ZBRA

Good day, and welcome to the Zebra Technologies first quarter earnings conference call. I would now like to hand the call over to Michael Steele, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to Zebra's first quarter earnings conference call. This presentation is being simulcast on our website at investors.zebra.com and will be archived there for at least one year. Our forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially, and we refer you to the risk factors discussed in our SEC filings. During this call, we will reference non-GAAP financial measures as we describe business performance, with reconciliations shown at the end of this slide presentation and in our earnings press release. Throughout this presentation, unless otherwise indicated, our references to sales performance are year-on-year on a constant currency basis and exclude results from both business acquisitions and dispositions for 12 months. This presentation will include prepared remarks from Bill Burns, our Chief Executive Officer, and Nathan Winters, our Chief Financial Officer.

Bill will begin with his perspective on our first quarter results, our value proposition, and strategic priorities. Nathan will then provide additional detail on our financial results and discuss our outlook, followed by Bill's closing remarks. Bill and Nathan will take your questions. Now let's turn to slide 3 as I hand it over to Bill.

Thank you, Mike. Good morning, everyone, and thank you for joining us. The year is off to a great start. Today, I want to take a step back to put our results into a broader context to what our performance says about Zebra's position in the market, the momentum in our business, and the opportunity ahead. There are three takeaways I want to leave you with this morning. First, we achieved strong Q1 results, and we are seeing continued momentum that supports our increased outlook for the full year. Second, our performance reflects Zebra's industry leadership and our unique value proposition backed by our integrated portfolio of solutions that combines hardware, software, and services to solve our customers' complex challenges.

We are deeply embedded in our customers' operations and increasingly central to their efforts to drive productivity through automating workflows, improving how work gets done across the front line of business, and beginning to integrate AI into their operations. Third, we are executing a clear strategy to create long-term shareholder value by driving profitable growth, building on our leadership and track record of innovation, and enhancing our financial strength and flexibility. With that, let's start with our first quarter results. Turning to slide 4. We delivered results near the high end of our outlook, driven by our team's strong execution and positive demand trends across our portfolio. For the quarter, we generated sales of nearly $1.5 billion, a 14% increase or 4% on organic basis from the prior year.

An adjusted EBITDA margin of 23.2% and non-GAAP diluted earnings per share of $4.75, an 18% increase over the prior year. We achieved growth across both our segments and all regions with outperformance in our manufacturing end markets. Elo Touch also contributed solid profitable growth, and we are encouraged by our customers' interest in our combined portfolio of solutions and our progress in driving synergies. We expanded adjusted EBITDA margin by 90 basis points, driven by a multiyear high gross margin and operating expense leverage reflecting the benefits of our productivity initiative. These results demonstrated the durability of demand for our solutions and our ability to convert that demand into profitable growth.

Supported by our strong financial position, we have executed $500 million of share repurchases year to date through early May, following more than $300 million in the fourth quarter. Our business momentum and progress in navigating the current memory supply environment gives us confidence in raising our outlook for the full year, with our recently elevated stock repurchase activity underscoring our conviction. In a few minutes, Nathan will discuss our outlook and our progress in managing memory supply. Turning to slide 5. We have significant runway for growth with our clear and differentiated value proposition, supported by trends in automation, digitization, and AI across a $35 billion served market. Our broad portfolio of integrated hardware and software solutions enables us to deliver value across the entire workflow, not just a single use case, creating a meaningful competitive advantage.

Our industry leadership puts us in a unique position to be the supplier of choice of AI for the frontline. We have a resilient financial model with strong margins and cash generation, supported by disciplined capital allocation that drives long-term shareholder value. Moving to slide 6, Zebra provides the foundation for intelligent operations. We help our customers understand what's happening across their operations in real time and then act on that information to drive better outcomes. We operate across two segments, the Connected Frontline, providing the digital touchpoints necessary to improve productivity, collaboration, and the customer experience. Our solutions include enterprise mobile computing, interactive displays, frontline software, and AI agents. Asset Visibility and Automation enables real-time insights from assets, inventory, and operations to automate environments through our portfolio solutions, including advanced data capture, printing and supplies, RFID, and machine vision.

Together, these segments give us a broad and complementary portfolio that allows us to meet customers where they are in their automation journey and advance their capabilities. Zebra is well-positioned to benefit from the megatrend shown on slide seven. Across industries, our customers are operating in increased complex environments shaped by labor constraints, cost pressures, higher consumer expectations, and the growing need for real-time visibility and execution. As a result, priorities like mobility, intelligent automation, Asset Visibility, cloud connectivity, and physical AI are becoming increasingly central to how enterprises run their operations. We see these as durable, long-term demand drivers that support Zebra's growth opportunity. Slide eight illustrates how Zebra's end-to-end presence across the supply chain is a key differentiator. Our embedded role in daily operations generates the insights that power smarter solutions and AI at scale.

Our broad portfolio enables us to address mission-critical workflows that span from factory floor to the warehouse to the end customer, and all touch points along the way. Zebra's products and solutions can be utilized more than 30 times as an item travels through the supply chain, and this number continues to increase with the need for real-time visibility. Slide 9 highlights the breadth of our customer base and the significant opportunities in front of us. Zebra supports more than 80% of the Fortune 500 across large and growing end markets, each with distinct needs shaped by their unique business models. That said, there's a common need across all of them, greater operational visibility and productivity. We play a critical role in helping our customers better understand what's happening across their operations, allowing them to take action in real time.

We are deeply embedded in their workflows as a trusted partner, enabling us to co-innovate as they adopt new technologies to digitize their operations and look to leverage AI. On slide 10, we highlight the three strategic priorities guiding our business. Our first priority is driving profitable growth. We see meaningful room to grow across both of our segments, supported by a large and diverse market and a long runway of adoption in many of the environments we serve. We believe both Connected Frontline and Asset Visibility and Automation have a 5%-7% organic sales growth profile over a cycle and are confident in our ability to deliver. Penetration is still relatively low across the markets we serve, highlighting the opportunity in front of us. For example, based on third-party research, nearly three-quarters of warehouses globally are in the early stages of their automation journey.

Our growth prospects are supported by investments in RFID, machine vision, and AI that enhance our differentiation and expand our relevance with customers. We are also driving efficiency initiatives in our business to enhance profitability, which include operating margin leverage through cost discipline, including our previously announced restructuring actions, accelerating software development velocity by deploying new AI tools, and enhancing our go-to-market model to improve market coverage and efficiency. Our second strategic priority is to continue building on our market-leading position by advancing innovation. Recent progress includes launching an entirely new line of enterprise mobile computers and wearables with embedded RFID and optimized AI processing capabilities. A global logistics customer has selected our new Frontline AI Picture Proof of Delivery capability. This on-device AI solution is driving faster delivery times while improving the consumer experience.

These are just a couple of examples of innovation that are tightly aligned with customer needs and designed to drive both growth and differentiation. Our third strategic priority is enhancing our financial strength and flexibility by driving consistency of earnings and cash flow generation through our capital-light business model. We will also continue to execute on our balanced capital allocation strategy, prioritizing investments in our business that elevate our portfolio of solutions while consistently returning capital to shareholders. I will now turn the call over to Nathan to review our Q1 financial results and improved 2026 outlook.

Thank you, Bill. Let's start with the P&L on slide 12. In Q1, total company sales increased 14.3% or 4.3% on an organic basis with momentum across our business. Our Connected Frontline segment grew 20.6%, including the recent Elo Touch acquisition, or 3.8% on an organic basis led by mobile computing. Our Asset Visibility and Automation segment grew 4.8%, led by printing and machine vision. We realized solid performance across all our regions. North America sales increased 4%, led by strength in manufacturing. EMEA sales grew 2% with broad-based growth across Europe, partially offset by softness in the Middle East. Asia Pacific sales increased 11%, led by India and Southeast Asia. Latin America sales grew 10%.

Adjusted gross margin improved 80 basis points to 50.4%, primarily due to productivity initiatives, favorable FX and business mix, with a modest impact from memory inflation in the quarter. Adjusted operating expense leverage improved by 20 basis points. This resulted in first quarter adjusted EBITDA margin of 23.2%. Non-GAAP diluted earnings per share were $4.75, an 18% year-over-year increase, exceeding the high end of our outlook. Turning now to the balance sheet and cash flow on slide 13. In the quarter, we generated free cash flow of $163 million. As of Q1, we had a modest debt leverage ratio of 2.1 and $1.1 billion of credit capacity. We have been deploying capital consistent with our allocation priorities.

For the quarter, we repurchased $300 million of stock and have repurchased an additional $200 million in the second quarter to date. Turning to slide 14. We have a proven track record of navigating dynamic environments, and we are applying that same disciplined playbook as we manage the current memory cost and supply landscape. While this remains an area we are monitoring closely, we are increasingly confident in our ability to successfully mitigate impacts based on the actions already underway and the visibility we have today. We are working proactively across multiple fronts, including direct supplier co-planning, alternative sourcing options, and transitions to higher density memory components, where capacity is expected to increase into 2027. Based on the progress we have made, we currently have line of sight to the supply we need to support our outlook.

In addition, the component pricing trajectory for the year is tracking in line with our prior guidance. Our cost position remains favorable relative to spot market rates given our direct supplier relationships, and we have line of sight to fully mitigate the margin impact for the year. This is not a new muscle for Zebra. Our teams have managed through prior component disruptions by acting early, maintaining close supplier partnerships, and using our scale to create flexibility in the supply chain. We are taking that same approach here. Let's now turn to our outlook. We've entered the quarter with a strong backlog and pipeline that supports our sales growth guidance range of 14%-17%, including approximately 10.5 points of contribution from business acquisitions and favorable FX.

Our second quarter adjusted EBITDA margin is expected to be slightly higher than 21%, and non-GAAP diluted earnings per share are expected to be in the range of $4.20 and $4.50. For the full year, we expect sales growth between 10% and 14%, reflecting a 1 point increase at the midpoint from our prior outlook. Our guide factors in year to date performance, a strong pipeline of opportunities, momentum in manufacturing and machine vision, the previously announced price increases, constrained memory availability, and a 7-point favorable impact from acquisitions and FX. Our full year adjusted EBITDA margin is expected to be approximately 22%, and non-GAAP diluted earnings per share is now expected to be between $18.30 and $18.70.

Our full year guide continues to reflect full mitigation of the memory 2-point headwind, which we are increasingly confident in achieving. We are driving this through targeted price increases and other direct memory initiatives, net of savings from our restructuring actions, volume leverage, and FX favorability. Free cash flow for the year is expected to be at least $900 million, which reflects a conversion rate of approximately 100%. We are continuing to optimize our working capital levels balanced with our supply chain resilience objectives. Please reference additional modeling assumptions on slide 15. With that, I will turn the call back to Bill.

Thank you, Nathan. Before we turn to your questions, let me conclude with the points I highlighted at the start of the call. We delivered a strong quarter and are moving forward with confidence in our increased outlook for the full year. Our integrated portfolio of solutions continues to differentiate Zebra, enabling customers to automate workflows and improve their operations, and we remain focused on executing our strategy to drive profitable growth and deliver long-term value for our shareholders. I will now turn the call back to Mike.

Thanks, Bill. We'll now open the call to Q&A. We ask that you limit yourself to one question and one follow-up to give everyone a chance to participate.

We will now begin the question and answer session. Our first question will come from Andrew Buscaglia of BNP Paribas. Please go ahead.

Hey, good morning, everyone.

Morning, Andrew.

Yeah, just, you know, I wanted to check on some of the comments you made on memory. Clearly, you know, a concern amongst investors. You guys say you have a line of sight to mitigate these costs through the end of the year. Are you implying, you know, have you secured capacity at this point? 'Cause shortages are a concern. What are your memory price assumptions baked into the rest of the year in terms of the memory price spiking?

Andrew, maybe I'll start and then hand to Nate for specifics. I'd say that, you know, memory continues to be a dynamic environment, overall. Our teams have, you know, done a great job, quite honestly, working closely with, you know, our suppliers, and the relationships, the long-term relationships we have, you know, with them, but also with our customers and partners to make sure that we get early visibility into, you know, their needs and on the demand side. You know, we're confident in our ability to mitigate the memory challenges and to achieve both our second quarter and full year guide. A lot goes into that. A lot of, you know, thinking and planning and the teams have been working this memory issue since, you know, the second half of 2025.

you know, we're in a good position to enter Q2 and where we're at for the full year. I'll let Nate add some more color.

Yeah, Andrew, I think if you look two pieces, one from a supply perspective, as we mentioned, pursuing numerous mitigation strategies, great relationship with our direct suppliers, as well as looking at new alternatives, as well as a lot of work in terms of transitioning to the different memory types where we expect capacity to increase, as we get into 2027. I think we feel, you know, really confident in what we have for the first half. Q1, we got the supply we needed to deliver on the outlook. Great visibility for what we need here in Q2. Our second half guide assumes a similar memory supply as received in the first half. We've received no indication that our second half allocation will be any less than the first half.

If anything, the teams are working options for increased supply to meet the unconstrained demand we have, which is near the high end of our guidance range. Again, a lot of actions right now in terms of how do we increase the supply to give some upside to the guide that we provided this morning. Then on the costing, as we mentioned, the market pricing trajectory is in line with our prior guidance. There's variability obviously across the different memory types. But as a reminder, we purchased the vast majority of our memory direct, which has been favorable to the spot market rates that a lot of folks have visibility to. We have built in escalations through the balance of the year.

So far those are playing out, which has enabled us to maintain our margin guidance for the year relative to memory.

The next question comes from Tommy Moll of Stephens. Please go ahead.

Good morning, and thank you for taking my questions.

Yeah, morning, Tommy.

I wanted to start on margins. You were well ahead of your guidance for the first quarter on a EBITDA margin % basis. If we look at the second quarter, that % steps down sequentially. It's a two-part question. What were some of the favorable items you would call out that drove that outperformance in 1Q that may fall away into 2Q? Are there any headwinds sequentially as we move from 1Q to 2Q? Thank you.

Yeah, Tommy. If you look at Q1, I think it starts with the operational gross margin, which was at record levels, at 50.4%, increase of 80 basis points, driven by, you know, a combination of factors. One, you know, the productivity initiative the teams have been actively working on. We had favorable deal mix. You know, we had real strength across our manufacturing vertical, which is favorable from a run rate perspective, but also our print, scanning, machine vision portfolio. The deal mix was a benefit in the quarter, that drove a, you know, a portion of the upside to our guide. FX was a tailwind as we entered the quarter.

Again, I think, you know, Q1 just had a combination of favorable deal mix, along with the productivity the team's been actively working on. You know, memory was, I'd say, a modest headwind in the quarter. Really, if you looked in from Q1 to Q2, on the EBITDA line, EBITDA margin guidance, the decline is really driven by the step-up in memory costs in the second quarter. If you look kind of 2 points lower sequential, about 1.5 points of that is the higher memory costs from the quarter, as well as just normalized deal mix as we go into Q2. I think what it really showed is that Q1 is, you know, part of our mitigation strategy on memory.

If you recall, half was the price increase we announced. The other half was underlying operational benefits from restructuring actions, as well as all the other actions the teams have taken. I think that beared out in Q1, and now it's being utilized to offset some of the headwind here as we go into Q2 in the back half of the year.

The next question comes from Amit Mehrotra of UBS. Please go ahead.

Good morning. This is Pratap on for Amit Mehrotra. Yeah.

Morning.

I just wanted to, yeah. I just wanted to catch up on the Elo. Like, it has been a couple of quarters for the Elo acquisition now. Can you provide any early feedback on your progress with the business?

What is the growth rate and, like, what kind of revenue or margin synergies you are seeing there? Thank you.

We continue to be excited about the Elo acquisition as really it elevates our strategic position across our Connected Frontline, you know, segment and, you know, adds to the breadth and depth of our portfolio and delivers a set of complementary solutions to what we've got, you know, already across mobile computing and our software assets inside the Connected Frontline pillar. You know, Elo in the quarter grew it in line with our expectations. Certainly, you know, a solid pipeline of opportunities. You know, we'd expect 2026 growth to be in the mid-single digits, you know, that's playing out as expected. We're seeing progress in the synergies, you know, both revenue and cost. A lot of work on the, you know, integration and that's, you know, taking place today.

You know, a lot of focus across the teams around the globe on building a commercial pipeline of opportunities, working together, you know, with our global teams as one team and then positioning with our customers. You know, we've entered some new geographies with the Elo portfolio where they haven't, you know, had a presence before. And we've got our first wins in India, which was one of those, you know, geographies overall. You know, we feel good about, you know, what's happening so far across the portfolio. We're still super excited about it. It gives us another opportunity to have a digital touch point and things like, you know, modernizing point of sale within our retail customers, you know, streamlining self-service, you know, payment, touchscreen displays across areas like manufacturing and healthcare.

You know, overall, it expands the breadth and depth of our portfolio, and so far, things are going well.

The next question comes from Ken Newman of KeyBanc Capital Markets. Please go ahead.

Hey, good morning, guys.

Morning.

Maybe if you could just give us a little bit of color on how sales trended through the quarter, Bill, and just maybe help us quantify, you know, if you saw any indications of a pull forward. I think you mentioned that the price actions really for the memory cost really took place in late March. maybe help us kind of quantify what that's supposed to add to the full year sales growth, if that was kind of in line with expectations. Again, just, you know, if you saw any indications of people trying to get ahead of that price action.

I'd say that, you know, Q1 overall, excellent execution by the teams, really strong start to the year that, you know, we're pretty happy about. Double-digit, you know, sales growth and EPS growth in the quarter. I'd say that, you know, the results demonstrate the durability of demand for our solutions, you know, across all the verticals we serve. Broad-based growth across both vertical markets, regions, products as well. Really our ability to convert that demand into profitable growth for Zebra. You know, the momentum has continued into Q2, you know, across the business.

You know, we're obviously, as Nate talked about, you know, progressing the navigating of the memory challenges, and we've made a lot of progress there and have more confidence certainly, you know, in the full year guide and what we've seen in Q1 and then, and what we have visibility to moving throughout the year, both in the demand perspective and then, you know, the strict constraints to that demand. You know, the unconstrained demand pushes us to the, you know, higher end of our, you know, outlook range, and I think we're seeing that. We feel good about where we're at in the momentum across the business. We saw no real pull forward of demand across our customers related to memory or price increases, you know, overall.

I think that, you know, we're seeing our customers continue to execute on their plans for deployed, you know, technology across their environments to make their businesses more effective and more efficient and moving ahead with that. We haven't seen any real change in demand based on it. The only thing we've really seen is we've worked closely with our suppliers and our customers and our partners on the demand side to make sure we have early visibility to what they need to make sure we have the right products. We're procuring memory and then building the right products for them. We've been working closely with our customers to make sure we really understand, but no pull forward that we've seen across the business.

Only thing I'd add is if you really look at the Q1, you know, the upside to our guidance to the high end was driven by Asset Visibility, and the strength in manufacturing, which did not have the price increase. The real strength in the quarter, which drove some of the gross margin favorability, was around Asset Visibility, which is again, where we didn't have the price increase to just, you know, add to what Bill had mentioned. The other one, we did incorporate the full year pricing benefit of a point into our guide. We offset that by lower volume assumptions in the back half due to the memory constraints.

If you look at it kind of net neutral from the benefit on the pricing side, but then lowering the overall demand or volume given the constraints. That balances out for the second half of the year.

The next question comes from Brad Heffern of Wolfe Research. Please go ahead.

Hey, good morning. Thanks for taking my question.

Morning, Brad.

Kind of tagging on that last question. You raised the full year organic growth guidance by about 1 point to 5%. You mentioned the Q1 outperformance in manufacturing in Latin America and Asia. Curious if you could elaborate a bit more on what drove the implicit organic growth guidance range for the rest of the year, whether that's by vertical or by geography.

I'd say that, you know, demand trends overall remain strong. You know, as I said a minute ago, customers continue and invest, you know, across each of the vertical markets. It was really broad-based growth, quite honestly, across regions, across vertical markets, and across both of the segments. I would say, you know, certainly manufacturing is helping, right? Manufacturing has been, you know, a lower growth profile than the other vertical markets we serve. Now clearly has been a strength, including, you know, in print scanning and we saw double-digit growth in machine vision in the quarter. We feel good about, you know, machine vision. I'd say demand for Elo continues to be strong. You know, our customer conversations that we've had, we've had our three largest trade shows of the year, most recently.

Start the year with our retail, with the national retail show and then, you know, logistics and, a warehousing show and then, you know, healthcare as well. All of those trade shows, we were able to demonstrate our innovation, the depth and breadth of our portfolio, our new solutions that we're bringing to market across mobile computing and machine vision, RFID, you know, our AI solutions. All of those have been, you know, positive conversations with our customers. They continue to invest as their businesses continue to grow. I'd say broad-based demand across regions, segments, verticals, which we feel really good about. That's really given us confidence in the full year outlook.

We'd be at the top end of our outlook range only I see, you know, constraints from memory, which we've factored in, and then we feel good about the momentum we're seeing in the marketplace.

The next question comes from Meta Marshall of Morgan Stanley. Please go ahead.

Great. Thanks. A couple of questions. Just one, in terms of kind of the demand that you're seeing within manufacturing, you know, are there any verticals kind of within manufacturing where you're seeing strength, or do you think that some of this is starting to be some of the refresh of some of the devices bought during COVID? Then as just a second question, just any commentary around increased freight and whether that has any impact to kind of your assumptions for the rest of the year. Thanks.

From manufacturing perspective, I would say that, you know, strong across, you know, each of the sub-verticals within manufacturing. Semiconductor, you know, auto, we've seen some additional strength across our machine vision portfolio. Maybe I'd call out. I would say that the investments are really, you know, across visibility across the supply chain. More drive to continue to have more visibility, both in warehousing but across the entire supply chain. You know, clearly automating quality control that's driving, you know, machine vision inside manufacturing overall. You know, outside of manufacturing, we're also seeing strength. Retail e-commerce, you know, was very vertical in the quarter, so solid demand across that and, you know, continues to be a long-term growth driver for us. You know, healthcare continues to have solid growth in the quarter.

When you were talking about, you know, more of the refresh opportunities, that's really focused, you know, from a retail perspective, they're continuing to refresh. Every customer has a different refresh cycle. Transportation & Logistics is really the larger refreshes that, you know, we're working with our customers on today, building a pipeline of opportunities. Really, we see that, you know, coming in and beginning in 2027, so that opportunity continues to grow. Transportation & Logistics cycle is a large, you know, order compare from prior year, but we see, you know, healthy pipeline of opportunities in that. Those conversations about the refreshes in 2026, we really have forecast about the same level of refresh activities across the different vertical markets as we did in 2025 in our guide.

Really 2027, we would see clearly an opportunity to these bigger refresh cycles where T&L begin to play a role in our numbers.

Yeah, Meta, the second question, which I believe was on the freight rates, and what we're seeing from a logistics standpoint. We have experienced, you know, 20%-30% price increases across the various lanes that we use for our products. That's stabilized here recently. We've incorporated that increase into our guidance. You know, transportation or freight costs are less than 2% of revenue. You know, right now it's in a range that we can manage and use other levers to offset. We've incorporated that higher pricing into the guidance for the full year. The teams are actively working on, you know, different lanes and different options given the environment.

Great. Thanks.

The next question comes from Keith Housum of Northcoast Research. Please go ahead.

Good morning, guys. I do want to say congratulations on the gross margin improvement. Good to see. In terms of the machine vision, I think, you know, Bill, you quoted that was up double digits here. Obviously, machine vision has had a little bit of a challenging time over the past year or two. Do we see an inflection point here? Or what's the teeniest kind of thing in terms of where the machine vision improvement's coming from and what the expectations are for the rest of the year?

Machine vision, you know, for us, we see as an integral part of really the future of our Asset Visibility and Automation segment, right? You know, as you know, Keith, drives both, you know, the logistics market, so transportation logistics, then, you know, clearly, manufacturing. We saw machine vision grow, you know, double digits, strong double-digit growth year-on-year in first quarter. You know, we've been, you know, looking for this inflection point in the market. I think you'll see that really aligned with, you know, the industry as a whole. You know, I'd say recent logistics wins across the U.S. and Europe continue to, you know, be encouraging signs for us in delivering our new solutions.

We're seeing growing opportunities in manufacturing and e-commerce that's, you know, driving what we would expect to be double-digit growth for the full year, so continuing the momentum and growth throughout 2026. I'd say overall, our value proposition is resonating with customers. You know, ease of use, the idea that, you know, we're using a single software platform that's unified across the portfolio of products that allows our customers to easily set up and use our products. We think of, you know, how do we make it simple for our customers to leverage machine vision portfolio? How do they get speed of deployment inside their environments?

Then, you know, how efficient are the reads and how good is our product overall from a machine vision and fixed industrial scanning portfolio? I think that, you know, we're continuing to invest in go-to-market. We've expanded the portfolio with the Photoneo acquisition. We continue to invest in software assets around AI and deep learning, which allows that simplification of deployment in our customers' environment. I think we're feeling good about, you know, where we're at in machine vision. We do think it's an inflection point. We've been working really hard to drive growth across this business, and I think the market opportunity allows us to do that. Then we're seeing it both in T&L and manufacturing, where, you know, it's really broad-based working with our customers around the world.

Great. Thank you. Appreciate it.

The next question comes from James Ricchiuti of Needham & Company. Please go ahead.

Thanks for the color on your machine vision business. I'm wondering if you can talk to, the kind of growth you're seeing across your RFID portfolio, maybe in the same light.

Yeah. RFID continues to build a strong pipeline of opportunities across the supply chain. We're seeing not just in retail, but transportation logistics, manufacturing, government. All of that creates opportunities for us in machine vision. You know, we saw strong compares from a year ago in RFID. We would expect a decline in first quarter, but not a concern to us. We had, you know, large cycling of compares in the first quarter. Expecting growth certainly in second quarter and then for the full year. Momentum in RFID continues, I would say, overall. You know, we're seeing the move in retail, beyond retail apparel really into things like fresh foods, which is, you know, a new opportunity for RFID inside grocery.

Broader, you know, merchandising as well within retail, you know, beyond apparel. Transportation logistics, you know, parcel tracking through, you know, logistics providers is creating a market as well or a new market for us, which is another place we're working closely with our customers. Quick serve restaurants, healthcare, you know, anything you need to track and trace across the supply chain is seeing momentum, you know, in RFID. From a Zebra perspective, we've got the broadest set of solutions, so we're the market leader in fixed and handheld, you know, RFID readers. We've got a portfolio of our printing printers and labels to go along with that. You know, we've recently released our new line of mobile computers that have embedded RFID capabilities into those and our wearable products as well across that portfolio.

We continue to expand RFID functionality across our portfolio. We see this as a long-term growth opportunity as people are continuing to drive visibility across the entire supply chain within their environments.

A question. Just with respect to the large project business, any change in the outlook looking out to the second half, you know, either macro related or, you know, the result of potential changes in the competitive landscape as it relates to the pending transaction with Brady and Honeywell?

No, Jim, we haven't seen any changes, you know, related to the second half. As Bill mentioned earlier, the project funnel remains strong. A great pipeline of opportunities as we look out through the balance of the year and into 2027 as particularly some of the large T&L refreshes start to come online. No change overall in terms of the overall pipeline relative to the recently announced transaction. I think it's playing out as we expected. You know, the large deals, they are in line with the total growth as we announced in our last earnings. No change that, you know, kind of the mix of large deal and run rate both equally contributing to the full year guidance.

Maybe the second part of your question, I'd say, you know, our focus is really, you know, on our business and continuing to expand, you know, our lead in the marketplace. I'd say that, Look, we've got deeply embedded relationships with our enterprise customers, and we're focused on continuing to innovate and drive our solutions portfolio to continue to take share in the marketplace.

The next question comes from Rob Mason of Baird. Please go ahead.

Hi, good morning. My question is just around capital allocation, if there's been any change in the thought process for 2026. I think originally you had earmarked about half the free cash flow for the year towards share repurchase. It sounds like, you know, year to date, we're already at that point or thereabouts. You know, any change in the thought process around half the free cash flow going to share repurchases?

Hey, Rob, as you, as you mentioned, you know, we've already repurchased $500 million through April, so, I mean, already above the 50% outlook that we provided in the last update. Obviously taking advantage of what we believe is an attractive stock valuation, and we're gonna continue to be active in the market. If you look at now our full year EPS guide assumes we do an additional $100 million of share repurchase. We have the flexibility to allocate all of our free cash flow for the year, if we see it's again, an attractive price, and an opportunity for us to continue to repurchase.

Thank you.

The next question comes from Joseph Giordano of TD Cowen. Please go ahead.

Hey, good morning, guys.

Morning, Joe.

One of, like, the more structural pushbacks people give on Zebra's story is like a terminal value question about in the future, as we have more and more automation and more and more robotics and less people in the buildings that you currently serve, there's just a structural smaller need for your products and services. How would you answer and address that question on, like, a much longer term view?

Yeah, Joseph Giordano, I'd say that the, you know, automation trends, right, and the, and the trend towards physical AI is clearly a benefit or, you know, I'd even say tailwind for Zebra as a whole. It's really our business is all about driving, you know, automation and productivity within our customers' environments. I'd say that we've got a long runway of growth ahead of us that, you know, we've got, you know, relationships with our largest customers and even the, you know, the most advanced customers today that are the most advanced from an automation perspective continue to grow their installed base of Zebra solutions, and that includes, you know, mobile computers to drive labor productivity.

I think that when we look at, you know, the one place you talk about automation, 'cause it doesn't really apply in things like front of store retail or, you know, nurses in hospital settings or, you know. Really you're talking about warehousing. You know, today, nearly 75% of warehouses around the world are really in the early stages of an automation journey. That we're seeing that if you look at the numbers, the number of frontline workers are continued to project it to increase. You know, warehouse footprint continues to grow, and, you know, really driven by things like e-commerce, now manufacturing growth along with that. You know, we see our customers wanting to have flexible, you know, solutions for automating and that's really what we do across the environments.

I think that, you know, we're seeing that continue to provide that from a quick ROI modularity and our solutions overall. When you think of what Zebra does, you know, we collect the data, ultimately reading a barcode, printing a label, all the things we do in our Asset Visibility portfolio to feed, you know, either automation trends, because you need data, or physical AI trends for analytics, and then leverage workers within the environment to get work done, and those workers are augmented by technology and automation to make their jobs easier overall. I'd say, you know, automation augments workers, doesn't, you know, replace workers, and we've seen automation in place for a long time, and we continue to see the demand for Zebra solution continue to grow.

I think that we feel good about, you know, where we're at, you know, as a business, and we see the terminal value being strong and things like physical AI being a net positive for us versus a detractor.

When you think about AI deployment, how do you where do you see the sweet spot for you, whether it's developing your own AI tools, or, you know, having a software partner deploy those tools on a Zebra device where you get just like the device sale? When you think about, like, monetizing, how what's the right balance for you there?

Yeah. It's, Joe, it's really all of the above. If you start at the highest level, AI adoption trends, as I said, just like automation, are net positive for us in that, you know, we really understand our customers' workflows and that we've got a large installed base of solutions today that really are fundamental to driving automation or AI for the frontline because AI is really the analytics that drives automation. I would say that we're really uniquely positioned to be the supplier of choice for AI for the frontline. What I mean by that is that at the highest levels, the Asset Visibility and Automation portfolio we have, printing, scanning, machine vision, optical character recognition, you know, parcel dimensioning, all that information is required on the front line to create data around the physical world to feed AI models.

So we give- You know, assets, a digital voice within our customers environments that feed AI models that ultimately tell our customers how to be more effective and more efficient. The way today you get that work done is through automation in the environment or people doing the work. Those, you know, workers are using mobile devices today and our software. Think of task management software, think of communication collaboration software, think of our new AI for the frontline agents. All of those are used to be able to drive the productivity within our customer's business and the answers from, you know, the AI engine. I'd say that, you know, the entire portfolio benefits from AI.

From a Frontline AI Suite, we've got on our mobile devices now specifically, we have Enablers, Blueprints and Companions, all of which allow our customers to easily deploy AI on the front line of business, we're at the very early stages of that. We've, you know, won a new opportunity and parcel proof of delivery with T&L provider. We're in multiple pilots with our customers around retail, transportation, logistics, other areas around the world. That's still very early days. Overall, the portfolio we have of Asset Visibility and Connected Frontline AI, physical AI deployment is a net positive for Zebra across the entire portfolio. Specifically, there's software opportunities with things like our Frontline AI Suite that allows our customers for us to meet them wherever they're at in the journey of automation or deploying AI.

The next question comes from Guy Hardwick of Barclays. Please go ahead.

Hi, good morning. Congratulations on the quarter. Excellent performance. Nathan, I appreciate that you expect to fully offset the 200 basis points of margin memory impact. Do you expect any impact from a lag of recovery in any one quarter? The reason I ask is that one of your competitors called out memories being ahead when specifically for Q3 to their gross margins, and then a major mobile device manufacturer mentioned gross margin headwind in their June quarter. I just wonder if you could comment on that.

No, I think the only thing, obviously you see the step up in, you know, the cost profile from Q1 to Q2, just as we, you know, work through our inventory position, coming into the year, as well as the prices have escalated, in line with what we had expected, escalated here over the, you know, the past quarter. Obviously, there's a step up from Q1 to Q2, and we'd expect that to continue to increase modestly, stepping up from Q3 to Q4, but offset as we get higher price realization on our own products and the flow through of that.

I think Q2 is kind of the inflection point in terms of step change sequentially, just as we roll through with that, and then, a modest increase as we go to Q3 and Q4, but that's mitigated as we get more price realization on our side, to help mitigate the inflow. There's I wouldn't say there's any other particular macro or market-driven reason for it. I'd say it's more just timing of inventory, and the flow through that through the P&L.

Just as a quick follow-up, just wondering whether the changes in the tariff regime could have had any impact on the business, either positively or negatively in Q1 and how it maybe impacts your Q2 guidance.

If you look at the elimination of the IEPA rates, but, you know, most of that, a big chunk of that was offset by the Section 122 tariffs. I'd say it really didn't have a meaningful impact on the P&L in Q1. Again, most of that, just given the timing of the announcement, and the carryover from inventory. It'll have a small benefit in Q2, but we don't expect really any impact for our full year guidance. Our expectation is that as we go into the back half of the year, second half of the year, you know, whatever the new form, whether that's Section 301 or others, will replace what was the effective IEPA rates coming into the year.

I'd say the full year, we're not expecting any material changes due to the new tariff regime, just as there's gonna be a new form factor of that, presumably in the second half of the year. If that changes, we'll obviously update as we go through the year. In the short term, I'd say pretty modest, just given inventory impact than the differentiation between the rates between IEPA and 122.

The next question comes from Brian Drab of William Blair. Please go ahead.

Yeah. I think my question was just taken there, but I wonder if you can just elaborate more on, you know, one of the questions I've been getting all quarter is around is Section 232 going to impact you? You know, you've moved a lot of manufacturing to Mexico. You know, how does this, you know, specifically for 232, does that have any impact? I can see that, you know, tariffs weren't mentioned in the transcript here until that last question, the Q&A, so I guess it's not a big deal, but wonder if you could just give some detail around that.

Yeah, look, I think it would all depend on, you know, what exactly comes out in terms of, you know, the scope. I think that's not clear today. We've been obviously monitoring and tracking with our trade compliance team, and, you know, we leverage the largest semiconductor companies in the world, and continue to assess country of origin across all of our different products, in terms of the flow of semiconductors through the supply chain. Again, actively working both our supply base and our government relations team, but I think there's nothing really to specifically comment on, relative to 232.

As it's, you know, it's been out there for quite some time, I'd say just like anything, whether that was the, you know, tariff round 1, tariff round 2, and all the other changes, as those change, we'll take the necessary actions to mitigate the impact of the P&L and communicate that implications with our customers. That's no different on whatever the next, you know, version of whether it's, you know, 301 or 232 that comes later this year.

This dynamic of, you know, a product being taxed based on its metal content at 50%, transitioning to a product being taxed on its entire value at 25%, like that type of dynamic is not a big deal for bringing a barcode printer or any other device into the country, say from Mexico or elsewhere.

Yeah. Again, I would say it all depends on what's actually ultimately written in terms of country of origin, and how they scope it in terms of, you know, what content and what rate. I'd say right now there's just not enough details to speculate on what the impact would be until we get further clarity.

The next question comes from Robert Jamieson of Vertical Research. Please go ahead.

Hey, congrats on the results. Just a couple from me. Bill, you know, you all have been very active on the ecosystem side, including the strategic investments like the Apera AI for, 4D vision for factory automation, as well as like the broad ISV network that you're building out for AI and mobile compute. Just curious, like how central are these partnerships and investments to your AI strategy? You know, on the near term ROI side, like where are you seeing the most tangible benefits from AI enhanced solutions today, and which verticals do you think, you know, or would you expect to see the most, you know, incremental AI revenue contribution from as we look ahead?

I'd say first that, you know, our venture investments, again, we view as another lever ultimately to be able to stay close to new innovation. You know, these are relatively small investments from our perspective. It allows us to invest across the portfolio in, you know, interesting companies, technologies that we ultimately see as interesting to us, you know, longer term. In this case, really around, you know, machine vision and physical AI in the most recent one. I think that's always of interest to us, but these are small investments overall. I think it's important for us to continue to keep our pulse on what's happening in the, you know, across venture.

I'd say our independent software vendor relationships and just our relationships as a whole is we're seeing that, you know, it's important that whether it's our relationship with Qualcomm or Google or the memory suppliers in this case most recently, but also the software vendors, large and small. You know, everyone from the biggest players to the smallest are part of our ecosystem of partners that we leverage to work with our customers. You know, our channel partner community ultimately serves a lot of our customers around the world as well. All those are, you know, incredibly important to us as we bring our solutions to market.

Across AI, we see it a combination of really meeting our customers wherever they're at in the journey. I think that, you know, their ROI is driven by, you know, our Frontline AI Suite is kinda three components to it. One is Enablers that allows our customers to leverage our next generation mobile devices that we've recently, you know, released, the idea of, you know, capabilities to support the processing and memory required for AI, allow those Enablers to be used by our customers that wanna deploy their own AI agents in their own, you know, AI software at the frontline of business. Our Blueprints allows our customers to leverage those Enablers where we package them together into a specific use case. Like, parcel proof of delivery is a good example of that.

We talked about the recent transportation logistics win in that area. That's combining our Enablers along with agents from Zebra, and then packaging those together that'll fit underneath our customer's application. The third is where we do the full application ourselves. That's Companions. We meet our customers wherever that they're at in their journey. They wanna use our Enablers on the device and leverage those to build their own AI agents, that's okay. If they want us to create that software for them, we've got an offering and generate revenue associated with that. If they want us to build a full application for them, we'll do that as well.

We meet our customers wherever they're at in our journey. That's what we do leveraging our independent software vendors and our AI partners, along with our customer, along with our offerings, complete the full suite of offerings to our customers, so we can meet them wherever they're at on their AI journey or wherever they're at in their automation journey. That's what our customers really wanna see from us, that we're not driving them in one direction or another. If they wanna do a lot of the development themselves, and some of our largest customers wanna go do that, the majority of our customers do not. They want help from us or our software vendor partners to be able to deliver an entire solution.

Our last question comes from Piyush Avasthy of Citi. Please go ahead.

Good morning, guys, and thanks for fitting me in. Bill, I think you mentioned AI-

Good morning.

Bill, you, I think you mentioned AI helping your customers improve efficiency. Are you deploying AI internally as well? Like, you mentioned productivity initiatives helping you this quarter. If you could elaborate on what you're doing there, and like how should we think about like margins in the longer term? Like, does AI kinda, you know, improve that 50 bps off year-on-year margin, you know, that's baked into the expansion that's baked into your long-term outlook?

Yeah, we do see AI driving internal productivity within our business. You know, at the areas you really would expect, software development, right? A lot of work being done using AI tools across our development process, you know, within research and development. You know, our sales and marketing teams leveraging, you know, AI across what they're doing, you know, around the globe, working with customers in their marketing platform and others. Supply chain forecasting, we're seeing that. Our customer service teams as well. We're using AI tools broadly across the entire organization, so we've encouraged, clearly, our employees to leverage, you know, the AI tools we have available to them, and we're seeing broad-based adoption across AI. We do believe that ultimately it drives efficiency and allows us to continue to increase, you know, our margins moving forward.

Absolutely we believe that AI will be a productivity tool inside Zebra, but we actually believe that you know, overall the biggest opportunity is what we provide to our customers. It's also important from a profitability perspective. Really both.

This concludes our question and answer session. I would like to turn the call back over to Bill Burns for any closing remarks.

I'd just like to wrap up by thanking our employees and partners for delivering solid Q1 results and certainly excellent progress we've seen so far on our 2026 priorities. We're excited about the opportunities ahead. Thank you everyone for joining.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.

Good day, and welcome to the Fourth Quarter and Full Year 2025 Zebra Technologies Corporation Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Michael Steele, Vice President of Investor Relations. Please go ahead. Good morning, and welcome to Zebra Technologies Corporation’s fourth quarter earnings conference call.

This presentation is being simulcast on our website at investors.zebra.com and will be archived there for at least one year. Our forward-looking statements are based on current expectations and assumptions, and are subject to risks and uncertainties. Actual results could differ materially and we refer you to the factors discussed in our SEC filings. During this call, we will reference non-GAAP financial measures as we describe our business performance, with reconciliations shown at the end of this slide presentation and in our earnings press release. Throughout this presentation, unless otherwise indicated, our references to sales performance are year-on-year at constant currency and exclude results from recently acquired businesses for twelve months. This presentation will include prepared remarks from William J. Burns, our Chief Executive Officer, and Nathan Andrew Winters, our Chief Financial Officer. Bill will begin with a discussion of our fourth quarter and full year results. Nathan will then provide additional detail and discuss our outlook. Bill will conclude with progress on advancing our strategic priorities. Bill and Nathan will take your questions following the prepared remarks. Now let's turn to slide four as I hand it over to Bill. Thank you, Mike.

Good morning, and thank you for joining us. We delivered fourth quarter results above our outlook driven by our team's strong execution and positive demand trends. Before discussing the quarter, I would like to briefly reflect on the progress we have made over the past year on our vision to advance intelligent operations. In 2025, we expanded our connected frontline portfolio and customer base through the Elo Touch acquisition and expanded our 3D machine vision capabilities with the Fotoneo acquisition. We advanced our market leadership with the introduction of our AI solutions for the frontline and sharpened our focus on automation by exiting our robotics business to prioritize areas where we see better growth opportunities including RFID, machine vision, and AI-powered solutions. Operationally, we delivered solid growth, generating strong free cash flow, and deepened customer and partner relationships. For the fourth quarter, we realized sales of nearly $1,500,000,000, a 10.6% increase, or 2.5% on an organic basis, from the prior year, an adjusted EBITDA margin of 22.1%, and non-GAAP diluted earnings per share of $4.33, which was 8% higher than the prior year. We drove strong results in our Asia Pacific and Latin America regions with EMEA returning to growth. Our healthcare, manufacturing, and retail and e-commerce end markets grew while transportation and logistics cycled strong compares in North America. Elo performed well in the quarter and we are pleased with the early progress on driving synergies. We realized solid earnings growth by fully mitigating existing tariffs and driving operating expense leverage through productivity initiatives while continuing to invest in our market leading solutions portfolio. For the full year, we achieved greater than 6% sales growth in line with our long-term expectations and 17% non-GAAP diluted earnings per share growth. We also generated more than $800,000,000 of free cash flow and closed on accretive acquisitions. Overall, our team executed well while navigating an uncertain environment. Our strong financial position enabled us to return significant value to shareholders with more than $300,000,000 of repurchases in Q4 and nearly $600,000,000 for the full year. Given our progress, our Board of Directors has expanded our authorization by $1,000,000,000. We will continue to execute on our disciplined and balanced capital allocation strategy prioritizing investments in our business that elevate our portfolio of solutions, while consistently returning capital to our shareholders. We are well positioned as we enter 2026 and excited about the opportunities ahead. I will now turn the call over to Nathan to review our Q4 financial results and 2026 outlook.

Thank you, Bill. Let's start with the P&L on slide six. In Q4, total company sales increased 10.6% or 2.5% on an organic basis with growth across most categories. Our Connected Frontline segment grew 3.6% led by mobile computing, and our Asset Visibility and Automation segment grew 1.3% led by printing and supplies. We realized solid performance across our regions.

Asia Pacific sales increased 13% led by Japan and India,

sales increased 8% in Latin America with double-digit growth in Mexico,

in EMEA, sales increased 4% with solid growth in Northern Europe and Germany. And in North America, sales declined 1%, as we cycled large order activity in the prior year partly offset by solid run-rate demand. Adjusted gross margin declined 50 basis points to 48.2% primarily due to lower services and software margins.

We fully mitigated current tariffs earlier than expected thanks to our team's successful efforts including supply chain moves, product portfolio rationalization, and price execution.

Adjusted operating expense leverage improved by 60 basis points.

This resulted in fourth quarter adjusted EBITDA margin of 22.1%,

non-GAAP diluted earnings per share were $4.33, an 8% year-over-year increase,

and above the high end of our outlook.

In Q4, we recognized $76,000,000 of restructuring charges relating to the exit of our robotics business and productivity initiatives. Turning now to the balance sheet and cash flow on slide seven. For the full year, we generated free cash flow of $831,000,000, or a conversion rate of 102%. At year-end, we held $125,000,000 of cash with a modest debt leverage ratio of 2 and $1,200,000,000 of credit capacity.

We have been deploying capital consistent with our allocation priorities. For the full year, we repurchased $587,000,000 of stock

and acquired Elo,

and Fotoneo with cash on hand and our existing credit facility.

We continue to maintain excellent financial flexibility

for investment in the business and return of capital to shareholders. As Bill noted, our Board authorized an additional $1,000,000,000 of share repurchase providing a total of $1,100,000,000 after the $100,000,000 repurchase through early February.

This action underscores the confidence in Zebra Technologies Corporation’s prospects for continued growth and value creation. Let's now turn to our outlook.

We entered 2026 with a solid backlog and pipeline that supports our first quarter sales growth guidance range

of 11% to 15%,

including approximately 10 points of contribution from business acquisitions and favorable FX. Our first quarter adjusted EBITDA margin

is expected to be between 21%–22%, and non-GAAP diluted earnings per share

are expected to be in the range of $4.05 and $4.35. For the full year,

we expect sales growth to be 9%–13%,

which reflects a strong pipeline of opportunities,

machine vision returning to growth, continued momentum in RFID, along with manufacturing, and a seven-point favorable

impact from acquisitions and FX.

Our full year adjusted EBITDA margin is expected to be approximately 22% and non-GAAP diluted earnings per share are expected to be between $17.70 and $18.30. We are currently facing industry-wide price increases for memory components beginning in Q2. Our full year guide reflects us fully mitigating this approximately two-point headwind and driving profitable growth in 2026 through multiple initiatives, including collaborating closely with our vendors to manage supply, targeted price increases, net savings from the robotics business exit,

targeted actions to drive productivity, as well as FX favorability.

Free cash flow for the year is expected to be at least $900,000,000 which reflects free cash flow conversion of approximately 100%. We are continuing to optimize our working capital levels balanced with our supply chain resilience objectives.

Please reference additional modeling assumptions on slide eight. With that, I will turn the call back to Bill. Thank you, Nathan. As we turn to slide 10,

Zebra Technologies Corporation remains well positioned to benefit from secular trends to digitize and automate workflows with our innovative portfolio of solutions including purpose-built hardware, software, and services. We deliver intelligent operations by digitally connecting people, assets, and data to assist our customers

with business-critical decisions

that drive meaningful outcomes. A $35,000,000,000 served market represents a significant growth opportunity. Zebra Technologies Corporation’s complementary and synergistic segments position us well to capitalize on this opportunity. The Connected Frontline provides the digital touch points necessary to improve efficiency, collaboration, and the customer experience. Our solutions include enterprise mobile computing,

interactive displays,

frontline software, and AI agents. Asset Visibility and Automation gives assets a digital voice to automate environments with technology that scales through printing solutions, advanced data capture, RFID, and machine vision. Turning to slide 11. Zebra Technologies Corporation solutions enable our customers across a broad range of end markets to drive productivity and efficiency and improve the experience of their customers, shoppers, and patients. We are accelerating our investments in RFID, machine vision, and AI, further sharpening our strategic focus. Zebra Technologies Corporation is investing in RFID solutions that advance our leadership and support emerging use cases. Our next generation mobile computers embed RFID reading capabilities to prepare our customers for the increased penetration of RFID tags across the supply chain. A North America telecommunications company recently selected our new RFID-enabled mobile computers for their retail locations, replacing consumer devices. Our solution enables this customer to improve inventory accuracy and reduce shrink, as well as lowering IT support costs over the product life cycle. We are excited about the momentum we are seeing in RFID adoption and our pipeline of opportunities. We are driving new opportunities in machine vision by investing in go-to-market initiatives for deeper engagement with our customers. There are many mainstream workflows that benefit from the proven return on investment from our solutions.

For example,

a large European parcel delivery company has selected Zebra Technologies Corporation’s machine vision platform to drive productivity gains by identifying and sorting parcels, eliminating bottlenecks along conveyance systems. We have a strong pipeline of machine vision opportunities and expect to return to growth in 2026. Now turning to slide 12. At the National Retail Federation trade show in January, our team, along with valued customers and partners, demonstrated how our innovative portfolio advances the AI-powered modern store through engaged associates, optimized inventory, and an elevated customer experience.

These outcomes are achieved

through improved real-time inventory management, omnichannel execution, and technology-empowered workers and shoppers.

The addition of the Elo Touch business

enhances the modern store experience as our combined capabilities along with AI enable us to offer additional ways to digitize operations across multiple touch points. Together with Elo, we will deliver higher customer satisfaction and complete solutions through the intersection of frontline mobility, self-service, and digital media. This value proposition extends well beyond retail, including quick-serve restaurants, hospitality, healthcare, and other industrial markets. For example, a high growth multinational fast-food restaurant recently selected Elo's self-serve kiosk at its U.S. locations to increase order size,

enable faster fulfillment,

and improve order accuracy. Looking ahead, we have an opportunity to expand our business across their entire point of service platform

and also supply their international locations. Turning to slide 13.

Our industry leadership puts us in a unique position to be a supplier of choice of AI solutions for the frontline of business. Our Connected Frontline and Asset Visibility and Automation segments play a critical role in enabling AI for business operations. As AI transforms the frontline of business, asset visibility becomes essential, providing a digital voice to physical assets to identify, locate, and understand condition. This real-time data provides critical insights allowing AI models to better understand the physical world which is fundamental to transforming frontline workflows across industries. Our connected frontline solutions unify a mobile workforce which, combined with our SaaS offerings, deliver the output from AI models to frontline workers providing the right information to the right person at the right time.

Global solutions will be capable of seeing,

hearing, and understanding the environment while interacting with frontline workers in a conversational or vision-based way. We continue to invest in our AI solutions with our recently launched Frontline AI Suite, comprised of three components. AI Enablers are foundational to our offering, consisting of tools and APIs that empower partners and customers to build enhanced applications for mobile devices. Our AI Blueprints combine enablers into purpose-built templates that streamline multistep workflows. These blueprints integrate computer vision,

voice recognition, and sensor data

to automate critical workflows such as proof of delivery, material receiving, and shelf merchandising. Zebra Companion includes agents we design and manage addressing key responsibilities including operating procedures, product knowledge, and sales enablement. Our Frontline AI Suite is a clear differentiator in the industry and enables us to meet a range of customer requirements. Our partners and customers can choose to build their own fully customized application using Enablers, elect to adopt Blueprints to more quickly address their evolving business needs, or deploy our fully functional Zebra Companion. AI Enablers are a value add to Zebra Technologies Corporation’s mobile computers, while AI Blueprints and Zebra Companion are software and service offerings with paid pilots already underway and scaled deployments expected this year. We are pleased that two prominent retail customers demonstrated the value of our Frontline AI Suite at the NRF trade show, and we look forward to building on our momentum to further elevate Zebra Technologies Corporation as the leading solutions provider

for the frontline of business.

I will conclude on slide 14, which highlights end market trends driving our long-term growth opportunities across our end markets. These include several broad-based themes including labor and resource constraints, track-and-trace requirements, increased consumer expectations, and advancements in artificial intelligence.

Our customers rely on our solutions

to advance their business-critical workflows and we are uniquely positioned to address the need for intelligent operations with our market-leading portfolio. I will now hand it back to Mike.

Thanks, Bill. We will now open the call to Q&A. We ask that you limit yourself to one question and one follow-up to give everyone a chance to participate.

We will now begin the question and answer session. If you are using a speakerphone, to withdraw your question,

Our first question today comes from Thomas Allen Moll of Stephens. Please go ahead. Good morning and thanks for taking my questions. Good morning, Tommy. Good morning, Tommy. First one for you on memory.

Nathan, I think I heard you say that beginning in Q2, you anticipate a two-point headwind that you can fully offset. So maybe we can just unpack that a little bit. Two-point, I presume you are just referencing a two percentage point hit to

gross margin

and

maybe you can give us some context how that progresses from Q2 and beyond? Or

maybe you can quantify for us some of the

initiatives that you have in flight to try to offset that headwind? Thank you. Yes, for sure.

No. It is correct. What we said in the statement is about two-point gross margin headwind on a gross basis, but obviously, the memory chip demand and price expectations have escalated quite a bit since the beginning of the year. But we are pursuing multiple mitigation strategies, different than what we have done before, whether this was with tariffs or semiconductors. So we recently announced price increases globally over the past week. They will be effective in March. Practically working with our suppliers around spot buys, co-planning around the demand trends as well as looking for alternative memory sources. And then a lot of work from our product teams on transitioning to some higher density memory. So, again, quite a few active work streams in process. And if you look at the impact for 2026, I mean, this is based on indicative pricing from our suppliers and where they see that going here over the next several quarters. The impact really begins in Q2 just based on the timing of those price increases, as well as what we have in inventory going into the year. But we fully expect to mitigate that within the year, and that is embedded in our guidance. About a half of that or a point is offset with just other offsets we have, whether that is the exit of the robotics business, some tailwinds from some of the lower tariff rates, as well as the actions the team has taken to mitigate the tariff exposure, as well as some of the favorability in FX. And then the other half coming through as we realize the pricing benefits into Q2 and through the second half of the year, as well as all the other mitigating actions the teams are currently working. So again, our teams have done a really great job at securing supply to meet the demand we have within the guidance. So a lot of work. It is obviously dynamic, but I think, again, we feel good about where we are at with the work streams and working closely with our supply base. Thank you. And I want to follow up on the repurchase

update you provided today. It sounds like you have already done

$100,000,000 through

the year-to-date period. And so my question is with the new authorization and

assuming your stock is at similar levels, is there any reason why you would not

or, excuse me, why you would slow down the recent level of repurchase?

No. If you look at, I mean, if you just take a step back, ending the year from a debt leverage around 2x, we feel great about the overall capital structure, strong cash position, balance sheet is in good shape. So, as we said, we repurchased $300,000,000 of share repurchases in the fourth quarter. We have repurchased $100,000,000 year to date leading into the call. So right now, we are targeting to do share repurchase around 50% of our full year free cash flow of $900,000,000. That will be primarily here in the first half of the year. So, again, we continue to plan to be aggressive in the market here over the next several months, and this still provides ample flexibility as we enter the back half of the year based on our cash profile for the year.

The next question comes from Guy Drummond Hardwick of Barclays.

Hi, good morning.

Bill, I think it has been a couple of years since you have referenced the pipeline. So I guess that is very positive. So is visibility improving? But just more specifically in the near term, it appears the midpoint of your Q1 revenue guidance suggests revenues are above Q4, which is much better than seasonality. Any particular reasons for that? Is that Elo? Is it because of the pull forward from Q4 to Q3 makes an easier comparative? What other sort of issues are there? And is FX a big change sequentially?

Yeah. I would say that the strong finish to the year certainly is playing into this. As we exceeded our outlook, 2025 we drove solid growth, 6% growth and then 17% EPS growth, greater than $800,000,000 of free cash flow in what was an uncertain environment through the year. Elo added two points of sales growth to the year leading to 8% growth for the full year, really advancing our offerings in the Connected Frontline segment, and then also our capabilities across engaging customers in a digital way certainly in that segment. So enhanced our modern store offering as well. We see that, as we enter 2026, there is momentum. Right? We see reacceleration of growth coming out of fourth quarter, led by manufacturing, our machine vision pipeline, momentum in RFID are all positives as we enter the year. We are seeing our customers continue to talk about investments in technology as we spent a lot of time with them at the National Retail show. Really, we are focused on higher growth opportunities across the portfolio and to drive productivity with the business, as Nate talked about, kind of offsetting memory. So I think overall, we feel good as we enter the year and that the momentum is there to

drive profitable growth in 2026.

And then, Guy, I think, if you look at the Q1 guidance, as you mentioned, in line or roughly flat from where we were in Q4. I think a couple of things in play. One, if you just look back over the last couple years, linearity has been anything but typical. So I think it is hard to say what has been typical linearity if you look back just at what has happened over the past couple years.

But also,

we did not see, as we said in our guidance for the fourth quarter, kind of a surge in year-end spends. So we did not see the same type of cyclical improvement from Q3 to Q4. And then Elo plays a small part, just not quite the same seasonality, more linear throughout the year. So I think all three of those play a factor, along with, as Bill mentioned, the demand environment, all play a factor in why Q1 is going to be in line with Q4 in the top line.

Sorry. Just on the memory issue, do you have much visibility to the back end of the year in terms of what could be the annualized impact as we kind of exit

Yes. I mean, we have, I mean, really, the

the year? Based on your discussions with your suppliers?

pricing we have gotten now is kind of through the middle of the year. So I think that is, you know, and obviously, that is what we have incorporated into the guide as well as some assumptions around just how that may play out in the back half. I think the way to think about it now would be you take the two points, really pull that over the second, third, and fourth quarter, and then annualize that run rate on an annual basis. So it is not that much different from what we are seeing here in our 2026 guide.

Our next question comes from Joseph Craig Giordano of TD Cowen. Please go ahead.

Hey, guys.

Good morning. Thanks for taking my questions here. Can you talk about, like, I mean, it is a fairly wide-ish, it is kind of a wide organic growth guide for the year. So maybe you could talk to scenarios and what your visibility looks like and how you are, you know, what would be required from a

from, like, a market standpoint to get to that higher end? And how, like, de-risked is the low end. Yeah. Maybe just, you know, start with the full year guide. 11% at the midpoint, 22% EBITDA margin, and double-digit EPS growth. So again, I think we feel good about the overall profile for the year. And as Bill mentioned, I think the underlying theme of that is entering the year with a strong pipeline, the momentum across different parts of our business, whether that is RFID, manufacturing, machine vision. And I think if you take a step back, we believe the guide provides a balanced view of the environment where we sit here today, including still some macro uncertainty out there, the memory component challenges, with the opportunities that we see in the market. So if you look at the 11% midpoint, about four points of that is driven by underlying demand. Elo provides five and a half points of the growth, and FX is a point and a half there. And I think visibility is pretty typical for what we see at this time of the year. So I think the range is really bound around the midpoint. It is more how we think about it in terms of circular around the midpoint. Obviously, the macro conditions, timing of deals, play a factor in kind of the balance between the low and high end of the range. But I think we are based on everything we have today.

And just a follow-up. Can you talk about price just like bigger picture? Has the

has the way customers think about price of these types of electronics, like, structurally changed and maybe permanently changed? Like, is it, I mean, how much of your, how much of your revenue base now is almost like just pure pass through of weird things that have happened, right? Whether it is

whether it is tariffs or memory or etcetera. Is it just, like,

more acceptable behavior now and customers kind of can accept that price is not just going to keep going down into perpetuity for, like, existing products?

Yeah, Joe. I would say that

you know, the things like tariffs and memory and others have,

you know, allowed us to raise price where, you know, along with

with our competitors as well. I think you are just seeing this across the industry that it is

not possible to absorb the cost of tariff or memory and we have to raise price. And I think that, look, our customers are price sensitive. We have competitors in the market. Our largest customers get our best pricing. That is just the way it works, and we continue to work with them to make sure they are seeing the value. We are adding a lot of technology to our devices, not just, you know, we are raising price because we have to on memory and tariff and others, but also, they are getting a lot of value. Right? We have added RFID to all our next generation mobile devices. We are increasing memory and

processing speeds, working with,

you know, our partners in Qualcomm and Google on the OS to make sure that they can support AI models on the device. So they are seeing value in things like mobile computing. We are doing the same across the entire portfolio, adding

AI capabilities, capabilities to machine vision, continuing to enhance capabilities around scanning,

printing to that portfolio. So, you know, our print portfolio, we are adding RFID. There is a lot of value as well that our customers are getting from our solution.

Certainly, there is price sensitivity and competition, and that all matters. But look, we do not have a choice but to raise price when memory and tariffs and others are so significant. But I think our customers understand that. They are seeing that across not just our segment, but many others.

Yeah. And, Joe, I think if you just look back at last year, even with the price increase we did in April, it still represented a little over half a point of the full year organic growth. So still the vast majority of the growth last year was driven by underlying demand. So it clearly plays a part, but that underlying demand is still what is going to ultimately drive the top line.

The next question comes from Robert W. Mason of Baird.

Please go ahead. Yes. Good morning.

Maybe just an extension of that last question. I mean, as you think about the way you have laid out the guidance for the first quarter and how you are thinking about the balance of the year and when pricing goes into effect. Are you giving any consideration to customers trying to get in front, you know, moving projects, pulling those forward, you know, trying to get ahead of some of the price increases or just, you know, uncertainty around memory in general?

Yeah, Rob. So I think two points. On the first quarter, we are not expecting any type of pull-forward activity, or that is not incorporated into the guidance. I mean, we just announced the price increase this past week. So, obviously, what we were seeing in the pipeline of opportunities was unaffected by the price announcement here just over the past week. And just how we implement that through our distribution channel, with our partners, in terms of honoring prior pricing that we have or updating the full backlog or what is sitting with our distributors. As we have done these price increases in the past, we really have not seen a huge pull-in of demand just based on how we administer that through our channel, as well as honoring some of the PCs, price concessions we have with certain customers on deals. And then I think the other one, just as you look at the incremental price increase we announced this week, that is not been incorporated into the guide. Similar to how we thought about last year. We want to monitor the impact. We just announced it, so, obviously, that is being absorbed through the channel. So I think, as we sit here today, we thought it was the right move to say, what is really what we are seeing from the underlying demand today? And then we will update that as we go through the year in terms of how we see that as either incremental revenue or any type of trade-off with underlying demand.

Yeah. I would say that maybe just to add, Rob, that, you know, talking to our partners at our channel partner conferences, we have been through North America and Asia Pacific already, and you know, the message they are sending to customers is, you know, let us talk about these major projects early. Let us get those orders in.

Not the idea of to save on pricing or others, but more just to make sure we have supply for them ultimately. And I think that is the message they are sending. So I do not see people buying early because of it. I think it is just a reality of what is happening across memory. But I think it allows our partners to have the conversation early with early visibility

to especially larger opportunities with our customers to make sure that they understand that, you know, the more visibility we have to demand on specific product they are looking to utilize, then we can go meet that demand with the memory we have.

Makes sense. And then, Bill, you mentioned this

return to growth in machine vision. I think historically, we are aware of where you had some maybe over-index into certain verticals. Are those the verticals that you are expecting

to see recovery in? Or do you have some new ones that you are looking to drive that return to growth? Yeah. We see that machine vision is really an integral part of the Asset Visibility and Automation segment for us. And I think that

when we look at machine vision, we saw sequential growth in fourth quarter. So we feel good about that. We have seen some new wins both in, you know, as you know, the machine vision market, there are two sides of that. One is T&L. So we have seen some large

transportation and logistics wins, and the other is inside

manufacturing. So we have seen at the high end of our portfolio some

you know, automobile manufacturing wins that are coming back a bit. So I think manufacturing

in general on the machine vision side

recovering, in addition to T&L, is

a good sign.

We expect sequential growth to continue through first half, but solid growth for the full year. I think the pipeline is, you know, we have been working hard to diversify the pipeline of customers, but

everything across inspection, you know, dock door, pack bench, scan tunnel, optical character recognition, to a broad breadth of

opportunities that the team is working on. I would say as we are looking to diversify,

the business, as you said, into new vertical markets. I think our value proposition is strong. We have got,

you know, we focus around ease of use, the unified software platform that we have brought across the portfolio. We have invested in go-to-market. We have changed out some leadership in the business. Acquired Fotoneo to have another offering at the high end of the market.

So I think, you know,

we feel good the market is recovering overall in machine vision as manufacturing recovers and T&L spends again in that environment.

So

we see, you know, solid growth, quite honestly, into 2026. So, you know, overall, I would say we feel good.

Our next question comes from Keith Michael Housum of Northcoast Research. Please go ahead. Good morning, guys. Appreciate the opportunity. Sorry to harp on the memory issue a little bit more, but I appreciate, Nathan, the visibility through the first half of the year. But we are hearing more and more concerns along the industry that perhaps product shortages and limitations to sales in the second half of the year. Can you talk about any confidence you have that in regards to the price,

you are going to have the availability there of the products?

Yeah. Of course.

Look, I think the team, as I mentioned earlier, the team has done a great job working with suppliers. Bill mentioned, I mean, part of this message through the channel with our partners is getting the visibility on those projects to what SKU, what product do you want, and getting that visibility early. It allows us to then shape demand. So it is really around, you know, a bit of can we get the product, as much as get the right memory for the right product that we need and making sure that those precious components are going to the right product families as we build out the pipeline. So that is where the team is really focused now, shaping demand, working with our customers around the particular SKUs they are looking for around projects maybe a bit earlier than normal, so that as we build the build plan, work back through our supply chain, we are getting the right memory through the pipeline. And then the other thing the team is working actively is moving to the higher density memory, with a lot of that capacity planned to come online in the middle of the year. So part of that is also shifting to the newer memory, which, again, we expect for that supply to increase as we go to the back half of the year.

I think, Keith, maybe I will just add really quick. Just strong supplier relationships is critical to this and that we know coming out of COVID, that is critical for our business. And we have worked really hard to make sure that we have got the right relationships in place with our suppliers and they are, quite honestly, guiding us through this, as Nate said. You know, months ago we had the conversation around moving to new memory that would be more readily available, and we have got early samples of that. We are working with

our other suppliers to go test that and make sure that we are ready. So we are doing everything our suppliers are asking us to go do to get the most access to memory we can. And those relationships really matter ultimately. We are working closely with them. And as Nate said,

on the other side of it, on the partner or customer side, to say, look, we do not want to build product and put memory in it that we do not need for customer demand. So we want to make sure we have got the right SKU, the right product,

the right timing around it,

and the analysis we have done so far is that we are going to mitigate the pricing, and we are going to have the supply we need. There is always some risk in that, but we feel good about where we stand today. The team has done a lot of work on this.

Okay. Great. In terms of that memory,

is it primarily the mobile computers that are at risk here? Or is it also point of sale of the Elo or the printers? Is that experiencing some of the same issues or is it really concentrated with mobile devices?

Concentrated to mobile devices. Elo and the POS and kiosk business has, you know, similar, but it is predominantly in those two portfolios. But, again, the teams there are working closely together. Our supply chains are

you know, tied on exactly what we are doing from

a pricing perspective, but also a supply perspective and leveraging

the strengths of both of our, you know, both Elo and

core Zebra to make sure we have got

supply across both.

The next question comes from Andrew Edouard Buscaglia from BNP Paribas. Please go ahead.

Hey, good morning, everyone. Good morning, Andrew.

I just wanted to get

a sense of these kind of customer conversations you are having in terms of what they are thinking for 2026.

It sounds like, I mean, you have a, it sounds like you have a healthy backlog and your Q1 guidance implies some,

you know, improving spending. But what are the customers saying in terms of the biggest, you know, impetus to spend here? Is it, like, in the past, you talked about clarity around tariffs. Is it, are they taking advantage of accelerating depreciation? And is there an upgrade cycle, maybe they just have not bought in so many years, and they have got to move forward this year. I would say that the, you know,

customer conversations are really around the idea that they are continuing to invest in their business, you know, and that is across all verticals. We have spent, you know, even though it is early in the year, a lot of time with customers, as I mentioned, at National Retail show, but, you know, our largest T&L customers, because T&L is so critical to retail also, were at that show. We have got

you know, our healthcare show coming up in HIMSS over the next, you know, x number of weeks. So

we are preparing for that. So across all verticals, our customers are really talking about continuing to invest in their business and technology. I would say that

you know, we enter the year with a solid backlog and really a pipeline. We have got momentum, as Nate talked about, around

you know, our core business overall,

you know, including scanning, printing,

mobile computing, but also, you know, manufacturing, you know, seeing more strengths in that, which has been a focus area for us. EMEA returning to growth. I would say that the demand remains strong for Elo, so we are certainly excited about that acquisition. You know, I think that the breadth and depth of our solutions portfolio,

including the addition of Elo and

the new opportunities around our AI suite and the idea that customers are thinking about how they are deploying AI at the frontline of business overall. Those conversations continue, and I think that, you know, customers are really focused on how do they serve their customers better and get better experiences, whether that is omnichannel or it is self-service or point of sale. They are talking about driving efficiencies within their business. How do I use our solutions to go do that across RFID, machine vision, and others. And I think it is how do you increase inventory visibility, which is still challenging across our customer base, and that is everything from, you know, printing to scanning to our mobile devices. So I think that, you know, we are confident in delivering solid growth in 2026. And our customers seem to be really focused on continuing to deploy technology across their business. And I would say, kind of playing their game. Right? They have got a plan. They are executing on it. And there has been really no talk about kind of anyone holding back or others. It has all been kind of positive about, you know, what are their plans for 2026 and what are the opportunities we have to work closely together.

Yeah.

Yeah. Sort of on that note, you know, a lot of people, like, looking at things like the AI effect, and certainly, your customers are trying to find ways to leverage it and, you know, reduce cost and, you know, improve productivity. I am wondering, you know, years ago, you had this Windows-based device that was shifting to Android, which prompted a big upgrade cycle. I am wondering, do you sense, like, these new AI products you are talking about, you have been talking about them for a while, could have a similar effect in terms of prompting new spending or an upgrade cycle here.

Yeah. I would say that, you know, if you look at the portfolio overall in relation to AI, that, you know, we are uniquely positioned to where, you know, Zebra Technologies Corporation can position itself really to be the leading AI solutions provider for the frontline. And I say that in a couple of ways. One is that the Asset Visibility and Automation segment gives a digital voice to assets, to inventory, that is necessary to feed AI models if you are going to leverage those at the frontline of business. You have to give everything a digital voice and have visibility to be able to

to leverage the AI model.

The second thing is you need something to deliver the output of the AI models, what needs to be done. You need to be able to connect that information to workers. And the way you do that is through mobile devices and our SaaS offerings like communication, collaboration, task management combined together take the output of the model and allow a worker to drive a behavior or do something: put inventory on the shelf, move something from backroom to front of room, pick up a pallet and move it to the next location, that drives ultimately the outcome in your business. That gets you to be more effective and more efficient. So it plays a critical role across our whole portfolio. Specific to mobile computing, the idea of,

you know, our latest mobile devices certainly will support

memory, processing power, and others, and the software to support AI models on the device or in the cloud. And we are seeing, you know, customers move to those devices as their next generation devices, as they are beginning to refresh. So, yes, we are seeing that clearly AI will drive, you know, the upgrade of those devices ultimately. You know, higher ASPs on those devices with higher memory, and also will have an opportunity for us across the idea of Enablers and Blueprints and Companion we talked about to be able to drive AI software revenue for ourselves as well. Our next question comes from Piyush Avasthy of Citi.

Please go ahead.

Good morning, guys, and thanks for taking my questions.

Good morning. Good morning.

I think you mentioned the decline in gross margins due to lower service and software margins. Can we double click on software margin performance, like anything you want to call out? Is it just the investments that you guys are making that are pressuring the margins? And when we can expect that to reverse? And anything on the receptivity of the software offering that you are coming out with, like, how the customers are kind of, you know, buying or procuring those, that would be helpful.

Yeah. For sure. I think if you look at the real driver within the service and software margin impact, it is primarily, and obviously it represents the vast majority of the revenue, in the service portfolio and the just higher repair costs that we have seen over the past couple of quarters. Now, the good thing is the overall margin rate improved in the fourth quarter from where we were in Q3. But this is really due to the age of the installed base, and we are starting to see that play out in terms of driving the overall number of repairs. We expect to see that level out here as we go through the year and see the overall margin for the services and software to be flat, kind of look at it year on year throughout 2026. Specific to software, you know, the two real areas the teams are working on: one is a lot of energy and efforts going over the last couple years in unifying the platform, bringing together the architecture to ultimately lower the overall support cost that will improve margins as we go really into the back half of this year and into next, as some of that effort is starting to come to a closure in terms of transitioning customers to the unified platform. And then, like anything, then it is about scaling on that in terms of as revenue grows, getting the scale to drive gross margins further. So those are the two aspects. If you look at that line, it is really driven by service, but within software, a lot of work over the past couple years around the platform and unifying the platform, and we are getting close to the end of that activity, which then gives us some runway to improve margin as we move forward.

Gotcha. Helpful. And Americas was soft in Q4, and I understand that there were some really tough comps. Can you elaborate on the underlying demand environment and trends you are seeing in the region? And as you think of your 2026 guidance, based on conversations with your customers, how do you think Americas is contributing to your 2026 guidance?

Yeah. I think that I would say that overall, you know, we saw relative strength in fourth quarter in North America around small and midsized business. But as we talked about, cycling larger large order activity in T&L and retail in the fourth quarter. So I think we feel good about the pipeline of opportunities that is healthy in the business. I think it really is just cycling a compare. We did not see as many large deals, very large deals, in fourth quarter as, you know, we have seen in past years. Nate talked about that a little bit in the seasonality idea. So

that is really what it is about. We feel

we feel across North America that all vertical markets, product areas, we see no real challenges there other than a tough compare in fourth quarter. If you talk about the other regions, I would say return to growth in EMEA, really driven by strength in North and Central Europe. I would say double-digit growth we saw, you know, so strong growth in mobile computing, print, RFID, so broad-based. And we are seeing opportunities in Europe around retail with personal shopper refresh opportunities in new. So where the North America market is really

more

self-service checkout and kiosk, where, you know, Elo plays, the European market is a combination of that as well as self-scan, which is a large opportunity for us both in new customers and refresh opportunities. So those continue to move forward in EMEA. Asia Pacific saw strong growth, 13%.

Growth across most of the region.

Japan and India certainly were bright spots. Those are areas where we have been investing. Certainly, the amount of manufacturing investment happening in India. We changed our go-to-market model in Japan several years ago, continue to win opportunities in Japan. Latin America, strong growth in Latin America, broad-based. I would say, you know, Brazil and Mexico outperformed with large retail deployments, but broad-based growth across Latin America. So we are not concerned at all about North America. Really, it is just truly cycling a compare. And we feel good about broad-based growth across the regions and product areas as we enter 2026. The next question comes from James Andrew Ricchiuti of Needham and Company. Please go ahead.

Thanks. I know it is early. I am wondering what kind of assumptions are you baking in for the large project business this year. What kind of visibility do you have? It sounds like just based on what you are hearing and the concerns around memory that maybe these discussions are happening earlier.

I would say that, you know, given the installed base, right, certainly, Zebra Technologies Corporation’s installed base overall, these very large orders are really tied to refresh cycles and activity across our customer base. And that remains an attractive opportunity for us overall. We are assuming the same, you know, a similar level of refresh activity in 2026 that we saw in 2025. And I would say remember every customer's refresh cycle is different, right? It is really driven by things like supporting new applications, driving, you know, higher processing power or memory or new features like we just talked around on AI or new features like, you know, RFID being embedded in the devices. It is driven by, you know, obsolescence of OS or the security life cycle, it is driven by technology transitions, but everyone is on a different cycle. And I would say that, you know, when customers refresh, the opportunity for us is not just the refresh cycle, but they typically buy more devices because they are extending their use cases and putting devices more in the hands of more associates overall across all industries. When we look at things like retail, the refresh cycle has really normalized over the last several years and we are seeing some retailers spread their purchases over a longer time horizon. From a T&L customer perspective, I would say they refresh at a slower pace than retail, which is typically four to five years, driven by really the fact that the devices have higher durability and are using fewer applications than we see in retail.

But as you said, those discussions are,

you know, with large T&L customers are progressing. We are talking to them earlier about these refreshes, and the pipeline continues to grow for multiyear deployments that, you know, likely begin in 2027. So in 2026, we would see, you know, about the same level as we saw in 2025, but this is clearly an opportunity out there for us. And

we would see that, you know, as these conversations continue to progress, and progress earlier with challenges, things like memory, we get more and more visibility to time frame from our customers.

And you

mentioned RFID several times. What kind of growth rate are you assuming in the RFID business this year? And are you seeing more of the activity coming from the emerging areas like food or

the traditional areas logistics and

retail.

Yeah, we see 2026 high double-digit growth continuing in RFID. We had

a strong year over the last several years including 2025 and we see that continuing. The opportunities have really been broad-based all the way across the supply chain from retail to transportation and logistics to manufacturing, now opportunities in government. We are seeing, you know, clearly the move from retail apparel. We saw it move to broader merchandise inside retail. You mentioned fresh food inside grocery as a new opportunity in things like bakery and around the outside edge of the store, higher margin perishable items. We are seeing that opportunity there. Parcel within T&L remains a large opportunity. Quick-serve restaurants, you know, we think of automation always as, you know, but quick-serve restaurants are moving from pen and paper to RFID. You know, we are seeing healthcare and just broader track and trace across the supply chain. So I think that we are seeing broad-based growth. We have got number one share in fixed and handheld readers, we continue to have strength in our, we are the leaders in RFID printers, you know, across our labels business, we are seeing strength. So I think it is broad-based. I think we are continuing to see the adoption. It is why we are adding RFID capabilities to the majority of our new mobile computing devices is that customers continue to want to adopt RFID within their environment. So really broad-based and not driven by just one industry or segment, but, you know, across all the vertical markets we serve. The next question comes from Bradley Thomas Hewitt of Wolfe Research.

Please go ahead.

Good morning, guys. Thanks for fitting me in there.

Good morning, Brad. So curious how you see channel inventories as they stand today and

does the guide embed any meaningful changes in channel inventory levels as you progress through the year?

Right. No. We have seen channel, as we exit, we are in good shape. Pretty similar to what we saw at the end of last year, so no meaningful change. You definitely see variability quarter to quarter, just, you know, whether that is timing of deployments on their end, prepping for year-end, etcetera. So quarter to quarter, you see some variability, but I think as we look at the full year picture, no major changes in terms of days on hand, you know, measuring it on days on hand. So how much are they carrying on a daily basis? And we do not expect a material change in that as we go through the year.

Okay.

That is helpful. And now that the tariff situation seems to have stabilized a little bit overall, have you guys seen any change in customer willingness to go ahead with projects versus three months ago? And to what degree is any macro-driven change in customer sentiment baked into your 2026 outlook? Thank you.

I would say that, you know, customers were

on the retail side, you know, a bit concerned overall about just the secondary effect of tariffs as they have, you know, had to push that through, you know, on their inventory to their customers ultimately. But I think that we are really beyond that. That is all kind of flowed through their supply chains. And they have had to raise price in the places that they have. So I would say that, you know, again, these conversations with customers today, there has not been concerns of tariffs raised. There are always, you know, challenges. There may be future challenges around trade, but we do not see those as of today. The bigger challenge we talked about multiple times in the call is probably memory that we have, you know, we are going to mitigate in the year. So I think that, you know, I think tariffs have not factored into a lot of conversations with customers at this point. This concludes our question and answer session. I would like to turn the conference back over to Mr. Burns for any closing remarks.

I would like to thank our employees and

for delivering solid 2025 results. We certainly

as we look ahead, are focused on advancing our portfolio of solutions and driving profitable growth across our business. Thank you, everyone. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.