Zebra Technologies Announces Repricing of $1.7 Billion ... · Sales By Geography Sales By Vertical...

Zebra Technologies Announces Repricing of $1.7 Billion Term Loan

Lincolnshire, Ill., Dec. 7, 2016 ─ Zebra Technologies Corporation (NASDAQ: ZBRA), a global leader in providing solutions and services that give enterprises real-time visibility into their operations, announced that effective Dec. 6 it has successfully repriced its $1.7 billion term loan.

Under the amended term loan, the interest rate has been reduced by 75 basis points to LIBOR + 2.50% (LIBOR floor of 0.75% is unchanged), from LIBOR + 3.25%, which is expected to generate annualized interest expense savings of approximately $13 million based on the current principal balance outstanding. As previously communicated, the company expects to continue to reduce the principal balance prior to the October 27, 2021 maturity date.

For the fourth quarter of 2016, the company expects to incur approximately $1 million of accelerated amortization of debt issuance cost and discount, as well as approximately $1 million of repricing transaction fees. The company also expects interestexpense savings of approximately $1 million in the quarter due to the repricing.

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June 14, 2018

William Blair & Company 38th Annual Growth Stock Conference

http://www.zebra.com/

2

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 implied in the company’s forward-looking 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

each 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 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 Forms 10-K and 10-Q. This presentation includes certain non-GAAP financial measures and we

refer to the reconciliations to the comparable GAAP financial measures and related information.

Information regarding the impact of the Tax Cuts and Jobs Act of 2017 (“TCJA”) consists of preliminary estimates, based on current

calculations, interpretations, assumptions and expectations. These estimates may change materially as we learn additional

information about and obtain additional guidance on the TCJA.

Safe Harbor Statement

3

Zebra: Compelling Investment Opportunity

Capitalizing on secular megatrends and technology transitions in growing markets

Nearly 50 years of technology innovation & expertise; enabling the more intelligent enterprise

Leader in Mobile Computing, Barcode Printing, Data Capture and RFID

Broad reach and scale through global partner ecosystem and diverse customer base

Attractive earnings expansion through sales growth, margin enhancement, and debt reduction

●

●

●

●

●

Five Decades of Innovation

8First All-touch

Android Inventory

Solution

First Rugged

RFID Handheld

and First

Enterprise Digital

Assistant (EDA)

Initial

Public

OfferingFounded as Data

Specialties by Ed Kaplan

and Gary Cless

First Barcode

Printer First Laser-

Scannable

Two-

dimensional

Barcode

First Wearable

Computer First Smart

Environment

for Thermal

Printers

First

Android-

based

Enterprise

Wearable

Computer

Migration Path to

Modem OS (Android)

for Legacy Windows

Applications

4

Rebranded the

company as

Zebra

TechnologiesMotorola Solutions’ Enterprise

Business

Merg

ers

& A

cq

uis

itio

ns

Re

se

arc

h &

De

ve

lop

me

nt First Mobile RFID

Printing Solutions

First Handheld

Laser Barcode

Scanner

Savanna

Data

Intelligence

Platform

(Zebra Retail Solutions)

1969 1982 1986 1991 1997 2004 2008 2013 2015 2017

5

Industry Leader Serving Enterprises Globally

Latin America North

America

EMEA

Asia

Pacific

Retail &

Ecommerce

Transportation &

Logistics

Manufacturing

Healthcare

OtherAsset

Intelligence

and

Tracking

Enterprise

Visibility

and

Mobility

Sales By Geography Sales By Vertical Market Sales By Segment

$3.7BGlobal Sales

~7,000 Employees

Worldwide

~4,300US & Int’l Patents

Issued and Pending

~10,000 Channel Partners

Worldwide

~95%of the Fortune 500

served

Slide data as of year-end 2017.

6

Market Leadership and Segment Sales Breakdown

Asset Intelligence & Tracking (AIT) Enterprise Visibility & Mobility (EVM)

#1 Market Share in Barcode Printing (~ 40%)#1 Market Share in Enterprise Mobile Computing (~ 45%)

and Data Capture Solutions (~ 30%)

2017 Sales: $1.3B 2017 Sales: $2.4B

Printing

Location Solutions and

Zebra Retail Solutions Services

Supplies

Enterprise Mobile

Computing

Data Capture

Services

7

HEALTHCAREMANUFACTURING

Vertical Market Expertise

RETAIL/

E-COMMERCETRANSPORTATION

& LOGISTICS

•

8

SENSE ANALYZE ACT

Savanna

Data

Intelligence

Platform

Real-Time Analytics

What is it?

Where is it?

How is it?

Data Application

Enables Mobile Workers’

Best Next Move

Zebra Enables Enterprise Asset Intelligence

Operational Visibility Services

9

Successfully Navigating An Evolving MarketplaceMYTHS FACTS

Mobile computing

devices commoditizing

1. Source: Retail Transformation Study (IHL Services Group and Peerless Insights) commissioned by Zebra Technologies, October 2017

Barcodes becoming

obsolete

Retail sector is in

decline and shift to

ecommerce hurts Zebra

• Retail sector is not declining, it’s transforming, benefitting Zebra (1)

• Total retail/ecommerce sales show increasing trend (~ 3%)

• Retail model evolving to better serve shoppers; omnichannel use cases expanding

• Zebra’s customers are market leaders investing in our technology

• Technology has become the basis of competition in retail and other sectors

• Zebra’s purpose-built enterprise mobile computers address the unique demands of the

enterprise environment

• We offer superior manageability and security with the highest customer ROI, and lowest

total cost of ownership, for a wide variety of use cases

• Superior support services and a lifecycle value proposition that is unmatched

• Barcoding remains the most prevalent means of asset track & trace visibility

• Additional use cases for barcoding continually emerging for automated data collection

• Offers the most compelling return on investment for many use cases

• Zebra has the broadest portfolio of various sensing technologies and implement cost-

effective tailored solutions

10

Megatrends Driving Use Case EvolutionNEW

• IoT

• Enterprise Mobility

• Cloud Computing

• On-demand economy /

shift to e-commerce

• Shift from task workers

to knowledge workers

NEW

TRADITIONAL

TRADITIONAL

11

Targeting 4-5% Annualized Sales Growth

Mobile Computing,

Scanning, Printing,

Repair Services

Mobile Computing

Data Capture

Barcode Printing

Support Services

Expansion

$15B+Faster growth markets

than the core

Core

~ $9B3-4% industry

growth

Extending our leadership position in core

markets

Evolving the portfolio into solutions

Opportunities in underpenetrated and

faster-growth adjacencies

$24B+ Addressable Market Opportunity

12

Achieving Strong Profitable Growth Post Enterprise Acquisition (1)

FY15 FY16 FY17 1Q18

Organic Net Sales

Growth(2,3) +7.5% +0.4% +6.5% +9.8%

Adjusted EBITDA Margin 16.2% 17.5% 18.6% 20.9%

Non-GAAP EPS Growth N/M +10% +27% +87%

Free Cash Flow $0M $303M $428M $98M

1. Refer to the appendix of this presentation for reconciliations of GAAP to non-GAAP financial results.

2. Organic Net Sales Growth is calculated by translating, for certain currencies, the current period results at the currency exchange rates used in the comparable prior

year period, rather than the exchange rates in effect during the current period. In addition, we exclude the impact of the company’s foreign currency hedging

program in both the current and prior year periods.

3. The Company sold the wireless LAN business in October 2016. We are excluding the impact of the net sales of this business in the FY16 and FY17 periods when

computing organic net sales growth. FY15 organic net sales growth uses estimated historical 2014 Enterprise (acquired Oct. 2014) sales and includes wireless

LAN sales.

13

Net-Debt-to-

Adjusted EBITDA

Target: 2.0x-2.5x

NOTE: Total debt before unamortized discounts and debt issuance costs.

$3.25B

$3.09B

$2.70B

$2.25B$2.15B

2014 2015 2016 2017 1Q 2018

4.8x

leverage

4.1x

leverage

3.2x

leverage 2.8x

leverage

Excellent Progress on Acquisition Debt Reduction $1.1 Billion of Debt Principal Paydown

14

Zebra: Compelling Investment Opportunity

Capitalizing on secular megatrends and technology transitions in growing markets

Nearly 50 years of technology innovation & expertise; enabling the more intelligent enterprise

Leader in Mobile Computing, Barcode Printing, Data Capture and RFID

Broad reach and scale through global partner ecosystem and diverse customer base

Attractive earnings expansion through sales growth, margin enhancement, and debt reduction

●

●

●

●

●

15

QUESTIONS?

APPENDIX

16

17

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 “adjusted operating expenses.” Management

presents these measures to focus on the on-going operations and believes it is useful to investors because they enable them to perform meaningful

comparisons of past and present operating results. The company believes it is useful to present Non-GAAP financial measures, which exclude certain

significant items, as a means to understand the performance of its ongoing operations and how management views the business. Please see the

“Reconciliation of GAAP to Non-GAAP Financial Measures” tables and accompanying disclosures at the end of this presentation for more detailed information

regarding non-GAAP financial measures herein, including the items reflected in adjusted net earnings calculations. These measures, however, should not be

construed as an alternative to any other measure of performance determined in accordance with GAAP.

The company does not provide a reconciliation for non-GAAP estimates on a forward-looking basis (including the information under “Outlook” above) where it

is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort.

This is due to the inherent difficulty of forecasting the timing or amount of various items that have not yet occurred, are out of the company’s control and/or

cannot be reasonably predicted, and that would impact diluted net earnings per share, the most directly comparable forward-looking GAAP financial measure.

For the same reasons, the company is unable to address the probable significance of the unavailable information. Forward-looking non-GAAP financial

measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.

As a global company, Zebra's operating results reported in U.S. dollars are affected by foreign currency exchange rate fluctuations because the underlying

foreign currencies in which the company transacts change in value over time compared to the U.S. dollar; accordingly, the company presents certain organic

growth financial information, which includes impacts of foreign currency translation, to provide a framework to assess how the company’s businesses

performed excluding the impact of foreign currency exchange rate fluctuations. Foreign currency impact represents the difference in results that are

attributable to fluctuations in the currency exchange rates used to convert the results for businesses where the functional currency is not the U.S. dollar. This

impact is calculated by translating, for certain currencies, current period results at the currency exchange rates used in the comparable period in the prior

year, rather than the exchange rates in effect during the current period. In addition, the company excludes the impact of its foreign currency hedging program

in both the current year and prior year periods The company believes these measures should be considered a supplement to and not in lieu of the company’s

performance measures calculated in accordance with GAAP.

Use of Non-GAAP Financial Information

18

GAAP to Non-GAAP Reconciliation – Organic Net Sales Growth

Three Months Ended

March 31, 2018

Reported GAAP Consolidated Net sales growth 12.9 %

Adjustments:

Impact of Wireless LAN Net sales(1) —

Impact of foreign currency translation(2) (3.1)%

Corporate, eliminations(3) —

Organic Net sales growth 9.8 %

(1) The Company sold the wireless LAN business in October 2016. Net sales from this business are excluded

in the prior year period when computing organic net sales growth.

(2) Operating results reported in U.S. dollars are affected by foreign currency exchange rate fluctuations.

Foreign currency translation impact represents the difference in results that are attributable to fluctuations in

the currency exchange rates used to convert the results for businesses where the functional currency is not the

U.S. dollar. This impact is calculated by translating, for certain currencies, the current period results at the

currency exchange rates used in the comparable prior year period, rather than the exchange rates in effect

during the current period. In addition, we exclude the impact of the company’s foreign currency hedging

program in both the current and prior year periods.

(3) Amounts included in Corporate, eliminations consist of purchase accounting adjustments which are related

to the Enterprise Acquisition in October 2014 and are not reported in segment results.

19

GAAP to Non-GAAP Reconciliation – Organic Net Sales Growth

December 31, 2017 December 31, 2016

Reported GAAP Consolidated Net sales growth 4.1 % (2.1)%

Adjustments:

Impact of Wireless LAN Net sales(1) 3.2 % 1.4 %

Impact of foreign currency translation(2) (0.6)% 1.3 %

Corporate, eliminations(3) (0.2)% (0.2)%

Organic Net sales growth 6.5 % 0.4 %

(1) The Company sold the wireless LAN business in October 2016. Net sales from this business are excluded in the

prior year period when computing organic net sales growth.

(2) Operating results reported in U.S. dollars are affected by foreign currency exchange rate fluctuations.

Foreign currency translation impact represents the difference in results that are attributable to fluctuations in the

currency exchange rates used to convert the results for businesses where the functional currency is not the U.S.

dollar. This impact is calculated by translating, for certain currencies, the current period results at the currency exchange

rates used in the comparable prior year period, rather than the exchange rates in effect during the current period. In

addition, we exclude the impact of the company’s foreign currency hedging program in both the current and prior year

periods.

(3) Amounts included in Corporate, eliminations consist of purchase accounting adjustments which are related to the

Enterprise Acquisition in October 2014 and are not reported in segment results.

Twelve Months Ended

20

GAAP to Non-GAAP Reconciliation - EBITDA

Net income $ 109

Add back:

Depreciation

Amortization of intangible assets

Total Other expenses, net

Income tax expense

EBITDA (Non-GAAP)

Adjustments to Net sales

Purchase accounting adjustments

Total adjustments to Net sales

Adjustments to Cost of sales

Share-based compensation

Total adjustments to Cost of sales

Adjustments to Operating expenses

Acquisition and integration costs


Exit and restructuring costs

Total adjustments to Operating expenses

Total adjustments to EBITDA

Adjusted EBITDA (Non-GAAP) $ 204

Adjusted EBITDA % of Adjusted Net Sales %

17

20.9

10

4

16

1

2

—

1

—

11

24

187

20

23

March 31,

2018

Three Months Ended

21


Net income (loss) $ 17 $ (137 )

Add back:

Depreciation


Total Other expenses, net

Income tax expense

EBITDA (Non-GAAP)









Impairment of goodwill and other intangibles





Adjusted EBITDA (Non-GAAP) $ 692 $ 628

Adjusted EBITDA % of Adjusted Net Sales % %18.6 17.5

107 244

16 19

101 232

— 62

35 26

50 125

3 2

3 2

3 10

3 10

585 384

234 209

71 8

79 75

184 229

2017

December 31,

2016

Twelve Months Ended

December 31,

22


Operating income $ 37

Depreciation


EBITDA (Non-GAAP)















Adjusted EBITDA (Non-GAAP) $ 595

Adjusted EBITDA % of Non-GAAP sales %

EBITDA Reconciliation

69

December 31,

2015

16

16

251

357

16.2

Twelve Months

Ended

238

40

215

—

30

145

3

7

4

23

GAAP to Non-GAAP Reconciliation – Net Income

Net income $ 109

Adjustments to Net sales(1)


Total adjustment to Net sales

Adjustments to Cost of sales(1)



Adjustments to Operating expenses(1)






Adjustments to Other expenses, net(1)

Amortization of debt issuance costs and discounts

Foreign exchange loss

Forward interest rate swaps gain )

Total adjustments to Other expenses, net )

Income tax effect of adjustments(2)

Reported income tax expense (benefit)

Adjusted income tax expense )

Total adjustments to income tax )

Total adjustments

Non-GAAP Net income $ 138

GAAP earnings per share

Basic $ 2.04

Diluted $ 2.01

Non-GAAP earnings per share

Basic $ 2.59

Diluted $ 2.56

Non-GAAP weighted average shares outstanding (3)

Basic

Diluted

(1) Presented on a pre-tax basis.

(2) Represents the adjustment to the GAAP basis tax provision commensurate with non-GAAP

adjustments.

(3) In periods of loss, Non-GAAP weighted-average shares exclude restricted stock awards and

performance stock awards within basic and dilutive weighted-average share computations. Share-based

compensation awards that are dilutive in nature are included within weighted-average dilutive share

computations.

Three Months Ended

53,286,249

53,985,755

29

24

(25

(1

(12

(10

2

—

10

4

39

23

2

1

1

—

—

March 31,

2018

24

GAAP to Non-GAAP Reconciliation – Net IncomeNet income (loss) $ 17 $ (137 ) $ (158 )

Adjustments to Net sales(1)


Total adjustment to Net sales

Adjustments to Cost of sales(1)




Adjustments to Operating expenses(1)







Adjustments to Other expenses, net(1)

Debt extinguishment costs

Amortization of debt issuance costs and discounts

Investment loss

Foreign exchange loss

Forward interest rate swaps (gain) loss ) )

Total adjustments to Other expenses, net

Income tax effect of adjustments(2)

Reported income tax expense )

Adjusted income tax expense ) ) )

Total adjustments to income tax ) ) )

Total adjustments

Non-GAAP Net income $ 379 $ 293 $ 265

GAAP earnings (loss) per share

Basic $ 0.33 $ (2.65 ) $ (3.10 )

Diluted $ 0.32 $ (2.65 ) $ (3.10 )

Non-GAAP earnings per share

Basic $ 7.14 $ 5.67 $ 5.19

Diluted $ 7.05 $ 5.60 $ 5.08

Non-GAAP weighted average shares outstanding (3)

Basic

Diluted

(1) Presented on a pre-tax basis.

(3) In periods of loss, Non-GAAP weighted-average shares exclude restricted stock awards and performance stock awards within basic and dilutive

weighted-average share computations. Share-based compensation awards that are dilutive in nature are included within weighted-average dilutive share

computations.

52,096,036

Twelve Months Ended

(2) Represents the adjustment to the GAAP basis tax provision commensurate with non-GAAP adjustments.

(79

(101

423

(4

35

16

—

—

30

40

7

251

16

4

December 31,

2015

53,688,832 52,259,157

53,021,761 51,579,112 50,996,297

(34 (78

362 430

71 8

(105 (86

(22

105 35

1 5

(2 —

23

40 23

1 7

65 —

466

16 19

285 461

— 62

35 26

145

184 229

50 125

3 2

3

—

3 2

3 10

3 10

16

2017

December 31,

2016

December 31,

25

GAAP to Non-GAAP Reconciliation – Free Cash Flow

Net cash provided by operating activities $ 116

Less: Purchases of property, plant and equipment )

Free cash flow (Non-GAAP)(1) $ 98

(18

(1) Free cash flow is defined as Net cash provided by operating activities in a period minus purchases

of property, plant and equipment (capital expenditures) made in that period. This measure does not

represent residual cash flows available for discretionary expenditures as the measure does not deduct

the payments required for debt service and other contractual obligations or payments for future business

acquisitions. Therefore, we believe it is important to view free cash flow as a measure that provides

supplemental information to our entire statements of cash flows.

Three Months Ended

March 31,

2018

26

GAAP to Non-GAAP Reconciliation – Free Cash Flow

Net cash provided by operating activities $ 478 $ 380 $ 122

Less: Purchases of property, plant and equipment ) ) )

Free cash flow (Non-GAAP)(1) $ 428 $ 303 $ 0

Free cash flow conversion(2) % % %

(2) Free cash flow conversion is defined as Free cash flow divided by non-GAAP Net income.

Twelve Months Ended

December 31,

2015

(122

0

(1) Free cash flow is defined as Net cash provided by operating activities in a period minus purchases of property, plant and equipment (capital

expenditures) made in that period. This measure does not represent residual cash flows available for discretionary expenditures as the measure does

not deduct the payments required for debt service and other contractual obligations or payments for future business acquisitions. Therefore, we

believe it is important to view free cash flow as a measure that provides supplemental information to our entire statements of cash flows.

(50 (77

113 103

December 31,

2017

December 31,

2016

Zebra Technologies Announces Repricing of $1.7 Billion ... · Sales By Geography Sales By Vertical...

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