ZEBRA TECHNOLOGIES CORP

The following commentary should be read in conjunction with the financial results of each reportable business segment as detailed in Note 17, Segment Information & Geographic Data in the Notes to Consolidated Financial Statements. To the extent applicable, segment operating income excludes Share-based Compensation, Amortization of intangible assets, Acquisition and integration costs, Exit and restructuring costs, as well as certain other non-recurring costs (impairment of goodwill and other intangible assets, and business acquisition purchase accounting adjustments).

Connected Frontline Segment (“CF”)

CF 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 Organic Net sales growth, amounts directly attributable to the acquisition of Elo Touch are excluded for twelve months following the acquisition date.

(3)CF 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 CF increased $244 million or 34.6% compared to the prior year, primarily due to the inclusion of Elo Touch, higher sales of mobile computers, and favorable impact of foreign currency. Excluding the impact of foreign currency and the acquisition of Elo Touch, CF Organic Net sales increased by 15.0%.

Gross margin decreased to 43.2% in the current year compared to 46.0% for the prior year quarter, primarily due to higher memory costs and unfavorable business mix, partially offset by foreign currency favorability.

Operating income increased 29.5% in the current year compared to the prior year.

Total Net sales for CF increased $571 million or 27.1% compared to the prior year, primarily due to the inclusion of Elo Touch, higher sales of mobile computers, and favorable impact of foreign currency. Excluding the impact of foreign currency and the acquisition of Elo Touch, CF Organic Net sales increased by 8.9%.

Gross margin increased to 47.7% in the current year compared to 47.3% for the prior year, primarily due to favorable impacts of IEEPA tariff recoveries recognized in the second quarter and foreign currency, partially offset by higher memory costs and unfavorable business mix.

Operating income increased 35.0% in the current year compared to the prior year.

Asset Visibility & Automation Segment (“AVA”)

AVA 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 AVA Organic Net sales growth, amounts directly attributable to the acquisition of Photoneo and the disposition of the robotics automation business are excluded for twelve months following or preceding the respective acquisition or disposition, respectively.

(3)AVA 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 AVA increased $50 million or 8.1% compared to the prior year, primarily due to higher sales of machine vision and printing products and favorable impact of foreign currency. Excludingthe impacts of foreign currency and acquisitions and dispositions, AVA Organic Net sales increased by 7.0%.

Gross margin decreased to 49.9% in the current year compared to 50.7% for the prior year, primarily due to higher memory costs, partially offset by foreign currency favorability.

Operating income for the current year increased by 16.2% compared to the prior year.

Total Net sales for AVA increased $174 million or 9.6% compared to the prior year, primarily due to higher sales of printing and machine vision products and favorable impact of foreign currency. Excluding theimpacts of foreign currency and acquisitions and dispositions, AVA Organic Net sales increased by 7.7%.

Gross margin increased to 52.7% in the current year compared to 50.0% for the prior year, primarily due to favorable impacts of IEEPA tariff recoveries recognized in the second quarter, business mix, and foreign currency, partially offset by higher memory costs.

Operating income for the current year increased by 34.7% compared to the prior year.