11.02.23
Zebra Technologies announced results for the third quarter ended September 30, 2023.
Net sales were $956 million in the third quarter of 2023 compared to $1,378 million in the prior year. Net sales in the Enterprise Visibility & Mobility (EVM) segment were $632 million in the third quarter of 2023 compared with $936 million in the prior year.
Asset Intelligence & Tracking (AIT) segment net sales were $324 million in the third quarter of 2023 compared to $442 million in the prior year. Consolidated organic net sales for the third quarter decreased 29.6% year-over-year, with a 31.4% decrease in the EVM segment and 25.8% decrease in the AIT segment.
Third quarter 2023 gross profit was $427 million compared to $628 million in the prior year. Gross margin decreased to 44.7% for the third quarter of 2023 compared to 45.6% in the prior year. The decrease was primarily due to volume deleveraging partially offset by lower premium supply chain costs. Adjusted gross margin was 44.8% in the third quarter of 2023 compared to 45.8% in the prior year.
“As expected, our third quarter results were impacted by broad-based end market softness and elongated sales cycles across our product categories, as well as distributor destocking,” said Bill Burns, CEO of Zebra Technologies. “As we enter the fourth quarter, with most of our cost restructuring actions now implemented, we expect to see a significant sequential improvement in profitability.
“While we believe demand trends are leveling, we are not seeing signs of a market recovery based on customer behavior, and remain cautious in our planning for the remainder of the year and first half of 2024,” added Burns. “We will continue to take decisive actions to position us well for profitable growth as our end markets recover, and elevate our position with customers through our innovative portfolio of solutions."
Net loss for the third quarter of 2023 was $15 million, or $0.28 loss per diluted share, compared to net income of $170 million, or $3.26 income per diluted share, for the prior year. Non-GAAP net income for the third quarter of 2023 decreased to $45 million, or $0.87 per diluted share, compared to $215 million, or $4.12 per diluted share, for the prior year.
Adjusted EBITDA for the third quarter of 2023 decreased to $111 million, or 11.6% of adjusted net sales, compared to $291 million, or 21.1% of adjusted net sales for the prior year primarily due to lower gross margin and higher operating expense as a percent of revenue.
As of Sept. 30, 2023, the company had cash and cash equivalents of $61 million and total debt of $2,280 million. For the first nine months of 2023, net cash used in operating activities was $145 million and the company made capital expenditures of $48 million, resulting in negative free cash flow of $193 million.
The company expects fourth quarter 2023 net sales to decrease between 32% and 36% compared to the prior year. Foreign currency translation is expected to have a negligible impact.
Adjusted EBITDA margin for the fourth quarter of 2023 is expected to be approximately 16%.
Free cash flow is expected to be positive for the second half of 2023, and negative for the full year 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 $956 million in the third quarter of 2023 compared to $1,378 million in the prior year. Net sales in the Enterprise Visibility & Mobility (EVM) segment were $632 million in the third quarter of 2023 compared with $936 million in the prior year.
Asset Intelligence & Tracking (AIT) segment net sales were $324 million in the third quarter of 2023 compared to $442 million in the prior year. Consolidated organic net sales for the third quarter decreased 29.6% year-over-year, with a 31.4% decrease in the EVM segment and 25.8% decrease in the AIT segment.
Third quarter 2023 gross profit was $427 million compared to $628 million in the prior year. Gross margin decreased to 44.7% for the third quarter of 2023 compared to 45.6% in the prior year. The decrease was primarily due to volume deleveraging partially offset by lower premium supply chain costs. Adjusted gross margin was 44.8% in the third quarter of 2023 compared to 45.8% in the prior year.
“As expected, our third quarter results were impacted by broad-based end market softness and elongated sales cycles across our product categories, as well as distributor destocking,” said Bill Burns, CEO of Zebra Technologies. “As we enter the fourth quarter, with most of our cost restructuring actions now implemented, we expect to see a significant sequential improvement in profitability.
“While we believe demand trends are leveling, we are not seeing signs of a market recovery based on customer behavior, and remain cautious in our planning for the remainder of the year and first half of 2024,” added Burns. “We will continue to take decisive actions to position us well for profitable growth as our end markets recover, and elevate our position with customers through our innovative portfolio of solutions."
Net loss for the third quarter of 2023 was $15 million, or $0.28 loss per diluted share, compared to net income of $170 million, or $3.26 income per diluted share, for the prior year. Non-GAAP net income for the third quarter of 2023 decreased to $45 million, or $0.87 per diluted share, compared to $215 million, or $4.12 per diluted share, for the prior year.
Adjusted EBITDA for the third quarter of 2023 decreased to $111 million, or 11.6% of adjusted net sales, compared to $291 million, or 21.1% of adjusted net sales for the prior year primarily due to lower gross margin and higher operating expense as a percent of revenue.
As of Sept. 30, 2023, the company had cash and cash equivalents of $61 million and total debt of $2,280 million. For the first nine months of 2023, net cash used in operating activities was $145 million and the company made capital expenditures of $48 million, resulting in negative free cash flow of $193 million.
The company expects fourth quarter 2023 net sales to decrease between 32% and 36% compared to the prior year. Foreign currency translation is expected to have a negligible impact.
Adjusted EBITDA margin for the fourth quarter of 2023 is expected to be approximately 16%.
Free cash flow is expected to be positive for the second half of 2023, and negative for the full year reflecting lower profitability and elevated inventory, higher cash taxes and is inclusive of the anticipated $180 million of previously announced settlement payments.