Zebra Technologies CEO Discusses Q3 2010 Results - Earnings Call Transcript
Zebra Technologies Corporation (
)
Q3 2010 Earnings Call Transcript
November 4, 2010 11:00 am ET
Executives
Doug Fox – VP, IR
Anders Gustafsson – CEO
Mike Smiley – CFO & Treasurer
Mike Terzich – SVP, Global Sales and Marketing, Specialty Printer Solutions
Analysts
Reik Read – Robert W. Baird
Paul Coster – JPMorgan
Andrew Abrams – Avian Securities
Ajit Pai – Stifel Nicolaus
Karl Ackerman – KeyBanc Capital Markets
Tim Mulrooney – William Blair
Presentation
Operator
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Zebra Technologies Q2 2009 Earnings Call Transcript
Good morning, and welcome to the Zebra Technologies third quarter 2010 earnings conference call. Joining us from Zebra Technologies are Anders Gustafsson, Chief Executive Officer; Mike Smiley, Chief Financial Officer; Mike Terzich, Senior Vice President, Global Sales and Marketing, SPS 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.
I would now like to introduce Mr. Doug Fox of Zebra Technologies. Sir, you may begin.
Doug 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 statement. Forward-looking information is subject to various risks and uncertainties, which could significantly affect expected results.
Risk factors were noted in the news release issued this morning and are also described in Zebra’s 10-K for the year ended December 31, 2009, which is on file with the SEC.
Now, let me turn the call over to Anders Gustafsson for his complete opening remarks.
Anders Gustafsson
Thank you, Doug and good morning everyone. Here in the room with me are Mike Smiley, our CFO and Mike Terzich, our SVP of Global Sales and Marketing for the Specialty Printing Group.
Today, Zebra announced its fifth consecutive quarter of sequential sales growth. Third-quarter sales were $246.5 million, up 5% from the second quarter and 23% from the year ago.
All geographic regions contributed to this performance, driven by stronger than expected activity with large customers and a consistent run rate business through channel partners during the quarter.
We delivered record GAAP Earnings of $0.46 per share as a result of higher gross margins and effective expense management which generated solid operating leverage.
Our third quarter results demonstrate that our investments in product, sales and channels are paying off. The strength of our overall brand and global industry leadership supporting a broad range of innovative solutions has resulted in greater success in serving more of our customers’ asset tagging needs, at the same time we have lowered product costs and maintained quality through outsourcing.
These actions have positioned Zebra well across several dimensions; product, technologies, customers and channels to deliver increasing shareholder returns over the long term.
During the third quarter we made further progress on several strategic initiatives. Specifically, our decision to expand geographically over the multi-year time horizon has been well timed. The additional sales resources hired in emerging markets most recently in the Brazil, Turkey and China have produced incremental business.
The expanding go-to-market channels that are a result of these investments are generating new opportunities in targeted verticals such as manufacturing, government, transportation and logistics and healthcare.
In addition, our third quarter results with reflect a further abatement in supply chain constraints for components, which led to a greater product availability, lower freight charges and an improved ability to fulfill demand.
Our activities to drive increasing returns were also evident as we continued to deploy resources through share buybacks. During the third quarter, we used $21 million to repurchase more than 750,000 Zebra shares.
So far this year we have used $67 million to buy back 2.5 million shares or 4% of shares outstanding, as we still view share repurchases as one of the best investment activities for our cash on a risk-adjusted basis along with funding further organic growth opportunities. Our share repurchases during the past 12 months have contributed approximately $0.02 to EPS.
Let me briefly cover some of the highlights for the quarter in Specialty Printing and Enterprise solutions. Our Specialty Printing Group or SPG delivered a solid quarter on all fronts. Sales advanced more than $10 million or 5% in the period we typically experience as seasonally flat with the second quarter.
All geographic regions contributed to the growth with a rich mix of business across products and verticals as customers continued to invest in solutions that helped them improve asset visibility across the supply chain.
Better than expected product sourcing enabled us to fulfill more orders than anticipated. Strong growth in Korea and China drove record sales in Asia Pacific for SPG and on a consolidated basis, including robust sales of high performance printers to manufacturing customers.
During the quarter we brought on 30 new resellers in this region to help us more deeply penetrate targeted verticals and provide longer run rate for growth in the region.
In Latin America an excellent quarter for mobile printer shipments to customers in retail contributed to record sales in this region as well. In addition healthcare labs deployed Zebra desktop printers to increase the accuracy of specimen labeling.
We also fulfilled a sizable order from a major electric and gas utility for kiosk printers to provide customers the ability to pay deals and perform other transactions more easily on the self-service basis.
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