Zebra Technologies Announces 3Q 2016 Results

Zebra Technologies announced results for the third quarter ended Oct. 1, 2016.
 
Net sales for the three months ended Oct. 1, 2016, were $904 million, compared with $916 million for the third quarter of 2015. The net loss for the third quarter of 2016 was $83 million, or $1.61 per share, compared with $29 million, or $0.57 per share, for the third quarter of 2015.
 
“We reported solid third-quarter results despite a challenging environment. Margin expansion and disciplined operating expense and working capital management enabled us to pay down $90 million of debt,” said Anders Gustafsson, CEO of Zebra Technologies. “In addition, we completed the sale of our wireless LAN business, which enables Zebra to enhance our focus on our core business while improving our growth profile.”
 
Adjusted net sales were $906 million, compared to $919 million in the third quarter of 2015; and adjusted gross margin was 45.9% in the third quarter of 2016 compared to 45.4% in the third quarter of 2015. Both adjusted net sales and gross margin exclude the impact of purchase accounting adjustments in 2016 and 2015.
 
Adjusted net sales in the Enterprise segment were $605 million, consistent with the third quarter of 2015. Legacy Zebra segment net sales were $301 million compared to $314 million in the third quarter of 2015. On a constant currency basis, and excluding the purchase accounting adjustments, third quarter year-over-year adjusted net sales declined 0.3%, with the Enterprise segment growing approximately 1%, and the Legacy Zebra segment declining by approximately 3%.
 
Adjusted gross margin for the quarter was 45.9%, compared to 45.4% in the prior year period, reflecting lower product and services costs, which was partially offset by a primarily one-time price concession to distributors of printer products imported into China.
 
Adjusted EBITDA for the third quarter of 2016 was $169 million, or 18.7% of adjusted net sales compared to $159 million, or 17.3% of adjusted net sales for the third quarter of 2015, primarily due to higher gross margin and lower selling and marketing and research and development expenses.
 
As of Oct. 1, 2016, the company had cash of $163 million and total long term debt of $2.8 billion. For the first nine months of 2016, the company made $121 million in scheduled cash interest payments and $235 million in term loan principal payments.
 
For the first nine months of 2016, the company generated $245 million of cash flow from operations and incurred capital expenditures of $49 million.
 
 
The company expects fourth quarter 2016 adjusted net sales to decline approximately 4% to 1% from adjusted net sales of $954 million in the fourth quarter of 2015. This expectation reflects year-over-year decline of 3% to 0% on a constant currency basis. It also reflects an approximate 3 percentage point negative impact from the October 2016 divestiture of the wireless LAN business..
 
Adjusted EBITDA margin is expected to be in the range of 19% to 20% for the fourth quarter 2016. Non-GAAP earnings are expected to be in the range of $1.65 to $1.85 per share, assuming an effective tax rate of approximately 26%.
 
Additionally, the company is on track to pay down $300 million of debt principal in 2016, excluding the financial impact from the sale of its WLAN business. Net proceeds from the sale will be used to pay down debt.