ZEBRA TECHNOLOGIES CORP — Call Transcript 2025

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 2023. He's more than 30 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. During this time, Bill extended Zebra's market share leadership across its core businesses while entering adjacent and expansion markets. He also delivered on the company's enterprise asset intelligence vision and strengthened Zebra's strategic relationships with its customers and partners. Before joining Zebra, Bill was CEO of Embrain and previously, before that, CEO of Spirent Communications. Thanks so much, Bill, for joining us today. Thank you. Great to be here. 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 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. Maybe, Mark, the, you know, maybe I 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, and 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 parcel delivery and e-commerce. You see us in hospital wristbands that identify patients in hospitals. And we serve retail, transportation, logistics, healthcare, manufacturing as our core markets, ultimately. You know, we, 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 billion-ish in revenue, ultimately, you know, have a broad range of our portfolio of products. The, you know, 80+% of Fortune 500 customers or, our 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. 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, a trusted partner as they deploy new technologies, including AI, moving forward. Thanks very much for that intro, Bill. Just going into the questions, Zebra saw a pandemic period surge, followed by a digestion period, and demand characteristics for Zebra solutions have started to improve again. Can you discuss what that means across your end markets? Is this different from what you saw four to five years ago? Has this also been relatively broad-based, or are you seeing more strength among different end markets, customer segments, regions, or deal sizes? Yeah, I would say that, you know, across our customer base, our products and solutions are mission-critical to what they do, picking in an e-commerce warehouse, delivering a parcel in transportation logistics, serving a customer in retail, treating a patient within healthcare. Our products and solutions are mission-critical to what our customers need. We've seen broad-based growth across the portfolio, and we've seen that during the pandemic, we saw a large buildout of capacity within our customers, whether that's transportation logistics or e-commerce or inside retail, that then saw them pull back in spending in 2022 or 2023, but return to growth in 2024. 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, you know, their thinking around what the global trade environment means to them, but we have not seen the change in buying behavior. We have seen them actually continue to buy, you know, continue to move ahead with their projects. We have continued to see them move forward with the areas in which we are working with them. You know, we think that is a good sign across the business. The global trade environment certainly is on their minds, but it has not changed their buying behavior. I think we are glad to see kind of this broad-based growth. I would say manufacturing lags a bit, you know, as that segment is still recovering. Still double-digit growth in first quarter, but lagging the other segments a little bit as we are 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 guided to Q2 that, you know, and where we're at for, you know, our overachievement in Q1. I would say our guide to Q2, FX moving in the right direction, a small acquisition we did ultimately would've led us to typically up our guide for the full year in Q1. I think the global uncertainty around trade, we, you know, stuck with our full-year guide. I think we feel good about where we stand today with the pipeline of opportunities and our customers and what we've delivered in Q1, our guide for Q2, and then ultimately, what we see moving forward. Okay. And how are you thinking about your 5-7% long-term growth algorithm? What gives you confidence in that? And how would you frame your customers' refresh cycles now? Yeah, I would say that, you know, the 5-7% growth rate is what we talked about, you know, through cycle across the business. That's kind of made up of, you know, our core product portfolio, which grows at about 4-5%, you know, as, as we kind of 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 and environments that we hadn't seen mobility in the past. Manufacturing's 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 their form factor to be able to communicate, collaborate, get more information than just looking at fixed screens around production. 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. We see faster than 4-5% growth across those areas of the portfolio. Then we've got new expansion businesses around machine vision, which is, and fixed industrial scanning, which applies to transportation logistics and manufacturing customers. Again, grows faster than our core. Most recently has kind of lagged behind, right? We've seen this in the manufacturing sector and the lack of investment in T and L coming out of COVID. At that market, we'll be a very attractive market, and machine vision is a return 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? We think of our software offerings that go along with our mobile computing area as expansion areas for us. And then, you know, lastly, robotics. Still at its infancy, but think of the idea of e-commerce warehouse picking, where robots and people work together to do that pick. Those areas grow much faster but are very small today in the portfolio overall. When we marry all that together, our core portfolio, these expansion areas that grow faster, we come to this 5-7% growth rate through cycle, and we feel good about delivering that and continue to, you know, increase profitability along the way. We think about really as profitable growth across the portfolio. Right. So 4-5% growth in the core businesses, and then there's additional growth areas to get to that 5-7%. That's correct. How do we think about that in light of 2015 to 2024 CAGR being closer to 33.5%? Say it again. It is 2015 to 2024, CAGR was actually closer to 3.5%. Maybe just frame it in terms of what has changed. Yeah, so I think right, compared to the 5-7%, yeah. 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 acquisition. So Zebra specialty printing business acquiring the assets from Motorola and the enterprise business, $3.5 billion in November, you know, of 2014 growing to $5 billion in 2020. And then, you know, 2019, flat in 2020, a large spike, you know, upwards in 2021 and 2022, really driven by the pandemic, right? Buy online, pick up in store, home delivery, e-commerce, all the things that our customers thought were gonna continue to grow at those growth rates and then the decline in 2023. We've seen a lot of variation in the growth, including the spike up and the decline in 2023. That's put a lot of, you know, it's hard to measure the business in CAGRs these days, across that timeframe. But I think as we think about 2023 moving forward, there's no reason why we shouldn't be able to deliver the 5-7% growth rate. Okay. Great. And can you talk about how that translates into EPS growth and free cash flow? I think you've talked about double-digit EPS growth. Can you just talk about that and free cash flow conversion? Yeah, I think that, you 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, you know, 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 gonna invest some of that across, you know, R&D as we enter new areas and sales and marketing, continue to extend our lead in the market and enter new markets. I think you'll see a drop through of, you know, profitability as, as we grow top line revenue. From a free cash flow perspective, we think of 100% free cash flow conversion as where we, you know, target across the business. The business generates a lot of cash, and ultimately, you know, we see free cash flow conversion as being an important metric, you know, for us to continue to track. 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 competitive dynamic is about the same. I think we haven't seen, you know, much different, certainly, in markets around the world. There's always gonna be, you know, formal competitors that we have in the markets, and we have new competitors in these new expansion areas that we're investing in today. I think that from an Asian competitor perspective, I think that we've seen, you know, that dynamic not change much. Ultimately, it represents kind of the value tier at a low end of the portfolio. We've spent a lot of time across the portfolio tiering the portfolio. What that, you know, early on, I would say, you know, 10 years ago, we thought that, you know, having a value tier product or a lower tier products would, you know, take away from the, you know, average sell price of our products and bring down the average sell price to our customers. It has actually done the opposite. It has given us a portfolio product of kind of good, better, best. It has allowed us to have conviction around the top end of our product portfolio. Customers who ultimately want the fastest device, the largest screens, the most durability, the best, you know, service around those devices will pay a premium for those ultimately. 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. It's allowed us to maintain kind of conviction and price at the high end of the product portfolio. Competition hasn't really changed, and we've tiered the portfolio to match the different market segments in which we're playing in today. How should we think about, in-store based on pricing power? How much risk is there of structural replacement cycle elongation? Yeah, I would say that, you know, 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 % 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 in product cycles around those. We see those being varying degrees, typically in mobile devices. It's kind of 4-5 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 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 as you 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. Let's say their refresh cycle comes up again, it's about, you know, it could be 60,000 devices. The refresh cycle isn't the same amount of devices. There are more associates. There are more stores. There are 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. That creates an opportunity for us beyond refresh, this idea of unserved hands. If we think about across the verticals we serve, not everyone's equipped with a mobile device today. That is 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 is happening at the point of productivity. You give an asset a digital voice by reading a barcode tag. You read an RFID tag. You have got an associate with a mobile device in their hand. Ultimately, you do analytics around to say, where is the pallet? Where is the forklift? Where is the employee? Ultimately, where do I gotta move that pallet to, to put it on this truck? I sense what is happening in the point of productivity. I analyze it, and AI enhances that, you know, analytics capability across the environment. 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. Then I drive an outcome. I get the right pallet to the right customer on time, ultimately. We think of our entire portfolio as being kind of tied to that, is 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? How do I take the analytics? 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. 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, I think that we, you know, we think about organic investment always first. So machine vision's 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 that scan 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. 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. It's kind of a very closely adjacent space to us. Machine vision is a step up from that. You just don't just read the barcode. You actually use vision systems to say, is the parcel damaged? In manufacturing, is the label on correctly? Are all the cashews whole? All the inspection you do within manufacturing. You go from kind of handheld scanning, which we have a 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. We think of extending the portfolio through acquisitions in areas that are closely adjacent to what we do today. I mentioned software today. Today, 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. They want to be able to communicate, collaborate with their manager. They want to be able to communicate, collaborate with each other. When are you on break? Do you want to go grab lunch? Those kind of things. They don't want the associates using their personal mobile devices because it distracts them. 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? It is 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? 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? 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 is software. I ultimately wanna be able to set my schedule. I 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. The software's closely adjacent to the mobile devices, and it sits on top of those mobile devices. 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. 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? 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 segments today, and it's not going away. I would say that, in fact, there's enhancements to barcode reading today that new regulation is driving more track and trace capability across 2D barcodes around the world. That's, you know, new standards that are coming in place. RFID technology is an exciting technology around the automation. This idea of having an enhanced digital voice associated with, starting in retail, really in apparel more than anything else, as customers were trying to track inventory better, especially in things that have lots of different sizes, lots of different styles, and others. 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. 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. We're seeing it being used all the way through the supply chain. Fast fashion would've been a good example early on. They controlled their supply chain. 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. UPS has made a lot of announcements around, you know, RFID technology. 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. 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 environments. That is why we talk about the long-term trend of digitizing and automating the environments. Today, what we are seeing ever more is this idea of using AI to do that analytics, which will drive more analytics. 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. It is not from the idea the data we collect could be used as big data and can be used as analytics after the fact. 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?" 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 the 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 any more unless it's actually on the shelf where somebody can buy it. If it's not on the top stock, is it in the back room? How do I direct a task to a worker to go move it from the back room onto the shelf? If it's not in the back room or not on the shelf, then ultimately how do I automatically reorder from my distribution center to get it into the store? It is a sense analyze act framework that ultimately says if I can give things a digital voice, which RFID does, and ultimately I can automate the environment, then I become more effective and more efficient. With AI today, that analytics becomes ever more important. Yeah. You, so you're talking about AI there, and how it's actually incorporated into your own solutions. I mean, obviously AI is a very, very hot topic. I mean, can you talk more broadly about how you're leveraging AI? Are you talking about it within your own products, but also perhaps potentially in your firm? How are you thinking about AI for increasing efficiencies internally? How are you thinking about AI in general? Yeah. I think the first and foremost, what I talked about already is the idea of digitizing the environment that feeds AI models. 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. 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. 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. We're working with Qualcomm and Google and, you know, our own technology 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. 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 90 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 do if I wanna return an item that's damaged?" 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 an associate 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 90 days old. It's, you know, not, is it damaged in any way? No." And then ultimately says, "I can return, you know, the credit on the customer's credit card. Would you like that, Mr. Customer?" 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, a generative AI, and the transition to more directed, you know, work taking place behind the scenes. 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. 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 genic 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." The idea of saying, "It's less than 90 days old. Yes, they can get a credit card. No, it's not, you know, yes, it's returnable." I think that's what we see 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 it across marketing. You know, we've had 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. We think the biggest opportunity for us is digitizing the environment and this idea of a digital companion using our mobile devices. Do you see software and services becoming a bigger focus for you? Yeah, I would say today that, you know, our software services and our supplies portfolio, which really is recurring like, represents about 25% of the business. I would say that, you know, so that's, you know, predominantly recurring revenue for, for Zebra. I think that that's, you know, a focus of all businesses. How do you get more recurring revenue, you know, into the business? I think we are looking for continued new ways to generate, you know, 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 attached to our mobile devices, especially as customers want, you know, latest and greatest software releases, software patches, and others and, and break fix across the portfolio. and then our supplies business really tied to our printing business is really recurring like. So I think that, you know, 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. Talking about R&D a bit, you invest about 10% of your, 10% of revenue into R&D. How do you determine where those investments go? 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. I think we think about investing, in our core portfolio to continue our leadership in, in those areas 'cause that's important to, to our customer base. And then we've shifted more of our R&D dollars into these new growth vectors. Places like RFID, places like robotics, places like retail software and machine vision where we're shifting more of our R&D dollars today to be able to enter those new markets where we believe, you know, 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 in 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 and balancing between today's portfolio and AI in the future as an example. How do you think about priorities for your capital structure? Are acquisitions gonna be more bolt-on or could they be more transformative? 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 investing organically our R&D dollars and then in our go-to-market resources around the world. First and foremost is organic, I would say. You know, second, we make venture investments at times into companies that ultimately we're inquisitive about, wanna know more about, but aren't convinced yet that that's a technology or a segment or an area in which we wanna learn more, but we're not convinced yet. You know, we leverage M&A in areas where 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. Machine vision's 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 entered that market, learned more about it, and then did an acquisition at the very high end, the machine vision market, with a Matrox acquisition. Now we've married a couple of smaller acquisitions around that, Adaptive Vision and most recently Photoneo. Our preference is organic because we've got great teams of software engineers today that ultimately have tight relationships with our product manager teams that are customers. We understand the market segments and the verticals we play in, but M&A accelerates our growth into specific areas that are adjacent, and we think it's an important piece of what we go do. We continue to be inquisitive about, you know, M&A opportunities. At the same time, we're returning cash to, you know, investors through share buybacks. We bought about $200 million in cash back between Q1 and in the beginning of Q2 when we had our earnings announcement. We'll continue to return capital in that way as well. Bringing things forward a bit to our today's environment, can you speak a bit about what the recent global trade policy dynamics mean to you from a demand perspective? Are you incorporating some of the tariff impact into your full year guide? Also, have you been working your own supply chain or price structure to mitigate some of these issues? Yeah, I would say that, you know, as I said earlier, we haven't seen a demand impact from 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 projects they had planned for the year. From a demand perspective, I think at the moment, 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 the world will move forward. I think that that's likely what will happen some way, somehow. What that looks like and in what timeframe is still a question, but I think that our customers believe this has to get sorted out, and it will. Therefore, they feel good about their businesses and continue to move ahead. I'd say from the impact on our business, we outlined in our first quarter earnings release that it's about a $70 million impact, you know, in our business at the tariffs that were in place at that time. And, you know, that obviously would change depending on the dynamics around, you know, a tariff environment. As things change, we'll continue to update, you know, here in second quarter as to what the impact is on our business. I think in first quarter was about $3 million, about $25 million profit impact, $25 million-$30 million we said for Q2. that will ultimately play out just because the tariffs that are in place today, they were already there when we called Q2. We've raised price to mitigate. We're continuing to work to move our supply chain, our shipments into the U.S. We had about 85% of our shipments into the U.S. a number of years ago came from China. By midyear this year, it'll be about 35%, you know, of what comes into the U.S. comes out of China. Otherwise, it's manufactured outside of China. We use contract manufacturers, which give us opportunities to move production fairly quickly overall. Where is that? Where is that moving to out of China? I mean, that, that's the question ultimately. Today we manufacture in China, in Vietnam, Malaysia, and in Mexico. You know, additional moves across the supply chain need more certainty around what the tariff rates are to do additional moves. I think that we're in the same position most other companies are, as moving production at the moment to other locations without clarity around what the tariffs are is a difficult, 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? Yeah, I mean, they're the same. I think that, you know, today, 2D 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. 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. The QR code or the 2D barcode is continuing to emerge because of things like regulation and new standards and others. It can hold more information than a traditional barcode. 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 imagers are what's used today. It's used in mobile devices. It's used in our scanners today. I think what it really shows is the enhancement of the 2D barcode and the enhancements around regulation around it and including more information around track and trace and be able to, you know, track from the point of manufacturer or the point of where something's produced and others allows, creates ever more important opportunity for the barcode reading. Great. So just one last one for me, and then I'm gonna go to some audience questions 'cause we've got a few audience questions here. What is it about Zebra that you think is most important for investors to understand? 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. Whether you're in retail or transportation logistics or manufacturing or healthcare, you know, ever so more, government opportunities, especially here in the U.S. and what we're doing in Europe, you know, our customers come to us as a strategic technology partner to them. 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 industry going overall. For as an example, in retail, we see the most important things to retailers today as being, you know, engaged associates within their stores. 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. 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 is not just about a mobile device or it is not just about a scanner or a printer or robotics inside e-commerce 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. When you change the conversation around that, then you are given more opportunities in your customers to do more and more for them. 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?" 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. 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 11 minutes left, so I'm gonna see how many of these we can get through. 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 will it take them, if they want to, switch to another competitor? Yeah, I would say that, you know, the majority of our customers are, you know, deploy, and make decisions around a single vendor in a specific solution area. The products are very sticky over time, meaning that, you know, lifecycle, these products are five years, you know, on this use mobile devices for a minute. Once a customer decides on a 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 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? Think of wearable devices for hands-free operations. 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. 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 that, you know, from an RFID perspective, there's multiple aspects that people look at. First is source tagging. 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. How do they tag it at that point? In retail, the source tagging is done at manufacturing. I think that's the first element of adoption, 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 of years is very significant uptick 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? I walk through a doorway and I tell wear 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 kind of 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. Perpetually, I can tell that the inventory is actually here 'cause I can see it with the RFID tag. It is a bit of a journey from a technology perspective, from a reader perspective. Ultimately, there is the software element associated with it. I would not call it a modern tech stack as much as I, I think about it as taking location reads of what you want to do. You want to 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, being 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. There is software clearly involved in that, and it's application software. 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 NFL today to track players, cleats and shoulder pads and helmets, for instance, every time they leave a locker room. Think of it, the idea of this portal reader. 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. Another question here, from the audience. Can you help us understand who is your core customer, and what is the product suite that, which has the highest market share? Our core customers range across retail, transportation logistics, manufacturing, healthcare. 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 new areas we've entered. We'd have lower market share as an example, but in our core markets, we are the market leader. 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 continue to look at market share as an important piece of what we do around the globe. 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 that market leader. I think that you've seen other competitors struggle in the market, and we've continued 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 kind of 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. I think that ultimately we've been taking share in that, you know, area around the globe. If you look at this value tier portfolio, there's, you know, a market segment that's very, very low end, you know, in some of the Asian markets that we've never really played in, and it doesn't really make sense for us to go do that. For the majority of areas where someone wants a lower-cost product with a lower specification than our premium or mid-tier product, we've got a product offering for them at a competitive price, at a competitive offering to, you know, any competitor around the world. 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 AI opportunities today that we've demoed at some of the largest trade shows are, you know, in pilot today, I would say, at our largest customers. The largest customers, especially in retail, are leading the way where they have their own applications within the devices 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 they're leveraging our devices to be able to manage, you know, those in their environment. I would say the early ones of those are the leaders in the market. It's that next tier down that I think we see the opportunity for us to leverage more of our software offerings to our customers but, Early pilots today, I would say, more so than anything else. 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, Talk about that. You know, I think there's, I don't know the, 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. You think of some of the retailers today, they would have, you know, upwards of 30-40 applications sometimes on a, on a mobile device in their environment. There's a significant amount of software on those devices today that allow, associates to do their job within retail or transportation logistics or others. Think about, you know, it really is a smartphone device with the 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 monitor things like refrigeration and others, their engagement software with, with their customers to be able to merchandise and others. I'm not sure of the TAM, but there's tremendous amounts of software are, you know, used and leveraged on those devices today. Great. Thanks, Bill. I think we're just about out of time. I just wanted to see if you could give your last moment for a few quick comments to leave 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 products and solutions from Zebra. Thanks for your time. Bill, thanks very much for joining us. Thank you, everyone.

Speaker 1: 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 2023. He's more than 30 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. During this time, Bill extended Zebra's market share leadership across its core businesses while entering adjacent and expansion markets. He also delivered on the company's enterprise asset intelligence vision and strengthened Zebra's strategic relationships with its customers and partners. Before joining Zebra, Bill was CEO of Embrain and previously, before that, CEO of Spirent Communications. Thanks so much, Bill, for joining us today. Okay, good morning, everyone. okay good morning everyone Thanks for coming. thanks for coming I'm Mark Newman, Bernstein's IT hardware analyst, and, great to welcome Bill Burns here, CEO of Zebra Technologies. 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. just a brief intro of bill Bill was named CEO of Zebra Technologies in March 2023. bill was named ceo of zebra technologies in march 2023 He's more than 30 years' experience in the technology sector and joined Zebra Technologies in 2015. he's more than 30 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. in his prior role as chief product and solutions officer he oversaw strategy investments and development of zebra's portfolio of products and solutions During this time, Bill extended Zebra's market share leadership across its core businesses while entering adjacent and expansion markets. during this time bill extended zebra's market share leadership across its core businesses while entering adjacent and expansion markets He also delivered on the company's enterprise asset intelligence vision and strengthened Zebra's strategic relationships with its customers and partners. he also delivered on the company's enterprise asset intelligence vision and strengthened zebra's strategic relationships with its customers and partners Before joining Zebra, Bill was CEO of Embrain and previously, before that, CEO of Spirent Communications. before joining zebra bill was ceo of embrain and previously before that ceo of spirent communications Thanks so much, Bill, for joining us today. thanks so much bill for joining us today

Speaker 2: Thank you. Great to be here. Thank you. thank you Great to be here. great to be here

Speaker 1: 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 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. 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. 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 just a reminder for everyone, we've got Pigeonhole. and then 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. 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. over to you

Speaker 2: Maybe, Mark, the, you know, maybe I 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, and 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 parcel delivery and e-commerce. You see us in hospital wristbands that identify patients in hospitals. And we serve retail, transportation, logistics, healthcare, manufacturing as our core markets, ultimately. You know, we, 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. Maybe, Mark, the, you know, maybe I start with Zebra's vision, right? maybe mark the you know maybe i 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, and optimally utilized. 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 and optimally utilized And what I mean by that is that we think of, you see Zebra in everyday life. 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 parcel delivery and e-commerce. so scanners at the front of checkout in retail you see us in mobile devices being used for parcel delivery and e-commerce You see us in hospital wristbands that identify patients in hospitals. you see us in hospital wristbands that identify patients in hospitals And we serve retail, transportation, logistics, healthcare, manufacturing as our core markets, ultimately. and we serve retail transportation logistics healthcare manufacturing as our core markets ultimately You know, we, 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. you know we 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 billion-ish in revenue, ultimately, you know, have a broad range of our portfolio of products. The, you know, 80+% of Fortune 500 customers or, our 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. 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, a trusted partner as they deploy new technologies, including AI, moving forward. Inside robotics and machine vision are new areas in which we've invested across the portfolio. inside robotics and machine vision are new areas in which we've invested across the portfolio Today, we're, you know, $5 billion-ish in revenue, ultimately, you know, have a broad range of our portfolio of products. today we're you know $5 billion-ish in revenue ultimately you know have a broad range of our portfolio of products The, you know, 80+% of Fortune 500 customers or, our 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. the you know 80+% of fortune 500 customers or our 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 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, a trusted partner as they deploy new technologies, including AI, moving forward. 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 a trusted partner as they deploy new technologies including ai moving forward

Speaker 1: Thanks very much for that intro, Bill. Just going into the questions, Zebra saw a pandemic period surge, followed by a digestion period, and demand characteristics for Zebra solutions have started to improve again. Can you discuss what that means across your end markets? Is this different from what you saw four to five years ago? Has this also been relatively broad-based, or are you seeing more strength among different end markets, customer segments, regions, or deal sizes? Thanks very much for that intro, Bill. thanks very much for that intro bill Just going into the questions, Zebra saw a pandemic period surge, followed by a digestion period, and demand characteristics for Zebra solutions have started to improve again. just going into the questions zebra saw a pandemic period surge followed by a digestion period and demand characteristics for zebra solutions have started to improve again Can you discuss what that means across your end markets? can you discuss what that means across your end markets Is this different from what you saw four to five years ago? is this different from what you saw four to five years ago Has this also been relatively broad-based, or are you seeing more strength among different end markets, customer segments, regions, or deal sizes? has this also been relatively broad-based or are you seeing more strength among different end markets customer segments regions or deal sizes

Speaker 2: Yeah, I would say that, you know, across our customer base, our products and solutions are mission-critical to what they do, picking in an e-commerce warehouse, delivering a parcel in transportation logistics, serving a customer in retail, treating a patient within healthcare. Our products and solutions are mission-critical to what our customers need. We've seen broad-based growth across the portfolio, and we've seen that during the pandemic, we saw a large buildout of capacity within our customers, whether that's transportation logistics or e-commerce or inside retail, that then saw them pull back in spending in 2022 or 2023, but return to growth in 2024. 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. Yeah, I would say that, you know, across our customer base, our products and solutions are mission-critical to what they do, picking in an e-commerce warehouse, delivering a parcel in transportation logistics, serving a customer in retail, treating a patient within healthcare. yeah i would say that you know across our customer base our products and solutions are mission-critical to what they do picking in an e-commerce warehouse delivering a parcel in transportation logistics serving a customer in retail treating a patient within healthcare Our products and solutions are mission-critical to what our customers need. our products and solutions are mission-critical to what our customers need We've seen broad-based growth across the portfolio, and we've seen that during the pandemic, we saw a large buildout of capacity within our customers, whether that's transportation logistics or e-commerce or inside retail, that then saw them pull back in spending in 2022 or 2023, but return to growth in 2024. we've seen broad-based growth across the portfolio and we've seen that during the pandemic we saw a large buildout of capacity within our customers whether that's transportation logistics or e-commerce or inside retail that then saw them pull back in spending in 2022 or 2023 but return to growth in 2024 That trend continues. that trend continues We saw in Q1 broad-based growth across the portfolio, across each of our vertical markets I mentioned before. 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. we've seen it across all geographies Obviously, some caution on the point of our customers of, you know, their thinking around what the global trade environment means to them, but we have not seen the change in buying behavior. We have seen them actually continue to buy, you know, continue to move ahead with their projects. We have continued to see them move forward with the areas in which we are working with them. You know, we think that is a good sign across the business. The global trade environment certainly is on their minds, but it has not changed their buying behavior. I think we are glad to see kind of this broad-based growth. I would say manufacturing lags a bit, you know, as that segment is still recovering. Still double-digit growth in first quarter, but lagging the other segments a little bit as we are still seeing manufacturing, you know, recover around the globe. Obviously, some caution on the point of our customers of, you know, their thinking around what the global trade environment means to them, but we have not seen the change in buying behavior. We have seen them actually continue to buy, you know, continue to move ahead with their projects. We have continued to see them move forward with the areas in which we are working with them. obviously some caution on the point of our customers of you know their thinking around what the global trade environment means to them but we have not seen the change in buying behavior. we have seen them actually continue to buy you know continue to move ahead with their projects. we have continued to see them move forward with the areas in which we are working with them You know, we think that is a good sign across the business. you know we think that is a good sign across the business The global trade environment certainly is on their minds, but it has not changed their buying behavior. the global trade environment certainly is on their minds but it has not changed their buying behavior I think we are glad to see kind of this broad-based growth. I would say manufacturing lags a bit, you know, as that segment is still recovering. i think we are glad to see kind of this broad-based growth. i would say manufacturing lags a bit you know as that segment is still recovering Still double-digit growth in first quarter, but lagging the other segments a little bit as we are still seeing manufacturing, you know, recover around the globe. still double-digit growth in first quarter but lagging the other segments a little bit as we are still seeing manufacturing you know recover around the globe

Speaker 1: Any specific, additional comments on pipeline? Any specific, additional comments on pipeline? any specific additional comments on pipeline

Speaker 2: 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 guided to Q2 that, you know, and where we're at for, you know, our overachievement in Q1. I would say our guide to Q2, FX moving in the right direction, a small acquisition we did ultimately would've led us to typically up our guide for the full year in Q1. I think the global uncertainty around trade, we, you know, stuck with our full-year guide. I think we feel good about where we stand today with the pipeline of opportunities and our customers and what we've delivered in Q1, our guide for Q2, and then ultimately, what we see moving forward. I would say that, you know, we feel good about, you know, where we're at with our customers today. 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 guided to Q2 that, you know, and where we're at for, you know, our overachievement in Q1. i mean i think that you know we guided to q2 that you know and where we're at for you know our overachievement in q1 I would say our guide to Q2, FX moving in the right direction, a small acquisition we did ultimately would've led us to typically up our guide for the full year in Q1. i would say our guide to q2 fx moving in the right direction a small acquisition we did ultimately would've led us to typically up our guide for the full year in q1 I think the global uncertainty around trade, we, you know, stuck with our full-year guide. i think the global uncertainty around trade we you know stuck with our full-year guide I think we feel good about where we stand today with the pipeline of opportunities and our customers and what we've delivered in Q1, our guide for Q2, and then ultimately, what we see moving forward. i think we feel good about where we stand today with the pipeline of opportunities and our customers and what we've delivered in q1 our guide for q2 and then ultimately what we see moving forward

Speaker 1: Okay. And how are you thinking about your 5-7% long-term growth algorithm? What gives you confidence in that? And how would you frame your customers' refresh cycles now? Okay. okay And how are you thinking about your 5-7% long-term growth algorithm? and how are you thinking about your 5-7% long-term growth algorithm What gives you confidence in that? what gives you confidence in that And how would you frame your customers' refresh cycles now? and how would you frame your customers' refresh cycles now

Speaker 2: Yeah, I would say that, you know, the 5-7% growth rate is what we talked about, you know, through cycle across the business. That's kind of made up of, you know, our core product portfolio, which grows at about 4-5%, you know, as, as we kind of 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 and environments that we hadn't seen mobility in the past. Yeah, I would say that, you know, the 5-7% growth rate is what we talked about, you know, through cycle across the business. yeah i would say that you know the 5-7% growth rate is what we talked about you know through cycle across the business That's kind of made up of, you know, our core product portfolio, which grows at about 4-5%, you know, as, as we kind of see it across our mobile device, mobile, you know, computing portfolio across our scanners, across our print portfolio. that's kind of made up of you know our core product portfolio which grows at about 4-5% you know as as we kind of 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. 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. we think of adjacent markets that are you know that we're invested in So think of RFID technology growing, growing much faster. 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 and environments that we hadn't seen mobility in the past. our tablet portfolio we're seeing new opportunities across you know tablets as a way to a a larger screen and environments that we hadn't seen mobility in the past Manufacturing's 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 their form factor to be able to communicate, collaborate, get more information than just looking at fixed screens around production. 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. We see faster than 4-5% growth across those areas of the portfolio. Then we've got new expansion businesses around machine vision, which is, and fixed industrial scanning, which applies to transportation logistics and manufacturing customers. Again, grows faster than our core. Most recently has kind of lagged behind, right? We've seen this in the manufacturing sector and the lack of investment in T and L coming out of COVID. Manufacturing's 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 their form factor to be able to communicate, collaborate, get more information than just looking at fixed screens around production. manufacturing's 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 their form factor to be able to communicate collaborate get more information than just looking at fixed screens around production We're seeing the tablet portfolio, for instance, grow faster. 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. our supplies business that ties to you know our printing portfolio overall grows a bit faster We see faster than 4-5% growth across those areas of the portfolio. we see faster than 4-5% growth across those areas of the portfolio Then we've got new expansion businesses around machine vision, which is, and fixed industrial scanning, which applies to transportation logistics and manufacturing customers. then we've got new expansion businesses around machine vision which is and fixed industrial scanning which applies to transportation logistics and manufacturing customers Again, grows faster than our core. again grows faster than our core Most recently has kind of lagged behind, right? most recently has kind of lagged behind right We've seen this in the manufacturing sector and the lack of investment in T and L coming out of COVID. we've seen this in the manufacturing sector and the lack of investment in t and l coming out of covid At that market, we'll be a very attractive market, and machine vision is a return 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? We think of our software offerings that go along with our mobile computing area as expansion areas for us. And then, you know, lastly, robotics. Still at its infancy, but think of the idea of e-commerce warehouse picking, where robots and people work together to do that pick. Those areas grow much faster but are very small today in the portfolio overall. At that market, we'll be a very attractive market, and machine vision is a return to growth. at that market we'll be a very attractive market and machine vision is a return to growth Our retail software ties to the mobile devices that we sell inside retail associates. 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 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 We think of our software offerings that go along with our mobile computing area as expansion areas for us. we think of our software offerings that go along with our mobile computing area as expansion areas for us And then, you know, lastly, robotics. and then you know lastly robotics Still at its infancy, but think of the idea of e-commerce warehouse picking, where robots and people work together to do that pick. still at its infancy but think of the idea of e-commerce warehouse picking where robots and people work together to do that pick Those areas grow much faster but are very small today in the portfolio overall. those areas grow much faster but are very small today in the portfolio overall When we marry all that together, our core portfolio, these expansion areas that grow faster, we come to this 5-7% growth rate through cycle, and we feel good about delivering that and continue to, you know, increase profitability along the way. We think about really as profitable growth across the portfolio. When we marry all that together, our core portfolio, these expansion areas that grow faster, we come to this 5-7% growth rate through cycle, and we feel good about delivering that and continue to, you know, increase profitability along the way. when we marry all that together our core portfolio these expansion areas that grow faster we come to this 5-7% growth rate through cycle and we feel good about delivering that and continue to you know increase profitability along the way We think about really as profitable growth across the portfolio. we think about really as profitable growth across the portfolio

Speaker 1: Right. So 4-5% growth in the core businesses, and then there's additional growth areas to get to that 5-7%. Right. right So 4-5% growth in the core businesses, and then there's additional growth areas to get to that 5-7%. so 4-5% growth in the core businesses and then there's additional growth areas to get to that 5-7%

Speaker 2: That's correct. That's correct. that's correct

Speaker 1: How do we think about that in light of 2015 to 2024 CAGR being closer to 33.5%? Say it again. How do we think about that in light of 2015 to 2024 CAGR being closer to 33.5%? how do we think about that in light of 2015 to 2024 cagr being closer to 33.5% Say it again. say it again It is 2015 to 2024, CAGR was actually closer to 3.5%. Maybe just frame it in terms of what has changed. It is 2015 to 2024, CAGR was actually closer to 3.5%. it is 2015 to 2024 cagr was actually closer to 3.5% Maybe just frame it in terms of what has changed. maybe just frame it in terms of what has changed

Speaker 2: Yeah, so I think right, compared to the 5-7%, yeah. 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 acquisition. So Zebra specialty printing business acquiring the assets from Motorola and the enterprise business, $3.5 billion in November, you know, of 2014 growing to $5 billion in 2020. And then, you know, 2019, flat in 2020, a large spike, you know, upwards in 2021 and 2022, really driven by the pandemic, right? Buy online, pick up in store, home delivery, e-commerce, all the things that our customers thought were gonna continue to grow at those growth rates and then the decline in 2023. Yeah, so I think right, compared to the 5-7%, yeah. yeah so i think right compared to the 5-7% yeah I think that if you look at the CAGR in the past, I think the challenge has been the pandemic, right? 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 acquisition. i think ultimately when you saw the you know back in you know we saw significant growth from the enterprise acquisition So Zebra specialty printing business acquiring the assets from Motorola and the enterprise business, $3.5 billion in November, you know, of 2014 growing to $5 billion in 2020. so zebra specialty printing business acquiring the assets from motorola and the enterprise business $3.5 billion in november you know of 2014 growing to $5 billion in 2020 And then, you know, 2019, flat in 2020, a large spike, you know, upwards in 2021 and 2022, really driven by the pandemic, right? and then you know 2019 flat in 2020 a large spike you know upwards in 2021 and 2022 really driven by the pandemic right Buy online, pick up in store, home delivery, e-commerce, all the things that our customers thought were gonna continue to grow at those growth rates and then the decline in 2023. buy online pick up in store home delivery e-commerce all the things that our customers thought were gonna continue to grow at those growth rates and then the decline in 2023 We've seen a lot of variation in the growth, including the spike up and the decline in 2023. That's put a lot of, you know, it's hard to measure the business in CAGRs these days, across that timeframe. But I think as we think about 2023 moving forward, there's no reason why we shouldn't be able to deliver the 5-7% growth rate. We've seen a lot of variation in the growth, including the spike up and the decline in 2023. we've seen a lot of variation in the growth including the spike up and the decline in 2023 That's put a lot of, you know, it's hard to measure the business in CAGRs these days, across that timeframe. that's put a lot of you know it's hard to measure the business in cagrs these days across that timeframe But I think as we think about 2023 moving forward, there's no reason why we shouldn't be able to deliver the 5-7% growth rate. but i think as we think about 2023 moving forward there's no reason why we shouldn't be able to deliver the 5-7% growth rate

Speaker 1: Okay. Great. And can you talk about how that translates into EPS growth and free cash flow? I think you've talked about double-digit EPS growth. Can you just talk about that and free cash flow conversion? Okay. okay Great. great And can you talk about how that translates into EPS growth and free cash flow? and can you talk about how that translates into eps growth and free cash flow I think you've talked about double-digit EPS growth. i think you've talked about double-digit eps growth Can you just talk about that and free cash flow conversion? can you just talk about that and free cash flow conversion

Speaker 2: Yeah, I think that, you 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, you know, 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 gonna invest some of that across, you know, R&D as we enter new areas and sales and marketing, continue to extend our lead in the market and enter new markets. I think you'll see a drop through of, you know, profitability as, as we grow top line revenue. From a free cash flow perspective, we think of 100% free cash flow conversion as where we, you know, target across the business. Yeah, I think that, you know, as we see, as I said, it was really focused on profitable growth. yeah i think that you 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, you know, probably about a 30% drop through to the bottom line in profitability. as we grow the top line of the business we would expect you know probably about a 30% drop through to the bottom line in profitability We've got to invest more in the business, obviously. we've got to invest more in the business obviously So we're gonna invest some of that across, you know, R&D as we enter new areas and sales and marketing, continue to extend our lead in the market and enter new markets. so we're gonna invest some of that across you know r&d as we enter new areas and sales and marketing continue to extend our lead in the market and enter new markets I think you'll see a drop through of, you know, profitability as, as we grow top line revenue. i think you'll see a drop through of you know profitability as as we grow top line revenue From a free cash flow perspective, we think of 100% free cash flow conversion as where we, you know, target across the business. from a free cash flow perspective we think of 100% free cash flow conversion as where we you know target across the business The business generates a lot of cash, and ultimately, you know, we see free cash flow conversion as being an important metric, you know, for us to continue to track. The business generates a lot of cash, and ultimately, you know, we see free cash flow conversion as being an important metric, you know, for us to continue to track. the business generates a lot of cash and ultimately you know we see free cash flow conversion as being an important metric you know for us to continue to track

Speaker 1: 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? Okay. okay Great. great Shifting gears slightly, on the competitive landscape, has that been more challenging recently? shifting gears slightly on the competitive landscape has that been more challenging recently Are lower-cost competitors a bigger risk now versus before? are lower-cost competitors a bigger risk now versus before

Speaker 2: Yeah, I would say the competitive dynamic is about the same. I think we haven't seen, you know, much different, certainly, in markets around the world. There's always gonna be, you know, formal competitors that we have in the markets, and we have new competitors in these new expansion areas that we're investing in today. I think that from an Asian competitor perspective, I think that we've seen, you know, that dynamic not change much. Ultimately, it represents kind of the value tier at a low end of the portfolio. We've spent a lot of time across the portfolio tiering the portfolio. Yeah, I would say the competitive dynamic is about the same. yeah i would say the competitive dynamic is about the same I think we haven't seen, you know, much different, certainly, in markets around the world. i think we haven't seen you know much different certainly in markets around the world There's always gonna be, you know, formal competitors that we have in the markets, and we have new competitors in these new expansion areas that we're investing in today. there's always gonna be you know formal competitors that we have in the markets and we have new competitors in these new expansion areas that we're investing in today I think that from an Asian competitor perspective, I think that we've seen, you know, that dynamic not change much. i think that from an asian competitor perspective i think that we've seen you know that dynamic not change much Ultimately, it represents kind of the value tier at a low end of the portfolio. ultimately it represents kind of the value tier at a low end of the portfolio We've spent a lot of time across the portfolio tiering the portfolio. we've spent a lot of time across the portfolio tiering the portfolio What that, you know, early on, I would say, you know, 10 years ago, we thought that, you know, having a value tier product or a lower tier products would, you know, take away from the, you know, average sell price of our products and bring down the average sell price to our customers. It has actually done the opposite. It has given us a portfolio product of kind of good, better, best. It has allowed us to have conviction around the top end of our product portfolio. Customers who ultimately want the fastest device, the largest screens, the most durability, the best, you know, service around those devices will pay a premium for those ultimately. What that, you know, early on, I would say, you know, 10 years ago, we thought that, you know, having a value tier product or a lower tier products would, you know, take away from the, you know, average sell price of our products and bring down the average sell price to our customers. It has actually done the opposite. It has given us a portfolio product of kind of good, better, best. It has allowed us to have conviction around the top end of our product portfolio. what that you know early on i would say you know 10 years ago we thought that you know having a value tier product or a lower tier products would you know take away from the you know average sell price of our products and bring down the average sell price to our customers. it has actually done the opposite. it has given us a portfolio product of kind of good better best. it has allowed us to have conviction around the top end of our product portfolio Customers who ultimately want the fastest device, the largest screens, the most durability, the best, you know, service around those devices will pay a premium for those ultimately. customers who ultimately want the fastest device the largest screens the most durability the best you know service around those devices will pay a premium for those ultimately 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. It's allowed us to maintain kind of conviction and price at the high end of the product portfolio. Competition hasn't really changed, and we've tiered the portfolio to match the different market segments in which we're playing in today. 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. 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 It's allowed us to maintain kind of conviction and price at the high end of the product portfolio. it's allowed us to maintain kind of conviction and price at the high end of the product portfolio Competition hasn't really changed, and we've tiered the portfolio to match the different market segments in which we're playing in today. competition hasn't really changed and we've tiered the portfolio to match the different market segments in which we're playing in today

Speaker 1: How should we think about, in-store based on pricing power? How much risk is there of structural replacement cycle elongation? How should we think about, in-store based on pricing power? how should we think about in-store based on pricing power How much risk is there of structural replacement cycle elongation? how much risk is there of structural replacement cycle elongation

Speaker 2: Yeah, I would say that, you know, 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 % 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 in product cycles around those. We see those being varying degrees, typically in mobile devices. It's kind of 4-5 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 products that they have deployed today. I'd say a couple of things around that. Yeah, I would say that, you know, 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? yeah i would say that you know 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 % 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. when you've got 80-plus % 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 in product cycles around those. there's refreshes in product cycles around those We see those being varying degrees, typically in mobile devices. we see those being varying degrees typically in mobile devices It's kind of 4-5 years, maybe about the same in scanning, a little elongated beyond that in, in the printing portfolio. it's kind of 4-5 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 products that they have deployed today. but our customers continue to refresh you know their portfolio products that they have deployed today I'd say a couple of things around that. i'd say a couple of things around that When the, you know, when a customer refreshes or buys, you know, especially as you 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. Let's say their refresh cycle comes up again, it's about, you know, it could be 60,000 devices. The refresh cycle isn't the same amount of devices. There are more associates. There are more stores. There are 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. That creates an opportunity for us beyond refresh, this idea of unserved hands. If we think about across the verticals we serve, not everyone's equipped with a mobile device today. When the, you know, when a customer refreshes or buys, you know, especially as you think of front-of-store retail, maybe five years ago, they bought 40,000 devices. when the you know when a customer refreshes or buys you know especially as you 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. over the next you know five years they're buying more and more devices Let's say their refresh cycle comes up again, it's about, you know, it could be 60,000 devices. let's say their refresh cycle comes up again it's about you know it could be 60,000 devices The refresh cycle isn't the same amount of devices. There are more associates. There are more stores. There are more applications. the refresh cycle isn't the same amount of devices. there are more associates. there are more stores. there are more applications They're using our devices. they're using our devices They're putting devices in the hands of more associates, you know, within the store to do more jobs. they're putting devices in the hands of more associates you know within the store to do more jobs That creates an opportunity for us beyond refresh, this idea of unserved hands. that creates an opportunity for us beyond refresh this idea of unserved hands If we think about across the verticals we serve, not everyone's equipped with a mobile device today. if we think about across the verticals we serve not everyone's equipped with a mobile device today That is 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 is happening at the point of productivity. You give an asset a digital voice by reading a barcode tag. You read an RFID tag. You have got an associate with a mobile device in their hand. Ultimately, you do analytics around to say, where is the pallet? Where is the forklift? Where is the employee? Ultimately, where do I gotta move that pallet to, to put it on this truck? I sense what is happening in the point of productivity. I analyze it, and AI enhances that, you know, analytics capability across the environment. I gotta take an action. That is becoming ever more critical, especially in the area of things like AI, right? that is 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. 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 is happening at the point of productivity. it means that you sense what is happening at the point of productivity You give an asset a digital voice by reading a barcode tag. you give an asset a digital voice by reading a barcode tag You read an RFID tag. You have got an associate with a mobile device in their hand. you read an rfid tag. you have got an associate with a mobile device in their hand Ultimately, you do analytics around to say, where is the pallet? ultimately you do analytics around to say where is the pallet Where is the forklift? where is the forklift Where is the employee? where is the employee Ultimately, where do I gotta move that pallet to, to put it on this truck? ultimately where do i gotta move that pallet to to put it on this truck I sense what is happening in the point of productivity. i sense what is happening in the point of productivity I analyze it, and AI enhances that, you know, analytics capability across the environment. i analyze it and ai enhances that you know analytics capability across the environment I gotta take an action. 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. Then I drive an outcome. I get the right pallet to the right customer on time, ultimately. We think of our entire portfolio as being kind of tied to that, is 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? How do I take the analytics? 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. I've gotta go pick up that pallet, and I've gotta move it to the truck to ultimately get efficiency within my environment. i've gotta go pick up that pallet and i've gotta move it to the truck to ultimately get efficiency within my environment Then I drive an outcome. then i drive an outcome I get the right pallet to the right customer on time, ultimately. i get the right pallet to the right customer on time ultimately We think of our entire portfolio as being kind of tied to that, is ultimately how do we drive more analytics through AI? we think of our entire portfolio as being kind of tied to that is 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? 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 How do I take the analytics? how do i take the analytics 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. 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

Speaker 1: Got it. You, you've also entered several new markets like machine vision, robotics. Can you talk about why Zebra can be successful in these areas? Got it. got it You, you've also entered several new markets like machine vision, robotics. you you've also entered several new markets like machine vision robotics Can you talk about why Zebra can be successful in these areas? can you talk about why zebra can be successful in these areas

Speaker 2: Yeah, I think that we, you know, we think about organic investment always first. So machine vision's 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 that scan 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. Yeah, I think that we, you know, we think about organic investment always first. yeah i think that we you know we think about organic investment always first So machine vision's 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 that scan your groceries—you know, we're the, you know, market leader in that space. so machine vision's 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 that scan 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. 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. 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. it decides on sortation of parcels and others 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. It's kind of a very closely adjacent space to us. Machine vision is a step up from that. You just don't just read the barcode. You actually use vision systems to say, is the parcel damaged? In manufacturing, is the label on correctly? Are all the cashews whole? All the inspection you do within manufacturing. You go from kind of handheld scanning, which we have a 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. We think of extending the portfolio through acquisitions in areas that are closely adjacent to what we do today. 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. 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 It's kind of a very closely adjacent space to us. it's kind of a very closely adjacent space to us Machine vision is a step up from that. machine vision is a step up from that You just don't just read the barcode. you just don't just read the barcode You actually use vision systems to say, is the parcel damaged? you actually use vision systems to say is the parcel damaged In manufacturing, is the label on correctly? in manufacturing is the label on correctly Are all the cashews whole? are all the cashews whole All the inspection you do within manufacturing. all the inspection you do within manufacturing You go from kind of handheld scanning, which we have a market leader in today, to fixed industrial scanning to machine vision. you go from kind of handheld scanning which we have a 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. they're all vision systems and they go in increasing capability associated with it We think of extending the portfolio through acquisitions in areas that are closely adjacent to what we do today. we think of extending the portfolio through acquisitions in areas that are closely adjacent to what we do today I mentioned software today. Today, 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. They want to be able to communicate, collaborate with their manager. They want to be able to communicate, collaborate with each other. When are you on break? Do you want to go grab lunch? Those kind of things. They don't want the associates using their personal mobile devices because it distracts them. How do you get communication, collaboration on those mobile devices? That's software we offer. I mentioned software today. i mentioned software today Today, in the predominance of retailers around the world, they're using our mobile devices in the hands of the retail associate. today 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. 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. meaning they want engaged associates but if they're working by themselves all day then you don't have an engaged employee They want to be able to communicate, collaborate with their manager. they want to be able to communicate collaborate with their manager They want to be able to communicate, collaborate with each other. they want to be able to communicate collaborate with each other When are you on break? when are you on break Do you want to go grab lunch? do you want to go grab lunch Those kind of things. those kind of things They don't want the associates using their personal mobile devices because it distracts them. they don't want the associates using their personal mobile devices because it distracts them How do you get communication, collaboration on those mobile devices? how do you get communication collaboration on those mobile devices That's software we offer. that's software we offer How do I take tasks from corporate and send it down to the store to individual associates? It is 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? 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? 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 is software. How do I take tasks from corporate and send it down to the store to individual associates? how do i take tasks from corporate and send it down to the store to individual associates It is Memorial Day weekend, and I gotta put the Pepsi end cap on or the Oreos end cap for the weekend. it is 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? how do i send that task down to 3,000 stores to have them go put the end cap on for the holiday weekend I do that through task management software, which is software that we offer to our customers. 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 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? how do i take an online order and send it to an employee to go pick that order within the store Workforce management. workforce management How do I plan the workforce in a do-it-yourself retailer? how do i plan the workforce in a do-it-yourself retailer I need somebody in plumbing. i need somebody in plumbing I need somebody in labor. i need somebody in labor I need somebody at the customer service department. That is software. i need somebody at the customer service department. that is software I ultimately wanna be able to set my schedule. I 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. The software's closely adjacent to the mobile devices, and it sits on top of those mobile devices. 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. I ultimately wanna be able to set my schedule. i ultimately wanna be able to set my schedule I have a mobile device in my hand in the store from Zebra. i 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. now i can set my schedule associated with it or re-request a change in schedule those kind of things The software's closely adjacent to the mobile devices, and it sits on top of those mobile devices. the software's closely adjacent to the mobile devices and it sits on top of those mobile devices 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. 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

Speaker 1: 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? Got it. got it Great. great That's very helpful. that's very helpful And could you also now speak a bit about RFID, which is, I think, gaining traction again? 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? do you see that as a threat to your traditional barcode tracking 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 segments today, and it's not going away. I would say that, in fact, there's enhancements to barcode reading today that new regulation is driving more track and trace capability across 2D barcodes around the world. That's, you know, new standards that are coming in place. RFID technology is an exciting technology around the automation. This idea of having an enhanced digital voice associated with, starting in retail, really in apparel more than anything else, as customers were trying to track inventory better, especially in things that have lots of different sizes, lots of different styles, and others. Yeah, I would say that, you know, RFID is complementary to barcodes. 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 segments today, and it's not going away. i would say the ubiquity of barcode reading today is across you know all industries and all segments today and it's not going away I would say that, in fact, there's enhancements to barcode reading today that new regulation is driving more track and trace capability across 2D barcodes around the world. i would say that in fact there's enhancements to barcode reading today that new regulation is driving more track and trace capability across 2d barcodes around the world That's, you know, new standards that are coming in place. that's you know new standards that are coming in place RFID technology is an exciting technology around the automation. rfid technology is an exciting technology around the automation This idea of having an enhanced digital voice associated with, starting in retail, really in apparel more than anything else, as customers were trying to track inventory better, especially in things that have lots of different sizes, lots of different styles, and others. this idea of having an enhanced digital voice associated with starting in retail really in apparel more than anything else as customers were trying to track inventory better especially in things that have lots of different sizes lots of different styles and others 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. 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. We're seeing it being used all the way through the supply chain. Fast fashion would've been a good example early on. They controlled their supply chain. Ultimately, they said, "I'm just not gonna use it in the store. I'm actually gonna use it in my distribution center. 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. 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 You think of this idea of track and trace across the entire supply chain and getting more visibility. you think of this idea of track and trace across the entire supply chain and getting more visibility I can use radio frequency tags. 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. 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 We're seeing it being used all the way through the supply chain. we're seeing it being used all the way through the supply chain Fast fashion would've been a good example early on. fast fashion would've been a good example early on They controlled their supply chain. they controlled their supply chain Ultimately, they said, "I'm just not gonna use it in the store. 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 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. UPS has made a lot of announcements around, you know, RFID technology. 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. 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 environments. 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. 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 UPS has made a lot of announcements around, you know, RFID technology. ups has made a lot of announcements around you know rfid technology 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. 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 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 environments. 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 environments That is why we talk about the long-term trend of digitizing and automating the environments. Today, what we are seeing ever more is this idea of using AI to do that analytics, which will drive more analytics. 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. It is not from the idea the data we collect could be used as big data and can be used as analytics after the fact. That is why we talk about the long-term trend of digitizing and automating the environments. that is why we talk about the long-term trend of digitizing and automating the environments Today, what we are seeing ever more is this idea of using AI to do that analytics, which will drive more analytics. today what we are seeing ever more is this idea of using ai to do that analytics which will drive more analytics 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. 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 It is not from the idea the data we collect could be used as big data and can be used as analytics after the fact. it is not from the idea the data we collect could be used as big data and can be used as analytics after the fact 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?" 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 the 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 any more unless it's actually on the shelf where somebody can buy it. If it's not on the top stock, is it in the back room? How do I direct a task to a worker to go move it from the back room onto the shelf? 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?" Our customers in retail would say, "It's not enough to tell me the shelf is empty. 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?" 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 the shelf is empty and associate has to go move top stock down to the shelf because I don't get an outcome. you need to be able to tell me that the 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 any more unless it's actually on the shelf where somebody can buy it. i don't sell any more unless it's actually on the shelf where somebody can buy it If it's not on the top stock, is it in the back room? if it's not on the top stock is it in the back room How do I direct a task to a worker to go move it from the back room onto the shelf? how do i direct a task to a worker to go move it from the back room onto the shelf If it's not in the back room or not on the shelf, then ultimately how do I automatically reorder from my distribution center to get it into the store? It is a sense analyze act framework that ultimately says if I can give things a digital voice, which RFID does, and ultimately I can automate the environment, then I become more effective and more efficient. With AI today, that analytics becomes ever more important. If it's not in the back room or not on the shelf, then ultimately how do I automatically reorder from my distribution center to get it into the store? if it's not in the back room or not on the shelf then ultimately how do i automatically reorder from my distribution center to get it into the store It is a sense analyze act framework that ultimately says if I can give things a digital voice, which RFID does, and ultimately I can automate the environment, then I become more effective and more efficient. it is a sense analyze act framework that ultimately says if i can give things a digital voice which rfid does and ultimately i can automate the environment then i become more effective and more efficient With AI today, that analytics becomes ever more important. with ai today that analytics becomes ever more important Yeah. You, so you're talking about AI there, and how it's actually incorporated into your own solutions. I mean, obviously AI is a very, very hot topic. I mean, can you talk more broadly about how you're leveraging AI? Are you talking about it within your own products, but also perhaps potentially in your firm? How are you thinking about AI for increasing efficiencies internally? How are you thinking about AI in general? Yeah. yeah You, so you're talking about AI there, and how it's actually incorporated into your own solutions. you so you're talking about ai there and how it's actually incorporated into your own solutions I mean, obviously AI is a very, very hot topic. i mean obviously ai is a very very hot topic I mean, can you talk more broadly about how you're leveraging AI? i mean can you talk more broadly about how you're leveraging ai Are you talking about it within your own products, but also perhaps potentially in your firm? are you talking about it within your own products but also perhaps potentially in your firm How are you thinking about AI for increasing efficiencies internally? how are you thinking about ai for increasing efficiencies internally How are you thinking about AI in general? how are you thinking about ai in general

Speaker 2: Yeah. I think the first and foremost, what I talked about already is the idea of digitizing the environment that feeds AI models. 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. 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. 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. Yeah. yeah I think the first and foremost, what I talked about already is the idea of digitizing the environment that feeds AI models. i think the first and foremost what i talked about already is the idea of digitizing the environment that feeds ai models I think that's what we do. 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. 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 I think that's the core of what we do. 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. 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 I'll use a retail example. 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. a retail associate has somebody who wants to return an item and ultimately has an ai model running on the mobile device itself We're working with Qualcomm and Google and, you know, our own technology 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. 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 90 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 do if I wanna return an item that's damaged?" 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. We're working with Qualcomm and Google and, you know, our own technology 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. we're working with qualcomm and google and you know our own technology 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 A lot of our customers don't have strong connectivity out of things like retail stores. 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 90 days old? 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 90 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 do if a customer wants to return an item that they want cash back but they paid a credit card What do I do if I wanna return an item that's damaged?" 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. what do i do if i wanna return an item that's damaged?" 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 an associate 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 90 days old. It's, you know, not, is it damaged in any way? No." And then ultimately says, "I can return, you know, the credit on the customer's credit card. Would you like that, Mr. Customer?" 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, a generative AI, and the transition to more directed, you know, work taking place behind the scenes. We think the mobile device as a key to a digital assistant. What do I do inside manufacturing when production's out of specification? Over time, what we see happening is that happening automatically, meaning that an associate takes an image of the actual receipt and what comes back and says, "Okay, that item, you know, can be returned. over time what we see happening is that happening automatically meaning that an associate 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 90 days old. it's less than 90 days old It's, you know, not, is it damaged in any way? it's you know not is it damaged in any way No." And then ultimately says, "I can return, you know, the credit on the customer's credit card. no." and then ultimately says "i can return you know the credit on the customer's credit card Would you like that, Mr. Customer?" 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, a generative AI, and the transition to more directed, you know, work taking place behind the scenes. would you like that mr customer?" 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 a generative ai and the transition to more directed you know work taking place behind the scenes We think the mobile device as a key to a digital assistant. 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 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. 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 genic 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." The idea of saying, "It's less than 90 days old. Yes, they can get a credit card. No, it's not, you know, yes, it's returnable." I think that's what we see is a big opportunity for Zebra's leveraging that mobile device. 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 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? what do i go do That's why the idea to move to tablets inside manufacturing is an example. that's why the idea to move to tablets inside manufacturing is an example 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 genic 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. 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 genic 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." The idea of saying, "It's less than 90 days old. i've done all the work for you." the idea of saying "it's less than 90 days old Yes, they can get a credit card. yes they can get a credit card No, it's not, you know, yes, it's returnable." I think that's what we see is a big opportunity for Zebra's leveraging that mobile device. no it's not you know yes it's returnable." i think that's what we see 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 it across marketing. You know, we've had 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. We think the biggest opportunity for us is digitizing the environment and this idea of a digital companion using our mobile devices. Internally, we're doing it, you know, many things that others are doing. 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 ai across you know our code writing We're leveraging it across our customer service teams. we're leveraging it across our customer service teams We're leveraging it across marketing. we're leveraging it across marketing You know, we've had 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. you know we've had 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 We think the biggest opportunity for us is digitizing the environment and this idea of a digital companion using our mobile devices. we think the biggest opportunity for us is digitizing the environment and this idea of a digital companion using our mobile devices

Speaker 1: Do you see software and services becoming a bigger focus for you? Do you see software and services becoming a bigger focus for you? do you see software and services becoming a bigger focus for you

Speaker 2: Yeah, I would say today that, you know, our software services and our supplies portfolio, which really is recurring like, represents about 25% of the business. I would say that, you know, so that's, you know, predominantly recurring revenue for, for Zebra. I think that that's, you know, a focus of all businesses. How do you get more recurring revenue, you know, into the business? I think we are looking for continued new ways to generate, you know, 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 attached to our mobile devices, especially as customers want, you know, latest and greatest software releases, software patches, and others and, and break fix across the portfolio. Yeah, I would say today that, you know, our software services and our supplies portfolio, which really is recurring like, represents about 25% of the business. yeah i would say today that you know our software services and our supplies portfolio which really is recurring like represents about 25% of the business I would say that, you know, so that's, you know, predominantly recurring revenue for, for Zebra. i would say that you know so that's you know predominantly recurring revenue for for zebra I think that that's, you know, a focus of all businesses. i think that that's you know a focus of all businesses How do you get more recurring revenue, you know, into the business? how do you get more recurring revenue you know into the business I think we are looking for continued new ways to generate, you know, more recurring revenue. i think we are looking for continued new ways to generate you know more recurring revenue Software is a focus for us. software is a focus for us As I said, within retail today, I think AI creates an opportunity for more software content. as i said within retail today i think ai creates an opportunity for more software content Our services business is a high level of attached to our mobile devices, especially as customers want, you know, latest and greatest software releases, software patches, and others and, and break fix across the portfolio. our services business is a high level of attached to our mobile devices especially as customers want you know latest and greatest software releases software patches and others and and break fix across the portfolio and then our supplies business really tied to our printing business is really recurring like. So I think that, you know, 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. and then our supplies business really tied to our printing business is really recurring like. and then our supplies business really tied to our printing business is really recurring like So I think that, you know, 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. so i think that you know 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

Speaker 1: Talking about R&D a bit, you invest about 10% of your, 10% of revenue into R&D. How do you determine where those investments go? Talking about R&D a bit, you invest about 10% of your, 10% of revenue into R&D. talking about r&d a bit you invest about 10% of your 10% of revenue into r&d How do you determine where those investments go? how do you determine where those investments go

Speaker 2: 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. I think we think about investing, in our core portfolio to continue our leadership in, in those areas 'cause that's important to, to our customer base. And then we've shifted more of our R&D dollars into these new growth vectors. Yeah, I think that, you know, across the portfolio, we, you know, are the global leaders in, in rugged mobile devices. 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 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. 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 I think we think about investing, in our core portfolio to continue our leadership in, in those areas 'cause that's important to, to our customer base. i think we think about investing in our core portfolio to continue our leadership in in those areas 'cause that's important to to our customer base And then we've shifted more of our R&D dollars into these new growth vectors. and then we've shifted more of our r&d dollars into these new growth vectors Places like RFID, places like robotics, places like retail software and machine vision where we're shifting more of our R&D dollars today to be able to enter those new markets where we believe, you know, 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 in 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 and balancing between today's portfolio and AI in the future as an example. Places like RFID, places like robotics, places like retail software and machine vision where we're shifting more of our R&D dollars today to be able to enter those new markets where we believe, you know, they're a bit faster growing than our core portfolio, but it's important that we invest in both. places like rfid places like robotics places like retail software and machine vision where we're shifting more of our r&d dollars today to be able to enter those new markets where we believe you know 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 in 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 and balancing between today's portfolio and AI in the future as an example. i think we take a strategic view on you know on an ongoing basis to make sure that we're investing in 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 and balancing between today's portfolio and ai in the future as an example

Speaker 1: How do you think about priorities for your capital structure? Are acquisitions gonna be more bolt-on or could they be more transformative? How do you think about priorities for your capital structure? how do you think about priorities for your capital structure Are acquisitions gonna be more bolt-on or could they be more transformative? are acquisitions gonna be more bolt-on or could they be more transformative

Speaker 2: 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 investing organically our R&D dollars and then in our go-to-market resources around the world. First and foremost is organic, I would say. You know, second, we make venture investments at times into companies that ultimately we're inquisitive about, wanna know more about, but aren't convinced yet that that's a technology or a segment or an area in which we wanna learn more, but we're not convinced yet. You know, we leverage M&A in areas where 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. Machine vision's a good example of that. Yeah, I think that, you know, we think first and foremost about, you know, our organic investment across the portfolio. 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 investing organically our R&D dollars and then in our go-to-market resources around the world. we get you know significant returns in investing organically our r&d dollars and then in our go-to-market resources around the world First and foremost is organic, I would say. first and foremost is organic i would say You know, second, we make venture investments at times into companies that ultimately we're inquisitive about, wanna know more about, but aren't convinced yet that that's a technology or a segment or an area in which we wanna learn more, but we're not convinced yet. you know second we make venture investments at times into companies that ultimately we're inquisitive about wanna know more about but aren't convinced yet that that's a technology or a segment or an area in which we wanna learn more but we're not convinced yet You know, we leverage M&A in areas where 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. you know we leverage m&a in areas where 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 Machine vision's a good example of that. machine vision's 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 entered that market, learned more about it, and then did an acquisition at the very high end, the machine vision market, with a Matrox acquisition. Now we've married a couple of smaller acquisitions around that, Adaptive Vision and most recently Photoneo. Our preference is organic because we've got great teams of software engineers today that ultimately have tight relationships with our product manager teams that are customers. We understand the market segments and the verticals we play in, but M&A accelerates our growth into specific areas that are adjacent, and we think it's an important piece of what we go do. We continue to be inquisitive about, you know, M&A opportunities. We took our core assets around handheld scanning I described before. 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 entered that market, learned more about it, and then did an acquisition at the very high end, the machine vision market, with a Matrox acquisition. we turned them into fixed industrial scanning the low end of the machine vision market and entered that market learned more about it and then did an acquisition at the very high end the machine vision market with a matrox acquisition Now we've married a couple of smaller acquisitions around that, Adaptive Vision and most recently Photoneo. now we've married a couple of smaller acquisitions around that adaptive vision and most recently photoneo Our preference is organic because we've got great teams of software engineers today that ultimately have tight relationships with our product manager teams that are customers. our preference is organic because we've got great teams of software engineers today that ultimately have tight relationships with our product manager teams that are customers We understand the market segments and the verticals we play in, but M&A accelerates our growth into specific areas that are adjacent, and we think it's an important piece of what we go do. we understand the market segments and the verticals we play in but m&a accelerates our growth into specific areas that are adjacent and we think it's an important piece of what we go do We continue to be inquisitive about, you know, M&A opportunities. we continue to be inquisitive about you know m&a opportunities At the same time, we're returning cash to, you know, investors through share buybacks. We bought about $200 million in cash back between Q1 and in the beginning of Q2 when we had our earnings announcement. We'll continue to return capital in that way as well. At the same time, we're returning cash to, you know, investors through share buybacks. at the same time we're returning cash to you know investors through share buybacks We bought about $200 million in cash back between Q1 and in the beginning of Q2 when we had our earnings announcement. we bought about $200 million in cash back between q1 and in the beginning of q2 when we had our earnings announcement We'll continue to return capital in that way as well. we'll continue to return capital in that way as well

Speaker 1: Bringing things forward a bit to our today's environment, can you speak a bit about what the recent global trade policy dynamics mean to you from a demand perspective? Are you incorporating some of the tariff impact into your full year guide? Also, have you been working your own supply chain or price structure to mitigate some of these issues? Bringing things forward a bit to our today's environment, can you speak a bit about what the recent global trade policy dynamics mean to you from a demand perspective? bringing things forward a bit to our today's environment can you speak a bit about what the recent global trade policy dynamics mean to you from a demand perspective Are you incorporating some of the tariff impact into your full year guide? are you incorporating some of the tariff impact into your full year guide Also, have you been working your own supply chain or price structure to mitigate some of these issues? also have you been working your own supply chain or price structure to mitigate some of these issues

Speaker 2: Yeah, I would say that, you know, as I said earlier, we haven't seen a demand impact from 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 projects they had planned for the year. From a demand perspective, I think at the moment, 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 the world will move forward. I think that that's likely what will happen some way, somehow. Yeah, I would say that, you know, as I said earlier, we haven't seen a demand impact from the uncertainty around global trade from our customer perspective. yeah i would say that you know as i said earlier we haven't seen a demand impact from the uncertainty around global trade from our customer perspective I think they're still moving ahead. i think they're still moving ahead You know, they are moving ahead still with the projects they had planned for the year. you know they are moving ahead still with the projects they had planned for the year From a demand perspective, I think at the moment, 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 the world will move forward. from a demand perspective i think at the moment 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 the world will move forward I think that that's likely what will happen some way, somehow. i think that that's likely what will happen some way somehow What that looks like and in what timeframe is still a question, but I think that our customers believe this has to get sorted out, and it will. Therefore, they feel good about their businesses and continue to move ahead. I'd say from the impact on our business, we outlined in our first quarter earnings release that it's about a $70 million impact, you know, in our business at the tariffs that were in place at that time. And, you know, that obviously would change depending on the dynamics around, you know, a tariff environment. As things change, we'll continue to update, you know, here in second quarter as to what the impact is on our business. I think in first quarter was about $3 million, about $25 million profit impact, $25 million-$30 million we said for Q2. What that looks like and in what timeframe is still a question, but I think that our customers believe this has to get sorted out, and it will. what that looks like and in what timeframe is still a question but i think that our customers believe this has to get sorted out and it will Therefore, they feel good about their businesses and continue to move ahead. therefore they feel good about their businesses and continue to move ahead I'd say from the impact on our business, we outlined in our first quarter earnings release that it's about a $70 million impact, you know, in our business at the tariffs that were in place at that time. i'd say from the impact on our business we outlined in our first quarter earnings release that it's about a $70 million impact you know in our business at the tariffs that were in place at that time And, you know, that obviously would change depending on the dynamics around, you know, a tariff environment. and you know that obviously would change depending on the dynamics around you know a tariff environment As things change, we'll continue to update, you know, here in second quarter as to what the impact is on our business. as things change we'll continue to update you know here in second quarter as to what the impact is on our business I think in first quarter was about $3 million, about $25 million profit impact, $25 million-$30 million we said for Q2. i think in first quarter was about $3 million about $25 million profit impact $25 million-$30 million we said for q2 that will ultimately play out just because the tariffs that are in place today, they were already there when we called Q2. We've raised price to mitigate. We're continuing to work to move our supply chain, our shipments into the U.S. We had about 85% of our shipments into the U.S. a number of years ago came from China. By midyear this year, it'll be about 35%, you know, of what comes into the U.S. comes out of China. Otherwise, it's manufactured outside of China. We use contract manufacturers, which give us opportunities to move production fairly quickly overall. that will ultimately play out just because the tariffs that are in place today, they were already there when we called Q2. that will ultimately play out just because the tariffs that are in place today they were already there when we called q2 We've raised price to mitigate. we've raised price to mitigate We're continuing to work to move our supply chain, our shipments into the U.S. we're continuing to work to move our supply chain our shipments into the u.s We had about 85% of our shipments into the U.S. a number of years ago came from China. we had about 85% of our shipments into the u.s a number of years ago came from china By midyear this year, it'll be about 35%, you know, of what comes into the U.S. comes out of China. by midyear this year it'll be about 35% you know of what comes into the u.s comes out of china Otherwise, it's manufactured outside of China. otherwise it's manufactured outside of china We use contract manufacturers, which give us opportunities to move production fairly quickly overall. we use contract manufacturers which give us opportunities to move production fairly quickly overall

Speaker 1: Where is that? Where is that moving to out of China? Where is that? where is that Where is that moving to out of China? where is that moving to out of china

Speaker 2: I mean, that, that's the question ultimately. Today we manufacture in China, in Vietnam, Malaysia, and in Mexico. You know, additional moves across the supply chain need more certainty around what the tariff rates are to do additional moves. I think that we're in the same position most other companies are, as moving production at the moment to other locations without clarity around what the tariffs are is a difficult, I mean, that, that's the question ultimately. i mean that that's the question ultimately Today we manufacture in China, in Vietnam, Malaysia, and in Mexico. today we manufacture in china in vietnam malaysia and in mexico You know, additional moves across the supply chain need more certainty around what the tariff rates are to do additional moves. you know additional moves across the supply chain need more certainty around what the tariff rates are to do additional moves I think that we're in the same position most other companies are, as moving production at the moment to other locations without clarity around what the tariffs are is a difficult, i think that we're in the same position most other companies are as moving production at the moment to other locations without clarity around what the tariffs are is a difficult

Speaker 1: Everyone's facing a similar. Everyone's facing a similar. everyone's facing a similar

Speaker 2: Yeah, yeah. Yeah, yeah. yeah yeah

Speaker 1: Similar dilemma at the moment. How should we think about disruption risks like a QR code instead of barcodes or on-phone checkouts? Similar dilemma at the moment. similar dilemma at the moment How should we think about disruption risks like a QR code instead of barcodes or on-phone checkouts? how should we think about disruption risks like a qr code instead of barcodes or on-phone checkouts

Speaker 2: Yeah, I mean, they're the same. I think that, you know, today, 2D 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. 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. The QR code or the 2D barcode is continuing to emerge because of things like regulation and new standards and others. It can hold more information than a traditional barcode. It will play an ever more important role, but it's the same readers that read both today, in our customers' environments. Yeah, I mean, they're the same. yeah i mean they're the same I think that, you know, today, 2D barcodes are read just the way traditional barcodes were read. i think that you know today 2d 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. it's made by you know vision systems and cameras that basically you know the technology today 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. 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 The QR code or the 2D barcode is continuing to emerge because of things like regulation and new standards and others. the qr code or the 2d barcode is continuing to emerge because of things like regulation and new standards and others It can hold more information than a traditional barcode. it can hold more information than a traditional barcode It will play an ever more important role, but it's the same readers that read both today, in our customers' environments. 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 imagers are what's used today. It's used in mobile devices. It's used in our scanners today. I think what it really shows is the enhancement of the 2D barcode and the enhancements around regulation around it and including more information around track and trace and be able to, you know, track from the point of manufacturer or the point of where something's produced and others allows, creates ever more important opportunity for the barcode reading. You know, the idea of laser scanning of barcodes is, you know, well beyond us, and the imagers are what's used today. you know the idea of laser scanning of barcodes is you know well beyond us and the imagers are what's used today It's used in mobile devices. it's used in mobile devices It's used in our scanners today. it's used in our scanners today I think what it really shows is the enhancement of the 2D barcode and the enhancements around regulation around it and including more information around track and trace and be able to, you know, track from the point of manufacturer or the point of where something's produced and others allows, creates ever more important opportunity for the barcode reading. i think what it really shows is the enhancement of the 2d barcode and the enhancements around regulation around it and including more information around track and trace and be able to you know track from the point of manufacturer or the point of where something's produced and others allows creates ever more important opportunity for the barcode reading

Speaker 1: Great. So just one last one for me, and then I'm gonna go to some audience questions 'cause we've got a few audience questions here. What is it about Zebra that you think is most important for investors to understand? Great. great So just one last one for me, and then I'm gonna go to some audience questions 'cause we've got a few audience questions here. so just one last one for me and then i'm gonna go to some audience questions 'cause we've got a few audience questions here What is it about Zebra that you think is most important for investors to understand? what is it about zebra that you think is most important for investors to understand

Speaker 2: 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. Whether you're in retail or transportation logistics or manufacturing or healthcare, you know, ever so more, government opportunities, especially here in the U.S. and what we're doing in Europe, you know, our customers come to us as a strategic technology partner to them. 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 industry going overall. For as an example, in retail, we see the most important things to retailers today as being, you know, engaged associates within their stores. 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. 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 Whether you're in retail or transportation logistics or manufacturing or healthcare, you know, ever so more, government opportunities, especially here in the U.S. and what we're doing in Europe, you know, our customers come to us as a strategic technology partner to them. whether you're in retail or transportation logistics or manufacturing or healthcare you know ever so more government opportunities especially here in the u.s and what we're doing in europe you know our customers come to us as a strategic technology partner to them You know, we do business with them in many areas today. you know we do business with them in many areas today We've got close relationships with them. 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 industry going overall. we lay out our vision for those industries to them and where we see you know them where we see the industry going overall For as an example, in retail, we see the most important things to retailers today as being, you know, engaged associates within their stores. for as an example in retail we see the most important things to retailers today as being you know engaged associates within their stores 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. 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 is not just about a mobile device or it is not just about a scanner or a printer or robotics inside e-commerce 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. When you change the conversation around that, then you are given more opportunities in your customers to do more and more for them. We see it being inventory management, making sure you have the right inventory in the right place. 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. we see customer engagement as a critical aspect of what retailers do 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. 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 is not just about a mobile device or it is not just about a scanner or a printer or robotics inside e-commerce warehouse or, you know, a piece of software. it is not just about a mobile device or it is not just about a scanner or a printer or robotics inside e-commerce 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. 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 When you change the conversation around that, then you are given more opportunities in your customers to do more and more for them. when you change the conversation around that then you are given more opportunities in your customers to do more and more for them 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?" 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. They reach out to us saying, "I've got a business problem to solve. they reach out to us saying "i've got a business problem to solve I've got a technology problem to solve. i've got a technology problem to solve Zebra, can you work with me in that area?" 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. zebra can you work with me in that area?" 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. you know it creates a tremendous opportunity for us

Speaker 1: 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 11 minutes left, so I'm gonna see how many of these we can get through. 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 will it take them, if they want to, switch to another competitor? Great. great Thanks. thanks Just a reminder, if anyone has any questions, you can submit them to Pigeonhole, or you can vote on questions. 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. there's about five i see here I'm just gonna go through. i'm just gonna go through We've got about 11 minutes left, so I'm gonna see how many of these we can get through. we've got about 11 minutes left so i'm gonna see how many of these we can get through First question, what is customer onboarding time and how much time and cost? first question what is customer onboarding time and how much time and cost It's moving around. it's moving around What is customer onboarding time and how much time and cost will it take them, if they want to, switch to another competitor? what is customer onboarding time and how much time and cost will it take them if they want to switch to another competitor

Speaker 2: Yeah, I would say that, you know, the majority of our customers are, you know, deploy, and make decisions around a single vendor in a specific solution area. The products are very sticky over time, meaning that, you know, lifecycle, these products are five years, you know, on this use mobile devices for a minute. Once a customer decides on a 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 refresh that, you know, product portfolio, they typically come back to us. Yeah, I would say that, you know, the majority of our customers are, you know, deploy, and make decisions around a single vendor in a specific solution area. yeah i would say that you know the majority of our customers are you know deploy and make decisions around a single vendor in a specific solution area The products are very sticky over time, meaning that, you know, lifecycle, these products are five years, you know, on this use mobile devices for a minute. the products are very sticky over time meaning that you know lifecycle these products are five years you know on this use mobile devices for a minute Once a customer decides on a 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. once a customer decides on a 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 refresh that, you know, product portfolio, they typically come back to us. the next time they come 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? Think of wearable devices for hands-free operations. 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. They're already having conversations with us of what's the next generation device? they're already having conversations with us of what's the next generation device What's the latest technology enhancements? what's the latest technology enhancements Have you added RFID to a, you know, a mobile device? 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? 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? how can i is there a different form factor that ultimately makes a certain portion of my business more efficient Think of wearable devices for hands-free operations. think of wearable devices for hands-free operations We're having these conversations with our customers all the time. 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. 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

Speaker 1: 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? With RFID, can you talk through the process of customer adoption? 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? is there a bottleneck in that customers need a modern- tech stack before first deploying the technology

Speaker 2: I would say that, you know, from an RFID perspective, there's multiple aspects that people look at. First is source tagging. 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. How do they tag it at that point? In retail, the source tagging is done at manufacturing. I think that's the first element of adoption, 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. I would say that, you know, from an RFID perspective, there's multiple aspects that people look at. i would say that you know from an rfid perspective there's multiple aspects that people look at First is source tagging. first is source tagging 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. 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 How do they tag it at that point? how do they tag it at that point In retail, the source tagging is done at manufacturing. in retail the source tagging is done at manufacturing I think that's the first element of adoption, that you have to be able to source tag at manufacturer or at the place in which you take receipt of the goods. i think that's the first element of adoption 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. 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. 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 of years is very significant uptick 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? I walk through a doorway and I tell wear the RFID tags. You have to take them right at point of egress into the system. you have to take them right at point of egress into the system I think that's the biggest barrier is tags. 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 of years is very significant uptick in tags or items being tagged. and we're seeing what people are really excited about is the number of tags being you know projected over the next couple of years is very significant uptick 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? 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? 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 I walk through a doorway and I tell wear the RFID tags. i walk through a doorway and i tell wear 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 kind of 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. Perpetually, I can tell that the inventory is actually here 'cause I can see it with the RFID tag. It is a bit of a journey from a technology perspective, from a reader perspective. Ultimately, there is the software element associated with it. I would not call it a modern tech stack as much as I, I think about it as taking location reads of what you want to do. You want to just know simply, is the item here or is it in the lobby? 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 kind of where it is within about three feet or so. 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 kind of 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. you can tell today in environments where an item is so you can direct somebody to where it is Perpetually, I can tell that the inventory is actually here 'cause I can see it with the RFID tag. perpetually i can tell that the inventory is actually here 'cause i can see it with the rfid tag It is a bit of a journey from a technology perspective, from a reader perspective. it is a bit of a journey from a technology perspective from a reader perspective Ultimately, there is the software element associated with it. ultimately there is the software element associated with it I would not call it a modern tech stack as much as I, I think about it as taking location reads of what you want to do. i would not call it a modern tech stack as much as i i think about it as taking location reads of what you want to do You want to just know simply, is the item here or is it in the lobby? you want to 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, being 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. There is software clearly involved in that, and it's application software. 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 NFL today to track players, cleats and shoulder pads and helmets, for instance, every time they leave a locker room. Think of it, the idea of this portal reader. Or do I wanna know where it is here? or do i wanna know where it is here And then ultimately taking those location reads, being 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. and then ultimately taking those location reads being 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 There is software clearly involved in that, and it's application software. there is software clearly involved in that and it's application software 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. 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 NFL today to track players, cleats and shoulder pads and helmets, for instance, every time they leave a locker room. you know we have our own application that we use within the nfl today to track players cleats and shoulder pads and helmets for instance every time they leave a locker room Think of it, the idea of this portal reader. think of it the idea of this portal reader 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. Those software exists today, and it's either developed internally by our customers. 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. 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

Speaker 1: Another question here, from the audience. Can you help us understand who is your core customer, and what is the product suite that, which has the highest market share? Another question here, from the audience. another question here from the audience Can you help us understand who is your core customer, and what is the product suite that, which has the highest market share? can you help us understand who is your core customer and what is the product suite that which has the highest market share

Speaker 2: Our core customers range across retail, transportation logistics, manufacturing, healthcare. 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 new areas we've entered. We'd have lower market share as an example, but in our core markets, we are the market leader. Our core customers range across retail, transportation logistics, manufacturing, healthcare. our core customers range across retail transportation logistics manufacturing healthcare No matter where you are in the world, you're likely a customer of ours in some way. 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 leaders in rugged mobile devices We're the global leader in handheld scanning. we're the global leader in handheld scanning We're the global leader in industrial barcode reading today across the portfolio. 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. 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 new areas we've entered. and you know across the rest of the portfolio we have different you know varying market share positions in new areas we've entered We'd have lower market share as an example, but in our core markets, we are the market leader. we'd have lower market share as an example but in our core markets we are the market leader

Speaker 1: 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? 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? 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

Speaker 2: Yeah, we continue to look at market share as an important piece of what we do around the globe. 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 that market leader. I think that you've seen other competitors struggle in the market, and we've continued 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 kind of work to tier the portfolio to make sure we've got an answer for lower-cost competitors in the market. Yeah, we continue to look at market share as an important piece of what we do around the globe. yeah we continue to look at market share as an important piece of what we do around the globe Being the market leader, we continue to invest across the portfolio, as I mentioned before, to continue to be that market leader. 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 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 that market leader I think that you've seen other competitors struggle in the market, and we've continued to take share against our traditional competitors across our core portfolio. i think that you've seen other competitors struggle in the market and we've continued to take share against our traditional competitors across our core portfolio I think you're always gonna have competitors. i think you're always gonna have competitors The Asian competitors have been around, you know, for a long time. the asian competitors have been around you know for a long time I think that, as I said before, we kind of work to tier the portfolio to make sure we've got an answer for lower-cost competitors in the market. i think that as i said before we kind of 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. I think that ultimately we've been taking share in that, you know, area around the globe. If you look at this value tier portfolio, there's, you know, a market segment that's very, very low end, you know, in some of the Asian markets that we've never really played in, and it doesn't really make sense for us to go do that. For the majority of areas where someone wants a lower-cost product with a lower specification than our premium or mid-tier product, we've got a product offering for them at a competitive price, at a competitive offering to, you know, any competitor around the world. We call it value tier, kind of a good, we got our best scenario. we call it value tier kind of a good we got our best scenario I think that ultimately we've been taking share in that, you know, area around the globe. i think that ultimately we've been taking share in that you know area around the globe If you look at this value tier portfolio, there's, you know, a market segment that's very, very low end, you know, in some of the Asian markets that we've never really played in, and it doesn't really make sense for us to go do that. if you look at this value tier portfolio there's you know a market segment that's very very low end you know in some of the asian markets that we've never really played in and it doesn't really make sense for us to go do that For the majority of areas where someone wants a lower-cost product with a lower specification than our premium or mid-tier product, we've got a product offering for them at a competitive price, at a competitive offering to, you know, any competitor around the world. for the majority of areas where someone wants a lower-cost product with a lower specification than our premium or mid-tier product we've got a product offering for them at a competitive price at a competitive offering to you know any competitor around the world

Speaker 1: 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? And how mature are the AI features that you've demoed? 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? what kind of timeline are you thinking about in terms of moving from pilot projects to deployment

Speaker 2: Yeah, I would say that the AI opportunities today that we've demoed at some of the largest trade shows are, you know, in pilot today, I would say, at our largest customers. The largest customers, especially in retail, are leading the way where they have their own applications within the devices 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 they're leveraging our devices to be able to manage, you know, those in their environment. I would say the early ones of those are the leaders in the market. It's that next tier down that I think we see the opportunity for us to leverage more of our software offerings to our customers but, Yeah, I would say that the AI opportunities today that we've demoed at some of the largest trade shows are, you know, in pilot today, I would say, at our largest customers. yeah i would say that the ai opportunities today that we've demoed at some of the largest trade shows are you know in pilot today i would say at our largest customers The largest customers, especially in retail, are leading the way where they have their own applications within the devices themselves, and they've got development teams working on these applications. the largest customers especially in retail are leading the way where they have their own applications within the devices 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 they're leveraging our devices to be able to manage, you know, those in their environment. they've got models where they've created digital assistance for you know for their associates and they're leveraging our devices to be able to manage you know those in their environment I would say the early ones of those are the leaders in the market. i would say the early ones of those are the leaders in the market It's that next tier down that I think we see the opportunity for us to leverage more of our software offerings to our customers but, it's that next tier down that i think we see the opportunity for us to leverage more of our software offerings to our customers but Early pilots today, I would say, more so than anything else. Early pilots today, I would say, more so than anything else. early pilots today i would say more so than anything else

Speaker 1: 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? So the next question here is, what is the total software revenue TAM, market size, for every dollar of hardware sold? 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? and which companies are currently part of this value chain

Speaker 2: Wait, Wait, wait

Speaker 1: Talk about that. Talk about that. talk about that

Speaker 2: You know, I think there's, I don't know the, 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. You think of some of the retailers today, they would have, you know, upwards of 30-40 applications sometimes on a, on a mobile device in their environment. There's a significant amount of software on those devices today that allow, associates to do their job within retail or transportation logistics or others. You know, I think there's, I don't know the, I don't know the TAM, associated with, like, the surrounding our device, right? you know i think there's i don't know the 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. it'd be interesting number but i think that there's a tremendous amount of software that resides on our mobile devices today You think of some of the retailers today, they would have, you know, upwards of 30-40 applications sometimes on a, on a mobile device in their environment. you think of some of the retailers today they would have you know upwards of 30-40 applications sometimes on a on a mobile device in their environment There's a significant amount of software on those devices today that allow, associates to do their job within retail or transportation logistics or others. there's a significant amount of software on those devices today that allow associates to do their job within retail or transportation logistics or others Think about, you know, it really is a smartphone device with the 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 monitor things like refrigeration and others, their engagement software with, with their customers to be able to merchandise and others. I'm not sure of the TAM, but there's tremendous amounts of software are, you know, used and leveraged on those devices today. Think about, you know, it really is a smartphone device with the 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 monitor things like refrigeration and others, their engagement software with, with their customers to be able to merchandise and others. think about you know it really is a smartphone device with the 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 monitor things like refrigeration and others their engagement software with with their customers to be able to merchandise and others I'm not sure of the TAM, but there's tremendous amounts of software are, you know, used and leveraged on those devices today. i'm not sure of the tam but there's tremendous amounts of software are you know used and leveraged on those devices today

Speaker 1: Great. Thanks, Bill. I think we're just about out of time. I just wanted to see if you could give your last moment for a few quick comments to leave us with. Great. great Thanks, Bill. thanks bill I think we're just about out of time. i think we're just about out of time I just wanted to see if you could give your last moment for a few quick comments to leave us with. i just wanted to see if you could give your last moment for a few quick comments to leave us with

Speaker 2: 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 products and solutions from Zebra. Thanks for your time. Yeah, I would just say that we're excited about the opportunity ahead of us. yeah i would just say that we're excited about the opportunity ahead of us Our customer relationships are incredibly strong today. our customer relationships are incredibly strong today We see our customers continue to invest in their portfolio of products and solutions from Zebra. we see our customers continue to invest in their portfolio of products and solutions from zebra Thanks for your time. thanks for your time

Speaker 1: Bill, thanks very much for joining us. Thank you, everyone. Bill, thanks very much for joining us. bill thanks very much for joining us Thank you, everyone. thank you everyone