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 growth:

(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 growth is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of this item.

Total Net sales increased by $299 million or 31.3% compared to the prior year reflecting growth in both of our segments. The prior year period was negatively impacted by declines in broad-based demand and actions taken by distributors to reduce their on-hand inventory levels. Excluding the effects of currency changes, Consolidated Organic Net sales increased by 30.6%.

Gross margin increased to 48.8% for the current year compared to 44.7% for the prior year. As compared to the prior year, Gross margin was higher in both of our segments which benefited from volume leverage in the current year.

Operating expenses for the quarters ended September 28, 2024 and September 30, 2023 were $422 million and $439 million, or 33.6% and 45.9% of Net sales, respectively. Current year Operating expenses were lower than the prior year primarily due to lower Exit and restructuring costs and incremental savings largely attributed to our Exit and restructuring actions, partially offset by higher incentive compensation. The decrease as a percentage of Net sales compared to the prior year reflects the impact of expense leveraging.

Operating income was $191 million for the current year compared to an operating loss of $12 million in the prior year. The increase was due to higher Gross profit and lower Operating expenses.

Net income increased compared to the prior year primarily due to higher Operating income, as described above, partially offset by higher Other expense, net. The increase in Other expense, net was primarily due to interest rate swap gains in the prior year and unfavorable changes in Foreign exchange (loss) gain as compared to the prior year.

The Company’s effective tax rates for the three months ended September 28, 2024 and September 30, 2023 were 8.1% expense and 37.5% benefit, respectively. The change in the effective tax rates year over year was primarily due to increased foreign income taxed favorably in the U.S. for the current year, while the prior year included a discrete tax benefit related to the VRP.

Diluted earnings per share increased to $2.64 as compared to $(0.28) in the prior year due to higher Net income.

Total Net sales increased $72 million or 2.0% compared to the prior year reflecting growth in our EVM segment that was largely offset by a decline in our AIT segment as the recovery in demand trends benefited EVM earlier in the current year than AIT. Excluding the effects of currency changes, Consolidated Organic Net sales increased by 1.5%.

Gross margin increased to 48.4% for the current year compared to 46.9% 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 nine months ended September 28, 2024 and September 30, 2023 were $1,248 million and $1,268 million, or 34.2% and 35.5% of Net sales, respectively. Current year Operating expenses were lower than the prior year primarily due to lower Exit and restructuring costs and incremental savings largely attributed to our Exit and restructuring actions, partially offset by higher incentive compensation.

Operating income was $517 million for the current year compared to $407 million in the prior year. The increase was due to higher Gross profit and lower Operating expenses.

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

The Company’s effective tax rates for the nine months ended September 28, 2024 and September 30, 2023 were 14.5% and 16.0%, respectively.

Diluted earnings per share increased to $7.04 as compared to $5.40 in the prior year due to higher Net income.