Zebra Technologies Corporation

Good day and welcome to the third 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 now would like to turn the conference over to Mike Steele, Vice President, Investor Relations. Please go ahead.

Good morning and welcome to Zebra's third quarter conference call. This presentation is being simulcast on our website at investors.zebra.com and will be archived there for at least one year. Slide two conveys that the forward-looking statements we make today are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially due to factors discussed in our SEC filings. During this call, we will reference non-GAAP financial measures as we describe our business performance. You can find reconciliations at the end of this slide presentation and in today's earnings press release. 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 will include prepared remarks from Anders Gustafsson, our Chief Executive Officer, and Nathan Winters, our Acting Chief Financial Officer. Anders will begin with our third quarter results, then Nathan will provide additional detail on the financials and discuss our fourth quarter outlook. Anders will conclude with progress on advancing our enterprise asset intelligence vision and trends 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. Now let's flip to slide four as I turn the call over to Anders.

Thank you, Mike. Good morning, everyone, and thank you for joining us. We are honored that our solutions are empowering frontline workers in the battle against COVID-19. I am proud of our employees' resiliency and focus on serving our customers' critical needs during these challenging times. Our top priority continues to be protecting the health and well-being of our employees, customers, and partners as businesses continue to progress with their reopening plans. In Q3, our results continued to be pressured by the global macro environment. For the quarter, we realized net sales growth of 30 basis points. adjusted EBITDA margin of 20.3%, which contracted by 240 basis points, and non-GAAP diluted earnings per share of $3.27, a 5% decrease from the prior year. As a result of excellent execution by our teams and a faster than expected recovery in demand, each of these measures exceeded our outlook. Demand from our large strategic customers has been at record levels, driven by accelerated trends to digitize and automate workflows. Not surprisingly, the pandemic has disproportionately impacted our smaller customers and certain end markets, which has resulted in a significant shift in business mix. Together with premium shipping costs, this has weighed on gross margin. In light of this pressure, we have continued to diligently manage discretionary costs to preserve profitability and cash flow. Despite the challenging environment, our enterprise customers have been prioritizing spend with Zebra, and I would like to highlight some notable Q3 success stories. We expanded our relationship with a leading e-commerce retailer experiencing significantly increased order volumes. They require trusted technology solutions that enable improved supply chain and order fulfillment execution to empower their labor force. We are deploying our mobile computing, scanning and printing solutions across their growing global footprint. Innovation, quality and value are critical partner attributes cited by this customer, and we are proud that our team is delivering to their high standards. The hospital system in Denmark has chosen to replace a competitor with our clinical point of care solution. In Q3, they began a multi-quarter deployment of our healthcare-purposed TC5 series mobile computers and accessories, which will interface seamlessly with their electronic medical health record system. We have continued to deploy TC7 series mobile computers to USPS postal carriers as planned. and are now passing through their peak holiday season, expecting to resume in late Q1 with the goal of completion by mid-Q3. We are proud that we are able to help our customers meet their mission-critical needs in an increasingly on-demand economy. We continue to view acquisitions as a vector of profitable growth for Zebra and a way to elevate our role as a solutions provider. In early September, we closed on the Reflexes acquisition. In a few minutes, I'll elaborate on how this acquisition is synergistic to our offering. With that, I will now turn the call over to Nathan to review our Q3 financial results and discuss our Q4 outlook.