of non- GAAP net income adjusts for certain items on a tax-effected basis, including stock-based compensation expense, acquisition and integration costs, exit and restructuring costs, purchase accounting adjustments, and amortization of intangible assets. The calculation also adjusts for a $27.2 million foreign exchange loss on unhedged net monetary assets. Please refer to the tables included in this press release for a reconciliation of GAAP to non- GAAP financial results.

“We started the year with strong, positive momentum, as business activity remained high specifically in North America and Europe,” stated Anders Gustafsson, Zebra’s chief executive officer. “Our partners and customers are responding enthusiastically to our greatly expanded portfolio of solutions and capabilities, and our enhanced focus on giving them improved visibility into their assets, transactions and people for better enterprise asset intelligence. During the quarter we also made material progress on achieving our cost-synergy targets, pursuing growth initiatives and integrating Zebra with the Enterprise business acquired from Motorola Solutions in October. The favorable business trends are continuing into the second quarter, as Zebra is well positioned to benefit over the long term from the convergence of technology trends in the Internet of Things, mobility and cloud computing.”

Discussion and Analysis – First Quarter

  •   Net sales increased 209.8% from the comparable quarter a year ago. The Enterprise business acquired from Motorola Solutions contributed $561.6 million to 2015 first quarter sales, including a reduction in sales for purchase accounting adjustments of $5.6 million related to service contracts acquired with the Enterprise business. Sales of legacy Zebra totaled $331.6 million, up 15.0% from $288.3 million for the first quarter of 2014. The effect of movements in foreign currency, net of hedges, reduced sales on legacy Zebra by $2.4 million.

  •   Gross margin for the first quarter of 2015 of 45.8%, compared with 51.3% for 2014, reflects the changing mix of products and services sold during the quarter, including Enterprise products which generally have lower gross margins than legacy Zebra products. Cost of sales for the first quarter of 2015 includes a purchase accounting increase of $800,000. The combination of the purchase accounting adjustments to sales and cost of sales reduced gross margin by 0.4 percentage points.

  •   Operating expenses for the first quarter of 2015 of $389.7 million, increased by $295.2 million from the prior year’s first quarter, primarily as a result of the Enterprise acquisition. Operating expenses for the first quarter of 2015 include $37.5 million in acquisition, integration, exit and restructuring costs, versus $5.2 million for the prior year, and $67.6 million in amortization of intangible assets, compared with $2.7 million for the first quarter of 2014.

  •   The company incurred a foreign exchange loss of $27.2 million related to changes in the valuation of net monetary assets. In addition, a net forward interest rate swaps gain of $1.7 million reflects a change in interest rates.

  •   Interest expense of $51.0 million reflects the increase in debt related to funding the acquisition of the Enterprise business from Motorola Solutions, and includes $4.6 million in amortization of debt issuance cost and discount.

  1. As of April 4, 2015, Zebra had cash of $329.5 million, accounts receivable of $637.9 million, inventories of $405.5 million, and long-term debt of $3.1 billion.

    Second Quarter Outlook

    Zebra announced its financial forecast for the second quarter of 2015. The company expects net sales within a range of $865 million to $895 million. This forecast incorporates an expectation of year-over-year growth of 9% to 13% in constant currency, on a proforma basis. Non-GAAP diluted earnings are expected in the range of $1.00 and $1.25 per share. Adjusted EBITDA are forecast within a range of $130 million and $145 million for the second quarter of 2015.

    Conference Call Notification

    Investors are invited to listen to a live webcast of Zebra’s conference call discussing the company’s financial results for the first quarter of 2015. The conference call will be held at 9:00 a.m. Eastern Time today. To listen to the call, visit the company’s website at http://www.zebra.com.

    Forward-looking Statement

    This press release contains forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995, including, without limitation, the statements regarding the company’s financial forecast for the second quarter of 2015 stated in the paragraph above captioned “Second Quarter Outlook.” Similarly, statements herein that describe the transaction between Zebra and Motorola Solutions including, its financial impact, and other statements of management’s beliefs, intentions, or goals are also forward-looking statements. When used in this release and documents referenced, the words “anticipate,” “believe,” “estimate,” 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. Actual results may differ from those expressed or implied in the company’s forward-looking statements. These statements represent estimates only as of the date they were made. Zebra undertakes 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 release.

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