Q2 2024 Zebra Technologies Corp Earnings Call

Good day and welcome to the second quarter 2024 Zebra Technologies earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Operator: Earnings Conference Call. All participants will be in listen-only mode.

Operator: Technologies earnings conference call. All participants will be in a listen-only mode.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mike Steele, Vice President, Investor Relations. Please do so.

Operator: Should you need assistance? Please signal conference specialist by pressing the star key followed by zero.

Operator: After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.

After today's presentation, there will be an opportunity to ask questions.

Michael Steele: I would now like to turn the conference over to Mike Steele, Vice President, Investor Relations. Please go ahead.

Please note this event is being recorded. I would now like to turn the conference over to Mike Steele, Vice President, Investor Relations. Please go ahead.

William Burns: Good morning and welcome to Zebra's second quarter earnings conference call. This presentation is being simulcast on our website and investors.zebra.com and will be archived there for at least one year. Our forward-looking statements are based on current expectations and assumptions, and are subject to risks and uncertainties. Actually, results could differ materially, and we refer you to the factors discussed in our SEC filing. During this call, we will reference non-GAAP financial measures as we describe our business performance. You can find recommendations at the end of this slide. You can find recommendations at the end of this slide presentation and in today's earnings press release.

Michael A. Steele: Good morning, and welcome to Zebra's second quarter earnings conference call. This presentation is being simulcast on our website at investors.zebra.com and will be archived there for at least one year. Our forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties. The actual results could differ materially, and we refer you to the factors discussed in our SEC filing. During this call, we will reference non-GAAP financial measures as we describe our business performance.

Speaker Change: Good morning and welcome to Zebra's second quarter earnings conference call. This presentation is being simulcast on our website at investors.zebra.com and will be archived there for at least one year.

Speaker Change: Our forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially, and we refer you to the factors discussed in our SEC filing.

Speaker Change: During this call, we will reference non-GAAP financial measures as we describe our business performance. You can find reconciliations at the end of this slide presentation and in today's earnings press release.

Michael A. Steele: You can find reconciliations at the end of this slide presentation and in today's earnings press release. Throughout this presentation, unless otherwise indicated, our references to sales performance are year-on-year and on a constant currency basis. This presentation will include prepared remarks from Bill Burns, our Chief Executive Officer, and Nathan Winters, our Chief Financial Officer. Bill will begin with a discussion of our second quarter results. Nathan will then provide additional detail on the financials and discuss our third quarter and revised full year outlook.

William Burns: Throughout this presentation, unless otherwise indicated, our references to sales performance are year-on-year and on a constant currency basis.

Speaker Change: Throughout this presentation, unless otherwise indicated, our references to sales performance are year-on-year and on a constant currency basis.

Michael Steele: This presentation will include prepared remarks from Bill Burns, our Chief Executive Officer, and Nathan Winters, our Chief Financial Officer. It will begin with the discussion of our second quarter results. Nathan will then provide additional detail on the financials and discuss our third quarter and revise full year outlook. Bill will conclude with progress on advancing our strategic priorities. Following the prepared remarks, Bill and Nathan will take your questions. Now let's turn to slide four as I handed over to Bill.

Speaker Change: This presentation will include prepared remarks from Bill Burns, our Chief Executive Officer, and Nathan Winters, our Chief Financial Officer.

Speaker Change: Bill will begin with the discussion of our second quarter results. Nathan will then provide additional detail on the financials and discuss our third quarter and revised full year outlook.

Speaker Change: Bill will conclude with progress on advancing our strategic priorities.

Speaker Change: Following the prepared remarks, Bill and Nathan will take your questions.

William Burns: Thank you, Mike.

Michael A. Steele: Bill will conclude with progress on advancing our strategic priorities. Following the prepared remarks, Bill and Nathan will take your questions. Now, let's turn to slide four as I hand it over to Bill. Thank you, Mike. Good morning, and thank you for joining us.

Speaker Change: Now let's turn to slide four as I hand it over to Bill.

William Burns: Good morning, and thank you for joining us. Our teams executed well in the second quarter, delivering sales and earnings results above the high end of our outlook. For the quarter, we realized sales of $1.2 billion, approximately flat to a prior year, and adjusted even a margin of 20.5%, a 70 basis point decrease, and non-GAAP solid earnings per share at $3.18, at 3% decrease from the prior year. As we discussed in our last earnings call, during the first quarter, we began to see modest recovery in retail and e-commerce. In the second quarter, we saw signs of momentum across other end markets, including healthcare, where we realized double-digit growth.

William J. Burns: Our team executed well in the second quarter, delivering sales and earnings results above the high end of our output. For the quarter, we realized sales of $1.2 billion, approximately flat to the prior year, and adjusted even a margin of 20.5%, a 70 basis point decrease, and non-GAP diluted earnings per share at $3.18, a 3% decrease from the prior year. As we discussed in our last earnings call, during the first quarter, we began to see a modest recovery in retail and e-commerce.

William J. Burns: Thank you, Mike. Good morning and thank you for joining us.

William J. Burns: Our team has executed well in the second quarter, delivering sales and earnings results above the high end of our outcome.

William J. Burns: For the quarter, we realized sales of $1.2 billion, approximately flat to the prior year, and adjusted even a margin of 20.5%, a 70 basis point decrease.

William J. Burns: and non-GAP diluted earnings per share at $3.18, a 3% decrease from the prior year.

William J. Burns: As we discussed in our last earnings call, during the first quarter, we began to see modest recovery in retail and e-commerce.

William J. Burns: In the second quarter, we saw signs of momentum across other end markets, including health care, where we realized double-digit growth. Mobile computing returned to growth across each of our vertical end markets, led by healthcare and retail. The growth in mobile computing was offset by declines across our other major product categories, where year-on-year comparisons are more challenging, and we were in earlier stages of recovery. Services and Software saw modest growth in the quarter.

William J. Burns: In the second quarter, we saw signs of momentum across other end markets, including healthcare, where we realized double-digit growth.

William Burns: Mobile computing returned to growth across each of our vertical end markets, led by healthcare and reaching. The growth in mobile computing was offset by declines across our other major product categories, where year and year comparisons are more challenging, and we were in earlier stages of recovery. Services and software saw modest growth in the quarter. While we are encouraged by early momentum and demand, we continue to see cautious spending behavior from our customers on large deployments, which have not yet returned to historical levels. Another highlight was our sequential improvement and profitability due to improved growth margin and the benefits of our restructuring actions.

William J. Burns: Mobile computing returned to growth across each of our vertical end markets, led by healthcare and retail.

William J. Burns: The growth in mobile computing was offset by declines across our other major product categories, where year-on-year comparisons are more challenging, and we were in earlier stages of recovery.

William J. Burns: Services and Software saw modest growth in the quarter.

William J. Burns: While we are encouraged by early momentum and demand, we continue to see cautious spending behavior from our customers on large deployments, which have not yet returned to historical levels. Another highlight was our sequential improvement in profitability due to improved gross margin and the benefits of a restructuring act. Our plan to deliver $120 million of net annualized operating savings is on track and substantially complete.

William J. Burns: While we are encouraged by early momentum and demand, we continue to see cautious spending behavior from our customers on large deployments, which have not yet returned to historical levels.

William J. Burns: Another highlight was our sequential improvement in profitability due to improved gross margin and the benefits of restructuring actions.

William Burns: Our plan to deliver $120 million in bet annualized operating savings is on track and substantially complete.

William J. Burns: Our plan to deliver $120 million of net annualized operating savings is on track and substantially complete.

William Burns: Given our second quarter performance, progress and our cost action, and early signs of momentum and demand, we are raising our full-year outlook for sales and profitability.

William J. Burns: Given our second-quarter performance, progress in our cost action, and early signs of momentum and demand, we are raising our full-year outlook for sales and profitability. I will now turn the call over to Nathan to review our 2-2 financial results and discuss our revised 2024 outlook. Thank you, Bill.

William J. Burns: Given our second quarter performance, progress on our cost action, and early signs of momentum and demand, we are raising our full year outlook for sales and profitability.

Nathan Winters: I will now turn it all over to Nathan to review our Q2 financial results and discuss our revised 2024 outlook. Thank you, Bill. Let's start with the PNL on slide six. In Q2, total company sales were approximately flat, reflecting early signs of momentum and demand beyond retail and e-commerce. Our asset intelligence and tracking segment declined 14.4 percent, primarily driven by printing an RFID on challenging prior year comparisons. Enterprise visibility and mobility segment sales increased 8.2 percent, with double digit growth and mobile computing partially offset by a decline in data capture solutions. We saw modest growth in services and software.

William J. Burns: I will now turn the call over to Nathan to review our Q2 financial results and discuss our revised 2024 outlook.

Nathan Andrew Winters: Let's start with the P&L on slide six. In Q2, total company sales were approximately flat, reflecting early signs of momentum and demand beyond retail and e-commerce. Our asset intelligence and tracking segment declined 14.4%, primarily driven by printing and RFID on challenging prior year comparisons.

Nathan Andrew Winters: Thank you, Bill. Let's start with the P&L on slide 6.

Nathan Andrew Winters: In Q2, total company sales were approximately flat, reflecting early signs of momentum and demand beyond retail and e-commerce.

Nathan Andrew Winters: Our asset intelligence and tracking segment declined 14.4%, primarily driven by printing and RFID on challenging prior year comparisons.

Nathan Andrew Winters: Enterprise Visibility and Mobility Segment Sales increased 8.2% with double-digit growth in mobile computing, partially offset by a decline in data capture solutions. We saw modest growth in services and software. Performance was mixed across our region; in North America, sales decreased 7% with fewer large orders in retail and transportation and logistics, partially offset by strong growth in health. In EMEA, sales increased 10%, driven by mobile computing. In Asia-Pacific, sales declined 3%, with continued weakness in China and challenging comparisons in Australia and Japan, partially offset by growth in Southeast Asia, which failed to increase 7% in Latin America, led by Brazil.

Nathan Andrew Winters: Enterprise Visibility and Mobility Segment Sales increased 8.2%, with double-digit growth in mobile computing partially offset by a decline in data capture solutions.

Nathan Winters: Performance was mixed across our regions. In North America, sales decreased 7 percent with fewer large orders and retail and transportation and logistics. Partially offset by strong growth and health care. In Amia, sales increased 10 percent driven by mobile computing. In Asia Pacific, sales declined 3 percent, with continued weakness in China and challenging compares in Australia and Japan, partially offset by growth in Southeast Asia. And sales increased 7 percent in Latin America, led by Brazil. From a sequential perspective, total Q2 sales were slightly higher than Q1, with growth in nearly all product categories as we realized modest improvement in demand throughout the quarter and manufacturing, health care, and transportation and logistics.

Nathan Andrew Winters: We sell modest growth in services and software.

Nathan Andrew Winters: Performance was mixed across our regions. In North America, sales decreased 7% with fewer large orders in retail and transportation and logistics.

Nathan Andrew Winters: Partially offset by strong growth in health care.

Nathan Andrew Winters: In EMEA, sales increased 10% driven by mobile computing.

Nathan Andrew Winters: In Asia-Pacific, sales declined 3%, with continued weakness in China and challenging compares in Australia and Japan, partially offset by growth in Southeast Asia.

Nathan Andrew Winters: Sales increased 7% in Latin America, led by Brazil.

Nathan Andrew Winters: From a sequential perspective, total Q2 sales were slightly higher than Q1, with growth in nearly all product categories, as we realized modest improvement in demand throughout the quarter in manufacturing, healthcare, and transportation logistics. Adjusted gross margin increased 60 basis points to 48.6% as we benefited from cyclical premium supply chain costs in the prior year in a favorable effect. Adjusted Operating Expenses as a Percent of Sales increased 110 basis points.

Nathan Andrew Winters: From a sequential perspective, total Q2 sales were slightly higher than Q1, with growth in nearly all product categories as we realized modest improvement in demand throughout the quarter in manufacturing, healthcare, and transportation and logistics.

Nathan Winters: Adjustee gross margin increased 60 basis points to 48.6 percent as we benefited from cycling, bringing supply chain costs in the prior year in favorable effects. Adjusted operating expenses as a percent of sales increased 110 basis points. This was driven by normalized incentive compensation expense. Partially offset by approximately $25 million of incremental net savings from our restructuring actions. This resulted in second quarter adjusted EBITDA margin of 20.5 percent. A 70 basis point decrease versus the prior year and a 60 basis points sequential improvement from Q1. Nine gap deluded earnings per share was $3.18, a 3.3 percent year-over-year decrease.

Nathan Andrew Winters: Adjusted gross margin increased 60 basis points to 48.6% as we benefited from cycling premium supply chain costs in the prior year in favorable effects.

Nathan Andrew Winters: Adjusted operating expenses as a percent of sales increased 110 basis points.

Nathan Andrew Winters: This was driven by normalized incentive compensation expense, partially offset by approximately $25 million of incremental net savings from our Restructuring Act. This resulted in a second quarter adjusted EBITDA margin of 20.5%, a 70 basis point decrease versus the prior year and a 60 basis point sequential improvement from Q1. Non-Gas Diluted Earnings Per Share was $3.18, a 3.3% year-over-year decrease.

Nathan Andrew Winters: This was driven by normalized incentive compensation expense, partially offset by approximately $25 million of incremental net savings from our restructuring actions.

Nathan Andrew Winters: This resulted in second quarter adjusted EBITDA margin of 20.5%.

Nathan Andrew Winters: A 70 basis point decrease versus the prior year, and a 60 basis point sequential improvement from Q1.

Nathan Andrew Winters: non-GAAP diluted earns per share was $3.18, a 3.3% year-over-year decrease.

Nathan Winters: Turning out to the balance sheet and cash flow on slide 7. In the first half of 2024, we generated $389 million for free cash flow as we drove improvements in working capital. We ended the quarter at a 2.4 times net debt to adjusted EBITDA leverage ratio, which is within our target range. And we had approximately $1.5 billion of capacity on a revolving credit facility as a quarter end. We diversified our capital structure during the second quarter by issuing $500 million of senior, unsecured notes while retiring your receivable financing facility that matured in May. We also terminated our remaining interest rate swap agreements for $77 million of cash proceeds.

Nathan Andrew Winters: Turning now to the balance sheet and cash flow on slide seven, in the first half of 2024, we generated $389 million in free cash flow as we drove improvements in working capital. We ended the quarter at a 2.4 times net debt to adjusted EBITDA leverage ratio, which is within our target range, and we had approximately $1.5 billion of capacity on a revolving credit facility as of quarter end. We diversified our capital structure during the second quarter by issuing $500 million of senior unsecured notes, while retiring a receivable financing facility that matured in May. We also terminated our remaining interest rate swap agreements for $77 million in cash.

Speaker Change: Turning now to the balance sheet and cash flow on slide 7.

Speaker Change: In the first half of 2024, we generated $389 million of free cash flow as we drove improvements in working capital.

Speaker Change: We ended the quarter at a 2.4 times net debt to adjusted EBITDA leverage ratio, which is within our target range. And we had approximately $1.5 billion of capacity on our evolving credit facility as of quarter end.

Speaker Change: We diversified our capital structure during the second quarter by issuing $500 million of senior unsecured notes while retiring a receivable financing facility that matured in May.

Speaker Change: We also terminated our remaining interest rate swap agreements for $77 million of cash proceeds.

Nathan Winters: We have been prioritizing debt paydown, and now have increased flexibility given our lower debt balance and improved cash flow.

Nathan Andrew Winters: We've been prioritizing debt paydown and now have increased flexibility given our lower debt balance and improved cash flow. Let's now turn to our outside. For Q3, we expect sales growth between 25% and 28% compared to the prior year. This outlook assumes continued stability of demand trends across our major product categories, with broad-based growth as we cycle easier comparisons across the business, including significant destocking activity by our distributors during the second half of last year.

Speaker Change: We have been prioritizing debt pay-down and now have increased flexibility given our lower debt balance and improved cash flow.

Nathan Winters: Let's now turn to our out.

Nathan Winters: For Q3, we expect sales growth between 25 and 28 percent compared to the prior year. This outlook assumes continued stability of demand trends across our major product categories, with broad base growth as we cycle easier compares across the business, including significant destocking activity by our distributors during the second half of last year. We enter the third quarter with the solid backlog of pipeline of opportunities.

Speaker Change: Let's now turn to our route.

Speaker Change: For Q3, we expect sales growth between 25% and 28% compared to the prior year.

Speaker Change: This outlook assumes continued stability of demand trends across our major product categories.

Speaker Change: with broad-based growth as we cycle easier compares across the business.

Speaker Change: Including significant destocking activity by our distributors during the second half of last year.

Nathan Andrew Winters: We entered the third quarter with a solid backlog of pipeline of opportunity. That said, we are not anticipating an increase in large order activity, considering the conversion rates on our pipeline remain lower than historical levels, as customers continue to be cautious in what remains an uncertain environment. We would like to see additional momentum in large orders before factoring in a stronger recovery. Q3 Adjusted EBITDA Margin is now expected to be between 20% and 21%, driven by expense leveraging from higher sales volume with benefits from restructuring actions partially offset by normalized incentive compensation expenses. Non-GAAP diluted earnings per share are expected to be in the range of $3 to $3.30.

Speaker Change: We entered the third quarter with a solid backlog of pipeline of opportunities.

Nathan Winters: That said, we are not anticipating an increase in large order activity, considering the conversion rates on our pipeline remain lower than historical levels as customers continue to be cautious in what remains an uncertain environment. We would like to see additional momentum in large orders before factoring in a stronger recovery. Q3 adjusted EBITDA margin is now expected to be between 20 and 21 percent, driven by expense leveraging from higher sales volume, with benefits from restructuring actions partially offset by normalized incentive compensation expense. Non-GAAP diluted earnings per share are expected to be in the range of $3 to $3.30.

Speaker Change: That said, we are not anticipating an increase in large order activity, considering the conversion rates on our pipeline remain lower than historical levels.

Speaker Change: as customers continue to be cautious in what remains an uncertain environment.

Speaker Change: We would like to see additional momentum in large orders before factoring in a stronger recovery.

Speaker Change: Q3 Adjusted EBITDA Margin is now expected to be between 20 and 21%, driven by expense leveraging from higher sales volume with benefits from restructuring actions, partially offset by normalized incentive compensation expense.

Speaker Change: non-GAAP diluted earnings per share are expected to be in the range of $3 to $3.30.

Nathan Winters: We have raised our guides for the full year, reflecting our second quarter performance and early signs of momentum and demand. We now expect sales growth between 4 and 7 percent for the year, and adjusted EBITDA margin to be in the range of 20 to 21 percent. Non-GAAP diluted earnings per share are now expected to be in the range of $12.30 to $12.90. Precaselo for the year is now expected to be at least $700 million. We have been making progress right sizing inventory in our balance sheet in improving cash conversion. Please reference additional modeling assumptions shown on slide 8.

Nathan Andrew Winters: We have raised our guidance for the full year, reflecting our second quarter performance and early signs of momentum and demand. We now expect sales growth between 4% and 7% for the year, and adjusted EBITDA margin to be in the range of 20 to 21 percent. Non-GAAP diluted earnings per share are now expected to be in the range of $12.30 to $12.90.

Speaker Change: We have raised our guides for the full year, reflecting our second quarter performance and early signs of momentum and demand.

Speaker Change: We now expect sales growth between 4% and 7% for the year and adjusted EBITDA margin to be in the range of 20% to 21%.

Speaker Change: non-GAAP diluted earnings per share are now expected to be in the range of $12.30 to $12.90.

William J. Burns: Free cash flow for the year is now expected to be at least $700 million. We have been making progress right-sizing inventory on our balance sheet and improving cash conversion. Please refer to the additional modeling assumptions shown on slide 8. With that, I will turn the call back to Bill. Thank you, Nathan.

Speaker Change: Free cash flow for the year is now expected to be at least $700 million.

Speaker Change: We have been making progress rightsizing inventory in our balance sheet and improving cash conversion.

Speaker Change: Please reference additional modeling assumptions shown on slide 8.

William Burns: With that, I will turn the call back to Bill. Thank you, Nathan. Zebra is well positioned to benefit from secular trends that support our long-term growth. These include labor and resource constraints, track and trace mandates, increased consumer expectations, and the need for real-time supply chain visibility. We help our customers digitize their environments and automate their workflows through our comprehensive portfolio of innovative solutions, including purpose-built hardware, software, and services. We empower frontline workers to execute tasks more effectively by navigating constant change in real-time to advance capabilities including automation for descriptive analytics, machine learning, and artificial intelligence.

William J. Burns: Zebra is well positioned to benefit from secular trends that support our long-term growth. These include labor and resource constraints, track and trace mandates, increased consumer expectations, and the need for real-time supply chain visibility. We help our customers digitize their environments and automate their workflows through our comprehensive portfolio of innovative solutions, including purpose-built hardware, software, and services. We empower frontline workers to execute tasks more effectively by navigating constant change in real time to advance capabilities, including automation, prescriptive analytics, machine learning, and artificial intelligence.

Speaker Change: With that, I will turn the call back to Bill.

William J. Burns: Thank you, Nathan. Zebra is well-positioned to benefit from secular trends that support our long-term growth.

William J. Burns: These include labor and resource constraints, track and trace mandates, increased consumer expectations, and the need for real-time supply chain visibility.

William J. Burns: We help our customers digitize their environments and automate their workflows through our comprehensive portfolio of innovative solutions, including purpose-built hardware, software, and services.

William J. Burns: We empower frontline workers to execute tasks more effectively by navigating constant change in real time to advance capabilities including automation, prescriptive analytics, machine learning, and artificial intelligence.

William Burns: At our Innovation Day of end-and-may, we demonstrate how we transform workflows across the supply chain to drive positive outcomes for enterprises across our end market. Our products and solutions are mission-critical to enable visibility that consumers and enterprises now expect throughout the entire supply chain. On slide 11, you will see Zebra solutions can touch a product 30 times from its origination to the point of last mile delivery. Let's briefly walk through the journey with a few high-level regimes. In manufacturing, our machine vision solutions provide quality inspection and track and trace visibility throughout the process. In a warehouse, our wearable mobile computers, autonomous mobile robots, and comprehensive RFID portfolio transform receiving, clicking, and ship.

William J. Burns: At our Innovation Day event in May, we demonstrated how we transform workflows across the supply chain to drive positive outcomes for enterprises across our end market. Our products and solutions are mission critical to enable the visibility that consumers and enterprises now expect throughout the entire supply chain. On slide 11, you will see Zebra Solutions can touch a product 30 times from its origination to the point of last mile delivery. Let's briefly walk through the journey with a few high-level examples. In manufacturing, our machine vision solutions provide quality inspection and track and trace visibility throughout the process.

William J. Burns: At our Innovation Day event in May, we demonstrated how we transform workloads across the supply chain to drive positive outcomes for enterprises across our end market.

William J. Burns: Our products and solutions are mission critical to enable visibility that consumers and enterprises now expect throughout the entire supply chain.

William J. Burns: On slide 11, you will see Zebra Solutions can touch a product 30 times from its origination to the point of last mile delivery.

William J. Burns: Let's briefly walk through the journey with a few high-level examples.

William J. Burns: In manufacturing, our machine vision solutions provide quality inspection and track and trace visibility throughout the process.

William J. Burns: In a warehouse, our wearable mobile computers, autonomous mobile robots, and comprehensive RFID portfolio transform receiving, picking, and shipping. As a product arrives at a store, associates are equipped with Zebra's software running on our mobile computers to assist customers, stock inventory, and fulfill online orders. And when an item is delivered to your home, you receive a notification and a picture from Zebra's handheld device, verifying on-time, quality delivery, as you'll see on slide 12.

William J. Burns: In a warehouse, our wearable mobile computers, autonomous mobile robots, and comprehensive RFID portfolio transform receiving, picking, and shipping.

William Burns: As a product arrived at its door, the associates are equipped with Zebra's software running on our mobile computers to assist customers, stock inventory, and fulfill online rules. And when an item is delivered to your home, you receive a notification and picture from Zebra's handheld device, verifying on-time quality delivery. As you'll see on slide 12, our customers leverage our solutions to optimize workflows across a broad range of Morkes. We empower enterprises to drive productivity and better serve their customers, shoppers, and patients. We are seeing Zebra's competitive differentiation in mobile computing solutions drive wins across our vertical end markets.

William J. Burns: As a product arrives at a store, associates are equipped with Zebra's software running on our mobile computers to assist customers, stock inventory, and fulfill online orders.

William J. Burns: And when an item is delivered to your home, you receive a notification and picture from Zebra's handheld device verifying on-time quality delivery.

William J. Burns: Our customers leverage our solutions to optimize workflows across a broad range of end markets. We empower enterprises to drive productivity and better serve their customers, shoppers, and patients. We are seeing Zebra's competitive differentiation in mobile computing solutions drive wins across our vertical end market. Customers value the capabilities we embed in the software layer of our devices, which they leverage to transform workflows and improve outcomes. For example, we secured a mobile computing win with a commercial airline utilizing our mobile package dimensioning solution enabled through AI.

William J. Burns: As you'll see on slide 12.

William J. Burns: Our customers leverage our solutions to optimize workloads across a broad range of end markets.

William J. Burns: We empower enterprises to drive productivity and better serve their customers, shoppers and patients.

William J. Burns: Where C and Zebra's competitive differentiation in mobile computing solutions drive wins across our vertical end markets.

William Burns: Customers value the capabilities we embed in the software layer of our devices that they leverage to transform workflows and improve outcomes. For example, we secured a mobile computing win with a commercial airline utilizing our mobile package dimensioning solution enabled through AI. Also, a North American retailer will leverage Zebra's work cloud collaboration software on their new wearable mobile computers, connecting their associates to drive better outcomes in their stores. Additionally, we are able to display consumer cell phones at a European retailer with our mobile computers and Zebra's Identity Guardian solution. It provides multifactor authentication for a shared device environment that brings security, productivity, and convenience to the front line.

William J. Burns: Customers value the capabilities we embed in the software layer of our devices.

William J. Burns: that they leverage to transform workflows and improve outcomes.

William J. Burns: For example, we secured a mobile computing win with a commercial airline utilizing our mobile package dimensioning solution enabled through AI.

William J. Burns: Also, a North American retailer will leverage Zebra's WorkCloud collaboration software on their new wearable mobile computers, connecting their associates to drive better outcomes in their stores. Additionally, we are able to displace consumer cell phones at a European retailer with our mobile computers and Zebra's Identity Guardian solution, which provides multi-factor authentication for a shared device environment that brings security, productivity, and convenience to the frontline.

William J. Burns: Also, a North American retailer will leverage Zebra's WorkCloud collaboration software.

William J. Burns: on their new wearable mobile computers, connecting their associates to drive better outcomes in their stores.

William J. Burns: Additionally, we are able to display consumer cell phones at a European retailer with our mobile computers and Zebra's Identity Guardian solution.

William J. Burns: It provides multi-factor authentication for a shared device environment that brings security, productivity, and convenience to the front line.

William Burns: It is also notable that mobile computing contributed to double-digit sales growth in healthcare. Over the past year, our teams have been successfully selling the benefits of our solutions in clinical mobility that empower caregivers while delivering lower total cost of ownership or hospital system. We have been displacing consumer cell phones with our devices, and there continues to be a long runway of opportunity for equipping more clinicians with mobile computers.

William J. Burns: It is also notable that mobile computing contributed to double-digit sales growth in healthcare. Over the past year, our teams have been successfully selling the benefits of our solutions in clinical mobility that empower caregivers while delivering lower total cost of ownership for hospital systems. We have been displacing consumer cell phones with our devices, and there continues to be a long runway of opportunity for equipping more clinicians with mobile computers.

William J. Burns: It is also notable that mobile computing contributed to double-digit sales growth in healthcare.

William J. Burns: Over the past year, our teams have been successfully selling the benefits of our solutions in clinical mobility that empower caregivers while delivering lower total cost of ownership for hospital systems.

William J. Burns: We have been displacing consumer cell phones with our devices, and there continues to be a long runway of opportunity for equipping more clinicians with mobile computers.

William Burns: In closing, we expect to see broad base growth in the second half as we cycle much easier comparisons and benefit from momentum beyond retail. We maintain strong conviction in our long-term opportunity for Zebra as we elevate our strategic role with our customers through our innovative portfolio solution. Our sales and cost initiatives have positioned us well for profitable growth as our M-markets continue to recover.

William J. Burns: In closing, we expect to see broad-based growth in the second half as we cycle much easier comparisons and benefit from momentum beyond reach. We maintain strong conviction in our long-term opportunity for Zebra as we elevate our strategic role with our customers through our innovative portfolio solution. Our sales and cost initiatives have positioned us well for profitable growth as our end markets continue to recover. I will now hand this over to Mike. Thanks, Bill.

William J. Burns: In closing, we expect to see broad-based growth in the second half as we cycle much easier comparisons and benefit from momentum beyond retail.

William J. Burns: We maintain strong conviction in our long-term opportunity for Zebra as we elevate our strategic role with our customers through our innovative portfolio solution.

William J. Burns: Our sales and cost initiatives have positioned us well for profitable growth as our end markets continue to recover. I will now hand it back to Mike.

Michael Steele: I will now hand it back to Mike. Thanks, Phil.

Michael A. Steele: We'll now open the call to Q&A. We ask that you limit yourself to one question or one follow-up to give everyone a chance to participate. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key.

Michael Steele: We'll now open the call to Q&A. We ask that you limit yourself to one question or one follow-up to give everyone a chance to participate. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two.

Michael A. Steele: Thanks, Bill. We'll now open the call to Q&A. We ask that you limit yourself to one question or one follow-up to give everyone a chance to participate.

Speaker Change: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2.

Damian Karas: Our first question comes from Damien Carris with UBS. Please go ahead. Good morning, everyone. Congrats on the quarter.

Operator: To withdraw your question, please press star then 2. Our first question comes from Damian Karas with UBS. Please go ahead. Hey, good morning, everyone. Congratulations on the quarter. All right, Damian.

Speaker Change: Our first question comes from Damian Karas with UBS. Please go ahead.

Damian Karras: Hey, good morning, everyone.

Damian Karas: Bill, I wanted to get your thoughts on what you think it's going to take to bring some of the larger project activity back into the fold. And maybe you could just give us a sense of, you know, it sounds like you're not expecting much this year. You know, how much upside to your guidance do you think there would be if you did, in fact, start to see a return sooner rather than later?

William Burns: Bill, I wanted to get your thoughts on what you suspect it's going to take to bring some of the larger project activity back into the fold, and maybe you could just give us a sense on, you know, it sounds like you're not expecting much this year. How much upside to your guidance do you think there would be if you do, in fact, start to see a return sooner rather than later. Yeah, Damian, I think that, you know, if we look back to Q1, we saw early signs of recovery, as we talked about last quarter in retail and e-commerce.

Amy: All right, Amy.

Amy: Bill, I wanted to get your thoughts on what you...

Speaker Change: I suspect it's going to take to bring some of the larger project activity back into the fold.

Speaker Change: and maybe you could just give us a sense on you know it sounds like you're not expecting much this year you know how much upside to your guidance do you think there would be if you do in fact start to see a return sooner rather than later

Damian Karas: Yeah, Damian, I think that, you know, if we look back on Q1, we saw early signs of recovery, as we talked about last quarter in retail and e-commerce. We're certainly encouraged by the better than expected, you know, sales results in Q2, which really, we saw momentum, as we said, around, you know, beyond retail, really, and it was driven by mid-tier and run-rate businesses. So large deal activity was pretty consistent in Q2, coming off of Q1. When they're placing small orders, they're placing those to add to their installed base or for new applications or expansion opportunities, you know.

Speaker Change: Yeah, Damian, I think that, you know, if we look back to Q1, we saw early signs of recovery as we talked about last quarter in retail and e-commerce.

William Burns: We're certainly encouraged by the better than expected, you know, sales results in Q2, which really we saw momentum, as we said, you know, around, you know, beyond retail really, and really it was driven by mid-tier and run rate business. So largely activity was pretty consistent in Q2 coming off the Q1, but still well below, you know, historic levels. So I think that, you know, we see customers overall continue to cite uncertainty to us in the, you know, market, their markets, their end markets, which really is reflecting in their purchasing behavior. I'd say that large deployments overall are being spread, you know, more to these mid sized deals or smaller deals.

Speaker Change: We're certainly encouraged by the better than expected, you know, sales results in Q2, which really we saw

Speaker Change: momentum, as we said, you know, around, you know, beyond retail, really, and really, it was driven by

Speaker Change: Mid-tier and run rate business. So, large-scale activity was pretty consistent in Q2, coming off of Q1, but still well below, you know, historical levels. So, I think that...

Speaker Change: You know, we see customers overall continue to cite uncertainty to us in the, you know, market, their markets, their end markets, which really is reflecting in their purchasing behavior. I'd say that.

Speaker Change: large deployments overall are being spread, you know, more to these midsize deals or smaller deals, and being spread out over a longer period of time, you know, because of this, and I think ultimately,

William Burns: And being spread out over a longer period of time, you know, because of this, and I think ultimately when they're placing small orders or placing those to add to their install base or for new applications or expansion opportunities, you know, to date. So I think that, you know, the pipeline of opportunities remains strong. I think there's optimism on the part of our partners and customers. I think we'd like to see more momentum in large orders. So we saw, you know, the first uptick in large orders; the first quarter kind of flat, the second quarter. So we feel okay about that.

William J. Burns: So I think that, you know, the pipeline of opportunities remains strong, I think there's optimism on the part of our partners and customers, and I think we'd like to see more momentum in large orders. So we saw the first uptick in large orders in the first quarter, and kind of flat in the second quarter. So we feel okay about that.

Speaker Change: When they're placing small orders or placing those to add to their install base or for new applications or expansion opportunities

Speaker Change: you know, to date. So I think that, you know, the pipeline of opportunities remains strong. I think there's optimism on the part of our partners and customers. I think we'd like to see

Speaker Change: More momentum in large orders. So we saw, you know, the first uptick in large orders in the first quarter.

Damian Karas: We saw growth and mid-tier and run rate. I just think we'd like to see more large order activity to call a broader base recovery. So I think now we're seeing strength in mobile computing strength across kind of large orders, medium and small, but we just want to see more large orders. I think it's just driven by their caution of what's happening in macro today. Right. That makes sense.

Speaker Change: Now we have kind of flat the second quarter, so we feel okay about that. We saw growth in mid tier and run rate. I just think we'd like to see more large order activity to call a broader base recovery. So I think now we're seeing strengthened mobile computing.

William J. Burns: We saw growth in the mid-tier and run rate. I just think we'd like to see more large order activity to, you know, call a broader base recovery. So I think now we're seeing strengthened mobile computing. Transcripts provided by Transcription Outsourcing, LLC.

Speaker Change: strength across kind of large orders, medium and small. But we just want to see more large orders really, from our customers. And I think it's just driven by their caution of what's happening in macro today.

Damian Karas: Right, that makes sense. And I just want to ask you on the cost front. It seems like there's been a pick-up in shipping rates, and I know that was a little bit of a headwind for you guys in previous years. So to what extent have you maybe been experiencing some of that cost inflation, and maybe just talk through what's kind of in your guidance for the rest of the year. Thanks.

William Burns: And I just want to ask you on the cost. It seems like there's been a pick back up in shipping rates. And I know that was a little bit of a headwind for you guys in past years. So, what have you been maybe experiencing some of that cost inflation, and maybe just talk to what's kind of in your guidance for the rest of the year. Thanks. Yeah, Damien. So we have seen a modest increase in rates due to whether that's some of the Red Sea issues or now what's the stronger demand, particular around the ocean rates.

Speaker Change: Great, that makes sense.

Speaker Change: And I just want to ask you on the cost front, it seems like there's been a pick back up in shipping rates, and I know that was a little bit of a headwind for you guys in past years.

Speaker Change: So what extent have you been maybe experiencing some of that cost inflation and maybe just talk through what's kind of in your guidance for the rest of the year. Thanks.

William J. Burns: Yeah, Damian, so we have seen a modest increase in rates due to whether that's some of the Red Sea issues or now what's the stronger demand, particularly on the ocean rates. I think it's a modest impact in terms of incremental costs that we've included in our full-year guide. But the team's again working on several actions in terms of the different air modes.

Speaker Change: Yeah Damian, so we have seen a modest increase in rates due to whether that's some of the Red Sea issues or now with the stronger demand particularly around the ocean rates.

William Burns: So I think it's a modest impact in terms of incremental costs that we've included in our full year guide, but the teams again working several actions in terms of different air modes. How we leverage cost to improve transit time as well as, you know, again, working with our partners around the forecast for the remainder of the year to get ahead of that. The second half demand and mitigate as much as possible. So there is absolutely seeing some increase, but I'd say it's pretty modest at this point and within our second half.

Speaker Change: So I think it's a modest impact in terms of incremental costs that we've included in our full year guide. But the team's again working several actions in terms of the different air modes.

Jamie Cook: How we leverage Cost Doc to improve transit Time, as well as, you know, again, working with our partners around the forecast for the remainder of the year to get ahead of that second half demand and mitigate as much of that as possible. So there is absolutely some increase, but I'd say it's pretty modest at this point and within our second half. The next question comes from Jamie Cook with Truist Securities. Please go ahead.

Speaker Change: How we leverage CostDoc to improve transit time, as well as, you know, again, working with our partners around the forecast for the remainder of the year to get ahead of that, the second half demand and mitigate as much of that as possible. So there is absolutely seeing some increase, but I'd say it's pretty modest at this point and within our second half guide.

Jamie Cook: The next question comes from Jamie Cook with Truest Securities. Please go ahead. Hi, good morning, and congratulations on a nice clutter. I guess just my first question, I guess what struck me in the clutter, your EVM margins were much better than I thought. I think even better than your expectations. I think you're regarding to down margins.

Speaker Change: The next question comes from Jamie Cook with Truist Securities. Please go ahead.

Jamie Cook: Hi, good morning, and congratulations on a nice quarter. I guess just my first question, I guess what struck me in the quarter was your EVM margins were much better than I thought, and I think even better than your expectations.

Jamie Cook: Hi, good morning, and congratulations on a nice quarter. I guess just my first question, I guess what struck me in the quarter, your EVM margins were much better than I thought, and I think even better than your expectations, I think you were guiding to

Nathan Winters: The question comes from Jamie Cook with Truist Securities. Please go ahead. Hi, good morning, and congratulations on a nice clutter. I guess just my first question, I guess what struck me in the clutter, your EVM margins were much better than I thought. And I think even better than your expectations, I think you were guiding to down margins. And sequentially, so can you just speak to the drivers behind that, I guess that's my first question. And then I'll start there, and then I'll give you my second question after, I guess.

Speaker Change: down margin sequentially. So can you speak to, you know, the drivers behind that? I guess that's my first question, and then I'll start there and then I'll give you my second question after, I guess.

Nathan Winters: Thank you for more, Jamie. So yeah, if you look at overall gross margins at 486, this is our highest gross margin quarter in three years, benefiting from the level of large deal. So the strength and run rate in mid-tier is a positive for gross margin. And particularly in the EVM segment, we're also seeing continued strength in our service and software margins, again, which is heavily left, you're more weighted towards EVM, as well as now fully rolling over all the premium supply chain costs. So again, I think it was your part of that was just the strength in the quarter and really seeing the incremental volume fall through to the bottom line, driving the sequential improvement in gross margin, both within EVM particularly.

Nathan Andrew Winters: I think you were guiding to the down margin sequentially. So can you just speak to, you know, the drivers behind that? I guess that's my first question. And then I'll start there.

Speaker Change: Good morning, Jamie. So, yeah, if you look at overall gross margins at 48.6.

Jamie Cook: And then I'll give you my second question after I. Good morning, Jamie. So yeah, if you look at overall gross margins at 48, this is our highest gross margin quarter in three years, benefiting from the level of large deals. So the, you know, the strength and run rate in mid-tier is a positive for gross margin, and in particular, within the EVM segment. We're also seeing continued strength in our service and software margins, again, which are heavily more weighted towards EVM, as well as now fully rolling over all the premium supply chain costs.

Jamie Cook: This is our highest gross margin quarter in three years, benefiting from the level of large deals, so the strength and run rate in mid-tier is a positive for gross margin.

Speaker Change: we're also seeing continued strength in our service and software margins, again, which is heavily more weighted towards EVM, as well as now fully rolling over all the premium supply chain costs.

Jamie Cook: So, again, I think part of that was just the strength in the quarter and really seeing the incremental volume fall through to the bottom line, driving the sequential improvement in gross margin, both within EVM in particular. Okay, and then I guess just given the strength in the margin, you know, this quarter and, I mean, I don't think your EBITDA margin guide is now what 20 to 21%. I think before it was about 20%.

Speaker Change: Again, I think part of that was just the strength in the quarter and really seeing the incremental volume fall through to the bottom line, driving the sequential improvement in gross margin, both within EV in particular.

Nathan Winters: Okay, and then I guess just given the strength in the margin, you know, this quarter and I mean, I don't think your EBITDA margin guide is now what 20 to 21%. I think before it was about 20%. I'm just wondering why, you know, we wouldn't see better pull-through in the back half of the year in particular with, you know, the top line growth that you would see relative to, you know, decline or flat revenues in the second quarter. Yeah, so if you look at our profit screen, EBITDA already. Yeah, no, if you look at our EBITDA guide for the third quarter of 20 to 21%.

Speaker Change: Okay, and then I guess just given the strength and the margin, you know, this quarter, and I mean, I don't think your EBITDA margin guide is now what 20 to 21%, I think before it was about 20%.

Nathan Andrew Winters: I'm just wondering why, you know, we wouldn't see better pull through in the back half of the year, in particular with, you know, the top line growth that you would see relative to, you know, declines or flat revenues in the second quarter. Yes, if you'll get our Q3 e-bid done ready. Yeah, no, if you look at our EBITDA guide for the third quarter of 20 to 21%. Again, year on year, that's primarily due to volume leverage, nearly nine points.

Speaker Change: wondering why, you know, we wouldn't see better pull-through in the back half of the year, in particular, with, you know, the top-line growth that you would see relative to, you know, declines or flat revenues in the second quarter.

Speaker Change: Yes, if you'll get our Q3 e-bid done ready.

Nathan Andrew Winters: And I think we'd select similar deals as well as business mix from Q2 to Q3, such that you get a similar margin profile from Q2 to Q3. So if you look at the Q3 guide, you know, effectively flat to Q2, based on that assumption of the kind of the underlying mix of deals, as well as the business unit mix gives us that similar profile. I'd say the other, you know, really don't expect the same level of incremental benefits sequentially as we were able to realize some of the incremental benefits in Q2 from the restructuring action. And then you do see that modest uptick in, you know, implied in the guy for the fourth quarter on the incremental volume. The next question comes from Tommy Moll with Stevens. Please go ahead.

Speaker Change: Yeah, no, if you look at our...

Nathan Winters: Again, year on year, that's primarily due to volume leverage nearly nine points, and I think we'd say similar deal, as well as business mix, Q2 to Q3 such that you get a similar margin profile from Q2 to Q3. So if you look at the Q3 guide, you know, effectively flat to Q2 based on that assumption of kind of the underlying value.

Speaker Change: EBITDA guide for the third quarter of 20 to 21 percent.

Speaker Change: Again, year-on-year, that's primarily due to volume leverage, nearly nine points.

Speaker Change: I think we'd select similar deal as well as business mix, Q2 to Q3, such that you get a similar margin.

Speaker Change: Profile from Q2 to Q3. So if you look at the Q3 guide, you know, effectively flat to Q2, based on that assumption of kind of the underlying mix of deals, as well as the business unit mix gives us that similar profile.

Nathan Winters: Mix of deals, as well as the business you didn't mix, gives us that similar profile, and I say the other, you know, really don't expect the same level of incremental benefits sequentially as we were able to realize some of the criminal benefits in Q2 from the restructuring actions. And then you do see that modest uptick, and you know, implied in the guide for the fourth quarter on the incremental volume.

Speaker Change: I really don't expect the same level of incremental benefits sequentially as we were able to realize some of the incremental benefits in Q2 from the restructuring actions.

Speaker Change: And then you do see that modest uptick in, you know, implied in the guy for the fourth quarter on the incremental volume.

Thomas Moll: The next question comes from Tommy Mal with Stevens. Please go ahead. Good morning, and thank you for taking my questions. Morning, Tommy.

Speaker Change: The next question comes from Tommy Moll with Stevens. Please go ahead.

Thomas Allen Moll: Good morning, and thank you for taking my question. Good morning. Good morning, Tommy.

Thomas Allen Moll: Good morning and thank you for taking my questions.

Thomas Moll: First question on the large order activity at this point, where we're nearly through July, how fully baked are your customer budgets for this year, and at what point does the large deal conversation really start to become one centered around. 2025 when a lot of the customer budgets are refreshed. I think that Tommy, I say that, you know, customers continue to scrutinize their budgets even as well into the year, right? And I think that some of those have to do with, you know, in the past, you've seen kind of year-end spending from our customers, but I think that the uncertainty around the economy is still kind of weighing on them and large deployments.

Thomas Allen Moll: First question on large order activity: at this point, where we're nearly through July, how fully baked are your customer budgets for this year? And at what point does the large deal conversation really start to become one centered around 2025 when a lot of the customer budgets are refreshed? I think that, Tommy, I'd say that, you know, customers continue to scrutinize their budgets, even as we're well into the year, right. And I think that some of those have to do with, you know, in the past, we've seen kind of year-end spending from our customers. But I think that the uncertainty around the economy is still kind of weighing on them and on large deployments and what will happen in the kind of second half of the year here.

Speaker Change: Morning. Morning, Tommy.

Thomas Allen Moll: First question on the large order activity. At this point where we're nearly through July , how fully baked are your customer budgets for this year?

Thomas Allen Moll: At what point does the large deal conversation really start to become one centered around 2025 when a lot of the customer budgets are refreshed?

Thomas Allen Moll: I think that, Tommy, I'd say that, you know, customers continue to scrutinize their budgets, even as we're well into the year, right. And I think that

Thomas Allen Moll: Some of those have to do with, you know, in the past we've seen putting year-end spending from our customers, but I think that the

Thomas Allen Moll: Uncertainty around the economy is still kind of weighing on on them and in large deployments and in what will happen in kind of second half of year here so I think that we

William Burns: And in what'll happen in kind of second half of year here. So I think that we, we typically not have visibility quite yet into whether they'll be year-end spending, you know, buyer customers. We're talking about certainly a pipeline of opportunities that they, you know, see, and then the question is, do they move ahead with those in. And, you know, late 24 or into 25, I think that, you know, from a macro perspective, whether it's interest rates or, you know, a presidential election or, you know, manufacturing, you know, production, all those, you know, shipping parcel parcels, you know, shipments have just started to inch up and turn to more positive volume for growth and volume.

William J. Burns: So I think that we typically do not have visibility quite yet into whether there'll be year-end spending by our customers; we're talking about certainly a pipeline of opportunities that they, you know, see, and then the question is, do they move ahead with those in late 24, or into 25? I think that, you know, from a macro perspective, whether it's interest rates, or, you know, the presidential election, or, you know, manufacturing, you know, production, all those, you know, shipping parcels, parcels, you know, shipments have just started to inch up and turn to more positive volumes for growth and volume. So I think all those kind of weigh on their business, and I think there's, even though they've got budgets, there's kind of a reluctance to move ahead with those, really, because of the macro factors overall.

Thomas Allen Moll: We typically...

Thomas Allen Moll: not have visibility quite yet into whether there'll be year-end spending by our customers. We're talking about certainly a pipeline of opportunities that they see. And then the question is, do they move ahead with those in late 24 or into 25? I think that

Thomas Allen Moll: From a macro perspective, whether it's interest rates, presidential election or manufacturing production, all those shipping, parcels, shipments have just started to

William Burns: So I think all those kind of weighing on their business. And I think there's, even though they've got budgets, it's kind of the reluctance to move ahead with those really because in a macro factors overall, I think that we'd expect those to continue to kind of stabilize, then get more confidence in their business. And then a bait as we get into kind of second half year and into 2025, but I'd say overall many discussions with our customers, regarding, you know, projects, it's really about just shaking longer to kind of move those forward still now. Again, we saw a larger order activity about flat Q1 to Q2, you know, overall, and we saw this pickup in mid-tier and run rate.

Thomas Allen Moll: Inch up and turn to the more positive volume for growth and volume so I think all those kind of weighing on their business, and I think there's

Thomas Allen Moll: Even though they've got budgets, it's kind of the reluctance to move ahead with those really because of the macro factors overall. And I think that we'd expect those to continue to kind of stabilize, they can get more confidence in their business.

William J. Burns: And I think that we'd expect those to continue to kind of stabilize, so they can get more confidence in their business, and then abate as we get into kind of the second half year and into 2025. But I'd say, overall, many discussions with our customers regarding, you know, projects, it's really about just taking longer to kind of move those forward still. Now, again, we saw a large order activity about flat from Q1 to Q2, you know, overall, and we saw this pickup in mid tier and run rate.

Thomas Allen Moll: and then abate as we get into kind of second half of the year and into 2025, but I'd say

Thomas Allen Moll: Overall, many discussions with our customers regarding projects. It's really about...

Thomas Allen Moll: Cheers.

Thomas Allen Moll: taking longer to kind of move those forward still. Now, again, we saw large order activity about flat Q1 to Q2, you know, overall, and we saw this pick up in mid-tier run rate. So these are all positive signs growth outside of retail, which we really saw in first quarter into a broader segment.

William Burns: So these are all positive sign growth outside of retail, which we really saw in first quarter into a broader segment. Mobile computing was the first to decline in the first to return to growth. We expected that. So I think everything's moving in the right direction. But I think that, you know, I think our customers just don't know for kind of year and 24 into 25, but we're optimistic, I would say, that everything's moving in the right direction.

William J. Burns: So these are all positive signs, growth outside of retail, which we really saw in the first quarter across a broader segment. Mobile computing was the first to decline and the first to return to growth. We expected that.

Thomas Allen Moll: Mobile Computing was the first to decline and the first to return to growth. We expected that, so I think everything's moving in the right direction, but I think that, you know, I think our customers just don't know if we're kind of year-end 24 and into 25, but we're optimistic, I would say, that everything's moving in the right direction.

William J. Burns: So I think everything's moving in the right direction. But I think that, you know, I think our customers just don't know for kind of year end 24 and into 25. But we're, we're optimistic. I would say that everything's moving in the right direction. And Bill, just from a competitive standpoint, is there any?

William Burns: And they'll just, from a competitive standpoint, is there anything that you've since having changed, particularly in a large deal context where you've seen other market participants perhaps become more aggressive on price or whatever other factor? Yeah, no, I would say that, you know, really the competitive environment hasn't changed. A lot, you know, overall, we're certainly, you know, continued to maintain share in the marketplace. We feel good about our differentiation that we bring to the marketplace with the depth and breadth of our solutions. Our competitive advantages, you know, scale, technology leadership, our partner community, are going to market, our relationships, and our customers.

Thomas Allen Moll: And Bill, just from a competitive standpoint, is there any, is there anything that you've sensed having changed?

William J. Burns: Is there anything that you've sensed having changed? Particularly in the large deal context where you've seen other market participants perhaps become more aggressive on price or whatever other factor. Yeah, no, I would say that, you know, really, the competitive environment hasn't changed a lot.

William J. Burns: particularly in a large deal context where you've seen other market participants perhaps become more aggressive on price or whatever other factor.

William J. Burns: You know, overall, we're certainly, you know, continuing to maintain share in the marketplace; we feel good about the differentiation that we bring to the marketplace with the depth and breadth of our solutions, our competitive advantages, you know, scale, technology, leadership, our partner community, our approach to market, our relationships with our customers. So the large deal, you know, the phenomenon not coming, you know, not returning to historic levels is not really about Zebra; it's truly about the market.

William J. Burns: Yeah, no, I would say that, you know, really, the competitive environment hasn't changed a lot. You know, overall, we're certainly, you know, continue to maintain share in the marketplace, we feel good about our

William J. Burns: Our differentiation that we bring to the marketplace with the depth and breadth of our solutions, our competitive advantages, you know,

William J. Burns: scale, technology leadership, our partner community, our go to market, our relationships with our customers. So the large deal, you know, phenomenon not coming, you know, not returned to historic levels is not.

William Burns: So the large deal, you know, phenomenon not coming, you know, not returned to historic levels is not really about the market, and we don't really see any more change from a competitive perspective. We're always going to have competitors out there, large and small, and that continues to be the case. So, so nothing there, and we feel good about our market position and continue to win in the market.

William J. Burns: And we don't really see any more change from a competitive perspective; we're always going to have competitors out there, large and small. And then that continues to be the case. So there's nothing there, and we feel good about our market position and continue to win in the market.

William J. Burns: It's not really about Zebra. It's truly about the market. And we don't really see any marked change from a competitive perspective. We're always going to have competitors out there, large and small, and that continues to be the case. So nothing there. We feel good about our market position and continue to win in the market.

Joe White: And the next question comes from Joe. You are Dana with TD Cowan. Please go ahead. Yeah, it's morning. You had mentioned, I guess it was last quarter, that distributors were asking for more product than you were willing to sell because, but you want, you were hesitant because you wanted to make sure you understood where it was going and try to prevent. You know, a future build-up of inventory that then needs to get liquidated again, like what's the update on that? Have you kind of started to give them what they're requesting?

William J. Burns: And the next question comes from Joe Giordano with TD Cowen. Please go ahead.

Joseph Craig Giordano: Hey guys, good morning. You had mentioned, I guess it was last quarter, that distributors were asking for more product than you were willing to sell, but you were hesitant because you wanted to make sure you understood where it was going and try to prevent a future buildup of inventory that then needs to get liquidated again. What's the update on that? Have you started to give them what they're requesting? Yeah, Joe, this is Nathan. I can take that.

Joseph Craig Giordano: Hey guys, good morning.

Joseph Craig Giordano: You had mentioned, I guess it was last quarter,

Joseph Craig Giordano: that distributors were asking for more product than you were willing to sell because, but you want, you were hesitant because you wanted to make sure you understood where it was going and try to prevent, you know, a future buildup of inventory that then needs to get liquidated again. Like, what's the update on that? Have you kind of started to give them what they're requesting?

Nathan Winters: Yeah, Joe, this is Nathan. I can take that. I'd say, you know, overall, the global channel inventory, as we look at it from a days on hand, we still at a normalized level. I think you have pockets around the world where, you know, there's still a little bit of rebalancing, both, you know, driving down inventory in the channel as well as where there's incremental needs. And I say similar to where we were last quarter, it's working with each one of those partners across the region to ensure that they have the appropriate level of inventory for the demand.

Nathan Andrew Winters: I'd say, you know, overall, the global channel inventory, as we look at it from a days on hand, is still at a normalized level. I think you have pockets around the world where there's still a little bit of rebalancing, both driving down inventory in the channel, as well as where there's incremental needs. And I'd say, similar to where we were last quarter, working with each one of those partners across the regions to ensure that they have the appropriate level of inventory for the demand, you know, they're expecting and that we see in the pipeline.

Joseph Craig Giordano: Yeah, Joe, this is Nathan. I can take that. I'd say, you know, overall, the global channel inventory, as we look at it from a days on hand, is still at a normalized level. I think you have pockets around the world where

Nathan Andrew Winters: There's still a little bit of rebalancing, both driving down inventory in the channel as well as where there's incremental needs.

Nathan Andrew Winters: So similar to where we were last quarter, it's working with each one of those partners across the regions to ensure that they have the appropriate level of inventory for the demand, you know, they're expecting and that we see in the pipeline. So, again, it remains a very collaborative

Nathan Winters: You know, they're expecting and that we see in the pipeline. So again, it remains a very collaborative. Similar position where we were into one where there's always some that want a little bit more. And again, it's just trying to make sure we have the right amount in the channel to support our end users, but not getting ahead of ourselves given some of the uncertainty that we've talked about.

Nathan Andrew Winters: So again, it remains very collaborative. It's a similar position where we were in Q1, where there are always some that want a little bit more. And again, it's just trying to make sure we have the right amount in the channel to support our end users. But not getting ahead of ourselves given some of the uncertainty that we've talked about. Fair enough. And then just if I could ask you about some of your smaller businesses, can you give us an update on trends within like RFID and with Matrox and Fetch and maybe how you see those businesses in terms of like growth and size exiting this year? I can take that too.

Nathan Andrew Winters: Similar position where we were in Q1, where there's always some that want a little bit more. And again, it's just trying to make sure we have the right amount in the channel to support our end users, but not getting ahead of ourselves given some of the uncertainty that we've talked about.

William Burns: Turn up and then just if I can ask on some of your smaller businesses, can you give us an update on trends within like RFID and with matrix infection, maybe how you see those businesses in terms of like growth and size exiting this year? Yeah, I can take that to I'd say RFID, you know, challenging kind of second quarter on, you know, compares from law cycling large opportunities a year ago. I would say that, you know, overall, would expect return to growth in in second half year. We're continued to, we move into the second half early with strong backlog and type line of opportunities across not just retail, but transportation logistics manufacturing.

Speaker Change: If I could ask on some of your smaller businesses, can you give us an update on trends within like RFID and with Matrox and Fetch and maybe how you see those businesses in terms of growth and size exiting this year?

Nathan Andrew Winters: I'd say RFID, you know, challenging kind of second quarter on, you know, compares with large cycling companies, Slide Chain, Parcel Tracking within TNL, baggage tracking within airlines. So, lots of opportunities across RFID. I would say, you know, machine vision. We continue to be excited about the opportunity within machine vision, a challenging market at the moment. And, you know, our Matrox acquisition, when we acquired that asset, we knew it was heavily weighted towards semiconductor equipment manufacturing, which is still a challenging segment as well.

Speaker Change: Yeah, I can take that, Joe. I'd say RFID, you know, challenging kind of second quarter on, you know, compares from large cycling large.

Speaker Change: opportunities a year ago, I would say that, you know, overall would expect return to growth in second half year. We're continuing to move into the second half early with strong backlog and pipeline of opportunities across.

William Burns: So we're seeing continued use spaces across RFID, you know, including moving beyond a parallel to general merchandise inside retail, fairly track and trace, you know, across the supply chain, parcel tracking within TNL, baggage tracking within airlines. So lots of opportunities across, you know, RFID, I would say, you know, machine vision. We can see to be excited about the opportunity within machine vision, challenging market at the moment and our matrix acquisition. When we acquired that asset, we knew was heavily weighted towards semiconductor equipment manufacturing, which is still a challenge segment as well. Also, you know, decline in the quarter and machine vision, but we feel good about it overall. We saw strength in our adapt to vision acquisition, so software, machine vision software in the quarter, that was a bright spot.

Speaker Change: Not just retail, but transportation, logistics, manufacturing, so we're seeing...

Speaker Change: Continued use cases across RFID.

Speaker Change: You know, including moving beyond apparel to general merchandise inside retail.

Speaker Change: fairly track and trace, you know, across the supply chain, parcel tracking within TNL baggage tracking within airline. So lots of opportunities across, you know, RFID

Speaker Change: I would say, you know, machine vision, we continue to be excited about the opportunity within machine vision, challenging market at the moment. And, you know, our Matrox acquisition, when we acquired that asset, we knew was heavily weighted towards

Speaker Change: Semiconductor Equipment Manufacturing, which is still a challenge segment as well. So, you know, decline in the quarter in machine vision, but...

Nathan Andrew Winters: So, you know, decline in the quarter in machine vision, but we feel good about it overall. We saw strength in our adaptive vision acquisition, so software, machine vision software in the quarter. That was a bright spot.

Speaker Change: We feel good about it overall. We saw strength in our adaptive vision acquisition, so software, machine vision software in the quarter, that was a bright spot.

Nathan Andrew Winters: I'd say that the diversification of that business, which was our focus all along with the Matrox business, diversifying into areas like automotive and logistics into new areas. We also had our organic investment in machine vision, which really applies, you know, more to the logistics area. That diversification is, you know, going well. We're calling on more customers.

William Burns: I'd say that the diversification of that business, which was our focus all along with the matrix business diversifying into areas like automotive and logistics, into new areas. We also had our organic investment in machine vision, which really applies, you know, more to the logistics area. That diversification is, you know, going well; ultimately, we're calling on more customers or seeing more opportunities. We're continuing to invest in go-to-market, you know, across the globe and just seeing more opportunities is, you know, a craft machine vision, so we feel good about that, you know, in a great opportunity for Zebra overall.

Speaker Change: I'd say that the diversification of that business, which was our focus all along as a Matrax business to diversify into areas like automotive and

Speaker Change: Logistics into new areas. We also had our organic investment in machine vision, which really applies more to logistics area. That...

Speaker Change: That diversification is, you know, going well. Ultimately, we're calling on more customers, we're seeing more opportunities, we're continuing to invest in go to market, you know, across the

Nathan Andrew Winters: We're seeing more opportunities. We're continuing to invest in go-to-market, you know, across the globe, and just seeing more opportunities in machine vision. So, we feel good about that, you know, and a great opportunity for Zebra overall. Let's say software, our software assets. We're seeing, you know, the combination of our mobile devices, especially in the wearable space now with some of our assets and software that we're pretty excited about. So the word cloud solutions really focused on retail and then leveraging our mobile device in the hands of retail associates.

Speaker Change: The Globe and just seeing more opportunities is, you know, across machine vision. So we feel good about that, you know, and a great opportunity for Zebra overall.

William Burns: Let's say software, our software assets we're seeing, you know, the combination of our mobile devices, especially in the wearable space now with some of our assets and software that we're pretty excited about. So that word cloud solutions really focused on retail and then leveraging our mobile device and the hands of retail associates. And we continue to advance and bring those solutions together and combine that with things like wearable mobile computing. We've seen some early wins there. So we feel good about the portfolio. The smaller segment of the market, right? The you're sorry are not market, meaning smaller segment of our business overall or piece of our business.

Nathan Andrew Winters: And we continue to advance and bring those solutions together and combine that with things like wearable mobile computing. We've seen some early wins there. So we feel good about the portfolio. There's a smaller segment of the market, right, or sorry, our not the market, meaning a smaller segment of our business overall, or piece of our business. So really, you know, mobile computing returning to growth, other segments being more challenged, these are our areas that we see driving the future growth of Zebra. The next question comes from Andrew Buscaglia with BNP. Please go ahead.

Speaker Change: I'd say software, our software assets, we're seeing, you know, the combination of combination of

Speaker Change: Our mobile devices, especially in the wearable space now, with...

Speaker Change: Some of our assets in software that we're pretty excited about so that

Speaker Change: work cloud solutions really focused on retail and then leveraging our mobile device in the hands of retail associates and

Speaker Change: We continue to advance and bring those solutions together and combine that with things like wearable mobile computing. We've seen some early wins there.

Speaker Change: We feel good about the portfolio. There's a smaller segment of the market, right?

Speaker Change: Not market, meaning smaller segment of our business overall or piece of our business.

William Burns: So really, you know, mobile computing, returning to grow. Other segments being more challenged. These are our areas that we see as driving the future growth of Zebra.

Speaker Change: So really, mobile computing returning to growth, other segments being more challenged, these are areas that we see as driving the future growth of Zebra.

Andrew Buscaglia: The next question comes from Andrew Buscaglia with BNP. Please go ahead. Good morning, guys. Morning.

Speaker Change: The next question comes from Andrew Buscaglia with BNP. Please go ahead.

Andrew Edouard Buscaglia: Hey, good morning, guys. Good morning. Yeah, so, you know, I want to get your thoughts on, you know, potential upgrades, upgrades of devices, especially in 2025. You know, do you have any data you can share around the age of your installed base? Because presumably a lot of these devices were sold during COVID, and, you know, we should start to see a natural need to upgrade these in the next year, I would think, would say, overall, we're, you know, from a mobile computing perspective, I'd say that, you know, our customers have really been absorbing the capacity that, you know, they built out during the pandemic more than anything else.

Andrew Edouard Buscaglia: Hey, good morning, guys.

William Burns: Yeah, so you know, I want to get your thoughts on, you know, potential upgrades, upgrades of devices, especially in 2025. You know, do you have any data you can share around the age of your install base? Because presumably a lot of these devices were sold during COVID, and you know, we should start to see it. The natural need to upgrade these in the next year, I would think. Let's say, you know, overall we're, you know, from a mobile computing perspective, I'd say that, you know, our customers have, you know, really been absorbing the capacity that, you know, they built out during the pandemic more than anything else.

Andrew Edouard Buscaglia: Morning.

Speaker Change: Good morning.

Andrew Edouard Buscaglia: Yeah, so, you know, I want to get your thoughts on, you know, potential upgrades.

Speaker Change: Upgrades of devices, especially in 2025. You know, do you have any data you can share around the age of your installed base? Because presumably a lot of these devices were sold during COVID. And, you know, we should start to see a natural need to upgrade these in the next year, I would think.

Speaker Change: I would say, you know, overall, we're, you know, from a mobile computing perspective, I'd say that, you know, our customers have

Andrew Edouard Buscaglia: So I think there's clearly continued upgrade cycles across all of our customers. But, you know, from the idea that they built out so much capacity during the pandemic, and they're using that capacity today. And then as the economy slowed, you know, that created even more capacity. So they're using that capacity off, and I think we're seeing customers move into the idea that they've absorbed some of that capacity and are beginning to buy again. But that's kind of the early signs of what we're seeing.

Speaker Change: You know, really been absorbing the capacity that you know, they've built out during the pandemic more than anything else. So I think there's clearly

William Burns: I think there's clearly continued upgrade cycles across all of our customers. But, you know, from the idea that they built out so much capacity during the pandemic that they're using that capacity today, and then as the economy slowed, you know, that created even more capacity, so they're using that capacity off. I think we're seeing customers moving to the idea that they've absorbed some of the capacity and are beginning to buy again, but that's kind of early signs of what we're seeing. I'd say that there's a solid type line of opportunities for mobile computing, you know, overall both in kind of refresh new use cases continue to add to the number of devices inside our customer base.

Speaker Change: Continued upgrade cycles across all of our customers, but, you know,

Speaker Change: from the idea that they've built out so much capacity during the pandemic that they're using that capacity today, and then as the economy slowed, you know, that created even more capacity. So they're using that capacity off, I think we're seeing

Speaker Change: Customers move into the idea that they've absorbed some of the capacity and are beginning to buy again, but that's kind of early signs of what we're seeing.

William J. Burns: I'd say that there's a solid pipeline of opportunities for mobile computing, you know, overall, both in kind of refresh, new use cases continue to add to the number of devices inside our customer base. And, you know, we continue to see competitive wins, you know, across the portfolio. So I'd say the upgrades are out there. The refreshes are out there.

Speaker Change: I'd say that there's a solid pipeline of opportunities for mobile computing, you know, overall, both in kind of refresh new use cases, continue to add to the number of devices inside our customer base.

William Burns: And, you know, we continue to see competitive wind, you know, across the portfolio. So I'd say the upgrades are out there; the refreshes are out there. And ultimately, some customers of sweating assets a bit more; others are leveraging what they have today. And I think it works, confident that, you know, as the macro environment gets better, our customers will continue to upgrade our devices. And we'll see an uptick in large orders within our business, which will marry with what we're seeing is kind of medium is in, you know, run rate business growing in second quarter.

Speaker Change: and, you know, we continue to see competitive win, you know, across the portfolio. So I'd say.

William J. Burns: And ultimately, some customers are sweating acids a bit more, while others are leveraging what they have today. And I think that we're confident that, you know, as the macro environment gets better, our customers will continue to upgrade our devices, and we'll see an uptick in large orders within our business, which will marry with what we're seeing is kind of a medium in, you know, run rate business growing in the second quarter. Yeah, okay.

Speaker Change: The upgrades are out there, the refreshes are out there, and ultimately some customers are sweating acids a bit more, others are leveraging what they have today, and I think that we're confident that, you know, as the macro environment gets better, our customers will continue

Speaker Change: to upgrade our devices and and we'll see an uptick in large orders within our business which will marry with what we're seeing is kind of medium as in you know run rate business growing in second quarter.

William Burns: Yeah, okay. Okay.

Andrew Edouard Buscaglia: Okay, and then, you know, you're raising your free cash flow expectations. Again, and just kind of given where we are, things are looking to start to improve, and you probably have some confidence here. Where do you see capital allocation going into the year end? Will we see some M&A come to fruition before year end?

Nathan Winters: And then, you know, you're raising your free cash flow expectations again. And, and just kind of given where we are, things looking start to improve. And you have probably had some confidence here.

Speaker Change: Yeah, okay.

Speaker Change: Okay, and then, you know, you're raising your free cash flow expectations again, and, and just kind of given where we are with things.

Speaker Change: I'm looking to start to improve and you probably have some confidence here.

Nathan Winters: Where do you see a capital location going into the year end? Is emanate is that will we see some MMA come and come to fruition before your end or, you know, is there a focus more on, you know, shared repurchase or are you thinking about things? Yeah, so I think, you know, the first part, again, please to raise the guide for free cash flow to over 700 million, including the final settlement as well as the swap sale in the second quarter. So, and the improvement overall and working capital to get us above the 100% free cash flow conversion.

Nathan Andrew Winters: Or, you know, is there a focus more on, you know, share repurchase? Or are you thinking about things like that? Yeah, so I think, you know, the first part. I'm pleased to raise the guide for free cash flow to over $700 million, including the final settlement, as well as the swap sale in the second quarter. So, and the improvement overall in working capital to get us above the 100% free cash flow conversion. And, as you stated, really, we've prioritized debt paydown, as well as working on our capital structure in the first half of the year.

Speaker Change: Where do you see capital allocation going into the year-end? Will we see some M&A come to fruition before year-end? Or is there a focus more on share repurchase? How are you thinking about things?

Nathan Andrew Winters: So, ending the second quarter, just below the target range of two and a half times debt leverage, and that'll sequentially improve as we move through the year. I think in terms of overall priority, they remain unchanged.

Speaker Change: Yeah, so I think, you know, the first part, again, pleased to raise the guide for free cash flow to over $700 million, including the final settlement, as well as the swap sale in the second quarter.

Speaker Change: and the improvement overall in working capital to get us above the 100% free cash flow conversion.

Nathan Winters: And, as you stated, really the prior, we prioritize debt pay down, as well as working on our capital structure in the first half of the year. So, ending the second quarter just under our below the target. The target range of two and a half time debt leverage, and that will sequentially improve as we move through the year. I think in terms of overall priority, they were made on change. You know, the first is organic growth, getting the business back to the growth trajectory we needed to be in, want it to be, along with the right profitability levels.

Speaker Change: And as you stated, we've prioritized debt pay down as well as working on our capital structure in the first half of the year. So ending the second quarter just below the target range of two and a half times debt leverage.

Nathan Andrew Winters: You know, the first is organic growth, getting the business back to the growth trajectory we needed to be and wanted to be, along with the right profitability levels. M&A continues to be a lever. And I think now, with the improved cash flow, as well as our overall capital structure, we have additional flexibility for share repurchases as we move through the year. So, Bill, would you maybe touch on the M&A approach here? And the next question comes from Meta Marshall with Morgan Stanley. Please go ahead.

Speaker Change: And that will sequentially improve as we move through the year.

Speaker Change: I think in terms of overall priority, they remain unchanged. The first is organic growth, getting the business back to the growth trajectory we need it to be and want it to be, along with the right profitability levels.

William Burns: M&A continues to be a lever, and I think now, with the improved cash flow, as well as our overall capital structure, we have additional flexibility for share repurchases as we move through the year.

Speaker Change: M&A continues to be a lever, and I think now with the improved cash flow, as well as our overall capital structure, we have additional flexibility for share repurchases as we move through the year. So, Bill, you want to maybe touch on the M&A approach here?

William Burns: So I'm really going to touch on the M&A brochure. Now, I guess I'd say that our M&A philosophy really remains unchanged. I think we continue to leverage M&A where it makes sense to advance our vision and our overall strategy. At the, in the short term, the bar is probably higher based on kind of macro uncertainty, and then, you know, higher interest rates. But I would say that we continue to target select assets that ultimately are close to adjacent and synergistic to our business today. As Nate said, we've got the strong balance sheet and flexibility to continue to look at companies, and we continue to be in positive, but, you know, the bar is higher at the moment.

William J. Burns: Yeah, I guess I'd say that our M&A philosophy really remains unchanged. I think we continue to leverage.

William J. Burns: M&A where it makes sense to advance our vision and our overall strategy, I'd say in the short term, the bar is probably higher based on kind of macro uncertainty and then, you know, higher interest rates, but I would say that

William J. Burns: We continue to target select assets that ultimately are closely adjacent and synergistic to our business today. As Nate said, we've got a strong balance sheet and flexibility to continue to look at companies. We continue to be inquisitive, but the bar is higher at the moment.

Meta Marshall: And the next question comes from Meta Marshall with Morgan Stanley. Please go ahead. Great. Thanks. Maybe a couple of questions. Just on the healthcare strength that you saw. You know, I know that that had been a relatively, you know, they had been in a more challenge spend environment.

William J. Burns: And the next question comes from Meta Marshall with Morgan Stanley . Please go ahead.

Meta A. Marshall: Maybe a couple of questions, just on the health care strength that you saw, you know, I know that that had been relatively. Transcripts provided by Transcription Outsourcing, LLC. 2013 Transcription Outsourcing, LLC. All rights reserved.

Meta A. Marshall: Great, thanks. Maybe a couple of questions. Just on the health care strength that you saw, you know, I know that that had been a relatively

William Burns: So just wondering, you know, how broad base that is, is that kind of new project based or just any detail there. And then second question, you know, Mia, look like a source of strength for you guys. I think we've seen that across some other, across some other companies. And so is that a matter of they're just coming from a very depressed environment. And so we're coming out of the lower base. And that's where some of the Mia's strength is. Are you, are there any trends in a Mia that you think are worth calling out?

Unknown Speaker: Transcription Outsourcing, LLC. Unknown Speaker, And then the second question, me out. Unknown Speaker, I think.

Meta A. Marshall: in a more challenged spend environment. So just wondering how broad-based that is. Is that kind of new project-based or just any detail there? And then second question, OMEA looked like a source of strength for you guys. I think we've seen that across some other

Unknown Speaker: [inaudible] Transcripts provided by Transcription Outsourcing, LLC. Are there any trends? Yeah, so I'll start with healthcare and then jump to EMEA. Healthcare, I'd say overall, you know, mobile computing, you know, drove the growth in healthcare. It really is our team's focus on clinical mobility and, and really total cost of ownership. We've seen, you know, in the past, a significant number of consumer devices used in that space. And I think that we're seeing healthcare systems realize that the total cost of ownership of zebra devices is well positioned for them in a, you know, an environment of tighter budgets and, you know, thinner margins overall within healthcare. And we add a lot of value ultimately by, you know, improving the productivity of healthcare workers, getting data into, you know, electronic medical records systems, and then ultimately, enhancing patient safety overall.

Meta A. Marshall: across some other companies. And so is that a matter of they're just coming from a very depressed environment? And so we are coming off of a lower base and that's where some of the MIA strength is. Are there any trends in MIA that you think are worth calling out? Thanks.

William Burns: Thanks. Yeah, so let's start. Let's start with health care and then jump to it. I mean, yeah, health care, I'd say overall, you know, mobile computing, you know, drove the growth in health care. It really is our team's focus on clinical mobility and really total cost of ownership. We've seen, you know, in the past, a significant number of consumer devices used in that space. And I think that we're seeing health care systems realize that the total cost of ownership of deeper devices. Well positioned for them in a, you know, an environment of tighter budgets and, you know, thinner margins overall within health care.

Speaker Change: Okay, so I'll start with healthcare and then jump to anemia. Healthcare, I'd say overall, you know, mobile computing, you know, drove the growth in healthcare.

Speaker Change: It really is our team's focus on clinical mobility and

Speaker Change: and really total cost of ownership, we've seen, you know, in the past, a significant number of

Speaker Change: Consumer devices used in that space, and I think that we're seeing

Speaker Change: Health care systems realize that the total cost of ownership of zebra devices is well positioned for them in a, you know, an environment of tighter budgets and, you know, thinner margins overall within health care and, and we add a lot of value ultimately by

William J. Burns: So I think that the automation of workflows, the digitizing of information around assets and patients and staff is a value that our healthcare customers are seeing. I think, you know, a medium to longer-term opportunity we're now seeing is things like home healthcare. That remains an opportunity for us. So, you know, things like tablets in that area of home healthcare.

William Burns: And, and we add a lot of value ultimately by, you know, improving productivity of health care workers, getting data into, you know, electronic medical records systems and then ultimately enhancing patient safety overall. So I think that the automating of workflows, the digitizing the information around assets and patients and staff is a value that our health care customers are seeing. I think a, you know, a medium, the longer term opportunity we're now seeing is things like home health care; that remains an opportunity for us. So, you know, things like tablets in, in that area and in home health care.

Speaker Change: You know, improving productivity of health care workers, getting data into, you know, you know, electronic medical record systems and then ultimately, enhancing patient safety overall, so I think that

Speaker Change: The automating of workflows, the digitizing, the information around assets and patients and staff is a value that our healthcare customers are seeing.

William J. Burns: So we're excited about, you know, that. Healthcare has always been a smaller piece of our business but, you know, been one of the faster growing areas. And certainly, that happened in Q2.

Speaker Change: I think a medium to longer term opportunity we're now seeing is things like home health care. That remains an opportunity for us.

Nathan Winters: So we're excited about, you know, that. So health care's always been a smaller piece of our business, but, you know, in one of the fact that growing areas that happened in Q2. I would say if we moved to Emia, say overall, you know, the strength in Emia was, you know, relatively easy compare in Q2 compared to the other regions. Overall, the positive, I say in Emia, is that we saw some larger projects move ahead, you know, outside of retail. So this is one of the places where we've seen some growth in TNL, outside of retail, you know, and some competitive wins, you know, in Emia.

Speaker Change: and other people who are doing things like tablets in that area in home healthcare. So we're excited about that. So healthcare has always been a smaller piece of our business, but it's been one of the faster-growing areas, and certainly that happened in Q2.

William J. Burns: I would say, if we move to EMEA, I'd say overall, you know, the strength in EMEA was, you know, relatively easy to compare in Q2 compared to the other regions. Overall, the positive I'd say about EMEA is that we saw some larger projects move ahead, you know, outside of retail. So this is one of the places where we've seen some growth in T&L outside of retail and some competitive wins in EMEA. So we feel good about that.

Speaker Change: I would say, if we move to anemia, I'd say overall, you know, the strength anemia was relatively easy to compare in Q2 compared to the other regions. Overall, the positive, I'd say, in anemia is that we saw

Speaker Change: Some larger projects move ahead, you know, outside of retail. So this is one of the places where we've seen some growth in.

Speaker Change: TNL outside of retail, you know, and some competitive wins, you know, in EMEA, so we feel good about that.

William Burns: So we feel good. About that manufacturing remains challenging, you know, in, in Emia today. So I think that, you know, kind of mixed overall feel good about some TNL orders, large TNL orders, easier compare when manufacturing means challenging. So I think, you know, overall, I think we want to see, you know, North America, EMIA; we'd expected to come out of this first, but we saw some strength in Latin America too.

William J. Burns: Manufacturing remains challenging, you know, in EMEA today. So I think that, you know, kind of mixed overall, feel good about some T&L orders, large T&L orders, easier to compare when manufacturing remains challenging. So I think, you know, overall, I think we want to see, you know, North American EMEA, which we'd expect to come out of this first, but we saw some strength in Latin America too. So I think mixed results across the region. And the next question comes from Brad Hewitt with Wells Fargo. Please go ahead. Hey, good morning, guys. Wolf Research. I am not sure what happened.

Speaker Change: Manufacturing remains challenging you know in in EMEA today so I think that you know kind of mixed overall feel good about some T&O orders large T&O orders.

Speaker Change: easier to compare when manufacturing remains challenging. So I think, you know, overall, I think we want to see, you know, North America anemia, we'd expect to come out of this first, but we saw some strength in Latin America, too. So I think mixed results across the regions.

Unknown Executive: So I think mixed results across the regions.

Bradley Hewitt: And the next question comes from Brad Hewitt with Wells Fargo. Please go ahead. Hey, good morning, guys. Wolf research, not sure what happened there. Sorry, Brad, I miss you. Broke up there during the question. Yeah, sorry.

Bradley Thomas Hewitt: Sorry, Brad, we missed you. You broke up there during the question. Yeah, sorry.

Speaker Change: And the next question comes from Brad Hewitt with Wells Fargo. Please go ahead.

Bradley Thomas Hewitt: Hey, good morning guys. Wolf Research. Not sure what happened there.

Speaker Change: Sorry Brad, we missed the question. You broke up there during the question.

Nathan Andrew Winters: So just curious if you could elaborate a little more on what you're assuming in the second half from the top line perspective. So at the midpoint of your four-year guidance, it implies revenue in the second half essentially flat with the Q2 run rate. So can you help me reconcile that versus kind of the early signs of momentum in mobile computing and also given the typical positive seasonality in Q4? Yeah, so if you look at our pull your guide of four to seven with the midpoint of five and a half, you know, I think, from a year on year perspective, really driven by what we see as double-digit growth in the second half demand, you know, about five points for the year where But then we had the challenging, you know, comps in the first half that offset that.

Nathan Winters: So just serious if you could elaborate a little more on what you're assuming in the second half from the top line perspective. So at the midpoint of your full year guidance, that implies revenue in the second half essentially flat with the Q2 run rate. So can you help me reconcile that versus kind of the early science and momentum in mobile computing and also given the typical positive technology in Q4? Yeah, so if you look at our full year guide, 4 to 7 with the midpoint of five and a half, you know, I think you're on your perspective, really driven by what we see as double-digit growth in the second half demands.

Bradley Thomas Hewitt: Yeah, sorry. So just curious if you could elaborate a little more on what you're assuming in the second half from the top line perspective.

Bradley Thomas Hewitt: So at the midpoint of your four-year guidance, it implies revenue in the second half essentially flat with the Q2 run rate. So can you help me reconcile that versus kind of the early signs of momentum in mobile computing and also given the typical positive seasonality in Q4?

Nathan Andrew Winters: So, again, really, the full-year growth is driven by underlying strength in the business in the second half. As we said, we see modest demand increases across each of our vertical markets, and that's inclusive of the Q2 beat.

Speaker Change: yeah so if you look at our pull your guide

Speaker Change: A four to seven with the midpoint of five and a half, you know, I think, you know, from a year on year perspective, really driven by what we see is double digit growth in the second half demand.

Nathan Winters: You're about five points for the year where, again, if you look at the full year, a lot of moving parts were the destocking from last year accounts for about seven points of growth. But then we had the challenging, you know, comps in the first half that offset that. So again, really the full year growth is driven by underlying strength in the business in the second half. Now, as we said, we see, you know, modest demand increases across each of our vertical markets; that's inclusive of the Q2B. So I think, you know, we look at it as really the strength we saw in Q2 continuing into the third quarter, as a similar how we structured the guide over the last several quarters of not anticipating or expecting, you know, sequential improvement. But what have we seen here in the most recent.

Speaker Change: It's about five points for the year where, again, if you look at the full year, a lot of moving parts where the destocking from last year accounts for about seven points of growth.

Speaker Change: Unknown Speaker But then we had the challenging comps in the first half that offset that. So again, really the full year growth is driven by underlying strength in the business in the second half.

Speaker Change: As we said, we see modest demand increases across each of our vertical markets.

Nathan Andrew Winters: So I think, you know, we look at it as really the strength we saw in Q2 continuing into the third quarter. I think it is similar to how we structured the guide, you know, over the last several quarters of not anticipating or expecting, you know, sequential improvement. But, you know, what we have seen here in the most recent weeks and months, we see that continuing here in July, in terms of that stability in the business, albeit at a bit higher level than we saw as we entered the second quarter.

Speaker Change: That's inclusive of the Q2 beat, so I think, you know, we look at it as really the strength we saw in Q2, continuing into the third quarter, I think similar to how we structured the guide over the last several quarters of not anticipating or expecting

Speaker Change: Sequential Improvement, but what have we seen here in the most recent?

Nathan Winters: You know, weeks and months, we said continuing here in July in terms of that stability in the business, albeit at a bit higher level than we saw as we entered the second quarter with modest increase as we go into the fourth quarter. So, you know, as Bill highlighted before, typically a lot of the year and spend that we see more customers is as lean towards large orders in the past. And again, being, you know, thoughtful about how we embed those in the guide until we have more certainty and commitments from our customers on moving forward with those projects before including it for our full year guide.

Speaker Change: weeks and months. We see that continuing here in July in terms of that stability in the business, albeit at a bit higher level than we

Nathan Andrew Winters: With a modest increase as we go into the fourth quarter. So, you know, as Bill highlighted before, typically, a lot of the year-end spend that we see from our customers is typically leaned towards large orders in the past. And again, being thoughtful about how we embed those in the guide until we have more certainty and commitments from our customers on moving forward with those projects before including them in our affiliate guide. So I think we think it's grounded in what we see today, given that visibility into the large deployments and appropriate. Okay, that's helpful.

Speaker Change: We saw as we entered the second quarter.

Speaker Change: with modest increase as we go into the fourth quarter. So, you know, as Bill highlighted before, typically a lot of the year-end spend that we see from our customers has leaned towards large orders in the past. And again,

Speaker Change: being thoughtful about how we embed those in the guide until we have more certainty and commitments from our customers on moving forward with those projects before including it for our affiliate guide. So I think, we think it's grounded in what we see today, given that visibility into the large deployments and appropriate.

Nathan Winters: So I think we think it's grounded in what we see today, given that visibility into the large deployments and appropriate.

Bradley Thomas Hewitt: And then you guys have talked in recent quarters about your expectation for seasonally lower OPEX spend in the second half of the year. Just curious if you could kind of shine some more light on that. And then if we look at the implied Q4 EBITDA margin of about 21%, can you talk about some of the puts and takes there on a sequential basis? Yeah, so if you look, just, you know, historically, sometimes it is hard to see, but typically, as we go throughout the year, and just based on when a lot of our trade shows, sales kickoff meetings, timing of benefits, et cetera, tend to be, you know, more weighted towards the first half of the year.

Nathan Winters: Okay, that's helpful. And then you guys have talked in recent quarters about your expectation first, easily lower up expand in the second half of the year. This is curious if you could kind of shine some more light on that. And then, if we look at the implied key for either, that margins about 21%. Can you talk about some of the puts and takes there on its sequential basis. Yeah, so if you look just historically, sometimes it is hard to see, but typically, as we go throughout the year, just based on Winnellov, our trade shows, sales kickoff meetings, timing of benefits, et cetera, tend to be more weighted towards the first half of the year.

Speaker Change: Okay, that's helpful. And then you guys have talked in recent quarters about your expectation for seasonally lower OPEX spend in the second half of the year.

Speaker Change: Just curious if you could kind of shine some more light on that, and then if we look at the implied Q4 EBITDA margins, about 21%, can you talk about some of the puts and takes there on a sequential basis?

Speaker Change: Yeah, so if you look just, you know, historically, sometimes it is hard to see, but typically as we go throughout the year,

Speaker Change: Just based on when a lot of our trade shows, sales kickoff meetings, timing of benefits, etc. tend to be more weighted towards the first half of the year. Then as you get into the back half of the year, you get into holiday seasons around the world.

Bradley Thomas Hewitt: Then, as you get into the back half of the year, you get into, you know, holiday seasons around the world, as well as some of the lower benefit costs as you go, you know, sequentially through the year.

Nathan Winters: Then, as you get into the back half of the year, you get holiday seasons around the world, as well as some of the lower benefits costs as you go sequentially through the year. So I think a lot of the sequential improvement is timing related. Now that we've kind of flushed through all of the restructuring benefits of the vast majority of the restructuring benefits through the PNL. And then I look at the sequential improvement and profitability from Q3 to Q4 is really based on that, you know, slight improvement in OPEX as well as the higher volume leverage flowing to the bottom line.

Speaker Change: and as well as some of the lower benefit costs as you go, you know, sequentially through the years. So I'd say a lot of the sequential improvement.

Nathan Andrew Winters: So I think a lot of the sequential improvement is timing-related now that we've, you know, kind of flushed through all of the restructuring benefits, the vast majority of the restructuring benefits through the P&L. And then I look at the sequential improvement and profitability from Q3 to Q4 is really based on that slight improvement in OPEX as well as the higher volume leverage flowing to the bottom. And the next question comes from Keith Housum with North Coast Research. Please go ahead.

Speaker Change: is timing related now that we've, you know, kind of flushed through all of the restructuring benefits, the vast majority of the restructuring benefits through the P&L.

Speaker Change: And then I look at the sequential improvement and profitability from Q3 to Q4 is really based on that slight improvement in OPEX as well as the higher volume leverage flowing to the bottom line.

Keith Housum: And the next question comes from Keith Halson with North Coast Research. Please go ahead. Good morning, guys. Question for you on the software and services; you know, with mobile computing being up double digits. I guess I would have expected a little bit of that phone through more in software and services. I know people find out for their warranty contracts and things of that nature.

Speaker Change: And the next question comes from Keith Housum with North Coast Research. Please go ahead.

Keith Michael Housum: Good morning, guys. Question for you on the software and services. You know, with mobile computing being up double digits, I guess I would have expected a little bit of that phone through in the software and services line as people sign up for their warranty contracts and things of that nature. Can you perhaps shed a little light on the connection between the two and, you know, the modest growth that you had in that line item this quarter? Twenty years ago, I would say that, you know, overall, we've seen consistent growth in software and services over the last several quarters. So we feel good about that.

Keith Michael Housum: Good morning, guys. Question for you on the software and services, you know, with mobile computing being up double digits, I guess I would have expected a little bit of that phone through more in the software and services line as people sign up for their warranty contracts.

Nathan Winters: Keith, you've got some of the light on the connection between the two and the modest growth that you had in that light on this quarter. Yeah, Kate, this bill. I would say that, you know, overall we've seen consistent growth in software and services over the last several quarters, so we feel good about that. Let's say we continue to see strong attach rates with mobile devices. So, you know, the revenue lags out of worse, right? So ultimately, you know, the strong attach rates continue with uptick and mobile computers. So no real change there. It's just not tied directly to revenue in the exact quarter, you know, depending on when the mobile devices are sold.

Speaker Change: and things of that nature. Can you perhaps shed a little light on the connection between the two and, you know, the modest growth that you had in that line item this quarter?

William J. Burns: Let's say we continue to see strong attach rates with mobile devices. So, you know, the revenue lags that, of course, right. So ultimately, you know, the strong attach rates continue with the uptick in mobile computers. So no, no real change there. It's just not tied directly to revenue in the exact quarter, you know, depending on when the mobile devices are sold. So I wouldn't, I wouldn't take anything away from

Speaker Change: Yeah, Keith, it's Bill. I would say that, you know, overall, we've seen consistent growth in software and services over the last, you know, several quarters. So we feel good about that.

Speaker Change: Let's say we continue to see strong attach rates with mobile devices, so the revenue lags that of course, so ultimately the strong attach rates continue with uptick in mobile computers, so no real change there, it's just not tied directly to revenue in the exact quarter depending on when the mobile devices are sold, so I wouldn't take anything away from that, then we'll continue to see.

William J. Burns: And then we'll continue to see strong attach rates really driven by, you know, things like upgrades around, you know, OS and security patches, and so forth, continue to be an important aspect of our customers buying service from us. I would like to say that, you know, we've seen in the past some customers extend their support agreements. And I think we're seeing a little bit less of that now, which is, again, a good sign for, you know, ultimately, our customers looking to upgrade their mobile devices in the future.

Nathan Winters: So I wouldn't take anything away from that. It would then continue to see strong attach rates, really driven by, you know, things like upgrades around, you know, OS and security patches and so forth continue to be an important aspect of our customers buying service from us. You know, like to say that, you know, we've seen in the past, some, you know, customers extend their support agreements. And I think we're seeing a little bit less of that now, which is again, a good sign for, you know, ultimately our customers looking to. We're seeing a little bit less of that, if anything else.

Speaker Change: Strong attach rate, really driven by things like upgrades around OS and security patches and so forth continue to be an important aspect of our customers buying service from us.

Speaker Change: You know, I like to say that...

Speaker Change: We've seen in the past some customers extend their support agreements, and I think we're seeing a...

Speaker Change: A little bit less of that now, which is, again, a good sign for, you know, ultimately...

William J. Burns: So maybe a little bit less of that, if anything else. Overall, I'd say, you know, software and services, an important piece of our business recurring revenue that we and others like, so I think all good there, nothing, really, to read into it. Okay, I appreciate that.

Speaker Change: Our customers looking to upgrade the mobile devices in the future, so maybe a little bit of less of that, if anything else. Overall, I'd say, you know, software and services, an important piece of our business, recurring revenue that we and others like. So I think all good there, nothing really to read into it, Keith.

Keith Housum: Overall, I'd say, you know, software and services, you know, important piece of our business, recurring revenue that we and others like. So I think all good there, nothing, nothing really to read into a key. Okay, I appreciate that.

Keith Michael Housum: And then just a follow-up question in terms of like, as most people are starting to look here toward the refresh cycle of all the devices bought, you know, four or five years ago, how should we think about pricing today versus where it was, you know, say, four years ago? You know, are people trading down to a lower-end remote computer? Or, as you think about most customers, is it relatively similar?

William Burns: And then just follow up in terms of like as most people start to care toward the refresh: like all the devices bought, you know, four or five years ago, how should we think about pricing today versus where it was, you know, say, four years ago? You know, are people trading down to a lower, the remote computer, or is you think about most customers is incredibly similar, but how do you think about pricing and what people are buying today versus four years ago? Yeah, I think we're, you know, obviously there's customers are making choices, you know, in the type of device they need in their environment.

Keith Michael Housum: Okay, I appreciate that. And then just to follow up, in terms of like, as most people are starting to look here toward the refresh cycle of all the devices bought, you know, four or five years ago.

Speaker Change: How should we think about pricing today versus where it was, say, four years ago? Are people trading down to a lower mobile computer, or as you think about most customers, is it relatively similar? But how do we think about pricing and what people are buying today versus four years ago?

William J. Burns: But how do we think about pricing and what people are buying today versus four years ago? Yeah, I think we're, you know, obviously, there's customers are making choices, you know, in the type of device they need in their environment. So I think that we continue to see that, you know, so if somebody needs a more rugged device, and their experience was, they had a, you know, a lower tier device, and they, you know, beat those devices up, they'll move to a higher tier device, and you'll see the reverse if they had a good experience with a more rugged device, could they go to a, you know, a more mid tier type device, I think that happens all the time.

Speaker Change: Yeah, I think we're, you know, obviously, there's customers are making choices, you know, on the type of device they need.

William Burns: So I think that we continue to see that. You know, so if somebody needs a more rugged device and their experience was data, you know, a lower tier device and they beat those devices up, they'll move to a higher tier device and you'll see the reverse that they had a good experience with a more rugged device. Could they go to a, you know, a more mid-tier type device? I think that happens all the time. But then we continue to focus on, you know, value that the devices bring to our customers to keep ASPs as high as we can.

Speaker Change: in their environment. So I think that we continue to see that.

Speaker Change: So if somebody needs a more rugged device, and their experience was...

Speaker Change: They had a lower tier device and they beat those devices up, they'll move to a higher tier device and you'll see the reverse if they had a good experience with a more rugged device. Could they go to a more mid-tier type device? I think that happens all the time.

William J. Burns: But we continue to focus on, you know, the value that the devices bring to our customers to keep ASPs as high as we can and, then, if we can't, to make sure that we're getting the same gross margin out of, you know, each tier of the portfolio.

Speaker Change: I think we continue to focus on, you know, value that the devices bring to our customers to keep

William Burns: And then, you know, if we can't make sure that we're getting the same gross margin out of, you know, each tier of the portfolio. In the past, we've cheered the portfolio kind of good, better, best, you know, or, you know, all the way down to kind of value tier. And I think that's allowed us to keep our pricing and margins higher. So if you want a higher spec device, you pay us a higher price for it. Then the, you know, early days, followed, you know, eight, nine years ago, eight years ago, nine years ago, an Android, you know, we didn't have as many flavors of devices.

Speaker Change: ASPs as high as we can. And then, you know, if we can't, to make sure that we're getting the same gross margin out of, you know, each tier of the portfolio.

Speaker Change: In the past, we've cheered the portfolio kind of good, better, best, you know, or, you know, all the way down to kind of value cheer. And I think that's allowed us to keep our

Speaker Change: Our pricing and margins to hire. So if you want a higher spec device, you pay us a higher price for it.

William J. Burns: In the past, we've cheered on the portfolio kind of good, better, best, you know, or, you know, all the way down to kind of a value tier. And I think that's allowed us to keep our prices and margins higher. So if you want a higher-spec device, you pay us a higher price for it. In the, you know, early days, Paul, eight, nine years ago, eight years ago, nine years ago, on Android, we didn't have as many flavors of devices.

Speaker Change: In the early days, Paul, 8, 9 years ago, 8 years ago, 9 years ago on Android, we didn't have as many flavors of devices.

William Burns: So, you know, you're discounting higher-end devices to meet value to your players. We don't do that today. We really cheering the portfolio as allowed us to kind of have conviction around our prices at the higher end. And, you know, we feel good about our customers and working closely with them to select the right device for the right use case.

Brian Drab: And the next question comes from Brian Drab with William Blair. Please go ahead. Hi, thanks. You mentioned that you're seeing sequential improvement in all the end markets, including T&L and manufacturing.

William J. Burns: So, you know, we were discounting higher-end devices to meet value-tier players; we don't do that today; we really love the portfolio has allowed us to kind of have conviction around our prices at the higher end. And, and, you know, we feel good about our customers and work closely with them to select the right device for the right use case. And the next question comes from Brian Drab with William Blair. Please go ahead.

Brian Paul Drab: Hi, thanks. You mentioned that you're seeing sequential improvement in all the end markets, including T&L and manufacturing. There have been some signs of further softness across the manufacturing industry in recent weeks. And I'm just wondering if you are seeing any of that show up in your customers' buying patterns, or if it really does feel like a pretty stable sequential improvement environment. Yeah, I'd say that, you know, as we talked about before, I think in Q1, we saw kind of retail and e-commerce first, and now we've seen mobile computers, and mobile computing kind of grow across each of the vertical end markets.

Speaker Change: Hi, thanks. You mentioned that you're seeing sequential improvement in all the end markets, including T&L and manufacturing.

William Burns: There have been some signs of further softness across the manufacturing industry in recent weeks, and I'm just wondering if you are seeing any of that show up in your customers' buying patterns or if it really does feel like a pretty stable sequential improvement environment now. Yeah, I'd say that, you know, we talked about before. I think in Q1 we saw kind of retail and e-commerce first, and now we've seen mobile computing kind of grow across each of the vertical and markets or retail, T&L, manufacturing, health care. I'd say that, you know, we're still seeing challenges in manufacturing and in overall, you know, demand, especially in the large deal, isn't back to the historical levels that it's been in the past.

Speaker Change: There have been some signs of further softness across the manufacturing industry in recent weeks And I'm just wondering if you're if you are seeing any of that show up in your customers buying patterns Or if it really does feel like a pretty stable sequential improvement environment now

Speaker Change: Yeah, I'd say that, you know, as we talked about before, I think in Q1, we saw kind of retail and e-commerce first, and now we've seen mobile computer, mobile computing kind of grow across.

Brian Paul Drab: So retail, T&L, manufacturing, healthcare, I'd say that, you know, we're still seeing challenges in manufacturing, and overall, your demand, especially for a large deal, isn't back to the historical levels that it has been in the past. But in manufacturing, specifically, we saw sequential improvement from Q1 and Q2. But I still think EMEA, for instance, we're clearly seeing, you know, a challenge in manufacturing where, you know, I would say overall, I wouldn't call manufacturing, you know, back to normalized levels in any way. But I think we just saw some sequential improvement, which I think was good.

Speaker Change: Each of the vertical end markets are retail, T&L, manufacturing, healthcare. I'd say that, you know, we're still seeing challenges in manufacturing and...

William Burns: But in manufacturing specifically, we sought sequential improvement from Q1 and Q2. But I still think, even for instance, we're clearly seeing a challenge in manufacturing where, you know, I would say overall, I wouldn't call manufacturing back to normalized levels in any way. But I think we just saw some sequential improvement, which I think was good.

Speaker Change: But I still think EMEA, for instance, we're clearly seeing, you know, a challenge in manufacturing where, you know, I would say overall, I wouldn't call manufacturing, you know, back to normalized levels in any, any way. But I think we just saw some sequential improvement, which I think was good.

William J. Burns: Manufacturing is an important segment for us. We see we've got fewer, we're less penetrated through manufacturing; our relationship with manufacturing is often more in the warehouse or the finished production and moving that through the supply chain. And, you know, some of our new solutions around machine vision, you know, rugged tablets, you know, our demand planning solutions for CPG manufacturers all play into having a broader portfolio for manufacturing. So, you know, we ultimately see that as a segment for growth for us, but I think still challenging in the short term. We would say we're seeing probably about the same as you're seeing. Okay, thank you.

William Burns: Manufacturing is an important segment for us. We see we've got lesser; we're lesser penetrated in through manufacturing. Our relationship and manufacturing many times or more in the warehouse or the finished production and moving that through the supply chain and some of our new solutions around machine vision. You know, rugged tablets, you know, our demand planning solutions for CPG manufacturers all play into having a broader portfolio for manufacturing. So, you know, we ultimately see that the segment for growth for us, but I think still challenge in the short term, we would say we're seeing probably about the same as you're seeing.

Speaker Change: Manufacturing is an important segment for us. We see we've got lesser, we're lesser penetrated in through manufacturing. Our relationship with manufacturing many times are more in the warehouse or the finished production and moving that through the supply chain.

Speaker Change: Some of our new solutions around machine vision.

Speaker Change: you know, rugged tablets, you know, our demand planning solutions for

Speaker Change: CPG manufacturers all play into having a broader portfolio for manufacturing. So, you know, we ultimately see that as a segment for growth for us, but I think still challenging the short term, we would say we're seeing probably about the same as you're seeing.

Unknown Executive: Okay, thank you.

Unknown Executive: And then for follow up, are you seeing opportunities potentially to gain share when we come out of this tougher environment? I mean, you obviously have a great balance sheet. You're not letting up in terms of investment, technology, and customer service. Can you comment on how you might be potentially better positioned in both AIT and EVM ultimately? Can't say that, you know, overall, we feel good about, you know, where we're at in our customer relationship. We continue to stay very close to our customers. Is, you know, we're a trusted partner to them. And I think that as the macro environment gets better, I think we would say that they will begin to buy again, especially, you know, in and we'll see larger orders improve as, you know, we continue to solve, you know, growth and medium and run rate in second quarter.

Brian Paul Drab: And then for follow-up. Unknown Speaker: Are you seeing opportunities potentially to gain share when we come out of this tougher environment? I mean, you obviously have a great balance sheet, you're not letting up in terms of investment in technology and customer service. Can you comment on how you might be potentially better positioned in both AIT and EVM, ultimately?

Speaker Change: Okay, thank you. And then for follow-up.

Speaker Change: Are you seeing opportunities potentially to gain share when we come out of this tougher environment? I mean, you obviously have a great balance sheet. You're not letting up in terms of investment in technology and customer service.

Speaker Change: Can you comment on how you might be potentially better positioned in both AIT and EVM ultimately?

William J. Burns: Yeah, I'd say that, overall, we feel good about where we are in our customer relationships. We continue to stay very close to our customers, and as you know, we're a trusted partner to them. And I think that as the macro environment gets better, I think we should say that they will begin to buy again, especially, you know, in and we'll see large orders improve as, you know, we continue to solve growth in medium and run rate, and in the second quarter, the install base continues to grow.

Speaker Change: Yeah, I'd say that, you know, overall, we feel good about, you know, where we're at in our customer relationships, we continue to stay

Speaker Change: very close to our customers is, you know, we're a trusted partner to them. And I think that

Speaker Change: As the macro environment gets better, I think we would say that they will begin to buy again, especially, you know, in, and we'll see large orders improve as, you know, we continue to solve, you know, growth in medium and run rate in second quarter.

William Burns: The install base continues to grow. And I think that, you know, from that perspective, I think that we're seeing increased use cases across, you know, our customer. So, you know, some are still sweating their assets. That'll shift. They can't do that, you know, forever. So I think overall, you know, we see the momentum in demand continuing and then continue to broaden both by vertical market to your first question and then by size of order and order activity.

William J. Burns: And I think that, from that perspective, I think that we're seeing increased use cases across, you know, our customer environments; some are still sweating their assets that'll shift; they can't do that, you know, forever. So I think overall, you know, we see the momentum in demand continuing and then continue to broaden both by vertical market, to your first question, and then by size of order and order activity, you know, across small, medium, and large types of orders. And the next question comes from Rob Mason with Baird. Please go ahead.

Speaker Change: The installed base continues to grow, and I think that, you know, from that perspective, I think that we're seeing increased use cases across, you know, our customer.

Speaker Change: Unknown Speaker, the environment, so you know, some are still sweating their asses, that'll shift, they can't do that.

Speaker Change: You know forever, so I think overall, You know, we see the momentum in demand continuing, and then continue to broaden both by vertical market to your first question and then by size of order and order activity, you know across small, medium, and large type of movers

Rob Mason: Williams. And the next question comes from Rob Mason with Baird. Please go ahead. Yes, good morning, Bill and Nathan. The strength in the Gross Margin, I think, has already been commented on, but if you think about, you know, when large orders do come back, how should we be thinking or how are you thinking about sensitivity in the Gross Margin profile today versus say maybe 2018, 2019? Have you done anything different structurally around your, either your supply agreements or just as you mentioned, Bill, tearing the portfolio that, you know, would suggest the Gross Margin, you know, holds up better or does it kind of have that kind of returned to maybe 2018, 2019 levels with large orders come back?

Robert W. Mason: Yes, good morning, Bill and Nathan. The strength in the gross margin, I think, has already been commented on. But if you think about, you know, when large orders do come back, how should we be thinking or how are you thinking about sensitivity in the gross margin profile today versus, say, maybe 2018, 2019? Have you done anything different structurally around your either your supply agreements or, just as you mentioned, Bill tiering the portfolio that would suggest that gross margin holds up better, or does it kind of have that kind of return to maybe 2018-2019 levels with large orders coming back?

Speaker Change: Good morning, Bill and Nathan. The strength in the gross margin, I think, has already been commented on, but if you think about, you know, when large orders do come back, how should we be thinking or how are you thinking about sensitivity in the gross margin profile today versus, say, maybe 2018, 2019?

William J. Burns: Have you done anything different structurally around either your supply agreements or just, as you mentioned, billetiering the portfolio?

Speaker Change: would suggest that gross margin holds up better or does it kind of have that kind of return to maybe 2018, 2019 levels when large orders come back?

Nathan Winters: Yeah, Rob, I think just if you look, I would say no structural difference in terms of maybe the differential between the margin we'd expect on a large yield versus kind of the runway business. So that, I think, hasn't structurally changed. You know, the one thing, if you, you know, if you go back, I think that the one aspect is, particularly if you go from 2019, since 2019, whether that's, you know, tariff, the supply chain challenges, the rapid growth. So it's, it's pretty challenging to find what's the right baseline. Any of you go back to 2018, right? It's on just the lower, you know, lower base.

Robert W. Mason: Yeah, Rob, I think just if you look, I would say there is no structural difference in terms of maybe the, you know, the differential between the margin we'd expect on a large deal versus kind of the run rate business. So that hasn't structurally changed. But the one thing, if you go back, I think the one...

Speaker Change: Yeah, Rob, I think just if you look...

Speaker Change: You know, the one thing, if you go back, I think the one...

Unknown Speaker: Unknown Speaker, Unknown Speaker, Unknown Speaker, Transcripts provided by Transcription Outsourcing, LLC. And, you know, being able to leverage scale and leverage our distribution network as we've grown to inherently build a higher gross margin profile company. But again, I think it will be somewhat decremental as we move to gross margin once large deals recover, but still incremental as you think about it from EBITDA rates. So I think there's the balance of, you know, it's still incremental margin to the total, you know, to the bottom line, but slightly dilutive in gross margin.

Speaker Change: aspect of particularly if you go from 2019 since 2019, whether that's, you know, tariffs, the supply chain challenges, the rapid growth, so it's

Speaker Change: It's pretty challenging to find what's the right baseline. I mean, if you go back to 2018, right, it's on just the lower base. So I think, you know, if you look at the business today, I think the strength across the portfolio is – we have strength across the portfolio in terms of the underlying gross margin.

Nathan Winters: So I think, I think, you know, if you look at the business today, I think the strength across the portfolio is, we have strength across the portfolio in terms of the underlying gross margin. And, you know, being able to leverage the scale and leverage our distribution network as we've grown to inherently build a higher gross margin profile company. But again, I think there will be somewhat decremental as we, in Gross Margin, once large deals recover, but still incremental as you think about it from the EBITDA rate. So I think there's the, the balance of, you know, it's still incremental margin to the total, you know, to the bottom line, but slightly dilutive in gross margin.

Speaker Change: and, you know, being able to leverage the scale and leverage our distribution network as we've grown to inherently build a higher gross margin profile company.

Speaker Change: But again, I think it will be somewhat decrimental as we, in gross margin,

Speaker Change: once large deals recover, but still incremental as you think about it from EBITDA rates. So I think there's the balance of, you know, it's still incremental margin to the total, you know, to the bottom line, but slightly dilutive in gross margin.

Nathan Winters: I see. And just to go back on the regional discussion, you know, my math, and maybe this is not totally right, but it did look like North America stepped down a little bit sequentially. If that is the case, it's just any color that you could provide on what you saw there. Yeah, it around North America was down, you know, year on year. I'm not sure if it's actually; it's down to potentially as well. And it's pointing to me, I would say, you know, overall mobile computing returned to gross in North America. And just like we saw across the other regions, so that that clearly was positive.

Unknown Speaker: And just to go back on the regional discussion, you know, my math, and maybe this is not totally right, but it did look like North America stepped down a little bit sequentially. If that is the case, just any color that you could provide on what you saw there.

Speaker Change: And just to go back on the regional discussion.

Nathan Andrew Winters: Yeah, Rob, North America was down, you know, year on year, I'm not sure, actually, it's down sequentially as well. And it's pointing to me, I would say, overall, mobile computing returns to growth in North America, again, just like we saw across the other regions, so that clearly was positive. The other product categories were down, you know, as a year ago, in the first and second quarters. We saw supply chain challenges from a print and a scanning perspective.

Speaker Change: Thank you for pointing to me. I would say, you know, overall, mobile computing returned to growth in North America, again, just like we saw across the other regions, so that that clearly was positive. The other product categories were down, you know, as

Nathan Winters: The other product categories were down, you know, as a year ago in 1st and 2nd quarter, we saw supply chain challenges abate from a print and a scanning perspective. So the compares were pretty challenging for both those businesses. They had really good Q1 and Q2s of last year. So I think that impacted North America. In North America, typically has an overweight on large deals as well. So, so growth in North America, we really like to see kind of run rate mid to year and large deals because the large deals are overweight typically in North America.

Speaker Change: A year ago in first and second quarter, we saw supply chain challenges abate from a print and a scanning perspective. So the compares were pretty challenging for both those businesses. They had really good Q1 and Q2s of last year. So I think that impacted North America.

Nathan Andrew Winters: So the comparisons were pretty challenging for both those businesses; they had really good Q1 and Q2 of last year. So I think that impacted North America. North America typically has an overweight on large deals as well.

Speaker Change: In North America, he typically has an overweight on large deals as well.

Speaker Change: So growth in North America, we really like to see kind of run rate, mid-tier and

Speaker Change: Unknown Speaker, the large deals are are overweight typically in North America. So we saw kind of black sequentially, as we said before.

Nathan Winters: So we saw kind of black sequentially as we said before, large deal activity Q1 to Q2. And really North America would like to see more large deal activity come back here in kind of 2nd half. And then hopefully some year ends to hand in it and then no growth into 25. So that's really the story of North America.

William J. Burns: So, growth in North America, we really like to see kind of run rate, mid-tier and large deals, because the large deals are overweight, typically in North America. So we saw kind of flat sequentially, as we said before, large deal activity, Q1 to Q2. And really, North America would like to see more large deal activity come back here and kind of the second half and then hopefully some year-end spend and then no growth into 25. So that's really the story of North America.

Speaker Change: Large deal activity Q1 to Q2 and really North America would like to see more large deal activity.

Speaker Change: come back here in kind of second half and then hopefully some year-end spend and then growth into 25. So that's really the story of North America.

Jim Ricchiuti: The next question comes from Jim Ricchiuti with Needham. Please go ahead. Hi, good morning.

James Andrew Ricchiuti: And the next question comes from Jim Ricchiuti with Needham. Please go ahead. Hi, good morning. This is Chris Grenga on behalf of Jim.

Speaker Change: And the next question comes from Jim Ricchuti with Needham. Please go ahead.

Christopher Grenga: Most of my questions have been addressed, but maybe just one for me. The chart with the touchpoints is very helpful. Just wondering, as you look ahead to seeing larger projects return, are you preparing for large project activity to be in any one of these particular nodes, whether it's factory, warehouse, store, last mile, et cetera, or do large projects generally entail, you know, abroad? A broad coverage of one or many of those nodes or just how you're thinking about that.

Christopher Grenga: This is Chris Grenga on for Jim. Most of my questions have been addressed, but maybe just one for me. The chart with the touch points is very helpful.

Speaker Change: Hi, good morning. This is Chris Grenga on for Jim. Most of my questions have been addressed, but maybe just one for me.

William Burns: Just wondering, as you look ahead to seeing larger projects return, are you preparing for large project activity to be in any one of these particular nodes, whether it's factory, warehouse, store, or last mile, et cetera, or do large projects generally entail a broad coverage of one or many of those nodes. They're just how you're thinking about that. Thank you. Yeah, I think we see large deals typically across the portfolio, so that it's all about size and scale of customers. So in retail, the larger retailers that would refresh and have repressicles or upgrades or larger orders across the portfolio that we do.

Christopher Grenga: The chart with the touchpoints is very helpful. Just wondering, as you look ahead to seeing larger projects return, are you preparing for...

Speaker Change: for large project activity to be in any one of these particular nodes, whether it's factory, warehouse, store, last mile, etc., or do large projects generally entail, you know, a broad

Speaker Change: A broad coverage of one or many of those nodes or just how you're thinking about that. Thank you.

Christopher Grenga: Yeah, I think we see large deals typically, you know, across the portfolio, so it's all about the kind of size and scale of customers. So, you know, in retail, it'd be larger, the larger retailers that would refresh and have refresh cycles or upgrades or larger orders, you know, across the portfolio that would do, you know, a multiple store upgrade, refreshing to a new device, for instance. In transportation logistics, you'd see things like the fleet of last mile delivery drivers, as an example, upgrading across transportation logistics or postal workers, you know, around the globe would be examples of large opportunities.

Speaker Change: Yeah, I think we see large deals typically, you know, across the portfolio, so that, you know, it's all about kind of size and scale of customers.

Speaker Change: You know, in retail would be larger, the larger retailers that would refresh and have refresh cycles or upgrades or larger orders, you know, across the portfolio that we do, you know, a multiple store upgrade refreshing to a new device, for instance.

William Burns: So, you know, a multiple store upgrade, repression to a new device, for instance, in transportation, the distance, you see things like the fleet of last mile delivery drivers as an example, you know, upgrade across transportation logistics or postal workers, you know, around the globe would be examples of large opportunities. So I think we see them across each one; they're a bit different. You know, in manufacturing, it's more location by location or plant by plant, as opposed to large deal activities we see in retail, whether you multiple stores at once or TNL, where they do an entire fleet of drivers are posted.

Speaker Change: In transportation logistics, you'd see things like the fleet of last-mile delivery drivers, as an example, you know, upgrade across.

Speaker Change: Transportation Logistics, or postal workers, you know, around the globe would be examples of large opportunities. So, I think we see them across each one. They're a bit different. You know, in manufacturing, it's more...

Christopher Grenga: So I think we see them across each one; they're a bit different, you know, in manufacturing, it's more location by location or plant by plant as opposed to large deal activities we would see in retail, where they do multiple stores at once or TNL, where they do an entire fleet of drivers or postal. So it's a bit different by node.

Speaker Change: Location by location or plant by plant as opposed to large deal activities we'd see in retail where they do multiple stores at once or TNL where they do an entire fleet of drivers or postal. So it's a bit different by node, so manufacturing more broken down by site.

William Burns: So it's a bit different by node, so manufacturing more broken down by site, retail more multiple stores at once. TNL more larger deployments, I would say, you know, healthcare more, more like manufacturing, you know, not as large a hospital systems, more kind of hospital at a time or multiple hospitals at a time, but not those large refreshes. So I'd say large refreshes and upgrades more tied to retail and TNL.

William J. Burns: So manufacturing more broken down by site, retail more multiple stores at once, and TNL more larger deployments. I would say, you know, healthcare more like manufacturing, not as large a hospital systems, more kind of hospital at a time or multiple hospitals at a time, but not those large refreshes. So I'd say large refreshes and upgrades more tied to retail and TNL. And the next question comes from Guy Hardwick with Freedom Capital Markets. Please go ahead.

Speaker Change: Retail more, multiple stores at once, T&L more, larger deployments, I would say.

Speaker Change: You know, healthcare more like manufacturing, you know, not as large a hospital systems, more kind of hospital at a time or multiple hospitals at a time, but not those large refreshes. So I'd say large refreshes and upgrades more tied to retail and T&L.

Guy Hardwick: And the next question comes from Guy Hardwick with Freedom Capital Markets. Please go ahead. Hi, good morning. Zebra Sisters, some really interesting morning, Monio. Zebra Sisters is some very interesting press releases regarding working with Qualcomm to run LLAMs on Zebra mobile computers, but without the requirements of regular loads to the cloud.

Speaker Change: And the next question comes from Guy Hardwick with Freedom Capital Markets. Please go ahead.

Guy Drummond Hardwick: Hi, good morning. Zebra's issued some very interesting press releases regarding working with Qualcomm to run LLMs on Zebra mobile computers, but without the requirements for any kind of regular uploads to the cloud. So I was just wondering, Bill, just how close is Zebra to kind of a broad-based introduction of these kinds of AI digital system products in mobile computing? Yeah, so we think of AI across the portfolio and in several different ways.

Guy Drummond Hardwick: Hi, good morning. Zebra has issued some very interesting press releases regarding working with Qualcomm.

Guy Drummond Hardwick: to run LLMs on Zebra mobile computers, but without the requirements of kind of regular uploads to the cloud. So I was just wondering, Bill, just how close is Zebra to kind of a broad based introduction of these kind of AI digital system products in mobile computing?

William Burns: So I was just wondering, Bill, just how close is Zebra to kind of a broad-based introduction of these kind of AI digital system products in mobile computing? Yeah, so we think of AI across the portfolio in several different ways. First, is that just our core business really is about collecting real-time data. And that's used as kind of intelligence to feed, you know, AI models, you know, overall. So whether that's a barcode reading a printed label with, you know, the information on it back into the cloud, whether that's an RFID, you know, tag being read. So the idea of digitizing a customer's environment, getting real-time data to AI models, and ultimately to generate insight to AI is the fundamental thing we do.

William J. Burns: Yeah, so we think of AI across the portfolio and in several different ways. First is that

Guy Drummond Hardwick: The first thing is that just our core business really is about collecting real-time data, and that's used as a kind of intelligence to feed, you know, AI models, you know, overall, so whether it's a barcode reading a printed label with, you know, the information on it back into the cloud, whether that's an RFID, you know, tag being read.

William J. Burns: Just our core business really is about collecting real-time data.

William J. Burns: And that's used as kind of intelligence to feed, you know, AI models, you know, overall. So whether that's a barcode reading, a printed label with, you know, the information on it back into the cloud, whether that's an RFID.

William J. Burns: Tag being read. So the idea of digitizing a customer's environment, getting real-time data to AI models, and ultimately to generate insights in AI is a fundamental thing we do, and the value of our data that we collect feeds these models. So I think that's kind of the baseline of when we think about AI.

William J. Burns: So the idea of digitizing a customer's environment, getting real-time data to AI models, and ultimately, generating insights in AI is a fundamental thing we do, and the value of our data that we collect feeds these models. So I think that's kind of a baseline for how we think about AI. Second, more traditional AI is used about, you know, probably in 50 different solutions across the portfolio today, whether that's optical character recognition or product recognition, navigation for autonomous mobile robots, package dimensioning, inside our software, around workforce planning and demand forecasting.

William Burns: And our value of our data that we collect feeds these models. So I think that's kind of a baseline of what we think about AI. Second is traditional. More traditional AI is used about, you know, probably in 50 different solutions across the portfolio today, whether that's optical character recognition or product recognition, navigation for autonomous mobile robots, package dimensioning inside our software around workforce planning and demand forecasting. So traditional AI is kind of the second piece that we think of across the portfolio. The third is what you're kind of referring to is the idea that this AI assistant, right, is that empowering the frontline worker through, you know, more information, leveraging a large language model on the device without connectivity to cloud.

William J. Burns: Second is traditional, more traditional AI is used about, you know, probably in 50 different solutions across the portfolio today.

William J. Burns: whether that's optical character recognition or product recognition, navigation for autonomous mobile robots, package dimensioning, inside our software around workforce planning and demand forecasting. So traditional AI is the second piece that we think of across the portfolio.

William J. Burns: So traditional AI is kind of the second piece that we think of across the portfolio. The third is what you're kind of referring to, which is this AI assistant, right, which empowers the frontline worker through, you know, more information, leveraging a large language model on the device without connectivity to the cloud, working closely with Qualcomm and Google, as you mentioned, to go do that.

William J. Burns: The third is what you're kind of referring to as the idea that this AI assistant, right, is that...

William J. Burns: Empowering the Frontline Worker through...

William J. Burns: You know, more information, leveraging a large language model on the device without connectivity to the cloud.

William Burns: Working closely with Paul Common Google, as you mentioned, to go do that. We've demonstrated that it's at our National Retail Federation trade show in January. We demonstrated again at our Innovation Day. We also demonstrated at Google's trade show earlier this year as well. So I think we're excited about that opportunity today.

William J. Burns: We've demonstrated that it works at our National Retail Federation trade show in January. We demonstrated it again at our Innovation Day. We also demonstrated it at Google's trade show earlier this year as well. So I think we're excited about that opportunity today, although it hasn't been commercialized yet.

William J. Burns: Working closely with Qualcomm and Google, as you mentioned, to go do that. We've demonstrated that at our National Retail Federation trade show in January . We demonstrated again at our Innovation Day. We also demonstrated at Google's

William J. Burns: Trade Show earlier this year as well. So I think we're, we're excited about that opportunity today. It's not commercialized yet. We're continuing to work closely with our customers to really understand all the use cases, what's required around that, how do we best

William Burns: It's not commercialized yet. We're continued to work closely with our customers to really understand all the use cases. What's required around that? How do we best leverage which model in that case? How do we keep the model up to date? So a lot of a lot of different discussions with our customers about what that offering will look like. But we're excited to work with Google and Qualcomm on it. Our customers excited about having a digital assistant within retail or manufacturing. You think of all the use cases of making your newest worker is good as your most experienced worker, having all of your standard operating procedures at the hands of the associate or the frontline worker, being able to tie that back to what's the source of the data being restricted to the individual customer.

William J. Burns: We're continuing to work closely with our customers to really understand all the use cases, what's required around that, how do we best leverage which model in that case, and how do we keep the model up to date. So a lot of different discussions with our customers about what that offering will look like. But we're excited to work with Google and Qualcomm on it. Our customers are excited about having a digital assistant in retail or manufacturing.

William J. Burns: leverage which model in that case, how do we keep the model up to date? So a lot of

William J. Burns: A lot of different discussions with our customers about what that offering will look like, but

William J. Burns: We're excited to work with Google and Qualcomm on it. Our customers are excited about having a digital assistant within retail or manufacturing. You think of all the use cases of making your newest worker as good as your most experienced worker, having all of your standard operating procedures at the hands of

William J. Burns: You think of all the use cases of making your newest worker as good as your most experienced worker, having all of your standard operating procedures at the hands of the associate or the frontline worker, being able to tie that back to, "What's the source of the data being restricted to the individual customer?"

William J. Burns: The Associate or the Frontline Worker, being able to tie that back to

William Burns: So we think it's a driver long term for our mobile devices and a differentiator for us, but today still early days, more pilots and demonstrating and working with customers than commercialized.

Speaker Change: What's the source of the data being restricted to the individual customer? So we think it's a driver long-term for our mobile devices and a differentiator for us. But today, still early days, more pilots and demonstrating and working with customers than commercialization.

Guy Drummond Hardwick: So we think it's a driver long-term for our mobile devices and a differentiator for us, but, you know, today, still early days, more pilots and demonstration and working with customers than commercialization. But if you don't mind me pushing a little bit on that, I mean, in terms of commercialization, is it a 2025 timeframe or beyond that? Yeah, and I'm likely like we're gonna have more demonstrations around it that we're planning today with some of our customers at the National Retail Show as we go to the next step along with it next year in 25. And then, you know, probably commercialization in, likely in 25, as I would see it today. Thank you. And the final question comes from Rob Jameson with Vertical Research. Please go ahead.

William Burns: Richard, but if you don't mind just me pushing a little bit on that, I mean in terms of commercialization, is it a 2025 timeframe, or will it be on that? Yeah, and now likely we're going to have more demonstrations around it than we're planning today with some of our customers at the National Retail Show as we go to the next step along with it, next year in 25 and then probably commercialization in likely in 25 as I would see it today.

Speaker Change: But if you don't mind just me pushing a little bit on that, I mean, in terms of commercialization, is it a 2025 timeframe or beyond that?

Speaker Change: Yeah, and I'll likely like we're gonna we're gonna have more demonstrations around it that we're planning today with some of our customers at the National Retail Show as we go to the next step along with it next year in 25 and then, you know, probably commercialization in in likely in 25 as I would see it today.

Unknown Executive: Thank you.

Rob Jamieson: And the final question comes from Rob Jamieson with Vertical Research. Please go ahead. Good morning, Bill and Nathan. You're resting in the quarter. Thanks, Rob.

Speaker Change: Thank you.

Speaker Change: And the final question comes from Rob Jamieson with Vertical Research. Please go ahead.

Rob Jameson: Hey, good morning, Bill and Nathan. Congratulations on the quarter. Thanks, Rob. I just wanted to kind of ask more of a high-level question around, go back and revisit M&A, and add in adjacencies. I mean, you all have a great installed base and a lot of market share across your various verticals. You know, as we think about you adding adjacencies and what you've done recently, adding, you know, things like Fetch and Matrox and other markets.

Rob Jamieson: Hey, good morning, Bill and Nathan. Congrats on the quarter.

Rob Jamieson: I just wanted to kind of ask more of a high level question around, you know, I'd go back and revisit M&A and add into agencies, and then you all have great installed base and a lot of market share across your various verticals. You know, as we think about you adding adjacencies and what you've done recently adding, you know, things like Fetch and Matrox and other markets, give them the comfort that your customers have with you. Do you think that as we return to like a more normal environment that will kind of, you know, you can leverage that and your customers will be more comfortable, you know, maybe deploying a new solution, you know, something more kind of like advanced like that or or Meetrox again and there's been their operations.

Rob Jamieson: Thanks Rob.

Rob Jamieson: I'm just wanted to kind of ask more of a high-level question around, you know,

Rob Jamieson: [inaudible]

Speaker Change: you adding adjacencies and what you've done recently adding, you know, things like Fetch and Matrox and, and other markets, given the comfort that your customers have with you, do you think that as we return to like a more normal

Rob Jameson: Given the comfort that your customers have with you, do you think that as we return to a more normal environment, that will kind of, you know, you can leverage that, and your customers will be more comfortable, you know, maybe deploying a new solution, something more kind of advanced like Thatcher or Matrox in their operations? I think that clearly, our strategic relationships with our customers create an opportunity for us to deploy a broader set of solutions within those customers. That trusted partnership allows us to do that. I think that the backdrop of the environment hasn't been all that great.

Speaker Change: environment that'll kind of, you know, you can leverage that and your customers be more comfortable, you know, maybe deploying a new solution, you know, something more kind of like advanced like Thatcher or Matrox in their operations.

William Burns: I think that clearly our strategic relationships with our customer breaks an opportunity for us to deploy a broader set of solutions within those customers. That trusted partnership allows us to go do that. I think that the backdrop of the environment hasn't been all that great. So, you know, machine vision is a good example that it's been kind of a challenging market. And then our diversification just takes time, where we were, you know, a center really around more semiconductor manufacturing and moving outside of that. So, but that is our customers are giving us an opportunity to sell solutions in that space because we have a relationship with them already.

William J. Burns: So you know, machine vision is a good example of that. It's been kind of a challenging market. And then our diversification just takes time, where we were, you know, centered really around more semiconductor manufacturing and moving outside of that. But that is because our customers are giving us an opportunity to sell solutions in that space because we have a relationship with them already. I think we're seeing the same thing across retail software and robotics, as you mentioned. So clearly, it matters, the breadth and depth of our current portfolio, the relationship we have with them, and the fact that we're a trusted partner to them. It's not always the same persona.

Speaker Change: I think that clearly our strategic relationships with our customer

Speaker Change #100: creates an opportunity for us to

Speaker Change #100: Deploy a broader set of solutions within those customers. That trusted partnership allows us to go do that.

Speaker Change #100: I think the backdrop of the environment hasn't been all that great, so you know, machine vision is a good example of that. It's been kind of a challenging market.

Speaker Change #100: and then our diversification just takes time where we were, you know, centered really around.

William J. Burns: So it's not I wouldn't say it's easy, meaning we've got to get from our current buyer of our solutions and the person who, you know, deploys our solutions today to someone else within the organization. So, you know, if we're working with somebody inside a manufacturer and more on the distribution of products at the end of the manufacturing line, we now need to form a relationship with somebody on the manufacturing line for things like machine vision solutions. To stick with that example, It's not easy, but it's certainly doable.

Speaker Change #100: more semiconductor manufacturing and moving outside of that so but that is our customers are giving us an opportunity to

William Burns: I think we're seeing the same thing across retail software and robotics, as you mentioned. So clearly it matters our breadth and depth of our current portfolio, the relationship we have with them, the fact that we're a trusted partner to them. It's not always the same persona. So it's not; I want to say it's easy, meaning we've got to get from our current buyer of our solutions and the person who, you know, um, deploys our solutions, but it does someone else within the organization. So, you know, if we're working with somebody inside a manufacturer and more on the distribution of products at the end of the manufacturing line, we now need to form a relationship with somebody on the manufacturing line for things like machine vision solutions to stick with that example.

Speaker Change #100: Sell Solutions in that space because we have a relationship with them already. I think we're seeing the same thing

Speaker Change #100: across retail software and in robotics, as you mentioned, so clearly, it matters are are

Speaker Change #100: The breadth and depth of our current portfolio, the relationship we have.

Speaker Change #100: with them, the fact that we're a trusted partner to them, it's not always the same persona. So it's not, I wouldn't say it's easy, meaning we've got to get from

William J. Burns: And because of our trusted relationship, they're willing to make that introduction. And then we've got to earn our way in and move our solutions into that manufacturing space. But we're given that opportunity because of those relationships.

Speaker Change #100: Our current buyer of our solutions and the person who...

Speaker Change #100: You know, um, deploys our, our solutions today to someone else within the organization. So,

Speaker Change #100: You know, if we're working with somebody inside a manufacturer and more on...

Speaker Change #100: So you're not only talking about the distribution of products at the end of the manufacturing line, we now need to form a relationship with somebody on the manufacturing line for things like the machine vision solutions to stick with that example. That's not easy, but it's certainly doable and because of our trusted relationship, they're willing to make that introduction. And then we've got to earn our way in and prove

William Burns: It's not easy, but it's certainly doable, and because of our trusted relationship, they're willing to make that introduction. And then we've got to earn our way in and move our solutions into that manufacturing space. But we're given that opportunity because of those relationships.

Speaker Change #100: Our solutions into that manufacturing space, but we're given that opportunity because of those relationships.

William Burns: That's helpful, and I appreciate it. And then that's the extent that you're willing to share, just as he talked about adjacent season things. You're looking at the portfolio. Is there anything, you know, either high level or specific that, you know, you're looking at at the moment, just especially as your leverage is getting to an attractive point here. Thank you. You know, I think that again, it's, you know, we think of assets that are close to, adjacent to the portfolio overall and really synergistic to what we do today. We'd like to, you know, do things in the, you know, similar vertical markets for the reasons we just talked about.

William J. Burns: That's helpful, and I appreciate it. And then there is the extent to which you're willing to share, just as you talked about adjacencies and things you're looking to add to the portfolio. Is there anything, you know, either high-level or specific, that, you know, you're looking at at the moment, just especially as your leverage is getting to an attractive point here? You know, I think that again when we think of assets that are closely adjacent to the portfolio overall and really synergistic to what we do today, we'd like to, you know, do things in the, you know, similar vertical markets for the reasons we just talked So all that comes into play.

Speaker Change #101: That's helpful and I appreciate it. And then that's the extent that you're willing to share just as you talked about adjacencies and things you're looking at in the portfolio. Is there anything, you know, either high level or specific that, you know, you're looking at at the moment, just especially as your leverage is getting to an attractive point here?

William J. Burns: And then ultimately, as I said before, a little bit higher hurdles at the moment, given the macro uncertainty to make sure that if we were going to acquire something or the certainty of revenue, and then ultimately, you know, higher interest rates, you know, way down on that a little bit. So I think overall, we continue to be inquisitive; it's got to be the right asset and the right fit for Zebra. This concludes our question and answer session.

Speaker Change #102: Thank you.

Speaker Change #103: You know, I think that again, it's, you know, it we think of assets that are closely adjacent to the portfolio overall and really

Speaker Change #103: Synergistic to what we do today, we'd like to.

Speaker Change #103: You know do things in the, you know similar vertical markets for the reasons we just talked about.

William Burns: So all that comes in to play. And then ultimately, like I said before, a little bit higher hurdles at the moment, given the macro uncertainty to make sure that if we were going to acquire something or the certainty of revenue, and then ultimately, you know, higher risk interest rates, you know, way down on that a little bit. So I think overall, we continue to be inquisitive. It's got to be the right asset and the right fit for Zebra.

Speaker Change #103: So all that comes into play and then ultimately, as I said before, a little bit higher hurdles at the moment given the macro uncertainty to make sure that

Speaker Change #103: If we were going to acquire something or the certainty of revenue and then ultimately, you know, higher risk interest rates, you know, way down on that a little bit. So I think overall, we continue to be inquisitive. It's got to be the right asset and the right fit for Zebra.

Michael Steele: This concludes our question and answer session.

William J. Burns: I would like to turn the conference back over to Mr. Burns for any closing remarks. I'd like just to wrap up by saying thank you to our employees and partners for continued support of Zebra and execution in the second quarter. We're now positioned for growth in the second half of the year.

William J. Burns: So have a great day, everyone. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

William Burns: I would like to turn the conference back over to Mr. Burns for any closing remarks. Yeah, I'd like just to wrap up by saying thank you to our employees and partners for continued support of Zebra and execution in the second quarter. We're now positioned for growth in the second half of the year. So have a great day, everyone. Thank you.

Speaker Change #103: This concludes our question and answer session. I would like to turn the conference back over to Mr. Burns for any closing remarks.

William J. Burns: I'd like just to wrap up by saying thank you to our employees and partners for continued support of Zebra and execution in the second quarter. We're now positioned for growth in the second half year, so have a great day everyone. Thank you.

Operator: The conference has now concluded. Thank you for attending today's presentation.

Operator: You may now disconnect.

Speaker Change #104: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.