Q4 2024 Zebra Technologies Corp Earnings Call

February 13, 2025

Assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation there'll 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 go ahead.

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Speaker Change: Morning, and welcome to Zebras fourth quarter earnings Conference call. This presentation is being simulcast on our website at investors Zebra dot 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.

Speaker Change: Results could differ materially and we refer you to the factors discussed in our SEC filings.

Speaker Change: During this call we will reference non-GAAP financial measures as we describe our business performance.

Speaker Change: You can find reconciliations at the end of this slide presentation and in today's earnings press release.

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

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

Nathan Winters: I will begin with a discussion of our fourth quarter results.

Nathan Winters: Nathan will then provide additional detail on the financials and discuss our 2025 outlook.

Nathan Winters: Bill will conclude with progress on advancing our strategic priorities.

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

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

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

Bill Burns: Our teams executed well in the fourth quarter delivering results above our outlook.

Bill Burns: For the fourth quarter, we realized sales greater than $1 3 billion.

Bill Burns: 32% increase compared to the prior year.

Bill Burns: And adjusted EBIT margin of 22, 1%.

Bill Burns: The nearly seven point increase.

Speaker Change: 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 fourth quarter results.

Bill Burns: non-GAAP diluted earnings per share of $4, which is more than double the prior year and strong free cash flow.

Bill Burns: As we discussed on our last earnings call in the third quarter.

Nathan Winters: Nathan will then provide additional detail on the financials and discuss our 2025 outlook.

Bill Burns: <unk> demand recovery brought it with data capture and printing returning to growth. Following mobile computing has returned to growth in Q2.

Nathan Winters: Bill will conclude with progress on advancing our strategic priorities.

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

Bill Burns: Demand trends continued to improve in most end markets throughout the fourth quarter with the manufacturing sector lagging.

Nathan Winters: Now, let's turn to slide four as I hand, it over to Bill.

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

Bill Burns: North American retail was a bright spot with stronger customer year end spending than we had anticipated.

Bill Burns: Our teams executed well in the fourth quarter delivering results above our outlook.

Bill Burns: These factors along with significant distributor destocking in the second half of last year.

Bill Burns: For the fourth quarter, we realized sales greater than $1 $3 billion or 32% increase compared to the prior year.

Bill Burns: Resulted in strong double digit sales growth in Q4.

Bill Burns: Adjusted EBITDA margin of 22, 1%.

Bill Burns: From a profitability perspective, the operating leverage from our strong sales growth drove significant margin expansion supporting our earnings and cash flow.

Bill Burns: Nearly seven point increase.

Bill Burns: non-GAAP diluted earnings per share of $4, which is more than double the prior year and strong free cash flow.

Bill Burns: As we enter 2025.

Bill Burns: As we discussed on our last earnings call in the third quarter, we saw demand recovery brought it with data capture and printing returning to growth.

Bill Burns: Order backlog supports a solid Q1, however, we remain cautious in our outlook as our customers navigate an uncertain environment, including a dynamic global trade geopolitical and macroeconomic backdrop.

Bill Burns: Following mobile computing has returned to growth in Q2.

Bill Burns: Demand trends continued to improve in most end markets throughout the fourth quarter with the manufacturing sector lagging.

Nathan Winters: I will now turn the call over to Nathan to review, our Q4 financial results and discuss our 2025 out.

Bill Burns: North America retail was a bright spot.

Nathan Winters: Thank you Bill, let's start with the P&L on slide six.

Bill Burns: With stronger customer year end spending than we had anticipated.

Nathan Winters: In Q4 total company sales grew approximately 32%, reflecting continued recovery in demand across our major product categories.

These factors along with significant distributor destocking in the second half of last year resulted in strong double digit sales growth in Q4.

Nathan Winters: Mobile computing strength and retail drove growth above our outlook.

Bill Burns: From a profitability perspective, the operating leverage from our strong sales growth drove significant margin expansion supporting our earnings and cash flow.

Nathan Winters: Our enterprise visibility <unk> mobility segment sales increased 33% and asset intelligence and tracking segment grew 29% or.

Nathan Winters: Our services and software recurring revenue businesses had solid growth in the quarter.

Bill Burns: As we enter 2025 or.

Bill Burns: Our order backlog supports a solid Q1.

Nathan Winters: We realized double digit sales growth across our regions.

Bill Burns: I ever we remain cautious in our outlook as our customers navigate an uncertain environment, including our dynamic global trade geopolitical and macroeconomic backdrop.

Nathan Winters: In North America sales grew 36% with the significant improvement in large retail mobile computing worse.

Nathan Winters: EMEA sales grew 24% with strength in northern Europe.

I'll now turn the call over to Nathan to review, our Q4 financial results and discuss our 2025 out.

Nathan Winters: Asia Pacific sales increased 30% led by Australia, New Zealand, and India, along with modest improvement in China.

Nathan Winters: Thank you Bill, let's start with the P&L on slide six.

Nathan Winters: In Q4 total company sales grew approximately 32%.

Nathan Winters: And sales grew 40% in Latin America, with particular strength in Brazil.

Nathan Winters: Reflecting continued recovery in demand across our major product categories.

Nathan Winters: Adjusted gross margin increased 410 basis points to 48, 7%, primarily due to volume leverage and adjusted operating expenses as a percentage of sales improved by 290 basis points.

Nathan Winters: Mobile computing strength and retail drove growth above our outlook.

Nathan Winters: Our enterprise visibility <unk> mobility segment sales increased 33% and asset intelligence and tracking segment grew 29% or.

Nathan Winters: This resulted in fourth quarter adjusted EBITDA margin of 22, 1%, a 670 basis point increase versus the prior year and a 70 basis point sequential improvement from Q3.

Nathan Winters: Our services and software recurring revenue businesses had solid growth in the quarter.

Nathan Winters: We realized double digit sales growth across our regions.

Nathan Winters: In North America sales grew 36% with a significant improvement in large retail mobile computing works.

Nathan Winters: non-GAAP diluted earnings per share was $4, 134% year over year increase and at the high end of our hour.

Nathan Winters: EMEA sales grew 24% with strength in northern Europe.

Nathan Winters: Asia Pacific sales increased 30% led by Australia, New Zealand, and India, along with modest improvement in China.

Nathan Winters: Turning now to the balance sheet and cash flow on slide seven.

Nathan Winters: For the full year, we generated $954 million of free cash flow as EBITDA increased and we drove significant improvements in working capital and inventory levels.

Nathan Winters: And sales grew 40% in Latin America, with particular strength in Brazil.

Nathan Winters: Adjusted gross margin increased 410 basis points to 48, 7%, primarily due to volume leverage and adjusted operating expenses as a percentage of sales improved by 290 basis points.

Nathan Winters: We achieved a 136% free cash flow conversion and ended the year at a one two times net debt to adjusted EBITDA leverage ratio.

Nathan Winters: As our cash flows recovered and debt levels have moderated we have increased flexibility to deploy capital consistent with our allocation priorities.

Nathan Winters: This resulted in fourth quarter adjusted EBITDA margin of 22, 1% is 670 basis point increase versus the prior year and a 70 basis point sequential improvement from Q3.

Nathan Winters: We repurchased $47 million of shares for the full year with most of the activity in Q4 as part of our.

Nathan Winters: non-GAAP diluted earnings per share was $4, 134% year over year increase and at the high end of our out.

Nathan Winters: Our continued efforts to scale our expansion in adjacent markets. We recently agreed to purchase photo Neo a leading three D machine vision company based in Eastern Europe.

Nathan Winters: Turning now to the balance sheet and cash flow on slide seven.

Nathan Winters: For approximately 60 million euros, which is expected to close in the first quarter.

Nathan Winters: For the full year, we generated $954 million of free cash flow as EBITDA increased and we drove significant improvements in working capital and inventory levels.

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

Nathan Winters: We entered 2025, the solid backlog supported by strong retail year end project spending that carried into our first quarter.

Nathan Winters: We achieved a 136% free cash flow conversion and ended the year at a one two times net debt to adjusted EBITDA leverage ratio.

Nathan Winters: Our first quarter sales growth guidance range of 8% to 11% reflects favorable comparisons and assumes a one point unfavorable impact from FX.

Nathan Winters: As our cash flows recovered and debt levels have moderated we have increased flexibility to deploy capital consistent with our allocation priorities.

Nathan Winters: Due to a significantly stronger dollar over the past several months.

Nathan Winters: Our first quarter adjusted EBITDA margin is expected to be approximately 21% and.

Nathan Winters: We repurchased $47 million of shares for the full year with most of the activity in Q4 as part of our.

Nathan Winters: And non-GAAP diluted earnings per share are expected to be in the range of $3 50 to.

Nathan Winters: Continued efforts to scale our expansion in adjacent markets. We recently agreed to purchase photo Neo a leading three D machine vision company based in Eastern Europe.

Nathan Winters: The $3 70.

Nathan Winters: This sales and profitability expectation is a sequential decline from Q4 reflective of normal seasonality.

Nathan Winters: For approximately 60 million euros, which is expected to close in the first quarter.

Nathan Winters: For the year, we expect sales growth between 3% to 7% inclusive of 130 basis point unfavorable impact from FX.

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

Nathan Winters: We entered 2025, the solid backlog supported by strong retail year end project spending they carried into our first quarter.

Nathan Winters: Demand trends have been positive across most of our end markets with manufacturing lagging.

Nathan Winters: That said, we remain cautious in our outlook as our customers navigate an uncertain environment and as a result, our visibility to customer spending beyond Q1 is lower than usual.

Nathan Winters: Our first quarter sales broke guidance range of 8% to 11% reflects favorable comparisons and assumes a one point unfavorable impact from FX.

Nathan Winters: Our full year adjusted EBITDA margin is expected to be between 21 and 22% and.

Nathan Winters: Due to a significantly stronger dollar over the past several months.

Nathan Winters: Our first quarter adjusted EBITDA margin is expected to be approximately 21% and.

Nathan Winters: And non-GAAP diluted earnings per share are expected to be in the range of $14 75.

Nathan Winters: And non-GAAP diluted earnings per share are expected to be in the range of $3 50 to.

Nathan Winters: To $15 25.

We will continue to remain agile to ensure we deliver solid profitable growth.

Nathan Winters: The $3 70.

Nathan Winters: This sales and profitability expectation is a sequential decline from Q4 reflective of normal seasonality.

Nathan Winters: Free cash flow for the year is expected to be at least $750 million, which reflects free cash flow conversion of greater than 90% we.

Nathan Winters: For the year, we expect sales growth between three and 7% inclusive of 130 basis point unfavorable impact from FX.

Nathan Winters: We will continue to work on further optimizing our working capital levels balanced with our supply chain resiliency initiatives.

Nathan Winters: Demand trends have been positive across most of our end markets with manufacturing lagging.

Nathan Winters: We've made substantial progress diversifying our supply chain sourcing beyond China over the past several years.

Nathan Winters: That said, we remain cautious in our outlook as our customers navigate an uncertain environment and as a result, our visibility to customer spending beyond Q1 is lower than usual.

Nathan Winters: We continue to work closely with our manufacturing and trade partners to optimize our footprint, which puts us in an improved position to navigate the impacts of recently announced import tariffs.

Nathan Winters: Our full year adjusted EBITDA margin is expected to be between 21 and 22% and.

Nathan Winters: Based on the incremental 10%, China tariffs that became effective in early February and.

Nathan Winters: And non-GAAP diluted earnings per share are expected to be in the range of $14 75 to.

Nathan Winters: And the 25% Mexico tariffs that become effective in early March.

Nathan Winters: To $15 25.

Nathan Winters: We anticipate a net impact to gross profit of approximately $20 million in 2025, peaking in Q2.

Nathan Winters: We will continue to remain agile to ensure we deliver solid profitable growth.

Nathan Winters: Free cash flow for the year is expected to be at least $750 million, which reflects free cash flow conversion of greater than 90%.

Nathan Winters: The impact is roughly split between China and Mexico.

Nathan Winters: We expect to substantially mitigate these tariffs as we exit 2025 through supply chain initiatives and targeted price increases left.

Nathan Winters: We will continue to work on further optimizing our working capital levels balanced with our supply chain resiliency initiatives.

Speaker Change: Lepton mitigated the annualized impact would have been more than $60 million.

Nathan Winters: We've made substantial progress diversifying our supply chain sourcing beyond China over the past several years.

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

Bill Burns: With that I will turn the call back to Bill.

Bill Burns: Thank you Nathan turning to slide 10.

Bill Burns: As we look at the long term opportunities for our business remains well positioned to benefit from secular trends to digitize and automate workflows with our portfolio of innovative solutions, including purpose built hardware software and services.

Nathan Winters: Based on the incremental 10%, China tariffs that became effective in early February and.

Nathan Winters: And the 25% Mexico tariffs that become effective in early March.

Bill Burns: We empower frontline workers to execute SaaS or effectively by helping them navigate constant change in real time.

Nathan Winters: We anticipate a net impact to gross profit of approximately $20 million in 2025, peaking in Q2.

Nathan Winters: The impact is roughly split between China and Mexico.

Bill Burns: Innovation remains central to our industry leadership, and we have consistently reinvested approximately 10% of our sales into research and development to advance our portfolio of solutions.

Nathan Winters: We expect to substantially mitigate these tariffs as we exit 2025 through supply chain initiatives and targeted price increases left.

Bill Burns: Recent progress includes AI based machine vision offerings expansion into self service kiosks.

Nathan Winters: Left on mitigated the annualized impact would have been more than $60 million.

Nathan Winters: Please reference additional modeling assumptions shown on slide eight.

Bill Burns: RFID capabilities within our mobile computing portfolio.

Bill Burns: With that I will turn the call back to Bill.

Bill Burns: In eco friendly printing supply.

Bill Burns: Thank you Nathan turning to slide 10.

Bill Burns: We augment our organic efforts with strategic acquisitions that advance our vision.

Bill Burns: This includes our pending acquisition of photo Neo which will expand our three D machine vision solutions into automotive manufacturing logistics and other key markets. We look forward to welcoming the team once the acquisition closes.

Bill Burns: We empower frontline workers to execute SaaS or effectively by helping them navigate constant change in real time.

Bill Burns: As Youll see on slide 11, our customers leverage our solutions to optimize workflows across a broad range of end markets, which drives productivity and better service to their customers shoppers and patients.

Bill Burns: The performance bar continues to rise and increasingly on demand economy.

Bill Burns: Recent progress includes AI based machine vision offerings expansion into self service kiosks.

Bill Burns: Zebra works closely with our customers on their technology journey to address their biggest challenges.

Bill Burns: RFID capabilities within our mobile computing portfolio.

Bill Burns: I would like to highlight some of the wins that transform customer workflows.

Speaker Change: In eco friendly printing supply.

We augment our organic efforts with strategic acquisitions that advance our vision.

Bill Burns: A large north American retailer is the and deploy zebra RFID fixed readers to optimize shelf availability for fresh food and apparel.

Speaker Change: This includes our pending acquisition of photo Neo which will expand our three D machine vision solutions into automotive manufacturing logistics and other key markets. We look forward to welcoming the team once the acquisition closes.

Bill Burns: This initial investment lays the groundwork for expansion into additional RFID solutions, such as loss prevention.

Bill Burns: A leading auto manufacturer recently launched mobile computing refresh and expansion projects spanning multiple us sites to provide real time visibility and streamline final quality inspections.

Speaker Change: As Youll see on slide 11, our customers leverage our solutions to optimize workflows across a broad range of end markets, which drives productivity and better service to their customers shoppers and patients.

Bill Burns: An online retailer in South America replaced the competitor's devices and expanded their relationship with us selecting zebra mobile computers scanners kiosk printers, and RFID readers to optimize their inbound and outbound warehouse operations.

Speaker Change: The performance bar continues to rise and increasingly on demand economy.

Speaker Change: Zebra works closely with our customers on their technology journey to address their biggest challenges.

Speaker Change: I would like to highlight some of the wins that transform customer workflows.

Bill Burns: A reliable device performance and ability to improve operational efficiency are particularly important to this customer.

Speaker Change: A large north American retailer is being deployed zebra RFID fixed readers to optimize shelf availability for fresh food and apparel.

Bill Burns: Additionally, a leading retail pharmacy is deploying zebra tablets, enabling their staff to provide improved patient care and scheduling whether in store or off site.

Speaker Change: This initial investment lays the groundwork for expansion into additional RFID solutions, such as loss prevention.

Bill Burns: This customer placed a competitor's solution with our tablets due to the breadth of zebras capabilities, along with our comprehensive support and maintenance services.

Speaker Change: A leading auto manufacturer recently launched mobile computing refresh and expansion projects spanning multiple U S sites to provide real time visibility and streamline final quality inspections.

Bill Burns: These projects demonstrate our customers rely on us to navigate their technology journey through our workflow expertise commitment to innovation and product lifecycle support.

Speaker Change: An online retailer in South America to replace the competitor's devices and expanded their relationship with us selecting zebra mobile computers scanners kiosk printers, and RFID readers to optimize their inbound and outbound warehouse operations.

Bill Burns: Slide 12 highlights zebra value proposition that we showcased at the National Retail Federation trade show in January.

Bill Burns: You highlighted zebras AI powered modern store demonstrating how our innovative solutions to help retailers drive improved performance through optimized inventory engaged associates and an elevated customer experience.

Speaker Change: A reliable device performance and ability to improve operational efficiency are particularly important to this customer.

Speaker Change: Additionally, a leading retail pharmacy is deploying zebra tablets, enabling their staff to provide improved patient care and scheduling whether in store or off site.

Bill Burns: Zebra and our partners helped to deliver these outcomes through improved omnichannel execution loss prevention worker collaboration and more.

Speaker Change: This customer placed a competitor's solution with our tablets due to the breadth of zebras capabilities, along with our comprehensive support and maintenance services.

Bill Burns: We have partnered with Qualcomm, Google and strategic independent software vendors to help our retail customers begin to leverage the power of AI across their frontline operations.

Speaker Change: These projects demonstrate our customers rely on us to navigate their technology journey through our workflow expertise commitment to innovation and product lifecycle support.

Bill Burns: At the show.

Bill Burns: Prominent retail customer demonstrated our zebra companion with AI agents that assist store associates with edge intelligence, such as operating procedures sales product information merchandising guidance and device operation.

Speaker Change: Slide 12 highlights zebra value proposition that we showcased at the National Retail Federation trade show in January.

Speaker Change: You highlighted zebras AI powered modern store demonstrating how our innovative solutions help retailers drive improved performance through optimized inventory engaged associates and an elevated customer experience.

Bill Burns: These agents active digital assistant.

Bill Burns: Dillard to our customers' unique operating environment.

Bill Burns: While leveraging generative AI to respond to queries and perform task without the need for extensive training.

Speaker Change: Zebra and our partners helped to deliver these outcomes through improved omnichannel execution loss prevention worker collaboration and more.

Bill Burns: Additionally, as our customers and partners accelerate their use of AI within business critical mobile applications.

Speaker Change: We have partnered with Qualcomm, Google and strategic independent software vendors to help our retail customers begin to leverage the power of AI across their frontline operations.

Bill Burns: <unk> AI suite enables quick and cost effective development of new solutions that take advantage of the continued advancement of our mobile computing platform.

Speaker Change: At the show.

Bill Burns: While we don't expect our new AI solutions to have a material impact on near term results. We believe they play an integral part of driving our connected frontline worker strategy.

Speaker Change: Prominent retail customer demonstrated our zebra companion with AI agent assist store associates with edge intelligence, such as operating procedures sales product information merchandising guidance and device operation.

In closing we remain strong conviction in the opportunities ahead, as we address our customers' evolving needs with our innovative portfolio of solutions.

Speaker Change: These agents active digital assistant.

Miller: Miller to our customers' unique operating environment.

Bill Burns: Our confidence in sustainable long term growth is underpinned by several themes reflected on slide 13.

Miller: While leveraging generative AI to respond to queries and perform task without the need for extensive training.

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

Additionally, as our customers and partners accelerate their use of AI within business critical mobile applications Nabors AI suite enables quick and cost effective development of new solutions that take advantage of the continued advancement of our mobile computing platform.

Mike: I will now hand, it back to Mike.

Mike: Thanks, Bill, we'll now open the call to Q&A, we ask that you limit yourself to one question and one follow up to give everyone the chance to participate.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one 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 two at this time, we will pause momentarily to assemble our roster.

Miller: While we don't expect our new AI solutions to have a material impact on near term results. We believe they play an integral part of driving our connected frontline worker strategy.

Miller: In closing we maintained strong conviction in the opportunities ahead, as we address our customers' evolving needs with our innovative portfolio of solutions.

Mike: <unk>.

Miller: Our confidence in sustainable long term growth is underpinned by several themes reflected on slide 13.

Speaker Change: The first question comes from Damian Harris with UBS. Please go ahead.

Miller: These include labor and resource constraints track and trace mandates increased consumer expectations and the need for real time supply chain visibility.

Dennis: Hey, good morning, Dennis <unk> Damian.

Speaker Change: So good morning, Ed.

Speaker Change: Hey, good morning, So I had a couple of quick questions on what Youre seeing in terms of larger project activity and for Gil. If you saw any larger projects done and how that's factoring into the <unk> guidance.

Mike: I will now hand, it back to Mike.

Bill Burns: Thanks, Bill, we'll now open the call to Q&A, we ask that you limit yourself to one question and one follow up to give everyone the chance to participate.

Bill Burns: We will now begin the question and answer session to ask a question you May Press Star then one 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 two at this time, we will pause momentarily to assemble our roster.

Speaker Change: Yes, I would say that in Q4.

Speaker Change: The team delivered well at the high end of our outlook really driven by stronger than expected year end spending from our retail customers. So yes.

Speaker Change: Yes, we did see some larger projects take place in Q4.

Speaker Change: That was the broader backdrop I would say was a double digit growth across really all major categories kind of all regions. All end markets and you know order sizes of all types, I mean run rate mid tier and and large deals in the quarter and that was certainly helped by.

Moderator: The first question comes from Damian Harris with UBS. Please go ahead.

Dennis: Hey, good morning, Dennis streetcar bogey answer Damien.

Speaker Change: So good morning.

Speaker Change: Hey, good morning.

Speaker Change: Couple of quick questions on what you're seeing in terms of larger project activity and for Gil. If you saw any larger projects are done and how that's factoring into the <unk> guidance.

Speaker Change: Easier compares from last year, which included just drove distributor destocking.

Speaker Change: We see that that flow through of no not just the retail activity, but a broader based growth drove stronger sales growth in Q4 and then.

Speaker Change: Yes, I would say that you know and in Q4 the team delivered well at the high end of our outlook really driven by stronger than expected year end spending from our retail customers. So.

Speaker Change: Earnings above the high end of our outlook.

Speaker Change: Okay, yes that makes sense.

Speaker Change: And.

Speaker Change: Yes, we did see some larger projects to take place in Q4.

Speaker Change: A follow up I, just wanted to quickly touch on Saturdays and.

Speaker Change: That was the broader backdrop I would say was a double digit growth across really all major categories kind of all regions. All end markets and you know order sizes of all types me run rate mid tier N and large deals in the quarter and that was certainly helped by.

Speaker Change: Just to get a sense for.

Speaker Change: What they are planning data, if we have already executed some pricing actions.

Speaker Change: <unk>.

Speaker Change: Does pricing actions would be in.

And more broadly what are the near take their decision to more manufacturing activity.

Speaker Change: <unk>.

Speaker Change: Yes, So I think the question sorry about just our broader tariff response.

Speaker Change: Easier compares from last year, which included just drove it distributor destocking.

Speaker Change: Obviously, it's a dynamic environment, we have a dedicated team to establish a monitor the changes.

Speaker Change: We see that that flow through of you know not just the retail activity, but a broader based growth drove stronger sales growth in Q4 and then.

Speaker Change: What are the potential app impact design mitigation strategies.

Speaker Change: And if you if you look at our.

Speaker Change: And obviously now we just want to provide transparency around what has been announced to date.

Speaker Change: <unk> earnings above the high end of our outlook.

Speaker Change: Okay, Yeah that makes sense.

Speaker Change: We do expect to.

Speaker Change: Announced price increases shortly to respond to the announced tariffs, which is part of the mitigation strategies that is embedded in the current guidance.

Speaker Change: And a follow up I just wanted to quickly touch on Saturdays.

Speaker Change: Just get a sense for what.

Speaker Change: What theyre planning that if you've already executed some pricing actions.

Speaker Change: Okay perfect. Thanks for taking the questions.

Speaker Change: <unk>.

Speaker Change: Does pricing actions would be in.

Speaker Change: And more broadly what would be a trigger deficient to more manufacturing activity.

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

Speaker Change: <unk>.

Tommy Moll: And thank you for taking my questions.

Speaker Change: Yes. So I think the question was talking about just our broader tariff response.

Good morning, Tommy.

Tommy Moll: You mentioned that the visibility beyond the first quarter is lower than usual for this time of year.

Speaker Change: Obviously, it's a dynamic environment, we have a dedicated team to establish a monitor the changes.

Speaker Change: My question is as you rolled pure full year sales outlook.

Speaker Change: What are the potential app impact design mitigation strategies.

Speaker Change: What kind of assumptions were you, making on large deals there I know in the past.

Speaker Change: And if you if you look at our and obviously now we just want to provide transparency around what has been announced to date.

Speaker Change: If you look at the funnel and the pipeline and make some assumptions about conversion.

Speaker Change: We do expect to announced price.

Speaker Change:

Speaker Change: What kind of assumptions are we making this year. Thank you.

Speaker Change: Increases shortly to respond to the the announced tariffs, which is part of the mitigation strategies that embedded in the current guidance.

Speaker Change: Yes, I'd say, probably maybe a broader view of that and then I'll cover kind of large deals I would say that.

Speaker Change: Okay perfect. Thanks for taking the questions.

Speaker Change: We entered 2025, certainly with solid backlog.

Speaker Change: Driven by the stronger retail spending so larger orders as you talked about that carried into the first quarter from from fourth quarter and.

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

Tommy Moll: Good morning, and thank you for taking my questions.

Speaker Change: We're expecting solid broad based organic growth in 2025.

Speaker Change: Good morning, Tommy.

Speaker Change: You mentioned that the visibility beyond the first quarter is lower than usual for this time of year.

But while we haven't seen customers really pulled back spending to date, we clearly are seeing some impacts from the market uncertainty playing out with our customers and a couple of examples.

Speaker Change: Question is as you rolled up your full year sales outlook.

Speaker Change: What kind of assumptions were you, making on large deals there I know in the past.

Speaker Change: Budget still being finalized right and that impacts our visibility and.

Speaker Change: If you look at the funnel of the pipeline and make some assumptions about conversion.

Speaker Change: And tempers our expectations beyond Q1.

Speaker Change:

Speaker Change: What kind of assumptions are we making this year. Thank you.

Speaker Change: We're seeing specific to large orders some customers stage deployments over longer periods of time, So thats something we are actually seeing some customers do clear.

Speaker Change: Yeah I'd say.

Speaker Change: Maybe.

Speaker Change: A broader view of that and then I'll cover kind of large deals I'd say that you know as we entered 2025 certainly with solid backlog.

Speaker Change: Clearly were seeing strong U S dollar.

Speaker Change: Driven by the stronger retail spending so larger orders as you talked about they carried into first quarter from from fourth quarter, and we're expecting you know solid broad based organic growth in 2025, but while we haven't seen customers really pulled back spending to date.

Speaker Change: As a headwind to us right at the FX impact and thats, causing a little bit of.

Speaker Change: Concern from some of our international customers and their plans with the strong U S dollar and not as much large deal oriented, but but still some impact and I think that.

Speaker Change: Our customers are really focused on hey, what's the potential impact on their business of the overall global trade policy and thinking about how do they mitigated and it just adds to the uncertainty of their projects and visibility.

Speaker Change: We clearly are seeing some impacts from the market uncertainty playing out with our customers and in a couple of examples.

Speaker Change: Budgets still being finalized right in and that impacts our visibility kind of and tempers our expectations beyond Q1.

Speaker Change: Mall, and large moving forward and our visibility around it so while we feel good about our business and that we're confident in our business. Our guide really reflects solid organic growth. Despite all these uncertainties, but visibility is pretty tough both.

Speaker Change: We're seeing.

Speaker Change: Specific to large orders some customers stage deployments over a longer periods of time, so thats something we are actually seeing some customers do.

Speaker Change: Clearly, we're seeing you know strong U S. Dollar you know is a headwind to us right at the FX impact and that's causing a little bit of.

Speaker Change: Especially on large orders and deployments.

Thank you Bill.

Speaker Change: You look at the inventory levels with some of your key channel partners what context.

Speaker Change: Concern from some of our international customers and their plans with the strong U S dollar and not as much large deal oriented, but but still some impact and I think that you know.

Speaker Change: Can you provide there and if if it feels like the bias is up or down or that you think the sell through and the sell in of roughly balanced at this point any insight would be helpful. Thank you.

Speaker Change: Our customers are really focused on hey, what's the potential impact on their business of the overall global trade policy and thinking about how do they mitigate it and it just adds to the uncertainty of their projects and visibility you know.

Nathan Winters: Yes, Tom This is Nathan I would say.

Speaker Change: It's very balanced.

Speaker Change: Fairly balanced throughout the year. So we're if you look at the days on hand in the channel were in a good place as we exited the year.

Speaker Change: Small and large moving forward and in our visibility around it so.

Speaker Change: With our distribution partners around the globe.

Speaker Change: While we feel good about our business and that we're confident in our business. Our guide really reflects solid organic growth. Despite all these uncertainties, but visibility is pretty tough.

Speaker Change: And obviously, that's a daily daily activity with our with our teams making sure they have the right inventory.

Speaker Change: But you know at the SKU level, but again I think we feel we feel good about the overall inventory position here at the beginning of the year and again it was it was pretty balanced.

Speaker Change: Especially on large orders and deployments.

Speaker Change: Thank you Bill as you look at the inventory levels with some of your key channel partners. What context can you provide there and if if it feels like the bias.

Speaker Change: Throughout the year in terms of what we saw from a sales and sales out perspective, if you exclude that the.

Speaker Change: <unk> for 2023.

Speaker Change: Thank you both I will turn it back.

Speaker Change: Is up or down or that you think the sell through and the sell in are roughly balanced at this point any insight would be helpful. Thank you.

Speaker Change: Sure.

Speaker Change: The next question comes from Joe Giordano with Teeny Cowen. Please go ahead.

Speaker Change: Yeah Tammi. This is Nathan I'd say, it's very balanced and stayed fairly balanced throughout the year. So we're looking at days on hand in the channel were in a good place as we exited the year.

Joe Giordano: Hey, good morning, guys.

Speaker Change: Good morning.

Joe Giordano: Yes so.

Joe Giordano: On a full year like I guess I would touch on is of it but to me given the <unk> it feels a little conservative, but I understand what like wire framing. It. The way you are given the uncertainty I'm just curious like if you were to compare.

Speaker Change: With our distribution partners around the globe.

Speaker Change: And obviously, that's a daily daily activity with our with our teams making sure they have the right inventory.

Joe Giordano: The full year framework and like what Youre, what youre baking in compared to like where we were a year ago.

Speaker Change: At the SKU level, but again I think we feel we feel good about the overall inventory position here at the beginning of the year and again that it was it was pretty balanced.

Speaker Change: How would you categorize that it seemed like last year, you were only putting in what's a highly visible to you and if there was like the project flows. It was all kind of upside is it is it a similar idea right now.

Speaker Change: Throughout the year in terms of what we saw from a sales and sales out perspective, if you exclude that you know the.

Joe Giordano: I would say that the <unk>.

Speaker Change: The dynamics for 2023.

Speaker Change: <unk> playing out.

Speaker Change: Thank you both I'll turn it back.

Speaker Change: A little bit like last year.

Speaker Change: For very different reasons for it I think last year, we came off a year that was much different in 2023 with really.

Speaker Change: The next question comes from Joe Giordano with TD Cowen. Please go ahead.

Joe Giordano: Hey, good morning, guys.

Speaker Change: Our customers absorbing the capacity that they built out independent making then.

Speaker Change: Good morning.

Joe Giordano: Hey, yeah. So.

Speaker Change: No.

Speaker Change: We saw a broader base recovery throughout 2020 for I would say the lack of visibility today and the commitment to the budgets and projects is really driven by visibility it's the idea that.

Joe Giordano: On a full year like I guess, we've touched on this a bit but to me given the <unk> it feels a little conservative, but I understand why like why you're framing. It. The way you are given the uncertainty I'm just curious like if you were to compare.

Joe Giordano: The full year framework and like what your what Youre baking in compare to like where we were a year ago.

Speaker Change: They are still kind of absorbing what is the global trade policy and what's happened geopolitically going to impact their business and ultimately then it reflects back on our guide so.

Speaker Change: How would you categorize that it seemed like last year, you were only putting in with a highly visible to you and if there was like project flows. It was all kind of upside is it is it a similar idea right now.

Speaker Change: While we clearly see.

Speaker Change: Organic growth in the year.

Speaker Change: And could it play out a bit differently, where we see.

Joe Giordano: I would say that the euro is playing out.

Speaker Change: A little bit like last year for.

Speaker Change: Hum.

Speaker Change: More confidence throughout the year the visibility today is kind of where it's at in it and Thats reflected in our guide so I think that.

Speaker Change: For very different reasons right I think last year, we came off a year that was much different in 2023 with really.

Speaker Change: We feel like.

Speaker Change: Our customers absorbing the capacity that they built out in the pandemic and then you know we.

Speaker Change: All of the uncertainty out there at the moment is causing us ultimately to be.

Speaker Change: We saw broader based recovery throughout 2020 for I would say the lack of visibility today and our commitment to the budgets and projects is really driven by visibility it's the idea that.

Speaker Change: Conservative and impacts.

Speaker Change: The guidance, we're providing today that's the visibility we have today.

Yes fair enough.

Speaker Change: Just as a follow up on the free cash flow in the quarter was excellent.

Speaker Change: They're still kind of absorbing what is the global trade policy and what's happened geopolitically going to impact their business and ultimately then it reflects back on our guide. So you know while we clearly see.

Speaker Change: In the guidance.

Speaker Change: At least $7 50, I mean, I guess, there's infinite above that.

Speaker Change: Definitions really.

Speaker Change: What are the puts and takes on 25 versus 24 that Michigan Center in.

Speaker Change: Why wouldnt kind of build from the strength that you add here.

Speaker Change: Organic growth in the year and put it play out a bit differently, where we see.

Speaker Change: Yes.

Speaker Change: You mentioned great.

Speaker Change: Great year last year from a free cash flow perspective coming off of 'twenty three.

Speaker Change: More confidence throughout the year the visibility today is kind of where it's at in it and that's reflected in our guide so I think that you know.

Speaker Change: 136% cash conversion I think.

Speaker Change: Just repeating that youre committing to repeat that on a.

Speaker Change: We feel like.

Speaker Change: On an annual basis as a challenge so when you look at the full year guidance of $750 million I mean, the real difference between the two as well.

Speaker Change: All of the uncertainty out there at the moment is causing us ultimately to be.

Speaker Change: Conservative and impacts.

Speaker Change: We do expect continued working capital improvements, but just not to the degree we saw in 2024.

Speaker Change: The guidance, we're providing today that's the visibility we have today.

Speaker Change: Yes, that's fair enough.

Speaker Change: It also does imply that as we look at our inventory position you saw a little bit of this in Q4 as inventory.

Speaker Change: Just sort of follow up that free cash flow in the quarter was excellent.

Speaker Change: I've seen the guidance.

Speaker Change: <unk> ticked up a bit to support Q January demand, but also our teams are doing everything they can to pull volume in from a purchasing perspective.

Speaker Change: At least $7 50, I mean, I guess, there's there's infinite above that.

Speaker Change: The definition of the how.

Speaker Change: What are the puts and takes on 25 versus 24 that Michigan Center in.

Speaker Change: And get that inventory into the U S. As early as possible ahead.

Speaker Change: Why wouldnt kind of build from the strength that you've that you adhere.

Speaker Change: Ahead of potential tariff impacts so.

Speaker Change: Yes, as you mentioned.

Speaker Change: Giving us some flexibility to help manage that as we go through the year and try to mitigate tariffs use our balance sheet as much as we can to help mitigate the short term impacts from tariffs. So.

Speaker Change: Great year last year from a free cash flow perspective coming off of 'twenty three.

Speaker Change: And at 136% cash conversion.

Speaker Change: Just repeating that are committing to repeat that on a.

Speaker Change: Big difference again working capital improvements.

Speaker Change: But theres still implies over 90% free cash flow conversion for 25 and.

Speaker Change: On an annual basis as a challenge. So when you look at the full year guide of $750 million I mean, the real difference between the two as we.

Speaker Change: And we think Thats just a good baseline to work from.

Speaker Change: Okay. Thanks, guys.

Speaker Change: We do expect continued working capital improvements, but just not to the degree we saw in 2024.

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

Speaker Change: It also does imply that as we look at our inventory position you saw a little bit of this in Q4 as inventory.

Hey, guys. Good morning. This is Ed on for Andrew Thanks for taking my question.

Speaker Change: Ticked up a bit to support Q January demand, but also.

Speaker Change: Following the developments with deep seek a few weeks ago wanted to ask about AI.

Speaker Change: Our teams are doing everything they can to pull volume in from a purchasing perspective.

Speaker Change: You guys have long discussed the power of AI platform.

Speaker Change: Get that inventory into the U S. As early as possible ahead of potential tariff impact. So I think you know, giving us some flexibility to help manage that as we go through the year and try to mitigate tariffs use our balance sheet as much as we can to help mitigate the short term impacts from tariffs. So.

Speaker Change: The recent events do you find that more efficient.

Speaker Change: Presents an opportunity from a product development standpoint.

Speaker Change: Net risk due to the probability or possibility of next competition. Thanks.

Speaker Change: Yes, we would see clearly AI as an opportunity for zebra really empowering.

Speaker Change: The big difference again working capital improvements.

Speaker Change: Empowering the frontline workers. So I think if we look at.

Speaker Change: But theres still implies over 90% free cash flow conversion for 25 and.

Speaker Change: What zebras role is today, an AI first and foremost we collect data.

Speaker Change: And we think that's just a good baseline to work from.

Speaker Change: At the frontline of business, which really gives assets and visibility in real time, and give us assets and workers digital voice right that.

Speaker Change: Sounds good thanks, guys.

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

Speaker Change: Really feed AI models first and foremost so it is kind of the heart of what we do around data collection at the front line of business. The second opportunity for AI is that traditional AI is used today.

Ed: Hey, guys. Good morning. This is Ed on for Andrew Thanks for taking my question.

Speaker Change: Following the developments with deep 60 weeks ago wanted to ask about AI.

Speaker Change: You guys have long discussed the power of AI and platform.

Speaker Change: Many of our solutions across the portfolio, so whether it's machine vision inspection or optical character recognition.

Speaker Change: The recent events do you find that more efficiently.

Speaker Change: Presents an opportunity from a product development standpoint.

Speaker Change: Product recognition package dimension, Inc. We use traditional AI throughout the portfolio and at the National retail show in January what we demonstrated was really generative AI capabilities. So.

Speaker Change: Net risk due to the probability or possibility of next competition. Thanks.

Speaker Change: Yeah, we would see you know clearly AI as an opportunity for zebra really you don't want powering the frontline workers. So I think if we look at.

Speaker Change: And AI suite of.

Speaker Change: What zebras role is today, an AI first and foremost we collect data.

Speaker Change: For our mobile couponing portfolio that really allows ourselves and other software developers independent software developers to build AI applications on our devices.

Speaker Change: At the frontline of business, which really gives assets and visibility in real time, and give us assets and workers digital voice right that you know really feed AI models first and foremost so it's kind of the heart of what we do around data collection at the frontline of business. The second opportunity for AI is that true.

Speaker Change: We've also.

Speaker Change: Launched zebra companion, so think of it as being a generative AI digital assistant that.

Speaker Change: <unk> has multiple agents to one around knowledge within this specific customer.

Speaker Change: <unk> is used today across many of our solutions across the portfolio. So whether it's machine vision inspection or optical character recognition product recognition.

Speaker Change: Base from their own standard operating procedures, let's say.

Speaker Change: Sales information and merchandising information.

Speaker Change: Device management, so and there'll be multiple agents as we continue to develop these agents or our partners and our software partners do so think of these agents is as a way to.

Speaker Change: Package dimension, Inc. We use traditional AI throughout the portfolio and at the National retail show in January what we demonstrated was really generative AI capability. So.

Speaker Change: The frontline worker to really be empowered with additional information and capabilities deleveraging Gen AI as the way too.

Speaker Change: And AI suite of.

Speaker Change: For our mobile computing portfolio that really allows ourselves and other software developers independent software developers to build AI applications on our devices.

Speaker Change: Gather information from standard operating procedures from the way customers operate from.

Speaker Change: We've also.

Speaker Change: Making your newest employee as good as your your best employee.

Speaker Change: Launched zebra companion, so think of it as being a generative AI digital assistant that you know.

Speaker Change: And we see this as really an opportunity for us to drive.

Speaker Change: Premium hardware sales.

Speaker Change: <unk> has multiple ages two at one around knowledge within this specific customer.

Speaker Change: Gain market share because we.

Speaker Change: We see our selves as the innovator in this area on enterprise mobile devices.

Speaker Change: Base from their own standard operating procedures, let's say sales.

Speaker Change: Sales information and merchandising information.

Speaker Change: Additional software as a service revenue and recurring revenues associated with AI capabilities from.

Speaker Change: Device management, so and there'll be multiple agents as we continue to develop these agents or our partners' software partners do so think of these agents is as a way to.

Speaker Change: Our war cloud software and our software offerings. So we see this as an opportunity for zebra and leveraging AI in true <unk>.

Speaker Change: The frontline worker to really be empowered with additional information and capabilities deleveraging Gen AI as the way too.

Speaker Change: Real world applications at the frontline that help our customers improve their efficiency each and every day.

Of the frontline workers.

Speaker Change: Gather information from standard operating procedures from the way customers operate from.

Speaker Change: Thanks for that great to see that all an accident at our Pip.

Speaker Change: Turning over to M&A you guys are entering 2025.

Speaker Change: Making your newest employee as good as your your best employee in and we see this as really an opportunity for us to drive.

Speaker Change: 112 times leverage a fair amount of capacity to tap into.

Speaker Change: If you can expand on the recent acquisition maybe offer any other plants into capital allocation. How we can think about it in 2005 it would be helpful. Thanks.

Speaker Change: Premium hardware sales.

Speaker Change: Gain market share because you know we see our selves as the innovator in this area on enterprise mobile devices.

Speaker Change: Yes, we're excited about the photo Neal.

Speaker Change: Additional software as a service revenue and recurring revenues associated with AI capabilities from.

Speaker Change: Acquisition and getting that closed ultimately.

Speaker Change: We feel good about.

Speaker Change: Our work cloud software and our software offerings. So we see this as an opportunity for zebra and leveraging AI and true.

Speaker Change: That from a three D vision perspective, so certainly.

Speaker Change: The <unk> market is the fastest growing segment within machine vision, and we again have leveraged M&A to really continue to.

Speaker Change: Real world applications at the frontline that help our customers improve their efficiency each and every day.

Speaker Change: Their frontline workers.

Speaker Change: Enter adjacent or synergistic opportunities beyond our organic investments in the business and this is just another example of that.

Speaker Change: Thanks for that great to see that all an accident at our App.

Pivoting over to M&A you guys are entering 2025.

Speaker Change: We were partnered with phone O'neill already with.

Speaker Change: 1.2 times leverage a fair amount of capacity to tap into.

Speaker Change: The OEM partnerships, so we know that.

Speaker Change: I guess, if you can expand on the recent acquisition maybe offer any other plans into capital allocation, how we could think about it in 2000 and we plan to be helpful. Thanks.

Speaker Change: The business well and the leadership team. So we feel good about that.

Speaker Change: Certainly as you said have a strong balance sheet and that enabled us to have flexibility.

Speaker Change: Yeah, we're excited about the photo Neal.

Speaker Change: I think we'll use M&A to advance our vision and strategy. That's what we've done in closely adjacent markets and I'd say today that.

Speaker Change: Acquisition and getting that closed ultimately.

Speaker Change: We feel good about.

Speaker Change: Near term the given the macro uncertainty and the visibility.

Speaker Change: You know that from a three D vision perspective, So certainly you know the <unk> market is the fastest growing segment within machine vision, and we again have leveraged M&A to really continue to.

Speaker Change: We're kind of experienced in the market there is a.

Speaker Change: A bit of a higher bar and certainly with higher interest rates, but.

Speaker Change: We continue to be inquisitive about M&A continue to use it as a tool to advance our vision.

Speaker Change: Enter adjacent or synergistic opportunities beyond our organic investments in the business and this is just another example of that we were partnered with photo Neil already with an OEM partnership So we know.

Speaker Change: Thanks again for taking the questions.

Speaker Change: The next question comes from Pious a vast sea with Citi. Please go ahead.

Speaker Change: Hey, good morning, guys. Thanks for taking my questions.

Speaker Change: The business well and the leadership team. So we feel good about that.

Speaker Change: Good morning.

Speaker Change: Certainly as you said have a strong balance sheet and that enable us to have flexibility.

Speaker Change: From a regional perspective can you elaborate on the trends you are seeing in Europe, and China based on your conversations with your customers like what's what's your outlook overall outlook for these regions as we think of your <unk> guidance and <unk> 25 in general like we have heard some mixed signals from other companies. So would appreciate what youre seeing at your end.

Speaker Change: I think we'll use M&A to advance our vision and strategy. That's what we've done in closely adjacent markets and I'd say today, the near term the given the macro uncertainty and the visibility.

Speaker Change: We're kind of experienced in the market there is a.

Speaker Change: The two geographies Europe, and China's always said, yes, yes, yes, I would say that.

Speaker Change: A bit of a higher bar and certainly with higher interest rates, but.

Speaker Change: We continue to be inquisitive about M&A and continue to use it as a tool to advance our vision.

Okay great.

Speaker Change: Maybe start on North America strong growth across all product categories and end markets in North America.

Speaker Change: Thanks for taking the questions.

Speaker Change: <unk> returned to year end spend within retail.

Speaker Change: Strong growth in healthcare manufacturing lagging I guess in North America, EMEA I would say.

Speaker Change: The next question comes from Pious a vast sea with Citi. Please go ahead.

Speaker Change: Hey, good morning, guys. Thanks for taking my questions.

Speaker Change: The highest growth rates really came from from northern Europe.

Speaker Change: Good morning.

Speaker Change: Overall, we saw.

Speaker Change: From a regional perspective can you elaborate on the trends you are seeing in Europe, and China based on your conversations with your customers like what what's your outlook overall outlook for these regions as we think of your <unk> guidance and 25 in general like we have heard some mixed signals from other companies. So would appreciate what youre seeing at your end.

Speaker Change: Momentum in larger projects continued to build throughout 2024.

Speaker Change: We're continuing to see competitive wins and strength in.

Speaker Change: In retail and.

Speaker Change: In our mobile computing business in Europe.

Speaker Change: Manufacturing still remains challenging, particularly.

Speaker Change: The two geographies Europe, and China, as we said, yes, yes, yes, I would say that.

Speaker Change: In Germany, and Europe I.

Speaker Change: I would say China represents about 3% of our business overall, and we've seen modest sales growth in China.

Speaker Change: Okay great.

Speaker Change: Maybe start in North America strong growth across all the product categories and end markets in North America.

Speaker Change: As the business has stabilized, but I think in Asia. The real strength is coming from more like Australia, and New Zealand, India, some markets outside of China, but clearly the opportunity exists continued to see modest growth in China I think that's the story around manufacturing as well in China right. We're seeing.

<unk> returned to year end spend within retail.

Speaker Change: Strong growth in health care manufacturing lagging I, just in North America, EMEA I would say.

Speaker Change: The highest growth rates really came from from northern Europe.

Speaker Change: Overall, we saw.

Speaker Change: Momentum in larger projects continued to build throughout 2024.

Speaker Change: Clearly a move outs.

Speaker Change: Outside of China from a manufacturing perspective, and the opportunity for US is not just in China, but also to capture the manufacturing opportunities outside of China as people move supply chains.

Speaker Change: We're continuing to see competitive wins and strength in in retail.

Speaker Change: Other geographies.

Speaker Change: In our mobile computing business in Europe.

Speaker Change: Yeah helpful. Thank you.

Manufacturing still remains challenging, particularly in Germany, and Europe I.

Speaker Change: Following up on walking to a satellite manufacturer manufacturing lagging versus your other verticals like the current U S administration appears to be more pro U S. So based on your conversations with your customers I know, it's still early but have you begun to see a step up in conversations with your customers are talking about reshaping the supply chain I mean, maybe adopt.

Speaker Change: I'd say, China represents about 3% of our business overall, and we've seen modest sales growth in China.

Speaker Change: More automation robotics and machine vision.

Speaker Change: Yes, I mean, we're seeing clearly that the around the world manufacturing represents an opportunity for us it's.

Speaker Change: We see it as a short term.

Speaker Change: Lagging the other markets right, but we see longer term, it's an opportunity as were less penetrated in manufacturing than than our other vertical markets and we see the investment in automation around machine vision.

Speaker Change: Clearly a move outs.

Speaker Change: Other geographies.

Speaker Change: Move from fixed screens to tablets with production workers are monitoring production.

Speaker Change: Yeah helpful quickly following up on what you just said like manufacturer manufacturing lagging versus your other verticals like the current U S administration appears to be more pro U S. So based on your conversations with your customers I know, it's still early but have you at least have begun to see a step up in conversations with your customers are talking about.

Speaker Change: RFID opportunities throughout the entire supply chain all are opportunities for us.

Speaker Change: Got it I appreciate all the color good luck guys.

Speaker Change: Thank you.

Speaker Change: The next question comes from Brian Drab with William Blair. Please go ahead.

Speaker Change: Reshaping the supply chain, maybe adopting more automation robotics and machine vision.

Brian Drab: Good morning, just a couple quick questions. So.

Speaker Change: Yes, I mean, we're seeing clearly that are around the world manufacturing represents an opportunity for us. It's a you know we see it as a short term.

Speaker Change: On.

Speaker Change: The difference between <unk> and the 2025 outlook in.

Speaker Change: In 2024.

Speaker Change: And AI team is essentially.

Speaker Change: If I'm rounding a little bit the flat.

Speaker Change: First quarter second quarter third quarter kind of around $400 million and then you have the seasonal strength in the fourth quarter.

Speaker Change: PVM.

Speaker Change: Move from fixed screens to tablets with production workers are monitoring production.

Speaker Change: Of course kind of improving sequentially building.

Speaker Change: Is that similar dynamic to what you expect in 2025.

Speaker Change: RFID opportunities throughout the entire supply chain all are opportunities for us.

Speaker Change: Yes, I would say I would expect similar similar growth rates, if we look out for the balance of the year. Obviously, there is timing wise in terms of.

Speaker Change: Got it.

Speaker Change: All the color good luck guys.

Speaker Change: Thank you.

Speaker Change: Sure.

Speaker Change: Growth rates could look a little.

Speaker Change: The next question comes from Brian Drab with William Blair. Please go ahead.

Speaker Change: Distorted just based on your obviously Q1 last year, we were down 16% so from an easier comp obviously playing into the the higher growth rate in the first quarter across the portfolio, but I think on the on the balance of the year again as we talk about the visibility.

Speaker Change: Thank you.

Speaker Change: Good morning, just a couple quick questions. So.

Speaker Change: On.

Speaker Change: The difference between <unk> and our 2025 outlook in.

Speaker Change: In 2024.

Speaker Change: We'd expect fairly consistent growth.

Speaker Change: And AI team is essentially.

Speaker Change: Across the two segments and we see that a grilling across giving back to the previous question, we're not seeing a huge bifurcation, whether its geography or vertical market.

Speaker Change: If I'm rounding a little bit flat.

Speaker Change: First quarter second quarter third quarter kind of around $400 million and then you have the seasonal strength in the fourth quarter.

Speaker Change: <unk>.

Speaker Change: I forget run rate large deals, we're seeing kind of again consistent growth across each one of those dimensions here as we as we enter the year now again on a quarterly basis, you might see some variation just based on comps.

Speaker Change: Of course kind of improving sequentially and building.

Speaker Change: Is that similar dynamic to what you expect in 2025.

Speaker Change: Yeah, I'd say I would expect similar similar growth rates, if we look out for the balance of the year. Obviously, there is timing wise in terms of.

Speaker Change: Or timing of some deals, but I think on the year youll see fairly balanced growth.

Speaker Change: Okay. Thanks, Bill and then just one other question.

Speaker Change: Growth rates could look a little.

Speaker Change: Could you elaborate on how youre thinking about moving.

Speaker Change: Distorted just based on your obviously Q1 last year, we were down 16%. So from an easier comp obviously, that's playing into the the higher growth rate in the first quarter across the portfolio, but I think on the on the balance of the year again, as we talked about the the visibility.

Speaker Change: Production potentially.

Speaker Change: I think last time.

Speaker Change: With the China tariffs and trade war.

Speaker Change: They book was a little bit more simple where you.

Speaker Change: Lewis move production out of China, but.

Speaker Change: We'd expect fairly consistent growth across the two segments and we see that a grilling across even back to the previous question, we're not seeing a huge bifurcation, whether its geography or vertical market.

Speaker Change: Are you at this point, considering even potentially moving some production.

Speaker Change: Back to the United States I guess switches.

Speaker Change: One of the the intentions of the administration.

Speaker Change: I forgot run rate large deals, we're seeing kind of again consistent growth across each one of those dimensions here as we as we enter the year now again on a quarterly basis, you might see some variation just based on comps.

Speaker Change: Yes look we continuously assess the manufacturing footprint.

Speaker Change: And taken multiple factors from geopolitical stability capability within the regions I think is a really important dynamic as well as cost overall cost.

Speaker Change: Or timing of some deals, but I think on the year youll see fairly balanced growth.

Speaker Change: From a full production capability and we have made significant progress to diversify our supply base, which gives us a lot more flexibility today to respond and we did several years ago. When if you look back historically, 85% of our imports into North America, where from China and with the actions we have in place right now.

Speaker Change: Okay. Thanks, Bill and then just one other question.

Speaker Change: Could you elaborate on how youre thinking about moving.

Speaker Change: Production potentially.

Speaker Change: You know I think last time.

Speaker Change: With the China tariffs and trade war.

Speaker Change: Book was a little bit more simple where you.

Speaker Change: That are executing we will end the year with about a third of our exposure from China. So again, a lot of great work.

Speaker Change: Move production out of China, but.

Speaker Change: Are you at this point, considering even potentially moving some production.

Speaker Change: Over the past several years to diversify.

Speaker Change: Back to the United States, I guess, which is.

Speaker Change: And then if you look today youre outside of China, primarily through Southeast Asia.

Speaker Change: One of the the intentions of the administration.

Speaker Change: And kind of mid to high single digit exposure to Mexico. So.

Speaker Change: Yeah look we continuously assess the manufacturing footprint.

Speaker Change: I think we'll continue to evolve.

Speaker Change: And taken multiple factors from geopolitical stability capability within the regions I think is a really important dynamic as well as cost overall cost.

Speaker Change: Just on where things land from a trade perspective to have a diverse supply chain that gives us the most competitive position. We can so again a lot of great activity I think to put us in a place I think one advantage. We have is our partnership with <unk>.

Speaker Change: Global manufacturing partners that have footprints around the world really gives us that flexibility to leverage their their footprint and where theyre expanding as they react with their other customers.

Speaker Change: It gives us a lot of scale and capability that we wouldn't have on our own and we're taking full advantage of that.

Speaker Change: <unk>, we will end the year with about a third of our exposure from China. So again, a lot of great work.

Speaker Change: Okay. Thank you.

Speaker Change: Over the past several years to diversify.

Meta Marshall: The next question comes from meta Marshall with Morgan Stanley. Please go ahead.

Speaker Change: And then if you look today outside of China, It's primarily through southeast Asia.

Meta Marshall: Great. Thanks, just given that we're kind of hitting four or five years since COVID-19 and kind of some of the demand searches that you saw I know in the past you've talked about.

Speaker Change: And kind of mid to high single digit exposure to Mexico. So.

Speaker Change: I think we'll continue to evolve.

Meta Marshall: Our large deal activity more indicative of refresh activity, but just is that still the same way to think about it and just kind of what youre seeing on that refresh pipeline may be billed and that I don't think that I caught anything in terms of.

Global manufacturing partners that have footprints around the world really gives us that flexibility to leverage their their footprint and where they're expanding as they react with their other customers. It.

Meta Marshall: Kind of RFID performance during the quarter, and that's kind of where that was versus kind of overall growth trends. Thanks.

Speaker Change: It gives us a lot of scale and capability that we wouldn't have on our own and we're taking full advantage of that.

Speaker Change: Yes, great I'll take both of those I would say that from a refresh perspective, we continually have refresh activity and I think that when you look at for instance, the fourth quarter retail spend was.

Speaker Change: Perfect. Thank you.

Meta Marshall: The next question comes from meta Marshall with Morgan Stanley. Please go ahead.

Speaker Change: Refresh plus additional opportunities in those retailers because remember refresh comes with multiple years of continuing to add additional devices applications and then what a refresh time comes they typically even even more broad applications I would say given the install base of mobile computers.

Meta Marshall: Okay, great Thanks and.

Meta Marshall: Just given that we're kind of hitting four or five years since COVID-19 and kind of some of that demand searches that you saw I know in the past you've talked about.

Meta Marshall: Our large deal activity more indicative of refresh activity, but just is that still the same way to think about it and just kind of what you're seeing on that refresh pipeline may be billed and then I don't think that I caught anything in terms of.

Speaker Change: And the expansion of that since pre COVID-19. They certainly believe that creates an opportunity for us.

Speaker Change: We're not seeing any acceleration of <unk>.

Meta Marshall: Kind of RFID performance during the quarter, and that's kind of where that was versus kind of overall growth trends. Thanks.

Speaker Change: Refresh us like into 2025 or anything.

Speaker Change: Like that but we think the time frames every customers on a different timeframe, meaning how long they use their devices, depending on how hard they are into the devices. How many applications. They use do they need more neural processing power or are they just damaging the devices because it's a hard environment I'd say, there's clearly an opportunity over the coming.

Speaker Change: Yes, great I'll take both of those I would say that from a refresh perspective, we continually have refresh activity and I think when you look at for instance, the fourth quarter, our retail spend was.

Speaker Change: Refresh plus additional opportunities in those retailers because remember refresh comes with multiple years of continuing that.

Years here to refresh the devices. We sold you know as you came out of Covid into 'twenty, one and 'twenty, two and that opportunity is still there.

Speaker Change: Additional devices applications and then what a refresh time comes they typically even even more broad applications I would say given the installed base of mobile computers and the expansion of that since pre COVID-19. They certainly believe that creates an opportunity for us.

Speaker Change: Go ahead of us and absolutely there.

Speaker Change: I'd say from an RFID perspective, we're pretty happy with RFID, we had a strong Q4 sales growth in RFID, we've got a pipeline of opportunities across supply chain not just in retail, but P&L manufacturing even government we've seen some opportunities most recently.

Speaker Change: We're not seeing any acceleration of of refreshes like into 2025 or anything.

Speaker Change: Like that but we think the time frames every customers on a different timeframe, meaning how long they use their devices, depending on how hard they arent devices, how many applications. They use do they need more neural processing power or are they just damaging the devices because it's a hard environment I'd say, there's clearly an opportunity over the coming.

Speaker Change: Our adoptions beyond retail really have retail general merchandise right, which has always been the primary use case into things like fresh fruit right. We saw the first.

Speaker Change: North America grocer really move ahead with.

Speaker Change: A rollout associated with bakery and fresh foods, we've seen another large retailer in North America look at apparel as well as fresh foods. So.

Speaker Change: Years here to refresh the devices. We sold you know as you came out of Covid into 'twenty, one and 'twenty two and that opportunity is still ahead of us and absolutely there.

Speaker Change: We've seen the U S military.

Speaker Change: Move ahead with one of their branches with visibility across the supply chain. So we're continuing to see broader adoption of RFID we've got.

Speaker Change: The probably the broadest portfolio of RFID of anybody from fixed to handle readers to printers to services to specialty labels. So I think we feel good about the opportunity and the broadening of that.

Speaker Change: Adoption beyond retail really have retail general merchandise right, which has always been the primary use case into things like fresh fruit right. We saw the first.

Speaker Change: Across supply chain into grocery into government applications, and we feel pretty good.

Speaker Change: Great. Thanks.

Speaker Change: North America grocer really move ahead with.

Speaker Change: The next question comes from Keith <unk> with Northcoast Research. Please go ahead good morning.

Speaker Change: Our rollout associated with bakery and fresh foods, we've seen another large retailer in North America look at apparel as well as fresh foods. So.

Speaker Change: Guys I appreciate it.

Speaker Change: And I hate to keep on being the drought here with a four year guide, but just trying to understand a little bit better about perhaps how that changes over the past several weeks in terms of vaca.

Speaker Change: We've seen the U.

Speaker Change: Military.

Speaker Change: You don't move ahead with one of their branches with visibility across the supply chain. So we're continuing to see broader adoption of RFID we've got.

Speaker Change: Lack of visibility increased because it seems like visibility was increasing over the past several quarters and then second can you perhaps touch about the visibility based on the end market here just trying to understand.

Speaker Change: Dynamics there.

Keith: Hey, Keith I think.

Speaker Change: Part of that visibility, but I think that is.

Speaker Change: Somewhat of an outcome of the uncertainty.

Speaker Change: Across supply chain into grocery into government applications, and we feel pretty good.

Speaker Change: That we've exceeded I think everyone's experienced here over the last couple of months. So if you look at our full year guide of 3% to 7%.

Speaker Change: Great. Thanks.

Speaker Change: And so over 6% on an organic basis.

Speaker Change: The next question comes from Keith Hughes, some with Northcoast Research. Please go ahead.

Speaker Change: Obviously, the FX has become a significant headwind to sales sales growth since our last business update in terms of the strength of the U S dollar and that's been fairly volatile even over the last the.

Speaker Change: Guys I appreciate it in terms of and I hate to keep on being the drought here with a four year guide, but just trying to understand that a little bit better about perhaps how that changes over the past several weeks in terms of has a lack of visibility increased because it seems like visibility was increasing over the past several quarters and then second can you perhaps touch about the <unk>.

Speaker Change: Coming weeks, so that that FX headwind headwind increases through the year as we rollover.

Speaker Change: Hedges, we had in place, particularly here in the first half of the year.

Speaker Change: And as Bill mentioned, while demand has stabilized.

Speaker Change: So again, there's the we have the wider range reflects at higher uncertainty. So again, it's not we're not predicting a falloff from a trade war, nor an acceleration as bill mentioned from the refresh cycle, but we think outside of Q1 steady mid single digit organic growth for.

Speaker Change: Ability based on the end market here just trying to understand.

Speaker Change: The dynamics there.

Keith Hughes: Keith I think.

Speaker Change: Part of that visibility, but I think that that is.

Keith Hughes: Somewhat of an outcome of the uncertainty.

Keith Hughes: That we've exceeded I think everyone's experienced here over the last couple of months. So if you look at our full year guide of 3% to 7%.

Speaker Change: For the balance of the year as appropriate.

Speaker Change: Again, given the visibility and the uncertainty around the macro economy today.

Keith Hughes: And so over 6% on an organic basis.

Keith Hughes: Obviously, the FX has become a significant headwind to sales sales growth since our last business update in terms of the strength of the U S dollar and that's been fairly volatile even over the last.

Speaker Change: Got it I appreciate it and then you just trying to understand like the trends in the overall industry.

Speaker Change: Seeing more and more of your devices I guess memory more towards the consumer end of the market can you talk about how your average sales price.

Keith Hughes: Coming weeks, so that that FX headwind headwind increases through the year as we rollover.

Speaker Change: Over the past several years and where should we think about where it's going in the future.

Keith Hughes: The hedges, we had in place, particularly here in the first half of the year.

Speaker Change: Yes, I would say that.

Bill Burns: As Bill mentioned, while demand has stabilized.

Keith: Keith I would say that.

Bill Burns: So again, there's the we have the wider range reflects at higher uncertainty. So again, it's not we're not predicting a falloff from a trade war, nor an acceleration as bill mentioned from the refresh cycle, but we think outside of Q1 steady mid single digit organic growth for.

Keith: There hasnt been a lot of change in in Asps over the timeframe. There's I would say that we've tiered the portfolio across mobile computing scanning printing to really protect the asp's at the high end. So if you want to buy a value tier device at the lower end of the market I have that for you because you know in the past.

Bill Burns: For the balance of the year as appropriate.

Bill Burns: Again, given the visibility and the uncertainty around the macro economy today.

Keith: I would if I didn't have that device I'd have to bring my mid tier pricing to go compete.

Keith: At the low end of the market. So caring of the portfolio of kind of premium mid and value tiers is really helped us kind of protect asps I think that we continue to look at opportunities for mobile computing that drive the device in the hands of more associates that clearly is a theme we've talked about for the <unk>.

Bill Burns: Got it I appreciate it and then just trying to understand like the trends in the overall industry.

Bill Burns: Seeing more and more of your devices I guess reached more toward the consumer end of the market can you talk about how your average sales price.

Bill Burns: Over the past several years and where should we think about where it's going in the future.

Keith: Last several years and but we are seeing it more we're seeing it in mobile computing and we're seeing it in tablet I mentioned, it kind of before and let's use manufacturing example, the move from fixed screens to control production to tablets is a real opportunity right.

Bill Burns: Yeah, I would say that.

Keith Hughes: Keith I would say that.

Keith Hughes: There hasnt been a lot of change in in Asps over the timeframe. There's I would say that we cheered the portfolio across mobile computing scanning printing to really protect the asps at the high end. So if you want to buy a value tier device at the lower end of the market I have that for you because you know in the past.

The idea that a.

Keith: And ultimately the idea of having a an assistant a digital assistant.

Keith: Idea of communication collaboration the idea of task management more and more.

Keith Hughes: I would if I didn't have that device I'd have to bring my mid tier pricing to go compete.

Keith: Enterprises are realizing but I'll have connectivity to the <unk>.

Keith Hughes: At the low end of the market. So hearing of the portfolio of kind of premium mid and value tier has really helped us kind of protect asps fees I think that we continue to look at opportunities for mobile computing that drive the device in the hands of more associates that clearly is a theme we've talked about for the <unk>.

Keith: Frontline worker, it's very difficult to communicate to them and think about even a big box retailer is the only way for a manager to meet with everybody is to get them all in the break room and have a conversation if you have no communication collaboration vehicle.

Keith: Throughout the store, so I think that we'll see in mobile computing asps.

Keith: Asps.

Keith Hughes: Last several years and but we are seeing it more we're seeing it in mobile computing and we're seeing it in tablet I mentioned of kind of before and let's use manufacturing example to move from fixed screens to control production to tablets is a real opportunity right.

Keith: Are what they are hearing the portfolio helps but I think there's an opportunity here to put the device in the hands of more associates, we've got new devices out to go do that so some of our new devices are.

Keith: Instead of scan engine based on camera base, but they have RFID technology on them. That's another opportunity for us. So I think we feel good about.

Keith Hughes: The idea that a.

Keith Hughes: And ultimately the idea of having a an assistant a digital assistant the idea of communication collaboration the idea of task management more and more.

Keith: The price points, we're selling mobile computing, but we're more excited about.

Keith: Generating more demand divvy.

Keith: <unk> devices in the hands of more workers.

Keith Hughes: Enterprises are realizing without having the connectivity to the <unk>.

Keith: Great. Thank you.

Keith Hughes: Frontline worker, it's very difficult to communicate to them and think about even a big box retailer and the only way from a manager to meet with everybody is to get them all in the break room and have a conversation if you have no communication collaboration vehicle.

Guy: The next question comes from Guy hardware with Freedom capital markets. Please go ahead.

Guy: Hi, good morning.

Speaker Change: Good morning Bill.

Keith Hughes: Throughout the store, so I think that we'll see in mobile computing asps.

Speaker Change: Bill I just want to follow up on that last points have those of us who at the NRA show in.

Keith Hughes: Asps.

Keith Hughes: You know are what they are hearing the portfolio helps but I think there's an opportunity here to put the device in the hands of more associates, we've got new devices out to go do that so some of our new devices are.

Speaker Change: In January <unk>.

Speaker Change: Zebra companion demonstration I know you mentioned earlier that you're still your opportunity is premium hardware sales of SaaS.

Speaker Change: Revenues, but maybe can you talk maybe what you think the business model could look like for Zebra companion three to four years out.

Keith Hughes: Instead of scan engine based on camera base, but they have RFID technology on them. That's another opportunity for us. So I think we feel good about the.

Speaker Change: You know.

Speaker Change: Mixture of say hardware sales versus what percentage of that could be in terms of recurring revenues and EDA.

Keith Hughes: The price points, we're selling mobile computing, but we're more excited about.

Speaker Change: But companion itself will slow as you mentioned some of the other software products.

Keith Hughes: Generating more demand would devices in the hands of more workers.

Keith Hughes: Great. Thank you.

Speaker Change: Yes, I mean, I think it's still early in the launch to kind of predict where all of the revenues come from we've thought a lot about.

Speaker Change: The next question comes from Guy hardware with Freedom capital markets. Please go ahead.

Speaker Change: Multiple areas to generate.

Guy Hardware: Hi, good morning.

Speaker Change: Additional either volume of business or us to win more or others. So I'll give you a couple of examples maybe there and then we can go further.

Speaker Change: Good morning, Bill Bill I, just want to follow up on that last points have those of us who at the NRA show.

Speaker Change: Further, but I think clearly monetizing the premium device hardware right working closely with Qualcomm in Google and to make sure that we've got devices that will support AI for our customers not only in the cloud, but on the device itself, which could drive ultimately premium hardware revenue and margin.

Speaker Change: In January so the secret companion demonstration I know you mentioned earlier that you still have a charity as premium hardware sales of SaaS.

Speaker Change: Revenues, but maybe could you talk maybe what you think the business model could look like for Zebra companion three to four years out.

Speaker Change: Yeah.

Speaker Change: Mixture of say hardware sales versus what percentage of that could be in terms of recurring revenues.

Speaker Change: Market share gains we continue to lead in the innovation front and we believe we will do that here with AI as well with our.

Speaker Change: Neither.

Speaker Change: The zebra companion itself will so as you mentioned some of the other software products.

Speaker Change: AI suite.

Speaker Change: As well as our own companions, but also working with our partners. So anytime I can drive additional value to my end customer either with our own software or third party software and make it easy to for our customers to either write the software or third party vendors or zebra, that's an opportunity for me to gain share.

Speaker Change: Yeah, I mean, I think it's still early in the launch to kind of predict where all of the revenues come from we've thought a lot about.

Speaker Change: Multiple areas to generate.

Speaker Change: Additional either volume of business or us to win more or others. So I'll give you a couple of examples maybe there and then we can go further.

Speaker Change: <unk>.

Speaker Change: Recurring revenues come really from things like our agents right the idea that.

Speaker Change: Zebra is going to create AI agents on top of this AI suite that allows our customers to leverage our portfolio of software, including adding AI capabilities to our work cloud suite that we talked about it in a wrap around the monitor store so there's opportunities for recurring revenue there.

Speaker Change: Market share gains we continue to lead in the innovation front and we believe we will do that here with AI as well with our.

Speaker Change: As well so I think both in our software business as well as with these agents. So I think overall you know where.

Speaker Change: AI suite.

Speaker Change: As well as our own companions, but also working with our partners. So anytime I can drive additional value to my end customer either what our own software or third party software and make it easy to for our customers to either write the software or third party vendors or zebra, that's an opportunity for me to gain share.

Speaker Change: We're still working through what those projections looked like they're not near term revenue, but they certainly are critical to our future and we believe we are on the forefront of US we feel really good about where we're at and the business models Rep.

Speaker Change: Represent lots of different opportunities to drive increased revenue and increased profit.

Speaker Change: Alright, Thanks, just as a quick follow up I'm, just wondering whether you saw any pre buy activity in Q4 or early Q1 of getting ahead of tariffs by customers.

Speaker Change: Recurring revenues come really from things like our agents right the idea that.

Speaker Change: No not really I mean, we've seen.

Speaker Change: Some customers, we've seen larger retail orders with year end spending, but not really driven by.

Speaker Change: Tariffs, so I would say I would say really no.

Speaker Change: Thank you.

Speaker Change: As well so I think both in our software business as well as with these agents. So I think overall you know we're still working through what those projections looked like they're they're not near term revenue, but they certainly are critical to our future and we believe we're on the forefront of this we feel really good about where we're at and the business model.

Speaker Change: The next question comes from Brad Hewitt with Wolfe Research. Please go ahead.

Brad Hewitt: Hey, good morning, Thanks for taking my questions.

Speaker Change: Good morning.

Speaker Change: So it appears that you're embedding about 30% organic incremental margins in 2025, I know the long term framework is 30% incrementals are better, but I would've thought the incrementals could have been a bit stronger in the early stages of volume recovery. So can you just walk through the puts and takes for 2025 on the margin side of things.

Speaker Change: Represent lots of different opportunities to drive increased revenue and increased profit.

Speaker Change: Great. Thanks, just as a quick follow up I'm, just wondering whether you saw any pre buy activity in Q4 or early Q1 of getting ahead of tariffs by customers.

Speaker Change: Hey, Brad I think the probably the first one I would point to is.

Speaker Change: Yeah, no not really I mean, we've seen.

Speaker Change: Some.

Speaker Change: With the guide, including $20 million of profit headwind from from the incremental tariffs and again thats predominantly in the first half of the year.

Speaker Change: Customers, we've seen larger retail orders with year end spending, but not really driven by <unk>.

Speaker Change: Tariffs, so I would say I would say really no.

Speaker Change: Thank you.

Speaker Change: So, peaking in Q2 that we'd see a pretty substantial sequential improvement from Q2 to Q3, and then fully mitigated into Q4 so.

Speaker Change: The next question comes from Brad Hewitt with Wolfe Research. Please go ahead.

Speaker Change: Obviously thats.

Brad Hewitt: Hey, good morning, Thanks for taking my questions.

Speaker Change: If you remove that you'd have probably a different you come to a different conclusion around the sequential improvement in margins. So I think that's one of the considering again, where we've been focused at least on what's been announced to date.

Speaker Change: Good morning.

Speaker Change: During we mitigate those as soon as possible. So that we can again exit the year and the year and exit the year.

Speaker Change: Fully recouped.

Speaker Change: Get those back as we head into 2026, so I think thats.

Hey, Brad I think the probably the first one I would point to is that with the guide, including $20 million of profit headwind from from the incremental tariffs.

Speaker Change: The probably the first and most important dynamic from a on the margin standpoint, and I think if you look from a full year EBITDA guide of 'twenty, one to 'twenty, two and obviously the higher end of the range would reflect removing those tariffs and get back to kind of where we would expect full profitability on a standalone basis or pre tariff release pre <unk>.

Speaker Change: And again thats predominantly in the first half of the year.

Speaker Change: So your peaking in Q2, then we would see a pretty substantial sequential improvement from Q2 to Q3, and then fully mitigated into Q4, so obviously thats.

Speaker Change: Mental tariff basis and.

Speaker Change: And that's where you really see the the volume leverage along with about a half a point of FX headwind.

Speaker Change: If you remove that you'd have probably a different you know you come to a different conclusion around the sequential improvement in margins. So I think that that's one of the considering again, where we've been focused at least on what's been announced to date.

Speaker Change: As we as we mentioned earlier so I think those are some of the puts and takes.

Speaker Change: Okay. That's helpful and then it looks like your gross margin on the service and software side of the business stepped down sequentially and there's been a bit of a downtrend since the start of 2024. So can you just talk about what's going on there and how you think about the services and software gross margin going into 2025.

Speaker Change: Ensuring we mitigate those.

Speaker Change: As soon as possible so that we can again exit the year and the year and exit the year.

Speaker Change: Kind of fully recouped.

Speaker Change: And get those back as we head into 2026. So I think that's that's the that's probably the first and most important dynamic from a margin standpoint, and I think if you look from a.

Speaker Change: Yes, So Q4 was down a bit some of that was just timing. We havent you know pretty high demand from our repair volume part of that was.

Speaker Change: Full year EBITDA guide of 'twenty, one to 'twenty, two and obviously the higher end of the range would reflect removing those tariffs.

Speaker Change: Internally driven just as we recoup some of the supply chain on some of those component parts and being able to get the the repairs complete in the queue into Q4, and I would still expect both the service and software line to be accretive.

And get back to kind of where we would expect full profitability on a standalone basis or pre tariff or at least pre incremental tariff basis.

Speaker Change: And that's where you really see the volume leverage along with about a half a point of FX headwind.

Speaker Change: And drive margin expansion and as we've said before just not to the same degree we've seen over the last five years I mean, the team has done an incredible job.

Speaker Change: As we as we mentioned earlier so I think those are some of the puts and takes.

Speaker Change: Both of the portfolios service and software expanding margins over the last three to four years to get us to where we are today and I would still expect margin expansion, but just not to the same degree we've seen over the last four years.

Nathan Winters: Great. Thanks Nathan.

Speaker Change: The next question comes from Melissa <unk> with Barclays. Please go ahead.

Speaker Change: Yeah. So Q4 was down a bit some of that was just timing. We havent you know pretty high demand from our repair volume part of that was.

Melissa: Yeah, Hi, good morning.

Melissa: Just a quick question on the.

Speaker Change: Internally driven just as we recoup some of the supply chain on some of those component parts and being able to get the the repairs complete in into Q4 and I would still expect both the service and software line to be accretive.

Melissa: You guys noticed that there was that strength in health care in Q4, and just thinking about moving into 2025, I know health care is the smallest vertical but it was pretty strong last year, how should we kind of think about that moving into 2025 is it a vertical where we should see continued kind of outsized strength. Thank you.

Speaker Change: And drive margin expansion and as we've said before just not to the same degree we've seen over the last five years I mean, the team has done an incredible job.

Speaker Change: On both of the portfolio of services and software expanding margins over the last three to four years to get us to where we are today and I'd still expect margin expansion, but just not to the same degree we've seen over the last four years.

Melissa: Yeah, I would say that.

Melissa: In Q4, we saw broad based.

Melissa: Demand across all the vertical markets, but as we commented we feel good about where we're at in health care, We've got a portfolio of products specific to health care.

Nathan Winters: Great. Thanks Nathan.

Melissa: Prior to the pandemic healthcare was our fastest growing vertical for some time and it's reemerged to that in Q2, three and four.

Speaker Change: The next question comes from Elisa Travis with Barclays. Please go ahead.

Elisa Travis: Yeah, Hi, good morning.

In 2024, and we would see that continuing into 2025 I would say you know.

Speaker Change: Just a quick question.

Elisa Travis: And.

Speaker Change: I've noticed that there was that strength in health care in Q4, just thinking about moving into 2025, I know health care is a small vertical.

Melissa: The improved productivity that health care workers get in providers get from the use of devices I would say that the.

Speaker Change: But it was pretty strong last year, how should we kind of think about that moving into 2025 is it a vertical where we should see continued kind of outsized strength.

Melissa: The opportunities exist in clinical mobility, it's in home health care patient engagement virtual care. So I think all of that bodes well for our portfolio.

Speaker Change: Yes.

Speaker Change: Yeah, I would say that you know that in.

Speaker Change: In Q4, we saw broad based.

Melissa: Of solutions, we have the <unk>.

Melissa: <unk> show coming up which is the largest trade show.

Speaker Change: Demand across all the vertical markets, but as we commented we feel good about where we're at in health care, We've got a portfolio of products specific to health care.

Melissa: In health care that we're excited about we've talked about the the retail show, but where we are.

Melissa: At that show in coming weeks, and we will spend more time with our customers there, but I think the health care team. Our sales team has done a great job and I think that.

Speaker Change: Prior to the pandemic health care was our fastest growing vertical for some time and it has reemerged to that in Q2, three and four.

Melissa: We've got a great portfolio of products and solutions in health care. So lets see continued strength there yes.

Speaker Change: And in 2024, and we would see that continuing into 2025 I would say.

Melissa: Great. Thank you.

Speaker Change: No.

Speaker Change: The improved productivity that health care workers get in providers get from the use of devices I would say that.

Melissa: The next question comes from Jim Ricchiuti with Needham <unk> Company. Please go ahead.

Speaker Change: The opportunities exist in clinical mobility, it's in home health care patient engagement virtual care. So I think all of that bodes well for our portfolio.

Chris: Hi, Good morning, this is Chris <unk> on for Jim.

Melissa: Just a couple of quick ones do you anticipate.

Speaker Change: The feature set for companion being.

Speaker Change: Of solutions, we have the HIMSS show coming up which is the largest trade show.

Speaker Change: Being exclusive to the customer that will showcase at our FERC for any period of time and.

Speaker Change: In health care that we're excited about we've talked about the the retail show, but where we are.

Speaker Change: Yeah.

Speaker Change: Could you talk about potentially the opportunity for these types of features.

Speaker Change: At that show in the next coming weeks and we'll spend more time with our customers there, but I think the health care team. Our sales team has done a great job and I think that we.

Speaker Change: To be expanding beyond that the retail setting into into the manufacturing and perhaps transportation logistics verticals. Thank you.

Speaker Change: We've got a great portfolio of products and solutions in health care. So lets see continued strength there yes.

Speaker Change: Yeah, So I think that no it's not exclusive to any one customer.

Speaker Change: Our solution and it's it's in two ways one is that.

Speaker Change: Great. Thank you.

Speaker Change: <unk>.

Speaker Change: The next question comes from Jim Ricchiuti with Needham <unk> Company. Please go ahead.

Speaker Change: AI suite for mobile computing.

Speaker Change: Allows our.

Speaker Change: Independent software vendors and our partners to be able to leverage AI on our devices for their own applications. So that way they can broaden it whether it's our customers specifically in the case of <unk>.

Speaker Change: Hi, Good morning. This is Chris screened on for Jim.

Speaker Change: Just a couple quick ones do you anticipate.

Speaker Change: The the feature set for companion.

Speaker Change: But the customers are presented with us at <unk> or independent software vendors building on top of the devices and then we're going to build agents on our own as well.

Speaker Change: Being exclusive to the customer that will showcase at our FERC for any period of time and.

Speaker Change: Could you talk about potentially the opportunity for these types of features too to be extended beyond the retail setting into the manufacturing and perhaps transportation logistics verticals.

Speaker Change: From that perspective, so both nothing nothing there.

Speaker Change: What was the second part of the question.

Speaker Change: Yes.

Speaker Change: I can jump in on that.

Speaker Change: Yeah. So I think there's no it's not exclusive to any one customer.

Speaker Change: Sorry on the AI companion being used in other verticals. However, one. Good example is we are using it within our own distribution center from.

Speaker Change: Sure.

Speaker Change: Our solution and it's it's in two ways. One is that you know.

Speaker Change: From a knowledge management think of again language transfer being able to translate documents and standard operating procedures into different languages to to support the workforce to again same thing that they are trying to do in retail which is how do you quickly train new.

Our.

Speaker Change: AI suite for mobile computing allows our independent software vendors and our partners to be able to leverage AI on our devices for their own applications. So that way they can broaden it whether it's our customers specifically in the case of.

Speaker Change: The customers are presented with us it an RF or its independent software vendors building on top of the devices and then we're going to build agents on our own as well.

Speaker Change: From that perspective, so both nothing nothing there.

Speaker Change: Ideas, what you train the trainer model on right. So ultimately it would be.

Speaker Change: What was the second part of the question.

Speaker Change: Our standard operating procedures within as Nate said Weyerhaeuser picking environment it could be standard operating procedures inside manufacturing.

Speaker Change: Yes.

Speaker Change: I can jump in on that.

Speaker Change: So on the AI companion being used in other verticals.

Speaker Change: So those are all opportunities to leverage the based software and it's all about training the model for your specific application.

Speaker Change: A good example is we're using it within our own distribution center.

Speaker Change: From a knowledge management think of again.

Speaker Change: Yeah.

Speaker Change: Okay. Thank you very much.

<unk> transfer being able to translate documents and standard operating procedures into different languages to to support the workforce.

Speaker Change: Our last question comes from Rob Jamieson with Cowen <unk> Company. Please go ahead.

Speaker Change: Same thing that they're trying to do in retail which is how do you quickly train new.

Rob Jamieson: Hey, guys. Thanks for taking my questions. Just the first one I know you've given a lot of color and I appreciate it around the full year guidance.

Speaker Change: New frontline workers to get up to speed as quickly as possible and we're using that functionality in our own distribution center. So, yes, I'd say different parts of the functionality, we're absolutely applicable to other vertical markets. Yes. The idea is what you train the trainer model on rates. So ultimately it would be you know a standard operating procedures within.

Rob Jamieson: Just wanted to make sure I have this right. So if you haven't seen really any indication delays or push out.

Rob Jamieson: More of a kind of hesitant.

Speaker Change: From your customers.

Rob Jamieson: And maybe just.

Rob Jamieson: Taking that a little bit longer.

Speaker Change: As Nate said, a warehouse or picking environment it could be standard operating procedures inside manufacturing.

Rob Jamieson: To understand the reputations with tariffs and everything I guess in a normal year. When would you expect it to get a little bit more visibility than some of the policy does come through and we get some clay.

Speaker Change: So those are all opportunities to leverage the based software and it's all about training the model for your specific application yes.

Rob Jamieson: Clarity.

Rob Jamieson: It's something ministration would you expect to see.

Rob Jamieson: A little bit more of an understanding of how the rest of the year might play out and when might that happen likelihood that would be later this quarter in the second quarter.

Speaker Change: Okay. Thank you very much.

Speaker Change: Our last question comes from Rob Jamieson with Cowen <unk> Company. Please go ahead.

Rob Jamieson: Yes, I would say that.

Speaker Change: Hey, guys. Thanks for taking my questions. Just the first one I know you're getting a lot of color and appreciate it around the full year guidance.

Rob Jamieson: Yeah, Theres always customers.

Budgets and visibility I would say typically by this time, we'd have more.

Speaker Change: One just wanted to make sure I have this right. So if they haven't seen really any indication delays or push out just more of a kind of hesitant.

Rob Jamieson: <unk>.

Rob Jamieson: More conviction by our customers that are projects that they're going to move ahead with and I think that's just this visibility uncertainty out there.

Rob Jamieson: Across the environment, there's no specific date customers are all different.

Speaker Change: From your customers.

Speaker Change: And maybe just.

Rob Jamieson: Retail customers now, we're still wrapping up their year right as we're continuing to ship in Q1 here to to finalized last year's budgets from their perspective other channel customers a budget year end, so it's R or sorry mid year.

Speaker Change: Taking them a little bit longer.

Speaker Change: To understand the ramifications of the tariffs and everything I guess in a normal year. When would you expect it to get a little bit more visibility than some of the policy does come through and we get some clear.

Speaker Change: Clarity.

Speaker Change: Something ministration would you expect to see.

Rob Jamieson: So it differs by customer I think that the.

Speaker Change: A little bit more about and.

Rob Jamieson: The lack of visibility is really driven by this uncertainty right and as you said if there becomes more clarity.

Speaker Change: And understanding of how the rest of the year might play out and when might that happen like would that be later this quarter in the second quarter.

Rob Jamieson: Round.

Rob Jamieson: Trade and what's going to happen from a policy perspective, but even yesterday and today there were discussions of <unk>.

Yeah, I would say that.

Speaker Change: Yeah, Theres always customers.

Speaker Change: Budgets and visibility I would say typically by this time, we'd have more.

Rob Jamieson: We're cyclical tariffs on other countries. So this uncertainty is not helping because our customers are focused as we are in things like hey, what happens if and how do I go mitigate tariffs and others.

Speaker Change: You know more.

Speaker Change: <unk> by our customers that are projects, they're going to move ahead with and I think that's just this visibility uncertainty out there.

Speaker Change: Across the environment, there's no specific date customers are all different.

Rob Jamieson: As opposed to finalizing project specifically.

Rob Jamieson: So youre right, we havent seen anything can be moved out or customers.

Speaker Change: Retail customers now, we're still wrapping up their year right as we're continuing to ship in Q1 here to to finalize last year's budgets from their perspective other channel customers are budgets year end, so it's R or sorry mid year.

Rob Jamieson: Delaying things yet we just don't have the visibility we'd normally have at this point in time.

Rob Jamieson: <unk> certainly is a headwind on on the growth that's real today, the China tariffs are real today.

Speaker Change: So it differs by customer I think that the.

Speaker Change: The lack of visibility is really driven by this uncertainty right and as you said if there becomes more clarity.

Rob Jamieson: But.

Rob Jamieson: Could the Mexico tariffs go away, that's why we try to characterize it about 50% of what <unk> talked about is Mexico, 50%, China. If it does go away. So more clarity certainly would help and give our customers more confidence in their year, and then give us some more clarity. So the problem is even as of yesterday and today.

Speaker Change: Around.

Speaker Change: Trade and what's going to happen from a policy perspective, but even yesterday and today there were discussions of reciprocal tariffs on other countries. So this uncertainty is not helping because our customers are focused as we are in things like hey, what happens if and how do I go mitigate tariffs and others.

Rob Jamieson: Less clarity than more on tariffs.

Rob Jamieson: No and thank you for that.

Speaker Change: As opposed to finalizing project specifically.

Rob Jamieson: And then just one last one just on the <unk> acquisition I know you said, it's not included in your full year guidance is there anything you can get us in the way of potential expectations from revenue profitability for full year as that.

Speaker Change: So you're right, we haven't seen anything can be moved out or customers.

Speaker Change: Delaying things yet we just don't have the visibility we'd normally have at this point in time.

Rob Jamieson: Acquisition gets completed.

Speaker Change: <unk> certainly is a headwind on on the growth Thats real today, the China tariffs are real today.

Rob Jamieson: And obviously based on the purchase price.

Rob Jamieson: It's relatively small relative to the total portfolio.

Speaker Change: But Chris.

Rob Jamieson: Assuming closing later this quarter it would be around 30 bps of incremental revenue for the year. So again, we didn't include that in our guide as we move into as we move into the second quarter. Once the once the deal is closed.

Speaker Change: <unk>, Mexico tariffs go away. That's why we tried to characterize it you know about 50% of what <unk> talked about is Mexico, 50%, China. If it does go away. So more clarity certainly would help and give our customers more confidence in their year, and then give us more clarity. So the problem is even though as of yesterday and today there is less.

Speaker Change: Great. Thank you.

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

Speaker Change: Clarity then more on tariffs.

Speaker Change: No and thank you for that.

Speaker Change: Yes, I'd like to thank our employees and partners for their support.

Speaker Change: And then just one last one just on the photo near acquisition I know you said, it's not included in your full year guidance is there anything you can get us in the way of potential expectations from revenue profitability for full year as that.

Speaker Change: As we continue to work together to solve our customers' biggest challenges a relentless focus on innovation will continue to transform our customer workflows, we feel good about our business.

Speaker Change: Acquisition gets completed.

Speaker Change: Have a great day everyone.

Speaker Change: Yes.

Speaker Change: Based on the purchase price.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker Change: It's relatively small relative to the total portfolio, but.

Speaker Change: No closing later this quarter it would be around 30 bps of incremental revenue for the year. So again, we didn't include that in our guide as we move into as we move into the second quarter. Once the once the deal is closed.

Speaker Change: Great. Thank you.

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

Bill Burns: Yeah, I'd like to thank our employees and partners for their support.

Bill Burns: As we continue to work together to solve our customers' biggest challenges a relentless focus on innovation will continue to transform our customer workflows, we feel good about our business.

Bill Burns: Have a great day everyone.

Bill Burns: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Q4 2024 Zebra Technologies Corp Earnings Call

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