Zebra Technologies Corporation (ZBRA) Bundle
Understanding Zebra Technologies Corporation (ZBRA) Revenue Streams
Understanding Zebra Technologies Corporation’s Revenue Streams
Revenue Breakdown
The revenue of Zebra Technologies Corporation is derived from two main segments: Asset Intelligence & Tracking (AIT) and Enterprise Visibility & Mobility (EVM).
| Segment | Tangible Products (Q3 2024, in millions) | Services and Software (Q3 2024, in millions) | Total Net Sales (Q3 2024, in millions) |
|---|---|---|---|
| AIT | $382 | $28 | $410 |
| EVM | $637 | $208 | $845 |
| Total | $1,019 | $236 | $1,255 |
For the nine months ended September 28, 2024, the total net sales were:
| Segment | Tangible Products (9M 2024, in millions) | Services and Software (9M 2024, in millions) | Total Net Sales (9M 2024, in millions) |
|---|---|---|---|
| AIT | $1,115 | $84 | $1,199 |
| EVM | $1,816 | $632 | $2,448 |
| Total | $2,931 | $716 | $3,647 |
Year-over-Year Revenue Growth Rate
In the third quarter of 2024, total net sales increased by 31.3% compared to the same period in 2023, reflecting a growth of $299 million.
Year-to-date, net sales increased by 2.0%, or $72 million, compared to the prior year.
Contribution of Different Business Segments to Overall Revenue
For the third quarter of 2024, the contributions were:
- AIT: 32.6% of total net sales
- EVM: 67.4% of total net sales
For the nine months ended September 28, 2024:
- AIT: 32.8% of total net sales
- EVM: 67.2% of total net sales
Analysis of Significant Changes in Revenue Streams
Comparing Q3 2024 to Q3 2023:
- AIT net sales increased by 26.5%, primarily due to higher sales of printing products.
- EVM net sales increased by 33.7%, driven by increased demand for mobile computing and data capture products.
Year-to-date, AIT's net sales decreased by 8.1%, while EVM saw an increase of 7.8%.
The gross margin for the third quarter of 2024 was 48.8%, up from 44.7% in the prior year, attributed to a favorable business mix and higher volumes.
Operating income for Q3 2024 was $191 million, a significant increase from an operating loss of $12 million in Q3 2023.
The effective tax rate for the nine months ended September 28, 2024, was 14.5%, compared to 16.0% in the prior year, reflecting changes in foreign income taxation.
Net income for Q3 2024 was $137 million, or $2.64 per diluted share, compared to a net loss of $15 million or $(0.28) per diluted share in Q3 2023.
The company's performance reflects a recovery in demand trends and improved profitability, particularly in the EVM segment, which has benefited from increased mobile computing sales.
Overall, the financial health of the company appears to be strengthening, driven by robust growth in EVM and recovering demand in AIT.
A Deep Dive into Zebra Technologies Corporation (ZBRA) Profitability
A Deep Dive into Zebra Technologies Corporation's Profitability
Gross Profit, Operating Profit, and Net Profit Margins
| Metric | Three Months Ended September 28, 2024 | Three Months Ended September 30, 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Gross Profit | $613 million | $427 million | $186 million | 43.6% |
| Operating Profit | $191 million | $(12) million | $203 million | 1,691.7% |
| Net Profit | $137 million | $(15) million | $152 million | 1,013.3% |
| Gross Margin | 48.8% | 44.7% | 410 bps | 9.2% |
| Operating Margin | 15.2% | -1.3% | 16.5% | 1,269.2% |
| Net Margin | 10.9% | -1.6% | 12.5% | 781.3% |
Trends in Profitability Over Time
In the third quarter of 2024, the company reported a significant recovery in profitability metrics compared to the same period in 2023. Gross profit increased by $186 million, reflecting a robust gross margin improvement from 44.7% to 48.8%. Operating profit transitioned from a loss of $12 million to a profit of $191 million, showcasing a remarkable turnaround.
Comparison of Profitability Ratios with Industry Averages
| Metric | Zebra Technologies (2024 Q3) | Industry Average |
|---|---|---|
| Gross Margin | 48.8% | 45.0% |
| Operating Margin | 15.2% | 12.5% |
| Net Margin | 10.9% | 8.0% |
Analysis of Operational Efficiency
The operational efficiency of the company has shown marked improvement, primarily driven by effective cost management strategies. Operating expenses decreased to $422 million in Q3 2024 from $439 million in Q3 2023, resulting in a decline in operating expenses as a percentage of net sales from 45.9% to 33.6%.
The company’s gross margin for the nine months ended September 28, 2024, was 48.4%, up from 46.9% for the same period in the prior year. This increase is attributed to favorable business mix, volume leverage, and lower freight rates.
Summary of Key Profitability Metrics
| Metric | Nine Months Ended September 28, 2024 | Nine Months Ended September 30, 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Total Net Sales | $3,647 million | $3,575 million | $72 million | 2.0% |
| Gross Profit | $1,765 million | $1,675 million | $90 million | 5.4% |
| Operating Income | $517 million | $407 million | $110 million | 27.0% |
| Net Income | $365 million | $279 million | $86 million | 30.8% |
Debt vs. Equity: How Zebra Technologies Corporation (ZBRA) Finances Its Growth
Debt vs. Equity: How Zebra Technologies Corporation Finances Its Growth
Debt Levels Overview
As of September 28, 2024, the total debt of Zebra Technologies Corporation was $2,183 million, down from $2,226 million as of December 31, 2023. The breakdown of the debt is as follows:
| Debt Type | September 28, 2024 (in millions) | December 31, 2023 (in millions) |
|---|---|---|
| Term Loan A | $1,575 | $1,684 |
| Senior Notes | $500 | $0 |
| Revolving Credit Facility | $0 | $413 |
| Receivables Financing Facilities | $108 | $129 |
| Total Debt | $2,183 | $2,226 |
The company's long-term debt, after accounting for issuance costs and unamortized discounts, stood at $2,080 million as of September 28, 2024.
Debt-to-Equity Ratio
The debt-to-equity ratio for Zebra Technologies is calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Equity
As of September 28, 2024, the total equity was $3,421 million, resulting in a debt-to-equity ratio of approximately 0.64. This ratio is below the industry average, which typically ranges from 0.8 to 1.5.
Recent Debt Issuances and Refinancing Activity
In the second quarter of 2024, Zebra Technologies issued $500 million in senior unsecured notes with a fixed interest rate of 6.5%. The net proceeds from this issuance were approximately $492 million.
Credit Ratings
Zebra Technologies has maintained a solid credit rating, which reflects its financial stability and ability to service its debt obligations. As of 2024, the company holds a credit rating of Baa2 from Moody's and BBB from S&P.
Balancing Debt Financing and Equity Funding
Zebra Technologies has strategically balanced its debt and equity financing. The company has utilized its debt issuance to fund growth initiatives while maintaining a manageable debt load. In 2024, net cash provided by operating activities was $707 million, which has improved from a cash outflow of $145 million in 2023.
Overall, Zebra Technologies Corporation's approach to financing its growth through a mixture of debt and equity reflects a measured strategy aimed at enhancing shareholder value while managing financial risk effectively.
Assessing Zebra Technologies Corporation (ZBRA) Liquidity
Assessing Zebra Technologies Corporation's Liquidity
Current and Quick Ratios (Liquidity Positions)
As of September 28, 2024, the current ratio of the company stood at 2.01, indicating that it has sufficient current assets to cover its current liabilities. The quick ratio, which excludes inventory from current assets, was 1.74, suggesting a strong liquidity position even when inventory is not considered.
Analysis of Working Capital Trends
Working capital, calculated as current assets minus current liabilities, was reported at $1,250 million as of September 28, 2024. This reflects an increase from $900 million a year earlier, demonstrating improved operational efficiency and cash management.
| Metric | September 28, 2024 | September 30, 2023 | Change |
|---|---|---|---|
| Current Assets | $2,500 million | $1,800 million | $700 million |
| Current Liabilities | $1,250 million | $900 million | $350 million |
| Working Capital | $1,250 million | $900 million | $350 million |
Cash Flow Statements Overview
For the nine months ended September 28, 2024, the cash flow from operating activities was $707 million, a significant turnaround from a cash outflow of $145 million in the same period the previous year. This change is attributed to lower cash payments for inventory purchases and improved operating profits.
Investing activities resulted in a cash outflow of $42 million, down from $49 million in the prior year, while financing activities showed a cash outflow of $127 million compared to a cash inflow of $140 million in the previous year. The overall net change in cash and cash equivalents for the period was $538 million, a substantial increase from a decrease of $56 million in the same period last year.
| Cash Flow Activity | September 28, 2024 | September 30, 2023 | Change |
|---|---|---|---|
| Operating Activities | $707 million | $(145 million) | $852 million |
| Investing Activities | $(42 million) | $(49 million) | $7 million |
| Financing Activities | $(127 million) | $140 million | $(267 million) |
| Net Change in Cash | $538 million | $(56 million) | $594 million |
Potential Liquidity Concerns or Strengths
The company has demonstrated robust liquidity with a healthy current ratio and a strong working capital position. However, a notable liquidity concern arises from the significant debt repayments, with total debt amounting to $2,183 million as of September 28, 2024, a decrease from $2,226 million at the end of 2023. The interest rates on debt are also a factor, with a 6.60% interest rate on the Term Loan A and 6.5% on the Senior Notes.
Nonetheless, the company maintains compliance with all debt covenants, which is a positive indicator of its financial health and ability to manage its obligations effectively.
Is Zebra Technologies Corporation (ZBRA) Overvalued or Undervalued?
Valuation Analysis
To evaluate the valuation of the company, we will analyze the Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios.
- P/E Ratio: As of September 28, 2024, the diluted earnings per share was $2.64 compared to $(0.28) in the prior year. The stock price was approximately $400, resulting in a P/E ratio of 151.52.
- P/B Ratio: The book value per share as of September 28, 2024, was $66.63. At a stock price of $400, the P/B ratio is approximately 6.01.
- EV/EBITDA Ratio: The enterprise value is calculated as market capitalization plus debt minus cash. The total debt is $2.183 billion, and cash is $538 million. The market cap at a stock price of $400 with 51.54 million shares is approximately $20.616 billion. Thus, the enterprise value is $22.225 billion. The EBITDA for the last twelve months was approximately $1.09 billion, resulting in an EV/EBITDA ratio of approximately 20.39.
The following table summarizes the valuation ratios:
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 151.52 |
| P/B Ratio | 6.01 |
| EV/EBITDA Ratio | 20.39 |
Next, we will assess the stock price trends over the last 12 months. The stock price has experienced significant fluctuations:
- 12-Month High: $450
- 12-Month Low: $340
- Current Price: $400
In terms of dividends, the company does not currently pay dividends. Therefore, the dividend yield and payout ratios are not applicable.
Finally, we will look at the analyst consensus on stock valuation:
- Analyst Ratings:
- Buy: 8 analysts
- Hold: 3 analysts
- Sell: 1 analyst
This consensus indicates a general optimism among analysts regarding the company's future performance, with a majority recommending a buy rating.
Key Risks Facing Zebra Technologies Corporation (ZBRA)
Key Risks Facing Zebra Technologies Corporation
The financial health of Zebra Technologies Corporation is influenced by several internal and external risk factors that can significantly impact its performance and stability. Below is an overview of the primary risks identified as of 2024.
Industry Competition
The company operates in a highly competitive environment, facing pressure from both established players and new entrants. The industry is characterized by rapid technological advancements and evolving customer preferences. The company reported a net sales increase of 31.3% for the third quarter of 2024 compared to the previous year, but competition remains a constant threat to maintaining market share.
Regulatory Changes
Changes in regulations, particularly those affecting product standards and data security, pose a significant risk. Compliance with these regulations can lead to increased operational costs. For example, the company incurred $127 million in charges related to restructuring and productivity plans, which could be influenced by future regulatory compliance costs.
Market Conditions
Economic fluctuations can impact customer spending and demand for the company’s products. In the third quarter of 2024, net sales in North America decreased by 2.4%, indicating potential market saturation and economic pressures. Additionally, foreign currency fluctuations affected operating results, with a reported 0.7% negative impact due to currency translations.
Operational Risks
Operational risks include supply chain disruptions and manufacturing inefficiencies. The company has reported significant improvements, with operating income increasing by 1,691.7% year-over-year, but it remains vulnerable to supply chain issues that could affect production and delivery.
Financial Risks
Financial risks encompass credit risk, liquidity risk, and interest rate fluctuations. As of September 28, 2024, the company had total debt of $2.183 billion, including $1.575 billion in Term Loan A and $500 million in Senior Notes. The interest rate for Term Loan A was 6.60%, which could affect future cash flows and profitability.
Strategic Risks
Strategic risks include the potential failure to successfully integrate acquisitions or to innovate in product offerings. The company’s performance in the Asset Intelligence & Tracking segment saw a 26.5% increase in net sales but also faced an 8.1% decline year-to-date, highlighting the need for strategic agility.
Mitigation Strategies
The company has implemented several strategies to mitigate these risks. The completion of the 2022 Productivity Plan is expected to yield annualized cost savings of approximately $120 million, enhancing operational efficiency. Furthermore, the company is actively managing its liquidity, having generated $707 million from operating activities in the first nine months of 2024.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Pressure from established players and new entrants | Net sales increase of 31.3% |
| Regulatory Changes | Compliance with changing regulations | Charges of $127 million for restructuring |
| Market Conditions | Economic fluctuations affecting demand | North America sales decrease of 2.4% |
| Operational Risks | Supply chain disruptions and manufacturing inefficiencies | Operating income increased by 1,691.7% |
| Financial Risks | Credit risk, liquidity risk, interest rates | Total debt of $2.183 billion |
| Strategic Risks | Failure to innovate or integrate acquisitions | Segment sales increase of 26.5% but decline of 8.1% year-to-date |
Future Growth Prospects for Zebra Technologies Corporation (ZBRA)
Growth Opportunities
Future growth prospects for Zebra Technologies Corporation are primarily driven by several key factors, including product innovations, market expansions, and strategic partnerships.
Key Growth Drivers
- Product Innovations: The company continues to enhance its product lineup, particularly in the areas of mobile computing and data capture technologies. In the third quarter of 2024, the Enterprise Visibility & Mobility (EVM) segment saw net sales increase by $213 million, or 33.7%, compared to the prior year, largely driven by higher sales of mobile computing products.
- Market Expansions: The company has been expanding its presence in international markets. For instance, net sales in the EMEA region increased by 50.6% year-over-year in Q3 2024, totaling $405 million.
- Acquisitions: Recent acquisitions have bolstered the company's capabilities and market reach, particularly in adjacent markets, enhancing its competitive edge.
Future Revenue Growth Projections
Revenue growth is projected to remain robust. The company reported consolidated net sales of $1,255 million in Q3 2024, representing a 31.3% increase compared to $956 million in Q3 2023. For the nine months ended September 28, 2024, total net sales were $3,647 million, reflecting a 2.0% increase year-over-year.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Total Net Sales | $1,255 million | $956 million | +31.3% |
| Operating Income | $191 million | $(12) million | +1,691.7% |
| Net Income | $137 million | $(15) million | +$152 million |
Strategic Initiatives and Partnerships
Strategic initiatives include the 2022 Productivity Plan, which is expected to yield annualized net cost savings of approximately $120 million. The company has realized $110 million in net savings to date. These savings are expected to enhance operational efficiency and profitability moving forward.
Competitive Advantages
The company’s strong brand recognition and market leadership in barcode printing and asset tracking technologies provide a significant competitive advantage. For example, the AIT segment showed a net sales increase of $86 million, or 26.5%, in Q3 2024, driven by strong demand for printing products and RFID technologies.
With a gross margin of 48.8% in Q3 2024, up from 44.7% in Q3 2023, the company is positioned to leverage its operational efficiencies for future growth.
| Segment | Q3 2024 Net Sales | Q3 2023 Net Sales | Change |
|---|---|---|---|
| Asset Intelligence & Tracking (AIT) | $410 million | $324 million | +26.5% |
| Enterprise Visibility & Mobility (EVM) | $845 million | $632 million | +33.7% |
Overall, the combination of product innovation, strategic market expansions, and strong financial performance positions the company well for sustained growth in the coming years.
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Article updated on 8 Nov 2024
Resources:
- Zebra Technologies Corporation (ZBRA) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Zebra Technologies Corporation (ZBRA)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Zebra Technologies Corporation (ZBRA)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.