ZEBRA TECHNOLOGIES CORP

Zebra Technologies Corporation is a global leader in the Automatic Identification and Data Capture (AIDC) industry, a market consisting of mobile computing, data capture, radio frequency identification devices (RFID), thermal barcode printing, and other workflow automation products and services. The Company operates in 129 facilities with approximately 10,700 employees worldwide and provides its offerings globally through a direct sales force and an extensive network of over 10,000 channel partners, operating in 179 countries. End-users of its offerings include those in retail and e-commerce, manufacturing, transportation and logistics, healthcare, hospitality, public sector, and other industries.

The Company competes in a highly competitive environment. Key competitors named in the filing include Avery Dennison, Entrust, Honeywell, Sato, Toshiba TEC, and TSC in barcode and card printing; Datalogic, Honeywell, and Newland in data capture, fixed industrial scanning, and machine vision; Datalogic, Honeywell, Panasonic, and Urovo in mobile computing; Acrelec, Diebold Nixdorf, HP, Toshiba TEC, and VeriFone in point-of-sale, self-checkout, payment solutions, self-service kiosks, and interactive displays; Chainway, Impinj, Invengo, JADAK, Rodinbell, TSC, and Ubisense in RFID and RTLS offerings; and software providers to the retail industry in workflow optimization solutions. The Company believes its competitive strengths include being an industry leader focused on digitizing and automating operations, high barriers to entry due to long-standing relationships with end-users and an extensive network of channel partners, commitment to innovation and deep industry-specific expertise, a highly diversified business mix across business segments, end markets and geographies, global reach and brand, and scale advantages including what it believes is the largest installed base of offerings compared to other companies in its industry.

The Company generates revenue through the design, manufacture, and sale of a broad range of AIDC offerings, including mobile computers, barcode scanners and imagers, RFID readers, specialty printers for barcode labeling and personal identification, real-time location systems (RTLS), related accessories and supplies such as labels and other consumables, and related software applications. It also provides machine vision and self-serve touchscreen solutions, a full range of services including maintenance, technical support, repair, managed and professional services, as well as cloud-based software subscriptions. Revenue is generated from both tangible products and services and software, with the Company experiencing some seasonality in sales depending upon the geographic region and industry served. The Company sells its offerings primarily through distributors (two-tier distribution), value added resellers (VARs), independent software vendors (ISVs), direct marketers, and OEMs, and its software offerings primarily through its direct sales force.

The Company operates through two reportable segments: Connected Frontline (CF) and Asset Visibility and Automation (AVA). The CF segment is focused on unifying teams, customers, and AI agents to deliver enhanced frontline experiences, with principal product categories including mobile computing, Elo point-of-sale solutions, self-service kiosks and interactive touchscreen displays, workflow optimization solutions, and related services. For the year ended December 31, 2025, the CF segment reported total Net sales of $2,960 million ¹, with tangible products contributing $2,156 million ² and services and software contributing $804 million ³. The AVA segment provides solutions that track critical assets and automate workflows, with principal product categories including barcode and card printing, data capture, fixed industrial scanning and machine vision, RFID and RTLS offerings, supplies and sensors, and related services. For the year ended December 31, 2025, the AVA segment reported total Net sales of $2,436 million ⁴, with tangible products contributing $2,262 million ⁵ and services and software contributing $174 million ⁶.

During the period, the Company completed two significant acquisitions. On September 30, 2025, the Company acquired Elo Holdings, Inc. (Elo) for $1,303 million ⁷ in cash, net of Elo's cash on-hand, expanding its portfolio of self-service and consumer-facing workflow offerings, with operating results included in the CF segment. On February 28, 2025, the Company acquired Photoneo for $62 million ⁸ in cash, net of Photoneo's cash on-hand, expanding its machine vision offerings across several industries, with operating results included in the AVA segment. In the fourth quarter of 2025, the Company announced its intention to dispose of or exit its robotics automation solutions business, incurring approximately $55 million ⁹ in one-time costs, principally consisting of long-lived asset impairments of $45 million ¹⁰, including an intangible asset impairment of $34 million ¹¹, a right-of-use lease asset impairment of $8 million ¹², and property, plant and equipment impairment of $3 million ¹³. Also in the fourth quarter of 2025, the Company committed to the 2025 Productivity Plan, with total cost estimated to be approximately $35-40 million ¹⁴, including $21 million ¹⁵ recognized in the fourth quarter of 2025. The Company repurchased $587 million ¹⁶ of common shares during the year, including $303 million ¹⁷ in the fourth quarter.

For the fiscal year ended December 31, 2025, total Net sales were $5,396 million ¹⁸ compared to $4,981 million ¹⁹ in the prior year, representing an increase of 8.3% ²⁰. Gross profit was $2,593 million ²¹ compared to $2,413 million ²² in the prior year, with gross margin decreasing to 48.1% ²³ from 48.4% ²⁴. Operating income was $700 million ²⁵ compared to $742 million ²⁶ in the prior year. Net income was $419 million ²⁷, or $8.18 ²⁸ per diluted share, compared to Net income of $528 million ²⁹, or $10.18 ³⁰ per diluted share in the prior year. Net cash provided by operating activities was $917 million ³¹ compared to $1,013 million ³² in the prior year.

The Company plans to drive revenue growth by continuing to outpace competition in its core businesses, including mobile computing, data capture, thermal barcode printing, and services, by leveraging its broad portfolio of offerings and product innovation and capitalizing on technology transitions occurring in the industry, including transitions to WiFi 7, the 5th generation mobile network (5G) and Android operating system in mobile computing and transitions in data capture to technologies involving 2D and 3D imaging and RFID. The Company also plans to leverage its market-leading installed base to accelerate growth in attach-oriented offerings, including services, supplies and sensors, accessories, and software applications. Additionally, the Company plans to drive growth through expansion, organically and inorganically, in adjacent market segments that are synergistic with its core markets, focusing specifically on segments where its offerings, workflow expertise, and customer and industry relationships enable it to provide significant value to end-users.

The Company expects annualized pre-tax operating costs savings of at least $20 million ³³ from the 2025 Productivity Plan actions, net of re-investment into advancing the Company's AI product portfolio, reorganizing its sales force, and absorbing increased employee-related costs. The total cost under the 2025 Productivity Plan is estimated to be approximately $35-40 million ³⁴ and is expected to be substantially completed in 2026.

The Company expects to spend approximately $85 million to $95 million ³⁵ on capital expenditures in 2026. The Company also expects to continue to improve profitability and cash flow generation through operational execution and increased productivity derived from continuous business process improvement, supply chain resiliency, cost management, and focus on working capital efficiency.

Research and development expenditures for the year ended December 31, 2025 were $593 million ³⁶, or 11.0% ³⁷ of Net sales. The Company expects to continue to invest in technologies that connect the frontline, provide real-time visibility, and enable automation. On February 4, 2026, the Company's Board of Directors authorized additional share repurchases of up to $1 billion ³⁸ of outstanding shares of common stock. Subsequent to the year ended December 31, 2025, the Company repurchased 401,649 ³⁹ shares of common stock for approximately $100 million ⁴⁰ through February 5, 2026. In October 2025, the Company announced its commitment to repurchase $500 million ⁴¹ of shares over the following twelve months, of which $403 million ⁴² had already been repurchased as of February 5, 2026. The Company has not declared any cash dividends since its initial public offering in 1991 and currently does not anticipate paying any cash dividends in the foreseeable future.

The Company faces headwinds from the impact of trade policy changes in the United States and corresponding actions by other countries, as the Company currently imports a significant percentage of its offerings into the U.S., and international trade disputes and increased tariffs between the U.S. and other countries, including China, could negatively impact the Company's financial performance. The Company also faces exposure to foreign exchange rate fluctuations on cross-border transactions and the translation of local currency results into U.S. dollars, with significant changes in foreign exchange rates, particularly the Euro, British Pound Sterling and Czech Koruna, having had in the past and could continue to cause fluctuations in reported results. Geopolitical turmoil, including regional conflicts, terrorism and war, could limit the Company's ability to sell its offerings and could have an adverse impact on its business and results of operations.

The Company faces material risks from its substantial operations and sales outside the U.S., with shipments to non-U.S. customers expected to continue to account for a material portion of Net sales, and from its reliance on third-party contract manufacturing services with non-U.S. production and assembly operations, many of which are concentrated in China, exposing it to risks including fluctuating foreign currency rates, trade policy changes such as tariffs, and geopolitical turmoil. The Company's significant indebtedness of $2,511 million ⁴³ as of December 31, 2025 could adversely affect its business by impairing its ability to obtain additional financing, making it more vulnerable to economic downturns, and requiring it to dedicate a substantial portion of its cash flow from operations to debt service. The Company faces risks related to the integration of its significant acquisition of Elo for $1,303 million ⁴⁴, which substantially increased goodwill and other intangible assets that could become impaired if expected operating results and cash flows are not achieved. The Company is also exposed to risks from its reliance on a limited number of significant customers, with three customers individually accounting for more than 10% of Net sales, including Customer A at 29% ⁴⁵, Customer B at 15% ⁴⁶, and Customer C at 15% ⁴⁷ for the year ended December 31, 2025.

Management's message emphasizes the Company's vision for frontline operations everywhere to be digitized, automated and intelligent, and its strategy to leverage its market leadership position and innovation to profitably grow its core business, advance its vision through end-to-end solutions that deliver asset visibility and intelligent operations, increase its opportunity for growth through expansion in adjacent market segments, and enhance financial strength and flexibility. Key strategic priorities emphasized for the period ahead include capitalizing on technology transitions such as WiFi 7, 5G, and Android in mobile computing, and transitions in data capture to 2D and 3D imaging and RFID; leveraging the market-leading installed base to accelerate growth in attach-oriented offerings; and expanding organically and inorganically in adjacent market segments.