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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 2024
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    
For the transition period from                                          to                                         
Commission File Number: 000-19406
Zebra Technologies Corporation
(Exact name of registrant as specified in its charter)
Delaware36-2675536
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
3 Overlook Point, Lincolnshire, IL 60069
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (847) 634-6700
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of exchange on which registered
Class A Common Stock, par value $.01 per shareZBRAThe NASDAQ Stock Market, LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 Large accelerated filer☒Accelerated filer☐
 Non-accelerated filer☐Smaller reporting company☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐   No  ☒
As of July 23, 2024, there were 51,580,365 shares of Class A Common Stock, $.01 par value, outstanding.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
QUARTER ENDED JUNE 29, 2024
TABLE OF CONTENTS
 
  PAGE
Item 1.
Item 2.
Item 3.
Item 4.
Item 5.
Item 1.
Item 1A.
Item 2.
Item 6.
2
PART I - FINANCIAL INFORMATION
 
Item 1.Consolidated Financial Statements
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
June 29,
2024		December 31,
2023
 (Unaudited)
Assets
Current assets:
Cash and cash equivalents$411 $137 
Accounts receivable, net of allowances for doubtful accounts of $1 each as of June 29, 2024 and December 31, 2023
701 521 
Inventories, net678 804 
Income tax receivable41 63 
Prepaid expenses and other current assets122 147 
Total Current assets1,953 1,672 
Property, plant and equipment, net297 309 
Right-of-use lease assets159 169 
Goodwill3,894 3,895 
Other intangibles, net476 527 
Deferred income taxes469 438 
Other long-term assets242 296 
Total Assets$7,490 $7,306 
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt$89 $173 
Accounts payable551 456 
Accrued liabilities426 504 
Deferred revenue447 458 
Income taxes payable9 7 
Total Current liabilities1,522 1,598 
Long-term debt2,080 2,047 
Long-term lease liabilities145 152 
Deferred income taxes66 67 
Long-term deferred revenue298 312 
Other long-term liabilities92 94 
Total Liabilities4,203 4,270 
Stockholders’ Equity:
Preferred stock, $.01 par value; authorized 10,000,000 shares; none issued
— — 
Class A common stock, $.01 par value; authorized 150,000,000 shares; issued 72,151,857 shares
1 1 
Additional paid-in capital633 615 
Treasury stock at cost, 20,581,866 and 20,772,995 shares as of June 29, 2024 and December 31, 2023, respectively
(1,855)(1,858)
Retained earnings4,560 4,332 
Accumulated other comprehensive loss(52)(54)
Total Stockholders’ Equity3,287 3,036 
Total Liabilities and Stockholders’ Equity$7,490 $7,306 
See accompanying Notes to Consolidated Financial Statements.
3
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share data)
(Unaudited)
 
 Three Months EndedSix Months Ended
 June 29,
2024		July 1,
2023		June 29,
2024		July 1,
2023
Net sales:
Tangible products$983 $986 $1,912 $2,156 
Services and software234 228 480 463 
Total Net sales1,217 1,214 2,392 2,619 
Cost of sales:
Tangible products515 522 1,013 1,140 
Services and software113 111 227 231 
Total Cost of sales628 633 1,240 1,371 
Gross profit589 581 1,152 1,248 
Operating expenses:
Selling and marketing150 146 298 307 
Research and development146 130 284 276 
General and administrative97 69 178 168 
Amortization of intangible assets25 26 51 52 
Acquisition and integration costs1 2 2 2 
Exit and restructuring costs3 14 13 24 
Total Operating expenses422 387 826 829 
Operating income167 194 326 419 
Other income (loss), net:
Foreign exchange (loss) gain— (5)3 (4)
Interest expense, net(23)(16)(40)(53)
Other expense, net(8)(2)(11)(6)
Total Other expense, net(31)(23)(48)(63)
Income before income tax 136 171 278 356 
Income tax expense23 27 50 62 
Net income$113 $144 $228 $294 
Basic earnings per share$2.19 $2.80 $4.43 $5.72 
Diluted earnings per share$2.17 $2.78 $4.40 $5.68 
See accompanying Notes to Consolidated Financial Statements.
4
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
 Three Months EndedSix Months Ended
 June 29,
2024		July 1,
2023		June 29,
2024		July 1,
2023
Net income$113 $144 $228 $294 
Other comprehensive income (loss), net of tax:
Changes in unrealized gains on sales hedging1 4 10 1 
Foreign currency translation adjustment(3)2 (8)5 
Comprehensive income$111 $150 $230 $300 
See accompanying Notes to Consolidated Financial Statements.
5
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions, except share data)
(Unaudited)
Class A Common Stock SharesClass A Common Stock ValueAdditional Paid-in CapitalTreasury StockRetained EarningsAccumulated Other Comprehensive LossTotal
Balance at December 31, 202351,378,862 $1 $615 $(1,858)$4,332 $(54)$3,036 
Issuances of treasury shares related to share-based compensation plans, net of forfeitures21,312 — (3)— — — (3)
Shares withheld to fund withholding tax obligations related to share-based compensation plans(206)— — — — — — 
Share-based compensation— — 17 — — — 17 
Net income— — — — 115 — 115 
Changes in unrealized gains and losses on sales hedging (net of income taxes)— — — — — 9 9 
Foreign currency translation adjustment— — — — — (5)(5)
Balance at March 30, 202451,399,968 $1 $629 $(1,858)$4,447 $(50)$3,169 
Issuances of treasury shares related to share-based compensation plans, net of forfeitures170,023 — (27)3 — — (24)
Share-based compensation— — 31 — — — 31 
Net income— — — — 113 — 113 
Changes in unrealized gains and losses on sales hedging (net of income taxes)— — — — — 1 1 
Foreign currency translation adjustment— — — — — (3)(3)
Balance at June 29, 202451,569,991 $1 $633 $(1,855)$4,560 $(52)$3,287 

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Class A Common Stock SharesClass A Common Stock ValueAdditional Paid-in CapitalTreasury StockRetained EarningsAccumulated Other Comprehensive LossTotal
Balance at December 31, 202251,451,500 $1 $561 $(1,799)$4,036 $(66)$2,733 
Issuances of treasury shares related to share-based compensation plans, net of forfeitures29,784 — 5 — — — 5 
Shares withheld to fund withholding tax obligations related to share-based compensation plans(504)— — — — — — 
Share-based compensation— — 18 — — — 18 
Repurchase of common stock(55,811)— — (15)— — (15)
Net income— — — — 150 — 150 
Changes in unrealized gains and losses on sales hedging (net of income taxes)— — — — — (3)(3)
Foreign currency translation adjustment— — — — — 3 3 
Balance at April 1, 202351,424,969 $1 $584 $(1,814)$4,186 $(66)$2,891 
Issuances of treasury shares related to share-based compensation plans, net of forfeitures75,271 — (6)1 — — (5)
Shares withheld to fund withholding tax obligations related to share-based compensation plans(28,795)— — (9)— — (9)
Share-based compensation— — 2 — — — 2 
Repurchase of common stock(138,508)— — (37)— — (37)
Net income— — — — 144 — 144 
Changes in unrealized gains and losses on sales hedging (net of income taxes)— — — — — 4 4 
Foreign currency translation adjustment— — — — — 2 2 
Balance at July 1, 202351,332,937 $1 $580 $(1,859)$4,330 $(60)$2,992 

See accompanying Notes to Consolidated Financial Statements.
7
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Six Months Ended
June 29,
2024		July 1,
2023
Cash flows from operating activities:
Net income$228 $294 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization85 88 
Share-based compensation48 20 
Deferred income taxes(36)(29)
Unrealized gain on forward interest rate swaps(31)(11)
Other, net7 2 
Changes in operating assets and liabilities:
Accounts receivable, net(185)105 
Inventories, net125 (3)
Other assets(3)(22)
Accounts payable98 (273)
Accrued liabilities23 (107)
Deferred revenue(25)16 
Income taxes38 (116)
Settlement liability(45)(90)
Cash receipts on forward interest rate swaps86 12 
Other operating activities— 4 
Net cash provided by (used in) operating activities413 (110)
Cash flows from investing activities:
Purchases of property, plant and equipment(24)(34)
Proceeds from sale of short-term investments2 — 
Purchases of long-term investments(3)(1)
Net cash used in investing activities(25)(35)
Cash flows from financing activities:
Payment of debt issuance costs, extinguishment costs and discounts(9)— 
Payments of debt(694)(183)
Proceeds from issuance of debt651 368 
Payments for repurchases of common stock— (52)
Net payments related to share-based compensation plans(27)(9)
Change in unremitted cash collections from servicing factored receivables(38)(27)
Other financing activities2 — 
Net cash (used in) provided by financing activities(115)97 
Effect of exchange rate changes on cash and cash equivalents, including restricted cash— (1)
Net increase (decrease) in cash and cash equivalents, including restricted cash273 (49)
Cash and cash equivalents, including restricted cash, at beginning of period138 117 
Cash and cash equivalents, including restricted cash, at end of period$411 $68 
Less restricted cash, included in Prepaid expenses and other current assets— — 
Cash and cash equivalents at end of period$411 $68 
Supplemental disclosures of cash flow information:
Income taxes paid$43 $212 
Interest (received) paid inclusive of forward interest rate swaps$(17)$50 
Certain prior period amounts included in Net cash provided by (used in) operating activities have been reclassified to conform with the current period presentation.
See accompanying Notes to Consolidated Financial Statements.

8
ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 Description of Business and Basis of Presentation

Zebra Technologies Corporation and its subsidiaries (“Zebra” or the “Company”) is a global leader providing innovative Enterprise Asset Intelligence (“EAI”) solutions in the automatic identification and data capture solutions industry. We design, manufacture, and sell a broad range of products and solutions, including cloud-based software subscriptions, that capture and move data. We also provide a full range of services, including maintenance, technical support, repair, managed and professional services. End-users of our products, solutions and services include those in retail and e-commerce, manufacturing, transportation and logistics, healthcare, public sector, and other industries. We provide our products, solutions and services globally through a direct sales force and an extensive network of channel partners.

Management prepared these unaudited interim consolidated financial statements according to the rules and regulations of the Securities and Exchange Commission for interim financial information and notes. As permitted under Article 10 of Regulation S-X and the instructions of Form 10-Q, these consolidated financial statements do not include all the information and notes required by United States Generally Accepted Accounting Principles (“GAAP”) for complete financial statements, although management believes that the disclosures made are adequate to make the information not misleading. These interim financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

In the opinion of the Company, these interim financial statements include all adjustments (of a normal, recurring nature) necessary to fairly present its Consolidated Balance Sheet as of June 29, 2024, the Consolidated Statements of Operations, Comprehensive Income and Stockholders’ Equity for the three and six months ended June 29, 2024 and July 1, 2023, and the Consolidated Statement of Cash Flows for the six months ended June 29, 2024 and July 1, 2023. These results, however, are not necessarily indicative of the results expected for the full fiscal year ending December 31, 2024.

Note 2 Significant Accounting Policies

For a discussion of our significant accounting policies, see Note 2, Significant Accounting Policies within Part II, Item 8. “Financial Statements and Supplementary Data” in the Annual Report on Form 10-K for the year ended December 31, 2023. There have been no changes to our significant accounting policies since our Annual Report on Form 10-K for the year ended December 31, 2023.

9
Note 3 Revenues

The Company recognizes revenue to depict the transfer of goods, solutions or services to a customer at an amount that reflects the consideration which it expects to receive for providing those goods, solutions or services.

Revenues for tangible products are generally recognized upon shipment, whereas revenues for services and solution offerings are generally recognized over time by using an output or time-based method, assuming all other criteria for revenue recognition have been met. Revenues for software are recognized either upon delivery or over time using a time-based method, depending on how control is transferred to the customer. In cases where a bundle of products, services, solutions and/or software are delivered to the customer, judgment is required to select the method of progress which best reflects the transfer of control.

Disaggregation of Revenue
The following table presents our Net sales disaggregated by product category for each of our segments (in millions):

Three Months Ended
June 29, 2024July 1, 2023
SegmentTangible ProductsServices and SoftwareTotalTangible ProductsServices and SoftwareTotal
AIT$368 $29 $397 $432 $27 $459 
EVM615 205 820 554 201 755 
Total$983 $234 $1,217 $986 $228 $1,214 
Six Months Ended
June 29, 2024July 1, 2023
SegmentTangible ProductsServices and SoftwareTotalTangible ProductsServices and SoftwareTotal
AIT$733 $56 $789 $927 $54 $981 
EVM1,179 424 1,603 1,229 409 1,638 
Total$1,912 $480 $2,392 $2,156 $463 $2,619 

In addition, refer to Note 17, Segment Information & Geographic Data for Net sales to customers by geographic region.

Performance Obligations
The Company’s remaining performance obligations relate to repair and support services, as well as software solutions. The aggregated transaction price allocated to remaining performance obligations for arrangements with an original term exceeding one year was $1,243 million and $1,127 million, inclusive of deferred revenue, as of June 29, 2024 and December 31, 2023, respectively. On average, remaining performance obligations as of June 29, 2024 and December 31, 2023 are expected to be recognized over a period of approximately two years.

Contract Balances
Progress on satisfying performance obligations under contracts with customers related to billed revenues is reflected on the Consolidated Balance Sheets in Accounts receivable, net. Progress on satisfying performance obligations under contracts with customers related to unbilled revenues (“contract assets”) is reflected on the Consolidated Balance Sheets as Prepaid expenses and other current assets for revenues expected to be billed within the next twelve months, and Other long-term assets for revenues expected to be billed thereafter. The total contract asset balances were $16 million as of June 29, 2024 and also as of December 31, 2023. These contract assets result from timing differences between billing and satisfying performance obligations, as well as the impact from the allocation of the transaction price among performance obligations for contracts that include multiple performance obligations. Contract assets are evaluated for impairment and no impairment losses have been recognized during the three and six months ended June 29, 2024 and July 1, 2023, respectively.

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Deferred revenue on the Consolidated Balance Sheets consists of payments and billings in advance of our performance. The combined short-term and long-term deferred revenue balances were $745 million and $770 million as of June 29, 2024 and December 31, 2023, respectively. During the three and six months ended June 29, 2024, the Company recognized $121 million and $267 million in revenue, which was previously included in the beginning balance of deferred revenue as of December 31, 2023. During the three and six months ended July 1, 2023, the Company recognized $114 million and $249 million in revenue, which was previously included in the beginning balance of deferred revenue as of December 31, 2022.

Note 4 Inventories

The categories of Inventories, net are as follows (in millions): 
 June 29,
2024		December 31,
2023
Raw materials (1)
$304 $403 
Work in process4 4 
Finished goods370 397 
Total Inventories, net$678 $804 

(1) Raw material inventories primarily consist of product components as well as supplies used in repair operations.

Note 5 Investments

The carrying value of the Company’s long-term investments, which are included in Other long-term assets on the Consolidated Balance Sheets, was $110 million and $113 million as of June 29, 2024 and December 31, 2023.

During the six months ended June 29, 2024 and July 1, 2023, the Company paid $3 million and $1 million, respectively, for the purchase of long-term investments. Net gains and losses related to the Company’s long-term investments are included within Other expense, net on the Consolidated Statements of Operations. The Company recognized net losses of $6 million during the three and six months ended June 29, 2024. Net gains and losses were not significant for the three and six months ended July 1, 2023.

Note 6 Exit and Restructuring Costs
Total charges associated with the 2022 Productivity Plan, which was substantially completed in the current quarter, and the U.S. voluntary retirement plan, which was completed in 2023, were $123 million incurred to date, including $3 million and $13 million recorded during the three and six months ended June 29, 2024. The costs of these plans are classified within Exit and restructuring on the Consolidated Statements of Operations. The Company’s remaining payment obligations of $6 million, are reflected within Accrued liabilities on the Consolidated Balance Sheets.

The Company’s liability associated with Exit and restructuring activities are:

Balance as of December 31, 2023$22 
Exit and restructuring charges13
Non-cash utilization(3)
Cash payments(26)
Balance as of June 29, 2024$6 


Note 7 Fair Value Measurements

Financial assets and liabilities are measured using inputs from three levels of the fair value hierarchy in accordance with Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into the following three broad levels:
•Level 1: Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs (e.g. U.S. Treasuries and money market funds).
11
•Level 2: Observable prices that are based on inputs not quoted in active markets but corroborated by market data.
•Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs. In addition, the Company considers counterparty credit risk in the assessment of fair value.
The Company’s financial assets and liabilities carried at fair value as of June 29, 2024, are classified below (in millions):
 Level 1Level 2Level 3Total
Assets:
Foreign exchange contracts (1)
$2 $8 $— $10 
Investments related to the deferred compensation plan41 — — 41 
Total Assets at fair value$43 $8 $— $51 
Liabilities:
Liabilities related to the deferred compensation plan$41 $— $— $41 
Total Liabilities at fair value$41 $— $— $41 
The Company’s financial assets and liabilities carried at fair value as of December 31, 2023, are classified below (in millions):
Level 1Level 2Level 3Total
Assets:
Forward interest rate swap contracts (2)
$— $83 $— $83 
Investments related to the deferred compensation plan41 — — 41 
Total Assets at fair value$41 $83 $— $124 
Liabilities:
Foreign exchange contracts (1)
$1 $6 $— $7 
Forward interest rate swap contracts (2)
— 28 — 28 
Liabilities related to the deferred compensation plan41 — — 41 
Total Liabilities at fair value$42 $34 $— $76 

(1)The fair value of the foreign exchange contracts is calculated as follows:
•Fair value of forward contracts associated with forecasted sales hedges is calculated using the period-end exchange rate adjusted for current forward points.
•Fair value of hedges against net assets denominated in foreign currencies is calculated at the period-end exchange rate adjusted for current forward points unless the hedge has been traded but not settled at period-end (Level 2). If this is the case, the fair value is calculated at the rate at which the hedge is being settled (Level 1).

(2)The fair value of forward interest rate swaps is based upon a valuation model that uses relevant observable market inputs at the quoted intervals, such as forward yield curves, and is adjusted for the Company’s credit risk and the interest rate swap terms.

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Note 8 Derivative Instruments

In the normal course of business, the Company is exposed to global market risks, including the effects of changes in foreign currency exchange rates and interest rates. The Company uses derivative instruments to manage its exposure to such risks and may elect to designate certain derivatives as hedging instruments under ASC Topic 815, Derivatives and Hedging (“ASC 815”). The Company formally documents all relationships between designated hedging instruments and hedged items as well as its risk management objectives and strategies for undertaking hedge transactions. The Company does not hold or issue derivatives for trading or speculative purposes.

In accordance with ASC 815, the Company recognizes derivative instruments as either assets or liabilities on the Consolidated Balance Sheets and measures them at fair value. The following table presents the fair value of its derivative instruments (in millions):
Asset (Liability)
Fair Values as of
Balance Sheets ClassificationJune 29,
2024		December 31,
2023
Derivative instruments designated as hedges:
    Foreign exchange contractsPrepaid expenses and other current assets$8 $— 
    Foreign exchange contractsAccrued liabilities— (6)
Total derivative instruments designated as hedges$8 $(6)
Derivative instruments not designated as hedges:
    Foreign exchange contractsPrepaid expenses and other current assets$2 $— 
    Forward interest rate swapsPrepaid expenses and other current assets— 34 
    Forward interest rate swapsOther long-term assets— 49 
    Foreign exchange contractsAccrued liabilities— (1)
    Forward interest rate swapsAccrued liabilities— (12)
    Forward interest rate swapsOther long-term liabilities— (16)
Total derivative instruments not designated as hedges$2 $54 
Total net derivative asset$10 $48 
The following table presents the net gains (losses) from changes in fair values of derivatives that are not designated as hedges (in millions):
Gains (Losses) Recognized in Income
 Three Months EndedSix Months Ended
Statements of Operations ClassificationJune 29,
2024		July 1,
2023		June 29,
2024		July 1,
2023
Derivative instruments not designated as hedges:
Foreign exchange contractsForeign exchange (loss) gain$1 $1 $2 $(4)
Forward interest rate swapsInterest expense, net11 18 31 11 
Total net gain recognized in income$12 $19 $33 $7 

Activities related to derivative instruments are reflected within Net cash provided by (used in) operating activities on the Consolidated Statements of Cash Flows.

13
Interest Rate Risk Management
The Company is exposed to market risk associated with interest rate payments on its borrowings under a term loan (“Term Loan A”), Revolving Credit Facility, and Receivables Financing Facilities, which bear interest at variable rates plus applicable margins. The Company manages its exposure to changes in interest rates by issuing both fixed and variable rate borrowings as well as utilizing interest rate swaps to economically hedge interest rate exposure based on current and projected market conditions.

In the current quarter, the Company terminated all of its interest rate swap agreements, none of which were designated as hedges, resulting in a $77 million cash receipt that is classified within Cash flows from operating activities on the Consolidated Statements of Cash Flows. Total cash receipts for the six months ended June 29, 2024 were $86 million. See Note 9, Long-Term Debt for further details related to the Company’s borrowings and interest rate exposure.

Credit and Market Risk Management
Financial instruments, including derivatives, expose the Company to counterparty credit risk of nonperformance and to market risk related to currency exchange rate and interest rate fluctuations. The Company manages its exposure to counterparty credit risk by establishing minimum credit standards, diversifying its counterparties, and monitoring its concentrations of credit. The Company’s counterparties are commercial banks with expertise in derivative financial instruments. The Company evaluates the impact of market risk on the fair value and cash flows of its derivative and other financial instruments by considering reasonably possible changes in interest rates and currency exchange rates. The Company continually monitors the creditworthiness of the customers to which it grants credit terms in the normal course of business. The terms and conditions of the Company’s credit policies are designed to mitigate concentrations of credit risk.

The Company’s master netting and other similar arrangements with the respective counterparties allow for net settlement under certain conditions, which are designed to reduce credit risk by permitting net settlement with the same counterparty. We present the assets and liabilities of our derivative financial instruments, for which we have net settlement agreements in place, on a net basis on the Consolidated Balance Sheets. If the derivative financial instruments had been presented gross on the Consolidated Balance Sheets, the asset and liability positions would have been unchanged as of June 29, 2024 and increased by $1 million as of December 31, 2023.

Foreign Currency Exchange Risk Management
The Company conducts business on a multinational basis in a variety of foreign currencies. Exposure to market risk for changes in foreign currency exchange rates arises primarily from Euro-denominated external revenues, cross-border financing activities between subsidiaries, and foreign currency denominated monetary assets and liabilities. The Company manages its objective of preserving the economic value of non-functional currency denominated cash flows by initially hedging transaction exposures with natural offsets and, once these opportunities have been exhausted, through foreign exchange forward and option contracts, as deemed appropriate.

The Company manages the exchange rate risk of anticipated Euro-denominated sales using forward contracts, which typically mature within twelve months of execution. The Company designates these derivative contracts as cash flow hedges. Unrealized gains and losses on these contracts are deferred in Accumulated other comprehensive income (loss) (“AOCI”) on the Consolidated Balance Sheets until the contract is settled and the hedged sale is realized. The realized gain or loss is then recorded as an adjustment to Net sales on the Consolidated Statements of Operations. Realized amounts reclassified to Net sales were $5 million of gains and $7 million of losses for the three months ended June 29, 2024 and July 1, 2023, respectively. Realized amounts reclassified to Net sales were $6 million of gains and $10 million of losses for the six months ended June 29, 2024 and July 1, 2023, respectively. As of June 29, 2024 and December 31, 2023, the notional amounts of the Company’s foreign exchange cash flow hedges were €569 million and €485 million, respectively. The Company has reviewed its cash flow hedges for effectiveness and determined that they are highly effective.

The Company uses forward contracts, which are not designated as hedging instruments, to manage its exposures related to net assets denominated in foreign currencies. These forward contracts typically mature within one month after execution. Monetary gains and losses on these forward contracts are recorded in income and are generally offset by the transaction gains and losses related to their net asset positions. The notional values and the net fair values of these outstanding contracts were as follows (in millions):
14
 June 29,
2024		December 31,
2023
Notional balance of outstanding contracts:
British Pound/U.S. Dollar£3 £11 
Euro/U.S. Dollar€124 €80 
Euro/Czech Koruna€16 €17 
Japanese Yen/U.S. Dollar¥366 ¥685 
Singapore Dollar/U.S. DollarS$22 S$14 
Mexican Peso/U.S. DollarMex$164 Mex$144 
Polish Zloty/U.S. Dollarzł28 zł116 
Net fair value of assets (liabilities) of outstanding contracts$2 $(1)

Note 9 Long-Term Debt

The following table shows the carrying value of the Company’s debt (in millions):
June 29,
2024		December 31,
2023
Term Loan A$1,575 $1,684 
Senior Notes500 — 
Revolving Credit Facility— 413 
Receivables Financing Facilities108 129 
Total debt$2,183 $2,226 
Less: Debt issuance costs(11)(2)
Less: Unamortized discounts(3)(4)
Less: Current portion of debt(89)(173)
Total long-term debt$2,080 $2,047 

As of June 29, 2024, the future maturities of debt are as follows (in millions):
2024 (6 months remaining)$89 
2025— 
202688 
20271,506 
2028— 
Thereafter500 
Total future maturities of debt$2,183 
All borrowings as of June 29, 2024 were denominated in U.S. Dollars.
The estimated fair value of the Company’s debt approximated $2.2 billion as of both June 29, 2024 and December 31, 2023, respectively. These fair value amounts, developed based on inputs classified as Level 2 within the fair value hierarchy, represent the estimated value at which the Company’s lenders could trade its debt within the financial markets and do not represent the settlement value of these liabilities to the Company. The fair value of debt will continue to vary each period based on a number of factors, including fluctuations in market interest rates as well as changes to the Company’s credit ratings.

Term Loan A
The principal on Term Loan A is due in quarterly installments, with the next quarterly installment due in the second quarter of 2026 and the majority due upon maturity in 2027. The Company may make prepayments in whole or in part, without premium or penalty, and would be required to prepay certain outstanding amounts in the event of certain circumstances or transactions. The Company made $109 million of principal payments during the six months ended June 29, 2024, inclusive of prepayment of amounts due in 2024 and 2025. As of June 29, 2024, the Term Loan A interest rate was 6.69%. Interest payments are made monthly and are subject to variable rates plus an applicable margin.

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Senior Notes
On May 28, 2024, the Company completed a private offering of $500 million senior unsecured notes (the “Senior Notes”) with a 6.5% fixed interest rate. The net proceeds of the issuance, after deducting debt issuance costs which were deferred and will be amortized over the term of the Senior Notes, were approximately $492 million. The proceeds were partially used to repay the outstanding debt under its Revolving Credit Facility, the Receivables Financing Facility that matured on May 13, 2024, and Term Loan A principal repayments. The Company intends to use the remaining net proceeds for general corporate purposes. The Senior Notes mature on June 1, 2032, and interest is payable semi-annually in arrears in June and December of each year, commencing on December 1, 2024. The Company has the option or could be required to prepay certain outstanding amounts in the event of certain circumstances or transactions.

The Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by certain of Zebra’s existing and future subsidiaries. The Senior Notes contain covenants that, among other things, limit the ability of Zebra to: (i) grant or incur liens; (ii) have its subsidiaries guarantee debt without becoming guarantors; and (iii) merge or consolidate with another company or sell all or substantially all of its assets.

Revolving Credit Facility
The Company has a Revolving Credit Facility that is available for working capital and other general business purposes, including letters of credit. As of June 29, 2024, the Company had letters of credit totaling $10 million, which reduced funds available for borrowings under the Revolving Credit Facility from $1,500 million to $1,490 million. As of June 29, 2024, the Revolving Credit Facility had an average interest rate of 6.69%. Upon borrowing, interest payments are made monthly and are subject to variable rates plus an applicable margin. The Revolving Credit Facility matures on May 25, 2027.

Receivables Financing Facility
As of June 29, 2024, the Company has a Receivables Financing Facility with a borrowing limit of up to $180 million. As collateral, the Company pledges perfected first-priority security interests in its U.S. domestically originated accounts receivable. The Company has accounted for transactions under this facility as secured borrowings. During the first quarter of 2024, the Company amended this facility to extend the maturity to March 19, 2027, but otherwise did not substantially change the terms of the facility. The Company’s additional facility, which allowed for borrowings of up to $100 million, matured on May 13, 2024 and was not renewed.

As of June 29, 2024, the Company’s Consolidated Balance Sheets included $537 million of gross receivables that were pledged under the facility. As of June 29, 2024, $108 million had been borrowed, of which $89 million was classified as current. Borrowings under the facility bear interest at a variable rate plus an applicable margin. As of June 29, 2024, the facility had an average interest rate of 6.39%. Interest is paid monthly on these borrowings.

The Company’s borrowings described above include terms and conditions that limit the incurrence of additional borrowings and require that certain financial ratios be maintained at designated levels.

As of June 29, 2024, the Company was in compliance with all debt covenants.

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Note 10 Leases

During the six months ended June 29, 2024, the Company recorded an additional $14 million of right-of-use (“ROU”) assets obtained in exchange for lease obligations primarily related to the commencement of a new office facility lease as well as contract modifications that extended existing lease terms.

Future minimum lease payments under non-cancellable leases as of June 29, 2024 were as follows (in millions):
2024 (6 months remaining)$27 
202543 
202636 
202729 
202825 
Thereafter66 
Total future minimum lease payments$226 
Less: Interest(40)
Present value of lease liabilities$186 
Reported as of June 29, 2024:
Current portion of lease liabilities$41 
Long-term lease liabilities145 
Present value of lease liabilities$186 

The current portion of lease liabilities is included within Accrued liabilities on the Consolidated Balance Sheets.

Note 11 Accrued Liabilities, Commitments and Contingencies

Accrued Liabilities
The components of Accrued liabilities are as follows (in millions):
June 29,
2024		December 31,
2023
Incentive compensation$88 $47 
Unremitted cash collections due to banks on factored accounts receivable74 112 
Payroll and benefits69 83 
Customer rebates50 40 
Current portion of lease liabilities41 42 
Warranty27 27 
Freight and duty13 10 
Exit and restructuring6 22 
Settlement— 45 
Other58 76 
Accrued liabilities$426 $504 

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Warranties
The following table is a summary of the Company’s accrued warranty obligations (in millions):
 Six Months Ended
 June 29,
2024		July 1,
2023
Balance at the beginning of the period$27 $26 
Warranty expense13 13 
Warranties fulfilled(13)(14)
Balance at the end of the period$27 $25 

Contingencies
The Company is subject to a variety of investigations, claims, suits, and other legal proceedings that arise from time to time in the ordinary course of business, including but not limited to, intellectual property, employment, tort, and breach of contract matters. The Company currently believes that the outcomes of such proceedings, individually and in the aggregate, will not have a material adverse impact on its business, cash flows, financial position, or results of operations. Any legal proceedings are subject to inherent uncertainties, and the Company’s view of these matters and their potential effects may change in the future. The Company records a liability for contingencies when a loss is deemed to be probable and the loss can be reasonably estimated.

Note 12 Share-Based Compensation

The Company issues share-based compensation awards under the Zebra Technologies 2018 Long-Term Incentive Plan (“2018 Plan”), approved by shareholders in 2018 which superseded and replaced all prior share-based incentive plans. Outstanding awards issued prior to the 2018 Plan are governed by the provisions of those plans until such awards have been exercised, forfeited, cancelled, expired, or otherwise terminated in accordance with their terms. Awards available under the 2018 Plan include stock-settled awards, including stock-settled restricted stock units, stock-settled performance stock units, restricted stock awards, performance share awards, stock appreciation rights, incentive stock options, and non-qualified stock options. Awards available under the 2018 Plan also include cash-settled awards, including cash-settled stock appreciation rights, cash-settled restricted stock units, and cash-settled performance stock units. No awards remain available for future grants under previous plans.

The Company uses treasury shares as its source for issuing shares under the share-based compensation programs. As of June 29, 2024, the Company had 1,850,705 shares of Class A Common stock remaining available to be issued under the 2018 Plan.

The compensation expense from the Company’s share-based compensation plans and associated income tax benefit, excluding the effects of excess tax benefits or shortfalls, were included in the Consolidated Statements of Operations as follows (in millions):
Three Months EndedSix Months Ended
Compensation costs and related income tax benefitJune 29, 2024July 1, 2023June 29, 2024July 1, 2023
Cost of sales$2 $2 $4 $3 
Selling and marketing8 1 13 7 
Research and development12 6 18 13 
General and administration15 (6)23 3 
Total compensation expense$37 $3 $58 $26 
Income tax benefit$6 $3 $10 $7 

As of June 29, 2024, total unearned compensation cost related to the Company’s share-based compensation plans was $166 million, which will be recognized over the weighted average remaining service period of approximately 1.7 years.

The majority of the Company’s share-based compensation awards are generally issued as part of its employee and non-employee director incentive program during the second quarter of each fiscal year. The Company also issues awards associated with business acquisitions or other off-cycle events. The majority of the Company’s share-based compensation is comprised of stock-settled awards.
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Stock-settled awards
Beginning in 2021, the Company began issuing stock-settled restricted stock units (“stock-settled RSUs”) and stock-settled performance share units (“stock-settled PSUs”) for the majority of its share-based compensation awards. Prior to 2021, the Company primarily awarded restricted stock awards (“RSAs”) and performance share awards (“PSAs”). The Company’s awards are typically time-vested with stock-settled RSUs and RSAs vesting ratably in three annual installments and stock-settled PSUs and PSAs vesting at the end of the three-year period. No RSAs or PSAs were issued to employees in the current year.

Vesting for each participant is subject to restrictions, such as continuous employment, except in certain cases as set forth in each stock agreement. Upon vesting, stock-settled RSUs and PSUs convert to shares of Class A Common Stock that are released to participants. RSAs and PSAs are considered participating securities, and as such, are included as part of the Company’s Class A Common Stock outstanding at the time of grant.

Compensation cost for the stock-settled RSUs, stock-settled PSUs, RSAs, and PSAs is expensed over each participant’s required service period. Compensation cost is calculated as the fair market value of the Company’s Class A Common Stock on the grant date multiplied by the number of units or awards granted, net of estimated forfeitures. The expected attainment of the performance goals for the stock-settled PSUs and PSAs is reviewed at the end of each reporting period, with adjustments recorded to compensation expense in the Consolidated Statements of Operations, as necessary.

The Company issues RSAs to non-employee directors. The number of shares granted to each non-employee director is determined by dividing the value of the annual grant by the price of a share of the Company’s Class A Common Stock. New directors in any fiscal year earn a prorated amount. During the first six months of 2024, there were 6,264 shares granted to non-employee directors compared to 6,640 shares during the first six months of 2023. The shares vest immediately upon grant.

A summary of the Company’s restricted and performance stock-settled awards for the six months ended June 29, 2024 is as follows:
RSUsPSUsRSAs

UnitsWeighted-Average Grant Date Fair ValueUnitsWeighted-Average Grant Date Fair ValueSharesWeighted-Average
Grant Date Fair Value
Outstanding at beginning of period437,379 $299.19 195,932 $334.59 433 $477.74 
Granted271,704 308.89 88,029 309.05 6,264 319.95 
Released(176,502)323.37 (35,597)482.42 (6,697)330.15 
Forfeited(7,971)296.31 (1,428)296.59 — — 
Outstanding at end of period524,610 $296.14 246,936 $304.49 — $— 

Stock Appreciation Rights (“SARs”)
SARs were previously granted primarily as part of the Company’s annual share-based compensation incentive program. Beginning in 2021, the Company no longer included SARs in its annual share-based compensation award issuances.

SARsWeighted-Average Exercise Price
Outstanding at beginning of period398,838 $124.96 
Exercised(126,582)100.02 
Expired(2)86.80 
Outstanding at end of period272,254 $136.48 
Exercisable at end of period270,999 $135.42 

The following table summarizes information about SARs outstanding as of June 29, 2024:
OutstandingExercisable
Aggregate intrinsic value (in millions)$47 $47 
Weighted-average remaining contractual life (in years)1.71.7
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The intrinsic value of SARs exercised during the six months ended June 29, 2024 and July 1, 2023 was $25 million and $5 million, respectively. The total fair value of SARs that vested during the six months ended June 29, 2024 and July 1, 2023 was $1 million and $2 million, respectively.

Cash-settled awards
The Company also issues cash-settled share-based compensation awards, including cash-settled restricted stock units and cash-settled performance stock units that are classified as liability awards. These awards are expensed over the vesting period of the related award, which is typically three years. Compensation cost is calculated as the fair value on grant date multiplied by the number of share-equivalents granted. The expected attainment of the performance goals for the cash-settled performance stock units is reviewed at the end of each reporting period, with adjustments recorded to compensation expense in the Consolidated Statements of Operations, as necessary. Cash settlement is based on the fair value of share equivalents at the time of vesting, which was $11 million and $8 million for the six months ended June 29, 2024 and July 1, 2023, respectively. Share-equivalents issued under these programs totaled 57,779 and 39,407 during the six months ended June 29, 2024 and July 1, 2023, respectively.

Employee Stock Purchase Plan
Eligible Zebra employees may purchase common stock at 95% of the fair market value at the date of purchase pursuant to the Zebra Technologies Corporation 2020 Employee Stock Purchase Plan (“2020 ESPP”). Employees may make purchases by cash or payroll deductions up to certain limits. The aggregate number of shares that may be purchased under the 2020 ESPP is 1,500,000 shares. As of June 29, 2024, 1,329,399 shares remained available for future purchase.

Note 13 Income Taxes

The Company’s effective tax rate for the three and six months ended June 29, 2024 was 16.9% and 18.0%, respectively, compared to 15.8% and 17.4% for the three and six months ended July 1, 2023. In the current and prior periods, the variance from the 21% federal statutory rate was primarily due to the generation of tax credits and the favorable impacts of foreign earnings subject to U.S. taxation, partially offset by U.S. State income taxes and foreign rate differentials.

Note 14 Earnings Per Share

Basic net earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average number of diluted common shares outstanding. Diluted common shares outstanding is computed using the Treasury Stock method and, in periods of income, reflects the additional shares that would be outstanding if dilutive share-based compensation awards were converted into common shares during the period.

Earnings per share (in millions, except share data):
Three Months EndedSix Months Ended
June 29,
2024		July 1,
2023		June 29,
2024		July 1,
2023
Basic:
Net income$113 $144 $228 $294 
Weighted-average shares outstanding51,489,735 51,377,064 51,444,179 51,395,062 
Basic earnings per share$2.19 $2.80 $4.43 $5.72 
Diluted:
Net income$113 $144 $228 $294 
Weighted-average shares outstanding51,489,735 51,377,064 51,444,179 51,395,062 
Dilutive shares340,510 330,396 371,720 328,964 
Diluted weighted-average shares outstanding51,830,245 51,707,460 51,815,899 51,724,026 
Diluted earnings per share$2.17 $2.78 $4.40 $5.68 

Anti-dilutive share-based compensation awards are excluded from diluted earnings per share calculations. There were 164,004 and 91,050 shares that were anti-dilutive for the three and six months ended June 29, 2024, respectively. There were 247,453 and 151,872 shares that were anti-dilutive for the three and six months ended July 1, 2023, respectively.
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Note 15 Accumulated Other Comprehensive (Loss) Income

Stockholders’ equity includes certain items classified as AOCI, including:

•Unrealized gain (loss) on sales hedging which relates to derivative instruments used to hedge the exposure related to currency exchange rates for forecasted Euro sales. These hedges are designated as cash flow hedges, and the Company defers income statement recognition of gains and losses until the hedged transaction occurs. See Note 8, Derivative Instruments for more details.

•Foreign currency translation adjustments which relates to the Company’s non-U.S. subsidiary companies that have designated a functional currency other than the U.S. Dollar. The Company translates the subsidiary functional currency financial statements to U.S. Dollars using a combination of historical, period-end, and average foreign exchange rates. This combination of rates creates the foreign currency translation adjustment component of AOCI.

The changes in each component of AOCI during the six months ended June 29, 2024 and July 1, 2023 were as follows (in millions):
 Unrealized gain (loss) on sales hedgingForeign currency translation adjustmentsTotal
Balance at December 31, 2022$(11)$(55)$(66)
Other comprehensive (loss) income before reclassifications(9)5 (4)
Amounts reclassified from AOCI(1)
10 — 10 
Other comprehensive income, net of tax1 5 6 
Balance at July 1, 2023$(10)$(50)$(60)
Balance at December 31, 2023$(5)$(49)$(54)
Other comprehensive income (loss) before reclassifications20 (8)12 
Amounts reclassified from AOCI(1)
(6)— (6)
Tax effect(4)— (4)
Other comprehensive income (loss), net of tax10 (8)2 
Balance at June 29, 2024$5 $(57)$(52)
(1) See Note 8, Derivative Instruments regarding the timing of reclassifications to operating results.

Note 16 Accounts Receivable Factoring

The Company transfers certain receivables to banks without recourse as part of its credit and cash management activities. Such transfers are accounted for as sales and the related receivables are removed from the Company’s balance sheet. The Company does not maintain any beneficial interest in the receivables sold. The Company services the receivables on behalf of the banks, but otherwise maintains no significant continuing involvement with respect to the receivables. Sale proceeds that are representative of the fair value of factored receivables, less a factoring fee, are reflected in Cash flows from operating activities on the Consolidated Statements of Cash Flows, while sale proceeds in excess of the fair value of factored receivables are reflected in Cash flows from financing activities on the Consolidated Statements of Cash Flows.

The Company has two Receivables Factoring arrangements. The first arrangement was amended in the current quarter to limit the factoring of uncollected receivables originated from the EMEA and Asia-Pacific regions from €150 million to €75 million, which will revert to €150 million in the third quarter if not further amended. Otherwise, the amendment did not substantially change the terms of the arrangement. In the current quarter, the Company provided notice to terminate the second arrangement, which allowed for the factoring of uncollected receivables originated from the EMEA region up to $50 million.

The Company may be required to maintain a portion of sales proceeds as deposits in a restricted cash account that is released to the Company as it satisfies its obligations as servicer of sold receivables, which totaled $0 million and $1 million as of June 29, 2024 and December 31, 2023, respectively, and is classified within Prepaid expenses and other current assets on the Consolidated Balance Sheets.

21
During the six months ended June 29, 2024 and July 1, 2023, the Company received cash proceeds of $607 million and $751 million, respectively, from the sales of accounts receivables under its factoring arrangements. As of June 29, 2024 and December 31, 2023, there were a total of $7 million and $56 million, respectively, of uncollected receivables that had been sold and removed from the Company’s Consolidated Balance Sheets.

As servicer of sold receivables, the Company had $74 million and $112 million of obligations that were not yet remitted to banks as of June 29, 2024 and December 31, 2023, respectively. These obligations are included within Accrued liabilities on the Consolidated Balance Sheets, with changes in such obligations reflected within Cash flows from financing activities on the Consolidated Statements of Cash Flows.

Note 17 Segment Information & Geographic Data

The Company’s operations consist of two reportable segments: Asset Intelligence & Tracking (“AIT”) and Enterprise Visibility & Mobility (“EVM”). The reportable segments have been identified based on the financial data utilized by the Company’s Chief Executive Officer (the chief operating decision maker or “CODM”) to assess segment performance and allocate resources among the Company’s segments. The CODM reviews adjusted operating income to assess segment profitability. To the extent applicable, segment operating income excludes business acquisition purchase accounting adjustments, amortization of intangible assets, acquisition and integration costs, impairment of goodwill and other intangibles, exit and restructuring costs, as well as certain other non-recurring costs. Segment assets are not reviewed by the Company’s CODM and therefore are not disclosed below.

Financial information by segment is presented as follows (in millions):
 Three Months EndedSix Months Ended
June 29,
2024		July 1,
2023		June 29,
2024		July 1,
2023
Net sales:
AIT$397 $459 $789 $981 
EVM820 755 1,603 1,638 
Total Net sales$1,217 $1,214 $2,392 $2,619 
Operating income:
AIT(2)
$73 $114 $149 $243 
EVM(2)
123 122 243 255 
Total segment operating income