05.03.23
Zebra Technologies announced results for the first quarter ended April 1, 2023.
Net sales were $1,405 million in the first quarter of 2023 compared to $1,432 million in the prior year. Net sales in the Enterprise Visibility & Mobility (EVM) segment were $914 million in the first quarter of 2023 compared with $1,038 million in the prior year.
Asset Intelligence & Tracking (AIT) segment net sales were $491 million in the first quarter of 2023 compared to $394 million in the prior year. Consolidated organic net sales for the first quarter decreased 0.3% year-over-year, with an 11.2% decrease in the EVM segment and 28.4% increase in the AIT segment.
First quarter 2023 gross profit was $667 million compared to $637 million in the prior year. Gross margin increased to 47.5% for the first quarter of 2023 compared to 44.5% in the prior year. The increase was primarily due to lower premium supply chain costs, partially offset by unfavorable foreign currency changes. Adjusted gross margin was 47.5% in the first quarter of 2023 compared to 44.6% in the prior year.
“Our team executed well in a challenging environment, delivering first quarter sales and earnings results above the midpoint of our outlook," said Bill Burns, CEO of Zebra Technologies.
"Our revised full year outlook reflects tighter enterprise customer capex and project deferrals in this uncertain macroeconomic environment and moderating demand through distribution. We are mitigating the impact of softer sales with focused go-to-market initiatives and incremental cost actions. While customer spend is pressured near term, we are well positioned to benefit from secular trends to digitize and automate workflows across our served markets."
Net income for the first quarter of 2023 was $150 million, or $2.90 income per diluted share, compared to net income of $205 million, or $3.83 per diluted share, for the prior year. Non-GAAP net income for the first quarter of 2023 decreased to $204 million, or $3.94 per diluted share, compared to $214 million, or $4.01 per diluted share, for the prior year.
Adjusted EBITDA for the first quarter of 2023 increased to $301 million, or 21.4% of adjusted net sales, compared to $285 million, or 19.9% of adjusted net sales for the prior year primarily due to higher gross profit.
For the first three months of 2023, net cash used in operating activities was $76 million and the company made capital expenditures of $16 million, resulting in negative free cash flow of $92 million.
The company expects second quarter 2023 net sales to decrease between 9% and 11% compared to the prior year. Adjusted EBITDA margin for the second quarter of 2023 is expected to be approximately 20%.
The company expects full year net sales to decrease between 2% and 6% compared to 2022. This expectation includes an approximately 1 point negative impact from foreign currency translation and a 50 basis point additive impact from acquisitions. Adjusted EBITDA margin is expected to be approximately 22%, which includes approximately $40 million of premium supply chain expense.
Free cash flow is expected to be between $450 million to $550 million, reflecting lower profitability and elevated inventory, higher cash taxes and is inclusive of the anticipated $180 million of previously announced settlement payments.
Net sales were $1,405 million in the first quarter of 2023 compared to $1,432 million in the prior year. Net sales in the Enterprise Visibility & Mobility (EVM) segment were $914 million in the first quarter of 2023 compared with $1,038 million in the prior year.
Asset Intelligence & Tracking (AIT) segment net sales were $491 million in the first quarter of 2023 compared to $394 million in the prior year. Consolidated organic net sales for the first quarter decreased 0.3% year-over-year, with an 11.2% decrease in the EVM segment and 28.4% increase in the AIT segment.
First quarter 2023 gross profit was $667 million compared to $637 million in the prior year. Gross margin increased to 47.5% for the first quarter of 2023 compared to 44.5% in the prior year. The increase was primarily due to lower premium supply chain costs, partially offset by unfavorable foreign currency changes. Adjusted gross margin was 47.5% in the first quarter of 2023 compared to 44.6% in the prior year.
“Our team executed well in a challenging environment, delivering first quarter sales and earnings results above the midpoint of our outlook," said Bill Burns, CEO of Zebra Technologies.
"Our revised full year outlook reflects tighter enterprise customer capex and project deferrals in this uncertain macroeconomic environment and moderating demand through distribution. We are mitigating the impact of softer sales with focused go-to-market initiatives and incremental cost actions. While customer spend is pressured near term, we are well positioned to benefit from secular trends to digitize and automate workflows across our served markets."
Net income for the first quarter of 2023 was $150 million, or $2.90 income per diluted share, compared to net income of $205 million, or $3.83 per diluted share, for the prior year. Non-GAAP net income for the first quarter of 2023 decreased to $204 million, or $3.94 per diluted share, compared to $214 million, or $4.01 per diluted share, for the prior year.
Adjusted EBITDA for the first quarter of 2023 increased to $301 million, or 21.4% of adjusted net sales, compared to $285 million, or 19.9% of adjusted net sales for the prior year primarily due to higher gross profit.
For the first three months of 2023, net cash used in operating activities was $76 million and the company made capital expenditures of $16 million, resulting in negative free cash flow of $92 million.
The company expects second quarter 2023 net sales to decrease between 9% and 11% compared to the prior year. Adjusted EBITDA margin for the second quarter of 2023 is expected to be approximately 20%.
The company expects full year net sales to decrease between 2% and 6% compared to 2022. This expectation includes an approximately 1 point negative impact from foreign currency translation and a 50 basis point additive impact from acquisitions. Adjusted EBITDA margin is expected to be approximately 22%, which includes approximately $40 million of premium supply chain expense.
Free cash flow is expected to be between $450 million to $550 million, reflecting lower profitability and elevated inventory, higher cash taxes and is inclusive of the anticipated $180 million of previously announced settlement payments.