Zebra Technologies Corporation

And welcome to the second quarter 2020 Zebra Technologies Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Mike Steele, Vice President, Investor Relations. Please go ahead.

Good morning. Thank you for joining us today. Before we begin, I need to inform you that certain statements made on this call are forward-looking and subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially due to the factors discussed in our filings with the Securities and Exchange Commission. During this call, we will make reference to non-GAAP financial measures as we describe our business performance. You can find reconciliations of our GAAP to non-GAAP results in today's earnings press release and at the end of this slide presentation. This presentation will include prepared remarks from Anders Gustafsson, our Chief Executive Officer, and Olivier Leonetti, our Chief Financial Officer. Anders will begin with our second quarter results. Then Olivier will provide additional detail on the financials and discuss our outlook. Anders will conclude with progress on advancing our enterprise asset intelligence vision and trends we are seeing in our end markets. Following the prepared remarks, Joe Heal, our Senior Vice President of Global Sales, will join us as we take your questions. Also, throughout this presentation, unless otherwise indicated, our references to sales growth are year-over-year on a constant currency basis and exclude results from recently acquired businesses for the 12 months following each acquisition. This presentation is being simulcast on our website at investors.zebra.com and will be archived there for at least one year. Now I'll turn the call over to Anders.

Thank you, Mike. Good morning, everyone, and thank you for joining us. First, I would like to emphasize that our top priority continues to be the health and well-being of our employees customers, and partners. I am particularly grateful for all of the frontline workers, including medical professionals, who continue to serve our communities and keep us safe. Zebra and many of our customers' workplaces have commenced reopening plans, and I am very proud of the ability of our teams to effectively serve our customers and partners while working remotely through the peak of the pandemic. In Q2, our teams remained agile and executed very well through the pandemic. It has been inspiring for me to see our employees rally to keep the business and each other moving forward. Although the financial results we published this morning reflect a challenging second quarter environment as we navigated through the peak of the crisis, Zebra's longer-term prospects have strengthened as secular trends to digitize and automate workflows have accelerated with the pandemic. In Q2, we realized a net sales decline of 12%, adjusted EBITDA margin of 18.3%, which contracted by 290 basis points, and non-GAAP diluted earnings per share of $2.41, a 20% decrease from the prior year. As the virus spread and market weakness affected all of our major geographies, particularly our Asia-Pac and Latin America regions. The impact was most pronounced in our run rate business, which required our distributors to reduce their inventory levels. However, sales growth in services was a bright spot, and enterprise mobile computing relatively outperformed. Although premium shipping costs due to the pandemic impacted gross margin more than we had anticipated, We diligently managed discretionary costs across the company to preserve profitability and cash flow. Despite the challenging environment, our enterprise customers have been prioritizing spend with Zebra. Our solutions are a key enabler of their strategy to digitize their operations, as well as supporting essential use cases during the pandemic. Large order volume was strong across vertical markets, increasing over the prior year. I would like to highlight some notable Q2 wins from large customers supporting critical use cases. The leading home improvement retailer expanded their relationship with us by purchasing 10,000 of our printers to address multiple front of store use cases, including curbside pickup and in aisle label printing. Their shift to mobile on demand printing is expected to significantly improve worker productivity and replaced a competitor's stationary printers. We also secured a competitive takeaway win with a federal retail commissary to deploy more than 7,000 mobile computers. Our solution enables this customer to satisfy multiple use cases, including curbside pickup. We were pleased to support a large healthcare organization by providing a wide range of mobile computers, scanners, and printers to quickly ramp their point of care and clinical communication needs as they added 4,000 hospital beds to treat COVID patients. Additionally, as expected, we began deploying TC7 series mobile computers to USPS postal carriers in late Q2. We expect the majority of the deployment to occur in 2021. We continue to collaborate with these customers to support their essential needs and drive further improvement in their workflows. I am pleased that we have substantially completed our global product sourcing diversification initiative despite modest delays due to the pandemic. Replicating production lines outside of China into broader Asia mitigates supply chain risk and enables us to avoid tariffs on our U.S. imports. With that, I will now turn the call over to Olivier to review our Q2 financial results and discuss our outlook.