Zebra Technologies Corporation (ZBRA)

Q1 2012 Earnings Call

April 27, 2012 11:00 am ET


Douglas A. Fox – Vice President, Investor Relations and Treasurer

Anders Gustafsson – Chief Executive Officer

Michael C. Smiley – Chief Financial Officer

Michael H. Terzich – Senior Vice President, Global Sales and Marketing


Brian Drab – William Blair & Company

Michael Holt – Morningstar Equity Research

Anthony Kure – KeyBanc Capital Markets

Chris Quilty – Raymond James

Keith Housum – Northcoast Research

Jason Rodgers – Great Lakes Review

Marc Heilweil – Spectrum Advisory Services



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Good morning. And welcome to the Zebra Technologies 2012 First Quarter Earnings Release Conference Call. Joining us from Zebra Technologies are Anders Gustafsson, CEO; Mike Smiley, CFO; Mike Terzich, Senior Vice President, Global Sales and Marketing; and Doug Fox, Vice President, Investor Relations.

All lines will be in a listen-only mode until after today’s presentation. Instructions will be given at that time in order to ask a question. At the request of Zebra Technologies, this conference call is being recorded. Should anyone have any objections, please disconnect at this time.

At this time, I would like to introduce Mr. Doug Fox of Zebra Technologies. Sir, you may begin.

Douglas A. Fox

Thank you. Good morning and thank you for joining us today. Certain statements made on this call will relate to future events or circumstances and therefore will be forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995.

Words such as expect, believe and anticipate are a few examples of words identifying a forward-looking statements. Forward-looking information is subject to various risks and uncertainties, which could significantly affect expected results. Risk factors were noted in the news release we issued this morning and are also described in Zebra’s 10-K for the year ended December 31, 2011 which is on filed with the SEC.

Now, let me turn the call over to Anders Gustafsson for some brief opening remarks.

Anders Gustafsson

Thank you, Doug and good morning everyone. Today Zebra reported sales of $244 million and earnings per share of $0.58, both within our guidance range. Strong execution across our business grew year-over-year sales growth in all geographic regions. We further extended our industry leadership with our scale, diversity and targeted business strategies.

At the same time, our operational discipline helped to deliver continued strong profitability with gross margin exceeding 49% and sequential increase in operating margin to 17.2%. We also successfully launched the latest and most complex module in our new companywide ERP system, which will generate greater operational efficiency well into the future.

While maintaining investments in activities that will drive further growth in high returns, we generated $42.7 million in free cash flow. For the quarter, we repurchased 265,000 shares. Within the constraints of a more challenging business environment in Asia-Pacific and EMEA and a seasonally slower period, our strong performance underscores the continued effectiveness of our strategic focus.

Zebra continues to outgrow and out execute its competitors. Companies around the world want to see more and do more with their valued assets across their supply chains. And Zebra is well positioned to deliver more high value products and solutions to meet our customers growing asset visibility needs.

As we outlined at our Investor Day in February, Zebra together with our partners is working to create a smarter, more connected business community. We are pursuing this vision through five strategic pillars. First, penetrate existing markets further. Second, expand into new markets. Third, intensify innovation. Fourth, maximize operational effectiveness. And lastly, inspire our people and culture.

Now let me highlight a few of our successes from the quarter. To further penetrate existing markets, our work is ongoing to develop deeper, more strategic customer relationships. We are executing on these opportunities by investing in relationships with key influencers such as system integrators and independent software vendors.

With our expanding set of channel partners coupled with the development of our own high touch sales capability, we are developing meaningfully tighter engagements, which with strategic customers in important sectors including small package delivery, retail and aviation and aerospace. Take share strategies with key customers are also resulting in solid wins including growing success in displacing installed competitor products as well as an increase in pipeline of opportunities.

Our expansion into new markets is paying off as well. Our focus on building a greater presence in the brick countries, Brazil, Russia, India and China has helped us grow in the past, and we contribute to our success in the future. The growing middle class and increasing adoption of AIDC technologies will continue to drive growth in these regions.

In addition to supporting established manufacturing customers, we are increasing the engagement with customers in government, healthcare, retail, and financial services. The region specific products we introduced last year together with our growing in country service capabilities demonstrate our commitment to supporting our customers and channel partners. And further strengthen Zebra’s competitive position.

Finally, innovation has been and continues to be core to Zebra’s long-term success. Today, Zebra out invest its competitors more than four to one in product development. More importantly, our focus is driving innovation throughout the product line. The strong growth of our card printers, which underwent a significant transformation over the past two years, demonstrates the success of these efforts. We increased the cadence on new product introductions as well as enhanced the efficiency of our product development activities.

Separately, we also made progress in location solutions. Most recently we upgraded our awareness family of product to the new IPv6 standard ahead of schedule. This ability to stay current on the evolving standards has already resulted in new bookings; in this case, for a department of defense application, a targeted growth area for Zebra.

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