Zebra Fourth Quarter Results

Stunning quarter from a stunning business. I want to first start off to remind everyone that reads Fiducia, we simply provide research on businesses we like long-term, with a side of trading with our personal strategy, may start to do a brief overview of 1 company per month as well for ideas. We will be charging $15 per month in March, which we feel is a fair price for what has been given. We hope for a smooth transition from free to paid, our businesses are doing very well and I am excited to continue to talk with all of you. Subscribers will have to become members as well for access to the Business Forum and trades. I do plan on utilizing the discussion forum more often with updates and keep these blog posts to a minimum of the quarterly reports, or unless something extremely important came out on the company, or the market drops and we have to calm people down and discuss where we think the market is headed. I recommend everyone download the Wix app and log in. I will no longer be responding to texts or personal messages outside Fiducia when it comes to my thoughts or the businesses I own.

The fourth quarter for Zebra was much better than expected, even our own expectations. Fiducia had $3.81 in earnings on $1.25b in revenue, Zebra came in at $4.46 (non-GAAP) and $1.308b in revenue. This is both a solid beat, as well as a solid guide for Q1 2021 coming in at revenue growth of 25-29% YoY which is $1.32-1.36b, and non-GAAP EPS between $4.30-$4.50 above the $3.16 consensus. For the full year Zebra expects adjusted net sales to increase 10-14% from 2020, 3% additive impact from the Reflexis acquisition and currency translation.

Anders notes how they entered the year with strong order backlog as small business demand recovers, and large customers continue to be robust. Zebra ended the quarter with record sales, EBITDA, EPS, and FCF ---> does this sound like a recession is coming? Zebra is providing the unique ability to digitize and automate customers workflow given our robust on-demand economy.

Earnings Call & Presentation Notes:

First thing that I noticed in the presentation is on slide 6, higher gross margins due to $12m China Tariff recovery and improved services and software margin. That is promising to me, and I hope to see more improvement with China tariffs over the 2021 year and beyond as well as the shift towards services and software impacting margins more.

Sales Growth

  • North America 6%

  • EMEA 20% --> this stands out to me, recovering nicely there

  • Asia Pacific (4)%

  • Latin America (15)%

Zebra continues to deliver Free Cash Flow of $895m for FY20, which is $271m higher YoY. The reason for this is customer collections and vendor payments timing, as well as lower cash payments for incentive comp/taxes/interest. Now we get into the net debt/adjusted EBITDA which came in much better than last Q at 1.2x (they state their max target is 2.5x). This is fine with me, as long as they are able to meet their payments (which they are).

(Source: Q4 Investor Presentation)

(Source: Q4 Investor Presentation)

The outlook Zebra has provided proves to me, again, that businesses are doing well and recovering. The reason I say this is because Zebra has their toes in everything. Retail & E-commerce, transportation and logistics, manufacturing, healthcare, and other markets.

Now let us focus on the earnings call, which I found on the Motley Fool before anywhere else (usually Seeking Alpha). Asia Pac and Latin America were slower to recover, but North America and EMEA as shown in the above text recovered very well. Asset Intelligence & Tracking segment that includes printing and supplies, benefited from the recovery in smaller business demand increasing 14% YoY, while the Enterprise Visibility & Mobility segment sales increased 5.6% by solid growth in the enterprise mobile computing solutions. Zebra is well positioned to solve the complex operational challenges that businesses have, Zebra also has a vast amount of frontline operational data from the installed based of products which in return can be used to advance leadership, as well as gain real time actionable insights.

With the pandemic, there has been an increased adoption of the omnichannel and online shopping, in swoops Zebra to provide solutions to overcome the fulfillment challenges due to the behavioral shift in shopping. Capital spending for retailers have been prioritized here, and Zebra is capturing that.

"We are enabling retailers to generate an unprecedented amount of valuable data captured through mobile computers, point of sale systems, RFID, and other intelligent automation solutions, all of which are critical to digitizing their operations." -Anders

"At one of the sessions, AutoZone explained how our Reflexis workforce and task management solution equipped their associates with highly flexible mobile technology that enables enhanced customer responsiveness and provides insightful data for analytics and reporting." -Anders

I wanted to make this post relatively clean and simple, to the point. I am optimistic on Zebra and their future and I will continue to own a part of this business. I believe that large dips in the equity are worth of buying.





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