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:

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

Total Net sales for AIT increased $21 million or 5.3% compared to the prior year, primarily due to higher sales of printing and RFID products. Excluding the impact of foreign currency changes, AIT Organic Net sales increased by 5.8%.

Gross margin increased to 48.6% in the current year compared to 47.1% for the prior year, primarily due to favorable business mix and volume leverage along with lower inventory related charges, partly offset by unfavorable impacts of tariffs, net.

Operating income increased 13.7% in the current year compared to the prior year due to higher Gross profit, partly offset by higher Operating expenses.

Total Net sales for AIT increased $91 million or 11.5% compared to the prior year, primarily due to higher sales of printing and RFID products. Excluding the impact of foreign currency changes, AIT Organic Net sales increased by 12.0%.

Gross margin increased to 49.9% in the current year compared to 47.0% for the prior year, primarily due favorable business mix and volume leverage along with lower inventory related charges, partly offset by unfavorable impacts of tariffs, net.

Operating income increased 22.8% in the current year compared to the prior year due to higher Gross profit, partly offset by higher Operating expenses.

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 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, amounts directly attributable to business acquisitions are excluded for twelve months following their respective acquisitions.

(3)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 $55 million or 6.7% compared to the prior year, primarily due to higher sales of mobile computing products. Excluding the impacts of foreign currency changes and acquisitions, EVM Organic Net sales increased by 6.5%.

Gross margin decreased to 47.2% in the current year compared to 49.0% for the prior year, primarily due to unfavorable impacts of tariffs, net, and lower services and software margins.

Operating income for the current year increased by 4.9% compared to the prior year due to higher Gross profit, partly offset by higher Operating expenses.

Total Net sales for EVM increased $118 million or 7.4% compared to the prior year, primarily due to higher sales of mobile computing and data capture products. Excluding the impacts of foreign currency changes and acquisitions, EVM Organic Net sales increased by 7.5%.

Gross margin decreased to 47.8% in the current year compared to 48.7% for the prior year, primarily due to unfavorable impacts of tariffs, net, and lower services and software margins, partly offset by volume leverage.

Operating income for the current year increased by 3.3% compared to the prior year due to higher Gross profit, largely offset by higher Operating expenses.