Zebra Technologies Corporation — FY2021 Form 10-K
Business and period: Global provider of automatic identification and data capture and Enterprise Asset Intelligence solutions, including mobile computers, scanners, printers, RFID, software, services and robotics. Reports two segments: Asset Intelligence & Tracking (AIT) and Enterprise Visibility & Mobility (EVM). Fiscal year ended December 31, 2021; comparisons are primarily with FY2020. Amounts below are USD unless stated otherwise.
Financial performance
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Net sales | $5.627 billion | $4.448 billion | +26.5%; organic growth 23.2% |
| Gross profit / margin | $2.628 billion / 46.7% | $2.003 billion / 45.0% | Margin +170 bps |
| Operating income | $979 million | $651 million | +50.4% |
| Net income | $837 million | $504 million | +66.1% |
| Diluted EPS | $15.52 | $9.35 | Increased |
| Cash from operations | $1.069 billion | $962 million | +$107 million |
Revenue growth reflected broad customer demand to digitize and automate workflows, pent-up purchases deferred during the pandemic, and acquisitions. Tangible product sales rose 27.1%; services and software rose 23.1%. Operating margin was approximately 17.4%, versus 14.6% in FY2020. Management attributed improved gross margin to favorable mix, volume leverage, services margins, currency, tariff mitigation and acquired businesses; higher premium freight partly offset these benefits.
Segments: EVM revenue was $3.946 billion (+28.8%; organic +25.0%) and segment operating income was $758 million (+61.3%). AIT revenue was $1.687 billion (+21.2%; organic +19.3%) and segment operating income was $374 million (+17.6%). AIT gross margin declined to 45.6% from 47.3%, primarily due to premium freight; EVM gross margin increased to 47.3% from 44.3%.
Liquidity, debt and capital allocation
Year-end cash and cash equivalents were $332 million, versus $168 million. Total debt was $996 million, down from $1.252 billion; the filing reports $922 million of long-term debt and $69 million current debt, before presentation adjustments. Cash less total debt implies net debt of approximately $664 million. The company had $993 million available under its $1 billion revolving facility, with no revolver borrowings outstanding, and stated that cash, operating cash generation and available borrowing capacity should meet requirements for the next 12 months and thereafter. Current assets were $1.689 billion and current liabilities $1.800 billion.
Cash used in investing was $546 million, including $452 million for acquisitions; cash used in financing was $371 million. FY2021 repurchases were $57 million, compared with $200 million in FY2020. The company reported $696 million remaining under its repurchase authorization at year-end and $173 million of additional repurchases through February 3, 2022. It does not anticipate cash dividends in the foreseeable future.
Developments, outlook and risks
- FY2021 acquisitions included Fetch Robotics ($301 million total consideration), Antuit ($145 million cash, net of acquired cash) and Adaptive Vision ($18 million cash, net of acquired cash), all included in EVM. Acquisition purchase-price allocations remained preliminary for certain items.
- Supply constraints, component shortages, labor limits, elevated input and freight costs affected operations and could continue. Management expected costs to remain elevated for some time and said higher pricing would partially mitigate them where market conditions permit.
- A 2021 productivity plan incurred $7 million of charges, with up to $3 million of additional costs expected; completion was expected by 2022. Management expected 2022 capital expenditures of $65–$75 million.
- The filing identifies forward-looking financial outlook for Q1 and full-year 2022, but the supplied filing text does not provide clear numerical guidance.
- Honeywell filed patent infringement actions in the U.S., U.K., Germany and China in 2021, seeking damages and injunctive relief over scanning and data-capture technology. The cases were at an early stage; Zebra said it intended to defend them. The filing does not state a clear estimated loss amount.
- Three distributors each represented more than 10% of FY2021 sales; together they accounted for 48.5%. The largest customer represented 22.3% of sales.
- Other material risks include reliance on global suppliers and contract manufacturers, continued COVID-19 and supply-chain disruption, competition, foreign exchange and trade-policy exposure, acquisition integration, cybersecurity, and tax and regulatory uncertainty.
Investor verification points
- Track whether component availability, freight costs and pricing actions improve delivery capacity and margins.
- Assess whether acquired software, machine-vision and robotics businesses contribute growth and returns commensurate with acquisition spending and added amortization.
- Monitor the Honeywell litigation, potential remedies and any subsequent disclosure of financial exposure.
- Review customer concentration and the effect of distributor ordering patterns on revenue and receivables.
- Check debt maturities, refinancing and interest-rate exposure; $845 million of reported debt maturities fall in 2024.
- Compare subsequent results and company disclosures with the outlook and capital-spending expectations; numerical 2022 guidance is not clear in the supplied text.