Slide 1: Zebra Technologies Third-Quarter 2017 Results
ZEBRA TECHNOLOGIES THIRD-QUARTER 2017 RESULTS NOVEMBER 7, 2017
Slide 2: Safe Harbor Statement
Safe Harbor Statement Statements made in this presentation which are not statements of historical fact are forward-looking statements and are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Actual results may differ from those expressed or impli
Slide 3: Anders Gustafsson, CEO and Olivier Leonetti, CFO
Anders Gustafsson Olivier Leonetti Chief Executive Officer Chief Financial Officer 3
Slide 4: Third-Quarter 2017 Highlights
Third-Quarter 2017 Highlights Anders Gustafsson, CEO Third-Quarter 2017 Financials and Outlook Olivier Leonetti, CFO Progress on Strategic Priorities Anders Gustafsson, CEO Q&A Anders Gustafsson, CEO │ Olivier Leonetti, CFO │ Joe Heel, SVP Global Sales
Slide 5: Third-Quarter 2017 Highlights
Third-Quarter 2017 Highlights • Adjusted net sales of $936M, above our guidance range; organic net sales growth of 5.9%(1); growth across all regions and business lines • Increased gross profit margin and reduced operating expenses • Adjusted EBITDA of 19.2%, a 110 bps year-over-year improvement fro
Slide 6: Third-Quarter 2017 Financials and Outlook
Third-Quarter 2017 Highlights Anders Gustafsson, CEO Third-Quarter 2017 Financials and Outlook Olivier Leonetti, CFO Progress on Strategic Priorities Anders Gustafsson, CEO Q&A Anders Gustafsson, CEO │ Olivier Leonetti, CFO │ Joe Heel, SVP Global Sales
Slide 7: Third-Quarter P&L Summary
Third-Quarter P&L Summary(1) • 5.9% Organic Net Sales In millions, except per share data 3Q17 3Q16 Growth Growth(2, 3, 4) ‒ Enterprise Segment up 5.5% Adjusted Net Sales(2) $936 $906 3.3% ‒ Legacy Zebra Segment up 6.6% Organic Net Sales Growth(2, 3, 4) 5.9% • Regional Breakdown(4) ‒ North America up
Slide 8: Comprehensive Debt Restructuring In Progress
Comprehensive Debt Restructuring In Progress Drives > $45 Million Annual Cash Interest Savings Reduces Weighted Average Interest Rate by Two Percentage Points to < 4% AMENDED CREDIT FACILTY $687.5M Term Loan A (NEW) $500M Revolving Credit Facility • LIBOR + 2.0% • Upsized Capacity from $250M • Matur
Slide 9: Balance Sheet and Cash Flow Highlights
Balance Sheet and Cash Flow Highlights • $88M in cash & cash equivalents as of the end of 3Q17 Liquidity • $235M borrowed on $500M revolver • $2.5B long-term debt on balance sheet at quarter-end • $187M in debt payments, net, through YTD 3Q17 Debt o Payments of long-term debt of $1.4B o Received pro
Slide 10: Debt Reduction is Top Priority for Free Cash Flow
Debt Reduction is Top Priority for Free Cash Flow 3.1 $3.01B 260 2.9 2.7 $2.65B 240 $2.49B 220 2.5 2.3 200 2.1 180 1.9 160 1.7 140 1.5 120 1.3 100 YE15 YE16 2Q17 3Q17 YE17 Cash & Cash Equivalents $192M $156M $95M $88M Net-Debt-to-Adjusted EBITDA 4.8x 4.1x 3.6x 3.6x Goal: < 3X Financed October 2014 E
Slide 11: Outlook
Outlook • Adjusted net sales growth of 3-6% vs. LY; organic net sales growth of 2-5%; Excludes ~2 percentage point positive impact from FX and ~1 percentage point adverse impact from wireless LAN 4Q17 • Adjusted EBITDA margin range of 19-20% • Adjusted EPS range of $2.00 to $2.20 • Organic sales gro
Slide 12: Progress on Strategic Priorities
Third-Quarter 2017 Highlights Anders Gustafsson, CEO Third-Quarter 2017 Financials and Outlook Olivier Leonetti, CFO Progress on Strategic Priorities Anders Gustafsson, CEO Q&A Anders Gustafsson, CEO │ Olivier Leonetti, CFO │ Joe Heel, SVP Global Sales
Slide 13: Strategic Focus
Strategic Focus Extend leadership and outpace the competition Advance Enterprise Asset Intelligence solutions Integration of Enterprise business Enhance financial strength and flexibility 13
Slide 14: Zebra Enables Enterprise Asset Intelligence
Zebra Enables Enterprise Asset Intelligence SENSE ANALYZE ACT What is it? Data Application Where is it? Enables Mobile Workers’ How is it? Real-Time Analytics Best Next Move Savanna Data Intelligence Platform Operational Visibility Services 14
Slide 15: Enabling Visibility Across Verticals
Enabling Visibility Across Verticals Zebra’s solutions reduce friction in workflows for frontline employees TRANSPORTATION RETAIL/ HEALTHCARE MANUFACTURING & LOGISTICS E-COMMERCE Simplify Operations and Comply with Regulations Enhance Customer/Patient Experience Track Inventory / Supply Chain Locati
Slide 16: Retail Sector Is Not Declining, It's Transforming…Benefiting Zebra
Retail Sector Is Not Declining, It’s Transforming…Benefiting Zebra MYTHS FACTS Retail Model Evolving to Better Serve Shoppers • Total retail sales show increasing trend (~3%) Retail Sector is o Ecommerce growing fastest, gaining share of market in Decline o Traditional retail sales growth sustainabl
Slide 17: Most Retail Sub-Sectors Fostering Zebra Growth
Most Retail Sub-Sectors Fostering Zebra Growth(1) Retail Sub-Sector Sub-Sector Zebra (descending order by Zebra sales) Sales Growth Sales vs Total Trend Mass Merchant / Superstore Slightly Below ~ 2/3rds of Zebra’s retail vertical sales Grocery / Supermarket Slightly Below are in these sub-secto
Slide 18: Q&A
Third-Quarter 2017 Highlights Anders Gustafsson, CEO Third-Quarter 2017 Financials and Outlook Olivier Leonetti, CFO Progress on Strategic Priorities Anders Gustafsson, CEO Q&A Anders Gustafsson, CEO │ Olivier Leonetti, CFO │ Joe Heel, SVP Global Sales
Slide 19: Q&A
Q&A
Slide 20: Appendix
i. = APPENDIX ZEBRA
Slide 21: Use of Non-GAAP Financial Information
Use of Non-GAAP Financial Information This presentation contains certain Non-GAAP financial measures, consisting of “adjusted net sales,” “adjusted gross profit,” “EBITDA,” “Adjusted EBITDA,” “Non-GAAP net income,” “Non-GAAP earnings per share,” “free cash flow,” “organic net sales growth,” and “adj
Slide 22: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation ORGANIC NET SALES GROWTH Three Months Ended September 30, 2017 Legacy Zebra Enterprise Consolidated Reported GAAP Consolidated Net sales growth 8.0 % 1.0 % 3.4 % Adjustments: Impact of Wireless LAN Net sales(1) — 6.0 % 4.0 % Impact of foreign currency translation (2)
Slide 23: GAAP to Non-GAAP Gross Margin Reconciliation
GAAP to Non-GAAP Gross Margin Reconciliation Three Months Ended September 30, 2017 October 1, 2016 Legacy Zebra Enterprise Consolidated Legacy Zebra Enterprise Consolidated GAAP Reported Net sales (1) $ 325 $ 611 $ 935 $ 301 $ 605 $ 904 Reported Gross profit 154 276 429 145 271 414 Gross Margin 47.4
Slide 24: GAAP to Non-GAAP Net Income Reconciliation
GAAP to Non-GAAP Net Income Reconciliation Three Months Ended Nine Months Ended September 30, October 1, September 30, October 1, 2017 2016 2017 2016 Net (loss) income $ (12) $ (83) $ 13 $ (154) Adjustments to Net sales(1) Purchase accounting adjustments 1 2 3 8 Total adjustment to Net sales 1 2 3 8
Slide 25: GAAP to Non-GAAP EBITDA Reconciliation
GAAP to Non-GAAP EBITDA Reconciliation Three Months Ended Nine Months Ended September 30, October 1, September 30, October 1, 2017 2016 2017 2016 Net (loss) income $ (12) $ (83) $ 13 $ (154) Add back: Depreciation 19 21 58 56 Amortization of intangible assets 49 59 151 178 Total Other expenses, net
Slide 26: GAAP to Non-GAAP Reconciliation: Free Cash Flow
GAAP to Non-GAAP Reconciliation FREE CASH FLOW Nine Months Ended September 30, October 1, 2017 2016 Net cash provided by operating activities (GAAP) $ 210 $ 252 Less: Purchases of property, plant and equipment (36) (49) Free cash flow (Non-GAAP)(1) $ 174 $ 203 (1) Free cash flow is defined as Net ca