“Our first quarter results were driven by strong broad-based market demand for our solutions and excellent operational execution by our team. We delivered net sales, EBITDA margin, and earnings per share above the respective guidance ranges. We also continued to aggressively retire debt, reducing our net leverage ratio to 2.8x,” said Anders Gustafsson, CEO of Zebra Technologies. “Given our sales and margin outperformance, we are raising our full-year outlook for sales growth, EBITDA margin, and free cash flow.”
Net sales were $977 million in the first quarter of 2018 compared to $865 million in the first quarter of 2017. Net sales in the Enterprise Visibility & Mobility (EVM) segment were $625 million in the first quarter of 2018 compared with $544 million in the first quarter of 2017. Asset Intelligence & Tracking (AIT) segment net sales were $352 million in the first quarter of 2018 compared to $322 million in the prior year period.
First-quarter 2018 gross profit was $465 million compared to $401 million in the comparable prior year period. Net income for the first quarter of 2018 was $109 million, or $2.01 per diluted share, compared to net income of $8 million, or $0.16 per diluted share, for the first quarter of 2017.
Adjusted EBITDA for the first quarter of 2018 increased to $204 million, or 20.9% of adjusted net sales, compared to $149 million, or 17.2% of adjusted net sales, for the first quarter of 2017 primarily due to higher sales and gross profit margin.
As of March 31, 2018, the company had cash and cash equivalents of $64 million and total debt of $2,133 million.
Free cash flow in the first quarter of 2018 was $98 million, consisting of $116 million of cash flow from operations and capital expenditures of $18 million. In the first quarter, the company made $95 million in long-term debt payments and $26 million in scheduled cash interest payments.
The company entered the second quarter of 2018 with a strong order backlog and expects second-quarter 2018 net sales to increase approximately 9% to 12% from the second quarter of 2017.
Adjusted EBITDA margin is expected to be in the range of 18.5% to 19.0% for the second quarter 2018, favorable to the prior year period. Non-GAAP earnings per diluted share are expected to be in the range of $2.10 to $2.30. This assumes an effective tax rate of approximately 16% to 17%.
The company now expects full year 2018 net sales growth to increase approximately 6% to 9%. Adjusted EBITDA margin is now expected to be approximately 20% for the full year 2018, which is favorable to Zebra’s prior outlook and an improvement compared to the full year 2017.
For the full year 2018, the company expects free cash flow to exceed $500 million, which is favorable to Zebra’s prior outlook, and to reduce financial leverage.