Zebra Technologies Corporation

Good day and welcome to the second quarter 2026 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 remarks, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mike Steele, Vice President of Investor Relations. Please go ahead.

Good morning and welcome to Zebra's second quarter earnings conference call. This presentation is being simulcast on our website at investors.zebra.com and will be archived there for at least one year. Our forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially, and we refer you to the risk factors discussed in our SEC filings. During this call, we will reference non-GAAP financial measures as we describe business performance with reconciliation shown at the end of this slide presentation and in our earnings press release. Throughout this presentation, unless otherwise indicated, our references to sales performance are year-on-year on a constant currency basis and exclude results from business acquisitions and dispositions for 12 months. This presentation will include prepared remarks from Bill Burns, our Chief Executive Officer, and Nathan Winters, our Chief Financial Officer. Bill will begin with perspectives on our second quarter results, our value proposition and strategic priorities. Nathan will then provide additional detail on our financial results and discuss our outlook, followed by Bill's closing remarks. Then Bill and Nathan will take your questions. Now let's turn to slide three as I hand it over to Bill.

Thank you, Mike. Good morning, everyone, and thank you for joining us. There are three key points I'd like to focus on today. First, our team executed well, driving record results with broad-based growth and significantly increased profitability. This strong performance, together with the continued momentum we are seeing across our business, supports our meaningful raise to the full year outlook. Second, our results reflect Zebra's unique value proposition. Customers are investing to digitize and automate frontline operations, and our integrated portfolio is central to their progress. Zebra's AI-powered solutions are helping customers globally to improve outcomes to enhance productivity, visibility, and real-time decision making. Third, We are executing on our clear strategy to create long-term shareholder value by driving sustainable growth, building on our industry leadership and track record of innovation in enhancing our financial strength and flexibility. With that, let's turn to our second quarter results. Turning to slide four, we delivered results exceeding our outlook, driven by our team's execution and positive demand trend across our portfolio. We had strong performance across all segments and regions with double-digit growth in our retail, manufacturing, and healthcare end markets. ELU Touch contributed strong, profitable growth with robust customer interest in our combined portfolio of solutions as we drive synergies with the acquisition. For the quarter, we generated sales of more than $1.5 billion, growing more than 20%, or 9% on an organic basis from the prior year. An adjusted EBITDA margin of 27.7%, including the benefit of $73 million of tariff recovery and non-GAAP diluted earnings per share of $6.35, a 76% increase over the prior year. Excluding the benefits of tariff recovery, we expanded adjusted EBITDA margin by two points Thank you for joining us today. in the first half of the year, following more than $300 million in the fourth quarter. This elevated level of capital return reflects our conviction in Zebra and our long-term value creation opportunity. Our business momentum and progress navigating the memory supply environment gives us confidence in raising our outlook for the full year. Moving to slide five, I want to share some additional details on our key end markets. In retail, e-commerce and convenience stores were bright spots, driven by consumers' elevated expectations for faster delivery and expanded fulfillment options. A recently acquired Elo Touch business delivered strong growth benefiting from self-service trends. We were also encouraged by customer interest in our Zebra Frontline AI Suite and new devices that can best deliver these solutions. In transportation logistics, sales were flat on a strong prior year compare with relative outperformance in third-party logistics and warehousing. Our AI software solutions and recently launched portfolio of AI optimized mobile computers has positioned us well with industry leading companies who recognize Zebra's ability to bring increased productivity and service levels to their operations. As we look ahead to 2027, we have a robust multi-year pipeline of large deployments. In manufacturing, our strong double-digit growth was driven by continued macro improvement and our customers' need for increased visibility across their operations. Electronics and pharmaceuticals were particularly strong in the quarter. Machine vision has also outperformed as our team has been executing well on growth initiatives as we invest in the business. Healthcare was our highest growth end market in Q2. We realized particularly strong performance in mobile computing as customers equipped more caregivers with enterprise grade solutions. We're excited about our opportunity to improve the patient care journey. Now turning to slide six, we continue to build on Zebra's unique competitive positioning as the foundation for intelligent operation. Our solutions capture data at the front line turn that data into insights and enable customers to take action in real time. AI strengthens its ongoing process by enabling faster decision-making, greater automation, and continuous workflow improvement. Benefits include increased productivity and better experiences for frontline workers as well as consumers. We are deeply embedded in our customers' workflows and understand how work gets done on the frontline. This allows us to serve as trusted partners to our customers and to co-innovate with them to digitize, automate, and deploy AI. With our integrated portfolio, we meet customers where they are today in their automation journey while also continue to expand our value as their operations evolve. Turning to slide seven, our results reflect the progress we are making in executing on our three strategic priorities. On our first priority, long-term profitable growth, we continue to see meaningful opportunity across both our segments, supported by a large and diverse market and a long runway for adoption in many of the environments we serve. We believe both connected frontline and asset visibility and automation have a 5% to 7% organic sales growth profile over a cycle and are confident in our ability to deliver. Penetration remains low across the markets we serve, highlighting the opportunity in front of us. For example, based on third-party research, nearly three-quarters of warehouses globally are in the early stages of their automation journey. Our growth prospects are augmented by investments in RFID, machine vision, and AI that enhance our differentiation and expand our relevance with customers. We're also driving efficiency initiatives in our business to enhance profitability, which include operating as French leverage through cost discipline, including our previously announced restructuring actions that were substantially completed in the second quarter, accelerating software development by deploying new AI tools, enhancing our go-to-market model to improve market coverage and efficiency. We also continue to make progress on our second priority, building on our market leadership by advancing innovation. We're seeing early traction in our new line of enterprise mobile computers and wearables that embed RFID and optimized AI processing capabilities, as well as new RFID and 3D machine vision solutions. Finally, our strong earnings and cash flow generation continue to enhance our financial strength and flexibility. who are executing on a balanced capital allocation strategy, prioritizing investments in our business that elevate our portfolio solutions while consistently returning capital to shareholders. Let me wrap up before I hand over to Nathan. We have significant runway for growth with our clear and differentiated value proposition, supported by trends in automation, digitization, and AI across a $35 billion serve market. Our broad portfolio of integrated hardware and software solutions enables us to deliver value across the entire workflow, not just a single use case, creating a meaningful competitive advantage. Our industry leadership puts us in a unique position to be the supplier of choice of AI for the frontline. And we have a resilient financial model with strong margins and cash generation, supported by disciplined capital allocation that drives long-term shareholder value. I will now turn the call over to Nathan to review our Q2 financial results, progress in navigating memory supply, and our improved 2026 output.

Thank you, Bill. Let's start with the P&L on slide 10. In Q2, total company sales increased 20.4% or 9.2% on an organic basis. We exceeded the high end of our guidance range primarily due to our ability to secure increased memory supply as well as continued momentum across the business and favorable pricing. Our connected frontline segment grew nearly 26%, including the recent ELO acquisition, or 7.5% on an organic basis, led by mobile computing. Our asset visibility and automation segment grew 11.4%, led by printing and machine vision. We realized solid performance across all our regions. North America sales increased 9% led by our retail, manufacturing, and healthcare in markets. EMEA sales grew 7% with broad-based growth across Europe, partially offset by continued softness in the Middle East. Asia Pacific sales increased 13% led by China, Korea, and Southeast Asia. And Latin America sales grew 15% led by Mexico and Brazil. Adjusted gross margin improved 540 basis points to 53.3%, largely due to the $73 million IEPA tariff recovery that was not included in our outlook, as well as favorable foreign currency exchange. Additionally, we fully mitigated a $20 million increase in memory costs through strong price realization. Gross margin outperformance, along with 170 basis point improvement and operating expense leverage, enabled us to expand adjusted EBITDA margin by 7.1 points to 27.7%. Non-GAAP diluted earnings per share were $6.35, a 76% year-over-year increase, significantly exceeding the high end of our outlook. Turning now to the balance sheet and cash flow on slide 11. Year-to-date, we generated $361 million of free cash flow, ending the second quarter with a modest debt leverage ratio of 1.9 times and $925 million of credit capacity. We've been deploying capital consistent with our allocation priorities, repurchasing $568 million of stock in the first half of the year. Turning to slide 12, our team has a track record of managing through disruptions by being proactive, maintaining close supplier partnerships and using our scale to create flexibility in the supply chain. We are successfully navigating the current memory cost and supply environment and have line of sight what we need to support our outlook. Suppliers are delivering on their commitments, enabling our strong sales growth. We continue to work proactively across multiple fronts, including direct supplier co-planning, alternative sourcing options, and transitions to higher density memory components where capacity is expected to increase into 2027. Additionally, The component pricing trajectory for the year is tracking in line with our expectations. Our cost position remains favorable relative to spot market rates given our direct supplier relationships. Looking ahead, we are committed to protecting profitability by taking additional price and other operational actions as necessary. Let's now turn to our outlook. We've entered the quarter with a strong backlog and pipeline that supports our sales growth guidance range of 17% to 20%, including approximately 10.5 points of contribution from business acquisitions and favorable effects. Our third quarter adjusted EBITDA margin is expected to be approximately 22%, and non-GAAP diluted earnings per share are expected to be in the range of $4.70 and $4.90. For the full year, we expect sales growth between 14% and 16%. reflecting a three-point increase at the midpoint from our prior outlook. Our guide factors in year-to-date outperformance, momentum across the business, including manufacturing and machine vision, previously announced price increases related to memory, and an eight-point favorable impact from acquisitions and FX. Our full-year adjusted EBITDA margin is now expected to be between 23.5% and 24%. and non-GAAP diluted earnings per share is expected to be between $20.75 and $21.25. Our full year guide continues to reflect full mitigation of the approximately $120 million memory cost headwind. We've been driving this through targeted price increases and other direct memory initiatives, as well as net savings from our restructuring actions, volume leverage and FX favorability. Free cash flow for the year is now expected to be at least $1 billion, which reflects a conversion rate of approximately 100%. We are continuing to optimize our working capital levels, balance with our supply chain resilience objectives. Please reference additional modeling assumptions on slide 13. With that, I will turn the call back to Bill. Thank you, Nathan.

Before we turn to your questions, let me leave you with three key takeaways from the quarter. We delivered record quarterly results and are confident in our increased outlook for the full year. Customers are leveraging Zebra's AI-powered portfolio solutions to improve productivity, visibility, and decision-making, and we remain focused on driving long-term profitable growth and shareholder value. I will now turn the call back to Mike.

Thanks, Bill. We'll now open the call to Q&A. We ask that you limit yourself to one question and one follow-up to give everyone the chance to participate.

We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. And our first question comes from Keith Hosom from North Coast Research. Please go ahead.

Great. Thanks, guys. Appreciate it. And good morning. Congratulations on this great quarter. Hey, Bill, as we're kind of thinking about, you know, the rest of the year into 2027, now the past two quarters, this quarter, last quarter, you referenced some successful deployments expected in 2027 in the T&L segment. Can you give us a little bit more color on that? Again, I'm not asking for 2027 guidance, but it sounds like your confidence in 2027 is growing based on some of the bookings that you have for that. Just any color you can provide on that would be great.

Yeah, Keith, I would say that the, you know, excellent results certainly in the quarter overall with great execution, you know, by the team. So I'll start there. When we look at the, you know, vertical markets, clearly, you know, saw that TNL cycling, you know, difficult comparison last year, just high compares. But, you know, still saw a solid performance, you know, across that vertical market with, you know growth across third-party logistics and warehousing in this segment. So we feel good about Transportation Logistics and the investments they're making in technology despite the compare from a year ago. I'd say that as you referenced really a robust multi-year pipeline of large deployments coming across T&L really focused on last mile delivery and Our customers and our differentiation coming from our new mobile devices, which add RFID and AI capabilities to those devices are clearly giving us a competitive advantage in the market. The deployment of RFID continues across transportation logistics as we see that investment continuing. And I'd say that they're focused really on Worker productivity, how do they drive operational efficiency? How do they increase visibility of parcels across their network? But we see over, you know, starting in 27, you know, a strong pipeline of opportunities for, you know, refreshes within transportation logistics. And we continue those conversation with customers that are ever confident in that happening.

Great, I appreciate that. You made some positive commentary in terms of machine vision this quarter. Any color you can comment on in terms of the progress that you've made over the past year, year and a half, and how you're thinking about that for the rest of the year?

Yeah, I think just like T&L, we saw strength in manufacturing. So while T&L has been a strong segment, manufacturing continues strength as well. So we're seeing the drive, again, for increased visibility across the supply chain. Electronics and pharmaceuticals, certainly a strength and a quarter in manufacturing. And then that driving really outperformance in machine vision with the team executing well within machine vision. Really, we've aligned our business unit, our go-to-market teams to really focus on specific opportunities within manufacturing. We've talked about our increased focus on manufacturing over the last couple of quarters and that alignment with our regional sales teams is really driving our value proposition into the marketplace which is resonating with not just our sales teams but our partners and our customers as well. We continue to enhance the portfolio of solutions and machine vision and we're seeing an excitement by the team and then strong growth. I mean you know there's lots of examples you know using AI for optical character recognition for instance in places like outside of manufacturing logistics and inside of manufacturing you know things like food and beverage so there's lots of examples of places where we're focused and we're winning we've seen strong performance from photo neo so you know acquisition in the space to continue to you know enhance our offerings both organically and inorganically and machine vision so We like this space. We're seeing growth across the business and manufacturing. We're seeing it diversifying the business and our team's focus is playing out as we'd expect it driving growth for us.

The next question comes from Tommy Mull from Stevens. Please go ahead.

Good morning and thank you for taking my questions. Hey, Tommy. Morning. Bill, it sounds like In second quarter, part of the reason you exceeded the top line expectation was the memory supply was a little better than expected. So my question is, to what extent is your guidance for 3Q and the second half still constrained by that memory supply? And to what extent do you have visibility into 2027 on that improving? Thank you.

I'll start and then maybe hand over to Nathan. I would say that memory continues to be a dynamic and challenging environment. I'd say that our teams executed really well both through the first half of the year and especially in the second quarter here to work closely with our suppliers to secure the memory we needed to get above the top end of our guide. We had told you that our demand was at that level and that really it was being gated by memory constraints. We're confident, you know, in mitigating the memory challenges, you know, to achieve our second half outlook. So, you know, demand signals and the demand we're seeing from our customers is above what we're, you know, guiding to. And, you know, there is still constraints out there, but the team has done, you know, an amazing job of really secure memory and All that data takes you through the details, but they're doing a lot to make sure that we can deliver for our customers, you know, not just in second quarter, but, you know, through the second half of year and into 2027.

Yeah, Tom, I just had a few things, you know, we talked about this before in terms of the different mitigation strategies and actions that teams are taking. And we do expect, as Bill mentioned, a modest increase in memory in the second half. But the team's really working hard to meet the unconstrained demand, which again is near the high end of our guidance range. The work we're doing with the direct supplier co-planning is really paying out, working on the supply pipeline, not just for the next three to six months, but actually the next 18 months. And then a lot of work with our product teams on qualifying new suppliers, new different chip types. We're working with 10 different new suppliers, and the goal is to have five to seven qualified suppliers for each of our primary memory types. So I think all those actions we're taking gives us confidence that we'll be able to continue to secure the volume we need to support our customers into 2027 and the growth that's required.

Nathan, a follow-up for you on the share repurchase activity, pretty robust through the first half. What can you tell us about any plans to continue to deploy capital there in the second half of this year? Thank you.

Just to start with the overall capital allocation, we ended the quarter at 1.9 debt leverage, strong cash flow expected for the year at $1 billion. The balance sheet's in great shape. As we mentioned on the call, we repurchased $568 million through the second quarter, but we've continued to be active here in the early part of the third quarter, given what we believe is still an attractive stock valuation. Our full-year EPS guide assumes that we'll do an additional $150 million of share repurchase in the back half, so call it $700 million for the year. I think we plan to take a bit more of a balanced approach here in the second half to maintain some flexibility, but again, have the option to continue to purchase more if we think the stock still remains at an attractive price.

Our next question comes from Quinn Fredrickson from Baird. Please go ahead.

Hey, good morning, guys. Just on memory, you talked about supply. I'm wondering when you might get visibility into next year's component costs from your key suppliers. I know you're on contract, not spot pricing. So when do you typically get some visibility into memory costs for next year?

I'll take that. One, from a cost, I think just to start with this year, the market pricing is in line with our prior guide. So As we kind of laid out the year and the guidance, the pricing and the price increases that we have planned at the beginning of the year are largely playing out as expected. And as you would expect, there's quite a variability across the different memory types. And the direct purchasing with those memory suppliers is a really big benefit in terms of avoiding the spot market as much as we can. We typically get pricing at the beginning of three months in advance. or every three months. But I'd say up to this point, our key suppliers have been pretty transparent around where they expect the price to go out into the future while it's not set. So I think the team has a pretty good handle on not only what we expect for the next three to six months, but where that trajectory is expected to be as we go out into 2027. And that's what we're going to continue to monitor. And I'd say our commitment, just like it was this year, is to continue to take the necessary actions to mitigate that exposure in the P&L whether that's through our own increased pricing actions or other productivity initiatives to offset and continue to ensure we expand margins as we go into 27.

Thanks, Nathan. And then you gave guidance for a third quarter in the full year here. So it looks like organic growth for fourth quarter is implied in about the 8% range. Can you just discuss how you think about what's embedded around year-end customer budget flush or large deals at this stage based on your conversations with customers?

Yeah, so if you look, again, we have a robust pipeline here as we go into the second half. So I think the conversations continue to be productive, similar to what they are in prior years. We don't typically get that full indication until we get to later part of the third quarter and early part of the fourth quarter. So we feel good about the position we have for the fourth quarter in terms of the overall pipeline. And today, somewhat the Q4 is capped by just on the memory supply we expect or have confidence in achieving here in the fourth quarter. So Again, but the team's actively working to secure that pipeline, get the visibility we need back to the supply chain team so we can work with our suppliers to meet that demand, which, again, we were able to do here in the second quarter.

And our next question comes from Andrew Buscaglia from BNP Paribus. Please go ahead.

Hey, good morning, everyone. Thanks for taking my question. Morning, Andrew. Good morning. I wanted to check on your sales. have just picked up nicely in Q2. But your Q3 guidance implies some slight deceleration. I mean, still very strong, but I'm wondering what's informing that guidance. And then similarly for Q3 margins, you had a nice heated expectations by quite a bit, even X tariff refunds. But then your Q3 margins imply a slight step down. So I'm just wondering if there's something going on with NICs or timing of... of demand or timing of orders coming through, or how would you characterize that?

Maybe just start with kind of the overall outlook. I think we have obviously confidence in the guy given the first half performance. A lot of the back half is still somewhat predicated around the memory capacity that we expect. So to a certain degree, the growth rates are somewhat – Just somewhat based on just prior year compares and where we expect the supply to play out and gives us confidence in that guide. So if you look at the Q3 sales guide of 17 to 20%, 8% organic at the midpoint, which includes about two points of pricing, we feel great about that ramp and the trajectory and the underlying demand supporting the business. And I think from an EBITDA rate perspective, If you look the step down from Q2 to Q3, obviously a primary driver that is removing the IEPA refunds here in the Q2 results, and there's about a point degradation coming from higher memory costs. So we do expect memory costs to increase as we go from Q2 to Q3. We were able to fully mitigate the memory step up in the second quarter with our own pricing actions, but we do anticipate a slight degradation as we go into the third quarter, which was which was always planned out as part of our implied guide at the beginning of the year. So operationally excluding memory, it's somewhat in line sequentially in a similar level of mix as we go from the second to third quarter.

Okay, got it. And, you know, you raised prices this year, obviously, to help mitigate things. I think you indicated you can raise prices again if you want to. I guess what gives you that confidence and how quickly can you implement it and what would you need to see if you had to move forward with further price increases?

Yeah, I'd say Andrew would prefer not to raise price. That's certainly our strong preference, but we've you know how to do that based on the significant increase in in memory we believe that and have confidence that if you know we need to we can see that pricing flow through and we've been able to demonstrate that both in our business and in the ELO acquisition as well on both sides. So our preference is not to raise price, but as we need to do that, as memory pricing continues to increase, we'll do that just like other suppliers have had to do. So I think that our preference is not, but that's kind of where things are at across the industry. There's just no way not to raise price given the significant increase in memory pricing today.

Yeah. Okay.

Thank you. The next question comes from Joe Giordano from TD Cowan. Please go ahead.

Hey, guys. Morning. Morning, Joe. Look, I know we've talked about this a lot. I just want to be very clear and correct me if I'm wrong in how I was thinking about it. But last quarter, I think you characterized the revenue guidance at the high end as kind of unachievable in light of and many more.

across each of our vertical markets and across each of our regions really leads us to the high end of our outlook for Q3 and for the full year. And the midpoint of that outlook factors in the potential supply constraints associated with memory that we're seeing. So I think it's the same approach we had in Q2. We've now taken for Q3 and full year. The team executed very well delivering for our customers and Q2, which has got us to the, you know, above the high end of our range. But, you know, in second half, we're continuing to see a challenging and, you know, dynamic environment around memory. So the prudent thing for us to do is to, the demand signals take us to the high end, but our guide is really, you know, at the midpoint of our guide that really factors in the potential supply constraints that we'd expect to see in second half.

But obviously both were significant steps up from where we were last quarter, both in what I think is a response to what we see as the underlying demand and the great work the team's doing to secure additional supply. So I think both, as Bill mentioned, that's playing out in the guidance. But I think the positive note is that both were substantially higher than we were three months ago by the great work from the team.

Is an LTA available to you guys if you wanted to pursue that?

We've had discussions regarding supply agreements with various of our memory suppliers, but our priority up to this point has really been on qualifying new suppliers and memory types, along with working on that visibility both here in the short and long term, and that's been playing out. So while those discussions are ongoing, we don't think it's limiting us or preventing us from achieving it. And if those were necessary to obtain increased supply, we absolutely would, but it hasn't been necessary to this point.

The next question comes from Piyush Awasthi from Citi. Please go ahead.

Good morning, guys, and thanks for taking my questions. Just following up on some of the other questions asked on the guidance raise, you are raising the organic growth expectations for the full year for 2026. Can you provide some clarity on how we should be thinking about the two segments? Connected Frontline has some memory constraints, so I understand that, but AVA had a really strong quarter not sure if there's like any one-time item to call out there but do you expect like AVA should lead that growth or do you think like CF could you know more meaningfully contribute as we progress through the year?

Yeah I think we see you know strong growth across you know both the segments so asset building and automation really you know focused on you know insights into assets within our customers so think of inventory as an example in in retail. So print, data capture, machine vision, RFID are all part of that portfolio of solutions. We in Q2 saw strong growth in print, again, driven by strength in manufacturing, for example. But we also had, you know, strong growth rates in volume and run rate for data capture solutions. Our supplies business continues to be strong, strong quarter, very strong quarter in machine vision and RFID deployments continue. So I think Strength in asset visibility, certainly in automation segment, but also connected frontline. So I think that we're clearly seeing that our customers are deploying more devices in the hands of more frontline workers to really improve productivity, drive collaboration. you know how do they enhance their interaction you know associates have with the you know customers on the on the front line and you know that segment of course is mobile computing but also our ELO segment fits into that you know software and our AI solutions and we're seeing you know mobile computing next generation of those devices adding AI capabilities and you know RFID next generation wearables you know devices optimized with the processing power necessary to deploy AI, both our AI suite and deployments our customers are looking to make. ELO, we had a strong performance in the second quarter and expect that to continue in the second half year with momentum with the ELO acquisition, with the two sales teams working closely together and positioning those solutions across our customer base. So I'd say you expect growth in both segments in second half year and feel good about the demand across you know we're seeing across the portfolio across the regions across the different vertical markets truly broad-based growth.

Very helpful and I think like I get the point that it's very broad-based but it seems like EMEA has been a bit of a laggard I mean there was decent growth this quarter but like and you mentioned like a Middle East impact there but can you elaborate on the underlying demand environment across like different business verticals in the in the EMEA region specifically And as you think of like 2026, like based on the conversations with your customers there, like how do you think like Europe would contribute to the organic sales growth construct?

Yeah, I mean, you know, EMEA was slightly behind the other regions. And I think to go back a couple of quarters ago, you know, EMEA growth was a bit challenged. But I think some of that was tougher compares from the prior year. We're seeing resilient demand, you know, across Europe. Obviously, as you said, you know, softness in the Middle East, right, is the, you know, the geopolitical challenges there. Relative strength, I'd say, in retail, manufacturing, healthcare across, you know, EMEA, you know, double digit growth, you know, in machine vision, our supplies business, ARPID, you know, print, mobile computing. So I think we're seeing... Strong Growth, it was 7% for the quarter and I think did slightly below the other regions of North America. And then certainly we saw a lot of strength in Asia-Pac and Latin America. But I don't think we have any concerns about EMEA. We feel good about what they're seeing. And it's been pretty resilient given all the things happening across the European market.

The next question comes from Meta Marshall from Morgan Stanley. Please go ahead.

Great, thanks. A couple of questions for me, just in terms of on Ello, just where do you feel like you've got, you know, clearly the business is continuing to do quite well, but just in terms of kind of revenue synergies or selling into the base, you know, where are you in terms of kind of exploiting some of those natural overlaps? And then maybe on the healthcare side, You noted very strong kind of traction there over the last quarter. Just trying to get a sense of, you know, are those new customers? Are those new project types? Just where is that kind of traction coming from? Thank you.

I'll start with Elo. I would say that, you know, excited about certainly the performance and the work around integration. As you mentioned, it really reaffirms our conviction that and the acquisition of Elo and the combined capabilities between our two portfolios that really gives us another dimension on the front line, which is really the focus areas there are modernizing point of sale, certainly continuing to streamline self-service and then the payment portfolio at Elo. So I think we saw growth above our expectations in Q2, strong pipeline of opportunities driven by are sales teams working closely together and growing that commercial pipeline, but also progress we're making on synergies, about $10 million identified so far. But the real synergies come, as you pointed out, around the commercial side of things. We're expanding in the new geographies that Elo didn't have a presence in before. We've got named accounts across the globe in which we're focused on joint selling efforts. And those are beginning to pay off with strong pipeline of opportunities, early wins, and continuing to position the entire broad portfolio. I'd say in healthcare, highest growth vertical in the quarter, and you see this repeatedly from time to time here in healthcare, strong performance in mobile computing. So we're clearly seeing The Equipping of More Caregivers with Enterprise-Grade Solutions. It's really around staff communication and collaboration, enhancing patient safety around operational efficiency in the healthcare base. We've seen clinical mobility. We've seen urgent care locations driving the business, track and trace opportunities across healthcare are getting better visibility into what inventory they have. We also see ELO opportunities in healthcare. So we've taken the ELO products and solutions, an area they really weren't, you know, a primary focus for them into the HIMSS trade show earlier this year and really looking at self-service applications, both for things like patient check-in or visitor check-in, you know, but more opportunities in healthcare for ELO as well. So I think that Healthcare continues to be a strong vertical for us. New customers and existing customers and new use cases and certainly more devices in the hands of more clinical workers overall.

The next question comes from Guy Hardwick from Barclays. Please go ahead.

Hi, good morning. Great results, guys. Nathan, so I think to go back three months ago, you said that the $120 million of memory headwinds would be half offset by price, so maybe $50 million, $60 million realized over the three quarters. Looks like you've already realized $20 million. I think you said in the Q3 guidance it's going to be two points of price, so that suggests perhaps another $30 million. So can you tell us what's happening in pricing? Is pricing being realized more quickly than you realized? Or is there some mix in fact? Or has there been some Other price increases that perhaps have not been announced, which are benefiting results.

Yeah. No, guys, that's exactly right. So out of the $120 million of gross headwinds, we had previously communicated $60 million expected benefit from pricing. We've increased that now to $90, primarily due to the strength we saw in the second quarter. And I think that's a real credit to the team. One thing we did differently this time versus other companies price increases. While the price increase went into effect in later part of March, we were proactively looking at deals and quoting opportunities at the higher price going back to the beginning of the year as we saw the price increase. So I think that proactively getting those projects that were in the pipeline for the second quarter and embedding the incremental pricing ahead of the actual price increase in the and the announcement was a big driver. And I think the team's been super focused on it. Big credit to the sales team and our product teams for driving it. But that obviously gives us confidence here as we go to the back half of the year to deliver on what we need for the back half and substantially and continue to increase that as we go into the fourth quarter and into 27 to fully mitigate the exposure.

And in EMC, what do you think kind of just in EMC, what sort of price increases are you realizing?

Yeah, it's pretty well split. I mean, the EMC takes a little bit longer just given the types of deals and the project base. But the vast majority of the price increase we announced in the second quarter was for our mobile computing portfolio. But we've seen nice strong prioritization in print and other parts of the portfolio. So we're seeing it pretty broad based. But I'd say the mobile computing made up probably about half of the price increase here in the second quarter. And we'd expect that to increase as we go to the back half of the year.

The next question comes from Trevor Saar from William Blair. Please go ahead.

Thanks. This is Trevor on for Brian. Just one for me. I was wondering if you could give a little bit more detail on the memory tech and the signals from customers or sorry, suppliers and how they're investing for that new memory tech in 2027. And are customers asking for your product to be upgraded to this new memory tech for 2027?

Yeah, so if you look, we've done a lot of work within the portfolio. I mean, the vast majority of our products are on the low power LPDDR5, which is where the primary memory type that a lot of the capacity is moving to. So I think that puts us in a nice position of our portfolio being where capacity is moving towards. And we're obviously working with each one of our suppliers as they move to the next generation memory type within that within that band, as well as qualifying new suppliers. The work with our commercial teams and our customers is really around, again, do they need six, eight, 12, 16 gig memory and what's the right memory for the use cases that they have, the applications, obviously what their future use of the device is gonna be over the next two to three years as they're making those decisions, but also There's a big price difference between those different types that we want to make sure our customers are aware of, as well as capacities different across each one of those. So I'd say it's a very active dialogue with the customers around their needs, the timing of when they need the product, and then what's available. So it's quite an extensive amount of coordination across the groups. But I think the team's doing a great job of working that between the sales team, the business units, and our supply chain team to get the right to our customers that meet their long-term needs with the best possible outcome, both from a timing and pricing perspective. Great, thank you.

And the next question comes from Patrick Muth from Needham. Please go ahead.

Hi, thank you for taking my question. This is Patrick Muth on for Jim Rashidi at Needham. I was curious about the RFID growth in the quarter and if you guys are still expecting on that double digit growth for the full year as opposed to OpEx investments in RFID. And then secondly, is there any more color that you guys can share on gross margins in OpEx in the second half of the year? Thank you.

Yeah, Patrick, I'll start and then hand over to Nathan. Strong pipeline of opportunities with RFID as we continue to see investments across the supply chain. So retail, transportation logistics, manufacturing, government as well. So we're expecting growth for the full year. Despite second quarter being flat, that's really primarily just timing on projects. Again, no concerns on our part about the growth of RFID. I think we're seeing the continued opportunities beyond retail apparel into broader merchandise, parcel within transportation logistics, fresh food and in grocery, quick serve restaurants, healthcare, government applications. So broad use cases of RFID really going to drive that growth for full year. Just, you know, again, not concerned about second quarter really at all. It's all project timing. Track and trace across the supply chain continues to be a focus, you know, for our customers. Zebra is the broadest, you know, set of solutions inside, you know, RFID today. So whether it's Fixed or handheld reading, our printers today printing RFID labels. We're really excited about our new line of mobile devices and wearables that have integrated near field RFID reading capabilities associated with them, embedded in those devices that we're seeing a lot of interest from our customers that are pulling RFID for those devices. So we're excited about RFID and the expanded opportunity it represents. And again, Full year growth definitely expected from the RFID portfolio.

If you look at the back half margin as well as OPEX assumptions, the Q3 guide around approximately 22%. As I mentioned, there was a slight step down from the Q2 results, excluding IEPA refund of about a point, reflecting the higher memory costs. And we'd expect a similar margin profile as we go into the fourth quarter that's embedded in the guidance. A lot of work on the OPEX line. We'll get about a point of scaling for the year driven on the higher volume, but also we took significant restructuring throughout the first half of the year, which we've completed here, exiting the second quarter, which is allowing us to not only right-size the portfolio, but absorb some of the higher healthcare costs and those types of things while we continue to invest in our new AI solutions, as well as expanded market coverage in our go-to-market team. So We'd expect that scaling to continue here as we go through the back half of the year and into 2027 in OPEX.

And our last question comes from Amit Malhotra from UBS. Please go ahead.

Good morning. This is Pratap on for Amit Malhotra. So my first question is on the four-year guide. If we take out pricing, volume growth seems to be around mid-single-digit range. Now, as we think beyond this year, do you think that rate is sustainable and can even improve into the next year? I know this is a bit too early to provide any outlook for 2027, but can you help me with any framework around this, like which parts of the portfolio can accelerate versus which can slow down? Thank you.

Yeah, so if you look at our full year sales guide of 14% to 16%, 15% at the midpoint, that's organic growth of seven points, which includes two points of price. And some of that pricing will roll over into 2027, just given the timing of the announcements, where acquisitions and FX make up eight points, the remaining eight points of the delta. Look, I think, as Bill mentioned earlier, we're excited about the long-term opportunities for the company. and while we're not guiding for 27, I think you look at the underlying demand of the business, the pipeline, we have a projects and the innovation, we feel confident that we'll be able to continue to meet the growing demand for our customers. And I'd say there's no reason to, as we look at the long-term growth, the five to seven, that would be not somewhere within that range as we move forward out of 27, but into 2027, but a lot of that depends on, again, the timing of the pipeline, along with looking at the memory capacity as we enter 2017.

Thank you. Just on a follow-up on this, if I look at the quarter, organic sales growth was like 9%, which is very strong. But was memory still a constraint for you in the quarter? In other words, do you think sales growth could have been even higher in the second quarter and pull your guide if memory isn't a constraint?

I think what we were saying before is that the demand certainly is strong from our customers and the momentum continues across each of our vertical markets and across both asset visibility and the connected frontline segments. Our outlook is, demand would represent kind of the high end of our outlook for Q3 and the full year. And we're factoring in You know, supply constraints into that that takes us, you know, down to about the midpoint of our guide, which is the same, you know, that we did in our guide for Q2. We were able to secure additional memory supply, which pushed us, you know, above the top end of our range for Q2. But, you know, we clearly are seeing strong demand for our solutions and, you know, we're factoring in the potential constraints of memory into our guide for Q3 and for full year.

This concludes our question and answer session. I'd like to turn the conference back over to Bill Burns for any closing remarks.

I'd like to wrap up by thanking our employees, our partners, and our suppliers for their support in delivering record results in Q2. We're making excellent progress on our 2026 priorities, and we're excited about the opportunities ahead of us. Have a great day, everyone. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.