Zebra Technologies (NASDAQ: ZBRA) reported Q2 EPS of $2.41, $0.13 better than the analyst estimate of $2.28. Revenue for the quarter came in at $956 million versus the consensus estimate of $939.9 million.

Second-Quarter Financial Highlights

• Second-quarter net sales of $956 million; year-over-year decrease of 12.9%
• Net income of $100 million and net income per diluted share of $1.85, year-over-year decreases of 19.4% and 18.1%, respectively
• Non-GAAP diluted EPS decreased 20.2% year-over-year to $2.41
• Adjusted EBITDA decreased 24.9% year-over-year to $175 million

"In Q2 our teams remained agile and executed very well through the global pandemic. It has been inspiring for me to see our employees rally to keep the business, and each other, moving forward. We delivered on our customer commitments and achieved sales and EPS above the midpoint of our outlook. Although freight costs were higher than expected, we thoughtfully managed discretionary costs across the company to preserve profitability and cash flow,” said Anders Gustafsson, Chief Executive Officer of Zebra Technologies. “We entered Q3 with a solid order backlog and encouraging pipeline of large orders. With that said, we have clearly been in a recessionary enterprise spending environment which is having a disproportionate impact on smaller customers. We believe our sales bottomed in Q2 and second half trends will improve. We continue to be very optimistic regarding our longer-term prospects as secular trends to digitize and automate workflows accelerate as a result of the pandemic."

GUIDANCE:

Zebra Technologies sees Q3 2020 EPS of $2.65-$2.95, versus the consensus of $2.69.

The company expects third-quarter 2020 net sales to decrease approximately 3% to 7% from the third quarter of 2019 due to the continued recessionary global environment from COVID-19. This expectation includes an approximately 50 basis point negative impact from foreign currency translation.

Adjusted EBITDA margin for the third quarter of 2020 is expected to be approximately 19%, which includes approximately $9 million of premium freight expense. Non-GAAP earnings per diluted share are expected to be in the range of $2.65 to $2.95. This assumes an adjusted effective tax rate of approximately 16%.

Full-Year 2020

The company continues to expect net sales, adjusted EBITDA margin, and free cash flow to be lower than last year, which we have been addressing through cost actions to protect profitability and cash flow. The company expects to see an improvement in sales trends in the second half of the year.

The company has substantially completed its initiative to diversify the sourcing of its U.S. volumes out of China, despite modest delays from COVID-19 in southeast Asia. In 2020, these actions are expected to result in up to $20 million of one-time pre-tax charges plus up to $10 million of capital expenditures.

The outlook amounts provided above do not include any projected results from the proposed acquisition of Reflexis Systems, Inc., which is expected to close by early in the fourth quarter of 2020.

For earnings history and earnings-related data on Zebra Technologies (ZBRA) click here.