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

Total Net sales for AIT increased $86 million or 26.5% compared to the prior year primarily due to higher sales of printing products (contributing the majority of the total increase) and RFID products. Excluding the impact of foreign currency changes, AIT Organic Net sales increased by 25.8%.

Gross margin increased to 48.5% in the current year compared to 44.8% for the prior year primarily due to favorable business mix and volume leverage, partially offset by higher freight rates.

Operating income increased 88.6% in the current year compared to the prior year due to higher Gross profit, partially offset by higher Operating expenses.

Total Net sales for AIT decreased $106 million or 8.1% 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 8.7%.

Gross margin decreased to 47.5% in the current year compared to 48.1% for the prior year primarily due to volume deleveraging, higher inventory-related charges, and unfavorable business mix.

Operating income decreased 19.2% in the current year compared to the prior year primarily due to lower Gross profit.

Enterprise Visibility & Mobility Segment (“EVM”)

EVM 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)EVM 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 for EVM increased $213 million or 33.7% compared to the prior year primarily due to higher sales of mobile computing (contributing the majority of the total increase) and data capture products. Excluding the impacts of foreign currency changes, EVM Organic Net sales increased by 33.0%.

Gross margin increased to 49.0% in the current year compared to 44.6% for the prior year primarily due to volume leverage, lower inventory-related charges, and favorable business mix.

Operating income for the current year increased by 373.3% compared to the prior year due to higher Gross profit, partially offset by higher Operating expenses.

Total Net sales for EVM increased $178 million or 7.8% compared to the prior year primarily due to higher sales of mobile computing products, and services and software, partially offset by lower sales of data capture products. Excluding the impacts of foreign currency changes, EVM Organic Net sales increased by 7.4%.

Gross margin increased to 48.8% in the current year compared to 46.1% for the prior year primarily due to primarily due to favorable business mix and higher service and software margins, volume leverage, lower inventory-related charges, and lower freight rates.

Operating income for the current year increased by 35.1% compared to the prior year due to higher Gross profit, partially offset by higher Operating expenses.