Zebra Technologies Announces 2Q 2023 Results

Zebra Technologies Corporation announced results for the second quarter ended July 1, 2023.

Net sales were $1,214 million in the second quarter of 2023 compared to $1,468 million in the prior year. Net sales in the Enterprise Visibility & Mobility (EVM) segment were $755 million in the second quarter of 2023 compared with $1,001 million in the prior year.

Asset Intelligence & Tracking (AIT) segment net sales were $459 million in the second quarter of 2023 compared to $467 million in the prior year. Consolidated organic net sales for the second quarter decreased 16% year-over-year, with a 23.6% decrease in the EVM segment and 0.2% increase in the AIT segment.

Second quarter 2023 gross profit was $581 million compared to $674 million in the prior year. Gross margin increased to 47.9% for the second quarter of 2023 compared to 45.9% in the prior year.

“Our second quarter results were impacted by softening demand and more cautious customer spending, particularly in our retail and logistics end markets, and by distributor destocking. Profit margin was higher than expected, enabling us to achieve our EPS outlook for the quarter,” said Bill Burns, CEO of Zebra Technologies.

“While we are revising our outlook downward, we remain confident in our ability to benefit from the long-term secular megatrends to digitize and automate workflows,” added Burns. “We are taking action to drive sales and enhance profitability, which we believe will position us for success in the current environment and in the future. With the incremental cost and restructuring actions announced today, we expect to improve profitability as our end markets recover.”

Operating expenses decreased in the second quarter of 2023 to $387 million from $819 million in the prior year. Excluding the previously disclosed settlement charges in second quarter of 2022, operating expenses declined primarily due to lower employee incentive compensation associated with financial performance, partially offset by higher exit and restructuring costs. Adjusted operating expenses decreased in the second quarter of 2023 to $344 million from $370 million in the prior year.

Net income for the second quarter of 2023 was $144 million, or $2.78 income per diluted share, compared to a net loss of $98 million, or $1.87 loss per diluted share, for the prior year. Non-GAAP net income for the second quarter of 2023 decreased to $170 million, or $3.29 per diluted share, compared to $243 million, or $4.61 per diluted share, for the prior year.

Adjusted EBITDA for the second quarter of 2023 decreased to $257 million, or 21.2% of adjusted net sales, compared to $321 million, or 21.9% of adjusted net sales for the prior year primarily due to lower gross profit.

As of July 1, 2023, the company had cash and cash equivalents of $68 million and total debt of $2,216 million.

The company expects third quarter 2023 net sales to decrease between 30% and 35% compared to the prior year. Adjusted EBITDA margin for the third quarter of 2023 is expected to be between 10% and 12%.

The company expects net sales to decrease between 20% and 23% compared to 2022. Adjusted EBITDA margin is expected to be approximately 18%, which includes $20 million of premium supply chain expense (incurred in the first half of 2023). Free cash flow is expected to be positive for the second half of the year and negative for the full year, reflecting lower profitability and elevated inventory, higher cash taxes and is inclusive of the anticipated $180 million of previously-announced settlement payments.