Zebra Technologies at Bernstein Conference: Strategic Growth Insights

On Friday, 30 May 2025, Zebra Technologies (NASDAQ:ZBRA) participated in the Bernstein 41st Annual Strategic Decisions Conference 2025. CEO Bill Burns outlined the company’s strategic vision, emphasizing both growth opportunities and challenges. Despite global trade uncertainties, Zebra remains optimistic about its market position and future growth prospects.

Key Takeaways

• Zebra targets a long-term growth rate of 5-7% with a focus on core and expansion markets.
• The company aims for a 30% conversion of revenue to profitability and 100% free cash flow conversion.
• AI integration is a priority, enhancing both internal processes and customer solutions.
• Supply chain diversification efforts are underway, moving production from China to other countries.
• Zebra is investing in new markets like retail software, robotics, and machine vision.

Financial Results

• Revenue: Zebra reported a $5 billion revenue.
• Long-term Growth: The company aims for 5-7% growth, with 4-5% from core products.
• Profitability: Zebra targets a 30% drop-through of revenue to bottom-line profitability.
• Free Cash Flow: The goal is to achieve 100% free cash flow conversion.
• Tariff Impact: Estimated $70 million impact, with a $25-30 million profit impact expected for Q2.
• Share Buybacks: Approximately $200 million in shares repurchased between Q1 and early Q2.
• Q1 Growth: Broad-based growth across verticals and geographies, though manufacturing growth lags slightly.

Operational Updates

• Core Markets: Zebra serves retail, transportation, logistics, healthcare, and manufacturing sectors.
• Geographic Expansion: The company operates globally, expanding its market reach.
• New Markets: Investments are being made in retail software, robotics, and machine vision.
• Product Portfolio Tiering: A "good, better, best" strategy is implemented to cater to different market segments.
• Supply Chain Diversification: Production is shifting from China to Vietnam, Malaysia, and Mexico, with 35% of U.S. imports expected to come from these regions by midyear.
• AI Integration: AI is being incorporated into products and internal processes.

Future Outlook

• Growth Drivers: Expansion in RFID, tablets, machine vision, retail software, and robotics.
• AI Strategy: Focus on digitizing environments to enhance AI models and using mobile devices as digital assistants for frontline workers.
• Recurring Revenue: Aiming to grow recurring revenue streams, currently 25% of the business.
• Market Share Gains: Zebra plans to continue gaining market share against competitors.
• Customer Engagement: Prioritizing engaged associates, inventory management, and customer engagement for retailers.

Q&A Highlights

• Customer Stickiness: Zebra’s products have a lifecycle of about five years, ensuring customer retention.
• RFID Adoption: Source tagging is crucial for RFID adoption.
• Customer Base: Core customers include retail, transportation, logistics, manufacturing, and healthcare sectors.
• Market Share: Continuous investment to maintain market leadership and outperform competitors.
• AI Deployment: AI features are in pilot stages with Zebra’s largest customers.

In conclusion, Zebra Technologies is poised for continued growth and innovation. For more detailed insights, refer to the full transcript below.

Full transcript - Bernstein 41st Annual Strategic Decisions Conference 2025:

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: Okay. Good morning, everyone. Thanks for coming. I’m Mark Newman, Bernstein’s IT hardware analyst, and great to welcome Bill Burns here, CEO of Zebra Technologies. Just a brief intro of, Bill.

Bill was named CEO of Zebra Technologies in March 23. He’s more than thirty years experience in the technology sector and joined Zebra Technologies in 2015. In his prior role as chief product and solutions officer, he oversaw strategy, investments, and development of Zebra’s portfolio of products and solutions. And during this time, Bill extended Zebra’s market share leadership across its core businesses while entering adjacent and expansion markets. You also delivered on the company’s enterprise asset intelligence vision and strengthened Zebra’s strategic relationships with its customers and partners.

And before joining Zebra, Bill was CEO of Embrane and previously before that, CEO of Spirant Communications. Thanks so much, Bill, for joining us today.

Bill Burns, CEO, Zebra Technologies: Thank you. Great to be here.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: So I think just to start off, Bill, if you could just, give us a brief intro, of your company just to start us off, and then we’re gonna go into some, prepared questions that I’ve got. And then we’ve just a reminder for everyone, we’ve got pigeonhole. You can submit your questions or vote on questions, and I’ll be, looking to take some questions from the audience from the pigeonhole, towards the end. Over to you.

Bill Burns, CEO, Zebra Technologies: Maybe, Mark, the you know, maybe I’ll start with Zebra’s vision. Right? It’s the idea that every asset and worker at the, you know, front line of business, think of where work gets done, is visible, connected, optimally utilized. And what I mean by that is that we think of you see Zebra in everyday life. So scanners at the front of checkout in retail.

You see us in mobile devices being used for partial delivery in ecommerce. You see us in hospital wristbands that identify patients in hospitals. And we serve retail, transportation, logistics, health care, manufacturing as our core markets ultimately. We’ve invested in new areas beyond barcode scanning, reading, printing, our core areas into the new adjacent areas inside retail software, including some recent AI offerings in in that area. Inside robotics and machine vision are new areas in which we’ve invested across the portfolio.

Today, we’re, you know, 5,000,000,000 in revenue. Ultimately, you know, have a broad range of our portfolio of products. The, you know, 80 plus percent of Fortune 500 customers or or companies are our customers today along with all the way from there down to the mom and pop retailer or transportation company or others around the world. We’re truly global. And, the breadth and depth of our technology, our customer relationships, the idea that we’re a trusted partner to those customers around the globe gives us an opportunity to continue to expand our presence in our customers’ environments and work with them as truly a trusted partner as they deploy new technologies, including AI moving forward.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: Thanks very much for that intro, Bill. And so just going into the questions, Zebra saw a pandemic period surge followed by digestion period and demand characteristics for Zebra solutions have started to improve again. Can you discuss what that means across your end markets? And is this different from what you saw four to five years ago? And has this also been relatively broad based, or are you seeing more strength among different end markets, customer segments, regions, or deal sizes?

Bill Burns, CEO, Zebra Technologies: Yeah. I would say that the you know, across our customer base that, you know, our products and solutions are mission critical to what they do. Picking an ecommerce warehouse, delivering a parcel in transportation logistics, serving a customer in retail, treating a patient within in health care. So our our products and solutions are mission critical to what our customers need. We’ve seen broad based growth across the portfolio, you know, and we’ve seen that, during the pandemic, we saw a large build out of capacity within our customers, whether that’s transportation logistics or ecommerce or inside retail that then saw them pull back in spending in 02/2022 but or ’23 but return to growth in 2024, and that trend continues.

We saw in Q1 broad based growth across the portfolio, across each of our vertical markets. I mentioned before, we’ve seen it across all geographies. Obviously, some caution on the point of our customers of their thinking around what’s the global trade environment mean to them, but we haven’t seen the change in buying behavior. We’ve seen them actually continue to buy continue to move ahead with their projects. We continue to see them move forward with the areas in which we’re working with them, and, you know, we think that’s a good sign across the business.

The global tryout environment certainly is on their minds, but it hasn’t changed their buying behavior. And I think we’re glad to see kind of this broad based growth. I’d say manufacturing lags a bit as that segment is still recovering. So still double digit growth in first quarter, but lagging the other segments a little bit as we’re still seeing manufacturing you know, recover around the globe. Any specific, additional comments on pipeline?

I would say that, you know, we feel good about, you know, where we’re at with our customers today. I mean, I think that, you know, we’ve we’ve guided to q two that you know, and and where we’re at for, you know, our overachievement in q one. I would say our guide to q two, FX moving in the right direction, a small acquisition we did ultimately would have led us to to typically, up our guide for the full year in q one. But I think the global uncertainty around trade, we, you know, stuck with our our full year guide. So I think we feel good about where we stand today with pipeline of opportunities on our customers and what we’ve delivered in q one, our guide for q two, and then ultimately, what we see moving forward.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: Okay. And and, how are you thinking about your five to 7% long term growth algorithm? What gives you confidence in that? And how would you frame your customers’ refresh cycles now?

Bill Burns, CEO, Zebra Technologies: Yeah. I would say that, you know, the five to 7% growth rate is what we talked about, you know, through cycle across the business. That’s kinda made up of, you know, our core product portfolio, which grows at about four to 5%, you know, as as we kinda see it across our mobile device, mobile, you know, computing portfolio, across our scanners, across our print portfolio, and and we continue to take share in in our core markets. We think of adjacent markets that are you know, that we’re invested in. So think of RFID technology growing growing much faster.

Our tablet portfolio, we’re seeing new opportunities across, you know, tablets as a way to a a larger screen in environments that we hadn’t seen mobility in the past. So manufacturing is a good example of that where you’re moving from kind of fixed screens in manufacturing to, you know, manufacturing associates having, you know, tablets as as their form factor to be able to communicate, collaborate, get more information than just looking at thick screens around production. So we’re seeing the tablet portfolio, for instance, grow faster. Our supplies business that ties to, you know, our printing portfolio overall grows a bit faster, so we see faster than four to 5% growth across those areas of the portfolio. And then we’ve got new expansion businesses around machine vision, which is a and and fixed industrial scanning, which applies to transportation logistics and manufacturing customers and, again, grows faster than than our core.

Most recently, it’s kinda lagged behind. Right? We’ve seen this in in the manufacturing sector and the lack of investment in T and L coming out of COVID. But at that market, it will be a very attractive market, and machine vision is as it returns to growth. Our retail software, ties to the mobile devices that we sell inside retail associates.

So think of a retail associate, communication collaboration across the store, or how do I send tasks from corporate or a manager to an associate in the store? So we think of our software offerings to go along with our mobile computing area as expansion areas for us. And then, you know, lastly, robotics. So still at its infancy, but think of the idea of ecommerce warehouse picking where robots and people work together to do that pick. So those areas grow much faster but are very small today in in the portfolio overall.

When we marry all that together, our core portfolio, these expansion areas that grow faster, we come to this 5% to 7% growth rate through cycle, and we feel good about delivering that and continue to, you know, increase profitability along the way. So we think about really is profitable growth across the portfolio.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: Alright. So four four to 5%, growth in the core businesses, and then there’s additional growth there is to get to that five to 7%. That’s correct. And how do we think about that in light of twenty fifteen to twenty fourteen CAGR being closer to 33.5%? Say it again.

So twenty fifteen to twenty four CAGR was actually closer to 3.5%. So Yeah. Maybe just frame it, like, in terms of what what’s changed.

Bill Burns, CEO, Zebra Technologies: Yeah. Right. Compared to the five to 7%. Yep. So I think that if you look at the CAGR in the past, I think the challenge has been the pandemic.

Right? I think, ultimately, when you saw the you know, back in you know, we saw significant growth from the enterprise acquisitions of Zebra specialty printing business acquiring the the assets from Motorola and the enterprise business, 3 and a half billion dollars in November, you know, of ’14, growing to to 5,000,000,000 in 02/2020. And then, you know, 02/2019, flat in 02/2020, a large spike, you know, upwards in 2122, really driven by the pandemic. Right? Buy online, pick up in store, home delivery, ecommerce, all the things that our customers thought were gonna continue to grow at those growth rates and then a decline in ’23.

So you’ve seen a lot of variation in the growth, including the spike up in the in the decline in ’23. That’s put a lot of you know, it’s hard to measure the business in CAGRs these days across that time frame. But I think as we think about 02/2023 moving forward, there’s no reason why we shouldn’t be able to deliver the 5% to 7% growth rate.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: Okay. Great. And can you talk about how that translates into EPS growth and free cash flow? I think you talked about double digit EPS growth. Can you just talk about that and free cash flow conversion?

Yeah. Think that, you

Bill Burns, CEO, Zebra Technologies: know, as we see, as I said, it was really focused on profitable growth. As we grow the top line of the business, we would expect, probably about a 30% drop through to the bottom line in profitability. We’ve got to invest more in the business, obviously. So we’re going invest some of that across R and D as we enter new areas and sales and marketing, continue to extend our lead in the market and enter new markets. But I think you’ll see a drop through of profitability as we grow top line revenue.

From a free cash flow perspective, we think of 100% free cash flow conversion is where we target across the business. So the business generates a lot of cash, ultimately, you know, we see free cash flow conversion as being an important metric, you know, for us to continue to track.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: Okay. Great. Shifting gears slightly, on the competitive landscape, has that been more challenging recently? Are lower cost competitors a bigger risk now versus before? Yeah.

I would say the the competitive dynamic is about the same. I think we haven’t seen, you know, much different. Certainly,

Bill Burns, CEO, Zebra Technologies: in markets around the world. There’s always gonna be, you know, formal competitors that we have in the markets, and and we have new competitors in the in these new expansion areas that we’re investing in today. I think that from a Asian competitor perspective, I think that we’ve seen, you know, that dynamic not change much. Ultimately, it represents kind of the the value tier at the low end of the portfolio. We’ve spent a lot of time across the portfolio, tiering the portfolio.

And and what that, early on, would say, ten years ago, thought that having a value tier product or a lower tier products would take away from the average sale price of our products and bring down average sale price to our customers. It’s actually done the opposite. It’s given us a portfolio of products of kinda good, better, best. It’s allowed us to have conviction around the top end of our product portfolio so customers who ultimately want the fastest device, the largest screens, the most durability, the best, you know, service around those devices will it pay a premium for those ultimately? And then those who wanna buy, a lower cost device in especially in, you know, countries like India or, you know, some places in Latin America inside the China market, we’ve developed products specifically for those markets that, quite honestly, don’t have the same specifications as our higher markets aren’t covered in the same, you know, service delivery vehicles and others.

And it’s allowed us to maintain kind of conviction and price at the high end of the product portfolio. So competition hasn’t really changed, and we’ve tiered the portfolio to match the different market segments in which we’re playing in today.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: And and so how how how should we think about installed base on pricing power? How much risk is there of structural replacement cycle elongation?

Bill Burns, CEO, Zebra Technologies: Yeah. I would say that, you know, we we there’s a lot of talk about, you know, a significant portion of our business are customers that are buying from us today. Right? When you’ve got 80 plus percent of the Fortune 500 and almost anybody who’s a retailer, a transportation logistics company, a manufacturer around the world is our customer in some way, there’s refreshes and product cycles around those. We see those being varying degrees typically in mobile devices.

It’s kind of four to five years, maybe about the same in scanning a little elongated beyond that in in the printing portfolio, but our customers continue to refresh, you know, their portfolio of products that they have deployed today. I’d say a couple of things around that. When the you know, when a customer refreshes or buys, you know, especially think of front of store retail, maybe five years ago, they bought 40,000 devices. Over the next, you know, five years, they’re buying more and more devices. So let’s say the refresh cycle comes up again.

It’s about you know, it could be 60,000 devices. So there’s you know, the refresh cycle isn’t the same amount of devices. There’s more associates. There’s more stores. There’s more applications.

They’re using our devices. They’re putting devices in the hands of more associates, you know, within the store to do more jobs. So that creates an opportunity for us beyond refresh is this idea of unserved hands. So if we think about across the verticals we serve, not everyone’s equipped with a mobile device today. And that’s becoming ever more critical, especially in the area of things like AI.

Right? The idea that says, we think of this framework at our customer’s environment around sense, analyze, and act. It means that you sense what’s happening at the point of productivity. So you give an asset a digital voice by reading a barcode tag. You read an RFID tag.

You’ve got an associate with a mobile device in their hand. And, ultimately, you do analytics around to say, where is the pallet? Where is the forklift? Where is the employee? And, ultimately, where do I gotta move that pallet to to put it on this truck?

So I sense what’s happening in the point of productivity. I analyze it, and AI enhances that, you know, analytics capability across the environment. And then I gotta take an action. I’ve gotta go pick up that pallet, and I’ve gotta move it to the truck to ultimately get efficiency within my environment, and then dry I drive an outcome. I get the right pallet to the right customer on time ultimately.

And we think of our entire portfolio as being kinda tied to that as ultimately how do we drive, more analytics through AI? How do we drive more, devices in the hands of associates, whether that’s across all of our verticals because this analytics become ever more important communication collaboration to that employee. And how do I take the analytics? And the only way to actually get an action taken is by having, an employee having a mobile device to be able to communicate to them, which drives this unserved hands opportunity for us beyond just the refreshes. Got it.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: You you’ve also entered several new markets like, machine vision robotics. Can you talk about, why Zebra can be successful in these areas? Yeah.

Bill Burns, CEO, Zebra Technologies: I think that we, you know, we think about, organic investment always first. So machine vision is a good example where our, you know, handheld scanning product think of the scanners you see every day in the supermarket, that, you know, that scans your water or the flatbed scanners scans your groceries. You know, we’re, the, you know, market leader in that space. The machine vision market, the low end of machine vision is really, fixed industrial scanning, which really fits into transportation logistics, which is a market that we do a lot of business in today around scanning and mobile computing and printing across our portfolio. And the fixed industrial scanners are just like a handheld scanner, only it sits above conveyance systems.

It decides on sortation of parcels and others. So it’s used in an environment, in picking where I have pack out stations and I’m ultimately, you know, scanning where I don’t wanna hold a handheld scanner. So it’s kind of a a a very closely adjacent space to us. Machine vision is a step up from that, and and you just don’t just read the barcode. You actually use vision systems to say, is the parcel damaged?

Is the, in manufacturing? Is the label on correctly? Are the all the cashews whole? All the inspection you do within manufacturing. So you go from kinda handheld scanning, which we have a, we’re the market leader in today, to fixed industrial scanning, to machine vision.

They’re all vision systems, and they go in increasing capability associated with it. So we think of extending the portfolio through acquisitions in areas in which they are closely adjacent to what we do today. I mentioned software today. Today, in in the predominance of retailers around the world, they’re using our mobile devices in the hands of the retail associate. Our customers would tell us that, two retail associates in a large big box retailer, if they’re two aisles apart from each other, they may as well be a forest away from each other.

Meaning, they want engaged associates, but if they’re working by themselves all day, then you don’t have an engaged employee. So they wanna be able to communicate, collaborate with their manager. They wanna be able to communicate, collaborate with each other. When you when are you on break? Do you wanna go grab lunch?

Those kind of things. But they don’t want the associates using their personal mobile devices because it distracts them. So how do you get communication collaboration on those mobile devices? That’s software we offer. How do I take tasks from corporate and send it down to the store to individual associates?

So it’s Memorial Day weekend, and I gotta put the Pepsi end cap on or the Oreos end cap for the weekend. How do I send that task down to 3,000 stores to have them go put the end cap on for the holiday weekend? Well, I do that through task management software, which is software that we offer to our customers. How do I take a task from a manager and send it to an employee? How do I take an online order and send it to an employee to go pick that order within the store?

So, workforce management. How do I plan the workforce in a do it yourself retailer? I need somebody in plumbing. I need somebody in labor. I need somebody at the customer service department.

That’s software. And then I ultimately wanna be able to set my schedule. So I may have a mobile device in my hand in the store from Zebra. Now I can set my schedule associated with it or re request a change in schedule, those kind of things. So the software is closely adjacent to the mobile devices, and it sits on top of those mobile devices.

So we think of the acquisition strategy as things that are closely adjacent that we do today and that we have a right to play in because ultimately we have customer relationships or we have a portfolio that’s really close to it from a technology perspective.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: Got it. Great. That’s very helpful. And could you also now speak a bit about RFID, which is, I think, gaining traction again? Do you see that as a threat to your traditional barcode tracking?

Bill Burns, CEO, Zebra Technologies: Yeah. I would say that, you know, RFID is complementary to barcodes. I would say the ubiquity of barcode reading today is across, you know, all industries and all industries and all segments today, and it’s not going away. I would say that the in fact, there’s enhancements to barcode reading today that new regulation that’s driving more track and trace capability across two d barcodes around the world that’s, you know, new standards that are coming in place. But RFID technology is, an exciting technology around the automation.

This idea of having an enhanced digital voice associated with, starting in retail really in in in apparel more than anything else as I was trying to customers were trying to track inventory better, especially in things that have lots of different sizes, lots of different styles in in others. So think of blue jeans, for instance, has moved into broad mainstream, you know, use within apparel inside, especially fast fashion and and across the retailers, but now has moved across the entire supply chain. So you think of this idea of track and trace across the entire supply chain and getting more visibility. I can use radio frequency tags. They’ve come down in price considerably, and they’ve been enhanced from a technology perspective to work in more environments and to be able to attach to more goods overall.

And we’re seeing it being used all the way through the supply chain. So fast fashion would have been a good example early on. They controlled their supply chain. So, ultimately, they said, I’m just not gonna use it in the store. I’m actually gonna use it in my distribution center.

I’m gonna actually have my suppliers tag everything that comes from them so that I can use it through my distribution center in my store and then at my point of sale so I can also use it to track things like loss prevention. Now we’re seeing it being used across things like transportation logistics, you know, vendors. So UPS has made a lot of announcements around, you know, RFID technology. So putting a RFID tag on every parcel to make sure ultimately you get the right parcel on the right truck to basically use to get more efficiency across their operations. So if I can give something a digital voice, and it doesn’t matter whether it’s a printed label, it’s a barcode, or it’s an RFID tag, once it has a digital voice, ultimately, then I can automate what I’m doing in my customer’s environment.

And that’s why we talk about the long term trend of digitizing and automating the environment. And today, what we’re seeing ever more is this idea of using AI to do that analytics, which will drive more analytics. And we think about it as the idea of using the data we collect, an RFID tag, a barcode scan, a mobile device in the hands of an associate knowing where a tool is, an IV pump or a forklift. If I have data in real time and I can make real decisions in real time, I can impact productivity. So it’s not from the idea the data we collect could be used as big data and can be used as analytics after the fact.

But the most advantageous thing to go do is use it in real time and say, what’s the next best action that needs to happen? So our customers in retail would say, it’s not enough to tell me the shelf is empty. You need to be able to tell me that this shelf is empty, and associate has to go move top stock down to the shelf because I don’t get an outcome. I don’t sell anymore unless it’s actually on the shelf where somebody can buy it. If it’s not on the top stock, is it in the backroom?

So how do I direct a task to a worker to go move it from the backroom onto the shelf? If it’s not in the backroom or not on the shelf, then ultimately, how do I automatically reorder from my distribution center to get it into the store? So it’s a sense analyze act framework that ultimately says if I can give things a digital voice with RFID does, and ultimately, I can automate the environment, then I became more effective and more efficient. And with AI today, that analytics becomes ever more important. You you’re talking about AI there, and how it’s actually incorporated into your own solutions.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: But, obviously, AI is a very, hot topic. And, I mean, can you talk more broadly about, how you’re leveraging AI? Are you talking about within your own products, but also potentially in your firm? How are you thinking about AI for increasing efficiencies internally? How are thinking about AI in general?

Yep. And and so I think the first and foremost, what I

Bill Burns, CEO, Zebra Technologies: talked about already is the idea of digitizing the environment that feeds AI models. And I think that’s what we do. We give visibility across the entire supply chain to assets and people and workers, you know, visibility and connectivity inside the environment, and we’re gonna feed the data into those models. So I think that’s the core of what we do. The second area I think we see as a large opportunity is the idea of leveraging our mobile devices in the hands of frontline workers to ultimately improve productivity using AI.

So I’ll use a retail example. A retail associate has somebody who wants to return an item and ultimately has an AI model running on the mobile device itself. So we’re working with Qualcomm and Google and, you know, our own technology to be able to be able to run the large language model on the device so I don’t need connectivity always to the cloud, which is expensive, and a lot of our customers don’t have strong connectivity out of things like retail stores. The associate says in plain text, in local language, you know, What do I do if a customer wants to return an item that’s over ninety days old? What do I do if a customer wants to return an item that, they want cash back, but they paid a credit card?

What do I would do if I wanna return an item that’s damaged? And, ultimately, having the store operating procedures available to that retail associate today to be able to go make the decisions to know and guide that associate. Over time, what we see happening is that happening automatically, meaning that the associates takes an image of the actual receipt and what comes back and says, okay. That item, you know, can be returned. It’s less than ninety days old.

It’s, you know, not is it damaged anyway? No. And then ultimately says, can return, you know, the the credit on the customer’s credit card. Would you like that, mister customer? So the transaction’s taking place in the background by using image to be able to just scan the receipt as opposed to the associate asking the question, hygienic AI, and the transition to more directed, you know, work taking place behind the scenes.

So we think the mobile device as a key to a digital assistant. What do I do inside manufacturing when production’s out of specification? What do I do when the red light’s on on the production you know, this area, the production, area, and how do I go fix it? What do I go do? That’s why the idea to move to tablets inside manufacturing is an example.

So this idea of a digital assistant, somebody, a companion with a frontline worker, being able to be able to query and drive information today, but moving to a genetic AI where there’s actually decision making and things happening in the background that then come back to the worker saying, I’ve done all that. I’ve done all the work for you and the idea of saying, it’s less than ninety days old. Yes. They can get a credit card. No.

It’s not. You know? Yes. It’s returnable. So I think that’s what we see is is a big opportunity for Zebra’s leveraging that mobile device.

Internally, we’re doing it, you know, many things that, others are doing. We’re leveraging AI across, you know, our code writing. We’re leveraging it across our customer service teams. We’re leveraging across marketing. So, you know, we’ve had a an opportunity where we’ve got our own internal AI tools available to all of our employees and then specific projects that we’re working on to drive efficiency internally.

But we think the biggest opportunity for us is digitizing the environment and then this idea of a digital companion using our mobile devices.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: And do you see software and services becoming a bigger focus for you?

Bill Burns, CEO, Zebra Technologies: Yeah. I would say today that, you know, our our software services and our supplies portfolio, which really is recurring like, represents about 25% of the business. Would say that you know? So that’s, you know, predominantly recurring revenue for for Zebra. And I think that that’s, you know, a focus of of all businesses.

How do you get more recurring revenue, you know, into the business? So I think you’re looking for continued new ways to generate more recurring revenue. Software is a focus for us, as I said. Within retail today, I think AI creates an opportunity for more software content. Our services business is a high level of attach to our mobile devices, especially as customers want latest and greatest software releases, software patches and others and breakfix across the portfolio.

And then our supplies business really tied to our printing business is really recurring like. So I think that, you know, it’s about 25% of the business today is, you know, is recurring, and we feel pretty good about that, and we’d like to continue to grow it.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: And talking about r and d a bit, you you invest about 10% of your 10% of revenue into r and d. How how do you determine where those investments go?

Bill Burns, CEO, Zebra Technologies: Yeah. I think that, you know, across the portfolio, we, you know, are the global leaders in in rugged mobile devices. We’re the global leader in in, you know, barcode scanning, handheld scanning. We’re the global leaders in in industrial, you know, printing, and we’re challengers in in some other new markets that we’ve entered. So I think we think about investing, in our core portfolio to continue our leadership in in those areas because that’s important to to our customer base.

And then we’ve shifted more of our r and d dollars into these new growth vectors. So places like RFID, places like robotics, places like our retail software and machine vision where we’re shifting more of our r and d dollars today to be able to enter those new markets where we believe, you know, we’ve got they’re a bit faster growing than our core portfolio, but it’s important that we invest in both. I think we take a strategic view on, you know, on an ongoing basis to make sure that we’re investing the right areas across the entire portfolio both in market segments or sorry, product portfolio segments, but as well as horizons, meaning, you know, how we take an investment of balancing between today’s portfolio and AI in the future as an example.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: And how do you think about priorities for your capital structure? Are acquisitions gonna be more bolt on, or could they be, more transformative?

Bill Burns, CEO, Zebra Technologies: Yeah. I think that, you know, we think first and foremost about, you know, our organic investment across the portfolio. We get, you know, significant returns in in investing organically, our our r and d dollars and then our in our go to market resources around the world. And and, so first and foremost, it’s organic, I would say. You know?

Second, we make, venture investments in times into companies that ultimately we’re inquisitive about, wanna know more about, but aren’t convinced yet that that’s a the technology or segment or an area in which we wanna learn more, but we’re not convinced yet. And, you know, we leverage m and a in areas where that many times we make an organic investment first to learn more about the market, and then we’ll go make, an acquisition in the space. So machine vision is a good example of that. We took our core assets around handheld scanning I described before. We turned them into fixed industrial scanning, the low end of the machine vision market, and and entered that market, learned more about it, and then did an acquisition at the very high end, the machine vision market of with the Matrox acquisition.

And now we’ve married a couple of smaller acquisitions around that, Adaptivision and most recently, Fotoneo. So our preference is organic because we’ve got great teams of software engineers today that ultimately have tight relationships with our product manager teams and our customers. We have understand the market segments and the verticals we play in. But M and A accelerates our growth into specific areas that are adjacent, and we think it’s an important piece of what we go do. So we continue to be inquisitive about M and A opportunities.

At the same time, we’re returning cash to investors through share buybacks. We bought about $200,000,000 in cash back between Q1 and the beginning of Q2 when we had our earnings announcement. We’ll continue to return capital in that way as well.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: Bringing things forward a bit to today’s environment, can you speak a bit about what the recent global trade policy dynamics mean to you from a demand perspective? And are you incorporating some of the tariff impact into your full year guide? And also, have you been working, your own supply chain or price structure to mitigate some of these issues? Yeah.

Bill Burns, CEO, Zebra Technologies: I would say that, you know, as I said earlier, the we haven’t seen a a demand impact from the the uncertainty around global trade from our customer perspective. I think they’re still moving ahead. You know, they are moving ahead still with the the projects they had planned, you know, for the year. So from a demand perspective, I think, at the moment, I think while it’s on their minds, while there’s concern about what’s gonna happen in the second half year from an economic perspective, I think they have an overall belief that some way, somehow, this will get sorted and and and the world will move forward. And I think that that’s likely what will happen some way somehow.

What that looks like and then what time frame is still a question, but I think that our customers believe this has to get sorted out and and it will. And therefore, they’re they feel good about their businesses and continue to move ahead. I’d say from the impact on our business, we outlined in in in our first quarter earnings release that it’s about a $70,000,000 impact, you know, in our business at the tariffs that were in in place at that time. And, that obviously would change depending on the dynamics around the tariff environment. As things change, we’ll continue to update here in second quarter as to what the impact is on our business.

I think in second in first quarter, was about $3,000,000 about $25,000,000 profit impact, dollars 25,000,000 to $30,000,000 we said for Q2. That will ultimately play out just because the tariffs are in place today. They were already there when we called Q2. And we’ve raised price to mitigate. We continue to work to to move our supply chain.

Our shipments into The US, we had about 85% of our shipments into The US a number of years ago came from China. By midyear this year, it’ll be up 35%, you know, of what comes into The US, comes out of China, and, otherwise, it’s manufactured outside of China. We use contract manufacturers, which give us opportunities to to move production fairly quickly overall.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: Where is that moving to out of China?

Bill Burns, CEO, Zebra Technologies: Mean, that that’s the question ultimately. So today, we manufacture in China, in Vietnam, Malaysia, and in Mexico. But, you know, additional moves across the supply chain, you need more certainty more certainty around what the tariff rates are to do additional moves. So I think that we’re in the same position most other companies are is moving production at the moment to other locations without clarity around what the tariffs are is is a difficult

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: Everyone’s facing a similar Yeah. Yeah. Similar dilemma at the moment. How should we think about, disruption risks like a QR code instead of barcodes or on phone checkouts?

Bill Burns, CEO, Zebra Technologies: Yeah. I mean, they’re they’re the same. I think that the you know, today, two d barcodes are read just the way, traditional barcodes were read. It’s made by, you know, vision systems and cameras that basically, you know, the technology today. So I think you’re seeing that’s why you see this move from, you know, where handheld scanning and fixed industrial scanning and machine vision are the same imaging systems, just higher processing power, more resolution, those kind of things.

So the the QR code or the two d barcode is continuing to to, emerge because of things like regulation and new standards and others. It can hold more information than a traditional barcode. So it will play an ever more important role, but it’s the same readers that read both today in our customers’ environments. You know, the idea of laser scanning of barcodes is, you know, well beyond us, and the images are what’s used today. And that’s used in mobile devices.

It’s used in in our scanners today. And I think it it it what it really shows is the enhancement of the two d barcode and the enhancements around regulation around it and in including more information around track and trace and be able to, you know, track from the point of manufacturer or the point of of where something’s produced and and others allows, creates ever more important opportunity for the barcode reading.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: Great. So just one last one for me, and then I’m gonna go to some audience questions because we’ve got a few audience questions here. What is it about Zebra that you think is most important for investors to understand?

Bill Burns, CEO, Zebra Technologies: Yeah. I would say that, you know, we’ve got strong customer relationships, around the world, and we’re truly a trusted partner to our customers. So whether you’re in retail or transportation logistics or manufacturing or health care, ever so more, government opportunities, especially here in The US and and what we’re doing in Europe, you know, our customers come to us as a strategic technology partner to them. So, you know, we do business with them in many areas today. We’ve got close relationships with them.

We lay out our vision for those industries to them and where we see, you know, them, where we see the the industry going overall. So for as an example, in in retail, we see the most important things to retailers today as being, you know, engaged associates within their stores. And we see it being inventory management, making sure you have the right inventory in the right place. We see customer engagement as a critical aspect of what retailers do. And that vision and how we leverage technology, hardware, software solutions across those priorities of retail is what we talk to our customers about, and we engage with them in.

It’s not just about a mobile device or it’s not just about a scanner or a printer or robotics inside ecommerce warehouse or, you know, a piece of software. We talk about their entire environment and how do they have better engaged associates, how do they have inventory in the right place, and how do I engage customers better. And when you change the conversation around that, then you’re given more opportunities in your customers to do more and more for them. That they reach out to us saying, I’ve got a business problem to solve. I’ve got a technology problem to solve.

Zebra, can you work with me in that area? And I think that that trusted partnership we have with, our customers around the world gives us an opportunity to continue to grow our business, not just in our core markets, but in the adjacencies and the areas where we’ve invested in. You know, it creates a tremendous opportunity for us.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: Great. Thanks. Just a reminder, if anyone has any questions, you can submit them to Pigeonhole, or you can vote on questions. There’s about five I see here. I’m just gonna go through.

We’ve got about eleven minutes left, so I’m gonna see how many of these we can get, get through. So first question, what is customer onboarding time and how much time and cost it’s moving around. What is customer onboarding time and how much time and cost would it take them if they want to switch to another competitor?

Bill Burns, CEO, Zebra Technologies: Yeah. I would say that, you know, the the the majority of our customers are, you know, deploy and make decisions around a single vendor in a specific solution area. So and and the products are very sticky over time, meaning that, you know, life cycle, these products are five years, you know, on let’s use mobile devices for a minute. Once a customer decides on device for a specific area, then ultimately, they make a large decision or purchase upfront. Then they continue to buy additional products, you know, over the life of that product to replace products that have gotten broken or lost or others or to enhance and have new applications associated with them, which they continue to buy from us.

The next time they come to to refresh that, you know, product portfolio, they typically come back to us. They’re already having conversations with us of what’s the next generation device? What’s the latest technology enhancements? Have you added RFID to a, you know, a mobile device? What’s the position around, you know, AI, and how can I use the device more in an AI area?

How can I is there a different form factor that ultimately makes a certain portion of my business more efficient? So think of wearable devices for hands free operations. So we’re having these conversations with our customers all the time. So, you know, we’re pretty confident once we’re into a customer’s environment and they’re deploying our technology that we will ultimately, you know, win the refresh within that environment.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: With RFID, can you talk through the process of customer adoption? Is there a bottleneck in that customers need a modern tech stack before first deploying the technology? I would say

Bill Burns, CEO, Zebra Technologies: that, you know, from an RFID perspective, there’s there’s multiple aspects that people look at. First is source tagging. So the the in inside transportation logistics, that source tag is done either when they bring the parcel into their facility or now the T and L carriers are looking at source tagging when they pick up the parcel at their customers. So how do they tag it at that point? In retail, the source tagging is done at manufacturing.

So I think that’s the first element of adoption is that you have to be able to source tag at manufacturer or at the place in which you take receipt of the goods. You can’t do that afterwards. It’s just too expensive to take items and actually tag them inside a retail store if they’re not tagged at retail or to tag them somewhere along the process within transportation logistics. You have to take them right at point of egress into the system. I think that’s the biggest barrier is tags, and we’re seeing what people are really excited about is the number of tags being, you know, projected over the next couple years is very significant uptick in in tags or items being tagged.

I think ultimately then you need to have, you know, the readers in place, and it’s a journey. Right? It starts with many times customers using handheld devices to read RFID tags. And then they move to portals, meaning is it in this room or is it out in the lobby area? So I walk through a doorway and I tell where are the RFID tags.

The next step in the journey is perpetual reading, meaning devices in the ceiling that ultimately tell you the device is not only or the the item is not only in this environment, but kinda where it is within about three feet or so. You can tell today in environments where an item is so you can direct somebody to where it is. And perpetually, can tell that the inventory is actually here because I can see it with the RFID tag. So it’s a bit of journey from a technology perspective, from a reader perspective. And then, ultimately, there is the software element associated with it.

And I wouldn’t call it a modern tech stack as much as I I think about it as taking location reads of what you wanna do. You wanna just know simply, is the item here, or is it in the lobby? Or do I wanna know where it is here? And then ultimately taking those location reads, be able to fill those and base to be able to fill filter that information, and then ultimately feed it into your inventory management system or feed it into a decision making system that says what’s the next best move in the business ultimately. So there’s software clearly involved in that, and it’s application software.

And we work with a whole series of independent software vendors that have applications today across retail, across transportation logistics, across quick serve restaurants, across different applications today. You know, we have our own application that we use within the the NFL today to track players’ cleats and shoulder pads and helmets, for instance, in every time they leave a locker room. So think of it, the idea of this portal reader. So those software exists today, and it’s either developed internally by our customers. Our largest customers have developed software on their own, but the majority would buy software, solutions from the independent software vendors that we work with each and every day.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: Another question here, from Milton. So can you help us understand who is your core customer, and what is the product suite that, which has the highest market share?

Bill Burns, CEO, Zebra Technologies: So our core customers range across retail, transportation, logistics, manufacturing, health care. No matter where you are in the world, you’re likely a customer of ours in some way. We’re the global leaders in rugged mobile devices. We’re the global leader in handheld scanning. We’re the global leader in industrial barcode reading today across the portfolio.

We’re a leader in RFID reading technology and printing technology both. And, you know, across the rest of the portfolio, we have different, you know, varying market share positions in in new areas we’ve entered. We’d have lower market share as example. But in our core markets, we are the market leader.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: Given your competitors are facing difficulties and there’s so much uncertainty, how are you thinking about continued market share gains and any threat from Asian or Chinese competitors? Yeah. We we continue to look

Bill Burns, CEO, Zebra Technologies: at market share as an important piece of of what we do around the globe. And and being the market leader, we continue to invest across the portfolio, as I mentioned before, to continue to be that market leader. We also work closely with our customers to make sure that we’re really understanding their next generation needs across the portfolio, so we remain as that market leader. I think that you’ve seen other competitors struggle in the market, and we’ve continued to to take share against our traditional competitors across our core portfolio. I think you’re always gonna have competitors.

The Asian competitors have been around, you know, for a long time. I think that, as I said before, we kinda work to tier the portfolio to make sure we’ve got an answer for lower cost competitors in the market. We call it value tier, kind of a good we got our best scenario. And I think that ultimately, we’ve been taking share in that, you know, area around the globe. So if you look at this value tier portfolio, there’s, you know, a market segment that’s very, very low end, you know, in in some of the Asian markets that we’ve never really played in.

It doesn’t really make sense for us to go do that. But for the minority you know, majority of areas where someone wants a lower cost product with a lower specification than our premium or mirror care product, we’ve got a product offering from them at a competitive price, at a competitive offering to, you know, any competitor around the world.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: And how mature are the AI features that you’ve demoed? What kind of timeline are you thinking about in terms of moving from pilot projects to deployment? Yeah. I would say that the opportunities today that we’ve demoed at some

Bill Burns, CEO, Zebra Technologies: of the largest trade shows are, you know, in pilot today, I would say, at our largest customers. So the largest customers, especially in retail, are leading the way where they have their own applications within the device themselves, and they’ve got development teams working on these applications. They’ve got models where they’ve created digital assistance for, you know, for their associates and are leveraging our devices to be able to manage, you know, those in their in their environment. So I’d say the the early ones of those are the the leaders in the market. It’s that next tier down that I think we see opportunity for us to to leverage more of our software offerings to to our customers, but early pilots today, I would say, more so than anything else.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: So the next question here is, what is the total software revenue TAM, market size for every dollar of hardware sold? And which companies are currently part of this value chain? Wait.

Bill Burns, CEO, Zebra Technologies: Can you talk about that? You I think there’s I don’t know that I don’t know the TAM, associated with, like, the surrounding our device. Right? It’d be interesting number, but I think that there’s a tremendous amount of software that resides on our mobile devices today. So you think of some of the retailers today, they would have, you know, upwards of 30 to 40 applications sometimes on a on a mobile device in their environment.

So there’s significant amount of software on those devices today that allow associates to do their job within retail or transportation lists or others. So think about, you know, it really is a smartphone device with a scanning, you know, engine, built into that device, and our customers are using a broad base of different technology, some of which from Zebra, as I said, communication collaboration, task management, workforce management, all those offerings, but also their inventory management systems, their, you know, their systems internally to manage the store ultimately and and monitor things like refrigeration and others, their engagement software with with their, customers to be able to merchandise and others. So I’m not sure of the TAM, but there’s tremendous amounts of software, know, used and leveraged on those devices today.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: Great. Thanks, Bill. I think we’re just about out of time. I just wanted to, see if you give you a last moment for few quick comments to to leave

Bill Burns, CEO, Zebra Technologies: us with. Yeah. I would just say that we’re excited about the opportunity ahead of us. Our customer relationships are incredibly strong today. We see our customers continue to invest in their, portfolio of of products and and solutions from Zebra, and and, thanks for your time.

Mark Newman, Bernstein’s IT hardware analyst, Bernstein: Bill, thanks very much for joining us. Thank you, everyone.

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