ZEBRA TECHNOLOGIES CORP

The following commentary should be read in conjunction with the financial results of each reportable business segment as detailed in Note 16, Segment Information & Geographic Data in the Notes to Consolidated Financial Statements. To the extent applicable, segment operating income excludes business acquisition purchase accounting adjustments, amortization of intangible assets, acquisition and integration costs, impairment of goodwill and other intangibles, exit and restructuring costs, as well as certain other non-recurring costs.

Asset Intelligence & Tracking Segment (“AIT”)

AIT 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)AIT 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 for AIT decreased $130 million or 24.9% compared to the prior year primarily due to lower sales of printing products. Excluding the impact of foreign currency changes, AIT Organic Net sales decreased by 25.3%.

Gross margin decreased to 46.9% in the current year compared to 49.4% for the prior year primarily due to unfavorable product mix and volume deleveraging, partially offset by lower freight rates.

Operating income decreased 41.1% in the current year compared to the prior year due to lower Gross profit, partially offset by lower Operating expenses.

Enterprise Visibility & Mobility Segment (“EVM”)

EVM 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)EVM 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 for EVM decreased $100 million or 11.3% compared to the prior year primarily due to lower sales of data capture products (contributing the majority of the total decrease) and mobile computing products, which were partially offset by higher sales of services and software. Excluding the impacts of foreign currency changes, EVM Organic Net sales decreased by 11.8%.

Gross margin increased to 48.4% in the current year compared to 46.3% for the prior year primarily due to higher service and software margins and lower freight rates, partially offset by product volume deleveraging.

Operating income for the current year decreased by 9.8% compared to the prior year due to lower Gross profit, partially offset by lower Operating expenses.