ZEBRA TECHNOLOGIES CORP

Results of Operations: Year Ended 2024 versus 2023 and Year Ended 2023 versus 2022

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 (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 as well as removing realized cash flow hedge gains and losses from both the current and prior year periods.

(2)For purposes of computing Organic Net sales growth (decline), amounts directly attributable to business acquisitions are excluded for twelve months following their respective acquisitions.

(3)Consolidated 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 increased $397 million or 8.7% compared to the prior year reflecting growth in our EVM segment that was partially offset by a slight decline in our AIT segment as the current year recovery in demand trends benefited EVM earlier in the year than AIT. Excluding the effects of foreign currency changes and acquisitions, Consolidated Organic Net sales increased by 8.1%.

Gross margin increased to 48.4% for the current year compared to 46.3% in the prior year. The increase was primarily due to volume leverage, higher service and software margins, lower freight rates, and lower inventory-related charges. Gross margin was higher in both segments, particularly EVM.

Operating expenses for the years ended December 31, 2024 and 2023 were $1,671 million and $1,642 million, or 33.5% and 35.8% of Net sales, respectively. Current year Operating expenses were higher than the prior year primarily due to higher incentive compensation, partially offset by lower Exit and restructuring costs and incremental savings largely attributed to our Exit and restructuring actions.

Operating income was $742 million for the current year compared to $481 million for the prior year. The increase was due to higher Gross profit partially offset by higher Operating expenses.

Net income increased 78.4% compared to the prior year primarily due to higher Operating income, as described above, as well as lower Interest (expense) income, net which included higher interest rate swap gains and interest income in the current year.

The Company’s effective tax rates for the years ended December 31, 2024 and December 31, 2023 were 16.9% and 11.4%, respectively. The increase in the effective tax rate compared to the prior year was primarily due to lower rate benefits from tax credits and discrete items as well as higher state income taxes.

Diluted earnings per share increased to $10.18 as compared to $5.72 in the prior year primarily due to higher Net income.

Results of Operations by Segment

The following commentary should be read in conjunction with the financial results of each reportable business segment as detailed in Note 20, Segment Information & Geographic Data in the Notes to Consolidated Financial Statements. To the extent applicable, segment operating income excludes Amortization of intangible assets, Acquisition and integration costs, Exit and restructuring costs, as well as certain other non-recurring costs (such as the Settlement costs in 2022, impairment of goodwill and other intangibles, and business acquisition purchase accounting adjustments).

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 as well as removing realized cash flow hedge gains and losses from both the current and prior year periods.

(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 $4 million or 0.2% compared to the prior year primarily due to lower sales of printing products and supplies, partially offset by favorable foreign currency changes and higher sales of RFID products. Excluding the impact of foreign currency changes, AIT Organic Net sales decreased by 0.9%.

Gross margin increased to 48.1% in the current year compared to 47.7% for the prior year primarily due to favorable foreign currency changes, partially offset by higher inventory-related charges.

Operating income decreased 3.2% in the current year compared to the prior year due to higher Operating expenses partially offset by higher Gross profit.

Enterprise Visibility & Mobility Segment (“EVM”)

EVM 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 as well as removing realized cash flow hedge gains and losses from both the current and prior year periods.

(2)For purposes of computing EVM Organic Net sales growth (decline), amounts directly attributable to business acquisitions are excluded for twelve months following their respective acquisitions.

(3)EVM 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 EVM increased $401 million or 13.7% 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 and acquisitions, EVM Organic Net sales increased by 13.2%.

Gross margin increased to 48.6% in the current year compared to 45.6% for the prior year primarily due to volume leverage, favorable business mix, higher service and software margins, lower inventory-related charges, and lower freight rates.

Operating income for the current year increased 55.7% compared to the prior year due to higher Gross profit partially offset by higher Operating expenses.