Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Zebra Technologies Corp (ZBRA, Financial) reported a 31% year-over-year increase in sales, reaching nearly $1.3 billion for the third quarter.
- The company achieved an adjusted EBITDA margin of 21.4%, marking a 980-basis-point improvement from the previous year.
- Non-GAAP diluted earnings per share increased fourfold to $3.49 compared to the prior year.
- Zebra Technologies Corp (ZBRA) successfully completed restructuring actions, resulting in $120 million of net annualized operating savings.
- The company raised its full-year outlook for sales, profitability, and free cash flow, expecting at least $850 million in free cash flow for the year.
Negative Points
- The manufacturing sector continues to lag behind other sectors as the goods economy recovers.
- Visibility remains limited regarding the timing of large deployments in 2025, creating uncertainty in future projections.
- Despite improvements, the machine vision business experienced a decline due to weakness in the manufacturing sector.
- The company faces challenges with the potential impact of tariffs and geopolitical uncertainties on its supply chain.
- Zebra Technologies Corp (ZBRA) noted that while there is a recovery in demand, it is uneven across different end markets.
Q & A Highlights
Q: What are you seeing in the North America retail market, and how do you see it playing out into next year?
A: William Burns, CEO, noted that the quarter ended positively with a broadening recovery across all vertical markets, including retail. Retail and e-commerce outperformed across all product categories in Q3, and this trend is expected to continue into Q4. The company is seeing year-end spending and normalized seasonality, particularly in North America and EMEA, with larger orders from retail and logistics sectors.
Q: Can you comment on what you're seeing with distributors and their restocking trends?
A: William Burns, CEO, mentioned that distributors are experiencing an uptick in business, and Zebra is working closely with them to ensure they have the right inventory levels to meet increased demand. Nathan Winters, CFO, added that distributors are at a good level of days on hand as they enter Q4, aligning with expectations for year-end spending.
Q: How did large orders impact Q3, and what is expected for Q4 and into 2025?
A: William Burns, CEO, explained that large orders were below historic levels in the first half of 2024 but have returned in the second half, particularly in retail and logistics. This has allowed Zebra to raise its guidance. While not providing specific guidance for 2025, Burns expressed optimism for continued recovery, though visibility into large projects remains limited.
Q: What is the outlook for machine vision, and is it still a drag on financials?
A: William Burns, CEO, acknowledged that machine vision declined due to weakness in manufacturing, particularly in sectors like electric vehicles and semiconductors. However, there is stabilization in semiconductors, and software growth in machine vision is promising. Zebra is diversifying beyond semiconductors into broader manufacturing and logistics, which should benefit as markets recover.
Q: How is Zebra preparing for potential tariff changes post-election?
A: Nathan Winters, CFO, stated that Zebra is focused on building alternatives to respond to new tariffs planned for 2026 and is actively working on mitigation plans. The company has been diversifying its supply chain since 2019 to improve resiliency and is prepared to pivot based on future tariff changes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
