ZEBRA TECHNOLOGIES. William Blair Growth Stock Conference June 16, 2016

Transcription

1 ZEBRA TECHNOLOGIES William Blair Growth Stock Conference June 16, 2016

2 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 Actual results may differ from those expressed or implied in the company s forwardlooking statements. Zebra may elect to update forward-looking statements but expressly disclaims any obligation to do so, even if the company s estimates change. These forward-looking statements are based on current expectations, forecasts and assumptions and are subject to the risks and uncertainties inherent in Zebra s industry, market conditions, general domestic and international economic conditions, and other factors. These factors include customer acceptance of Zebra s hardware and software products and competitors product offerings, and the potential effects of technological changes. The continued uncertainty over future global economic conditions, the availability of credit, capital markets volatility, may have adverse effects on Zebra, its suppliers and its customers. In addition, a disruption in our ability to obtain products from vendors as a result of supply chain constraints, natural disasters or other circumstances could restrict sales and negatively affect customer relationships. Profits and profitability will be affected by Zebra s ability to control manufacturing and operating costs. Because of its debt, interest rates and financial market conditions will also have an impact on results. Foreign exchange rates will have an effect on financial results because of the large percentage of our international sales. The outcome of litigation in which Zebra may be involved is another factor. The success of integrating acquisitions, including the Enterprise business, could also affect profitability, reported results and the company s competitive position in it industry. These and other factors could have an adverse effect on Zebra s sales, gross profit margins and results of operations. Descriptions of the risks, uncertainties and other factors that could affect the company s future operations and results can be found in Zebra s filings with the Securities and Exchange Commission. In particular, please refer to Zebra s latest filing of its Form 10-K. This presentation includes certain non-gaap financial measures and we refer to the reconciliations to the comparable GAAP financial measures and related information. 2

3 Zebra: Compelling Investment Opportunity Leader in Mobile Computing, Barcode Printing, Data Capture and RFID 40+ years of technology innovation & expertise Globally diverse partner & customer base, serving key industries Poised to capitalize on secular growth trends & technology transitions Executing on strategic priorities & value creation opportunities Attractive earnings growth through margin enhancement and debt reduction 3

4 Global Leader of Enterprise Asset Intelligence Providing the smart, visionary solutions to see the big picture Mobile Computing Location and Motion Sensing Cloud-based Device Management Zebra s innovative solutions makes businesses smarter and more connected, enabling real-time: Services Visibility into people and things; Data Capture Barcode Printing Software Wireless LAN RFID Analysis of operational data; and, Critical insights and knowledge to act on. Card Printing Visibility That s Visionary 4

5 Attractive Growth Drivers Internet of Things Cloud Mobility Megatrends Laser to Imaging OS Transition ac Technology Trends Use Case Trends E-commerce Omnichannel / Shopper Experiences Real-time, Workflow Management Workforce Mobility Location & Motion Tracking Dynamic Scheduling / Routing Asset Identification, Tracking & Utilization Optimization 5

6 Emerging Areas of Enterprise Asset Intelligence TRAILER LOAD ANALYTICS ASSET TRACKING TEMPERATURE MONITORING 6

7 Industry Leader Serving Enterprises Globally By Geography By Market By Segment Latin America Asia Pacific North America Other Retail Legacy Zebra Solutions Healthcare EMEA Manufacturing T&L Enterprise Solutions Global, Blue-Chip Customer Base 7

8 Leadership Position in Key Markets #1 MOBILE COMPUTING #1 DATA CAPTURE #1 RFID #1 BARCODE PRINTING 8

9 Excellent Progress Integrating Oct 2014 Enterprise Acquisition Exiting remaining transition service agreements (TSAs) with MSI by October 2017 Implementation complete: Customer relationship management (CRM) IT data center migration New channel partner program Single sales compensation process and tools Engineering tools rationalized Zebra.com redesign Board Level IT Committee Oversight Business Transformation Office (BTO) 3 rd Party Management Consulting Advisory In progress: Enterprise Resource Planning (ERP) integration, inclusive of distribution- and services-related business applications APAC region (2Q16) Rest of world (through mid 2017) IT Infrastructure: changes related to site moves, platform scalability and ecosystem modernization Services, repair, and parts planning Digital & self-service web portal Note: selected key activities only, not a comprehensive listing 9

10 0 Debt Reduction is Top Priority Financed October 2014 Enterprise acquisition with $3.25B of debt Total debt 5 $3.01B ~$300M 4 $2.94B Q ~$350M YE 2015 YE 2016 YE 2017 Cash and cash equivalents $192M Repatriate ~$50M Int l Cash Net debt to Adjusted EBITDA 4.7x Target <3x 10

11 Financial Highlights $ in millions, except per share data FY Q 2016 Adjusted Net Sales (1) $3,668 $850 Adj. Net Sales Growth (2) +8% -3% Adj. Gross Margin (%) (1) 45.4% 46.2% Adj. EBITDA $608 $132 Adj. EBITDA Margin (%) 16.6% 15.5% Adjusted EPS $5.31 $1.01 Q1 sales down 3% YoY (2) Continued impact from economic uncertainty Purchasing decisions pushed to future quarters Channel softness led to distributor destocking Difficult comparison to a strong 1Q 2015 Regional breakdown North America down 7% EMEA up 1% (2) Asia Pacific up 10% (2) Latin America down 15% Q1 Adj. EBITDA margin decline Flow-through impact of lower sales Neg. FX impact of ~100 bps 1. Excludes purchase accounting adjustments 2. Assumes constant FX 11

12 Long-Term Outlook Positioned for Success Our financial goals: SALES GROWTH at least 4 5% CAGR over a cycle INTERNET OF THINGS ADJUSTED EBITDA (1) margin expansion to 18 20% by the end of 2017 CLOUD NET-DEBT-TO-ADJUSTED EBITDA < 3x by the end of 2017 MOBILITY 1) Assumes no material change to the recent global currency exchange rate environment. 12

13 Zebra: Compelling Investment Opportunity Leader in Mobile Computing, Barcode Printing, Data Capture and RFID 40+ years of technology innovation & expertise Globally diverse partner & customer base, serving key industries Poised to capitalize on secular growth trends & technology transitions Executing on strategic priorities & value creation opportunities Attractive earnings growth through margin enhancement and debt reduction 13

14 QUESTIONS?

15 APPENDIX

16 Reconciliation of GAAP to Non-GAAP Net Income Twelve Months Ended December 31, 2015 December 31, 2014 Net (loss) income $ (137,333) $ 32,429 Income tax (benefit) expense (26,290) (15,800) Share-based compensation 32,654 19,891 Acquisition and integration costs 143, ,711 Exit and restructuring costs 39,279 6,007 Loss on minority investment 2,333 Purchase accounting adjustments 19,562 34,634 Foreign exchange loss (income) 22,048 8,759 Amortization of intangible assets 250,869 54,096 Amortization of debt issuance cost and discount 16,513 2,113 Forward interest rate swaps (loss) gain (3,763) 4,649 Tax effects (80,545) (74,918) Total adjustments $ 413,973 $ 168,475 Non-GAAP net income $ 276,640 $ 200,904 GAAP (loss) earnings per share Basic $ (2.69) $ 0.64 Diluted $ (2.69) $ 0.63 Non-GAAP earnings per share Basic $ 5.42 $ 3.96 Diluted $ 5.31 $ 3.91 Basic weighted average shares outstanding 50,996 50,789 Diluted weighted average and equivalent shares outstanding 52,096 51,380 16

17 Reconciliation of GAAP to Non-GAAP Net Income (Amounts in millions, except share data) Three Months Ended April 2, 2016 April 4, 2015 Net loss $ (29) $ (25) Income tax benefit (20) (33) Share-based compensation 9 9 Acquisition and integration costs Exit and restructuring costs 6 11 Purchase accounting adjustments 3 6 Foreign exchange loss (gain) (1) 27 Amortization of intangible assets Amortization of debt issuance cost and discount 5 5 Forward interest rate swaps gain (1) (2) Tax effects (15) (20) Total adjustments $ 82 $ 97 Non-GAAP net income $ 53 $ 72 GAAP (loss) earnings per share Basic $ (0.56) $ (0.50) Diluted $ (0.56) $ (0.50) Non-GAAP earnings per share Basic $ 1.03 $ 1.43 Diluted $ 1.01 $ 1.41 Basic weighted average shares outstanding 51,299,632 50,666,970 Diluted weighted average and equivalent shares outstanding 52,045,345 51,212,713 17

18 GAAP to Non-GAAP Reconciliation EBITDA Reconciliation Twelve Months Ended December 31, December 31, Operating income $ 53,303 $ 88,590 Depreciation 69,010 27,275 Amortization of intangible assets 250,869 54,096 EBITDA (Non-GAAP) $ 373,182 $ 169,961 Acquisition and integration costs 143, ,711 Purchase accounting adjustments 19,562 34,634 Exit and restructuring costs 39,279 6,007 Share-based compensation 32,654 19,891 Adjusted EBITDA (Non-GAAP) $ 608,323 $ 357,204 Adjusted EBITDA % of Non-GAAP Sales 16.6% 21.3% 18

19 GAAP to Non-GAAP Reconciliation (Amounts in millions) EBITDA Reconciliation Three Months Ended April 2, April 4, Operating (loss) income $ 0 $ 20 Depreciation Amortization of intangible assets EBITDA $ 77 $ 100 Acquisition and integration costs Purchase accounting adjustments 3 6 Exit and restructuring costs 6 11 Share-based compensation 9 9 Adjusted EBITDA $ 132 $ 152 Adjusted EBITDA % of Adjusted Sales 15.5% 16.9% 19

20 GAAP to Non-GAAP Reconciliation ADJUSTED NET SALES GROWTH FROM PRIOR YEAR PERIOD Twelve Months Ended December 31, 2015 Three Months Ended April 2, 2016 Reported net sales growth (decline) 119 % (5) % Inclusion of estimated pre-transaction Enterprise sales and exclusion of purchase accounting adjustments and foreign currency translation impact (111) % 2 % Adjusted net sales growth (decline) in constant currency 8 % (3) % ADJUSTED NET SALES AND GROSS MARGIN Twelve Months Ended December 31, 2015 Three Months Ended April 2, 2016 Adjusted net sales $ 3,668 $ 850 Purchase accounting adjustments (16) (3) Reported net sales $ 3,652 $ 847 Adjusted gross margin $ 1,664 $ 393 Purchase accounting adjustments (20) (3) Reported gross margin $ 1,644 $