Q3 2025 Zebra Technologies Corp Earnings Call

Speaker #1: Good day and welcome to the third quarter 2025 Zebra Technologies Earnings Conference Call . All participants will be in listen only mode should you need assistance , please signal a conference specialist by pressing the star key , followed by zero .

Speaker #1: After today's presentation , there will be an opportunity to ask questions . Please note this event is being recorded . I would now like to turn the conference over to Mike Steele , Vice President , Investor Relations .

Speaker #1: Please go ahead .

Bill Burns: Please go ahead. Good morning and welcome.

Speaker #2: Good morning , and welcome to zebra's third quarter earnings conference call . This presentation is being simulcast on our website at investors and will be archived there for at least one year .

Mike Steele: Zebra Technologies' third quarter Earnings Conference Call. This presentation is being simulcast on our website at investors.zebra.com and will be archived there for at least one year. Our forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially and we refer you to the factors discussed in our SEC filings. During this call we will reference non-GAAP financial measures as we describe our business performance. You can find reconciliations at the end of the slide presentation and in today's earnings press release. Throughout this presentation, unless otherwise indicated, our references to sales performance are year-on-year on a constant currency basis and exclude results from recently acquired businesses for 12 months. This presentation will include prepared remarks from Bill Burns, our Chief Executive Officer, and Nathan Winters, our Chief Financial Officer.

Speaker #2: Our forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially, and we refer you to the factors discussed in our SEC filings.

Speaker #2: During this call , we will reference non-GAAP financial measures as we describe our business performance . You can find reconciliations at the end of the slide presentation .

Speaker #2: And in today's earnings press release . Throughout this presentation . Unless otherwise indicated , our references to sales performance are year on , year on a constant currency basis , and exclude results from recently acquired businesses for 12 months .

Speaker #2: This presentation will include prepared remarks from Bill Burns , our Chief Executive Officer , and Nathan Winters , our Chief Financial officer . Bill will begin with the discussion of our third quarter results .

Mike Steele: Bill will begin with a discussion of our third quarter results. Nathan will then provide additional detail and discuss our outlook. Bill will conclude with progress on advancing our strategic priorities. Following the prepared remarks, Bill and Nathan will take your questions. Now, let's turn to slide 4 as I hand it over to Bill.

Speaker #2: Nathan will then provide additional detail and discuss our outlook . Bill will conclude with progress on advancing our strategic priorities . Following the prepared remarks , Bill and Nathan will take your questions .

Speaker #2: Now let's turn to slide four . As I hand it over to Bill . Thank you . Mike . Good morning , and thank you for joining us .

Bill Burns: Thank you, Mike. Good morning and thank you for joining us. Our team executed well in the third quarter, delivering results above our outlook, driven by solid demand, lower than expected tariffs, and strong operating expense leverage. For the quarter, we realized sales of $1.3 billion, a 5% increase from the prior year, an adjusted EBITDA margin of 21.6%, a 20 basis point improvement, and non-GAAP diluted earnings per share of $3.88, which was 11% higher than the prior year. We realized solid growth in our Asia Pacific, Latin America, and North America regions and had relative outperformance in printing, mobile computing, and RFID. Our retail and e-commerce end market was a bright spot, healthcare cycled a strong compare, and manufacturing remained relatively soft. We achieved double-digit earnings growth by driving operational efficiencies as we continue to invest in our leading portfolio of solutions.

Speaker #2: Our team executed well in the third quarter, delivering results above our outlook, driven by solid demand, lower-than-expected tariffs, and strong operating expense leverage.

Speaker #2: For the quarter . We realized sales of $1.3 billion , a 5% increase from the prior year , and adjusted EBITDA margin of 21.6% , a 20 basis point improvement in non-GAAP diluted earnings per share of $3.88 , which was 11% higher than the prior year .

Speaker #2: We realized solid growth in our Asia Pacific , Latin America and North America regions and had relative outperformance in printing , mobile computing and RFID .

Speaker #2: Our retail and e-commerce end market was a bright spot . Healthcare cycled a strong compare and manufacturing remained relatively soft . We achieved double digit earnings growth by driving operational efficiencies as it continue to invest in our leading portfolio of solutions .

Speaker #2: While we see growth across most of our business , our customers continue to navigate an uncertain macro environment , resulting in uneven demand across some geographies and vertical markets .

Bill Burns: While we see growth across most of our business, our customers continue to navigate an uncertain macro environment, resulting in uneven demand across some geographies and vertical markets. As we look at our broader business prospects, we are excited about our profitable growth opportunities, including our recent acquisition of Elo Touch Solutions, which enables us to accelerate our vision for the connected frontline. Our strong balance sheet and free cash flow profile also enable us to commit $500 million to share repurchases over the next 12 months as we drive long-term value for our shareholders. I will now turn the call over to Nathan to review our Q3 financial results and Q4 outlook.

Speaker #2: As we look at our broader business prospects , we are excited about our profitable growth opportunities , including our recent acquisition of Elo Touch Solutions , which enables us to accelerate our vision for the connected front line .

Speaker #2: Our strong balance sheet and free cash flow profile also enables us to commit $500 million to share repurchases over the next 12 months as we drive long term value for our shareholders .

Speaker #2: I will now turn the call over to Nathan to review our 2 or 3 financial results and Q4 outlook . Thank you . Bill .

Nathan Winters: Thank you Bill. Let's start with the P&L on slide 6. In Q3, total company sales increased approximately 5% with growth across most product categories, and services and software recurring revenue business grew modestly in the quarter. Our Enterprise Visibility and Mobility segment grew 2% led by mobile computing, and our Asset Intelligence and Tracking segment grew 11% led by RFID and printing, as we disclosed in our earnings press release this morning. Please note that effective in the fourth quarter, we will be reporting under two new segments, Connected Frontline and Asset Visibility and Automation. Bill will cover how this view aligns to our strategy and how we manage the business. Historical results have been recast in the appendix. We realized strong sales growth across most of our regions. In North America, sales grew 6% with double-digit growth in mobile computing and RFID offsetting weakness in Canada.

Speaker #2: Let's start with the PNL on slide six . In Q3 , total company sales increased approximately 5% with growth across most product categories and services and software recurring revenue , business grew modestly in the quarter .

Speaker #2: Our enterprise visibility and mobility segment grew 2% , led by mobile computing and our asset intelligence and tracking segment grew 11% , led by RFID and printing .

Speaker #2: As we disclosed in our earnings press release this morning , please note that effective in the fourth quarter , we were reporting under two new segments connected Frontline and Asset Visibility .

Speaker #2: And Automation . Bill will cover how this view aligns to our strategy and how we manage the business . Historical results have been recast in the appendix .

Speaker #2: We realized strong sales growth across most of our regions in North America. Sales grew 6%, with double-digit growth in mobile computing and RFID offsetting weakness in Canada.

Speaker #2: Asia-Pacific sales increased 23% , led by Australia , New Zealand and India . Sales increased 8% in Latin America , with broad based growth across the region .

Nathan Winters: Asia Pacific sales increased 23% led by Australia, New Zealand, and India. Sales increased 8% in Latin America with broad-based growth across the region. In EMEA, sales declined 3%. Regional performance was mixed, with softness in Germany balanced with relative strength in Northern Europe. Adjusted gross margin declined 90 basis points to 48.2%, primarily due to higher U.S. import tariffs. Adjusted operating expenses as a percent of sales improved by 110 basis points. This resulted in second quarter adjusted EBITDA margin of 21.6%, a 20 basis point year-on-year improvement. Non-GAAP diluted EPS were $3.88, an 11% year-over-year increase and above the high end of our outlook. Turning now to the balance sheet and cash flow on slide 7. Year to date, we generated $504 million of free cash flow.

Speaker #2: In EMEA , sales declined 3% . Regional performance was mixed , with softness in Germany , balanced with relative strength . In northern Europe , adjusted gross margin declined 90 basis points to 48.2% , primarily due to higher U.S.

Speaker #2: import tariffs . Adjusted operating expenses . As a percent of sales improved by 110 basis points . This resulted in second quarter adjusted EBITDA margin of 21.6% , a 20 basis point year on year improvement .

Speaker #2: non-GAAP diluted earnings per share were $3.88 , an 11% year over year increase , and above the high end of our outlook . Turning now to the balance sheet and cash flow on slide seven .

Speaker #2: Year to date, we generated $504 million of free cash flow. As of the end of Q3, we held more than $1 billion of cash with a modest debt leverage ratio of 1 and $1.5 billion credit capacity.

Nathan Winters: As of the end of Q3, we held more than $1 billion of cash with a modest debt leverage ratio of 1 and $1.5 billion credit capacity. We have been deploying capital consistent with our allocation priorities through October. Year to date, we have repurchased more than $300 million of stock and acquired 3D machine vision company Photoneo and Elo Touch Solutions. With cash on hand and our existing credit facility, we continue to maintain excellent financial flexibility for investment in the business and return of capital to shareholders, and as Bill highlighted, we are planning $500 million of share repurchases through the third quarter of 2026. On Slide 8, we provide an update on the anticipated impact from tariffs on our products imported to the U.S. and our progress on mitigation for the full year 2025.

Speaker #2: We have been deploying capital consistent with our allocation priorities through October. Year to date, we have repurchased more than $300 million of stock and acquired 3D machine vision company Photo Neo and Elo Touch Solutions with cash on hand and our existing credit facility. We continue to maintain excellent financial flexibility for investment in the business and return of capital to shareholders.

Speaker #2: And as Bill highlighted , we are planning $500 million of share repurchases through the third quarter of 2026 . On slide eight , we provide an update on the anticipated impact from tariffs on our products imported to the United States and our progress on mitigation .

Speaker #2: For the full year 2025 , we're now assuming approximately $24 million of gross profit impact after mitigation with a $6 million net impact expected in Q4 , which is an improvement from our prior guidance .

Nathan Winters: We're now assuming approximately $24 million of gross profit impact after mitigation, with a $6 million net impact expected in Q4, which is an improvement from our prior guide. Our forecast assumes the current effective rates and exemptions remain in place. We have a track record of successfully navigating supply chain challenges, including tariffs, and expect to substantially mitigate the current U.S. import tariffs entering 2026 as a result of actions taken by our team, including previously announced pricing adjustments yielding about 1 point of sales growth, reducing U.S. imports from China to less than 20%, rationalizing our product portfolio, and strong progress on driving overall supply chain efficiency and resilience. Let's now turn to our outlook. We anticipate between 8% and 11% sales growth in the fourth quarter, including approximately 850 basis points of contribution from our Elo Touch Solutions and Photoneo acquisitions and favorable FX.

Speaker #2: Our forecast assumes the current effective rates and exemptions remain in place . We have a track record of successfully navigating supply chain challenges , including tariffs , and expect to substantially mitigate the current U.S.

Speaker #2: import tariffs entering 2026 . As a result of actions taken by our team , including previously announced pricing adjustments yielding about one point of sales growth , reducing US imports from China to less than 20% .

Speaker #2: Rationalizing our product portfolio and strong progress on driving overall supply chain efficiency and resilience . Let's now turn to our outlook . We anticipate between 8 and 11% sales growth in the fourth quarter , including approximately 850 basis points of contribution from our Elo and acquisitions and favorable FX .

Speaker #2: Our second half demand assumptions have not changed from our prior business update . Our fourth quarter adjusted EBITDA margin is expected to be approximately 22% , which assumes a $6 million net impact from US import tariffs in non-GAAP diluted earnings per share is expected to be in the range of $4.20 to $4.40 .

Nathan Winters: Our second half demand assumptions have not changed from our prior business update. Our fourth quarter adjusted EBITDA margin is expected to be approximately 22%, which assumes a $6 million net impact from U.S. import tariffs, and non-GAAP diluted earnings per share is expected to be in the range of $4.20 to $4.40. Our fourth quarter outlook translates to full year sales growth of approximately 8%. Our full year adjusted EBITDA margin is expected to be approximately 21.5%, and non-GAAP diluted earnings per share is expected to be approximately $15.80. Based on our Q4 guide, a 17% year on year increase. Please reference additional modeling assumptions shown on Slide 9. With that, I will turn the call back to Bill.

Speaker #2: Our fourth quarter outlook translates to full year sales growth of approximately 8% . Our full year adjusted EBITDA margin is expected to be approximately 21.5% , and non-GAAP diluted earnings per share is expected to be approximately $15.80 .

Speaker #2: Based on our Q4 guide , a 17% year on year increase , please reference additional modeling assumptions shown on slide nine . With that , I'll turn the call back to Bill .

Speaker #2: Thank you . Nathan . As we turn to slide 11 , Z 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 .

Bill Burns: Thank you, Nathan. As we turn to slide 11, Zebra 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. Our solutions intelligently connect people, assets, and data to assist our customers with business-critical decisions. I would like to spend a minute on our new reporting segments. Zebra operates in a greater than $35 billion served addressable market encompassing the connected frontline in asset visibility and automation. Each segment has a 5% to 7% organic growth profile over a cycle, supported by megatrends including artificial intelligence, mobile and cloud computing, and the on-demand economy. The connected frontline is about equipping the frontline of business with tools and digital touchpoints necessary to drive efficiency, optimize collaboration, and improve the consumer experience. Our solutions portfolio includes enterprise mobile computing, rugged tablets, frontline software, and AI agents.

Speaker #2: Our solutions intelligently connect people , assets and data to assist our customers with business critical decisions . I would like to spend a minute on our new reporting segments .

Speaker #2: Cyber operates in a greater than $35 billion served addressable market , encompassing the connected front line and asset visibility and automation . Each segment has a 5 to 7% organic growth profile over a cycle , supported by megatrends , including artificial intelligence , mobile and cloud computing , and the on demand economy .

Speaker #2: The connected front line is about equipping the front line of business with tools and digital touchpoints necessary to drive efficiency, optimize collaboration, and improve the consumer experience.

Speaker #2: Our solutions portfolio includes enterprise mobile computing , rugged tablets , front software and AI agents . Our acquisition of Elo adds key capabilities in self-service and point of sale , increasing our addressable market .

Bill Burns: Our acquisition of Elo Touch Solutions adds key capabilities in self-service and point of sale, increasing our addressable market in this segment to greater than $20 billion. Asset visibility and automation is primarily focused on digitizing environments and automating operations across the supply chain through advanced data capture, printing, machine vision, RFID, and other solutions. These are complementary and synergistic segments that digitize and automate operations and solve our customers' biggest challenge. Turning to slide 12, Zebra solutions enable our customers across a broad range of end markets to drive productivity and efficiency and improve service to their customers, shoppers, and patients. I would like to highlight RFID, which has been a consistent bright spot in our portfolio, growing double digits over the past several years. As a market leader, we are encouraged by the continued momentum we are realizing.

Speaker #2: In this segment to greater than $20 billion . Assets , visibility and automation is primarily focused on digitizing environments and automating operations across the supply chain .

Speaker #2: Through advanced data capture , printing , machine vision , RFID , and other solutions . These are complementary and synergistic segments that digitize and automate operations and solve our customers biggest challenges .

Speaker #2: Turning to slide 12 . Zebra solutions enable our customers across a broad range of end markets to drive productivity and efficiency and improve service to their customers , shoppers and patients .

Speaker #2: I would like to highlight RFID , which has been a consistent bright spot in our portfolio , growing double digits over the past several years as the market leader , we're encouraged by the continued momentum we are realizing our largest customers and retail and e-commerce , as well as transportation , logistics and manufacturing have been expanding their adoption of zebra's RFID solutions to additional workflows and categories .

Bill Burns: Our largest customers in retail and e-commerce, as well as transportation, logistics, and manufacturing, have been expanding their adoption of Zebra's RFID solutions to additional workflows and categories due to the improved business outcomes they are achieving. Supply chain visibility, inventory accuracy, increased productivity, improved profitability, and reduced waste are key outcomes that are driving increased adoption of the technology deeper into all end markets. Our FAD continues to be an important area of growth for us, enhancing our broader set of solutions offerings and demonstrating how our evolving portfolio enables us to solve increasingly complex challenges. Turning to slide 13, our industry leadership puts us in a unique position to be the supplier of choice of AI solutions for the frontline. We can deliver an entirely new experience for frontline workers through mobile computing coupled with wearable solutions and the cognitive capabilities of AI.

Speaker #2: Due to the improved business outcomes they are achieving , supply chain visibility , inventory accuracy , increased productivity , improved profitability , and reduced waste .

Speaker #2: Our key outcomes that are driving increased adoption of the technology deeper into all end markets . RFID continues to be an important area of growth for us , enhancing our broader set of solutions offerings and demonstrating how our evolving portfolio enables us to solve increasingly complex challenges .

Speaker #2: Turning to slide 13, our industry leadership puts us in a position to be the supplier of choice for AI solutions for the front line.

Speaker #2: We can deliver an entirely new experience for frontline workers through mobile computing , coupled with wearable solutions and the cognitive capabilities of AI .

Speaker #2: Imagine handheld and wearable solutions that can see , hear and understand the environment . While interacting with the front line worker in a conversational way .

Bill Burns: Imagine handheld and wearable solutions that can see, hear, and understand the environment while interacting with the frontline worker in a conversational way. This is the direction AI for the frontline is headed and we are starting this journey with our Zebra companion offerings. We're excited by the opportunity to transform the way work gets done as we collaborate with our strategic partners across the AI ecosystem. Last month, more than 100 senior leaders of companies representing a variety of industries attended our inaugural Frontline AI Summit. During the event, we presented our AI vision and the benefits Zebra can bring to our customers to accelerate AI adoption and impact across their frontline operations. We have active pilots with our customers validating the benefits of our new AI solution.

Speaker #2: This is direction AI for the front line is headed , and we are starting this journey with our zebra companion offerings . We are excited by the opportunity to transform the way work gets done as we collaborate with our strategic partners across the AI ecosystem .

Speaker #2: Last month , more than 100 senior leaders of companies representing a variety of industries attended our inaugural frontline AI summit . During the event , we presented our AI vision and the benefits zebra can bring to our customers to accelerate AI adoption and impact across their front line operations .

Speaker #2: We have active pilots with our customers validating the benefits of our new AI solution , especially retailer is actively utilizing an advanced pilot of our AI companion agents to provide assistance with product recommendations , resulting in better sales , conversions and upsells , faster employee onboarding , and elevated shopping experience .

Bill Burns: A specialty retailer is actively utilizing an advanced pilot of our AI companion agents to provide assistance with product recommendations resulting in better sales conversions and upsells, faster employee onboarding, and an elevated shopping experience. We believe that our AI agents will be attractive to any customer who strives to improve the productivity and effectiveness of their frontline associates. A large transportation logistics company is digitizing and accelerating proof of delivery with immediate feedback and enhanced compliance powered by our on-device AI suite. A digitized environment leveraging AI is fundamental to transforming workflows across a multitude of industries. These are early examples of the significant benefits our AI solutions can deliver to our customers and elevate Zebra as a leading AI solutions provider for the front line of business. We are looking forward to demonstrating our solutions at the National Retail Federation Trade Show in January.

Speaker #2: We believe that our AI agents will be attractive to any customer who strives to improve the productivity and effectiveness of their frontline associates .

Speaker #2: A large transportation logistics company is digitizing and accelerating proof of delivery with immediate feedback and enhanced compliance . Powered by our on device AI suite , the digitized environment leveraging AI is fundamental to transforming workflows across a multitude of industries .

Speaker #2: These are early examples of the significant benefits our AI solutions can deliver to our customers , and elevate zebra as a leading AI solutions provider for the front line of business .

Speaker #2: We are looking forward to demonstrating our solutions at the National Retail Federation trade show in January . Turning to slide 14 . We are excited about the opportunity to enhance the connected front line experience with our recent acquisition of Elo Touch solution .

Bill Burns: Turning to slide 14, we are excited about the opportunity to enhance the connected frontline experience with our recent acquisition of Elo Touch Solutions. Our combined capabilities enable us to offer more ways to digitize operations across more touch points and drive increased business with our enterprise customers. Elo is a pioneer in touchscreen technology and a leading provider of point of sale solutions, self-serve kiosks, interactive displays, and industry-tailored offerings. Elo's modular solutions deliver cross-generational compatibility, and their enterprise-ready platform and software tools seamlessly integrate into customers' existing ecosystem. Together, we can deliver better customer experiences through the intersection of frontline mobility and self-serve technology. This acquisition further elevates our strategic positioning across retail, hospitality, quick-serve restaurants, health care, and manufacturing through the breadth and depth of our complementary portfolio of solutions.

Speaker #2: Our combined capabilities enable us to offer more ways to digitize operations across more touchpoints and drive increased business with our enterprise customers . ELO is a pioneer in touchscreen technology and a leading provider of point of sale solutions , self-serve kiosks , interactive displays and industry tailored offerings .

Speaker #2: Ellos modular solutions deliver cross-generational compatibility and their enterprise ready platform and software tools seamlessly integrate into customer's existing ecosystem . Together , we can deliver better customer experiences through the intersection of frontline mobility and self-serve technology .

Speaker #2: This acquisition further elevates our strategic positioning across retail , hospitality , quick service restaurants , healthcare and manufacturing through the breadth and depth of our complementary portfolio of solutions .

Speaker #2: Over time , zebra will offer a common platform across mobile and fixed digital touchpoints that improve frontline efficiency . Together with Elo , we are better positioned to deliver complete solutions and leverage AI to empower associates and elevate consumer experiences .

Bill Burns: Over time, Zebra will offer a common platform across mobile and fixed digital touch points that improve frontline efficiency. Together with Elo, we are better positioned to deliver complete solutions and leverage AI to empower associates and elevate consumer experience. In closing, our confidence in sustainable long-term growth is underpinned by several themes that drive demand for our solutions, including labor and resource constraints, track and trace requirements, increased consumer expectations, advancements in artificial intelligence, and the need for intelligent operations. We are well positioned to address these critical requirements in our customers' operations with our leading portfolio of solutions. As we move forward, we remain focused on advancing our industry leadership with our innovative solutions that digitize and automate our customers' workflows and driving profitable growth. I will now hand it back to Mike.

Speaker #2: In closing , our confidence in sustainable , long term growth is underpinned by several themes that drive demand for our solutions , including labor and resource constraints .

Speaker #2: Track and trace requirements , increased consumer expectations , advancements in artificial intelligence , and the need for intelligent operations . We are well positioned to address these critical requirements , and our customers operations with our leading portfolio of solutions .

Speaker #2: As we move forward , we remain focused on advancing our industry leadership with our innovative solutions that digitize and automate our customers workflows and driving profitable growth .

Speaker #2: I will now hand it back to 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 .

Mike Steele: 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 #1: We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone.

Operator: 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. The first question comes from Andrew Buscaglia with BNP Paribas. Please go ahead.

Speaker #1: If you are using a speakerphone , please pick up your handset before pressing the keys . To withdraw your question , please press star then two .

Speaker #1: At this time , we will pause momentarily to assemble our roster . The first question comes from Andrew Buscaglia with BNP Paribas . Please go ahead .

Speaker #3: Hey , good morning everyone .

Bill Burns: Hey, good morning everyone. Morning. Demand trend seems strong or relatively strong in Q3 and I noticed your Q4 guidance implies organic growth somewhat decelerating. I know you're facing a tough comp, but I'm wondering if you can kind of walk through what you see demand wise and just additional commentary by end market would be helpful. Yeah, I would say that if we look at Q3, the team executed well, driving sales near the high end of our outlook and that was backed up by solid demand across the business. I would say the second half is really playing out as we expected with some customers that bought products early to deliver their peak season a bit earlier than we had originally expected. If you look across the regions, we saw solid growth across North America, Asia Pacific, and Latin America.

Speaker #2: Morning .

Speaker #3: So yes , demand trends . Strong in or relatively strong in Q3 . And I know your Q4 guidance implies organic growth somewhat decelerating .

Speaker #3: I know you're facing a tough comp , but I'm wondering if you can kind of walk through what you see demand wise and just additional commentary by end market would be helpful .

Speaker #2: Yeah , I would say that , you know , the if we look at Q3 , the team executed well driving , you know , sales near the high end of our outlook .

Speaker #2: And , you know , that was backed up by kind of solid demand across the business . I would say the second half is really playing out as we expected with some customers that , you know , bought products early to deliver their peak season , you know , a bit earlier than than we had originally expected .

Speaker #2: I would say that , you know , if you look across the regions , we saw solid growth across , you know , North America , Asia and Latin America .

Speaker #2: If we think of the vertical markets , really the quarter was led by retail and e-commerce , you know , from an end market perspective .

Bill Burns: If we think of the vertical markets, really the quarter was led by retail and e-commerce from an end market perspective. As we called out in Q2, weakness in EMEA continued through Q3. From a product perspective, relative strength in mobile computing and printing and RFID a bright spot. Overall, second half is playing out as we expected, just the timing of those orders coming a little early into Q3. I see, helpful. Can you comment on EVM? The growth was rather modest in the quarter. What are you seeing specifically in that segment and do we still expect that to grow exiting the year? Yeah, I would say EVM from a mobile computing perspective, we saw strong growth in Q3 with large deals in North America, Asia Pacific, and Latin America.

Speaker #2: And , you know , as we called out in , in Q2 . You know , weakness in , in EMEA continued , you through Q3 , I would say from a product perspective , you know , relative strength in mobile computing and printing .

Speaker #2: And RFID , a bright spot , but I would say overall , you know , second half is playing out as we expected .

Speaker #2: Just the timing of those orders coming a little early into Q3 .

Speaker #3: I see helpful . Can you comment on EVM ? The growth was rather modest in the quarter . What are you seeing specifically in that segment ?

Speaker #3: And do we do we still expect that to grow exiting the year ?

Speaker #2: Yeah , I would say , you know , EVM from a mobile computing perspective , we saw strong growth in Q3 with large deals in North America , Asia Pacific and Latin America .

Speaker #2: You know , continue to be positioned for long term growth and opportunities of across mobile computing , including , you know , device in the hands of more associates overall next generation product deliverables around wearables and RFID technology .

Bill Burns: We continue to be positioned for long term growth and opportunities across mobile computing, including device in the hands of more associates. Overall, next generation product deliverables around wearables and RFID technology. As we talked about in the prepared remarks, there is an opportunity mid to longer term inside AI as we see opportunities there to leverage AI in the frontline. From a data capture perspective, which is also the other element of EVM, the second largest element to that is we saw decline based on a difficult compare across the scanning portfolio. I think that really was the story of EVM, a combination of strong mobile computing but difficult compare from a scanning perspective which then impacted overall EVM in Q3.

Speaker #2: We continue as we talked about in the prepared remarks , and opportunity , you know , mid to longer term inside , you know , AI , as we see opportunities there to leverage AI in the front line .

Speaker #2: I would say that data capture perspective , which is also the other element of , you know , EVM , you know , the largest , you know , the second largest element to that is , you know , we saw decline based on a difficult compare , I would say , and you know , across the scanning portfolio .

Speaker #2: So , you know , I think that really was the story of EVM , a combination of strong mobile computing . But , you know , difficult compare from a scanning perspective , which then , you know , impacted , you know , overall EVM in Q3 .

Speaker #1: The next question comes from Piyush Avasthi with city . Please go ahead .

Operator: The next question comes from Piyush Avasthy with Citi. Please go ahead.

Speaker #4: Good morning guys .

Bill Burns: Good morning, guys. Morning. With the understanding that you're not providing 2026 guidance, it would be helpful if you could provide some puts and.

Speaker #2: Good morning .

Speaker #4: With the understanding that you're not providing 2020 guidance , but it would be helpful if you could provide some puts and takes on the construct itself , like how different or similar can 2026 be from your long term financial targets ?

[Analyst]: Takes on the construct itself.

Bill Burns: How different or similar can 2026 be from your long-term financial targets? I know that visibility is somewhat limited and there is still some macro uncertainty, but based on your conversation with your clients, how would you characterize the demand outlook heading into 2026 across your different verticals? Yes, I'd say today, while our customers remain cautious in the near term and we're experiencing some uneven demand across different environments, think EMEA and then overall places like Canada. We're seeing uneven demand manufacturing from a vertical market perspective across our different vertical markets. Our solutions basically remain fundamental to our customers and they remain essential for digitizing and automating environments. Longer term, AI represents an opportunity to continue to advance our solutions and we're well positioned to drive sustainable, profitable growth into next year is what I'd say. Got it. You guys mentioned digital AI features.

Speaker #4: I know that visibility is somewhat limited , and there is still some macro uncertainty , but based on your conversation with your clients , how would you characterize the demand outlook heading into 26 across your different verticals ?

Speaker #2: Yeah , I'd say , you know , today , while our customers remain cautious , you know , in the near term , you know , and we're experiencing , you know , some uneven demand across different environments .

Speaker #2: I think , you know , EMEA and then , you know , overall places like Canada , you know , so we're seeing uneven demand manufacturing , you know , from a vertical market , you know perspective across you know , our different vertical markets , our solutions basically remain fundamental to our customers .

Speaker #2: And they remain essential for digitizing and automating environments . So you know , longer term AI represents an opportunity to continue to advance our solutions .

Speaker #2: And , you know , we're well positioned to , you know , drive sustainable , profitable growth into next year is what I'd say .

Speaker #4: Got it . And you guys mentioned digital AI features again , like I understand it's like very early , but how soon can these features become a catalyst for growth for the company ?

Bill Burns: Again, I understand it's very early, but how soon can these features become a catalyst for growth for the company? I think you have talked about a refresh cycle at some point. Do you get the sense that there is demand and appetite from your customers to invest in software? Which means when the next refresh cycle comes, it translates to not only hardware upgrade but also strong software. Any comments there? Yeah, I would say from an AI perspective we see two opportunities as you've called out. One is certainly the hardware environment with next generation handheld devices coupled with, we're the leader today in wearable technology inside the enterprise. We see that playing out as the way AI is delivered to the frontline. It starts with mobile devices and it's likely coupled with wearable technology from a hardware perspective.

Speaker #4: I think you have talked about a refresh cycle at some point . Do you think you get the sense that there is demand and appetite from your customers to invest in software , which means when the next refresh cycle comes , it translates to not only hardware upgrade , but also like strong software .

Speaker #4: Any comments ? There ?

Speaker #2: Yeah , I would say from from an AI perspective , we see , you know , two opportunities , as you've called out .

Speaker #2: One is , you know , certainly the the hardware environment with , you know , next generation handheld devices coupled with , you know , where the leader today in wearable technology inside the enterprise .

Speaker #2: So we see that playing out as the , you know , the way AI is delivered to the front line , it starts with mobile devices and it's likely coupled with wearable technology from hardware perspective .

Speaker #2: We're in pilot now . As we talked about in our prepared remarks or with our zebra companion and our , you know , AI suite overall in different applications with , you know , customers and retail and as we talked about .

Bill Burns: We're in pilot now as we talked about in our prepared remarks with our Zebra companion and our AI suite overall in different applications with customers in retail and TNL as we talked about. That creates a software opportunity for us across our AI agents and early customer pilots where they're seeing significant value to those. I would say first revenues likely in 2026 and then ramping in 2027 and beyond is where we'd see as we want to get through the pilots, demonstrate the value to our customers ultimately and then begin to drive revenue and scale those into our customers. The opportunity, as you said, is in two areas: hardware upgrade of those hardware, new hardware in the idea of wearable, and then ultimately in software as well.

Speaker #2: So that creates , you know , a software opportunity . For us across our AI agents and early customer pilots are they're seeing significant value to those .

Speaker #2: I would say , you know , first revenues likely in 26 . And then , you know , ramping in 27 and beyond is where we'd see as we're , you know , want to get through the pilots demonstrate the the value to our customers ultimately .

Speaker #2: And then begin to drive revenue and scale those into our customers . But the opportunity , as you said , is is in two areas hardware upgrade of those hardware , new hardware in the idea of wearable and then ultimately in software as well .

Speaker #1: The next question comes from Damian Karas with UBS. Please go ahead.

Operator: The next question comes from Damian Karas with UBS. Please go ahead.

Speaker #5: Hey , good morning everyone .

Bill Burns: Hey, good morning everyone. Good morning, Damian. How are you? I'm wondering if you are doing well. Thank you. I was wondering if you could maybe speak a little bit to the large project funnel. What you're seeing out there, what conversations you're having. Has there been any? Obviously the fourth quarter, it doesn't appear you're expecting much large project activity. Just in terms of the funnel, is there any increase in customer conversations and any hope that maybe you could see some of that stuff get awarded in the fourth quarter or likely going to be waiting sometime longer? I'd say as we've talked about, I would say the demand trajectory has remained pretty consistent with our outlook from the prior quarter. I would say customers have generally maintained their capital spending for the most part and projects continue to move forward.

Speaker #2: Good morning Damian .

Speaker #6: I wondering if you .

Speaker #5: Doing well. Thank you. I was wondering if you could maybe speak a little bit to the large project funnel. What?

Speaker #5: You're seeing out there , what conversations you're having , you know , has there been any obviously , the fourth quarter doesn't appear .

Speaker #5: You're expecting much large project activity , but but just in terms of the funnel , is there is there any increase in customer conversations and any hope that maybe you could see some of that stuff get awarded in the fourth quarter , or likely going to be waiting some time longer ?

Speaker #2: Yeah , I'd say is , you know , as we've talked about , I would say the demand trajectory has remained pretty consistent with our outlook from the prior quarter .

Speaker #2: And I would say , you know , customers have , you know , generally maintained their capital spending for the most part . And projects continue to move forward .

Speaker #2: I would say some have . And I think we talked about this last quarter as well . Some of spread , you know , projects and purchases over multiple quarters .

Bill Burns: I would say some have, and I think we talked about this last quarter as well, some have spread projects and purchases over multiple quarters. Driven by caution that still remains out there as our customers are navigating the global macro uncertainty and specifically some of the ultimate ramifications to a certain trade policy that's in place today. I would say this has driven this uneven demand across some verticals and geographies. We feel good about the business overall and continuing to extend our lead, but the demand environment hasn't changed much. I think we saw some orders earlier in the year than we anticipated. We continue to monitor our customers and not only opportunities for year end but what's happening across EMEA, the tariff situation, government shutdown.

Speaker #2: Again , you know , driven by caution , that's still remains out . There is , you know , our customers are navigating , you know , the global macro uncertainty and specifically some of the ultimate ramifications to the , you know , in trade policy .

Speaker #2: That's , you know , in place today , I would say this is driven , you know , this uneven demand , you know , across some verticals and geographies .

Speaker #2: But , you know , we feel good about the business overall and continuing to extend our lead , you know , but the demand environment hasn't changed much .

Speaker #2: I think we saw some orders earlier in the year than we anticipated . We continue to monitor our customers . And , you know , not only opportunities for year end , but , you know , you know , what's happening across Emia .

Speaker #2: You know , the tariff situation , government shutdowns . So there's a lot of things happening in Q4 that , you know , we feel good about , you know , our guide being balanced , you know , for the quarter .

Bill Burns: There are a lot of things happening in Q4 that we feel good about, our guide being balanced for the quarter and overall that makes sense. Bill, on your point about some of this pull forward demand in the third quarter, any particular reason why you think some orders might have come in earlier in the second half, anything to do with tariffs or sort of price optimization on the part of your customers? Just curious why that might be. No, I would say again the timing is always, isn't always exact. We anticipated Q3, we call the guide for that. We overachieved. That guide really is some customers just need a product earlier to meet their peak demand. I think that's a good thing. We're seeing E-commerce demand retail continue to be strong in Q3, and I think that drove some earlier orders.

Speaker #2: And, you know, overall.

Speaker #5: That makes sense . And , Bill , on your point about some of this pull forward demand , you know , in the third quarter , any particular reason why you think some some orders might have come in earlier in the second half ?

Speaker #5: You know , anything to do with tariffs or sort of price optimization on the part of your customers . Just just curious why why that might be .

Speaker #5: Thanks .

Speaker #2: Yeah . No , I would say again the the timing is always , you know , isn't a , you know , isn't always exact .

Speaker #2: Right . And you know , we anticipated , you know , Q3 we call the guide for that . We you know , overachieved that guide really is some customers just need a product earlier to , to meet their peak demand .

Speaker #2: I think that's a good thing . Right . We're seeing you know , e-commerce demand retail continue to to be strong in Q3 .

Speaker #2: And I think that drove some earlier orders . I wouldn't call it pull in as much as just , you know , timing of the need for the product when they would have normally ordered a bit later , they said , hey , I'd like to have this product earlier to meet the Q3 demand for peak .

Bill Burns: I wouldn't call it pull in as much as just timing of the need for the product when they would have normally ordered a bit later. They said, hey, I'd like to have this product earlier to meet the Q3 demand for peak. I think that's the balance between Q3 and Q4. It's just played out in a timing perspective. I think the demand is as we expected. I think we feel good about the year overall. We're going to deliver almost 6% organic revenue growth, 17% EPS growth. The year is kind of playing out as we expected as well. I think we feel good. It's just timing, not really pulling as much.

Speaker #2: And I think that's , you know , the balance between between Q3 and Q4 . It's just played out in a timing perspective .

Speaker #2: I think the demand is as we expected . I mean , I think we feel good about the year overall . We're going to you know , deliver almost 6% organic revenue growth , 17% EPs growth .

Speaker #2: So the years kind of playing out as we expected , you know , as well . So I think we feel good . It's just timing not really pulling as much .

Speaker #1: The next question comes from Tommy Moll Stephens . Please go ahead .

Operator: The next question comes from Tommy Moll of Stephens. Please go ahead.

Speaker #7: Good morning and thank you for taking my question .

[Analyst]: Good morning, and thank you for taking my question.

Speaker #2: Morning , Tommy .

Bill Burns: Morning Tommy.

Speaker #7: For the fourth quarter , I want to unpack the assumption around budget flush . So maybe we could take it in two parts .

[Analyst]: For the fourth quarter, I want to unpack the assumption around budget flush. Can you quantify what you're assuming for Elo Touch Solutions from a top line perspective in Q4, and then if we back that out, what does the sequential quarter over quarter look like there? I think typically you see some year end flush, but I just want to hear you talk about what you're assuming for this year. Thank you.

Speaker #7: Can you quantify what you're assuming for ELO from a top line perspective , in Q4 ? And then if we back that out , what does the the sequential quarter over quarter look like there ?

Speaker #7: I think typically you see some year end flush , but I just want to hear you talk about what you're assuming for this year .

Speaker #7: Thank you .

Speaker #2: Yeah . Tommy I'll take that . I think as Bill mentioned , you know , we're I'd say the first thing is holding the full year organic growth rate consistent to what we had guided back in August .

Nathan Winters: Yeah, Tommy, I'll take that. I think as Bill mentioned, we're, I would say the first thing is holding the full year organic growth rate consistent to what we had guided back in August. We believe that provides a balanced view of the current environment that Bill had talked about relative and with some of those orders being realized a bit earlier ahead of the quarter.

Speaker #2: And we believe that provides a balanced view of the current environment . That Bill had talked about relative and with some of the some of those orders being realized a bit earlier ahead of the quarter .

Speaker #2: So if you look at our Q4 guide , 9.5% growth , as we said in the prepared remarks , about eight and a half points of that is just due to the ELO as well as Neo and FX .

Bill Burns: If you look at our Q4.

Nathan Winters: Guide, 9.5% growth, as we said in the prepared remarks, about 8.5 points of that is just due to the Elo as well as Photoneo and FX. Elo we have in the guide of $100 million. In line with what we had talked about last quarter in terms of their overall revenue profile, we're getting about a point of price which really leaves that organic demand flat if you look at it from a year-on-year perspective. The way to think about it is we see year-end spend at similar levels as we saw last year. As you recall, we had a nice year-end as we exited 2024 and we're seeing similar levels of spend and pipeline here as we go in towards the year-end.

Speaker #2: Elo . We have in the guide of $100 million . So in line with what we had talked about last quarter in terms of their overall revenue profile , and we're getting about a point of price , which really leaves that organic demand flat .

Speaker #2: If you look at it from a year on year perspective . And I'd say the way to think about it is we see year end spend just similar levels as we saw last year .

Speaker #2: As you recall , we had a nice year end as we exited 2024 and we're seeing similar levels of spend and pipeline here as we as we go in towards the towards the year end .

Speaker #2: So that's obviously one we're paying close attention to as well as as Bill mentioned , monitoring what's going on within Europe . The government shutdown and everything else is going around the world .

Nathan Winters: That's obviously one we're paying close attention to, as well as, as Bill mentioned, monitoring what's going on within Europe, the government shutdown, and everything else going on around the world. I think that's the way to think about Q4, which is, excluding FX, pricing, and M&A, you really have kind of a flat demand really driven by that year-end project spend being at similar levels to last year.

Speaker #2: But I think that's the way to think about the Q4 , which is , excluding FX pricing and M&A . You really have kind of a flat demand really driven by that year end project spend being at similar levels to last year .

Speaker #7: Thank you . Nathan . I wanted to ask about RFID . You you framed some of the recent success there . There's been a pretty high profile announcement recently in the fresh category from one of the omnichannel leaders .

[Analyst]: Thank you, Nathan. I wanted to ask about RFID. You framed some of the recent success there. There's been a pretty high-profile announcement recently in the fresh category from one of the omnichannel leaders. I'm curious, are you able to comment if your business should benefit from that recent update, or maybe if you're not, anything you can do to comment on forward visibility on RFID? Are there things in your pipeline that are continuing to suggest some of those elevated growth rates? Thank you.

Speaker #7: I'm curious, are you able to comment if your business should benefit from that recent update? Or maybe, if you're not, is there anything you can do to comment on forward visibility on RFID?

Speaker #7: Are there things in your pipeline that are continuing to suggest some of those elevated growth rates? Thank you.

Speaker #2: Yeah , I'd say , Tommy , we clearly have seen , you know , strong double digit growth rates . You know , on RFID over the past several years .

Bill Burns: Yeah, I'd say, Tommy, we clearly have seen strong double-digit growth rates on RFID over the past several years, and we continue to see a pipeline of opportunity across the entire supply chain, whether it's across retail or now. TNL continues to deploy projects across RFID, manufacturing, government. I would say in retail we're seeing, you know, grocery, as you said, fresh opportunities. In retail, beyond general merchandise opportunities into quick serve restaurants, into health care, I would say the broader track and trace across supply chains across multiple verticals all creates growth opportunities for us. As you know, we have the broadest set of RFID solutions in the market today across fixed and handheld readers, across new releases of our mobile computing devices that have RFID integrated within them.

Speaker #2: And we continue to see a pipeline of opportunity across the entire supply chain , whether its across retail or now TNL continues to to deploy projects across RFID manufacturing , government .

Speaker #2: I would say in retail , we're seeing , you know , grocery , as you said , fresh opportunities . So you know , in retail beyond general merchandise opportunities into quick serve restaurants , into healthcare .

Speaker #2: So I would say the broader track and trace across supply chains , across multiple verticals , all , you know , creates growth opportunities for us .

Speaker #2: You know , as you know , we're the you know , we have the broadest set of RFID solutions in the market today across fixed and handheld readers , across , you know , near , you know , new releases of our mobile computing devices that have RFID integrated within them .

Speaker #2: Our printing portfolio , the labels associated with that , you know , so all of that , you know , allows us to continue to be excited about , you know , RFID and moving forward .

Bill Burns: Our printing portfolio, the labels associated with that, all of that allows us to continue to be excited about RFID and moving forward. Yes, I think things like Fresh and Grocery and others just create more and more demand for our solutions. I think the customers that have deployed solutions to date continue to see value and continue to expand the use cases that they've deployed already inside their environment. RFID, I think, continues to be a growth driver for us moving forward.

Speaker #2: And yes, I think things like fresh and grocery and others just create more and more demand for our solutions. I think the customers that have deployed solutions to date continue to see value and continue to expand the use cases that they've deployed already inside their environment.

Speaker #2: So RFID , I think , continues to be a growth driver for us . You know , moving forward .

Speaker #1: The next question comes from Keith Howsam with North Coast Research . Please go ahead .

Operator: The next question comes from Keith Housum with Northcoast Research, please go ahead.

Speaker #8: Great . Good morning guys . Hey Bill , just want to unpack a little bit more of your commentary regarding AI and the opportunity there .

Bill Burns: Great. Good morning guys. Hey Bill, just want to unpack a little bit more your commentary regarding AI and the opportunity there. Understanding that it's a long game here. It sounds like the opportunity from a hardware perspective is adding more wearable devices, but also perhaps an acceleration of the refresh cycle. I guess one, is that true and then second, will these devices under the AI world, will they need a more higher end device compared to what perhaps are using today? Yeah, so I think you hit it spot on. I think the opportunity is certainly with higher or premium devices, higher end devices which we'd look to drive higher ASP's and over time we would see that being a driver for the refresh cycle as new technology would be that. Think faster processor, more memory on mobile devices.

Bill Burns: We see that we're the global leader today in wearable technology for enterprise and we see there's an opportunity there as well to pair, think body cam type devices, you know, with a mobile device, things that can sense the environment or see the environment. Be leveraging the mobile device in certain applications. Wearable technology could be, you know, almost watch like technology that we've released recently as well. Different form factors and wearables as we're seeing across the customer base today. Hardware clearly mobile computing and wearable and then software offering. If we kind of wind all the way back, Zebra Technologies solutions of digitizing and out of the environment become kind of fundamental for AI.

Bill Burns: Collecting data on the front line that allows this sense, analyze, act, right, sense what's happening at the point of productivity so you can analyze it with AI and take the next best action within your business. Our solutions fundamentally drive models in AI. That's what we do, provide data, you got to start there. AI used throughout, you know, multiple solutions today across, you know, different applications of software, you know, robotics 3D quality inspection today. Traditional AI used across our portfolio, the revenue you talked about from mobile devices and wearables and then software on top of that. Think of our Zebra companion offerings and what we're doing in our AI suite that layers on top of software offerings on the mobile device to either manage those models for our customers.

Bill Burns: Think models on the device need to be managed, or think of it as applications that Zebra provides in the idea of AI agent all create opportunities for us. As I said, likely first revenues in 2026 and scaling from there. Great, thank you, I appreciate that detail. Just as a follow up, retail and E-commerce, you know, probably we're on the fifth or sixth quarter at least of contributing to the growth of the company. Is there visibility to how long that's sustainable? You're looking at historical information. Is it usually over the two-year period that these things go through a refresh cycle, then kind of another vertical is going to be expected to take over and drive growth from there? Not necessarily. I would say that we've seen strength in retail and E-commerce, but we have to remember that E-commerce continues to grow.

Bill Burns: We talked about some of this product being used for peak. It really has driven some of that by the E-commerce players as they continue to deploy devices to meet peak demand. I would say this whole idea of refresh cycle, everyone's on a different time frame and cycle, whether that's retail or T&L or postal or others, and they're all on their own cycle. Every retailer is on a different cycle, and every E-commerce, E-commerce is more, they don't do that same type of refresh, they buy over time. I would say T&L the same way. I don't think it switches from one vertical to the other. We'd like all geographies and all vertical markets to be up all at the same time. It just doesn't quite work that way. Today we're seeing strength in retail and E-commerce.

Bill Burns: Transportation and logistics has gone to more normalized levels, and we're seeing growth there. Manufacturing is pretty flat. Tough compare in healthcare. While we'd like to see everything up and to the right all the time, I don't think there's a transition away from retail and E-commerce to something else. We'd like to see growth across all of them, and there's no reason why not. Things like manufacturing remain pretty challenging in the short term.

Driven some of that by the e-commerce players uh, as they continue to to deploy devices to meet Peak demand. I would say, you know, the this whole idea of refresh cycle. Everyone's on a different time frame and cycle whether that's retail or tnl or, you know, postal or or others and, um, they're all on their own cycle. Meaning that every retailer is on a different cycle and every e-commerce, e-commerce is more. They don't do that. Same type of refresh, they buy over time. Um, but I would say tnl the same way, so I I don't think it switches from 1 veux to the other. I think, look, we'd like all geographies and all vertical markets to be up all at the same time. It just doesn't quite work that way. You know today we're seeing strength and Retail and e-commerce. You know. Transportation Logistics has gone to more normalized levels and we're seeing growth their manufacturing pretty flat. Um, tough comparing Healthcare. So I think that what I would like to see everything up in the right all the time, I don't think there's a transition

Away from retail and e-commerce to something else. I think you know, we'd like to see growth across all of them and there's no reason why not. Um, but I think things like manufacturing remains pretty challenging in the short term.

Operator: The next question comes from Jamie Cook with Truist. Please go ahead.

Jamie Cook: Hi, good morning. I guess my first question, just the margin divergence between the two segments, asset intelligence and tracking, the margins seem to be doing better this year whereas last year the two segments were flat. If you could sort of unpack that as tariffs hitting one of those segments more than the other. I know you talked about being able to cover tariffs for the most part in 2026. Any nuances on how it would impact the segments? I guess we can talk about it within the new segmentation. Any color on that for 2026 as well. Thanks.

The next question comes from. Jamie cook with truist Securities. Please go ahead.

Hi, good morning. Um I guess my first question, just the margin Divergence between the 2 segments um as it intelligence and tracking uh the margins seem to be doing better this year, whereas last year, the 2 segments were flat. So just if you could sort of unpack that, um, as tariffs hitting 1 of those segments, more than the other. And then I know you talked about, um, you know, being able to uh, cover tariffs for the most part in 2026. Uh, any nuances on how would it impact the segments? And I guess we can talk about it, you know, within the new within the new segmentation. But any color on that for 26 as well. Thanks.

Nathan Winters: Yeah, Jamie, I wouldn't say there's anything specific driving the gross margin difference between the two variables in terms of unique. I think just some of that is a bit of the mix within the portfolio. You see the strong growth in AIT, so you're getting nice volume leverage there across our printing portfolio. That's also where you have the RFID growth kind of coming through in terms of the higher margin profile. I think some of it's just timing of mix between the portfolios. As Bill mentioned, data capture was down in Q3 in the EVM segment, which has again nice operating or nice gross margin profile. I think that more just mix within the portfolio quarter to quarter versus that they have fundamental shift between the two. I think as we mentioned we expect to fully mitigate tariffs as we go into next year.

Yeah, Jamie I I wouldn't say there's anything specific driving the, the gross margin difference between the 2 verbs in terms of unique, I think just some of that is a bit of the mix within the portfolio. Um, you see the strong growth in AIT, so you're getting a nice volume, leverage their across our printing portfolio. That's also where you have the RFID growth.

Nathan Winters: You'd expect maybe a modest amount in Q1, but fully mitigated as we go into the second quarter with some additional actions the team's been working. I think primarily that will be benefiting within the AIT segment. That's again where we have across EVM. That's where we have the mobile computing exemption today. Most of that benefit you'll see in AIT as we cycle into next year with some of the additional actions we have planned later this year and early part of next.

Uh, kind of coming through in terms of the, the higher margin profile. So I think so much just timing of mix, um, between between the portfolios. As, as Bill mentioned, data capture was down in Q3 or in the evm segment, which has, you know, again, a nice operating or nice gross margin profile. So again, I think that more just mixed within the portfolio quarter to quarter versus a. Let's say a fundamental shift, um, between the 2. Yeah. And I think, you know, as we mentioned we expect to fully mitigate tariffs as we go into

Next year. So you'd expect maybe a modest amount in q1, but fully mitigated, as we go into the second quarter with some additional actions, the team's been working.

Jamie Cook: Okay, I guess. My second question just on Elo, I think you said for the fourth quarter that contributes $100 million in revenues, which is in line with the $400 million of annual sales that you talked about when you announced the acquisition last quarter. Any thoughts? I think that's a business that you've said has grown 5 to 7% through the cycle, similar to you guys. Any thoughts on Elo as you're thinking about 2026? Thanks.

See, again, I think the primarily that will be benefiting within the AIT segment. So that's again where we have across evm, that's where we have the mobile Computing exemption today. So the most of that benefit you'll see in in AIT as we cycle into next year, with some of the additional actions, we have planned later this year in in early part of next.

Okay, I guess in the just my second question, just on Elo. So I think you said for the fourth quarter that contributes, you know, 100 million in revenues, which is in line with the 400 million of annual sales that you talked about when you announced the acquisition last quarter, any thoughts? I mean, I think that's a business that you've said has grown 5 to 7% through the cycle, similar, to you guys. Any, um, thoughts on Elo as your as you're thinking about um, you know, 2026, thanks.

Bill Burns: Yeah, I would say that we continue to be excited about the acquisition. It certainly further positions us as a strategic partner to our customers across multiple vertical markets, and the breadth and depth of their portfolio married with ours gives us more strategic partnering opportunities with our customers. Overall, I would say that as you said, similar growth profile to Zebra, similar value proposition as well. Purpose-built hardware, enterprise-ready platform, just like our mobility DNA software tools that seamlessly integrate into an enterprise environment. All those are the reasons why our customers buy mobile computing from us. It's the same reason why customers buy Elo Touch Solutions. We closed in early Q4. I would say performing as expected overall at the moment, and we don't see any change to that.

Yeah, I would say that, you know, we continue to be excited about, you know, the acquisition it, it certainly further, you know, positions us as a strategic partner to, you know, our customers um, across, you know, multiple uh, vertical markets and, you know, the breadth and depth of their portfolio married with ours, uh, you know, gives us more strategic, you know, partnering opportunities with our customers. Overall, I would say that, you know, as, as you said similar growth pile profile to zebra similar, um, value proposition as well, purpose-build Hardware.

Bill Burns: We see opportunities into next year, including continued POS rollout or point of sale rollout solutions at a very large retailer. We continue to see new opportunities and new wins from their business in the self-serve kiosk and some of the largest quick-serve restaurants around the world. We're continuing, we're working closely with them, our teams together and progressing our operational synergies both on the revenue and the cost side. Those are early days but progressing as we expected. We feel good overall about their business, their growth profile as we enter Q4 or go through Q4 and then into 2026.

New wins, um, from their business in the, you know, self-serve kiosk and some of the largest, you know, Quick Serve restaurants around the world. We're continuing, we're working closely with the Mr teams together and progressing, you know, our operational synergies, both in the revenue and the cost side and and those are early days. But progressing as as we expected so we feel good overall about their business, their growth profile, you know, as we enter Q4 or go through Q4 and then into 26.

Operator: The next question comes from Meta Marshall with Morgan Stanley. Please go ahead. Hi, this is Marianne from Meta. I have two questions for you.

Question comes from meta, Marshall with Morgan Stanley, please go ahead.

Jamie Cook: The first is on the pricing actions related to tariffs. Given the pricing actions that were taken to offset the tariff costs, what kind of impact are you seeing from these pricing actions on customer demand?

Operator: My second question is on.

Jamie Cook: The OBBBA tax impact. Can you walk us through how the OBBBA is expected to impact your effective tax rate and cash taxes going forward?

Operator: Thanks.

Hi. This is Marion from Meda, um, I have 2 questions for you. The first is on the pricing actions related to tariffs. Um, so given the pricing actions that were taken to offset the Tariff costs. What kind of impact are you seeing from these pricing actions on customer demand? And then my second question is on the o bbba tax impact. Um, can you walk us through? How the O bbba is expected to impact your effective tax rate and cash taxes going forward? Thanks.

Nathan Winters: Yeah. On the first one, I'll be able to speak of the pricing impact. We're seeing some nice benefit from the pricing actions we announced back earlier this year. We increased from our prior guide the expected annual benefit, which we now expect to be around $60 million or a point of growth on an annual basis from our prior guide of $40 million. Again, some nice momentum here as we work through the third quarter in terms of overall price realization. I'd say we haven't really seen that dramatic of an impact on demand. I mean, as Bill mentioned, the year's pretty much played out as we expected both from first half, second half. We haven't seen a major shift or pullback in demand.

Yeah, so on the first 1, I be able to speak to the the pricing impact.

So we had, um, we're seeing some nice benefit, um, from the pricing actions. We announced, uh, back earlier this year. So, we we increased from our prior guide, the expected annual benefit, which now expect to be around 60 million, or a point of growth.

Nathan Winters: I think what we hear from our channel partners is that the pricing actions we've taken are in line with a lot of our competitors across the industry where tariffs have had an impact. We feel good about the momentum there. As we said, trying to fully mitigate the impact of the current tariffs as we go into next year. If you look at the impact on the new tax bill, as we said in the last guide, this year we expect about a $50 million to $60 million reduction in our cash taxes due to the ability to amortize the current R&D, deduct or deduct R&D. The full amount of that, we expect about over $200 million over the next two years, a little over $200 million in the next two years of incremental cash benefit from the change in the tax bill.

On an annual basis from our prior guide of 40 million. So, again, some nice nice momentum here. As we work through the third quarter in terms of overall price realization. And so, we haven't really seen that dramatic of an impact on demand. I mean, that is Bill mentioned the, the years. Pretty much played out as we expected. Um, both from, you know, first half second half so we haven't seen a major shift or, you know, pull back in demand. And I think what we hear from our Channel Partners is that, you know, the pricing actions we take in, are, are in line with a lot of our competitors, um, across the industry where, where tariffs have had an impact. So again, we feel feel good about the momentum there, um, and again, as we said trying to, you know, fully mitigate the the impact of the current tariffs as we go into next year.

If you look at the, the impact on the, the new tax bill, as you said in the, the last guide, um, this year, we expect about a 50 60 million dollar reduction in our cash taxes. Um, due to the ability to advertise the current R&D deductible or deduct R&D

Nathan Winters: It did result, if you'd notice, in our guide, we increased our expected tax rate to 18%. Part of that is just reflecting the impact of the tax bill with some of the new permanent rate effects as well as just a shift in income. A modest impact on the overall tax rate, but again a bigger benefit on the lower cash taxes expected over the next two years.

Um, and the full amount of that we expect about over million dollars over the next 2 years. A little over 200 million in the next 2 years of incremental, cash benefit, uh, from the change in the tax bill. Um, but it did result, if you notice in our guy, we increased our expected tax rate to 18%, um, part of that is just reflecting the impact of the tax bill, with some of the new, um, permanent rate effects, as well as just a shift in income. So, a modest impact on the overall tax rate.

um, but again, a bigger benefit on the, on the lower cash taxes, expected over the next 2 years,

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

The next question.

Bill Burns: Hey, good morning, guys. Morning, Joe. When you talked last year into the fourth quarter, I felt like you had guided in a way that took the market risk largely out. You were guiding to things that were in hand and backlog, and volumes came in better than you expected and it was upside to your guide. This quarter you're talking about flows similar to last year. Is that element of like we're not baking in much in terms of what we're not seeing directly in the market still a fair way to categorize the nature of how you're guiding? I'm just curious what the EPS accretion you have from Elo Touch Solutions in there is. I have a follow up, maybe I'll start in hand.

To go ahead.

Hey, good morning, guys.

Um, Good morning, Joe. So when you, when you talked last year into the fourth quarter, I felt like you had guided in a way that took the market risk largely out, right? And you were guiding the things that were in hand and backlog and kind of volumes came in better than you expected and it was upside to your guide. Now now this quarter you're talking about, um, you know, flows similar to last year, but is that element of like we're not baking in much?

In terms of what we're not seeing directly in the market is, is that still a fair way to categorize like the the nature of how you're guiding and, and just curious what the the EPS secretion you have from from uh, ELO in. There is, and then I have a follow-up.

Nathan Winters: The neat.

Bill Burns: I would say that, you know, Joe, overall, you know, customers are generally moving ahead with planned projects. I would say, you know, they're hesitant to accelerate future projects based on kind of macro uncertainty and the trade policy and the secondary impacts of the trade policy clearly on their business, parcel slowing, for instance, in, you know, transportation logistics because of the trade policy. Right. That is an example of that. I think while they're generally moving ahead, we haven't seen an acceleration of projects or moving in projects based on this uncertainty. I think the discussions with our partners and customers, you know, hasn't fundamentally changed. That's why we're saying the demand trajectory feels about the same as it did when we, you know, talked last quarter. The need for our solutions certainly hasn't changed.

And maybe I'll start and hand the mic. I would say that, you know, Joe, overall, customers are generally moving ahead with planned projects. Um, I would say, you know, they're hesitant to accelerate future projects.

Bill Burns: As you saw, some buying early, you know, in peak to be able to meet their demands that are customers. We're still essential. A lot of it's about timing. I think we saw, you know, above the, you know, close to the high end of our guide for Q3. I think we see, you know, Q4 playing out as we expected for the year. I mean, again, as I said earlier, nearly 6% organic revenue growth, 17% EPS growth for the year. I think that overall the macro environment and the trade policy uncertainty and the ramifications of their business is, you know, having customers hold back a little bit on do I advance.

Nathan Winters: Future projects Joe, maybe a little additional color. I think I characterize the guide we had last year which was, to your point, we assumed very little year-end spend in terms of above and beyond what we kind of had, you know, clear line of sight to, and obviously that came in better than expected as we exited the year. This year we're assuming a similar level of year-end spend as we did last year. Obviously some of that we have in hand, but the team has to go convert pipeline here over the next six weeks, six to eight weeks, to close out the year. I think that's how I characterize the difference between this year's guide and last year in terms of those expectations around year-end. Then just your question on the Elo EPS impact, it's about $0.10.

Solutions, certainly hasn't changed as you saw some buying early, you know, in Peak to, to be able to meet their demands, that our customers. So, we're still essential, um, a lot of it's about timing. So, I think we saw, you know, above the, you know, close to the high end of our guide for Q3. I think we see, you know, Q4 playing out as we expected for the year. I mean, again, as I said earlier, nearly 6%, organic Revenue growth, 17% EPS growth, for the year, but I think that overall, I think the macro environment and the trade policy and certainty, and the ramifications of their business is, you know, having customers hold back a little bit on do I Advance future projects and Joe maybe be a little additional color. I think I characterize the guy we had last year which was 0. We assumed very little year in spent in terms of above and beyond what we kind of had, you know, clear line of sight too. And obviously that came in better than expected um, as we exited the year where where this year, we're assuming a similar level of year and spend as we did last year. So obviously some of that

Nathan Winters: If you look at the, you know, for the full year we raised the guide about $0.30. Some of that was better.

We have in hand, but the team has to go convert pipeline here, you know, over the next, you know, 6 weeks 6, to 8 weeks to to close out the year. So I think characterize a, that's how I characterize the difference between this year's guide. And, and, and last year is, um, on on terms of those expectations around your end and then just your, your question, on the ELO EPS, um, impact, it's about 10 cents. So, if you look at the, you know,

Bill Burns: Tariffs basically split a third, a third, a third.

Nathan Winters: A third between lower tariff Elo Touch Solutions and a little bit of favorability on overall interest rates and share count.

For the full year, we raised the guide by about $0.30 on some of the better tariffs. Basically, we split the third a third, a third between lower tariff ELO and a little bit of favorability on overall interest rates and share count.

Bill Burns: The follow up, and we kind of talked about this a little bit, but as you think into next year, I'm not trying to pin you down, but as we're coming off, you know, you had a big Covid deployments, then you had kind of a multi-year decline. As we're kind of bouncing modestly off that, what reasons, if any, would you kind of like talk us off of thinking that next year, at least from where we're sitting now, shouldn't be at least in the range that you would see in a cycle. Yeah, I mean, again, we're not, you know, we're not guiding to 2026 as you acknowledged. I think that today we're clearly seeing, you know, customers remain a bit cautioned in the near term, and because of that, we're seeing some uneven demand environments overall.

and then the follow up and we kind of talked about this a little bit, but as you think into next year I'm not trying to pin you down but like

as we're coming off, you know, you had a big coid deployments then you had kind of a multi-year decline as we're kind of bouncing modestly off that like

What reasons, if any would you kind of like, talk us off of thinking that next year at least from where we're sitting now? Like shouldn't be at least in the range that you would see in a cycle?

Bill Burns: You know, EMEA, for example, manufacturing, you know, across different vertical segments. In some cases, it's just tough compares in place of, you know, DCs. I'd say, you know, we feel good about driving sustainable, profitable growth into next year across the business. I think we've got to play out Q4 here, and we'll provide more guidance come first quarter.

Yeah, I mean I again we're not, you know, um, we're not guiding the 26s as as as you acknowledge. I, I think that today we're clearly seeing you know, customers, um, remain a bit caution in the near term is. And because of that, we're seeing, you know, some uneven demand environments, overall. Um, you know, eme example, manufacturing, you know, a frost different vertical, segments, some cases, It's just tough Compares in case of, you know, um, DCS. But I'd say, you know, we feel good about driving sustainable profitable growth in the next year, um, across the business. And I think we've got to play out to 4 here and and, you know, we'll provide more guidance. Come, you know, first quarter. So um,

Operator: The next question comes from Rob Mason. Please go ahead.

Bill Burns: Yes, good morning Bill. I just wanted to touch on thinking about demand as you go into next year or finish up fourth quarter. You know a couple of your geographies you've already talked about, EMEA being softer. We saw some of that in the second quarter and it continued on here. I'm just curious maybe what the month-to-month or quarterly trend looked like in that region as you entered the fourth quarter. Also, if you could address, you know, maybe conversely just Asia Pacific that's been double digit now for I guess five quarters. Is that broadening out your customer base there? Is it kind of project specific? I'm just kind of curious what's driving the strength and how you see Asia Pacific as you look forward as well. Maybe cover all the geographies.

The next question comes from Rob Mason with beard. Please go ahead.

I guess. Good morning, hey Bill. I just wanted to touch on, you know, thinking about demand as you go into next year, uh, or finish up fourth quarter, you know, a couple of your geographies, you've already talked about uh, AI being soft. So, we saw some of that in the second quarter and to continue on here. Um, I'm just curious maybe what the

Uh, what does the month-to-month or quarterly trend look like in that region as we enter the fourth quarter?

And then also, if you could address, you know maybe conversely just asia-pac that's been double digit now for I guess, 5 quarters um is that broadening out your customer base there? Is it kind of Project Specific? You know I'm just kind of curious what's driving the the strength and how you see uh Asia pack as you look forward as well.

Bill Burns: I would say North America, you know, strength in mobile computing and printing, tough compare in DCS. We talked about peak demand as we're already covered in retail and e-commerce. In Q3 a bit of pull in there, continued strength in RFID. As we talked about, the use cases there, large and mid-tier customers and orders were up in North America. I would say again as we talk about, you know, trade policy, Canada, you know, demand softer in Q3 in North America. EMEA I would say about the same as we saw in Q2 and we called out. It's really mixed performance in EMEA. If I added color, I would say Northern Europe continues to do well in retail and transportation logistics, where places like Germany and manufacturing or France, retail continues to be challenged. I say, you know, mixed throughout EMEA but ultimately down in Q3.

Yeah, maybe, um, maybe, maybe cover all the geographies, I would say North America, you know, strength and mobile Computing, and and printing tough compared and DCS. We talked about, um, Peak demand is is, uh, we're already covered in in retail and e-commerce. Uh, you know, in Q3, um, a bit of pull in their continued strengthening RFID, you know, as we talked about the use cases there, um, large and mid uh, tier um, customers, uh, and orders were were up in in North America. I would say again, as we talked,

Bill Burns: Asia Pacific, you called it out, strong growth in Asia Pacific. We talked about opportunities around the world and leveraging our go-to-market and we talked about the investment in Japan. Japan was a strength. As we focused in that focus there, new applications in the postal service in Japan where we won early device wins for postal carriers. Now we're deploying devices in post offices. Again, speak to the strength of our go-to-market organization shifting resources into places where we have lower market share and want to drive growth. That's a good example in Asia. Another is India. We continue to see growth in the India market as others have called out as well. I think, you know, around the globe, stronger GDP in India, Australia, New Zealand continues to be a strength in Asia. So feel good there.

Bill Burns: We don't talk a lot about it, but Latin America, you know, record quarter in Latin America and broad-based strength, you know, in the Latin America region. We feel good about, you know, Latin America even though we don't talk a lot about it typically. That's kind of the spread and the difference across the different geographies. That's helpful. Just as a follow-up, you obviously talked about taking your or committed to share repurchases over the next 12 months. You did, you know, you have seen the stock comp tick up. Nathan, I was just curious if you could kind of address that, you know, how that will trend, any thoughts into 2026 and kind of what's driving the increase in the stock comp.

Um, strong growth in asia-pacific, you know, we talked about opportunities around the world and, and leveraging our go to market, and we talked about the investment in in Japan. So, Japan was a strength, you know, as we focused in that, um, focus their new applications and the, you know, in the Postal Service in Japan where we won, uh, early, um, device wins for postal carriers. Now, we're deploying devices in in post offices. So again, um, speak to the the strength of our go to market organization shifting resources into places where we have lower market share and want to drive growth. So that's a good example in Asia another's, India. So we continue to see growth in the India market as others have have called out as well. I think that, you know, around the globe stronger GDP in in India, Australia and New Zealand continues to to be a strength in Asia, so feel good there. We don't talk a lot about it, but Latin America, you know, record quarter in Latin America um and Broad

Bank strength, you know, in the, in the Latin America region. So we feel good about, you know, Latin America, um, even though we don't talk a lot about it, typically, so that's kind of the, the spread and, and the difference across the different geographies.

That's helpful. Um, it just, uh, as a followup. You're, um, you talked about taking your or committed to share repurchases, uh, over the next 12 months. Um, you did, you know, you have seen the, uh, the stock comp pick up, um, Nathan. I was just curious. If you could kind of address that, you know how that'll Trend any thoughts into 26. Um, and kind of what's driving the, the increase in the stock up.

Nathan Winters: Yeah, so I think two things we talked earlier in the year was somewhat of just a change in the design of the plan that had us accelerate some of the expense within the P&L. No change in the overall comp, but just from an accounting perspective we had to accrue a bit more of it early in the year. As you see that play out over the next couple of years, you'll see the offset, and then this quarter in particular was just a true-up with coming out of our STRAT plan, truing up the performance and some of the performance shares and doing a kind of cumulative catch-up.

Nathan Winters: I think this year, this quarter was a bit of an anomaly in terms of the higher expense, and we expect that to normalize back out as we go into Q4 and then next year start to more normalize back to historical levels again. Just this year had some changes based on the accounting change as well as now just the true-up on the performance shares.

Yeah, so um, I think 2 things we talked earlier in the year was with someone just a, a change in in the design of the plan that had us accelerate some of the expense within the p&l. So no change in the overall comp. But just from an accounting perspective, we had to a, a crew, a bit more of it early in the year. So as you see that play out over the next couple years, you'll see the offset and then this quarter in particular was just a true up, um, with the coming out of our strap plan, um, chewing up the performance and some of the performance shares and doing a, you know, kind of a accumulative catch up. So, I think this year this quarter was a bit of an anomaly, um, in terms of the higher expense and we expect that to normalize back out as we go into Q4. And then next year, start to more normalize back to historical levels. Again just this year, had some um,

Uh, changes based on the accounting change, as well as now just to chew up on the performance shares.

Operator: The next question comes from Guy Hardwick with Barclays. Please go ahead.

The next question.

Bill Burns: Hi, good morning. Great job on the supply chain. Navigating supply chain challenges mostly. It stands out that you intend to take China to below 20% of U.S. imports. Where do you think that goes to long term, and what do you think kind of the footprint of contract manufacturers will look like, say, a year from now?

Hi, good morning.

Morning morning.

Um, that's a great job, uh, on um, on the supply chain navigating supply chain changes. Um,

Obviously it stands out that you intend to take China to below, 20% of us Imports. Where do you think that goes too long term. Um and what do you think the kind of the the footprint of contract manufacturers will look like say, you know, a year from now

Nathan Winters: Yeah, I can take that. I think, as you mentioned, I think the team's done a phenomenal job over the last, really, you probably say six years driving that from, as you talked, over 80% concentration for North America in China now down to 20% and below that as we go into next year.

Bill Burns: Look, I think there'll be a certain.

Yeah, I can, I can take that. I think look, as you mentioned, I think, the team's done a, a phenomenal job. Um, you know, over the last I really you probably say 6 years, um, driving that from, you know, as we talked about, you know, over 80%, um, concentration for North America in China now down to, you know, 20% and below that as we go into next year.

Nathan Winters: Portion that will remain for, you know, it's hard to see an exit just particularly around some of the components that are, you know, really there's only one source for those and we still use those and need to import those for service or, you know, and those types of things. We're probably getting close into the teens where you, you know, you start to get a, outside of some major shifts in component manufacturing, you kind of hit a baseline there. I think what we focused on is broader resilience, making sure we have multiple options, whether that's with our supply base or with our contract manufacturers. That way, whether it's tariffs or any other, you know, natural disaster, what you might have is a resilient supply chain that we can mix and move production around the world to navigate those challenges.

look, I think there'll be a, a certain portion that will will remain for, you know, it's hard to see an exit just particularly around some of the components

Um that are, you know, really there's only 1 Source for those and we we still use those and need to import those for service or you know and and those types of things. So um we're probably getting close into the teens where you, you know, you start to get a um outside of some major shifts and component manufacturing. You you kind of hit a baseline there so but again I think what we've focused on is broader resilience

Nathan Winters: That's the one thing I think we've learned over the last five years, that there will be something and we need to have a resilient supply chain to manage through those. I think the team's done a great job of balancing resilience with cost to get us to the footprint we have today.

Bill Burns: Just as a follow up, I know Bill, you answered a couple of questions on this, but at what point does technological obsolescence on the installed base and EMC actually force customers to drive to upgrade if they really want to benefit from magnetic AI, whether it's your products or whether Zebra products or other people's products? I think that if you're, you know, again, it creates an opportunity. AI clearly creates an opportunity for technology-driven refresh on, you know, the mobile devices as you want to move to faster processing speeds and more memory. If you want to run the models on the device, which we're seeing, you know, many of our customers want to do, we see a combination of leveraging AI on the device and leveraging AI in the cloud, depending on the specific application.

Making sure we have, you know, multiple options, whether that's with our supply base, with our contract, manufacturers. So that, again, whether its tariffs or any other, you know, natural disaster. What, what you might have is a resilient supply chain that we can mix and move production around the world, uh, to navigate those challenges because that's the 1 thing, I think we've learned over the last 5 years is that there will be something and we need to have a resilient supply chain to manage through those. And again, I think the teams doing a great job of balancing resilience with cost, uh, to get us to the footprint we have today.

This is a follow up. I know. Bill you, you you

a couple of questions on this, but

Point is.

you go up, so lessons on the install base and EMC, actually Force customers to drive to upgrade if they really want to benefit from authentic AI, whether it's your products, or whether it's c,

Products or other people's products.

Bill Burns: In both cases, we think this leads and attributes to the refresh cycle upcoming. The number of mobile devices continues to grow in the marketplace since pre-pandemic, and we see that our customers all upgrade on different refresh cycles and this will be another reason to go do that. Things like health of their device, longevity, how long it's been in the marketplace, devices just get broken, they get older, and as technology moves on. Cybersecurity is another driver. From a technology perspective, AI is going to be one of those. I think we see the refresh cycle opportunity as being really multi-year and driven by driving sustainable growth for our growth profile as a company. We don't see it as the kind of pandemic-based, compressed, concentrated acceleration cycle. We see it more driving sustainable growth for us as a business.

Technology-driven Refresh on, you know, the mobile devices. Um, as you want to move the faster processing speeds and more memory. If you want to run the, the models on the device which we're seeing, you know, many of our customers want to do. We see a combination of leveraging, AI on the device and leveraging AI in the cloud to spending depending on the specific application, you know? But in both cases, we think this, you know, leads in in, uh, attributes to the refresh cycle, you know, upcoming the the number of mobile devices continues to, you know, um, grow in the marketplace since pre-pandemic. And, you know, we see that, you know, our customers all upgrade on different refresh cycles and this will be another reason to go do that. Um, things like health of their device longevity. How long? It's been in the marketplace devices just get broken, they get older and others technology moves on. Uh, cyber security is another driver, but for my technology perspective,

Bill Burns: There will be lots of factors into that and AI will be one of them.

AI is going to be 1 of those. I think we see the refresh cycle opportunity is being really, you know, multi-year and driven by, you know, driving sustainable growth for, you know, our growth profile as a company. And we don't see it, you know, the kind of pandemic based, you know, compressed concentrated acceleration cycle, we see it more driving, you know, sustainable growth for us as a business and it'll be lots of factors into that and AI will be 1 of them.

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

Bill Burns: Good morning, guys. As it relates to the $500 million buyback that you expect to execute over the next four quarters, how dynamic is that number? Should we think of that as more of a minimum threshold? How do you think about cadence of deployment? Why not execute this as an ASR? Thank you.

The next question comes from Brad, with Wolf Research. Please go ahead.

Hey, good morning, guys.

Morning morning.

so as it relates to the 500 million dollar buyback that you expect to execute over the next 4 quarters,

Fraud Dynamic, is that number should we think of that as more of a minimum threshold? And then how do you think about Cadence of deployment, and why not execute this as an ASR? Thank you.

Nathan Winters: Yeah, right now we're just committed to the $500 million. We'll see that. I think the best way to think about that is spread out over the next four quarters and we'll be dynamic, taking advantage of opportunities that we see in the volatility in the stock, making sure we show more of that consistent return over the next several quarters. I really wanted to commit to that given we've been kind of silent on the commitment as we move into future periods. We felt like it was the right time to make that commitment given the overall profile. We have our debt leverage ratio here as we exit the year. I think we just think that doing it through the open market right now provides more of a benefit, lets us more manage the return and the timing of that versus uploading it, upfronting that to an ASR.

Yeah, so uh, again, we, I think right now, we're just committed to the to the 500 million. Um, you know, we'll, we'll see that, you know, I think the best way to think about that is spread out over the next 4 quarters and, and we'll be dynamic, you know, well, taking taking taking advantage of opportunities that we see in the volatility in the stock. But, you know, again, making sure we show more of that consistent return, um, over the next several quarters and and really wanted to, you know, um, commit to that given, you know, we've been kind of Silent on the the commitment as we move into future periods. But we felt like, you know, it was the right time to make that commitment given the overall profile we have and our debt leverage ratio here as we as we exit the year.

And I think we we just think that um, you know, doing it through the open market right now provides um you know, more more of a benefit lets us more managed you know the the return and the timing of that versus you know uploading it. You know upfront that through an ASR.

Bill Burns: Okay, that's helpful. As we think about the Q4 outlook, it looks like the implied incremental margins are about 25% both on a year-over-year basis and sequential basis compared to typical 30%+ incrementals. I guess, curious, just is that margin outlook embedding a little bit of conservatism or is there anything that you would expect to limit the drop through in Q4?

Okay that's helpful. And then as we think about the key for Outlook, it looks like the implied incremental. Margins are about 25%, both on a year-over-year basis and sequential basis.

Um compared to typical you know, 30% plus increments. So I guess curious just is that margin Outlook embedding a little bit of conservatism or is there anything that you would expect to limit the drop there in Q4?

Nathan Winters: No, I think the only thing typically in Q4 we see a little bit higher mix of large deals. You see a little bit of mixed dynamic as we go from Q3 to Q4, but nothing unusual, I'd say from a timing or margin profile within either one of the quarters to call out.

No, I think the only thing you're typically in Q4, we see a little bit higher, you know, mix of large deals. You see a little bit of mixed dynamic because we go from Q3 to Q4 but, um, you know, nothing unusual. Um, I'd say from a, you know, timing or margin profile within either one of the quarters to call out.

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

The next question comes.

Bill Burns: Hi. Thanks. Can you talk a little bit more about the machine vision business? I know you talked about softness in manufacturing. How has that business been doing? The bigger picture is are there any of these other, you know, like RFID and other growth engine type businesses that you'd call out that are in that double-digit growth range or high single-digit range that are being the growth drivers that we want them to be? Yeah, I would say that from a machine vision perspective, we saw growth in machine vision software as we've got leveraging our differentiation in our software across machine vision. I would say overall machine vision declined in the quarter for us, really pressured in the areas in which we compete. We've seen now stabilization in semiconductor manufacturing where we're embedded in those solutions. That's positive news moving forward, but certainly negative in the quarter.

From here, please go ahead.

Hi, thanks. Um, can you talk a little bit more about the Machine Vision business? And, you know, I know you talked about softness and Manufacturing, um, how how has that business been doing? And then kind of the bigger picture is, are there any of these other

You know, like RFID and other growth engine-type businesses that you'd call out, that are...

That, you know, that are in that double digit growth range or high single digit range that are are, are being the growth drivers that that we want them to be.

Yeah, I would say that, you know, from a Machine Vision perspective, we saw, you know, um, growth in Machine Vision software. Um, as we've been leveraging our differentiation in, you know, our software across Machine Vision, I would say overall Machine Vision declined. Uh, in the quarter for us, it was really pressured in the areas in which we compete. So, we've seen now.

Bill Burns: Some new areas that we had, the focus of the go-to-market teams has been diversification away from semiconductor manufacturing into new markets. One of those markets was a lot of spend happening in new builds of EV auto manufacturing, but that has now slowed down, another driver of the weak quarter. I would say that our focus is really on go-to-market initiatives to expand specific markets that are growing and leverage our advanced technology into use cases where we're leveraging the strength of our software portfolio along with things like 3D vision to be able to win new opportunities and customers and to be able to then get a footprint in those customers and expand it from there. That's really the focus of our go-to-market teams. We're excited about this market longer term.

Bill Burns: Clearly, doing more in manufacturing from our perspective is important to us and we think that continues to be an opportunity for us. We talked about RFID already. RFID continues to be a strength for us across the vertical markets. I would say inside other segments, the tablet opportunity within our mobile computing is another opportunity for us. I think the next generation of task management in software is an area we've been focused. We're a leader in task management software. We see next generation opportunities to that as we evolve task management into more communication, collaboration with our customers to drive software growth over time leveraged with our mobile devices.

And then you know, some new areas that we had um you know the focus of the go to market teams has been diversification away from semiconductor manufacturing into new markets 1 of those markets was you know a lot of spend was happening in new bills of EV um you know auto manufacturing. But that is is now slowed. Uh, so another driver of of, um, of the week quarter, I would say that our focus is really on, you know, go to market initiatives. To expand specific markets that are growing and leverage our advanced technology into use cases where we're leveraging this, you know, strength of um our software portfolio uh along with things like 3D Vision uh to be able to win new opportunities and customers and to be able to then get a footprint in those customers and expand it from there. That's really the focus of our go to market teams. We're excited about this Market, you know, longer term, clearly doing more.

More in manufacturing, from our perspective is important to us and we think that, you know, continues to to be an opportunity for us. You, we talked about RFID already RFID with Phillies continues to be, you know, a strength for us um across you know, the vertical markets. I would say, you know, inside other segments, you know, I think um, you know, the tablet opportunity within um M within our mobile Computing is a another opportunity for us. I think the next generation of path

Task management in software is an area we've been focused. So, you know, we're a leader in task management software. We see Next Generation opportunities to that, as we evolve task management into more communication collaboration with our customers to drive software growth, you know, over time, um, leverage with our mobile devices.

Operator: The last question comes from Katie Flesher with KeyBanc Capital Markets, please. Go ahead.

The last question comes from.

KB flasher with KeyBank, please go ahead.

Jamie Cook: Hey, thanks for squeezing me in. I just had one question. Just to kind of go back to the margins for Q, is there anything that we should think about for the segments that's different from this quarter, or is it fair to assume that those margins are pretty steady?

Hey, thanks for squeezing me in. Um I just had 1 question, just to kind of go back to the margins for for Q. Um is there anything that we should think about for the segments? That's you know, different from this quarter or is it fair to assume that? Um those margins are are pretty steady

Nathan Winters: Yeah, they're pretty steady between the segments between Q3 and Q4. I wouldn't, you know, we wouldn't see any major changes around the gross margin profile between the segments quarter to quarter.

Yeah, they're, they're pretty steady between the segments between Q3 and Q4. So I wouldn't, you know, we don't see any major changes.

Um, around the gross margin profile, um, between the segments quarter to quarter.

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

this concludes

I would like to turn the conference back over to Bill Burns for any closing remarks.

Bill Burns: Yeah, I'd like to thank our employees and our partners as they've delivered strong Q3 results. Ultimately, I would like to extend a warm welcome to the Elo Touch Solutions team as we kick off our exciting journey together moving forward. Thank you.

Yeah, I'd like to thank our employees and and our partners as they, you know, delivered a strong Q3 results. And ultimately um, you know, I would like to to extend a warm welcome to the ELO team. As you know, we kick off our exciting Journey uh together moving forward. Thank you.

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

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect