Zebra(ZBRA) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted net sales growth for Q1 2022 was greater than 5%, with adjusted EBITDA margin at 19.9%, a decrease of 540 basis points year-over-year. Non-GAAP diluted earnings per share were $4.01, reflecting a 16% decrease from the prior year [7][16][18] - Adjusted net sales increased by 6.1%, including currency and acquisitions, and 5.4% on an organic basis [12] - Adjusted gross margin declined by 430 basis points to 44.6% due to elevated supply chain costs [15] Business Line Data and Key Metrics Changes - The Asset Intelligence and Tracking segment, including printing and supplies, saw a decline of 8.1% due to supply constraints [12] - The Enterprise Visibility & Mobility segment experienced an increase of 11.6%, driven by strong growth in mobile computing [13] - Sales growth was recognized across all four regions, with North America and EMEA both increasing by 2%, Asia-Pacific growing by 28%, and Latin America increasing by 31% [14] Market Data and Key Metrics Changes - North America sales increased by 2%, while Asia-Pacific and Latin America showed exceptional growth at 28% and 31%, respectively [14] - The company faced challenges in satisfying customer demand for printing products due to supply chain constraints [9] Company Strategy and Development Direction - The company is focused on advancing its Enterprise Asset Intelligence vision, leveraging its product portfolio to digitize and automate workflows [32][37] - The acquisition of Matrox Imaging is aimed at enhancing the company's capabilities in machine vision and expanding into new markets [40][62] - The company raised its long-term organic sales growth expectations to 5% to 7%, supported by megatrends such as the on-demand economy and automation [37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong customer demand despite macroeconomic uncertainties and supply chain challenges [48] - The company anticipates a sales growth of 3% to 7% for the full year, with expectations of improved supply visibility and a strong order backlog [24][27] - Management noted that supply chain costs are expected to be approximately $200 million for the full year, impacting margins [23] Other Important Information - The company generated $40 million in free cash flow in Q1, lower than the previous year due to higher incentive compensation and increased working capital [18] - The company has been active in share repurchases, totaling $305 million in Q1 and over $100 million in Q2 [18][86] Q&A Session Summary Question: Pricing Actions and Revenue Outlook - Management discussed the implementation of targeted price increases to offset component cost increases, with a nearly 2-point contribution to sales growth expected for the full year [55][58] Question: Matrox Acquisition Details - The acquisition of Matrox Imaging is expected to enhance Zebra's product offerings in machine vision, with Matrox generating annual sales of approximately $100 million [60][66] Question: Supply Chain Issues - Management indicated that supply chain conditions have improved, with better visibility and commitments from suppliers, although challenges remain [70][72] Question: Demand Dynamics - Management noted strong demand across all verticals, particularly in mobile computing, and highlighted resilience in European markets despite geopolitical tensions [81][93] Question: RFID Demand - There is strong demand for RFID solutions, particularly driven by large customers like Walmart, which is mandating RFID tagging for suppliers [113][115]