SEC Form 10-Q filed by Zebra Technologies Corporation

7/30/24 4:05:52 PM ET

$ZBRA

Industrial Machinery/Components

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


			For the transition period from to

Commission File Number: 000-19406

Zebra Technologies Corporation

(Exact name of registrant as specified in its charter)


Delaware			36-2675536
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

3 Overlook Point, Lincolnshire, IL 60069

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (847) 634-6700

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of exchange on which registered

Class A Common Stock, par value $.01 per share

ZBRA

The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 23, 2024, there were 51,580,365 shares of Class A Common Stock, $.01 par value, outstanding.

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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

QUARTER ENDED JUNE 29, 2024

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		PAGE
PART I - FINANCIAL INFORMATION		3
Item 1.	Consolidated Financial Statements	3
	Consolidated Balance Sheets as of June 29, 2024 (unaudited) and December 31, 2023	3
	Consolidated Statements of Operations (unaudited) for the three and six months ended June 29, 2024 and July 1, 2023	4
	Consolidated Statements of Comprehensive Income (unaudited) for the three and six months ended June 29, 2024 and July 1, 2023	5
	Consolidated Statements of Stockholders’ Equity (unaudited) for the three and six months ended June 29, 2024 and July 1, 2023	6
	Consolidated Statements of Cash Flows (unaudited) for the six months ended June 29, 2024 and July 1, 2023	8
	Notes to Consolidated Financial Statements (unaudited)	8
	Note 1: Description of Business and Basis of Presentation	9
	Note 2: Significant Accounting Policies	9
	Note 3: Revenues	10
	Note 4: Inventories	11

	Note 5: Investments	11
	Note 6: Exit and Restructuring Costs	11
	Note 7: Fair Value Measurements	11
	Note 8: Derivative Instruments	13
	Note 9: Long-Term Debt	15
	Note 10: Leases	17
	Note 11: Accrued Liabilities, Commitments and Contingencies	17
	Note 12: Share-Based Compensation	18
	Note 13: Income Taxes	20
	Note 14: Earnings Per Share	20
	Note 15: Accumulated Other Comprehensive (Loss) Income	21
	Note 16: Accounts Receivable Factoring	21
	Note 17: Segment Information & Geographic Data	22
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Overview	23
	Results of Operations	24
	Results of Operations by Segment	27
	Liquidity and Capital Resources	29
	Significant Customers	31
	Safe Harbor	32
	New Accounting Pronouncements	32
	Non-GAAP Measures	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
Item 5.	Other Information	37
PART II - OTHER INFORMATION		34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 6.	Exhibits	38
Signatures		39

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PART I - FINANCIAL INFORMATION


Item 1.			Consolidated Financial Statements

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)


	June 29, 2024		December 31, 2023
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	411	$	137
Accounts receivable, net of allowances for doubtful accounts of $1 each as of June 29, 2024 and December 31, 2023	701		521
Inventories, net	678		804
Income tax receivable	41		63
Prepaid expenses and other current assets	122		147
Total Current assets	1,953		1,672
Property, plant and equipment, net	297		309
Right-of-use lease assets	159		169
Goodwill	3,894		3,895
Other intangibles, net	476		527
Deferred income taxes	469		438
Other long-term assets	242		296
Total Assets	$	7,490	$	7,306
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt	$	89	$	173
Accounts payable	551		456
Accrued liabilities	426		504
Deferred revenue	447		458
Income taxes payable	9		7
Total Current liabilities	1,522		1,598
Long-term debt	2,080		2,047
Long-term lease liabilities	145		152
Deferred income taxes	66		67
Long-term deferred revenue	298		312
Other long-term liabilities	92		94
Total Liabilities	4,203		4,270
Stockholders’ Equity:
Preferred stock, $.01 par value; authorized 10,000,000 shares; none issued	—		—
Class A common stock, $.01 par value; authorized 150,000,000 shares; issued 72,151,857 shares	1		1
Additional paid-in capital	633		615
Treasury stock at cost, 20,581,866 and 20,772,995 shares as of June 29, 2024 and December 31, 2023, respectively	(1,855)		(1,858)
Retained earnings	4,560		4,332
Accumulated other comprehensive loss	(52)		(54)
Total Stockholders’ Equity	3,287		3,036
Total Liabilities and Stockholders’ Equity	$	7,490	$	7,306

See accompanying Notes to Consolidated Financial Statements.

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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share data)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Net sales:
Tangible products	$	983	$	986	$	1,912	$	2,156
Services and software	234		228		480		463
Total Net sales	1,217		1,214		2,392		2,619
Cost of sales:
Tangible products	515		522		1,013		1,140
Services and software	113		111		227		231
Total Cost of sales	628		633		1,240		1,371
Gross profit	589		581		1,152		1,248
Operating expenses:
Selling and marketing	150		146		298		307
Research and development	146		130		284		276
General and administrative	97		69		178		168

Amortization of intangible assets	25		26		51		52
Acquisition and integration costs	1		2		2		2
Exit and restructuring costs	3		14		13		24
Total Operating expenses	422		387		826		829
Operating income	167		194		326		419
Other income (loss), net:
Foreign exchange (loss) gain	—		(5)		3		(4)
Interest expense, net	(23)		(16)		(40)		(53)
Other expense, net	(8)		(2)		(11)		(6)
Total Other expense, net	(31)		(23)		(48)		(63)
Income before income tax	136		171		278		356
Income tax expense	23		27		50		62
Net income	$	113	$	144	$	228	$	294
Basic earnings per share	$	2.19	$	2.80	$	4.43	$	5.72
Diluted earnings per share	$	2.17	$	2.78	$	4.40	$	5.68

See accompanying Notes to Consolidated Financial Statements.

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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Net income	$	113	$	144	$	228	$	294
Other comprehensive income (loss), net of tax:
Changes in unrealized gains on sales hedging	1		4		10		1


Foreign currency translation adjustment	(3)		2		(8)		5
Comprehensive income	$	111	$	150	$	230	$	300

See accompanying Notes to Consolidated Financial Statements.

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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except share data)

(Unaudited)


	Class A Common Stock Shares	Class A Common Stock Value		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total
Balance at December 31, 2023	51,378,862	$	1	$	615	$	(1,858)	$	4,332	$	(54)	$	3,036

Issuances of treasury shares related to share-based compensation plans, net of forfeitures	21,312	—		(3)		—		—		—		(3)
Shares withheld to fund withholding tax obligations related to share-based compensation plans	(206)	—		—		—		—		—		—
Share-based compensation	—	—		17		—		—		—		17

Net income	—	—		—		—		115		—		115
Changes in unrealized gains and losses on sales hedging (net of income taxes)	—	—		—		—		—		9		9

Foreign currency translation adjustment	—	—		—		—		—		(5)		(5)
Balance at March 30, 2024	51,399,968	$	1	$	629	$	(1,858)	$	4,447	$	(50)	$	3,169

Issuances of treasury shares related to share-based compensation plans, net of forfeitures	170,023	—		(27)		3		—		—		(24)

Share-based compensation	—	—		31		—		—		—		31

Net income	—	—		—		—		113		—		113
Changes in unrealized gains and losses on sales hedging (net of income taxes)	—	—		—		—		—		1		1

Foreign currency translation adjustment	—	—		—		—		—		(3)		(3)
Balance at June 29, 2024	51,569,991	$	1	$	633	$	(1,855)	$	4,560	$	(52)	$	3,287

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	Class A Common Stock Shares	Class A Common Stock Value		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total
Balance at December 31, 2022	51,451,500	$	1	$	561	$	(1,799)	$	4,036	$	(66)	$	2,733

Issuances of treasury shares related to share-based compensation plans, net of forfeitures	29,784	—		5		—		—		—		5
Shares withheld to fund withholding tax obligations related to share-based compensation plans	(504)	—		—		—		—		—		—
Share-based compensation	—	—		18		—		—		—		18
Repurchase of common stock	(55,811)	—		—		(15)		—		—		(15)
Net income	—	—		—		—		150		—		150
Changes in unrealized gains and losses on sales hedging (net of income taxes)	—	—		—		—		—		(3)		(3)

Foreign currency translation adjustment	—	—		—		—		—		3		3
Balance at April 1, 2023	51,424,969	$	1	$	584	$	(1,814)	$	4,186	$	(66)	$	2,891

Issuances of treasury shares related to share-based compensation plans, net of forfeitures	75,271	—		(6)		1		—		—		(5)
Shares withheld to fund withholding tax obligations related to share-based compensation plans	(28,795)	—		—		(9)		—		—		(9)
Share-based compensation	—	—		2		—		—		—		2
Repurchase of common stock	(138,508)	—		—		(37)		—		—		(37)
Net income	—	—		—		—		144		—		144
Changes in unrealized gains and losses on sales hedging (net of income taxes)	—	—		—		—		—		4		4

Foreign currency translation adjustment	—	—		—		—		—		2		2
Balance at July 1, 2023	51,332,937	$	1	$	580	$	(1,859)	$	4,330	$	(60)	$	2,992

See accompanying Notes to Consolidated Financial Statements.

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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Six Months Ended
	June 29, 2024		July 1, 2023
Cash flows from operating activities:
Net income	$	228	$	294
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	85		88


Share-based compensation	48		20

Deferred income taxes	(36)		(29)
Unrealized gain on forward interest rate swaps	(31)		(11)
Other, net	7		2
Changes in operating assets and liabilities:
Accounts receivable, net	(185)		105
Inventories, net	125		(3)
Other assets	(3)		(22)
Accounts payable	98		(273)
Accrued liabilities	23		(107)
Deferred revenue	(25)		16
Income taxes	38		(116)
Settlement liability	(45)		(90)
Cash receipts on forward interest rate swaps	86		12
Other operating activities	—		4
Net cash provided by (used in) operating activities	413		(110)
Cash flows from investing activities:

Purchases of property, plant and equipment	(24)		(34)
Proceeds from sale of short-term investments	2		—
Purchases of long-term investments	(3)		(1)
Net cash used in investing activities	(25)		(35)
Cash flows from financing activities:
Payment of debt issuance costs, extinguishment costs and discounts	(9)		—
Payments of debt	(694)		(183)
Proceeds from issuance of debt	651		368

Payments for repurchases of common stock	—		(52)
Net payments related to share-based compensation plans	(27)		(9)
Change in unremitted cash collections from servicing factored receivables	(38)		(27)
Other financing activities	2		—
Net cash (used in) provided by financing activities	(115)		97
Effect of exchange rate changes on cash and cash equivalents, including restricted cash	—		(1)
Net increase (decrease) in cash and cash equivalents, including restricted cash	273		(49)
Cash and cash equivalents, including restricted cash, at beginning of period	138		117
Cash and cash equivalents, including restricted cash, at end of period	$	411	$	68
Less restricted cash, included in Prepaid expenses and other current assets	—		—
Cash and cash equivalents at end of period	$	411	$	68
Supplemental disclosures of cash flow information:
Income taxes paid	$	43	$	212
Interest (received) paid inclusive of forward interest rate swaps	$	(17)	$	50

Certain prior period amounts included in Net cash provided by (used in) operating activities have been reclassified to conform with the current period presentation.

See accompanying Notes to Consolidated Financial Statements.

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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 Description of Business and Basis of Presentation

Zebra Technologies Corporation and its subsidiaries (“Zebra” or the “Company”) is a global leader providing innovative Enterprise Asset Intelligence (“EAI”) solutions in the automatic identification and data capture solutions industry. We design, manufacture, and sell a broad range of products and solutions, including cloud-based software subscriptions, that capture and move data. We also provide a full range of services, including maintenance, technical support, repair, managed and professional services. End-users of our products, solutions and services include those in retail and e-commerce, manufacturing, transportation and logistics, healthcare, public sector, and other industries. We provide our products, solutions and services globally through a direct sales force and an extensive network of channel partners.

Management prepared these unaudited interim consolidated financial statements according to the rules and regulations of the Securities and Exchange Commission for interim financial information and notes. As permitted under Article 10 of Regulation S-X and the instructions of Form 10-Q, these consolidated financial statements do not include all the information and notes required by United States Generally Accepted Accounting Principles (“GAAP”) for complete financial statements, although management believes that the disclosures made are adequate to make the information not misleading. These interim financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

In the opinion of the Company, these interim financial statements include all adjustments (of a normal, recurring nature) necessary to fairly present its Consolidated Balance Sheet as of June 29, 2024, the Consolidated Statements of Operations, Comprehensive Income and Stockholders’ Equity for the three and six months ended June 29, 2024 and July 1, 2023, and the Consolidated Statement of Cash Flows for the six months ended June 29, 2024 and July 1, 2023. These results, however, are not necessarily indicative of the results expected for the full fiscal year ending December 31, 2024.

Note 2 Significant Accounting Policies

For a discussion of our significant accounting policies, see Note 2, Significant Accounting Policies within Part II, Item 8. “Financial Statements and Supplementary Data” in the Annual Report on Form 10-K for the year ended December 31, 2023. There have been no changes to our significant accounting policies since our Annual Report on Form 10-K for the year ended December 31, 2023.

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Note 3 Revenues

The Company recognizes revenue to depict the transfer of goods, solutions or services to a customer at an amount that reflects the consideration which it expects to receive for providing those goods, solutions or services.

Revenues for tangible products are generally recognized upon shipment, whereas revenues for services and solution offerings are generally recognized over time by using an output or time-based method, assuming all other criteria for revenue recognition have been met. Revenues for software are recognized either upon delivery or over time using a time-based method, depending on how control is transferred to the customer. In cases where a bundle of products, services, solutions and/or software are delivered to the customer, judgment is required to select the method of progress which best reflects the transfer of control.

Disaggregation of Revenue

The following table presents our Net sales disaggregated by product category for each of our segments (in millions):


	Three Months Ended
	June 29, 2024						July 1, 2023
Segment	Tangible Products		Services and Software		Total		Tangible Products		Services and Software		Total
AIT	$	368	$	29	$	397	$	432	$	27	$	459
EVM	615		205		820		554		201		755

Total	$	983	$	234	$	1,217	$	986	$	228	$	1,214

	Six Months Ended
	June 29, 2024						July 1, 2023
Segment	Tangible Products		Services and Software		Total		Tangible Products		Services and Software		Total
AIT	$	733	$	56	$	789	$	927	$	54	$	981
EVM	1,179		424		1,603		1,229		409		1,638

Total	$	1,912	$	480	$	2,392	$	2,156	$	463	$	2,619

In addition, refer to Note 17, Segment Information & Geographic Data for Net sales to customers by geographic region.

Performance Obligations

The Company’s remaining performance obligations relate to repair and support services, as well as software solutions. The aggregated transaction price allocated to remaining performance obligations for arrangements with an original term exceeding one year was $1,243 million and $1,127 million, inclusive of deferred revenue, as of June 29, 2024 and December 31, 2023, respectively. On average, remaining performance obligations as of June 29, 2024 and December 31, 2023 are expected to be recognized over a period of approximately two years.

Contract Balances

Progress on satisfying performance obligations under contracts with customers related to billed revenues is reflected on the Consolidated Balance Sheets in Accounts receivable, net. Progress on satisfying performance obligations under contracts with customers related to unbilled revenues (“contract assets”) is reflected on the Consolidated Balance Sheets as Prepaid expenses and other current assets for revenues expected to be billed within the next twelve months, and Other long-term assets for revenues expected to be billed thereafter. The total contract asset balances were $16 million as of June 29, 2024 and also as of December 31, 2023. These contract assets result from timing differences between billing and satisfying performance obligations, as well as the impact from the allocation of the transaction price among performance obligations for contracts that include multiple performance obligations. Contract assets are evaluated for impairment and no impairment losses have been recognized during the three and six months ended June 29, 2024 and July 1, 2023, respectively.

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Deferred revenue on the Consolidated Balance Sheets consists of payments and billings in advance of our performance. The combined short-term and long-term deferred revenue balances were $745 million and $770 million as of June 29, 2024 and December 31, 2023, respectively. During the three and six months ended June 29, 2024, the Company recognized $121 million and $267 million in revenue, which was previously included in the beginning balance of deferred revenue as of December 31, 2023. During the three and six months ended July 1, 2023, the Company recognized $114 million and $249 million in revenue, which was previously included in the beginning balance of deferred revenue as of December 31, 2022.

Note 4 Inventories

The categories of Inventories, net are as follows (in millions):


	June 29, 2024		December 31, 2023
Raw materials (1)	$	304	$	403
Work in process	4		4
Finished goods	370		397
Total Inventories, net	$	678	$	804

(1) Raw material inventories primarily consist of product components as well as supplies used in repair operations.

Note 5 Investments

The carrying value of the Company’s long-term investments, which are included in Other long-term assets on the Consolidated Balance Sheets, was $110 million and $113 million as of June 29, 2024 and December 31, 2023.

During the six months ended June 29, 2024 and July 1, 2023, the Company paid $3 million and $1 million, respectively, for the purchase of long-term investments. Net gains and losses related to the Company’s long-term investments are included within Other expense, net on the Consolidated Statements of Operations. The Company recognized net losses of $6 million during the three and six months ended June 29, 2024. Net gains and losses were not significant for the three and six months ended July 1, 2023.

Note 6 Exit and Restructuring Costs

Total charges associated with the 2022 Productivity Plan, which was substantially completed in the current quarter, and the U.S. voluntary retirement plan, which was completed in 2023, were $123 million incurred to date, including $3 million and $13 million recorded during the three and six months ended June 29, 2024. The costs of these plans are classified within Exit and restructuring on the Consolidated Statements of Operations. The Company’s remaining payment obligations of $6 million, are reflected within Accrued liabilities on the Consolidated Balance Sheets.

The Company’s liability associated with Exit and restructuring activities are:


Balance as of December 31, 2023	$	22
Exit and restructuring charges	13
Non-cash utilization	(3)
Cash payments	(26)
Balance as of June 29, 2024	$	6

Note 7 Fair Value Measurements

Financial assets and liabilities are measured using inputs from three levels of the fair value hierarchy in accordance with Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into the following three broad levels:

•Level 1: Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs (e.g. U.S. Treasuries and money market funds).

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•Level 2: Observable prices that are based on inputs not quoted in active markets but corroborated by market data.

•Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs. In addition, the Company considers counterparty credit risk in the assessment of fair value.

The Company’s financial assets and liabilities carried at fair value as of June 29, 2024, are classified below (in millions):


	Level 1		Level 2		Level 3		Total
Assets:
Foreign exchange contracts (1)	$	2	$	8	$	—	$	10

Investments related to the deferred compensation plan	41		—		—		41
Total Assets at fair value	$	43	$	8	$	—	$	51
Liabilities:


Liabilities related to the deferred compensation plan	$	41	$	—	$	—	$	41
Total Liabilities at fair value	$	41	$	—	$	—	$	41

The Company’s financial assets and liabilities carried at fair value as of December 31, 2023, are classified below (in millions):


	Level 1		Level 2		Level 3		Total
Assets:

Forward interest rate swap contracts (2)	$	—	$	83	$	—	$	83
Investments related to the deferred compensation plan	41		—		—		41
Total Assets at fair value	$	41	$	83	$	—	$	124
Liabilities:
Foreign exchange contracts (1)	$	1	$	6	$	—	$	7
Forward interest rate swap contracts (2)	—		28		—		28
Liabilities related to the deferred compensation plan	41		—		—		41
Total Liabilities at fair value	$	42	$	34	$	—	$	76

(1)The fair value of the foreign exchange contracts is calculated as follows:

•Fair value of forward contracts associated with forecasted sales hedges is calculated using the period-end exchange rate adjusted for current forward points.

•Fair value of hedges against net assets denominated in foreign currencies is calculated at the period-end exchange rate adjusted for current forward points unless the hedge has been traded but not settled at period-end (Level 2). If this is the case, the fair value is calculated at the rate at which the hedge is being settled (Level 1).

(2)The fair value of forward interest rate swaps is based upon a valuation model that uses relevant observable market inputs at the quoted intervals, such as forward yield curves, and is adjusted for the Company’s credit risk and the interest rate swap terms.

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Note 8 Derivative Instruments

In the normal course of business, the Company is exposed to global market risks, including the effects of changes in foreign currency exchange rates and interest rates. The Company uses derivative instruments to manage its exposure to such risks and may elect to designate certain derivatives as hedging instruments under ASC Topic 815, Derivatives and Hedging (“ASC 815”). The Company formally documents all relationships between designated hedging instruments and hedged items as well as its risk management objectives and strategies for undertaking hedge transactions. The Company does not hold or issue derivatives for trading or speculative purposes.

In accordance with ASC 815, the Company recognizes derivative instruments as either assets or liabilities on the Consolidated Balance Sheets and measures them at fair value. The following table presents the fair value of its derivative instruments (in millions):


	Asset (Liability)
		Fair Values as of
	Balance Sheets Classification	June 29, 2024		December 31, 2023
Derivative instruments designated as hedges:
Foreign exchange contracts	Prepaid expenses and other current assets	$	8	$	—
Foreign exchange contracts	Accrued liabilities	—		(6)


Total derivative instruments designated as hedges		$	8	$	(6)

Derivative instruments not designated as hedges:
Foreign exchange contracts	Prepaid expenses and other current assets	$	2	$	—
Forward interest rate swaps	Prepaid expenses and other current assets	—		34
Forward interest rate swaps	Other long-term assets	—		49
Foreign exchange contracts	Accrued liabilities	—		(1)
Forward interest rate swaps	Accrued liabilities	—		(12)
Forward interest rate swaps	Other long-term liabilities	—		(16)
Total derivative instruments not designated as hedges		$	2	$	54
Total net derivative asset		$	10	$	48

The following table presents the net gains (losses) from changes in fair values of derivatives that are not designated as hedges (in millions):


	Gains (Losses) Recognized in Income
		Three Months Ended				Six Months Ended
	Statements of Operations Classification	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Derivative instruments not designated as hedges:
Foreign exchange contracts	Foreign exchange (loss) gain	$	1	$	1	$	2	$	(4)
Forward interest rate swaps	Interest expense, net	11		18		31		11
Total net gain recognized in income		$	12	$	19	$	33	$	7

Activities related to derivative instruments are reflected within Net cash provided by (used in) operating activities on the Consolidated Statements of Cash Flows.

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Interest Rate Risk Management

The Company is exposed to market risk associated with interest rate payments on its borrowings under a term loan (“Term Loan A”), Revolving Credit Facility, and Receivables Financing Facilities, which bear interest at variable rates plus applicable margins. The Company manages its exposure to changes in interest rates by issuing both fixed and variable rate borrowings as well as utilizing interest rate swaps to economically hedge interest rate exposure based on current and projected market conditions.

In the current quarter, the Company terminated all of its interest rate swap agreements, none of which were designated as hedges, resulting in a $77 million cash receipt that is classified within Cash flows from operating activities on the Consolidated Statements of Cash Flows. Total cash receipts for the six months ended June 29, 2024 were $86 million. See Note 9, Long-Term Debt for further details related to the Company’s borrowings and interest rate exposure.

Credit and Market Risk Management

Financial instruments, including derivatives, expose the Company to counterparty credit risk of nonperformance and to market risk related to currency exchange rate and interest rate fluctuations. The Company manages its exposure to counterparty credit risk by establishing minimum credit standards, diversifying its counterparties, and monitoring its concentrations of credit. The Company’s counterparties are commercial banks with expertise in derivative financial instruments. The Company evaluates the impact of market risk on the fair value and cash flows of its derivative and other financial instruments by considering reasonably possible changes in interest rates and currency exchange rates. The Company continually monitors the creditworthiness of the customers to which it grants credit terms in the normal course of business. The terms and conditions of the Company’s credit policies are designed to mitigate concentrations of credit risk.

The Company’s master netting and other similar arrangements with the respective counterparties allow for net settlement under certain conditions, which are designed to reduce credit risk by permitting net settlement with the same counterparty. We present the assets and liabilities of our derivative financial instruments, for which we have net settlement agreements in place, on a net basis on the Consolidated Balance Sheets. If the derivative financial instruments had been presented gross on the Consolidated Balance Sheets, the asset and liability positions would have been unchanged as of June 29, 2024 and increased by $1 million as of December 31, 2023.

Foreign Currency Exchange Risk Management

The Company conducts business on a multinational basis in a variety of foreign currencies. Exposure to market risk for changes in foreign currency exchange rates arises primarily from Euro-denominated external revenues, cross-border financing activities between subsidiaries, and foreign currency denominated monetary assets and liabilities. The Company manages its objective of preserving the economic value of non-functional currency denominated cash flows by initially hedging transaction exposures with natural offsets and, once these opportunities have been exhausted, through foreign exchange forward and option contracts, as deemed appropriate.

The Company manages the exchange rate risk of anticipated Euro-denominated sales using forward contracts, which typically mature within twelve months of execution. The Company designates these derivative contracts as cash flow hedges. Unrealized gains and losses on these contracts are deferred in Accumulated other comprehensive income (loss) (“AOCI”) on the Consolidated Balance Sheets until the contract is settled and the hedged sale is realized. The realized gain or loss is then recorded as an adjustment to Net sales on the Consolidated Statements of Operations. Realized amounts reclassified to Net sales were $5 million of gains and $7 million of losses for the three months ended June 29, 2024 and July 1, 2023, respectively. Realized amounts reclassified to Net sales were $6 million of gains and $10 million of losses for the six months ended June 29, 2024 and July 1, 2023, respectively. As of June 29, 2024 and December 31, 2023, the notional amounts of the Company’s foreign exchange cash flow hedges were €569 million and €485 million, respectively. The Company has reviewed its cash flow hedges for effectiveness and determined that they are highly effective.

The Company uses forward contracts, which are not designated as hedging instruments, to manage its exposures related to net assets denominated in foreign currencies. These forward contracts typically mature within one month after execution. Monetary gains and losses on these forward contracts are recorded in income and are generally offset by the transaction gains and losses related to their net asset positions. The notional values and the net fair values of these outstanding contracts were as follows (in millions):

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	June 29, 2024		December 31, 2023
Notional balance of outstanding contracts:
British Pound/U.S. Dollar	£	3	£	11
Euro/U.S. Dollar	€	124	€	80


Euro/Czech Koruna	€	16	€	17



Japanese Yen/U.S. Dollar	¥	366	¥	685
Singapore Dollar/U.S. Dollar	S$	22	S$	14
Mexican Peso/U.S. Dollar	Mex$	164	Mex$	144


Polish Zloty/U.S. Dollar	zł	28	zł	116
Net fair value of assets (liabilities) of outstanding contracts	$	2	$	(1)

Note 9 Long-Term Debt

The following table shows the carrying value of the Company’s debt (in millions):


	June 29, 2024		December 31, 2023
Term Loan A	$	1,575	$	1,684
Senior Notes	500		—
Revolving Credit Facility	—		413
Receivables Financing Facilities	108		129

Total debt	$	2,183	$	2,226
Less: Debt issuance costs	(11)		(2)
Less: Unamortized discounts	(3)		(4)
Less: Current portion of debt	(89)		(173)
Total long-term debt	$	2,080	$	2,047

As of June 29, 2024, the future maturities of debt are as follows (in millions):


2024 (6 months remaining)	$	89
2025	—
2026	88
2027	1,506
2028	—
Thereafter	500
Total future maturities of debt	$	2,183

All borrowings as of June 29, 2024 were denominated in U.S. Dollars.

The estimated fair value of the Company’s debt approximated $2.2 billion as of both June 29, 2024 and December 31, 2023, respectively. These fair value amounts, developed based on inputs classified as Level 2 within the fair value hierarchy, represent the estimated value at which the Company’s lenders could trade its debt within the financial markets and do not represent the settlement value of these liabilities to the Company. The fair value of debt will continue to vary each period based on a number of factors, including fluctuations in market interest rates as well as changes to the Company’s credit ratings.

Term Loan A

The principal on Term Loan A is due in quarterly installments, with the next quarterly installment due in the second quarter of 2026 and the majority due upon maturity in 2027. The Company may make prepayments in whole or in part, without premium or penalty, and would be required to prepay certain outstanding amounts in the event of certain circumstances or transactions. The Company made $109 million of principal payments during the six months ended June 29, 2024, inclusive of prepayment of amounts due in 2024 and 2025. As of June 29, 2024, the Term Loan A interest rate was 6.69%. Interest payments are made monthly and are subject to variable rates plus an applicable margin.

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Senior Notes

On May 28, 2024, the Company completed a private offering of $500 million senior unsecured notes (the “Senior Notes”) with a 6.5% fixed interest rate. The net proceeds of the issuance, after deducting debt issuance costs which were deferred and will be amortized over the term of the Senior Notes, were approximately $492 million. The proceeds were partially used to repay the outstanding debt under its Revolving Credit Facility, the Receivables Financing Facility that matured on May 13, 2024, and Term Loan A principal repayments. The Company intends to use the remaining net proceeds for general corporate purposes. The Senior Notes mature on June 1, 2032, and interest is payable semi-annually in arrears in June and December of each year, commencing on December 1, 2024. The Company has the option or could be required to prepay certain outstanding amounts in the event of certain circumstances or transactions.

The Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by certain of Zebra’s existing and future subsidiaries. The Senior Notes contain covenants that, among other things, limit the ability of Zebra to: (i) grant or incur liens; (ii) have its subsidiaries guarantee debt without becoming guarantors; and (iii) merge or consolidate with another company or sell all or substantially all of its assets.

Revolving Credit Facility

The Company has a Revolving Credit Facility that is available for working capital and other general business purposes, including letters of credit. As of June 29, 2024, the Company had letters of credit totaling $10 million, which reduced funds available for borrowings under the Revolving Credit Facility from $1,500 million to $1,490 million. As of June 29, 2024, the Revolving Credit Facility had an average interest rate of 6.69%. Upon borrowing, interest payments are made monthly and are subject to variable rates plus an applicable margin. The Revolving Credit Facility matures on May 25, 2027.

Receivables Financing Facility

As of June 29, 2024, the Company has a Receivables Financing Facility with a borrowing limit of up to $180 million. As collateral, the Company pledges perfected first-priority security interests in its U.S. domestically originated accounts receivable. The Company has accounted for transactions under this facility as secured borrowings. During the first quarter of 2024, the Company amended this facility to extend the maturity to March 19, 2027, but otherwise did not substantially change the terms of the facility. The Company’s additional facility, which allowed for borrowings of up to $100 million, matured on May 13, 2024 and was not renewed.

As of June 29, 2024, the Company’s Consolidated Balance Sheets included $537 million of gross receivables that were pledged under the facility. As of June 29, 2024, $108 million had been borrowed, of which $89 million was classified as current. Borrowings under the facility bear interest at a variable rate plus an applicable margin. As of June 29, 2024, the facility had an average interest rate of 6.39%. Interest is paid monthly on these borrowings.

The Company’s borrowings described above include terms and conditions that limit the incurrence of additional borrowings and require that certain financial ratios be maintained at designated levels.

As of June 29, 2024, the Company was in compliance with all debt covenants.

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Note 10 Leases

During the six months ended June 29, 2024, the Company recorded an additional $14 million of right-of-use (“ROU”) assets obtained in exchange for lease obligations primarily related to the commencement of a new office facility lease as well as contract modifications that extended existing lease terms.

Future minimum lease payments under non-cancellable leases as of June 29, 2024 were as follows (in millions):


2024 (6 months remaining)	$	27
2025	43
2026	36
2027	29
2028	25
Thereafter	66
Total future minimum lease payments	$	226
Less: Interest	(40)
Present value of lease liabilities	$	186

Reported as of June 29, 2024:
Current portion of lease liabilities	$	41
Long-term lease liabilities	145
Present value of lease liabilities	$	186

The current portion of lease liabilities is included within Accrued liabilities on the Consolidated Balance Sheets.

Note 11 Accrued Liabilities, Commitments and Contingencies

Accrued Liabilities

The components of Accrued liabilities are as follows (in millions):


	June 29, 2024		December 31, 2023
Incentive compensation	$	88	$	47
Unremitted cash collections due to banks on factored accounts receivable	74		112
Payroll and benefits	69		83
Customer rebates	50		40
Current portion of lease liabilities	41		42
Warranty	27		27
Freight and duty	13		10
Exit and restructuring	6		22

Settlement	—		45
Other	58		76
Accrued liabilities	$	426	$	504

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Warranties

The following table is a summary of the Company’s accrued warranty obligations (in millions):


	Six Months Ended
	June 29, 2024		July 1, 2023
Balance at the beginning of the period	$	27	$	26
Warranty expense	13		13
Warranties fulfilled	(13)		(14)
Balance at the end of the period	$	27	$	25

Contingencies

The Company is subject to a variety of investigations, claims, suits, and other legal proceedings that arise from time to time in the ordinary course of business, including but not limited to, intellectual property, employment, tort, and breach of contract matters. The Company currently believes that the outcomes of such proceedings, individually and in the aggregate, will not have a material adverse impact on its business, cash flows, financial position, or results of operations. Any legal proceedings are subject to inherent uncertainties, and the Company’s view of these matters and their potential effects may change in the future. The Company records a liability for contingencies when a loss is deemed to be probable and the loss can be reasonably estimated.

Note 12 Share-Based Compensation

The Company issues share-based compensation awards under the Zebra Technologies 2018 Long-Term Incentive Plan (“2018 Plan”), approved by shareholders in 2018 which superseded and replaced all prior share-based incentive plans. Outstanding awards issued prior to the 2018 Plan are governed by the provisions of those plans until such awards have been exercised, forfeited, cancelled, expired, or otherwise terminated in accordance with their terms. Awards available under the 2018 Plan include stock-settled awards, including stock-settled restricted stock units, stock-settled performance stock units, restricted stock awards, performance share awards, stock appreciation rights, incentive stock options, and non-qualified stock options. Awards available under the 2018 Plan also include cash-settled awards, including cash-settled stock appreciation rights, cash-settled restricted stock units, and cash-settled performance stock units. No awards remain available for future grants under previous plans.

The Company uses treasury shares as its source for issuing shares under the share-based compensation programs. As of June 29, 2024, the Company had 1,850,705 shares of Class A Common stock remaining available to be issued under the 2018 Plan.

The compensation expense from the Company’s share-based compensation plans and associated income tax benefit, excluding the effects of excess tax benefits or shortfalls, were included in the Consolidated Statements of Operations as follows (in millions):


	Three Months Ended				Six Months Ended
Compensation costs and related income tax benefit	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Cost of sales	$	2	$	2	$	4	$	3
Selling and marketing	8		1		13		7
Research and development	12		6		18		13
General and administration	15		(6)		23		3
Total compensation expense	$	37	$	3	$	58	$	26
Income tax benefit	$	6	$	3	$	10	$	7

As of June 29, 2024, total unearned compensation cost related to the Company’s share-based compensation plans was $166 million, which will be recognized over the weighted average remaining service period of approximately 1.7 years.

The majority of the Company’s share-based compensation awards are generally issued as part of its employee and non-employee director incentive program during the second quarter of each fiscal year. The Company also issues awards associated with business acquisitions or other off-cycle events. The majority of the Company’s share-based compensation is comprised of stock-settled awards.

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Stock-settled awards

Beginning in 2021, the Company began issuing stock-settled restricted stock units (“stock-settled RSUs”) and stock-settled performance share units (“stock-settled PSUs”) for the majority of its share-based compensation awards. Prior to 2021, the Company primarily awarded restricted stock awards (“RSAs”) and performance share awards (“PSAs”). The Company’s awards are typically time-vested with stock-settled RSUs and RSAs vesting ratably in three annual installments and stock-settled PSUs and PSAs vesting at the end of the three-year period. No RSAs or PSAs were issued to employees in the current year.

Vesting for each participant is subject to restrictions, such as continuous employment, except in certain cases as set forth in each stock agreement. Upon vesting, stock-settled RSUs and PSUs convert to shares of Class A Common Stock that are released to participants. RSAs and PSAs are considered participating securities, and as such, are included as part of the Company’s Class A Common Stock outstanding at the time of grant.

Compensation cost for the stock-settled RSUs, stock-settled PSUs, RSAs, and PSAs is expensed over each participant’s required service period. Compensation cost is calculated as the fair market value of the Company’s Class A Common Stock on the grant date multiplied by the number of units or awards granted, net of estimated forfeitures. The expected attainment of the performance goals for the stock-settled PSUs and PSAs is reviewed at the end of each reporting period, with adjustments recorded to compensation expense in the Consolidated Statements of Operations, as necessary.

The Company issues RSAs to non-employee directors. The number of shares granted to each non-employee director is determined by dividing the value of the annual grant by the price of a share of the Company’s Class A Common Stock. New directors in any fiscal year earn a prorated amount. During the first six months of 2024, there were 6,264 shares granted to non-employee directors compared to 6,640 shares during the first six months of 2023. The shares vest immediately upon grant.

A summary of the Company’s restricted and performance stock-settled awards for the six months ended June 29, 2024 is as follows:


	RSUs			PSUs			RSAs
	Units	Weighted-Average Grant Date Fair Value		Units	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value
Outstanding at beginning of period	437,379	$	299.19	195,932	$	334.59	433	$	477.74
Granted	271,704	308.89		88,029	309.05		6,264	319.95
Released	(176,502)	323.37		(35,597)	482.42		(6,697)	330.15
Forfeited	(7,971)	296.31		(1,428)	296.59		—	—
Outstanding at end of period	524,610	$	296.14	246,936	$	304.49	—	$	—

Stock Appreciation Rights (“SARs”)

SARs were previously granted primarily as part of the Company’s annual share-based compensation incentive program. Beginning in 2021, the Company no longer included SARs in its annual share-based compensation award issuances.


	SARs	Weighted-Average Exercise Price
Outstanding at beginning of period	398,838	$	124.96

Exercised	(126,582)	100.02

Expired	(2)	86.80
Outstanding at end of period	272,254	$	136.48
Exercisable at end of period	270,999	$	135.42

The following table summarizes information about SARs outstanding as of June 29, 2024:


	Outstanding		Exercisable
Aggregate intrinsic value (in millions)	$	47	$	47
Weighted-average remaining contractual life (in years)	1.7		1.7

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The intrinsic value of SARs exercised during the six months ended June 29, 2024 and July 1, 2023 was $25 million and $5 million, respectively. The total fair value of SARs that vested during the six months ended June 29, 2024 and July 1, 2023 was $1 million and $2 million, respectively.

Cash-settled awards

The Company also issues cash-settled share-based compensation awards, including cash-settled restricted stock units and cash-settled performance stock units that are classified as liability awards. These awards are expensed over the vesting period of the related award, which is typically three years. Compensation cost is calculated as the fair value on grant date multiplied by the number of share-equivalents granted. The expected attainment of the performance goals for the cash-settled performance stock units is reviewed at the end of each reporting period, with adjustments recorded to compensation expense in the Consolidated Statements of Operations, as necessary. Cash settlement is based on the fair value of share equivalents at the time of vesting, which was $11 million and $8 million for the six months ended June 29, 2024 and July 1, 2023, respectively. Share-equivalents issued under these programs totaled 57,779 and 39,407 during the six months ended June 29, 2024 and July 1, 2023, respectively.

Employee Stock Purchase Plan

Eligible Zebra employees may purchase common stock at 95% of the fair market value at the date of purchase pursuant to the Zebra Technologies Corporation 2020 Employee Stock Purchase Plan (“2020 ESPP”). Employees may make purchases by cash or payroll deductions up to certain limits. The aggregate number of shares that may be purchased under the 2020 ESPP is 1,500,000 shares. As of June 29, 2024, 1,329,399 shares remained available for future purchase.

Note 13 Income Taxes

The Company’s effective tax rate for the three and six months ended June 29, 2024 was 16.9% and 18.0%, respectively, compared to 15.8% and 17.4% for the three and six months ended July 1, 2023. In the current and prior periods, the variance from the 21% federal statutory rate was primarily due to the generation of tax credits and the favorable impacts of foreign earnings subject to U.S. taxation, partially offset by U.S. State income taxes and foreign rate differentials.

Note 14 Earnings Per Share

Basic net earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average number of diluted common shares outstanding. Diluted common shares outstanding is computed using the Treasury Stock method and, in periods of income, reflects the additional shares that would be outstanding if dilutive share-based compensation awards were converted into common shares during the period.

Earnings per share (in millions, except share data):


	Three Months Ended				Six Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Basic:
Net income	$	113	$	144	$	228	$	294
Weighted-average shares outstanding	51,489,735		51,377,064		51,444,179		51,395,062
Basic earnings per share	$	2.19	$	2.80	$	4.43	$	5.72

Diluted:
Net income	$	113	$	144	$	228	$	294
Weighted-average shares outstanding	51,489,735		51,377,064		51,444,179		51,395,062
Dilutive shares	340,510		330,396		371,720		328,964
Diluted weighted-average shares outstanding	51,830,245		51,707,460		51,815,899		51,724,026
Diluted earnings per share	$	2.17	$	2.78	$	4.40	$	5.68

Anti-dilutive share-based compensation awards are excluded from diluted earnings per share calculations. There were 164,004 and 91,050 shares that were anti-dilutive for the three and six months ended June 29, 2024, respectively. There were 247,453 and 151,872 shares that were anti-dilutive for the three and six months ended July 1, 2023, respectively.

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Note 15 Accumulated Other Comprehensive (Loss) Income

Stockholders’ equity includes certain items classified as AOCI, including:

•Unrealized gain (loss) on sales hedging which relates to derivative instruments used to hedge the exposure related to currency exchange rates for forecasted Euro sales. These hedges are designated as cash flow hedges, and the Company defers income statement recognition of gains and losses until the hedged transaction occurs. See Note 8, Derivative Instruments for more details.

•Foreign currency translation adjustments which relates to the Company’s non-U.S. subsidiary companies that have designated a functional currency other than the U.S. Dollar. The Company translates the subsidiary functional currency financial statements to U.S. Dollars using a combination of historical, period-end, and average foreign exchange rates. This combination of rates creates the foreign currency translation adjustment component of AOCI.

The changes in each component of AOCI during the six months ended June 29, 2024 and July 1, 2023 were as follows (in millions):


	Unrealized gain (loss) on sales hedging		Foreign currency translation adjustments		Total
Balance at December 31, 2022	$	(11)	$	(55)	$	(66)
Other comprehensive (loss) income before reclassifications	(9)		5		(4)
Amounts reclassified from AOCI(1)	10		—		10

Other comprehensive income, net of tax	1		5		6
Balance at July 1, 2023	$	(10)	$	(50)	$	(60)

Balance at December 31, 2023	$	(5)	$	(49)	$	(54)
Other comprehensive income (loss) before reclassifications	20		(8)		12
Amounts reclassified from AOCI(1)	(6)		—		(6)
Tax effect	(4)		—		(4)
Other comprehensive income (loss), net of tax	10		(8)		2
Balance at June 29, 2024	$	5	$	(57)	$	(52)

(1) See Note 8, Derivative Instruments regarding the timing of reclassifications to operating results.

Note 16 Accounts Receivable Factoring

The Company transfers certain receivables to banks without recourse as part of its credit and cash management activities. Such transfers are accounted for as sales and the related receivables are removed from the Company’s balance sheet. The Company does not maintain any beneficial interest in the receivables sold. The Company services the receivables on behalf of the banks, but otherwise maintains no significant continuing involvement with respect to the receivables. Sale proceeds that are representative of the fair value of factored receivables, less a factoring fee, are reflected in Cash flows from operating activities on the Consolidated Statements of Cash Flows, while sale proceeds in excess of the fair value of factored receivables are reflected in Cash flows from financing activities on the Consolidated Statements of Cash Flows.

The Company has two Receivables Factoring arrangements. The first arrangement was amended in the current quarter to limit the factoring of uncollected receivables originated from the EMEA and Asia-Pacific regions from €150 million to €75 million, which will revert to €150 million in the third quarter if not further amended. Otherwise, the amendment did not substantially change the terms of the arrangement. In the current quarter, the Company provided notice to terminate the second arrangement, which allowed for the factoring of uncollected receivables originated from the EMEA region up to $50 million.

The Company may be required to maintain a portion of sales proceeds as deposits in a restricted cash account that is released to the Company as it satisfies its obligations as servicer of sold receivables, which totaled $0 million and $1 million as of June 29, 2024 and December 31, 2023, respectively, and is classified within Prepaid expenses and other current assets on the Consolidated Balance Sheets.

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During the six months ended June 29, 2024 and July 1, 2023, the Company received cash proceeds of $607 million and $751 million, respectively, from the sales of accounts receivables under its factoring arrangements. As of June 29, 2024 and December 31, 2023, there were a total of $7 million and $56 million, respectively, of uncollected receivables that had been sold and removed from the Company’s Consolidated Balance Sheets.

As servicer of sold receivables, the Company had $74 million and $112 million of obligations that were not yet remitted to banks as of June 29, 2024 and December 31, 2023, respectively. These obligations are included within Accrued liabilities on the Consolidated Balance Sheets, with changes in such obligations reflected within Cash flows from financing activities on the Consolidated Statements of Cash Flows.

Note 17 Segment Information & Geographic Data

The Company’s operations consist of two reportable segments: Asset Intelligence & Tracking (“AIT”) and Enterprise Visibility & Mobility (“EVM”). The reportable segments have been identified based on the financial data utilized by the Company’s Chief Executive Officer (the chief operating decision maker or “CODM”) to assess segment performance and allocate resources among the Company’s segments. The CODM reviews adjusted operating income to assess segment profitability. To the extent applicable, segment operating income excludes business acquisition purchase accounting adjustments, amortization of intangible assets, acquisition and integration costs, impairment of goodwill and other intangibles, exit and restructuring costs, as well as certain other non-recurring costs. Segment assets are not reviewed by the Company’s CODM and therefore are not disclosed below.

Financial information by segment is presented as follows (in millions):


	Three Months Ended				Six Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Net sales:
AIT	$	397	$	459	$	789	$	981
EVM	820		755		1,603		1,638


Total Net sales	$	1,217	$	1,214	$	2,392	$	2,619
Operating income:
AIT(2)	$	73	$	114	$	149	$	243
EVM(2)	123		122		243		255
Total segment operating income	196		236		392		498
Corporate (1)	(29)		(42)		(66)		(79)
Total Operating income	$	167	$	194	$	326	$	419

(1)To the extent applicable, amounts included in Corporate consist of business acquisition purchase accounting adjustments, amortization of intangible assets, acquisition and integration costs, impairment of goodwill and other intangibles, and exit and restructuring costs.

(2)AIT and EVM segment operating income includes depreciation and share-based compensation expense. The amounts of depreciation and share-based compensation expense are proportionate to each segment’s Net sales.

Information regarding the Company’s operations by geographic area is contained in the following tables. Net sales amounts are attributed to geographic area based on customer location.

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Net sales by region were as follows (in millions):


	Three Months Ended				Six Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
North America	$	599	$	642	$	1,211	$	1,367
EMEA	419		374		799		817
Asia-Pacific	118		122		230		276
Latin America	81		76		152		159
Total Net sales	$	1,217	$	1,214	$	2,392	$	2,619


Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a global leader in the Automatic Identification and Data Capture (“AIDC”) industry. The AIDC market consists of mobile computing, data capture, radio frequency identification devices (“RFID”), barcode printing, and other workflow automation products and services. The Company’s solutions are proven to help our customers and end-users digitize and automate their workflows to achieve their critical business objectives, including improved productivity and operational efficiency, optimized regulatory compliance, and better customer experiences.

We design, manufacture, and sell a broad range of AIDC products, including: mobile computers, barcode scanners and imagers, RFID readers, specialty printers for barcode labeling and personal identification, real-time location systems (“RTLS”), related accessories and supplies, such as labels and other consumables, and related software applications. We also provide machine vision and robotics automation solutions; a full range of services, including maintenance, technical support, repair, managed and professional services; as well as cloud-based software subscriptions. End-users of our products, solutions and services include those in the retail and e-commerce, manufacturing, transportation and logistics, healthcare, public sector, and other industries within North America; Europe, Middle East, and Africa (“EMEA”); Asia Pacific; and Latin America.

We continue to advance our Enterprise Asset Intelligence (“EAI”) vision: every asset and front-line worker visible, connected, and fully optimized. Through continual innovation, we have expanded beyond the traditional AIDC market to transform activities such as factory production, packages moving through a supply chain, retail shopping, and the hospital patient journey. Data from enterprise assets, including status, condition, location, utilization, and preferences, is analyzed in the cloud to provide prioritized actionable insights. As a result, our solutions enable enterprises to “sense, analyze, and act” more effectively to optimize their activities.

The Company’s operations consist of two reportable segments that provide complementary offerings to our customers: Asset Intelligence & Tracking (“AIT”) and Enterprise Visibility & Mobility (“EVM”).

•The AIT segment is an industry leader in barcode printing and asset tracking technologies. Its major product lines include barcode and card printers, RFID and RTLS offerings, and supplies, including temperature-monitoring labels, and services.

•The EVM segment is an industry leader in automatic information and data capture solutions. Its major product lines include mobile computing, data capture, fixed industrial scanning and machine vision, services, and workflow optimization solutions. Our workflow optimization solutions include cloud-based software subscriptions, retail solutions, and robotic automation solutions.

We are a market leader in our core businesses, which are generally considered to be comprised of our mobile computing and data capture products, printing products and supplies, as well as support and repair services. We continue to focus on growth opportunities within adjacent and expansion markets by scaling and integrating our recent business acquisitions.

Second Quarter 2024 Financial Summary and Other Recent Developments

•Net sales were $1,217 million in the current quarter compared to $1,214 million in the prior year.

•Operating income was $167 million in the current quarter compared to $194 million in the prior year.

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•Net income was $113 million, or $2.17 per diluted share in the current quarter, compared to net income of $144 million, or $2.78 per diluted share in the prior year.

•Net cash provided by operating activities was $413 million in the current year compared to net cash used in operating activities of $110 million in the prior year.

In the current quarter distributor inventory levels remained relatively stable and, as expected, we saw a modest recovery in the demand trends particularly in our EVM segment’s mobile computing business; however, our results continued to be impacted by weakness in certain of our end markets, most pronounced in our AIT segment. As discussed below, our second quarter results benefited from the actions taken under our 2022 Productivity Plan and the U.S. voluntary retirement plan. We expect revenues and profitability to improve both sequentially from the first half to the second half of the current year, and on a year-over-year basis in the second half of the year.

The Company substantially completed the actions under the 2022 Productivity Plan in the current quarter. Total charges associated with the 2022 Productivity Plan and the U.S. voluntary retirement plan, which was completed in 2023, were $123 million to date, including $3 million recorded in the current quarter. The costs of these actions are classified within Exit and restructuring on the Consolidated Statements of Operations. Together, these programs have impacted over 9% of our global employee base and are expected to result in annualized net cost savings of approximately $120 million, primarily within Operating expenses. The Company has realized a total of $100 million in annualized net savings to date, with $50 million in 2023 and $50 million in the first half of 2024, and estimates full calendar year 2024 total net savings to approximate $60 million with the remainder expected to be realized in 2025.

During the current quarter, the Company completed a private offering of $500 million senior unsecured notes (the “Senior Notes”) with a 6.5% fixed interest rate; the proceeds of which, were partially used to repay the outstanding debt under its Revolving Credit Facility, the Receivables Financing Facility that matured on May 13, 2024, and Term Loan A principal repayments. Additionally, with the issuance of the fixed rate Senior Notes, the Company terminated its interest rate swap agreements which were intended to result in a fixed interest rate on a portion of our variable rate debt.

Results of Operations

Consolidated Results of Operations

(amounts in millions, except percentages)


	Three Months Ended										Six Months Ended
	June 29, 2024			July 1, 2023			$ Change		% Change		June 29, 2024			July 1, 2023			$ Change		% Change
Net sales:
Tangible products	$	983		$	986		$	(3)	(0.3)	%	$	1,912		$	2,156		$	(244)	(11.3)	%
Services and software	234			228			6		2.6	%	480			463			17		3.7	%
Total Net sales	1,217			1,214			3		0.2	%	2,392			2,619			(227)		(8.7)	%
Gross profit	589			581			8		1.4	%	1,152			1,248			(96)		(7.7)	%
Gross margin	48.4		%	47.9		%			50 bps		48.2		%	47.7		%			50 bps
Operating expenses	422			387			35		9.0	%	826			829			(3)		(0.4)	%
Operating income	$	167		$	194		$	(27)	(13.9)	%	$	326		$	419		$	(93)	(22.2)	%

Net sales to customers by geographic region were as follows (amounts in millions, except percentages):

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	Three Months Ended								Six Months Ended
	June 29, 2024		July 1, 2023		$ Change		% Change		June 29, 2024		July 1, 2023		$ Change		% Change
North America	$	599	$	642	$	(43)	(6.7)	%	$	1,211	$	1,367	$	(156)	(11.4)	%
EMEA	419		374		45		12.0	%	799		817		(18)		(2.2)	%
Asia-Pacific	118		122		(4)		(3.3)	%	230		276		(46)		(16.7)	%
Latin America	81		76		5		6.6	%	152		159		(7)		(4.4)	%
Total Net sales	$	1,217	$	1,214	$	3	0.2	%	$	2,392	$	2,619	$	(227)	(8.7)	%

Operating expenses are summarized below (amounts in millions, except percentages):


	Three Months Ended								Six Months Ended
	June 29, 2024		July 1, 2023		As a % of Net sales				June 29, 2024		July 1, 2023		As a % of Net sales
					2024		2023						2024		2023
Selling and marketing	$	150	$	146	12.3	%	12.0	%	$	298	$	307	12.5	%	11.7	%
Research and development	146		130		12.0	%	10.7	%	284		276		11.9	%	10.5	%
General and administrative	97		69		8.0	%	5.7	%	178		168		7.4	%	6.4	%

Amortization of intangible assets	25		26		NM		NM		51		52		NM		NM
Acquisition and integration costs	1		2		NM		NM		2		2		NM		NM
Exit and restructuring costs	3		14		NM		NM		13		24		NM		NM
Total Operating expenses	$	422	$	387	34.7	%	31.9	%	$	826	$	829	34.5	%	31.7	%

Consolidated Organic Net sales decline:


	Three Months Ended		Six Months Ended
	June 29, 2024		June 29, 2024
Reported GAAP Consolidated Net sales growth (decline)	0.2	%	(8.7)	%
Adjustments:
Impact of foreign currency translations (1)	(0.5)	%	(0.5)	%

Consolidated Organic Net sales decline (2)	(0.3)	%	(9.2)	%

(1)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 the current period results at the currency exchange rates used in the comparable prior year period, inclusive of the Company’s foreign currency hedging program.

(2)Consolidated Organic Net sales decline is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of this item.

Second quarter 2024 compared to Second quarter 2023

Total Net sales increased slightly by $3 million or 0.2% compared to the prior year as growth in our EVM segment was largely offset by a decline in our AIT segment. Excluding the effects of currency changes, Consolidated Organic Net sales decreased by 0.3%.

Gross margin increased to 48.4% for the current year compared to 47.9% for the prior year. As compared to the prior year, Gross margin was higher in our EVM segment and lower in our AIT segment.

Operating expenses for the quarters ended June 29, 2024 and July 1, 2023 were $422 million and $387 million, or 34.7% and 31.9% of Net sales, respectively. Current year Operating expenses were higher than the prior year primarily due to higher

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incentive compensation, due in part to a significant reduction of incentive compensation expense in the prior year associated with the Company’s performance target attainment assessment on certain performance-based compensation awards. The increase in incentive compensation was partially offset by cost savings largely attributed to our Exit and restructuring actions.

Operating income was $167 million for the current year compared to $194 million in the prior year. The decrease was primarily due to higher Operating expenses.

Net income decreased compared to the prior year primarily due to lower Operating income, as described above, and higher Other expense, net. The increase in Other expense, net was primarily due to lower interest rate swap gains and a long-term investment loss in the current year, partially offset by favorable changes in Foreign exchange gain (loss) as compared to the prior year.

The Company’s effective tax rates for the three months ended June 29, 2024 and July 1, 2023 were 16.9% and 15.8%, respectively.

Diluted earnings per share decreased to $2.17 as compared to $2.78 in the prior year due to lower Net income.

Year to date 2024 compared to Year to date 2023

Total Net sales decreased $227 million or 8.7% compared to the prior year reflecting declines in both of our segments. Excluding the effects of currency changes, Consolidated Organic Net sales decreased by 9.2%.

Gross margin increased to 48.2% for the current year compared to 47.7% for the prior year. As compared to the prior year, Gross margin was higher in our EVM segment and lower in our AIT segment. Gross margins of both segments benefited from lower freight rates and favorable changes in foreign currency rates compared to the prior year.

Operating expenses for the year ended June 29, 2024 and July 1, 2023 were $826 million and $829 million, or 34.5% and 31.7% of Net sales, respectively. Current year Operating expenses were slightly lower than the prior year primarily due to cost savings largely attributed to our Exit and restructuring actions, that were largely offset by higher incentive compensation. The increase as a percentage of Net sales over the prior year reflects the impact of expense deleveraging.

Operating income was $326 million for the current year compared to $419 million in the prior year. The decrease was primarily due to lower Gross profit.

Net income decreased compared to the prior year primarily due to lower Operating income, as described above, partially offset by lower Other expense, net. The decrease in Other expense, net was primarily due to higher interest rate swap gains in the current year compared to the prior year, partially offset by higher interest expense associated with higher interest rates in the current year.

The Company’s effective tax rates for the six months ended June 29, 2024 and July 1, 2023 were 18.0% and 17.4%, respectively.

Diluted earnings per share decreased to $4.40 as compared to $5.68 in the prior year due to lower Net income.

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Results of Operations by Segment

The following commentary should be read in conjunction with the financial results of each reportable business segment as detailed in Note 17, Segment Information & Geographic Data in the Notes to Consolidated Financial Statements. To the extent applicable, segment operating income excludes business acquisition purchase accounting adjustments, amortization of intangible assets, acquisition and integration costs, impairment of goodwill and other intangibles, exit and restructuring costs, as well as certain other non-recurring costs.

Asset Intelligence & Tracking Segment (“AIT”)

(amounts in millions, except percentages)


	Three Months Ended										Six Months Ended
	June 29, 2024			July 1, 2023			$ Change		% Change		June 29, 2024			July 1, 2023			$ Change		% Change
Net sales:
Tangible products	$	368		$	432		$	(64)	(14.8)	%	$	733		$	927		$	(194)	(20.9)	%
Services and software	29			27			2		7.4	%	56			54			2		3.7	%
Total Net sales	397			459			(62)		(13.5)	%	789			981			(192)		(19.6)	%
Gross profit	187			225			(38)		(16.9)	%	371			483			(112)		(23.2)	%
Gross margin	47.1		%	49.0		%			(190) bps		47.0		%	49.2		%			(220) bps
Operating expenses	114			111			3		2.7	%	222			240			(18)		(7.5)	%
Operating income	$	73		$	114		$	(41)	(36.0)	%	$	149		$	243		$	(94)	(38.7)	%

AIT Organic Net sales decline:


	Three Months Ended		Six Months Ended
	June 29, 2024		June 29, 2024
AIT Reported GAAP Net sales decline	(13.5)	%	(19.6)	%
Adjustments:
Impact of foreign currency translations (1)	(0.9)	%	(0.6)	%

AIT Organic Net sales decline (2)	(14.4)	%	(20.2)	%

(2)AIT Organic Net sales decline is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of this item.

Second quarter 2024 compared to Second quarter 2023

Total Net sales for AIT decreased $62 million or 13.5% compared to the prior year primarily due to lower sales of printing and RFID products. Excluding the impact of foreign currency changes, AIT Organic Net sales decreased by 14.4%.

Gross margin decreased to 47.1% in the current year compared to 49.0% for the prior year primarily due to higher inventory-related charges, volume deleveraging and unfavorable business mix, partially offset by favorable changes in foreign currency rates.

Operating income decreased 36.0% in the current year compared to the prior year primarily due to lower Gross profit.

Year to date 2024 compared to Year to date 2023

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Total Net sales for AIT decreased $192 million or 19.6% compared to the prior year primarily due to lower sales of printing products. Excluding the impact of foreign currency changes, AIT Organic Net sales decreased by 20.2%.

Gross margin decreased to 47.0% in the current year compared to 49.2% for the prior year primarily due to unfavorable business mix, volume deleveraging, and higher inventory-related charges, partially offset by lower freight rates and favorable changes in foreign currency rates.

Operating income decreased 38.7% in the current year compared to the prior year due to lower Gross profit, partially offset by lower Operating expenses.

Enterprise Visibility & Mobility Segment (“EVM”)

(amounts in millions, except percentages)


	Three Months Ended										Six Months Ended
	June 29, 2024			July 1, 2023			$ Change		% Change		June 29, 2024			July 1, 2023			$ Change		% Change
Net sales:
Tangible products	$	615		$	554		$	61	11.0	%	$	1,179		$	1,229		$	(50)	(4.1)	%
Services and software	205			201			4		2.0	%	424			409			15		3.7	%
Total Net sales	820			755			65		8.6	%	1,603			1,638			(35)		(2.1)	%
Gross profit	402			356			46		12.9	%	781			765			16		2.1	%
Gross margin	49.0		%	47.2		%			180 bps		48.7		%	46.7		%			200 bps
Operating expenses	279			234			45		19.2	%	538			510			28		5.5	%
Operating income	$	123		$	122		$	1	0.8	%	$	243		$	255		$	(12)	(4.7)	%

EVM Organic Net sales growth (decline):


	Three Months Ended		Six Months Ended
	June 29, 2024		June 29, 2024
EVM Reported GAAP Net sales growth (decline)	8.6	%	(2.1)	%
Adjustments:
Impact of foreign currency translations (1)	(0.4)	%	(0.4)	%

EVM Organic Net sales growth (decline) (2)	8.2	%	(2.5)	%

(2)EVM Organic Net sales growth (decline) is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of this item.

Second quarter 2024 compared to Second quarter 2023

Total Net sales for EVM increased $65 million or 8.6% compared to the prior year primarily due to higher sales of mobile computing products, partially offset by lower sales of data capture products. Excluding the impacts of foreign currency changes, EVM Organic Net sales increased by 8.2%.

Gross margin increased to 49.0% in the current year compared to 47.2% for the prior year primarily due to lower inventory-related charges, volume leverage, lower freight rates, and favorable changes in foreign currency rates.

Operating income for the current year increased by 0.8% compared to the prior year due to higher Gross profit, largely offset by higher Operating expenses.

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Year to date 2024 compared to Year to date 2023

Total Net sales for EVM decreased $35 million or 2.1% compared to the prior year primarily due to lower sales of data capture products, partially offset by higher sales of mobile computing products, and services and software. Excluding the impacts of foreign currency changes, EVM Organic Net sales decreased by 2.5%.

Gross margin increased to 48.7% in the current year compared to 46.7% for the prior year primarily due to higher service and software margins, lower freight rates, and favorable changes in foreign currency rates.

Operating income for the current year decreased by 4.7% compared to the prior year due to higher Operating expenses, partially offset by higher Gross profit.

Liquidity and Capital Resources

The primary factors that influence our liquidity include the amount and timing of cash collections from our customers, cash payments to our suppliers, capital expenditures, acquisitions, and share repurchases. Management believes that our existing capital resources, inclusive of available borrowing capacity on debt and other financing facilities and funds generated from operations, are sufficient to meet anticipated capital requirements and service our indebtedness. The following table summarizes our cash flow activities for the periods indicated (in millions):


	Six Months Ended
Cash flow provided by (used in):	June 29, 2024		July 1, 2023		$ Change
Operating activities	$	413	$	(110)	$	523
Investing activities	(25)		(35)		10
Financing activities	(115)		97		(212)
Effect of exchange rates on cash balances	—		(1)		1
Net change in cash and cash equivalents, including restricted cash	$	273	$	(49)	$	322

The change in our cash and cash equivalents balance during the six months ended June 29, 2024 compared to the prior year is primarily due to the following:

•$523 million change in operating activities primarily due to lower cash payments for inventory purchases and the reduction of overall inventory levels, lower income tax payments, higher cash receipts on interest rate swaps attributed to the termination of those agreements, as well as lower employee incentive compensation and legal settlement payments, partially offset by unfavorable timing of customer collections, including reduced accounts receivable factoring activity.

•$212 million change in financing activities primarily due to current year net debt repayments as a portion of the recently issued Senior Notes was utilized to reduce total debt, compared to net borrowings and common stock repurchases in the prior year.

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Company Debt

The following table shows the carrying value of the Company’s debt (in millions):


	June 29, 2024		December 31, 2023
Term Loan A	$	1,575	$	1,684
Senior Notes	500		—
Revolving Credit Facility	—		413
Receivables Financing Facilities	108		129

Total debt	$	2,183	$	2,226
Less: Debt issuance costs	(11)		(2)
Less: Unamortized discounts	(3)		(4)
Less: Current portion of debt	(89)		(173)
Total long-term debt	$	2,080	$	2,047

Term Loan A

Senior Notes

With the issuance of the fixed rate Senior Notes, the Company terminated its interest rate swap agreements, which were intended to result in a fixed interest rate on a portion of its variable rate debt.

Revolving Credit Facility

Receivables Financing Facility

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Borrowings under the facility bear interest at a variable rate plus an applicable margin. As of June 29, 2024, the facility had an average interest rate of 6.39%. Interest is paid monthly on these borrowings.

See Note 9, Long-Term Debt in the Notes to Consolidated Financial Statements for further details related to the Company’s debt instruments.

Receivables Factoring

As of June 29, 2024 and December 31, 2023, there were a total of $7 million and $56 million, respectively, of uncollected receivables that had been sold and removed from the Company’s Consolidated Balance Sheets.

See Note 16, Accounts Receivable Factoring in the Notes to Consolidated Financial Statements for further details.

Share Repurchases

On May 17, 2022, the Company announced that its Board of Directors authorized a share repurchase program for up to an incremental $1 billion of its outstanding shares of common stock. This authorization augments the previous $1 billion share repurchase authorization which was announced on July 30, 2019. The May 2022 share repurchase program does not have a stated expiration date. The level of the Company’s repurchases depends on a number of factors, including its financial condition, capital requirements, cash flows, results of operations, future business prospects and other factors its management may deem relevant. The timing, volume, and nature of repurchases are subject to market conditions, applicable securities laws and other factors and may be amended, suspended or discontinued at any time. Repurchases may be affected from time to time through open market purchases, including pursuant to a pre-set trading plan meeting the requirements of Rule 10b5-1(c) of the Securities Exchange Act of 1934. In the fourth quarter of 2022, the Company completed its original authorization of $1 billion in share repurchases. During the first six months of 2024, the Company did not repurchase shares of common stock. As of June 29, 2024, the Company has cumulatively repurchased 409,014 shares of common stock for approximately $107 million, resulting in a remaining amount of share repurchases authorized under the May 2022 program of $893 million.

Significant Customers

End-users of our products, solutions and services are diversified across a wide variety of industries. We have three customers, who are distributors of the Company’s products and solutions, that individually accounted for more than 10% of our Net sales for the periods presented. In the aggregate, the approximate percentage of our segment and Company total Net sales was as follows:


	Six Months Ended
	June 29, 2024						July 1, 2023
	AIT		EVM		Total		AIT		EVM		Total
Significant customers as a % of Net sales	18	%	37	%	55	%	18	%	33	%	51	%

These customers accounted for 52% of accounts receivable as of June 29, 2024. No other customer accounted for more than 10% of total Net sales during the period ended June 29, 2024.

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Safe Harbor

Forward-looking statements contained in this filing are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995 and are highly dependent upon a variety of important factors, which could cause actual results to differ materially from those expressed or implied in such forward-looking statements. When used in this document and documents referenced, the words “anticipate,” “believe,” “intend,” “estimate,” “will,” and “expect” and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements but are not the exclusive means of identifying these statements. The forward-looking statements include, but are not limited to, the Company’s financial outlook for full year of 2024. These forward-looking statements are based on current expectations, forecasts and assumptions, and are subject to the risks and uncertainties inherent in the Company’s industry, market conditions, general domestic and international economic conditions, and other factors. These factors include:

•Market acceptance of the Company’s products, services and solution offerings and competitors’ offerings and the potential effects of emerging technologies and changes in customer requirements,

•The effect of global market conditions, including the North America; EMEA; Latin America; and Asia-Pacific regions in which we do business,

•The impact of changes in foreign exchange rates, customs duties and trade policies due to the large percentage of our sales and operations being outside the U.S.,

•Our ability to control manufacturing and operating costs,

•Risks related to the manufacturing of the Company’s products and conducting business operations in non-U.S. countries, including the risk of depending on key suppliers who are also in non-U.S. countries,

•The Company’s ability to purchase sufficient materials, parts, and components, our ability to provide services, software, and products to meet customer demand, particularly in light of global economic conditions,

•The availability of credit and the volatility of capital markets, which may affect our suppliers, customers, and ourselves,

•Success of integrating acquisitions,

•Our ability to attract, retain, develop, and motivate key personnel,

•Interest rate and financial market conditions,

•Access to cash and cash equivalents held outside the U.S.,

•The effect of natural disasters, man-made disasters, public health issues (including pandemics), and cybersecurity incidents on our business,

•The impact of changes in foreign and domestic governmental policies, laws, or regulations,

•The outcome of litigation in which the Company may be involved, particularly litigation or claims related to infringement of third-party intellectual property rights, and

•The outcome of any future tax matters or tax law changes.

We encourage readers of this report to review Part II, Item 1A, “Risk Factors” in this report for further discussion of issues that could affect the Company’s future results. We undertake no obligation, other than as may be required by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances, or any other reason after the date of this report.

New Accounting Pronouncements

We do not expect any recently issued accounting pronouncements to have a material impact on our consolidated financial statements.

Non-GAAP Measures

The Company has provided reconciliations of the supplemental non-GAAP financial measures, as defined under the rules of the Securities and Exchange Commission, presented herein to the most directly comparable financial measures calculated and presented in accordance with GAAP.

These supplemental non-GAAP financial measures – Consolidated Organic Net sales decline, AIT Organic Net sales decline, and EVM Organic Net sales growth (decline) – are presented because our management evaluates our financial results both including and excluding the effects of business acquisitions and foreign currency translation, as applicable. Management believes that the supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of our business from period to period and trends in our historical operating results. These supplemental non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with the GAAP financial measures presented.

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Item 3.			Quantitative and Qualitative Disclosures About Market Risk

There were no material changes in the Company’s market risk during the quarter ended June 29, 2024. For additional information on market risk, refer to Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in the Annual Report on Form 10-K for the year ended December 31, 2023.


Item 4.			Controls and Procedures

Management’s Report on Disclosure Controls

Our management is responsible for establishing and maintaining adequate disclosure controls as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management assessed the effectiveness of our disclosure controls as of June 29, 2024. Based on this assessment and those criteria, our management believes that, as of June 29, 2024, our disclosure controls were effective.

Changes in Internal Control over Financial Reporting

During the quarter ended June 29, 2024, there have been no changes in our internal controls that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on the Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within Zebra have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

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PART II - OTHER INFORMATION


Item 1.			Legal Proceedings

See Note 11, Accrued Liabilities, Commitments and Contingencies in the Notes to Consolidated Financial Statements included in this report.

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Item 1A.			Risk Factors

In addition to the other information included in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2023, and the factors identified under “Safe Harbor” in Part I, Item 2 of this Quarterly Report on Form 10-Q, which could materially affect our business, financial condition, cash flows, or results of operations. The risks described in the Annual Report are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently considers immaterial also may materially adversely affect its business, financial condition, and/or operating results. There have been no material changes to the risk factors included in our Annual Report for the year ended December 31, 2023, other than as described below.

Our indebtedness could adversely affect our business. Our indebtedness could have important consequences, including the following:

• We may experience difficulty in satisfying our obligations with respect to our existing indebtedness or future indebtedness;

• Our ability to obtain additional financing for working capital, capital expenditures, acquisitions, or general corporate purposes may be impaired;

• We may be unable to create liens on certain assets to secure debt;

• Our subsidiary guarantors may not have sufficient assets or cash flow to allow them to guarantee new debt and existing debt;

• We may be at a competitive disadvantage with reduced flexibility in planning for, or responding to, changing conditions in the industry, including increased competition; and

• We may be more vulnerable to economic downturns and adverse developments in the business.

Any or all of the above events or factors could have an adverse effect on our results of operations and financial condition. The risks that we face based on our outstanding indebtedness may intensify if we incur additional indebtedness or financing obligations in the future.

We expect to fund our expenses and to pay the principal and interest on our indebtedness from cash flow from operations. Our ability to meet our expenses and to pay principal and interest on our indebtedness when due depends on our future performance and ability to collect cash from our customers, which will be affected by financial, business, economic, and other factors. We will not be able to control many of these factors, such as economic conditions in the markets where we operate and pressure from competitors.

If our business does not generate sufficient cash flows from operations or if future borrowings are not available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs, we may need to refinance all or a portion of our indebtedness on or before the maturity thereof, sell assets, reduce or delay capital investments, or seek to raise additional capital, any of which could have a material adverse effect on our operations. In addition, we may not be able to effect any of these actions, if necessary, on commercially reasonable terms or at all. Our ability to restructure or refinance our indebtedness will depend on the condition of the capital and debt markets and our financial condition at such time. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict business operations. The terms of anticipated or future debt instruments may limit or prevent us from taking any of these actions.

If there were an event of default under any of the agreements relating to our outstanding indebtedness, the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable immediately. We cannot assure you that our assets or cash flow would be sufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon an event of default. Further, if we are unable to repay, refinance or restructure our indebtedness under our secured debt, the holders of such debt could proceed against the collateral securing that indebtedness. In addition, any event of default or declaration of acceleration under one debt instrument could also result in an event of default under one or more of our other debt instruments. As a result, any default by us on our indebtedness could have a material adverse effect on our business and could impact our ability to satisfy the obligations in respect of our indebtedness. In addition, an event of default would likely result in a reduction of our credit rating, which could harm our ability to access additional capital on commercially reasonable terms or at all.

If we experience a significant disruption in our IT systems, our business, reputation, and operating results could be adversely affected. Our business processes depend on our IT systems, and the IT systems and processes of third parties to provide solutions and services, maintain financial records, retain sensitive data such as intellectual property, proprietary business information, and data related to customers, suppliers, and business partners, process orders, manage inventory, process shipments to customers and operate other critical functions. Disruptions to our IT systems from system failures, shutdowns, implementation of new operational systems or software or upgrades to existing systems and software, and other events, including disruptions at our cloud computing, server, systems, and other third party IT service providers, could interfere with our operations, interrupt order processing and shipments, damage customer and business partner relationships, and negatively impact our reputation. Any such event could have a material adverse effect on our business, reputation, operating results and financial condition, and no assurance can be given that our efforts to reduce the risk of such events will be successful.

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Defects or errors in the Company’s software products, or third party software included in or upon which our products, solutions and services rely, could harm our reputation, result in significant cost to us, and impair our ability to market such products. Our software, third party software included on our products, solutions or services, or servers and infrastructure may contain undetected errors, defects, or bugs. Although we have not suffered significant harm from any errors, defects, or bugs, we may discover significant errors, defects, or bugs in the future that we may not be able to correct or correct in a timely manner. Any future errors, defects, or bugs found in such software, solutions, services or infrastructure may result in delays in, or loss of market acceptance of, our products, solutions or services; inability to deliver our products, solutions or services; diversion of resources; injury to reputation; increased service and warranty expenses; and payment of damages; which could have a material adverse effect on our financial results.

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Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth information with respect to repurchases of the Company’s common stock for the three months ended June 29, 2024:


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) (1)
March 31, 2024 - April 27, 2024	—	$	—	—	$	893
April 28, 2024 - May 25, 2024	—	—		—	893
May 26, 2024 - June 29, 2024	—	—		—	893
Total	—	$	—	—	$	893

(1)On May 17, 2022, the Company announced that its Board of Directors authorized a share repurchase program for up to $1 billion of its outstanding shares of common stock. This authorization augments the previous $1 billion share repurchase authorization which was announced on July 30, 2019. Repurchases may be affected from time to time through open market purchases, including pursuant to a pre-set trading plan meeting the requirements of Rule 10b5-1(c) of the Securities Exchange Act of 1934. In the fourth quarter of 2022, the Company completed its original authorization of $1 billion in share repurchases. As of June 29, 2024, the Company has cumulatively repurchased 409,014 shares of common stock for approximately $107 million, resulting in a remaining amount of share repurchases authorized under the May 2022 program of $893 million.


Item 5.			Other Information

None of our directors or executive officers had in effect, adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the second quarter of 2024.

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Item 6.			Exhibits


10.1			Form of 2024 performance-vested restricted stock unit agreement for all employees (including the CEO)

10.2			Form of 2024 time-vested restricted stock unit agreement for all employees (including the CEO)

10.3			Form of 2024 stock-settled stock appreciation rights agreement for all employees (including the CEO)

31.1			Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer

31.2			Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer

32.1			Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2			Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101			The following financial information from Zebra Technologies Corporation Quarterly Report on Form 10-Q, for the quarter ended June 29, 2024, formatted in Inline XBRL: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Stockholders’ Equity; (v) the Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements. The instance document does not appear in the interactive data file because Inline XBRL tags are embedded in the iXBRL document.

104			The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 29, 2024 formatted in Inline XBRL (included in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	ZEBRA TECHNOLOGIES CORPORATION

Date: July 30, 2024	By:	/s/ William J. Burns
		William J. Burns
		Chief Executive Officer



Date: July 30, 2024	By:	/s/ Nathan Winters
		Nathan Winters
		Chief Financial Officer

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Date	Price Target	Rating	Analyst
7/23/2024	$375.00	Buy	Vertical Research
6/13/2024	$305.00	Underperform → Neutral	Exane BNP Paribas
4/8/2024	$337.00	Peer Perform → Outperform	Wolfe Research
4/2/2024	$292.00	Equal Weight	Barclays
3/14/2024	$300.00	Hold	Truist
10/5/2023	$183.00	Underperform	Exane BNP Paribas
10/3/2023		Sector Weight	KeyBanc Capital Markets
9/20/2023	$260.00 → $220.00	Equal-Weight → Underweight	Morgan Stanley

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