ZEBRA TECHNOLOGIES CORP

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 increased slightly by $3 million or 0.2% compared to the prior year as growth in our EVM segment was largely offset by a decline in our AIT segment. Excluding the effects of currency changes, Consolidated Organic Net sales decreased by 0.3%.

Gross margin increased to 48.4% for the current year compared to 47.9% for the prior year. As compared to the prior year, Gross margin was higher in our EVM segment and lower in our AIT segment.

Operating expenses for the quarters ended June 29, 2024 and July 1, 2023 were $422 million and $387 million, or 34.7% and 31.9% of Net sales, respectively. Current year Operating expenses were higher than the prior year primarily due to higher incentive compensation, due in part to a significant reduction of incentive compensation expense in the prior year associated with the Company’s performance target attainment assessment on certain performance-based compensation awards. The increase in incentive compensation was partially offset by cost savings largely attributed to our Exit and restructuring actions.

Operating income was $167 million for the current year compared to $194 million in the prior year. The decrease was primarily due to higher Operating expenses.

Net income decreased compared to the prior year primarily due to lower Operating income, as described above, and higher Other expense, net. The increase in Other expense, net was primarily due to lower interest rate swap gains and a long-term investment loss in the current year, partially offset by favorable changes in Foreign exchange gain (loss) as compared to the prior year.

The Company’s effective tax rates for the three months ended June 29, 2024 and July 1, 2023 were 16.9% and 15.8%, respectively.

Diluted earnings per share decreased to $2.17 as compared to $2.78 in the prior year due to lower Net income.

Total Net sales decreased $227 million or 8.7% compared to the prior year reflecting declines in both of our segments. Excluding the effects of currency changes, Consolidated Organic Net sales decreased by 9.2%.

Gross margin increased to 48.2% for the current year compared to 47.7% 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 and favorable changes in foreign currency rates compared to the prior year.

Operating expenses for the year ended June 29, 2024 and July 1, 2023 were $826 million and $829 million, or 34.5% and 31.7% of Net sales, respectively. Current year Operating expenses were slightly lower than the prior year primarily due to cost savings largely attributed to our Exit and restructuring actions, that were largely offset by higher incentive compensation. The increase as a percentage of Net sales over the prior year reflects the impact of expense deleveraging.

Operating income was $326 million for the current year compared to $419 million in the prior year. The decrease was primarily due to lower Gross profit.

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 higher interest rate swap gains in the current year compared to the prior year, partially offset by higher interest expense associated with higher interest rates in the current year.

The Company’s effective tax rates for the six months ended June 29, 2024 and July 1, 2023 were 18.0% and 17.4%, respectively.

Diluted earnings per share decreased to $4.40 as compared to $5.68 in the prior year due to lower Net income.