So the answer to my question is probably yes - higher taxes and interest on payments will likely be the new normal for Zebra.Īs per the company's CEO Bill Burns, Zebra is focused on driving profitable growth, increasing market share, and improving free cash flow through customer collaboration. statutory tax rate offset by changes in the global earnings distribution. The effective tax rate for the respective period was 18.9%, with the increase attributed to a higher U.K. The total interest expense was primarily due to a $7 million loss on interest rate swaps and higher interest expense resulting from increased debt levels and interest rates, according to 10-Q. The main question I had for Q1 EPS was whether increased taxes and interest are the new norms. Non-GAAP diluted earnings per share decreased by 1.7% year-over-year, primarily due to increased interest expense and higher tax rates. Adjusted EBITDA margin increased by 150 basis points to 21.4%, supported by gross margin expansion. Adjusted OPEX increased by 130 basis points as a percentage of sales, driven by normalized sales and marketing activity and strategic investments. But ZBRA's adjusted gross margin improved by 290 basis points to 47.5%, primarily due to lower premium supply chain costs, partially offset by foreign exchange impacts and lower service margins. In the first quarter, Zebra Technologies experienced a 1.9% decrease in net sales, including currency impacts, with a 0.3% decline on an organic basis. By "energy", I primarily mean margin and profitability. This made ZBRA possible to switch from aggressively expanding the business to "energy saving mode" on time. Management's awareness of the issues created by the supply chain strengthening is a key factor, in my opinion.
The good thing about Zebra Technologies is that the company is aware of all the challenges and doesn't bury its head in the sand, but speaks out about them openly : I've provided further details on the demand situation in my recent macro article. This has led to lower demand for various goods and services, as prices are rising faster compared to wage growth. Global inflation is coming down, but it is accompanied by a slowdown or decline in wages for certain population groups. For Zebra's clients, the primary concern is to retain its own customers, who are likely to face the impact of high prices. Consequently, the focus on process automation and optimization has taken a backseat. In the meantime, however, the logistics situation has relatively stabilized in most enterprises. In 2022, the logistics industry experienced significant changes, especially in terms of peak lead times in the supply chain. The decline in that segment is primarily due to reduced demand caused by fewer large order deployments in the EVM segment. As far as I can see, the data doesn't favor ZBRA - the company is losing in a more attractive market in terms of business expansion.īut upon further analysis, I discovered that the management's objective does not involve reducing operations in their largest segment. The second market - the one where Zebra is declining - is expected to reach $36.5 billion by 2027, growing at a CAGR of 11- 14 %. The first market - the one where Zebra is seeing growth - is expected to reach $11.06 billion by 2032, growing at a CAGR of 7 - 9 %, according to various public sources. At this stage, it became interesting for me to look at the growth prospects of two addressable markets - the barcode printer market and the automatic data capture market.
The multi-directional dynamics of the financial indicators suggest either attempts to reorient the business from one niche to another, or competitive weakness in the largest segment against the backdrop of strength in the smaller one. EVM segment : automatic data capture solutions, offering mobile computing, data capture, RFID, scanning, machine vision, and workflow optimization solutions, along with services.Īs we can see from the latest financial data, ZBRA is gaining momentum in barcode printing and asset tracking technologies and losing revenue in what remains its most important segment - automated data capture solutions.AIT segment : barcode printing and asset tracking technologies, including printers, supplies, and services.Zebra reports under 2 operating segments, based on served market areas: The company has 2 product categories: Tangible Products and Services and Software. The company collaborates closely with customers and partners to optimize end-to-end workflows and solve complex business challenges. Zebra's solutions span across various industries, including retail, e-commerce, transportation logistics, manufacturing, and healthcare. According to the latest 10-Q filing, Zebra Technologies Corporation ( NASDAQ: ZBRA) is a global leader in providing innovative solutions for the Automatic Identification and Data Capture industry.
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