ZEBRA TECHNOLOGIES CORP

Results of Operations

Consolidated Results of Operations

Net sales to customers by geographic region were as follows (amounts in millions, except percentages):

Operating expenses are summarized below (amounts in millions, except percentages):

Consolidated Organic Net sales decline:

(1)Operating results reported in U.S. Dollars are affected by foreign currency exchange rate fluctuations. Foreign currency translation impact represents the difference in results that are attributable to fluctuations in the currency exchange rates used to convert the results for businesses where the functional currency is not the U.S. Dollar. This impact is calculated by translating the current period results at the currency exchange rates used in the comparable prior year period, inclusive of the Company’s foreign currency hedging program.

(2)Consolidated Organic Net sales decline is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of this item.

Total Net sales decreased $230 million or 16.4% compared to the prior year reflecting declines in both of our segments primarily due to continued softness across our end markets in all regions. Excluding the effects of currency changes, Consolidated Organic Net sales decreased by 16.8%.

Gross margin increased to 47.9% for the current year compared to 47.5% for the prior year. As compared to the prior year, Gross margin was higher in our EVM segment and lower in our AIT segment. Gross margins of both segments benefited from lower freight rates compared to the prior year and were negatively impacted by volume deleveraging.

Operating expenses for the quarters ended March 30, 2024 and April 1, 2023 were $404 million and $442 million, or 34.4% and 31.5% of Net sales, respectively. Current year Operating expenses were lower than the prior year primarily due to cost savings largely attributed to our Exit and restructuring actions. The increase as a percentage of Net sales over the prior year reflects the impact of expense deleveraging.

Operating income was $159 million for the current year compared to $225 million in the prior year. The decrease was due to lower Gross profit, partially offset by lower Operating expenses.

Net income decreased compared to the prior year primarily due to lower Operating income, as described above, partially offset by lower Other expense, net. The decrease in Other expense, net was primarily due to interest rate swap gains in the current year compared to losses in the prior year, partially offset by higher interest expense associated with higher interest rates and average outstanding debt levels in the current year.

The Company’s effective tax rates for the three months ended March 30, 2024 and April 1, 2023 were 19.0% and 18.9%, respectively.

Diluted earnings per share decreased to $2.23 as compared to $2.90 in the prior year due to lower Net income.