Zebra Technologies Corporation Q1 2010 Earnings Call Transcript

Zebra Technologies Corporation Q1 2010 Earnings Call Transcript
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Zebra Technologies Corporation (ZBRA)

Q1 2010 Earnings Call Transcript

May 4, 2010 11:00 am ET


Doug Fox – VP, IR

Anders Gustafsson – CEO

Mike Smiley – CFO and Treasurer

Mike Terzich – SVP, Global Sales and Marketing, Specialty Printer Group


Brian Drab – William Blair

Reik Read – Robert W. Baird

Charles Murphy – Sidoti & Company

Paul Coster – J.P. Morgan Securities

Chris Quilty – Raymond James

Ajit Pai – Thomas Weisel Partners

Jay Meier – Feltl & Company

Andrew Abrams – Avian Securities

Dick Davis – Richard W Davis & Company

Anthony Kure – KeyBanc Capital Markets

Greg Halter – Great Lakes Review



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Previous Statements by ZBRA
» Zebra Technologies Corp. Q4 2009 Earnings Call Transcript
» Zebra Technologies Q2 2009 Earnings Call Transcript
» Zebra Technologies Q1 2009 Earnings Call Transcript

Good morning. And welcome to the Zebra Technologies 2010 first quarter earnings release conference call. Joining us from Zebra Technologies are Anders Gustafsson, CEO; Mike Smiley, CFO; and Doug Fox, Vice President Investor Relations. All lines will be in 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.

Doug Fox

Thank you, and good morning. 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 some brief 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 with Specialty Printer Group.

Today, Zebra record year-over-year improved gross margin, earnings that were really ahead of expectation and our third consecutive quarter of sequential sales growth. Strong demand in international territories, improved sales of high-performance and mid-range tabletop printers and lower than expected operating expenses helped drive the 18% year-over-year improvement in sales to $226 million and $0.42 in GAAP EPS.

Momentum continued to build during the quarter as manufactures, retailers and others responded to improving business conditions. Our initiatives over the past 18 months to improve operational efficiency and extend our leadership enable Zebra to capitalize on growing economic confidence.

Our financial strength provided us the capability to respond to increase demand by expediting product delivery in the constrained supply chain environment to meet customer needs. Our actions in this regard led to more orders with more customers and stronger channel relationships that would deliver ongoing benefits well into the future.

During the quarter, we made solid progress on several key initiatives that support growth, profitability and shareholder value creation. Our geographic expansion activities extended Zebra's global reach into underserved, high growth regions.

We are also pleased with the growing pipeline of new products under development to meet more regional and vertical specific needs. We have now met our target of achieving at least 250 basis points of gross margin improvement from printer outsourcing.

Further, we used our cash reserves and $24 million in free cash flow for the quarter to buyback additional shares of Zebra stock, demonstrating our continued discipline in deploying our resources in those activities with the highest risk adjusted returns.

The results for the first quarter, combined with our actions to extend global reach introduced new products and build stronger more robust channels give us confidence that we are on the right path to giving greater shareholder values.

Let me briefly cover some of the highlights for the quarter in our specialty printing and Enterprise Solution segments.

In specialty printing or SPG, sales were up by nearly $5 million from the fourth quarter in a period that is normally down on a seasonal basis. International territories drove SPG's 22% growth from a year ago. The ongoing recovery continued to be broad-based across the diversity of Zebra products, customers and geographies, the historical foundations of our long-term success.

In EMEA, the large manufacturing regions of France, Germany and Central Europe led the region in a strong steady quarter. Favorable business conditions also prevailed in the U.K. with some significant rollouts of Zebra kiosk and mobile printers with retail customers.

EMEA also maintain strong sales of Zebra. Zebra branded wristbands for patient identification in hospitals in support of the 2009 recommendation by The U.K.'s National Patient Safety Agency.

We are pleased to report that we have now sold more than 100 million wristbands worldwide since introducing this product five years ago. We remain optimistic about the future of our innovative healthcare solution which includes the wristbands and the related HC100 wristband printer. This solution is beginning to generate broader interest in several other countries as well.

Sales momentum also accelerated in Asia Pacific, solid growth in all sub regions was highlighted by increasing demand in the manufacturing sector in Greater China, the particularly strong growth in high-performance printers, as well as, card printers for a number of government applications.

In Latin America, mobile and card applications helped propel the regional sales to a new first quarter record, including better than 200% sales growth of SPG products in Brazil and more than 50% growth in Mexico.

In North America, large enterprise deals maintained the strong pace of bookings throughout the quarter. New sales opportunities also developed in high growth sectors, including printers for mobile workforce applications, kiosk for retail self service and printer/encoders for RFID [ph] asset tracking. The quarter also included a healthy run rate business.

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