ZBRA

Zebra Technologies Corporation (ZBRA)

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Zebra Technologies Corporation (ZBRA)

Q4 2010 Earnings Call

February 15, 2011 11:00 AM ET

Executives

Douglas Fox – VP, IR

Anders Gustafsson – CEO

Michael Smiley – CFO

Mike Terzich – SVP, Global Sales and Marketing for the Specialty Printing Group

Analysts

Chris Quilty – Raymond James & Associates

Ajit Pai – Stifel Nicolaus

Tony Kure – KeyBanc Capital Markets

Charles Murphy – Sidoti & Company LLC

Paul Coster – J.P. Morgan Securities

Andrew Abrams – Avian Securities

Marty Moser (ph) – Northwestern Mutual (ph)

Greg Halter – Great Lakes Review

Keith Housum – Northcoast Research

Presentation

Operator

Good morning and welcome to the Zebra Technologies 2010 Fourth Quarter Earnings Release Conference Call. Joining us from Zebra Technologies are Anders Gustafsson, CEO, Mike Smiley, CFO, Mike Terzich, Senior Vice President, Global Sales and Marketing for the Specialty Printing Group and Doug Fox, Vice President – Investor Relations. (Operator Instructions)

At the request of Zebra Technologies this conference call is being recorded. Should anyone have any objections, please disconnect at this time. At this time, I would like to introduce Doug Fox of Zebra Technologies. Sir, you may begin.

Douglas Fox

Thank you and good morning. Thank you for joining us today. Certain statements made on this call will relate to future events or circumstances and therefore will be forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995.

Words such as expect, believe and anticipate are a few examples of words identifying a forward-looking statement. Forward-looking information is subject to various risks and uncertainties which could significantly affect expected results. Risk factors were noted in the news release issued this morning and are also described in Zebra’s 10-K for the year ended December 31, 2009 which is on file with the SEC. Now let me turn the call over to Anders Gustafsson for some brief opening remarks.

Anders Gustafsson

Thank you, Doug and good morning, everyone. Here in the room with me are Mike Smiley, our CFO, and Mike Terzich, our SVP of Global Sales and Marketing. Zebra’s fourth quarter results provide a solid conclusion to an outstanding year in which Zebra gained market share, diversified and expanded its international business and further strengthened its leading brand position.

We capped the year with earnings of $0.50 per share, representing Zebra’s second consecutive record quarter. We also realized 12% year-over-year sales growth with fourth quarter sales of $248.2 million. The consistent run rate business through channel partners together with increased strength in international regions enabled us to deliver our sixth consecutive quarterly sales increase as well as the second highest quarterly level of sales in Zebra’s history. In addition, high gross margin and a continued focus on expense management drove further improvements in profitability and strong free cash flow.

Zebra’s performance in the fourth quarter and throughout 2010 further demonstrates the effectiveness of our actions to extend industry leadership and serve more of our customers’ asset tracking needs. During the year we continued to build on this leadership by adding 40 new Zebra sales representatives in high-growth emerging territories including China, Brazil and Turkey. We strengthened customer loyalty by leveraging our financial strength to deliver innovative products in a constrained supply chain environment.

We are also now fully benefiting from the outsourcing of printer manufacturing. We have continued to position Zebra to capture more opportunities in large, complex supply chain situations through broader multi-market channel partners including system integrators And independent software venders. We also introduced innovative new products during the past year to expand the range of applications we serve, most notably the ZXP Series 8 with transfer card printer for secure on-demand instant issuance card printing as well as the RXI4 RFID printer and coder for advanced items of tagging with Zebra’s proprietary neoprene and coding.

We continue to view share repurchases as one of the most attractive uses of our cash on a risk adjusted basis in addition to funding key organic growth opportunities. During 2010, we deployed $102 million to buy back 3.3 million Zebra shares including 900,000 share in the fourth quarter.

Let me briefly cover some of the highlights of the quarter. Meaningful sales contributions from most of our product lines, most notably our high-end, midrange and desktop printers drove growth in our Specialty Printing Group or SPG. In addition, our international regions maintained strong momentum aided by the investments we made in geographic expansion. For those countries and regions were we added Zebra sales personnel, sales grew 39% for the fourth quarter and 54% for the full year.

We enjoyed record sales in Latin America, including shipments to increased number of manufacturing customers as well as a large number of smaller deals. Ongoing positive performance in Brazil and Mexico our two largest countries in the region was supplemented by improved results in other parts of Central and South America. IN EMEA our business momentum carried through the fourth quarter with a combination of ongoing run rate business and significant new wins.

Post and grocery applications highlighted strong demand across nearly all sub-regions. The impact of our expansionary investments was also evident of sales increased 90% in Turkey and more than 30% in India’s sub-region. Zebra’s investment in these markets will enable further penetration into these key growth regions.

Our Asia-Pacific region surpassed $100 million in annual sales for the first time. Robust economies in combination with the rebound in export manufacturing and increased local consumption supported growth in just about every sub-region throughout Asia. Our strategic expansion, which displaced more sales representation in China, India, Malaysia and Thailand has proven to be a well-timed investment and provides a solid foundation for further growth, help this channel recruitment from our expanded sales forces added 35 new resellers during the fourth quarter out of a total of a total of more than 150 new resellers per year.

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