UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                          to                                         

COMMISSION FILE NUMBER 000-19406

Zebra Technologies Corporation

(Exact name of registrant as specified in its charter)

Delaware	36-2675536
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3 Overlook Point, Lincolnshire, IL 60069

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (847) 634-6700

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of exchange on which registered
Class A Common Stock, par value $.01 per share	ZBRA	The NASDAQ Stock Market, LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes  ☒    No  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes  ☐    No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Act). Yes  ☐    No  ☒

The aggregate market value of the shares of Class A Common Stock held by non-affiliates of the registrant, computed by reference to the closing price of such stock as of the last business day of the registrant’s most recently completed second quarter, July 2, 2022, was $15.4 billion.

As of February 9, 2023, there were 51,404,742 shares of Class A Common Stock, par value $.01 per share, outstanding.

Documents Incorporated by Reference

Certain sections of the Registrant’s definitive proxy statement for its Annual Meeting of Stockholders to be held on May 11, 2023, are incorporated by reference into Part III of this report, as indicated herein. The definitive proxy statement shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

YEAR ENDED DECEMBER 31, 2022

TABLE OF CONTENTS

		PAGE
PART I
Item 1.	Business	4
Item 1A.	Risk Factors	13
Item 1B.	Unresolved Staff Comments	23
Item 2.	Properties	23
Item 3.	Legal Proceedings	23
Item 4.	Mine Safety Disclosures	23
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24
Item 6.	[Reserved]	26
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
	Overview	27
	Results of Operations	29
	Liquidity and Capital Resources	33
	Critical Accounting Estimates	35
	New Accounting Pronouncements	36
	Non-GAAP Measures	36
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 8.	Financial Statements and Supplementary Data	38
	Report of Independent Registered Public Accounting Firm	39
	Consolidated Balance Sheets	41
	Consolidated Statements of Operations	42
	Consolidated Statements of Comprehensive Income	43
	Consolidated Statements of Stockholders’ Equity	44
	Consolidated Statements of Cash Flows	45
	Notes to Consolidated Financial Statements	46
	Note 1: Description of Business and Basis of Presentation	46
	Note 2: Significant Accounting Policies	46
	Note 3: Revenues	50
	Note 4: Inventories	52
	Note 5: Business Acquisitions	52
	Note 6: Goodwill and Other Intangibles	56
	Note 7: Property, Plant and Equipment	57
	Note 8: Investments	57
	Note 9: Exit and Restructuring Costs	57
	Note 10: Fair Value Measurements	57
	Note 11: Derivative Instruments	58
	Note 12: Long-Term Debt	61
	Note 13: Leases	62
	Note 14: Accrued Liabilities, Commitments and Contingencies	63
	Note 15: Share-Based Compensation	65
	Note 16: Income Taxes	68
	Note 17: Earnings Per Share	71

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	Note 18: Accumulated Other Comprehensive Income (Loss)	71
	Note 19: Accounts Receivables Factoring	72
	Note 20: Segment Information & Geographic Data	73
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	75
Item 9A.	Controls and Procedures	75
Item 9B.	Other Information	77
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	77
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	78
Item 11.	Executive Compensation	78
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	78
Item 13.	Certain Relationships and Related Transactions, and Director Independence	78
Item 14.	Principal Accounting Fees and Services	78
PART IV
Item 15.	Exhibits and Financial Statement Schedules	79
Item 16.	Form 10-K Summary	82
Signatures		83

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PART I

References in this document to “the Company,” “we,” “us,” or “our” refer to Zebra Technologies Corporation and its subsidiaries, unless the context specifically indicates otherwise.

Safe Harbor

Forward-looking statements contained in this filing are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995 and are highly dependent upon a variety of important factors, which could cause actual results to differ materially from those expressed or implied in such forward-looking statements. When used in this document and documents referenced, the words “anticipate,” “believe,” “intend,” “estimate,” “will,” and “expect” and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements but are not the exclusive means of identifying these statements. The forward-looking statements include, but are not limited to, the Company’s financial outlook for the first quarter and full year of 2023. These forward-looking statements are based on current expectations, forecasts and assumptions, and are subject to the risks and uncertainties inherent in the Company’s industry, market conditions, general domestic and international economic conditions, and other factors. These factors include:

•Market acceptance of the Company’s products, services and solution offerings and competitors’ offerings and the potential effects of emerging technologies and changes in customer requirements,

•The effect of global market conditions, including the North America; EMEA; Latin America; and Asia-Pacific regions in which we do business,

•The impact of changes in foreign exchange rates, customs duties and trade policies due to the large percentage of our sales and operations being outside the U.S.,

•Our ability to control manufacturing and operating costs,

•Risks related to the manufacturing of the Company’s products and conducting business operations in non-U.S. countries, including the risk of depending on key suppliers who are also in non-U.S. countries,

•The Company’s ability to purchase sufficient materials, parts, and components, our ability to provide services, software, and products to meet customer demand, particularly in light of global economic conditions,

•The availability of credit and the volatility of capital markets, which may affect our suppliers, customers, and ourselves,

•Success of integrating acquisitions,

•Our ability to attract, retain, develop, and motivate key personnel,

•Interest rate and financial market conditions,

•Access to cash and cash equivalents held outside the U.S.,

•The effect of natural disasters, man-made disasters, public health issues (including pandemics), and cybersecurity incidents on our business,

•The impact of changes in foreign and domestic governmental policies, laws, or regulations,

•The outcome of litigation in which the Company may be involved, particularly litigation or claims related to infringement of third-party intellectual property rights, and

•The outcome of any future tax matters or tax law changes.

We encourage readers of this report to review Item 1A, “Risk Factors,” in this report for further discussion of issues that could affect the Company’s future results. We undertake no obligation, other than as may be required by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances, or any other reason after the date of this report.

Item 1.Business

The Company

We are a global leader providing Enterprise Asset Intelligence (“EAI”) solutions in the Automatic Identification and Data Capture (“AIDC”) industry. The AIDC market consists of mobile computing, data capture, radio frequency identification devices (“RFID”), barcode printing, and other workflow automation products and services. The Company’s solutions are proven to help our customers and end-users digitize and automate their workflows to achieve their critical business objectives, including improved productivity and operational efficiency, optimized regulatory compliance, and better customer experiences.

We design, manufacture, and sell a broad range of AIDC products, including: mobile computers, barcode scanners and imagers, RFID readers, specialty printers for barcode labeling and personal identification, real-time location systems (“RTLS”), related accessories and supplies, such as labels and other consumables, and related software applications. We also provide a full range of services, including maintenance, technical support, repair, managed and professional services, as well as cloud-based software subscriptions and robotics automation solutions. End-users of our products, solutions and services include those in the

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retail and e-commerce, manufacturing, transportation and logistics, healthcare, public sector, and other industries. We provide our products, solutions and services globally through a direct sales force and extensive network of over 10,000 channel partners, operating in approximately 190 countries, with 120 facilities and approximately 10,500 employees worldwide.

Through continual innovation of our technologies, we are leading an evolution of the traditional AIDC market into EAI, which encompasses solutions that sense key operational information such as packages moving through a supply chain, equipment in a factory, workers and robots in a warehouse, shoppers in a store, and patients in a hospital. Data from enterprise assets, including status, condition, location, utilization, and preferences, is then analyzed to provide prioritized actionable insights. Finally, with the benefits of cloud computing and connectivity, these insights and directives can be delivered to the right user at the right time to drive the best next action. As a result, our solutions enable enterprises to “sense, analyze, and act” more effectively throughout their workflows.

The evolution of the AIDC market to transform workflows is being driven by strong underlying secular trends in technology, which include the internet of things (“IoT”), cloud-based data analytics, intelligent automation, mobility, computer vision, as well as artificial intelligence and machine learning. The IoT enables the real-time exchange of an increasingly broad set of information among a proliferation of smart, connected devices. Cloud computing and expanded data analytics are allowing enterprises to make better business decisions through improved timeliness and increased visibility into workflows. While traditional AIDC solutions capture limited amounts of data and populate static enterprise systems, newer solutions that can leverage artificial intelligence through machine learning can analyze real-time data from many sources to generate actionable insights. The continued rapid growth of mobile devices and application software are also significantly expanding mobile computing use cases throughout enterprises and supply chains. With these expanded capabilities, end-users can consume and act upon dynamic enterprise data and information anytime and anywhere. Additionally, computer and machine vision technology, which enables the automatic extraction and understanding of useful information from a digital image or video, provides a key element in many of our solutions.

Acquisitions

Matrox: On June 3, 2022, the Company acquired Matrox Electronic Systems Ltd. (“Matrox”) for $881 million in cash, net of Matrox’s cash on-hand. Matrox is a leading provider of advanced machine vision components and software serving multiple end-markets. Through its acquisition, the Company significantly expands machine vision products and software offerings. The operating results of Matrox are included in the EVM segment.

Antuit: On October 7, 2021, the Company acquired Antuit Holdings Pte. Ltd. (“Antuit”) for $145 million in cash, net of cash acquired. Antuit is a provider of demand-sensing and pricing optimization software solutions for retail and consumer products companies. Through this acquisition, the Company expands its portfolio of software solution offerings to customers in these industries by combining Antuit’s platform with its existing software solutions and EVM products. The operating results of Antuit are included in the EVM segment.

Fetch: On August 9, 2021, the Company acquired Fetch Robotics, Inc. (“Fetch”) for $301 million, which consisted of $290 million in cash paid, net of cash acquired, and the fair value of the Company’s existing minority ownership interest in Fetch of $11 million, as remeasured upon acquisition. Fetch is a provider of autonomous mobile robot solutions for customers who operate in the manufacturing, distribution, and fulfillment industries, enabling customers to optimize workflows through robotic automation. Through this acquisition, the Company intends to expand its automation solution offerings within these industries. The operating results of Fetch are included within the EVM segment.

Adaptive Vision: On May 17, 2021, the Company acquired Adaptive Vision Sp. z o.o. (“Adaptive Vision”) for $18 million in cash, net of cash acquired. Adaptive Vision is a provider of graphical machine vision software with applications in the manufacturing industry, as well as a provider of libraries and other offerings for machine vision developers. The operating results of Adaptive Vision are included within the EVM segment.

Reflexis: On September 1, 2020, the Company acquired Reflexis Systems, Inc. (“Reflexis”) for $547 million in cash, net of cash acquired. Reflexis is a provider of task and workforce management, execution, and communication software solutions for customers in the retail, food service, hospitality, and banking industries. Through this acquisition, the Company intends to enhance its solution offerings to customers in those industries by combining Reflexis’ platform with its existing software solutions and EVM products. The operating results of Reflexis are included within the EVM segment.

See Note 5, Business Acquisitions in the Notes to Consolidated Financial Statements for additional details.

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Operations and Technologies

Our operations consist of two reportable segments that provide complementary offerings to our customers: Asset Intelligence & Tracking (“AIT”), which includes barcode and card printing, supplies and services; and Enterprise Visibility & Mobility (“EVM”), which includes mobile computing, data capture, RFID, fixed industrial scanning and machine vision, services and workflow optimization solutions including location solutions.

Asset Intelligence & Tracking

Barcode and Card Printing: We design, manufacture, and sell printers, which produce high-quality labels, wristbands, tickets, receipts, and plastic cards on demand. Our customers use our printers in a wide range of applications, including routing and tracking, patient safety, transaction processing, personal identification, and product authentication. These applications require high levels of data accuracy, speed, and reliability. They also include specialty printing for receipts and tickets for improved customer service and productivity gains.

Our printers use thermal printing technology, which creates images by heating certain pixels of an electrical printhead to selectively image a ribbon or heat-sensitive substrate. Our printers integrate company-designed mechanisms, electrical systems, and firmware that supports serial, parallel, Ethernet, USB, Bluetooth, or 802.11 wireless communications with appropriate security protocols. Enclosures of metal or high-impact plastic help ensure durability of our printers. Printing instructions can be received as a proprietary language such as Zebra Programming Language II, as a print driver-provided image, or as user-defined Extensible Markup Language. These features make our printers easy to integrate into most computer systems.

We also provide dye-sublimination thermal card printers that produce high quality images and are used for secure, reliable personal identification (e.g. state identification cards, drivers’ licenses, and healthcare identification cards), access control (e.g. employee or student building access), and financial transactions (e.g. credit, debit and ATM cards). Additionally, we provide RFID printers that encode data into passive RFID transponders embedded in a label or card. We offer a wide range of accessories and options for our printers, including carrying cases, vehicle mounts and battery chargers.

Supplies: We produce and sell stock and customized thermal labels, receipts, ribbons, plastic cards, and RFID tags suitable for use with our printers, as well as wristbands for use in laser printers. We support our printing products, resellers, and end-users with an extensive line of superior quality, high-performance supplies optimized to a particular end-user’s needs, such as chemical or abrasion resistance, extreme temperature environments, exceptional image quality, or long life. We promote the use of supplies with our printing equipment. Our supplies business also includes temperature-monitoring labels primarily used in vaccine distribution, which incorporate chemical indicators designed to change color upon exceeding predefined time and/or temperature thresholds.

Services: We provide a full range of maintenance, technical support, and repair services. We also provide managed and professional services, including those which help customers manage their devices and related software applications. Our offerings include cloud-based subscriptions and multiple service levels. They are typically contracted through multi-year service agreements. We provide our services directly and through our global network of partners.

Enterprise Visibility & Mobility

Mobile Computing: We design, manufacture, and sell rugged and enterprise-grade mobile computing products and accessories in a variety of specialized form factors and designs to meet a wide array of enterprise applications. Purpose-built devices ensure reliable operations for targeted use cases, surviving years of rough handling and harsh environments. Industrial applications include inventory management in warehouses and distribution centers; field mobility applications include field service, post and parcel, and direct store delivery; and retail and customer facing applications include e-commerce, omnichannel, mobile point of sale, inventory look-up, staff collaboration, and analytics. Our mobile computing products primarily incorporate the Android™ operating system and support local-area and wide-area voice and data communications. Our products are also offered with software tools and services that enable secure data transmission while also supporting application development, device configuration, and field support to facilitate seamless, rapid deployment and maximum customer return on investment. Our products often incorporate barcode scanning, global position system and RFID features, and other sensory capabilities. Additionally, specialized features, such as advanced data capture technologies, data analytics technologies, voice and video collaboration tools, and advanced battery technologies, enable our customers to work more efficiently and better serve their own customers.

Data Capture, RFID, Fixed Industrial Scanning, and Machine Vision: We design, manufacture, and sell barcode scanners, RFID readers, industrial machine vision cameras, and fixed industrial scanners. Our portfolio of scanners includes laser scanning and imager products in a variety of form factors, including fixed, handheld, and embedded original equipment manufacturer (“OEM”) modules. Our scanners incorporate a range of technologies including area imagers, linear imagers, and lasers, as well as read linear and two-dimensional barcodes. They are used in a broad range of applications, ranging from

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supermarket checkouts to industrial warehouse optimization to patient management in hospitals. The design of these products reflects the diverse needs of these markets, with different ergonomics, multiple communication protocols, and varying levels of ruggedness. Our RFID products include fixed readers, RFID enabled mobile computers, and RFID sleds that utilize passive ultra-high frequency to provide high-speed, non-line of sight data capture from hundreds or thousands of RFID tags in near real-time. Using the Electronic Product Code (“EPC”) standard, end-users across multiple industries use our RFID technology to track high-value assets, monitor shipments, and drive increased retail sales through improved inventory accuracy. We also offer mobile computers that support high frequency near-field communications and low frequency radio technologies. In 2021 we introduced fixed industrial scanning and machine vision solutions, and in 2022, we significantly expanded our machine vision solutions through the acquisition of Matrox Imaging. Our fixed industrial scanning products automatically track and trace items that move from production through distribution. Our industrial machine vision platform-independent software, software development kits, smart cameras, vision controllers, frame grabbers, input/output cards, and 3D sensors capture, inspect, assess, and record data from industrial vision systems in factory automation, semiconductor inspection, pharmaceutical packaging, food & beverage, among other use cases. We also provide related software and accessories for these products.

Services: We provide a full range of maintenance, technical support, and repair services. We also provide managed and professional services that, among other things, help customers design, test, and deploy our solutions as well as manage their mobility devices, software applications and workflows. Our offerings include cloud-based subscriptions with multiple service levels, which are typically contracted through multi-year service agreements. We provide our services directly and through our global network of partners.

Workflow optimization solutions: We provide a portfolio of solutions that help our customers improve the agility and productivity of key operational workflows by analyzing and acting on data in real time. Our primary focus is on frontline workers in Zebra’s core customer segments, including retail, transportation and logistics, warehouse and distribution, and healthcare. Our workflow optimization solutions include:

•Software-based solutions, which include workforce management, workflow execution and task management, demand-sensing, price optimization, prescriptive analytics, as well as communication and collaboration-based solutions. These solutions are typically delivered through cloud-based software subscriptions and leverage big data, artificial intelligence, and mobile and web applications to provide customers with real-time visibility and actionable insights about their business. By analyzing labor, inventory, transactional and real-time situational data, these solutions are able to forecast demand, prescribe actions, schedule workers, and enhance collaboration. Our software-based solutions are available with multiple service levels, and are often contracted through multi-year service agreements;

•Retail solutions, which include a range of physical inventory management solutions, including solutions for full store physical inventories, cycle counts, and analytics; and

•Robotic automation solutions, which include software-powered autonomous robots that enable customers to orchestrate workflows alongside frontline workers, improving productivity and operational efficiency. Our robotic automation solutions are available in a variety of form factors to accommodate many use cases.

•Location Solutions, which include a range of RTLS and services that generate precise, on-demand information about the physical location and status of high-valued assets, equipment, and people. These solutions incorporate active and passive RFID technologies, beacons, and other tracking technologies to enable users to locate, track, manage, and optimize the utilization of enterprise assets and personnel. We provide substantially all elements of the location solution, including tags, sensors, exciters, middleware software, and application software. Our location solutions are deployed primarily in manufacturing, aerospace, transportation and logistics, sports, and healthcare industries.

Our Competitive Strengths

The following are core competitive strengths that we believe enable us to differentiate ourselves from our competitors:

An industry leader focused on improving enterprise workflows

We are focused on the key technology solutions of EAI that drive improved enterprise workflows, including mobile computing, barcode and card printing, data capture, RFID, fixed industrial scanning, machine vision, and workflow optimization solutions, along with related software, services, and accessories. Our leadership position enables us to work with and support customers globally, in a variety of industries, who are focused on implementing leading-edge solutions.

High barriers to entry

On a global basis, we have long-standing relationships with end-users and with our extensive network of channel partners. We believe these customer relationships and our strong partner network are critical to our success and would be difficult for a new market entrant to replicate. We believe a significant portion of our products and solutions are deployed with specialized product performance and software application requirements, which could result in high switching costs.

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Commitment to innovation and deep industry-specific expertise

Over time, we have developed and delivered improved, targeted end-to-end solutions for our customers. We remain committed to leveraging our technology portfolio and expertise in the industries that we service to continue to develop innovative solutions that meet the key needs of our customers.

Highly diversified business mix

We are highly diversified across business segments, end markets, geographies, and customers. Additionally, we have strong recurring business in services, supplies, and software driven by an extensive global installed base of purpose-built products and solutions.

Global reach and brand

We sell to customers directly and through our network of channel partners around the world. This global presence gives us the capability to supply our customers with products, solutions, and services no matter the location of their operations. In addition, we believe we have strong brand recognition with a reputation in the industry as a trusted and strategic partner, known for delivering high quality products that are reliable and durable.

Scale advantages

We believe the size and scope of our operations, including market leadership, product and solution development investment, portfolio breadth, and global distribution, give us advantages over our competitors. We believe we have the largest installed base of products compared to other companies in our industry. These characteristics enable us to compete successfully, achieve economies of scale, and develop industry-leading solutions.

Our Business Strategies

Leverage our market leadership position and innovation to profitably grow our core business

We expect to drive revenue growth by continuing to outpace our competition in our core businesses, including mobile computing, data capture, barcode printing, and services. We expect to achieve this by leveraging our broad portfolio of solutions and product innovation and continuing to be a strategic partner to end customers. We also expect to drive growth by capitalizing on technology transitions occurring in the industry, including the transition to the Android™ operating system in mobile computing and transitions in data capture to newer technologies involving 2D and 3D imaging and RFID. This includes increased focus on market segments and geographies that offer share-gain opportunities. In addition, we plan to leverage our market-leading installed base to accelerate growth in attach-oriented offerings, including services, supplies, accessories, and software applications. Our global channel partner network is vital to helping us achieve these goals. As such, we will ensure that we provide the necessary value and support for our partners to be successful.

Advance our Enterprise Asset Intelligence vision

Our EAI vision is for every asset and front-line worker to be connected, visible, and fully optimized. We believe that secular technology trends, particularly in IoT, cloud computing, intelligent automation, and mobility, advance our vision and are transforming our customers’ businesses and our industry, providing us with significant new opportunities to create value for our customers and for the Company. We expect to capitalize on these trends, and in particular the proliferation of smart connected sensors and devices in our core market segments, by providing end-to-end solutions that integrate these sensors and devices with cloud-based workflows and analytics applications. We plan to continue investing in the development of technologies that will enable intelligent automation solutions, providing increased visibility into the enterprise, real-time, actionable information, and improved customer experiences. Our solutions will also increasingly include advanced features, functions, and user experiences to drive additional competitive differentiation and elevate our role as a solutions provider.

Increase our opportunity for growth through expansion in adjacent market segments

We plan to drive growth through expansion, organically and inorganically, in adjacent market segments that are synergistic with our core markets. We will focus specifically on segments where our products and solutions, workflow expertise, and customer and industry relationships will enable us to provide significant value to end-users.

Enhance financial strength and flexibility

While maintaining our strong balance sheet, we intend to continue to improve profitability and cash flow generation through operational execution and increased productivity derived from continuous business process improvement, supply chain resiliency, cost management, and focus on working capital efficiency.

Sustainable business model

Zebra’s foundational ESG priorities of human capital management, resource conservation, and climate align with our strategic focus and corporate values. Initiatives within these priorities are advanced by our cross-functional Sustainability Council, with executive sponsorship and board oversight. Our approach helps to ensure that our business is sustainable over the long term for the benefit of our primary stakeholder groups, including employees, customers, partners, and investors. We are driving a high-

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performance, inclusive and diverse culture, striving to consistently be the employer of choice in the communities where we work and live. We also focus on waste reduction, circular economy product innovation with certified refurbished devices, eco-packaging and sustainable product design. Additionally, we have science-based targets on carbon emission reductions in Zebra’s operations and throughout our value chain.

Competition

We operate in a highly competitive environment. The need for companies to improve productivity and implement their strategies, as well as the secular trends around IoT, cloud computing, intelligent automation, and mobility, are some of the factors that are creating growth opportunities for established and new competitors.

Key competitive factors include the breadth and quality of products, solutions and services, as well as pricing, design, performance, durability, geographic availability, warranty coverage, relationships with customers and channel partners, company reputation, and brand recognition. We believe we compete effectively with respect to these factors.

Mobile Computing: Competitors in mobile computing and related services include companies that have historically served enterprises with ruggedized devices. For some applications, we compete with companies that provide tablets and smart phones. Competitors include: Datalogic, Honeywell, and Panasonic.

Data Capture, RFID, Fixed Industrial Scanning, and Machine Vision: Competitors that provide a broad portfolio of barcode scanning products and related services that are suitable for most global market applications include Datalogic and Honeywell. We also compete against smaller companies that focus on limited product subsets or specific regions, including Newland and Impinj. Competitors in our fixed industrial scanning and machine vision business include Cognex, SICK, and Keyence.

Barcode and Card Printing: We consider our direct competition in printing to be producers of on-demand thermal transfer and direct thermal label fixed and mobile printing systems and RFID printers/encoders. We also compete with companies engaged in the design, manufacture, and marketing of printing systems that use technologies such as ink-jet, direct marking and laser printing, as well as card printers based on ink-jet, thermal transfer, embossing, film-based systems, encoders, laser engraving, and large-scale dye sublimation printers. In addition, service bureaus, which provide centralized services, compete for end-user business and provide an alternative to our card printing solutions. Competitors include: Fargo Electronics (a unit of HID Global), Honeywell, Sato, Toshiba TEC, TSC, Brother, and Dymo.

Supplies: The supplies industry is highly fragmented with competition comprised of numerous companies of various sizes around the world.

Workflow optimization solutions: We compete with a diverse and varied group of companies across our solution offerings worldwide. Competitors range from providers of software-based solutions serving customers in the retail industry to providers of autonomous mobile robot solutions serving customers in the manufacturing, distribution, and fulfillment industries.

Customers

End-users of our products, solutions and services are diversified across a wide variety of industries. We have three customers, who are distributors of the Company’s products and solutions, that individually accounted for more than 10% of our Net sales during the past three years. No other customer accounted for more than 10% of our Net sales during these years. See Note 20, Segment Information & Geographic Data in the Notes to Consolidated Financial Statements for further information.

Our Net sales to significant customers as a percentage of the Company’s total Net sales were as follows:

	Year Ended December 31,
	2022		2021		2020
Customer A	20.7	%	22.3	%	20.7	%
Customer B	15.0	%	13.6	%	13.9	%
Customer C	12.8	%	12.6	%	17.7	%

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Sales and Marketing

Sales: We sell our products and services primarily through distributors (two-tier distribution), value added resellers (“VARs”), independent software vendors (“ISVs”), direct marketers, and OEMs, and our software solutions primarily through our direct sales force. We also sell our products and services directly to a select number of customers through our direct sales force. Distributors purchase our products and sell to VARs, ISVs and others, thereby increasing the distribution of our products globally. VARs, ISVs, OEMs, and systems integrators provide end users with a variety of hardware, accessories, software applications, and services. VARs and ISVs typically customize solutions for specific end-user applications using their industry, systems, and applications expertise. Some OEMs resell Zebra-manufactured products and solutions under their own brands as part of their own product offerings. Because these sales channels provide specific software, configuration, installation, integration, and support services to end-users within various industry segments, these relationships are highly valued and allow our products to reach end users in a wide array of industries around the world. We believe that the breadth of our distributor and channel partner network is a competitive differentiator and enhances our ability to compete. Finally, we experience some seasonality in sales, depending upon the geographic region and industry served.

Marketing: Our marketing function aligns closely with sales and product management functions to market our products and to deliver and promote solutions that address the needs of our customers and partners. Our marketing organization includes regional and channel marketing teams that interface closely with customers, partners, and sellers. Our marketing organization also includes teams that support global strategies and communications, including portfolio marketing, digital marketing, marketing operations and communications, and strategic marketing functions.

Manufacturing and Outsourcing

Final assembly of our hardware products is performed by third-parties, including electronics manufacturing services companies (“EMSs”) and joint design manufacturers (“JDMs”). Our products are currently produced in facilities primarily located in the Asia-Pacific region, including China, Taiwan, Vietnam, and Malaysia, as well as Mexico and Brazil. The EMSs and JDMs produce our products to our design specifications. We maintain control over portions of the supply chain, including supplier selection and price negotiations for key components. The manufacturers generally purchase all the components and subassemblies used in the production of our products. Our products are shipped to regional distribution centers, operated by third party logistics providers or the Company. A portion of products are reconfigured at the distribution centers through firmware downloads, packaging, and customer specific customization before they are shipped to customers. In addition, certain products are manufactured in accordance with procurement regulations and various international trade agreements and remain eligible for sale to the U.S. government.

Production facilities for our supplies products are located in the U.S. and Western Europe. We also supplement our in-house supplies production capabilities with third-party manufacturers, principally located in Asia-Pacific.

Repair services for our products are performed by either our own operations or through third-parties, with repair service hubs located in each of the regions in which we serve our customers.

Research and Development

The Company devotes significant resources to developing innovative solutions for our target markets and ensuring that our products, solutions, and services maintain high levels of reliability and provide value to end-users. Research and development expenditures for the years ended 2022, 2021, and 2020 were $570 million, $567 million, and $453 million, or 9.9%, 10.1% and 10.2% of Net sales, respectively. Worldwide, we have employed approximately 3,100 engineers and innovation and design experts, who along with contractors, are focused on strengthening and broadening our extensive portfolio of products and solutions.

Intellectual Property

We rely on a combination of trade secrets, patents, trademarks, copyrights, and contractual rights to establish and protect our innovations, and hold a large portfolio of intellectual property rights in the U.S. and other countries. As of December 31, 2022, the Company owned approximately 2,200 trademark registrations and trademark applications, and approximately 6,500 patents and patent applications, worldwide.

We believe that our intellectual property will continue to provide us with a competitive advantage in our product areas as well as provide leverage for future technologies. Our success depends more upon our extensive know-how, deep understanding of end-user processes and work-flows, innovative culture, technical leadership and marketing and sales abilities. Although we do not rely only on patents or other intellectual property rights to protect or establish our market position, we will enforce our intellectual property rights when and where appropriate.

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Human Capital

The Company is committed to attracting, developing, and retaining talent to enable our strategic vision. This commitment directly shapes our approach to fostering a culture of inclusion and diversity and ensuring employees can reach their potential.

We believe that our strong Company culture is a key enabler of our success. The values of accountability, integrity, teamwork, agility, and innovation are central to our culture and how we operate and work together. We take proactive steps to ensure that this culture continues to permeate throughout our organization. Employee engagement within the Company is consistently high with the most recent measures scoring above relevant benchmarks for technology companies. We consider our relations with our employees to be very good. In addition, we believe our compensation structure aligns with our stockholders’ long-term interests by balancing profitability and growth, and reflects the Company’s commitment to pay for performance.

In response to employee survey feedback, this year the Company implemented well-being solutions including a speaker series on resilience, a manager toolkit, and a “Be You, Be Real, Be Well” campaign. In addition, the Company implemented zDay, a paid, company-wide day off for all eligible Zebra employees, and Focus Fridays to encourage meeting-free time on Friday afternoons.

As recognition of the Company’s strong culture and commitment to its employees, the Company ranked #42 on Newsweek’s list of America’s 100 Most Loved Workplaces, #42 on Fast Company’s list of the Best Workplaces for Innovators, #79 on Forbes’ list of America’s 500 Best Midsize Employers and was Great Place to Work-Certified™ in 2022.

As of December 31, 2022, the Company had approximately 10,500 employees globally, with a majority in sales and technical roles. Our employees work in 56 countries with a majority of our employees located outside of the U.S. Some portions of our business, primarily in Europe, China, and India, are subject to labor laws that differ significantly from those in the U.S. In Europe, for example, it is common for a works council to represent employees when discussing matters such as compensation, benefits, restructurings and layoffs.

Talent Development

We are a Company built on a community of changemakers, innovators, and doers who come together to deliver a performance edge to the front line of business. We believe that empowered team members enable us to advance our strategic priorities. As a result, we provide ample employee development opportunities, starting with our robust onboarding process. Our Zebra Education Network online learning platform offers a wide variety of learning and development resources such as formal learning courses, cross-functional development experiences, as well as tools for mentoring and career shadowing. We also offer annual training and certification programs. Additionally, on an annual basis, we conduct a comprehensive talent review to assess our leadership pipeline and align on the skills we need to proactively develop employees for the future. This annual exercise is complemented by quarterly sessions with management to ensure we make progress on our critical talent development efforts throughout the year.

Inclusion and Diversity

We are committed to leveraging a diverse workforce where employees can bring their best selves to work, to being an inclusive workplace where all employees are seen, heard, valued, and respected, and to being a recognized leader in the marketplace that values the diversity of its’ employees, customers, partners and suppliers. We have continued to expand our Inclusion & Diversity program, formalized in 2018, through the launch of our Inclusion & Diversity Advisory Council in 2020, the launch of our Inclusion Champions program in 2021, and the formalization of an internal I&D goals framework in 2022. This expansion has been enabled through our continued focus on a culture of inclusion (leveraged through our inclusion networks), embedding I&D as a component of a career at Zebra (including expanding the hiring, retention & career development of diverse talent with the support of our external outreach partnerships) and setting the foundations for wider outreach in the community (building multiple pathways for access to employment at Zebra), as well as deepening relationships with our customers through a shared vision to advance I&D.

•Culture: Our inclusion networks are employee-driven, executive sponsored communities which foster a more inclusive workplace by bringing together employees from across the business to empower, support and learn from each other. The inclusion networks promote collaboration and host productive dialogue to help all Zebras understand the unique needs of our diverse employee populations. Currently at Zebra, we have eight inclusion networks: Women’s Inclusion Network (WIN), Zebra Equality Alliance (ZEAL), Zebra Veteran’s Inclusion Network (VETZ), Zebras of African Descent (ZAD), Zebra Hispanic/Latinx Inclusion Network (UNIDOZ), Zebras of All Abilities (ZoAA) and Zebra’s Early Career Inclusion Network (EDGE). In 2022, we launched The Green Herd employee network to support grassroots sustainability efforts, inspire a conservation mindset at each Zebra site, and support and develop focus areas for active employee engagement across the globe.

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•Career: We have established talent acquisition partnerships with organizations such as Society of Women Engineers (SWE), National Society of Black Engineers (NSBE), Disability:IN, Hispanic Alliance for Career Enhancement (HACE), Hiring our Heroes (HOH), Out in STEM (oSTEM), as well as Hispanic Serving Institutions to enhance our recruitment efforts and deepen our partnerships with diverse talent. In addition to external outreach, we provide a variety of training including unconscious bias awareness for all employees, interviewing bias awareness training for hiring managers, and a mandatory Inclusive Leadership workshop for all people leaders. There are additional diversity and inclusion learning tools and resources available for all Zebras, including discussion forums and on-demand learning geared specifically on allyship focusing on the development of our diverse talent. Additionally, we have launched employee development programs with external coaching, partnered with CEO Action’s Executive Level Mentoring Initiative.

•Community: We focus on how the Company deepens the impact that we have on the local communities we serve through aligned philanthropic activity, as well as increasing access for learning and employment opportunities within our communities.

•Customers: The Company values the opportunity to engage on the journey of advancing a culture of Inclusion & Diversity in collaboration with our customers and partners together, recognizing that we may share many similar opportunities and challenges. Our inclusion networks have started collaborating with employee resource groups at external customers and partners to share best practices and innovate on initiatives to foster inclusive cultures, as well as hosting joint events to raise overall awareness and education.

Regulatory Matters

Wireless Regulatory Matters

Our business is subject to certain wireless regulatory matters. The use of wireless voice, data, and video communications systems requires radio spectrum, which is regulated by government agencies throughout the world. In the U.S., the Federal Communications Commission (“FCC”) and the National Telecommunications and Information Administration (“NTIA”) regulate spectrum use by non-federal entities and federal entities, respectively. Similarly, countries around the world have one or more regulatory bodies that define and implement the rules for use of the radio spectrum, pursuant to their respective national laws and international coordination under the International Telecommunications Union. We manufacture and market products in spectrum bands already made available by regulatory bodies, these include voice and data infrastructure, mobile radios, and portable or hand-held devices. Consequently, our results of operations could be positively or negatively affected by the rules and regulations adopted from time-to-time by the FCC, NTIA, or regulatory agencies in other countries. Our products operate both on the licensed and unlicensed spectrum. The availability of additional radio spectrum may provide new business opportunities, and consequently, the loss of available radio spectrum may result in the loss of business opportunities. Regulatory changes in current spectrum bands may also provide opportunities or may require modifications to some products so they can continue to be manufactured and marketed.

Other Regulatory Matters

Some of our operations use substances regulated under various federal, state, local, and international laws governing the environment and worker health and safety, including those governing the discharge of pollutants into the ground, air and water, the management and disposal of hazardous substances and wastes and the cleanup of contaminated sites. Certain products are subject to various federal, state, local, and international laws governing chemical substances in electronic products. During 2022, compliance with U.S. federal, state and local, and foreign laws regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment did not have a material effect on our business or results of operations.

Available Information

Our website address is www.zebra.com. The information on our website is not, and shall not be deemed to be, a part of this Annual Report on Form 10-K or incorporated into any other filings we make with the Securities and Exchange Commission (“SEC”). Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, are made available free of charge on the Investor Relations page of our website as soon as reasonably practicable after we electronically file them with or furnish them to the SEC.

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Item 1A.Risk Factors

Investors should carefully consider the risks, uncertainties, and other factors described below, as well as other disclosures in this report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, because they could have a material adverse effect on our business, financial condition, operating results, cash flows, and growth prospects. These risks are not the only risks we face. Our business operations could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial. No priority or significance is intended by, nor should be attached to, the order in which the risk factors appear.

General Business and Industry Risks

The Company is vulnerable to the potential difficulties associated with the increase in the complexity of our business. We have grown rapidly over the last several years both organically and through acquisitions. This growth has caused increased complexities in the business. We believe our future success depends in part on our ability to manage our growth and increased complexities of our business. The following factors could present difficulties to us:

•Managing our distribution channel partners and end-user customers;

•Managing our contract manufacturing and supply chain;

•Manufacturing an increased number of products;

•Developing and managing custom solutions offerings;

•Managing parties to whom we have outsourced portions of our business operations;

•Managing administrative and operational burdens;

•Managing stakeholder interests including customer, investor and employee social responsibility matters;

•Maintaining and improving information technology infrastructure to support growth;

•Managing the integration of acquisitions;

•Managing logistical problems common to complex, expansive operations;

•Managing our international operations; and

•Attracting, developing and retaining individuals with the requisite technical expertise to develop new technologies and introduce new products and solutions.

Inability to consummate future acquisitions at appropriate prices could negatively impact our growth rate and stock price. Our ability to expand revenues, earnings, and cash flow depends in part upon our ability to identify and successfully acquire and integrate businesses at appropriate prices and to realize anticipated synergies. Acquisitions can be difficult to identify and consummate due to competition among prospective buyers and the need to satisfy applicable closing conditions and obtain antitrust and other regulatory approval on acceptable terms. Macroeconomic factors, such as rising inflation and interest rates, capital market volatility, etc., could negatively influence our future acquisition opportunities.

The Company could encounter difficulties in any acquisition it undertakes, including unanticipated integration problems and business disruption. Acquisitions could also dilute stockholder value and adversely affect operating results. We may acquire or make investments in businesses, technologies, services, products, or solutions. An acquisition may present business issues which are new to us. The process of integrating any acquired business, technology, service, product, or solution into our operations may result in unforeseen operating difficulties and expenditures. Integration of an acquired company also may consume considerable management time and attention, which could otherwise be available for ongoing operations and the further development of our existing business. These and other factors may result in benefits of an acquisition not being fully realized.

Acquisitions also may involve a number of risks, including, but not limited to:

•Difficulties and uncertainties in retaining the customers, distributors, vendors, or other business relationships from the acquired entities;

•The loss of key employees of acquired entities;

•Disruptions in our business due to difficulties integrating and reorganizing operations, products, technologies and personnel;

•The ability of acquired entities to fulfill their customers’ obligations;

•The inheritance of known, and the discovery of unknown, issues or liabilities;

•Pre-closing and post-closing acquisition-related earnings charges could adversely impact operating results and cash flows in any given period, and the impact may be substantially different from period to period;

•The failure of acquired entities to meet or exceed expected operating results or cash flows could result in impairment of goodwill or intangible assets acquired;

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•The ability to implement internal controls and accounting systems necessary to be compliant with requirements applicable to public companies subject to SEC reporting, which could result in misstated financial reports; and

•Future acquisitions could result in changes such as potentially dilutive issuances of equity securities and the incurrence of debt and contingent liabilities.

The Company may not be able to continue to develop products or solutions to address user needs effectively in an industry characterized by ongoing change. To be successful, we must adapt to rapidly changing technological and application needs by continually improving our products and solutions, as well as introducing new products, solutions, and services, to address user demands.

The Company’s industry is characterized by:

•Evolving industry standards;

•Frequent new product, solution, and service introductions;

•Evolving distribution channels;

•Increasing demand for customized product and software solutions;

•Changing customer demands; and

•Changing security protocols.

Future success will depend on our ability to effectively and economically adapt in this evolving environment. We could incur substantial costs if we must modify our business to adapt to these changes, and may even be unable to adapt to these changes.

The Company participates in a competitive industry, which may become more competitive. Competitors may be able to respond more quickly to new or emerging technology and changes in customer requirements. The markets that we serve are rapidly evolving and highly competitive. Some of our products, solutions and services are in direct competition with similar or alternative products, solutions and services provided by our competitors. In addition, we often compete with local competitors that may have a substantial advantage in attracting customers in their countries due to more established branding in that country, greater knowledge with respect to the tastes and preferences of customers residing in that country or their focus on a single market. Because of the potential for consolidation in any market, such competitors may become larger, and increased size could permit them to operate in wider geographic areas. To remain competitive, we believe we must continue to effectively and economically:

•Identify and evolve with customer needs, emerging technologies, and industry trends;

•Monitor disruptive technologies and business models;

•Innovate, develop and timely commercialize new technologies, solutions, and services;

•Competitively price our products, solutions and services;

•Offer superior customer service;

•Provide products and solutions of high quality and reliability;

•Provide dependable and efficient distribution networks; and

•Attract, retain and develop employees with technical expertise and an understanding of our industry and customer needs.

We cannot assure that we will be able to compete successfully against current or future competitors or technologies. Current or future competitors are likely to continue to develop and introduce new and enhanced products, solutions and services that could cause a decline in market acceptance of our products, solutions or services, or result in the loss of major customers. Increased competition in our industry may result in price reductions, lower gross profit margins, and loss of market share, and could require increased spending on research and development, sales and marketing, and customer support. In addition, we may not be able to effectively anticipate and react to new entrants in the marketplace competing with our products, solutions or services.

Further, as we expand into markets beyond our core products, we may face well established competitors, placing us at a disadvantage in a new competitive landscape. Some competitors may make strategic acquisitions or establish cooperative relationships with suppliers or companies that produce complementary products and solutions, which may create additional pressures on our competitive position in the marketplace. An inability to compete successfully could have an adverse effect on our business and results of operations.

Operational Risks

The Company has substantial operations and sells a significant portion of our products, solutions and services outside of the U.S. and purchases important components, including final products, from suppliers located outside the U.S., many of whom with operations concentrated in China. Shipments to non-U.S. customers are expected to continue to account for a material portion of Net sales. We also expect to continue the use of third-party contract manufacturing services with non-U.S. production and assembly operations for our products.

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Risks associated with operations, sales, and purchases outside the United States include:

•Fluctuating foreign currency rates could restrict sales, increase costs of purchasing, and affect collection of receivables outside of the U.S.;

•Volatility in foreign credit markets may affect the financial well-being of our customers and suppliers;

•Violations of anti-corruption laws, including the Foreign Corrupt Practices Act and the U.K. Bribery Act, could result in large fines and penalties;

•Adverse changes in, or uncertainty of, local business laws or practices, including the following:

•Imposition of burdensome tariffs, quotas, taxes, trade barriers, or capital flow restrictions;

•Restrictions on the export or import of technology may reduce or eliminate the ability to sell in, or purchase from, certain markets;

•Political and economic instability may reduce demand for our products or put our assets at risk;

•Limited intellectual property protection in certain countries may limit recourse against infringement on our products or may cause us to refrain from selling in certain geographic territories;

•Staffing may be difficult including higher than anticipated turnover;

•A government-controlled exchange rate and limitations on the convertibility of currencies, including the Chinese Yuan;

•Transportation delays and customs related delays may affect production and distribution of our products;

•Geopolitical uncertainty or turmoil could negatively affect our operations or those of our customers or suppliers;

•Difficulty in effectively managing and overseeing operations that are distant and remote from corporate headquarters; and

•Integration and enforcement of laws varies significantly among jurisdictions and may change over time.

The war between Russia and Ukraine and the global response to this war could have an adverse impact on our business and results of operations. On March 5, 2022, we suspended our business operations in Russia. While this suspension has not had, and is not expected to have, a material impact on our operating results, it is not possible to predict the broader or long-term consequences of the war between Russia and Ukraine, which may include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, cybersecurity conditions, currency exchange rates, financial markets and energy markets. Such geopolitical instability and uncertainty could have a negative impact on our ability to sell and ship products, collect payments from and support customers in certain regions, and could increase the costs, risks and adverse impacts from supply chain and logistics challenges.

Third parties may allege that the Company or our suppliers infringe upon their intellectual property rights. Periodically, third parties claim that we or our suppliers infringe upon their intellectual property rights. As we continue to expand our business and incorporate new technologies into our products and solutions, these types of claims may increase. Any of these claims, with or without merit, could result in costly litigation and divert the attention of key personnel. To the extent a violation of a third party’s patent or other intellectual property right is established, we may be prevented from operating our business as planned and we may be required to pay costly judgments or settlements, enter into costly licensing arrangements or use a non-infringing method to accomplish our business objectives, any of which could have a negative impact on our operating margins. See Item 3, Legal Proceedings for additional information regarding current patent litigation.

The inability to protect intellectual property could harm our reputation, and our competitive position may be materially damaged. Our intellectual property is valuable and provides us with certain competitive advantages. We use copyrights, patents, trademarks, trade secrets, and contracts to protect these proprietary rights. Despite these precautions, third parties may be able to copy or reproduce aspects of our intellectual property and our products or, without authorization, to misappropriate and use information we regard as trade secrets. Additionally, the intellectual property rights we obtain may not be sufficient to provide us with a competitive advantage and may be successfully challenged, invalidated, circumvented, or infringed. In any infringement litigation that the Company may undertake to protect our intellectual property, any award of monetary damages may be unlikely or very difficult to obtain, and any such award we may receive may not be commercially valuable. Furthermore, efforts to enforce or protect our proprietary rights may be ineffective and could result in the invalidation or narrowing of the scope of our intellectual property and may cause us to incur substantial litigation costs. Because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of the Company’s confidential information could be compromised by disclosure during this type of litigation. Some aspects of our business and services also rely on technologies, software, and content developed by or licensed from third parties, and we may not be able to maintain our relationships with such third parties or enter into similar relationships in the future on reasonable terms or at all.

We currently use third-party and/or open source operating systems and associated application ecosystems in certain of our products and solutions. Such parties ceasing continued development of the operating systems or restricting our access to such operating systems could adversely impact our business and financial results. We are dependent on third-parties’ continued development of operating systems, software application ecosystem infrastructures, and such third-parties’ approval of our implementations of their operating systems and associated applications. If such parties cease to continue development or support of such operating systems or restrict our access to such operating systems, we would be required to change our strategy

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for such devices. Our financial results could be negatively impacted by a resulting shift away from the operating systems we currently use and the associated applications ecosystem could be costly and difficult. A strategy shift could increase the burden of development on the Company and potentially create a gap in our portfolio for a period of time, which could competitively disadvantage us. Some aspects of our business and services also rely on technologies, software, and content developed by or licensed from third parties, and we may not be able to maintain our relationships with such third parties or enter into similar relationships in the future on reasonable terms or at all.

Cybersecurity incidents could disrupt business operations. We rely on information technology systems throughout the Company to keep financial records, process orders, manage inventory, coordinate shipments to distributors and customers, maintain confidential and proprietary information, and other technical activities, and operate other critical functions such as internet connectivity, network communications, and email. The Company stores confidential and proprietary information through cloud-based services that are hosted by third parties where we have less influence over security protocols. In addition, our customers may use certain of our products and solutions to transmit and/or process personal data and other sensitive information. Like many companies, we continually strive to meet industry information security standards relevant to our business. We periodically perform vulnerability assessments, remediate vulnerabilities, review log/access, perform system maintenance, manage network perimeter protection, implement and manage disaster recovery testing, and provide periodic educational sessions to our employees to foster awareness of schemes to access sensitive information. Despite our implementation of a variety of security controls and measures, as well as those of our third-party vendors, there is no assurance that such actions will be sufficient to prevent a cybersecurity incident. Further, as cybercrime and threats continue to rapidly evolve and become increasingly more difficult to detect and defend against, our current security controls and measures may not be effective in preventing cybersecurity incidents and we may not have the capabilities to detect certain vulnerabilities. A cybersecurity incident could include an attempt to gain unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. Phishing and other types of attempts to obtain unauthorized information or access are often sophisticated and difficult to detect or defeat.

Cybersecurity incidents can take a variety of forms including, unintentional events as well as deliberate attacks by individuals, groups and sophisticated organizations, such as state sponsored organizations or nation-state actors. Further, certain of our third party vendors have limited access to our employee and customer data and may use this data in unauthorized ways. Any such cybersecurity incident or misuse of our employees’ or customers’ data may lead to a material disruption of our core business systems, the loss or corruption of confidential business information, and/or the disclosure of personal data that in each case could result in an adverse business impact as well as possible damage to our brand. This could also lead to a public disclosure or theft of private intellectual property and a possible loss of customer confidence.

While we have experienced and expect to continue to experience these types of threats and incidents, there have been no material incidents incurred to-date at the Company. If our core business operations, or that of one of our third-party service providers, were to be breached, this could affect the confidentiality, integrity, and availability of our systems and data. Any failure on the part of us or our third-party service providers to maintain the security of data we are required to protect, including via the penetration of our network security and the misappropriation of confidential and proprietary information, could result in: business disruption; damage to our reputation; financial obligations to third parties; fines, penalties, regulatory proceedings; private litigation with potentially large costs; deterioration in our suppliers’, distributors’, and customers’ confidence in us; as well as other competitive disadvantages. Such failures to maintain the security of data could have a material adverse effect on our business, financial condition, and results of operations. While we continue to perform security due diligence, there is always the possibility of a significant breach.

Any threats or security breaches to our systems may negatively impact our customers. Our products and solutions that are deployed in customer environments also have the possibility of being breached, which could result in disclosure of a customer’s confidential information, or disrupt the availability of the customer’s data and systems. Further, our customers may fail to adopt adequate security controls and measures, or may fail to timely update their products and solutions to install or enable security patches, which may result in a security breach. The market perception of the effectiveness of our products and our reputation could also be harmed as a result of any actual or perceived security breach that occurs in our network or in the network of a customer of our products, regardless of whether the breach is attributable to our products, the systems of other vendors or to actions of malicious parties. It is possible that such a breach, or a perceived breach, could result in delays in, or loss of market acceptance of, our products, solutions or services; diversion of our resources; injury to our reputation; theft or misuse of our intellectual property or other assets; increased service and warranty expenses; and payment of damages. To date, we have had no material incidents related to the security of our products or solutions. Further, strategic customers may negotiate specific controls and we may incur additional costs to comply with such customer-specific controls. Although we maintain insurance related to cybersecurity risks, there can be no assurance that our insurance will cover the particular cyber incident at issue or that such coverage will be sufficient.

We may incur liabilities as a result of product failures due to actual or apparent design or manufacturing defects. We have been subject to product liability claims, and may continue to be subject to such claims, including claims for property or economic damages or personal injury, where damages arose, and may continue to arise, from our products as a result of actual or apparent design or manufacturing defects. In addition, such design or manufacturing defects may occur not only in our own

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designed products, but also in components provided by third-party suppliers. We seek to limit such risk through insurance protection as well as product design, manufacturing quality control processes, product testing and contractual indemnification from suppliers. Although there have been no material claims to-date at the Company, due to the growing size of the Company’s installed product base and growing number of applications in which our products can be used, an actual or alleged design or manufacturing defect could result in product recalls, injury to our reputation, and customer service costs or legal costs that could have material adverse effects on our financial results.

Defects or errors in the Company’s software products could harm our reputation, result in significant cost to us, and impair our ability to market such products. Our software may contain undetected errors, defects, or bugs. Although we have not suffered significant harm from any errors, defects, or bugs to date, we may discover significant errors, defects, or bugs in the future that we may not be able to correct or correct in a timely manner. Any future errors, defects, or bugs found in our software products and related services may result in delays in, or loss of market acceptance of, our products, solutions or services; diversion of resources; injury to reputation; increased service and warranty expenses; and payment of damages; which could have a material adverse effect on our financial results.

Our business success depends on our ability to attract, retain, develop and motivate key personnel. Our business and results of operations could be adversely affected by increased competition for highly skilled employees, higher employee turnover, or increased compensation and benefit costs. The future success of the Company is substantially dependent on the continued services and contributions of key personnel, including senior management and other highly skilled employees. The experience, industry knowledge, and skill sets of our employees materially benefit our operations and performance, and the ability to attract, retain, develop, and motivate highly skilled employees is important to our long-term success. Skilled employees in our industry are in high demand and competition for their experience and skill sets is intense. The incentives and benefits we have available to attract, retain, and motivate employees may become less effective as employees seek new or different opportunities based on factors such as compensation, benefits, mobility, and flexibility that are different from what we offer. Although we strive to be an employer of choice, we may not be able to continue to successfully attract, retain, develop, or motivate key personnel in the future. Any disruption in the services of key personnel may have a material adverse effect on our business and results of operations.

A natural disaster, widespread public health issue, civil unrest, or man-made disaster may cause supply disruptions that could adversely affect our business and results of operations. Natural disasters or widespread public health issues, including pandemics, may occur in the future and the Company is not able to predict to what extent or duration any such disruptions will have on our ability to maintain ordinary business operations. The Company’s operations and facilities are subject to catastrophic loss due to fire, flood, terrorism, or other natural or man-made disasters. If any of our facilities were to experience a catastrophic loss, it could disrupt our operations, delay production, shipments and revenue, and result in large expenses to repair or replace the facility. Following an interruption to our business, the Company could require substantial recovery time, experience significant expenditures to resume operations, and lose significant sales. If such a disruption were to occur, we could breach agreements, our reputation could be harmed, and our business and operating results could be adversely affected. The consequences of a natural disaster or widespread public health issue may have a material adverse effect on our business and results of operations.

The effects of the COVID-19 pandemic have and may continue to adversely affect our business, financial results, and results of operations. The coronavirus (“COVID-19”) pandemic has been, and continues to be, complex and rapidly evolving, and has impacted our business, with prior impacts primarily related to supply chain disruption (including higher fulfillment costs and component shortages) and labor constraints. The duration and extent of the impact of the COVID-19 pandemic on our business, operations and financial results depends on factors that cannot be accurately predicted at this time, such as the severity and transmission rate of COVID-19, the emergence of new variants of the virus, the length of the pandemic, and the impact of these and other factors on our stakeholders.

The U.S. federal, state, and local governments as well as non-U.S. governments, to varying degrees, have imposed, and may again impose, several protocols and regulations restricting activities of individuals in an effort to limit the spread of COVID-19. Over the course of the pandemic we have implemented a number of measures in an effort to protect the health and well-being of our employees, customers and suppliers, including having the majority of office workers work remotely during the height of the pandemic and gradually returning to offices as restrictions are lifted, limiting employee travel where appropriate, and implementing more strenuous health and safety measures for hosting and attending in-person industry events. We continue to allow our employees to come back to work in our offices in a controlled approach, with modified business practices and increased health and safety protocols, consistent with government regulations and guidelines. However, there is no guarantee that such protocols will be successful in preventing the spread of COVID-19 amongst our employees, and even as employees return to our offices, we may be prevented from conducting business activities at full capacity for an indefinite period of time. The extent and duration of future workplace restrictions and limitations, particularly in sites with significant headcount, could adversely impact our operations and our ability to execute on strategic imperatives for our business. The potential negative

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effects to our operations, including reductions in production levels, research and development activities, and increased efforts to mitigate the impact of COVID-19, may adversely affect our ability to deliver our products, solutions and services.

Further, the conditions caused by COVID-19 have affected, and may continue to affect, the overall demand environment for our products, solutions and services. The level of demand for certain product components has resulted in, and may continue to result in, lengthened lead times and higher input costs, including freight. This has impacted, and may continue to impact, our ability to meet customer demand as well as profitability. An inability to meet customer demand may also adversely affect our customers’ ability or willingness to purchase our products, solutions or services. Additionally, our financial results may be adversely impacted by challenges in the macroeconomic environment, including market inflation, as a result of global supply chain shortages.

If COVID-19 or its variants become more prevalent in the locations where our customers, suppliers, or we conduct business, we may experience more pronounced disruptions in our operations. If we are not able to respond to and manage the impact of such events effectively, our business and results of operations in future periods may be adversely affected. Moreover, the impacts of the COVID-19 pandemic may exacerbate other pre-existing risks, such as global economic conditions, political, regulatory, social, financial, operational and cybersecurity as well as similar risks relating to our suppliers and customers, any of which could have a material adverse effect on our business.

We are exposed to risks under large, multi-year system and solutions and services contracts that may negatively impact our business. We enter into large, multi-year system and solutions and services contracts with our customers that expose us to risks, including among others: (i) technological risks, especially when contracts involve new technology; (ii) financial risks, including the accuracy of estimates inherent in projecting costs associated with large, long-term contracts and the related impact on operating results; and (iii) cybersecurity risks, especially in solutions or managed services contracts with customers that process personal data. Recovery of front-loaded costs incurred on long-term managed services and software-based solutions contracts with customers is dependent on the continued viability of such customers. The insolvency of customers could result in a loss of anticipated future revenue attributable to that program or product, which could have an adverse impact on our profitability.

We enter into fixed-price contracts that could subject us to losses in the event we fail to properly estimate our costs. If our initial cost estimates are incorrect, we can lose money on these contracts. Because many of these contracts involve new technologies and applications and require the Company to engage subcontractors and can last multiple years, unforeseen events, such as technological difficulties, fluctuations in the price of raw materials, problems with our subcontractors or suppliers, and other cost overruns, can result in the contract pricing becoming less favorable or even unprofitable to us and have an adverse impact on our financial results. In addition, a significant increase in inflation rates could have an adverse impact on the profitability of longer-term contracts.

We utilize the services of subcontractors to perform under many of our contracts, and the inability of our subcontractors to perform in a timely and compliant manner could negatively impact our performance obligations as the prime contractor. We engage subcontractors on many of our contracts and our use of subcontractors has and may continue to increase as we expand our global solutions and services business. Our subcontractors may further subcontract performance and may supply third-party products and software. We may have disputes with our subcontractors, including disputes regarding the quality and timeliness of work performed by a subcontractor and the functionality, warranty and indemnities of products, software, and services supplied by a subcontractor. We are not always successful in passing along customer requirements to our subcontractors, and thus in some cases may be required to absorb contractual risks from our customers without corresponding back-to-back coverage from our subcontractors. Our subcontractors may not be able to acquire or maintain the quality of the materials, components, subsystems, and services they supply, or secure preferred warranty and indemnity coverage from their suppliers, which might result in greater product returns, service problems, warranty claims and costs, and regulatory compliance issues and could harm our business, financial condition, and results of operations.

We have outsourced portions of certain business operations such as repair, distribution, engineering services, and information technology services and may outsource additional business operations, which limits our control over these business operations and exposes us to additional risk as a result of the actions of our outsource partners. We are not able to directly control certain business operations that we outsource. Our outsource partners may not prioritize our business over that of their other customers and they may not meet our desired level of service, cost reductions, or other metrics. In some cases, our outsource partners’ actions may result in our being found to be in violation of laws or regulations, such as import or export regulations. As many of our outsource partners operate outside of the U.S., our outsourcing activity exposes us to information security vulnerabilities and increases our global risks. In addition, we are exposed to the financial viability of our outsource partners. Once a business activity is outsourced, we may be contractually prohibited from, or may not practically be able to, bring such activity back within the Company or move it to another outsource partner. The actions of our outsource partners could result in reputational damage to us and could negatively impact our financial results. Further, we have from time-to-time, and in certain instances will continue to, transition our outsourced operations to new service providers and/or to different geographies. Such transition activities between new or existing outsource partners or across different geographies, as well as insourcing activities, could

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result in additional cost, time and management attention in order to effectively manage the transition, which could negatively impact our financial results.

Failure of our suppliers, subcontractors, distributors, resellers, and representatives to use acceptable legal or ethical business practices could negatively impact our business. It is our policy to require suppliers, subcontractors, distributors, resellers, and third-party sales representatives (“TPSRs”) to operate in compliance with applicable laws, rules, and regulations, including those regarding working conditions, employment practices, environmental compliance, anti-corruption, and trademark and copyright licensing. However, we do not control their labor and other business practices. If one of our suppliers, subcontractors, distributors, resellers, or TPSRs violates labor or other laws or implements labor or other business practices that are regarded as unethical, the shipment of finished products to us could be interrupted, orders could be canceled, relationships could be terminated, and our reputation could be damaged. If one of our suppliers or subcontractors fails to procure necessary license rights to trademarks, copyrights, or patents, legal action could be taken against us that could impact the salability of the Company’s products and solutions, and expose us to financial obligations to a third-party. Any of these events could have a negative impact on our sales and results of operations.

We rely on third-party dealers, distributors, and resellers to sell many of our products, services and solutions, and their failure to effectively bring our products, services and solutions to market may negatively affect our results of operation and financial results. In addition to our own sales force, we offer our products, services and solutions through a variety of third-party dealers, distributors, and resellers who may also market other products, services and solutions that compete with ours. Failure of one or more of our third-party dealers, distributors, or resellers to effectively promote our offerings could affect our ability to bring products, services and solutions to market and have a negative impact on our results of operations. Any changes to our channel program may cause some of our third-party dealers, distributors, or resellers to exit the program due to modifications to the program structure, which may reduce our ability to bring products and solutions to market and could have a negative impact on our results of operations.

Some of these third-parties are smaller and more likely to be impacted by a significant decrease in available credit that could result from a weakness in the financial markets. If credit pressures or other financial difficulties result in insolvency for third-party dealers, distributors, or resellers and we are unable to successfully transition end-customers to purchase our products and solutions from other third-parties or from us directly, it may cause, and in some cases, has caused, a negative impact on our financial results.

Final assembly of certain of our products is performed by third-party electronics manufacturers. We may be dependent on these third-party electronics manufacturers as a sole-source of supply for the manufacture of such products. A failure by such manufacturers to provide manufacturing services to us as we require, or any disruption in such manufacturing services up to and including a catastrophic shut-down, may adversely affect our business results. Because we rely on these third-party electronics manufacturers to manufacture our products, we may incur increased business continuity risks. We are not able to exercise direct control over the assembly or related operations of certain of our products. If these third-party manufacturers experience business difficulties or fail to meet our manufacturing needs, then we may be unable to satisfy customer product demands, lose sales, and be unable to maintain customer relationships. Longer production lead times may result in shortages of certain products and inadequate inventories during periods of unanticipated higher demand. Without such third parties continuing to manufacture our products, we may have no other means of final assembly of certain of our products until we are able to secure the manufacturing capability at another facility or develop an alternative manufacturing facility. This transition could be costly and time consuming. We have taken actions to diversify, and may take additional actions to diversify in the future, our product sourcing footprint. Such actions have, and may again, result in additional costs.

Our future operating results depend on our ability to purchase a sufficient amount of materials, parts, and components, as well as services and software to meet the demands of customers. We source some of our components from sole source suppliers. Any disruption to our suppliers or significant increase in the price of supplies, inclusive of transportation costs, could have a negative impact on our results of operations. Our ability to meet customers’ demands depends, in part, on our ability to obtain in a timely manner an adequate delivery of quality materials, parts, and components, as well as services and software from our suppliers, and our ability to deliver products, services and software to our customers. In addition, certain supplies are available only from a single source or limited sources and we may not be able to diversify sources in a timely manner. If demand for our products, solutions or services increases from our current expectations or if suppliers are unable or unwilling to meet our demand for other reasons, including as a result of natural disasters, public health issues, severe weather conditions, or financial issues, we could experience an interruption in supplies or a significant increase in the price of supplies that could have a negative impact on our business. We have experienced shortages in the past that have negatively impacted our results of operations and may experience such shortages in the future. At times we have and may continue to execute multi-year purchase commitments with suppliers that contain minimum spend thresholds, which we are obligated to fulfill even if customer demand declines, and may require that we purchase inventory that exceeds our forecasted demand. In addition, volatility in customer demand, product availability, and costs to transport products, may result in increased operating input costs. Also, credit constraints at our suppliers could cause us to accelerate payment of accounts payable by us, impacting our cash flow.

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In addition, our current contracts with certain suppliers may be canceled or not extended by such suppliers and, therefore, not afford us with sufficient protection against a reduction or interruption in supplies. Moreover, in the event any of these suppliers breach their contracts with us, our legal remedies associated with such a breach may be insufficient to compensate us for any damages it may suffer.

Financial and Market Risks

The impact of changes in customs duties and trade policies in the United States and corresponding actions by other countries in which the Company does business could adversely affect our financial performance. The Company currently imports a significant percentage of our products into the U.S., and an increase in customs duties with respect to these imports could negatively impact the Company’s financial performance. Although the Company has taken actions to diversify its product sourcing footprint, these efforts may not be sufficient to mitigate negative impacts on the Company’s financial performance resulting from an increase in customs duties.

Taxing authority challenges may lead to tax payments exceeding current reserves. We are subject to, and may become subject to, ongoing tax examinations in various jurisdictions. As a result, we may record incremental tax expense based on expected outcomes of such matters. In addition, we may adjust previously reported tax reserves based on expected results of these examinations. Such adjustments could result in an increase or decrease to the Company’s effective tax rate and cash flows. Future changes in tax law in various jurisdictions around the world and income tax holidays could have a material impact on our effective tax rate, foreign rate differential, future income tax expense, and cash flows.

Forecasting our estimated annual effective tax rate is complex and subject to uncertainty, and there may be material differences between our forecasted and actual tax rates. Forecasts of our income tax position and effective tax rate are complex, subject to uncertainty and periodic updates because our income tax position for each year combines the effects of a mix of profits earned and losses incurred by us in various tax jurisdictions with a broad range of income tax rates, as well as changes in the valuation of deferred tax assets and liabilities, the impact of various accounting rules and changes to these rules, the results of examinations by various tax authorities, and the impact of any acquisition, business combination, disposition or other reorganization, or financing transaction.

As a multinational corporation, we conduct our business in many countries and are subject to taxation in many jurisdictions. The taxation of our business is subject to the application of multiple, and sometimes conflicting, tax laws and regulations, as well as multinational tax conventions. Many countries have recently adopted, or are considering the adoption of, revisions to their respective tax laws based on the on-going reports issued by the Organization for Economic Co-operation and Development (“OECD”)/G20 Base Erosion and Profit Shifting (“BEPS”) Project, which could materially impact our tax liability due to our organizational structure and significant operations outside of the U.S. Our effective tax rate is highly dependent upon the geographic distribution of our worldwide earnings or losses resulting from our structure and operating model, the tax regulations and tax holidays in each geographic region, and the availability of tax credits and carry-forwards. The application of tax laws and regulations is subject to legal and factual interpretation, judgment, and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation, and the evolution of regulations and court rulings. Consequently, taxing authorities may impose tax assessments or judgments against us that could materially impact our tax liability and/or our effective income tax rate.

Economic conditions and financial market disruptions may adversely affect our business and results of operations. Adverse economic conditions or reduced information technology spending may negatively impact our business. General disruption of financial markets and a related general economic downturn could adversely affect our business and financial condition through a reduction in demand for our products, solutions or services by our customers. If a slowdown were severe enough, it could require further impairment testing and write-downs of goodwill and other intangible assets. Cost reduction actions may be necessary and might lead to restructuring charges. A tightening of financial credit could adversely affect our customers, suppliers, outsourced manufacturers, and channel partners (e.g., distributors and resellers) from obtaining adequate credit for the financing of significant purchases. An economic downturn could also result in a decrease in or cancellation of orders for our products, solutions and services; negatively impacting the ability to collect accounts receivable on a timely basis; result in additional reserves for uncollectible accounts receivable; and require additional reserves for inventory obsolescence. Higher volatility and fluctuations in foreign exchange rates for the U.S. Dollar against currencies such as the Euro, British Pound Sterling and Czech Koruna could negatively impact product sales, margins, and cash flows.

It is important that we are able to obtain many different types of insurance, and if we are not able to obtain insurance or exhaust our coverage, we may be forced to retain the risk. We have many types of insurance coverage and are also self-insured for some risks and obligations. Our third-party insurance coverage varies from time to time in both type and amount depending on availability, cost and our decisions with respect to risk retention. Economic conditions and uncertainties in global markets may adversely affect the cost and other terms upon which we are able to obtain third-party insurance. In addition, our third-party insurance policies are subject to deductibles, policy limits, and exclusions that result in our retention of a level of risk on a self-insurance basis. Further, certain types of coverages may be difficult or expensive to obtain. We self-insure against certain

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business risks and expenses where we believe we can adequately self-insure against the anticipated exposure and risk or where insurance is either not deemed cost-effective or is not available. If the amount of our third-party insurance coverage is not available or adequate to cover all claims or liabilities, or to the extent we have elected to self-insure, we may be forced to bear substantial costs from an accident, incident, or claim. Losses not covered by insurance could be substantial and unpredictable and could adversely affect our financial condition and results of operations.

Our indebtedness could adversely affect our business. Our indebtedness could have important consequences, including the following:

•We may experience difficulty in satisfying our obligations with respect to our existing indebtedness or future indebtedness;

•Our ability to obtain additional financing for working capital, capital expenditures, acquisitions, or general corporate purposes may be impaired;

•We may be at a competitive disadvantage with reduced flexibility in planning for, or responding to, changing conditions in the industry, including increased competition; and

•We may be more vulnerable to economic downturns and adverse developments in the business.

We expect to fund our expenses and to pay the principal and interest on our indebtedness from cash flow from operations. Our ability to meet our expenses and to pay principal and interest on our indebtedness when due depends on our future performance and ability to collect cash from our customers, which will be affected by financial, business, economic, and other factors. We will not be able to control many of these factors, such as economic conditions in the markets where we operate and pressure from competitors.

If our business does not generate sufficient cash flows from operations or if future borrowings are not available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs, we may need to refinance all or a portion of our indebtedness on or before the maturity thereof, sell assets, reduce or delay capital investments, or seek to raise additional capital, any of which could have a material adverse effect on our operations. In addition, we may not be able to effect any of these actions, if necessary, on commercially reasonable terms or at all. Our ability to restructure or refinance our indebtedness will depend on the condition of the capital and debt markets and our financial condition at such time. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict business operations. The terms of anticipated or future debt instruments may limit or prevent us from taking any of these actions. In addition, any failure to make scheduled payments of interest and/or principal on outstanding indebtedness would likely result in a reduction of our credit rating, which could harm our ability to access additional capital on commercially reasonable terms or at all. Our inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance or restructure our obligations on commercially reasonable terms or at all, would have an adverse effect, which could be material, on our business, financial condition and results of operations, as well as on our ability to satisfy the obligations in respect of our indebtedness.

Our use of derivative financial instruments to reduce interest rate risk may result in added volatility in our operating results. We do not hold or issue derivative financial instruments for trading purposes. However, we do utilize derivative financial instruments to reduce interest rate risk associated with our indebtedness. To manage variable interest rate risk, we entered into forward interest rate swap agreements, which will effectively convert a portion of our indebtedness into a fixed rate loan. Under generally accepted accounting principles, changes in the fair values of the swap contracts are reflected in our Consolidated Statements of Operations as a component of “Interest expense, net” if not hedged. The associated impact on our quarterly operating results is directly related to changes in prevailing interest rates. If interest rates increase, we would have a non-cash gain on the swaps, and vice versa in the event of a decrease in interest rates. Consequently, these swaps may introduce additional volatility to our operating results.

Legal and Regulatory Risks

We could be adversely impacted by changes in accounting standards and subjective assumptions, estimates, and judgments by management related to complex accounting matters. Generally accepted accounting principles and related accounting pronouncements, implementation guidelines, and interpretations with regard to a wide range of matters that are relevant to our businesses, including, but not limited to, revenue recognition, business acquisition purchase price allocations, impairment of goodwill and other intangible assets, inventories, tax matters, and litigation and other contingent liabilities are highly complex and involve many subjective assumptions, estimates, and judgments. Changes in these rules or their interpretation or changes in underlying assumptions, estimates, or judgments could significantly change our reported or expected financial performance or financial condition. New accounting guidance may also require systems and other changes that could increase our operating costs and/or change our financial statements.

Laws and regulations relating to the handling of personal data may result in increased costs, legal claims, or fines against the Company. As part of our operations, the Company collects, uses, stores, and transfers personal data of third parties, employees and limited customer data in and across various jurisdictions. Laws and regulations relating to the handling of such personal

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data may result in increased costs, legal claims, or fines against the Company. Existing laws and emerging regulations may be inconsistent across jurisdictions and are subject to evolving and differing (sometimes conflicting) interpretations. Government officials, regulators and privacy advocates are increasingly scrutinizing how companies collect, process, use, store, share and transmit personal data, which may result in new interpretations of existing laws that impact our business. Compliance with these laws may require us to, among other things, make changes in services, business practices, or internal systems that may result in increased costs, lower revenue, reduced efficiency, or greater difficulty in competing with foreign-based firms. Further, there is no assurance that we will be able to meet additional requirements that may be imposed on the transfer of personal data without incurring expenses. We may experience reluctance or refusal by customers to purchase or continue to use our services due to concerns regarding their data protection obligations. Our actual or perceived failure to comply with applicable laws and regulations or other obligations to which we may be subject, or to protect personal data from unauthorized access, use, or other processing, may subject the Company to enforcement actions and regulatory investigations, claims, legal proceedings or other actions, reputational harm and loss of goodwill, any of which could have a material adverse effect on our operations, financial performance, and business.

The unfavorable outcome of any pending or future litigation, arbitration, or administrative action could have a material adverse effect on our financial condition or results of operations. From time to time we are a party to litigation, arbitration, or administrative actions. Our financial results and reputation could be negatively impacted by unfavorable outcomes to any pending or future litigation or administrative actions, including those related to the Foreign Corrupt Practices Act, the U.K. Bribery Act, or other anti-corruption laws. There can be no assurances as to the favorable outcome of any litigation or administrative proceedings. In addition, it can be very costly to defend litigation or administrative proceedings and these costs could negatively impact our financial results.

We are subject to a wide range of product regulatory and safety, consumer, worker safety, and environmental laws. Our operations and the products we manufacture and/or sell are subject to a wide range of product regulatory and safety, consumer, worker safety, and environmental laws and regulations. Compliance with such existing or future laws and regulations could subject us to future costs or liabilities, impact our production capabilities, constrict our ability to sell, expand or acquire facilities, restrict what products, solutions and services we can offer, and generally impact our financial performance. Some of these laws are environmental and relate to the use, disposal, remediation, emission and discharge of, and exposure to hazardous substances. These laws often impose liability and can require parties to fund remedial studies or actions regardless of fault. We continue to incur disposal costs and have ongoing remediation obligations. Environmental laws have tended to become more stringent over time and any new obligations under these laws could have a negative impact on our operations or financial performance.

Laws focused on the energy efficiency of electronic products and accessories; recycling of both electronic products and packaging; reducing or eliminating certain hazardous substances in electronic products; and the transportation of batteries continue to expand significantly. Laws pertaining to accessibility features of electronic products, standardization of connectors and power supplies, the transportation of lithium-ion batteries, and other aspects are also proliferating. There are also demanding and rapidly changing laws around the globe related to issues such as product safety, radio interference, radio frequency radiation exposure, medical related functionality, and consumer and social mandates pertaining to use of wireless or electronic equipment. These laws, and changes to these laws, could have a substantial impact on whether we can offer certain products, solutions, and services, and on what capabilities and characteristics our products, solutions or services can or must include.

These laws impact our products and negatively affect our ability to manufacture and sell products competitively. We expect these trends to continue. In addition, we anticipate that we will see increased demand to meet voluntary criteria related to reduction or elimination of certain constituents from products, increasing energy efficiency, and providing additional accessibility.

Increased public awareness and worldwide focus on environmental and climate change issues has led to legislative and regulatory efforts to limit greenhouse gas emissions, and may result in more international, federal or regional requirements or industry standards to reduce or mitigate global warming. ESG requirements and other increased regulation of climate change concerns could subject us to additional costs and restrictions and require us to make certain changes to our manufacturing practices and/or product designs, which could negatively impact our business, results of operations, financial condition and competitive position.

From time to time, we create and publish voluntary disclosures regarding ESG matters. Identification, assessment, and disclosure of such matters is complex. Many of the statements in such voluntary disclosures are based on our expectations and assumptions, which may require substantial discretion and forecasts about costs and future circumstances. However, if our ESG practices or business portfolio do not meet evolving investor or other stakeholder expectations and standards, then our reputation, our ability to attract or retain employees and our attractiveness as an investment, supplier, business partner, or acquiror could be negatively impacted. In addition, we note that certain ESG matters are becoming less “voluntary” as regulators, including the SEC, begin proposing and adopting regulations regarding ESG matters, including, but not limited to climate change-related matters. To the extent we are subject to increased regulatory requirements, we could become subject to

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increased compliance-related costs and risks, including potential enforcement and litigation. Such ESG matters may also impact our suppliers and customers, which may compound or cause new impacts on our business, financial condition or results of operations.

Item 1B.Unresolved Staff Comments

None.

Item 2.Properties

Our corporate headquarters are located in Lincolnshire, Illinois; a northern suburb of Chicago. We also operate manufacturing, repair, distribution and warehousing, administrative, research, and sales facilities in other U.S. and international locations.

As of December 31, 2022, the Company owned three laboratory and warehouse facilities located in the U.S., U.K., and Canada.

As of December 31, 2022, the Company had a total of 117 leased facilities with locations spread globally; 41 of which are located in the U.S. and 76 of which are located in other countries. See Note 13, Leases in the Notes to Consolidated Financial Statements for further details related to the Company’s lease arrangements.

We generally consider the productive capacity of our facilities to be adequate and sufficient for our requirements. The extent of utilization of each manufacturing facility varies throughout the year.

Item 3.Legal Proceedings

Beginning in September 2021, Honeywell filed patent infringement lawsuits against Zebra in multiple jurisdictions, including the International Trade Commission and Federal District Court in the Western District of Texas in the United States, as well as foreign courts in the United Kingdom, Germany, Netherlands, and China. Honeywell made substantially similar allegations of patent infringement in all cases filed. The technology addressed in the various actions generally includes aspects of data capture, barcode reading, and scanning. The allegedly infringing Zebra products identified in the actions were described as barcode scanners, mobile computers with barcode scanning capabilities, scan engines, and components thereof. The remedies sought in these lawsuits included damages and injunctive relief. The same Zebra products and technology were implicated in all of the lawsuits. Zebra vigorously defended against these infringement allegations. In February 2022, Zebra filed patent infringement lawsuits against Honeywell in multiple jurisdictions, including the International Trade Commission and Federal District Court in the Eastern District of New York in the United States, as well as foreign courts in the United Kingdom, Germany and China. Zebra’s allegations against Honeywell in each case varied based on the underlying technology in the Zebra patent that is alleged to have been infringed by Honeywell. The technology addressed in the various actions includes scan engine functionality generally, distance scanning, power management and security. The Honeywell products that are accused of infringing Zebra’s patents in the various actions include scan engines and components thereof, barcode scanners, mobile computers, RFID printers and other wireless devices. The remedies sought in these lawsuits included damages and injunctive relief. In June 2022, the parties resolved their disputes and entered into a License and Settlement Agreement (“Settlement”). All pending matters between the parties were dismissed. The following are the relevant terms disclosed in Zebra’s Form 8-K filed on June 30, 2022: Under the Settlement, the Company and Honeywell each deny liability and agreed to a mutual general release from all past claims; entered into a covenant not to sue for patent infringement; agreed to a payment by the Company to Honeywell for past damages of $360 million which was charged in the Company’s second quarter 2022 results and will be paid in equal quarterly installments over eight quarters; and entered into a royalty-free cross-license with respect to each party’s existing patent portfolio for the lives of the licensed patents.

See Note 14, Accrued Liabilities, Commitments and Contingencies in the Notes to Consolidated Financial Statements for discussion of certain other matters.

Item 4.Mine Safety Disclosures

Not applicable.

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PART II

Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Stock Information

Our Class A Common Stock is traded on the NASDAQ Stock Market, LLC under the symbol “ZBRA”.

As of February 9, 2023, the last reported price for the Company’s Class A Common Stock was $316.56 per share, and there were 91 registered stockholders of record for Zebra’s Class A Common Stock. The number of beneficial owners is substantially greater than the number of stockholders of record because a large portion of our Class A common stock is transacted through banks and brokers.

Dividend Policy

Since our initial public offering in 1991, we have not declared any cash dividends or distributions on our capital stock. We currently do not anticipate paying any cash dividends in the foreseeable future.

Treasury Shares

The following table sets forth information with respect to repurchases of the Company’s common stock for the three months ended December 31, 2022.

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) (1)
October 2, 2022 - October 29, 2022	187,024	$	267.33	187,024	$	992
October 30, 2022 - November 26, 2022	12	282.67		12	992
November 27, 2022 - December 31, 2022	187,629	250.50		187,629	945
Total	374,665	$	258.90	374,665	$	945

(1)On May 17, 2022, the Company announced that its Board of Directors authorized a share repurchase program for up to $1 billion of its outstanding shares of common stock. This authorization augments the previous $1 billion share repurchase authorization which was announced on July 30, 2019. Repurchases may be effected from time to time through open market purchases, including pursuant to a pre-set trading plan meeting the requirements of Rule 10b5-1(c) of the Securities Exchange Act of 1934. As of December 31, 2022, the Company has cumulatively repurchased 3,323,283 shares of common stock for approximately $1.1 billion, resulting in a remaining amount of share repurchases authorized under the plans of $945 million.

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Stock Performance Graph

The following graph compares the cumulative total stockholder return, calculated on a dividend-reinvested basis, in Zebra Technologies Corporation Class A Common Stock, the S&P 500 Index, and the S&P 500 Information Technology Index for the five years ended December 31, 2022. The comparison assumes that $100 was invested in each of the Company’s Class A Common Stock, the S&P 500 Index, and the S&P 500 Information Technology Index as of the market close on December 31, 2017. Note that historic stock price performance is not necessarily indicative of future stock price performance.

Value at each year-end of $100 initial investment made on December 31, 2017
	12/17		12/18		12/19		12/20		12/21		12/22
Zebra Technologies Corporation	$	100.00	$	153.40	$	246.09	$	370.26	$	573.41	$	247.02
S&P 500	$	100.00	$	95.62	$	125.72	$	148.85	$	191.58	$	156.89
S&P 500 Information Technology	$	100.00	$	99.71	$	149.86	$	215.63	$	290.08	$	208.30

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Item 6.[Reserved]

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Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

This section generally discusses fiscal 2022 and 2021 items and year-over-year comparisons between 2022 and 2021. Discussions of 2020 items and year-over-year comparisons between 2021 and 2020 are not included herein. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for that discussion.

Overview

The Company is a global leader providing Enterprise Asset Intelligence (“EAI”) solutions in the Automatic Identification and Data Capture (“AIDC”) industry. The AIDC market consists of mobile computing, data capture, radio frequency identification devices (“RFID”), barcode printing, and other workflow automation products and services. The Company’s operations consist of two reportable segments that provide complementary offerings to our customers: Asset Intelligence & Tracking (“AIT”) and Enterprise Visibility & Mobility (“EVM”). Refer to Part I, Item 1 of this document for additional information.

•The AIT segment is an industry leader in barcode printing and asset tracking technologies. Its major product lines include barcode and card printers, supplies, including temperature-monitoring labels and services.

•The EVM segment is an industry leader in automatic information and data capture solutions. Its major product lines include mobile computing, data capture, RFID, fixed industrial scanning and machine vision, services, workflow optimization solutions and location solutions. Our workflow optimization solutions include cloud-based software subscriptions, retail solutions, and robotic automation solutions.

During the past year, we have maintained our position as a market leader in our core businesses, which are generally considered to be comprised of our mobile computing and data capture products, printing products and supplies, as well as support and repair services. Customers across the industries that we serve have benefited from our core offerings to keep pace with the increasingly on-demand economy and to invest in their long-term technology capabilities.

The Company has continued to make strategic investments to accelerate progress in certain adjacent and expansion markets. In June 2022, the Company acquired Matrox Electronic Systems Ltd. (“Matrox) for $881 million in cash, net of Matrox’s cash on-hand. Matrox, part of our EVM segment, is a leading provider of advanced machine vision components and software serving many end-markets. Through its acquisition of Matrox, the Company significantly expanded its machine vision products and software offerings. The Company also continues to focus on scaling and integrating our other recent acquisitions (Antuit.ai, Fetch Robotics, Adaptive Vision Sp. z.o.o., and Reflexis) providing growth opportunities across our software and robotic solution offerings. These investments were funded partly through cash flow generation from our core businesses operations as well as through borrowings and other working capital facilities that enable us to maintain strong liquidity and manageable debt leverage.

As part of our ongoing supply chain optimization and resiliency initiatives, we extended the transition timeline of our distribution center in North America. The transition negatively impacted product fulfillment and operating results in the third quarter and contributed to elevated inventory levels. To mitigate the impacts associated with that transition, we resumed servicing customer orders through our existing logistics service provider. Additionally, in January 2023, we terminated our contractual arrangement with the new service provider and have directly assumed the distribution center lease and have staffed the facility with Zebra employees, hence assuming all operational activities at the location.

We are actively managing our inventory levels and have been addressing certain component part shortages through a combination of entering long-term supply commitments with key vendors, utilizing expedited modes of transportation, as well as executing select product re-designs. We anticipate inventory levels to remain elevated from historical levels as we continue to manage through supply chain challenges.

Macroeconomic Environment

The acceleration of broad global cost inflation, a rising interest rate environment, and a stronger U.S. dollar in the current year have negatively impacted our operating results. We have partially mitigated the financial impacts of these headwinds through a combination of targeted price increases, as well as our ongoing foreign currency exchange and interest rate risk management programs. We believe that this challenging operating environment, partially due to the COVID-19 pandemic and Russia/Ukraine war, has contributed to a deceleration of certain customer demand, particularly late in the current year. The Company expects these macro conditions to persist into 2023.

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In the first quarter of 2022, we announced the suspension of our business operations in Russia. Neither Russia nor Ukraine comprises a material portion of our business; therefore, the war thus far has not had a significant effect on our results of operations. Additionally, the war has not significantly affected our ability to source supplies or deliver our products and services to our customers in the surrounding EMEA region. We will continue to monitor this for potential future adverse impacts on our business.

In 2020, the global COVID-19 pandemic resulted in significant declines in customer demand and supply chain disruptions, which negatively impacted the Company’s Net sales and overall profitability. In 2021, customer demand sharply rebounded as the underlying trend to digitize and automate workflows accelerated, which, along with pent-up demand from customers who we believe previously delayed purchases due to the pandemic, benefited the Company’s 2021 sales and profitability. The level of demand for certain product components resulted in lengthened lead times, component shortages, and higher input costs, including freight and component parts. Component shortages for certain products and elevated input costs continued in 2022 which negatively impacted our ability to meet customer demand and our operating results.

2022 Financial Highlights and Other Recent Developments

•Net sales were $5,781 million in the current year compared to $5,627 million in the prior year.

•Operating income was $529 million in the current year compared to $979 million in the prior year.

•Net income was $463 million, or $8.80 per diluted share in the current year, compared to Net income of $837 million, or $15.52 per diluted share in the prior year.

•Operating cash flow was $488 million in the current year compared to $1,069 million in the prior year.

•We repurchased $751 million of common shares in the current year compared to $57 million in the prior year.

Restructuring Activity

In the third quarter of 2022, the Company committed to certain organizational changes and leased site rationalization actions designed to generate structural cost efficiencies (collectively referred to as the “2022 Productivity Plan”). The total cost under the 2022 Productivity Plan, which is expected to be completed in 2023, is estimated to be approximately $25 million. Exit and restructuring charges associated with the 2022 Productivity Plan were $12 million for the year ended December 31, 2022. The Company incurred Exit and restructuring costs, under previously announced programs of $2 million, $7 million, and $11 million for the years ended December 31, 2022, 2021 and 2020, respectively.

License and Settlement Agreement

On June 30, 2022, the Company announced it entered into a License and Settlement Agreement (“Settlement”) resulting in a $372 million pre-tax charge, inclusive of $12 million of external legal fees, within Operating expenses on the Consolidated Statement of Operations. Under the Settlement, Zebra agreed to pay $360 million to the counterparty in eight quarterly payments of $45 million which began in the second quarter. See Item 3, Legal Proceedings and Note 14, Accrued Liabilities, Commitments, and Contingencies for additional information.

Change in Segments

In the first quarter of 2022, the location solutions offering, which provides a range of RTLS and services that generate on-demand information about the physical location and status of high-valued assets, equipment, and people, moved from our AIT segment into our EVM segment contemporaneous with a change in our organizational structure and management of the business. We have reported our results reflecting this change, including historical periods, on a comparable basis. This change did not have an impact to the Consolidated Financial Statements.

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Results of Operations: Year Ended 2022 versus 2021 and Year Ended 2021 versus 2020

Consolidated Results of Operations

(amounts in millions, except percentages)

	Year Ended December 31,									Percent Change 2022 vs 2021		Percent Change 2021 vs 2020
	2022			2021			2020
Net sales:
Tangible products	$	4,915		$	4,845		$	3,813		1.4	%	27.1	%
Services and software	866			782			635			10.7	%	23.1	%
Total Net sales	5,781			5,627			4,448			2.7	%	26.5	%
Gross profit	2,624			2,628			2,003			(0.2)	%	31.2	%
Gross margin	45.4		%	46.7		%	45.0		%	(130) bps		170 bps
Operating expenses	2,095			1,649			1,352			27.0	%	22.0	%
Operating income	$	529		$	979		$	651		(46.0)	%	50.4	%

Net sales to customers by geographic region were as follows (amounts in millions, except percentages):

	Year Ended December 31,						Percent Change 2022 vs 2021		Percent Change 2021 vs 2020
	2022		2021		2020
North America	$	2,919	$	2,819	$	2,319	3.5	%	21.6	%
EMEA	1,920		1,976		1,495		(2.8)	%	32.2	%
Asia-Pacific	609		543		439		12.2	%	23.7	%
Latin America	333		289		195		15.2	%	48.2	%
Total Net sales	$	5,781	$	5,627	$	4,448	2.7	%	26.5	%

Operating expenses are summarized below (amounts in millions, except percentages):

	Year Ended December 31,						As a Percentage of Net sales
	2022		2021		2020		2022		2021		2020
Selling and marketing	$	607	$	587	$	483	10.5	%	10.4	%	10.9	%
Research and development	570		567		453		9.9	%	10.1	%	10.2	%
General and administrative	375		348		304		6.5	%	6.2	%	6.8	%
Settlement and related costs	372		—		—		6.4	%	—		—
Amortization of intangible assets	136		115		78		NM		NM		NM
Acquisition and integration costs	21		25		23		NM		NM		NM
Exit and restructuring costs	14		7		11		NM		NM		NM
Total Operating expenses	$	2,095	$	1,649	$	1,352	36.2	%	29.3	%	30.4	%

Consolidated Organic Net sales growth:

	Year Ended December 31,
	2022		2021
Reported GAAP Consolidated Net sales growth	2.7	%	26.5	%
Adjustments:
Impact of foreign currency translations (1)	2.0	%	(2.1)	%
Impact of acquisitions (2)	(1.5)	%	(1.2)	%
Consolidated Organic Net sales growth (3)	3.2	%	23.2	%

(1)Operating results reported in U.S. Dollars are affected by foreign currency exchange rate fluctuations. Foreign currency translation impact represents the difference in results that are attributable to fluctuations in the currency exchange rates used to convert the results for businesses where the functional currency is not the U.S. Dollar. This impact is calculated by translating the current period results at the currency exchange rates used in the comparable prior year period, inclusive of the Company’s foreign currency hedging program.

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(2)For purposes of computing Organic Net sales growth, amounts directly attributable to business acquisitions are excluded for twelve months following their respective acquisitions.

(3)Consolidated Organic Net sales growth is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of this item.

2022 compared to 2021

Total Net sales increased $154 million or 2.7% compared to the prior year as our customers continue to digitize and automate their workflows. Net sales grew across both of our segments and most of our regions. Current year Net sales of both segments were negatively impacted by supply chain bottlenecks, which were particularly pronounced in our EVM segment. Prior year Net sales of both segments benefited from pent-up demand from customers who we believe delayed purchases in fiscal 2020 due to the COVID-19 pandemic. Excluding the effects of currency changes and acquisitions, the increase in Consolidated Organic Net sales was 3.2%.

Gross margin decreased to 45.4% for the current year compared to 46.7% in the prior year. Gross margins were lower in both of our segments. The decrease in gross margin was primarily due to higher premium freight and component part costs, the negative impact of foreign currency changes, unfavorable business mix, and lower support service margins, partially offset by targeted price increases. The prior year gross margin included the benefit of partial recovery of Chinese import tariffs.

Operating expenses for the years ended December 31, 2022 and 2021 were $2,095 million and $1,649 million, or 36.2% and 29.3% of Net sales, respectively. Excluding the Settlement charge, Operating expenses were 29.8% of Net sales in the current year, with an increase over the prior year primarily due to the inclusion of operating expenses and amortization of intangible assets associated with recently acquired businesses, and increased employee travel, which were partially offset by lower employee incentive-based compensation.

Operating income was $529 million for the current year compared to $979 million for the prior year. The decrease was primarily due to the negative impact of the Settlement charge.

Net income decreased 44.7% compared to the prior year due to lower Operating income and a higher income tax rate, which were partially offset by favorability in Other income (expense), net as follows:

•Other income (expense), net was income of $15 million for the current year, compared to an expense of $11 million in the prior year primarily due to the current year benefiting from an $83 million gain on interest rate swaps compared to a $13 million gain in the prior year, which was partially offset by higher interest expense due to higher average outstanding debt levels and interest rates in the current year.

•The Company’s effective tax rates for the years ended December 31, 2022 and December 31, 2021 were 14.9% and 13.5%, respectively. The increase in the effective tax rate compared to the prior year was primarily due to settlements with tax authorities, unfavorable return to provision adjustments, and lower share-based compensation deductions.

Diluted earnings per share decreased to $8.80 as compared to $15.52 in the prior year due to lower Net income, partially offset by lower average shares outstanding.

Results of Operations by Segment

The following commentary should be read in conjunction with the financial results of each operating business segment as detailed in Note 20, Segment Information & Geographic Data in the Notes to Consolidated Financial Statements. To the extent applicable, segment operating income excludes business acquisition purchase accounting adjustments, amortization of intangible assets, acquisition and integration costs, impairment of goodwill and other intangibles, exit and restructuring costs, as well as certain other non-recurring costs (such as the Settlement in the current year).

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Asset Intelligence & Tracking Segment (“AIT”)

(amounts in millions, except percentages)

	Year Ended December 31,									Percent Change 2022 vs 2021		Percent Change 2021 vs 2020
	2022			2021			2020
Net sales:
Tangible products	$	1,641		$	1,563		$	1,286		5.0	%	21.5	%
Services and software	95			94			83			1.1	%	13.3	%
Total Net sales	1,736			1,657			1,369			4.8	%	21.0	%
Gross profit	746			759			653			(1.7)	%	16.2	%
Gross margin	43.0		%	45.8		%	47.7		%	(280) bps		(190) bps
Operating expenses	386			377			322			2.4	%	17.1	%
Operating income	$	360		$	382		$	331		(5.8)	%	15.4	%

AIT Organic Net sales growth:

	Year Ended December 31,
	2022		2021
AIT Reported GAAP Net sales growth	4.8	%	21.0	%
Adjustments:
Impact of foreign currency translations (1)	1.9	%	(1.9)	%
AIT Organic Net sales growth (2)	6.7	%	19.1	%

(1)Operating results reported in U.S. Dollars are affected by foreign currency exchange rate fluctuations. Foreign currency translation impact represents the difference in results that are attributable to fluctuations in the currency exchange rates used to convert the results for businesses where the functional currency is not the U.S. Dollar. This impact is calculated by translating the current period results at the currency exchange rates used in the comparable prior year period, inclusive of the Company’s foreign currency hedging program.

(2) AIT Organic Net sales growth is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of this item.

2022 compared to 2021

Total Net sales for AIT increased $79 million or 4.8% compared to the prior year primarily due to higher sales of printing products (contributing the majority of the total increase), supplies, and support services. Current year Net sales included the benefit of targeted price increases as well as the negative effects of supply chain bottlenecks, while prior year Net sales benefited from pent-up demand from customers who we believe delayed purchases in fiscal 2020 due to the COVID-19 pandemic. Excluding the impact of foreign currency changes, AIT Organic Net sales growth was 6.7%.

Gross margin decreased to 43.0% in the current year compared to 45.8% in the prior year primarily due to higher premium freight and component part costs, the negative impact of foreign currency changes, and unfavorable business mix, partially offset by targeted price increases. The prior year gross margin included the benefit of partial recovery of Chinese import tariffs.

Operating income decreased 5.8% in the current year compared to the prior year due to lower Gross profit and higher Operating expenses.

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Enterprise Visibility & Mobility Segment (“EVM”)

(amounts in millions, except percentages)

	Year Ended December 31,									Percent Change 2022 vs 2021		Percent Change 2021 vs 2020
	2022			2021			2020
Net sales:
Tangible products	$	3,274		$	3,282		$	2,527		(0.2)	%	29.9	%
Services and software	771			694			559			11.1	%	24.2	%
Total Net sales	4,045			3,976			3,086			1.7	%	28.8	%
Gross profit	1,878			1,875			1,363			0.2	%	37.6	%
Gross margin	46.4		%	47.2		%	44.2		%	(80) bps		300 bps
Operating expenses	1,166			1,125			906			3.6	%	24.2	%
Operating income	$	712		$	750		$	457		(5.1)	%	64.1	%

EVM Organic Net sales growth:

	Year Ended December 31,
	2022		2021
EVM Reported GAAP Net sales growth	1.7	%	28.8	%
Adjustments:
Impact of foreign currency translations (1)	2.2	%	(1.9)	%
Impact of acquisitions (2)	(2.2)	%	(1.9)	%
EVM Organic Net sales growth (3)	1.7	%	25.0	%

(1)Operating results reported in U.S. Dollars are affected by foreign currency exchange rate fluctuations. Foreign currency translation impact represents the difference in results that are attributable to fluctuations in the currency exchange rates used to convert the results for businesses where the functional currency is not the U.S. Dollar. This impact is calculated by translating the current period results at the currency exchange rates used in the comparable prior year period, inclusive of the Company’s foreign currency hedging program.

(2)For purposes of computing EVM Organic Net sales growth, amounts directly attributable to the acquisitions of Adaptive Vision, Fetch, Antuit, and Matrox are excluded for twelve months following their respective acquisitions.

(3)EVM Organic Net sales growth is a non-GAAP financial measure. See the Non-GAAP Measures section at the end of this item.

2022 compared to 2021

Total Net sales for EVM increased $69 million or 1.7% compared to the prior year primarily due to higher sales of data capture products, contributions from our recent acquisitions, and higher sales of support services, which were partially offset by lower sales of mobile computing products and unfavorable foreign currency changes. Current year Net sales included the benefit of targeted price increases as well as the negative impact of supply chain bottlenecks, while prior year Net sales benefited from pent-up demand from customers who we believe delayed purchases in fiscal 2020 due to the COVID-19 pandemic. Excluding the impacts of foreign currency changes and acquisitions, EVM Organic Net sales growth was 1.7%.

Gross margin decreased to 46.4% in the current year compared to 47.2% in the prior year primarily due to higher premium freight and component part costs, unfavorable business mix, the negative impact of foreign currency changes, and lower support service margins, partially offset by targeted price increases. The prior year gross margin included the benefit of partial recovery of Chinese import tariffs.

Operating income for the current year decreased 5.1% compared to the prior year period primarily due to higher Operating expenses.

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Liquidity and Capital Resources

The primary factors that influence our liquidity include the amount and timing of cash collections from our customers, cash payments to our suppliers, capital expenditures, acquisitions, and share repurchases. Management believes that our existing capital resources, inclusive of available borrowing capacity on debt and other financing facilities and funds generated from operations, are sufficient to meet anticipated capital requirements and service our indebtedness. The following table summarizes our cash flow activities for the years indicated (in millions):

	Year Ended December 31,						$ Change 2022 vs 2021		$ Change 2021 vs 2020
	2022		2021		2020
Cash flow provided by (used in):
Operating activities	$	488	$	1,069	$	962	$	(581)	$	107
Investing activities	(968)		(546)		(641)		(422)		95
Financing activities	253		(371)		(157)		624		(214)
Effect of exchange rates on cash balances	—		—		(2)		—		2
Net (decrease) increase in cash and cash equivalents, including restricted cash	$	(227)	$	152	$	162	$	(379)	$	(10)

2022 vs. 2021

The change in our cash and cash equivalents balance during the current year is reflective of the following:

•The decrease in cash provided by operating activities compared to the prior year was primarily due to higher inventory levels, current year payments associated with the Settlement, and higher payments of 2021 incentive compensation. These items were partially offset by favorability in the timing of customer collections and accounts receivable factoring activity in the current year in comparison to the prior year.

•Cash used in investing activities was higher than the prior year primarily due to the $881 million acquisition of Matrox, with the prior year including cash payments of $453 million for the acquisitions of Antuit, Fetch, and Adaptive Vision.

•Cash provided by financing activities during the year included $1,037 million in net debt proceeds primarily related to the Company's debt refinancing activities in the second quarter, partially offset by $751 million of common stock repurchases. Cash used in financing activities in the prior year was primarily comprised of $257 million net debt repayments, $57 million of common stock repurchases, and $56 million of net payments related to share-based compensation.

Company Debt

The following table shows the carrying value of the Company’s debt (in millions):

	December 31,
	2022		2021
Term Loan A	$	1,728	$	888
Revolving Credit Facility	50		—
Receivables Financing Facilities	254		108
Total debt	$	2,032	$	996
Less: Debt issuance costs	(4)		(3)
Less: Unamortized discounts	(5)		(2)
Less: Current portion of debt	(214)		(69)
Total long-term debt	$	1,809	$	922

In May 2022, the Company refinanced its long-term credit facilities by entering into its third amendment to the Amended and Restated Credit Agreement (“Amendment No. 3”). Amendment No. 3 increased the Company’s borrowing under Term Loan A from $875 million to $1.75 billion and increased the Company’s borrowing capacity under the Revolving Credit Facility from $1 billion to $1.5 billion. Amendment No. 3 also extended the maturities of Term Loan A and the Revolving Credit Facility to May 25, 2027 and replaced LIBOR with SOFR as the benchmark reference rate.

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Term Loan A

The principal on Term Loan A is due in quarterly installments, with the next quarterly installment due in March 2023 and the majority due upon maturity in 2027. The Company may make prepayments, in whole or in part, without premium or penalty, and would be required to prepay certain outstanding amounts in the event of certain circumstances or transactions. As of December 31, 2022, the Term Loan A interest rate was 5.67%. Interest payments are made monthly and are subject to variable rates plus an applicable margin.

Revolving Credit Facility

The Company has a Revolving Credit Facility that is available for working capital and other general business purposes, including letters of credit. As of December 31, 2022, the Company had letters of credit totaling $7 million, which reduced funds available for borrowings under the Revolving Credit Facility from $1,500 million to $1,493 million. As of December 31, 2022, the Revolving Credit Facility had an average interest rate of 5.71%. Upon borrowing, interest payments are made monthly and are subject to variable rates plus an applicable margin. The Revolving Credit Facility matures on May 25, 2027.

Receivables Financing Facilities

The Company has two Receivables Financing Facilities with financial institutions that have a combined total borrowing limit of up to $280 million. As collateral, the Company pledges perfected first-priority security interests in its U.S. domestically originated accounts receivable. The Company has accounted for transactions under its Receivables Financing Facilities as secured borrowings. The Company’s first Receivables Financing Facility allows for borrowings of up to $180 million and matures on March 19, 2024. The Company’s second Receivable Financing Facility allows for borrowings of up to $100 million and matures on May 15, 2023.

As of December 31, 2022, the Company’s Consolidated Balance Sheets included $785 million of receivables that were pledged under the two Receivables Financing Facilities. As of December 31, 2022, $254 million had been borrowed, of which $171 million was classified as current. Borrowings under the Receivables Financing Facilities bear interest at a variable rate plus an applicable margin. As of December 31, 2022, the Receivables Financing Facilities had an average interest rate of 5.33%. Interest is paid on these borrowings on a monthly basis.

See Note 12, Long-Term Debt in the Notes to Consolidated Financial Statements for further details related to the Company’s debt instruments.

Receivables Factoring

The Company currently has two Receivables Factoring arrangements, pursuant to which certain receivables are sold to banks without recourse in exchange for cash. One arrangement allows for the factoring of up to $25 million of uncollected receivables originated from the EMEA region. The second arrangement allows for the factoring of up to €150 million of uncollected receivables originated from the EMEA and Asia-Pacific regions. Transactions under the Receivables Factoring arrangements are accounted for as sales under Accounting Standards Codification 860, Transfers and Servicing of Financial Assets, with the sold receivables removed from the Company’s balance sheet. Under these Receivables Factoring arrangements, the Company does not maintain any beneficial interest in the receivables sold. The banks’ purchase of eligible receivables is subject to a maximum amount of uncollected receivables. The Company services the receivables on behalf of the banks, but otherwise maintains no significant continuing involvement with respect to the receivables. Sale proceeds that are representative of the fair value of factored receivables, less a factoring fee, are reflected in Net cash provided by operating activities on the Consolidated Statements of Cash Flows, while sale proceeds in excess of the fair value of factored receivables are reflected in Net cash used in financing activities on the Consolidated Statements of Cash Flows.

As of December 31, 2022 and 2021 there were a total of $61 million and $24 million, respectively, of uncollected receivables that had been sold and removed from the Company’s Consolidated Balance Sheets.

As servicer of sold receivables, the Company had $130 million and $141 million of obligations that were not yet remitted to banks as of December 31, 2022 and 2021, respectively. These obligations are included within Accrued liabilities on the Consolidated Balance Sheets, with changes in such obligations reflected within Net cash used in financing activities on the Consolidated Statements of Cash Flows.

See Note 19, Accounts Receivable Factoring in the Notes to Consolidated Financial Statements for further details.

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Share Repurchases

On May 17, 2022, the Company announced that its Board of Directors authorized a share repurchase program for up to $1 billion of its outstanding shares of common stock. This authorization augments the previous $1 billion share repurchase authorization which was announced on July 30, 2019. The newly authorized share repurchase program does not have a stated expiration date. The level of the Company’s repurchases depends on a number of factors, including its financial condition, capital requirements, cash flows, results of operations, future business prospects and other factors its management may deem relevant. The timing, volume, and nature of repurchases are subject to market conditions, applicable securities laws and other factors and may be amended, suspended or discontinued at any time. Repurchases may be affected from time to time through open market purchases, including pursuant to a pre-set trading plan meeting the requirements of Rule 10b5-1(c) of the Securities Exchange Act of 1934. During the year ended December 31, 2022, the Company repurchased 2,027,542 shares of common stock for approximately $751 million. As of December 31, 2022, the Company has cumulatively repurchased 3,323,283 shares of common stock for approximately $1.1 billion, resulting in a remaining amount of share repurchases authorized under the plans of $945 million. Subsequent to the year ended December 31, 2022, the Company has repurchased 55,811 shares of common stock for approximately $15 million through February 9, 2023.

Future Cash Requirements

We believe that our Cash and cash equivalents, which totaled $105 million as of December 31, 2022, along with anticipated cash generation from operations and available borrowing capacity on debt and other financing facilities, will be sufficient to fund the Company’s cash requirements during the next 12 months and thereafter based on our current business plans.

Included in the Company’s Cash and cash equivalents are amounts held by foreign subsidiaries, which was $36 million and $39 million as of December 31, 2022 and 2021, respectively. We do not expect that Cash and cash equivalents held by foreign subsidiaries will need to be repatriated in order to fund the Company’s U.S. operations based on current cash requirements.

Our cash requirements during the next 12 months and thereafter include payments to satisfy the following obligations:

•Purchase obligations — We have a limited number of multi-year purchase commitments, primarily related to semiconductors and cloud-services, which contain minimum purchase requirements and are non-cancellable. As of December 31, 2022, these commitments were approximately $557 million. This amount excludes routine purchase orders for good and services, as well as amounts already reflected within Accounts payable or Accrued expenses on the Consolidated Balance Sheet. See Note 14, Accrued Liabilities, Commitments and Contingencies in the Notes to Consolidated Financial Statements for additional details.

•Debt obligations — We expect to make total payments of approximately $237 million associated with the Company’s debt facilities in 2023. This expected use of cash is based on the Company’s current borrowings and applicable interest rates and margins as of December 31, 2022, and includes principal and interest payments along with expected cash settlements associated with the Company’s interest rate swaps. In the ordinary course of business, the Company may decide to borrow additional amounts or repay principal earlier than contractually owed, which would affect future cash payments. See Note 12, Long-Term Debt in the Notes to Consolidated Financial Statements for further details related to the Company’s debt facilities.

•Leases obligations — We lease certain manufacturing facilities, distribution centers, sales and administrative offices, equipment, and vehicles. As of December 31, 2022, the Company’s fixed lease commitments totaled $243 million, of which $46 million is payable in 2023. See Note 13, Leases in the Notes to Consolidated Financial Statements for further details related to the Company’s lease arrangements.

In addition to the expected cash requirements described above, the Company may use cash to fund strategic acquisitions, investments, or repurchase common stock under its share repurchase program. We also expect to spend approximately $75 million to $85 million on capital expenditures in 2023.

Critical Accounting Estimates

Management prepared the consolidated financial statements of the Company under accounting principles generally accepted in the U.S. The application of these principles requires the use of estimates which affect the amounts reported in our consolidated financial statements. While we believe that our estimates are reasonable based upon available information, actual results could differ substantially from those estimates. Note 2, Significant Accounting Policies in the Notes to Consolidated Financial Statements provides additional discussion of these items along with other significant accounting policies of the Company. The accounting estimates described below have been identified by Management as those that are most critical to our financial statements, as they require management to make significant judgments and assumptions about inherently uncertain matters.

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Income Taxes

We estimate a provision or benefit for income taxes and amounts to be settled or recovered in several tax jurisdictions globally. Our estimates are complex and involve significant judgments and interpretations of regulations. Resolution of income tax treatments in individual jurisdictions may not be known for several years after completion of a given year. We are also required to evaluate the realizability of our deferred tax assets on an ongoing basis, which requires estimation of our ability to generate future taxable income. In particular, our income tax provision or benefit is dependent on our ability to forecast future taxable income in the U.S., U.K., Singapore, and other jurisdictions. Significant judgments included in our forecasts include projecting future sales volumes and pricing, costs to manufacture and procure products and to deliver services and solutions, among other factors. There were no significant changes in estimates to our income tax provision during the current year.

Acquisitions

We account for acquired businesses using the acquisition method of accounting. This method requires that the purchase price be allocated to the identifiable assets acquired and liabilities assumed at their estimated fair values. The excess of the purchase price over the identifiable assets acquired and liabilities assumed is recorded as goodwill. The estimates used to determine the fair values of long-lived intangible assets can be complex and require judgment. We generally value intangible assets using income-based valuation methodologies, such as the excess earnings method, which require critical estimates that include, but are not limited to, future expected cash flows from revenues and the determination of discount rates.

Goodwill Impairment

Goodwill impairment testing consists of comparing the estimated fair value of each of our reporting units to its carrying value. Fair value determinations require judgment and are sensitive to changes in underlying assumptions, estimates, as well as market factors. We estimate the fair value of reporting units using both income and market-based valuation approaches. Estimating the fair value of reporting units requires that we make assumptions and estimates including projections of revenue and income growth rates as well as cash flows; capital investments; competitive and customer trends; appropriate peer group selection; market-based discount rates and other market factors. Our annual quantitative impairment test, most recently completed in the fourth quarter of 2022, continues to indicate that the fair values of each of our reporting units significantly exceed their respective carrying values.

Revenue Recognition

We recognize revenues when we transfer control of promised goods, solutions or services to our customers in an amount that reflects the consideration we expect to receive. The consideration that we expect to receive is estimated by reflecting reductions to our transaction price for product returns, rebates, and other incentives. These estimates are developed using the expected value that the Company anticipates receiving and are based on recent trends observed in similar transactions. Additionally, some of our contracts with customers contain multiple performance obligations, including various hardware, software, and/or services. For such contracts that contain multiple performance obligations, we allocate the estimated total transaction price to each performance obligation based on relative standalone selling prices (“SSP”). The determination of SSP is established at a regional level. SSP is based on observable prices in recent standalone transactions for the same or similar offerings, to the extent available, which is often applicable to tangible products and software licenses. Alternatively, in the absence of recent observable prices, the Company generally applies the expected cost-plus margin approach to professional services, repair and maintenance services, and solution offerings. There were no changes to our estimation processes for consideration received or SSP that materially affected revenues during the year.

New Accounting Pronouncements

See Note 2, Significant Accounting Policies in the Notes to Consolidated Financial Statements regarding recent accounting pronouncements.

Non-GAAP Measures

The Company has provided reconciliations of the supplemental non-GAAP financial measures, as defined under the rules of the Securities and Exchange Commission, presented herein to the most directly comparable financial measures calculated and presented in accordance with GAAP.

These supplemental non-GAAP financial measures – Consolidated Organic Net sales growth, AIT Organic Net sales growth, and EVM Organic Net sales growth – are presented because our management evaluates our financial results both including and excluding the effects of business acquisitions and foreign currency translation, as applicable. Management believes that the supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of our business from period to period and trends in our historical operating results. These supplemental non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with the GAAP financial measures presented.

36

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the sensitivity of income to changes in interest rates, commodity prices, and foreign currency changes. Zebra is primarily exposed to the following types of market risk: interest rate and foreign currency.

Interest Rate Risk

We are exposed to interest rate volatility with regard to existing debt issuances. Our exposures include the London Inter-bank Offered Rate (“LIBOR”) and the Secured Overnight Financing Rate (“SOFR”). We use interest rate derivative contracts, including interest rate swaps, to mitigate the majority of the Company’s exposure from interest rate changes on existing debt and future debt issuances, thereby reducing the volatility of our financing costs and, based on current and projected market conditions, achieve a desired proportion of fixed versus floating-rate debt. Generally, under these interest rate swaps, we agree with a counterparty to exchange floating-rate for fixed-rate interest amounts with an agreed upon notional amount.

The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced in 2017 the phase out of LIBOR. We continue to closely monitor the phase out of LIBOR to assess any impacts to our debt and interest rate swap contracts. We have already taken actions to amend certain contracts to incorporate a SOFR benchmark rate, and we expect other key contracts will be amended to incorporate a SOFR benchmark rate before the LIBOR phase out is completed. As of December 31, 2022, our remaining contracts containing exposure to LIBOR pertain only to LIBOR tenors that will be phased out by June 30, 2023.

As of December 31, 2022, we had approximately $2.0 billion of debt outstanding under our debt facilities, which bears interest determined by reference to a variable rate index. A one percentage point increase or decrease in interest rates would increase or decrease annual interest expense by approximately $12 million. This exposure includes the impact of associated forward interest rate swaps outstanding as of December 31, 2022. Refer to Note 11, Derivative Instruments in the Notes to Consolidated Financial Statements for further discussion of these risk mitigation activities. Exposure to variable interest may increase or decrease, to the extent that the Company’s borrowings under its debt facilities increase or decrease, respectively.

Foreign Exchange Risk

We provide products, solutions and services in approximately 190 countries throughout the world and, therefore, at times are exposed to risk based on movements in foreign exchange rates. In some instances, we invoice customers in their local currency and have a resulting foreign currency denominated revenue transaction and accounts receivable. We also purchase certain raw materials and other items in foreign currencies. We manage these risks using derivative financial instruments, including foreign currency exchange contracts. See Note 11, Derivative Instruments in the Notes to Consolidated Financial Statements for further discussions of hedging activities.

The currencies that we are primarily exposed to fluctuations in foreign currency exchange rates are the Euro, British Pound Sterling, and Czech Koruna. A one percentage point increase or decrease in exchange rates relative to the U.S. Dollar would increase or decrease our pre-tax income by approximately $2 million. This amount is inclusive of the impact of associated derivative contracts.

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Item 8.Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)	39
Consolidated Balance Sheets as of December 31, 2022 and 2021	41
Consolidated Statements of Operations for the years ended December 31, 2022, 2021, and 2020	42
Consolidated Statements of Comprehensive Income for the years ended December 31, 2022, 2021, and 2020	43
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2022, 2021, and 2020	44
Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021, and 2020	45
Notes to Consolidated Financial Statements	46

38

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Zebra Technologies Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Zebra Technologies Corporation and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 16, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accounting for Income Taxes

Description of the Matter As discussed in Note 16 of the financial statements, the Company earns a significant amount of its operating income across multiple jurisdictions and the Company’s organizational structure and transactional flows are designed to reflect strategic and operational business imperatives that change over time. As the Company operates in a multinational tax environment and incurs income tax obligations in a number of jurisdictions, complexities and uncertainties can arise in the application of complex tax regulations to the Company’s multinational operations.
Auditing the application of taxation legislation to the Company’s affairs is inherently complex, highly specialized and requires judgment. These factors impact the Company’s estimation of tax exposures, valuation allowances and income tax provisions.

39

How We Addressed the Matter in Our
Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s identification of and accounting for the tax impact of changes in the business or significant changes in tax laws. This included controls over the Company’s evaluation of tax law changes, the evaluation of cross-jurisdictional transactions and the Company’s tax technical assessment over those changes and/or transactions. We involved our tax professionals in the Company’s significant operating jurisdictions to assist in the evaluation of the Company’s tax obligations and the application of significant tax law changes. We assessed the completeness of the tax matters identified, evaluated the Company’s assessment regarding the related status and potential exposure, assessed the Company’s computations resulting from significant tax law changes and evaluated the adequacy of the Company’s disclosures of tax and ongoing tax matters.

Acquisition of Matrox Electronic Systems Ltd. – Valuation of Intangible Assets

Description of the Matter During 2022, the Company completed its acquisition of Matrox Electronic Systems Ltd. (“Matrox”) for net consideration of $881 million, as disclosed in Note 5 to the consolidated financial statements. The Company’s accounting for the acquisition required it to determine the fair value of the intangible assets acquired, including technology assets and customer relationships.
Auditing the Company’s accounting for the acquired intangible assets was complex and subjective due to the estimation required in management’s determination of the fair values of these assets. The estimation was significant due to the sensitivity of the respective fair values to the underlying assumptions, in particular, projected revenue growth rates and the selected discount rate. These assumptions relate to the future performance of the acquired business, are forward-looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our
Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s valuation of acquired intangible assets. For example, we tested controls over management’s review of the valuation of the acquired intangibles assets, including the review of the valuation model and significant assumptions used in the valuation.
To test the fair value of the acquired intangible assets, our audit procedures included, among others, evaluating the appropriateness of the valuation methodologies used by management, evaluating the projected revenue growth rates and discount rate, and testing the completeness and accuracy of underlying data. Evaluating the reasonableness of the projected revenue growth rates involved comparing the projections to historical results of the acquired business and current industry and market trends. We involved our valuation specialists to assist in the evaluation of the Company’s discount rate by comparing it against a range of reasonable rates that was independently developed using publicly available market data for comparable entities.

/s/ Ernst & Young LLP        

We have served as the Company’s auditor since 2005.

Chicago, Illinois

February 16, 2023

40

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

	December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	105	$	332
Accounts receivable, net of allowances for doubtful accounts of $1 million each as of December 31, 2022 and 2021	768		752
Inventories, net	860		491
Income tax receivable	26		8
Prepaid expenses and other current assets	124		106
Total Current assets	1,883		1,689
Property, plant and equipment, net	278		272
Right-of-use lease assets	156		131
Goodwill	3,899		3,265
Other intangibles, net	630		469
Deferred income taxes	407		192
Other long-term assets	276		197
Total Assets	$	7,529	$	6,215
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt	$	214	$	69
Accounts payable	811		700
Accrued liabilities	744		639
Deferred revenue	425		380
Income taxes payable	138		12
Total Current liabilities	2,332		1,800
Long-term debt	1,809		922
Long-term lease liabilities	139		121
Deferred income taxes	75		6
Long-term deferred revenue	333		315
Other long-term liabilities	108		67
Total Liabilities	4,796		3,231
Stockholders’ Equity:
Preferred stock, $.01 par value; authorized 10,000,000 shares; none issued	—		—
Class A common stock, $.01 par value; authorized 150,000,000 shares; issued 72,151,857 shares	1		1
Additional paid-in capital	561		462
Treasury stock at cost, 20,700,357 and 18,736,582 shares as of December 31, 2022 and 2021, respectively	(1,799)		(1,023)
Retained earnings	4,036		3,573
Accumulated other comprehensive loss	(66)		(29)
Total Stockholders’ Equity	2,733		2,984
Total Liabilities and Stockholders’ Equity	$	7,529	$	6,215

See accompanying Notes to Consolidated Financial Statements.

41

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

	Year Ended December 31,
	2022		2021		2020
Net sales
Tangible products	$	4,915	$	4,845	$	3,813
Services and software	866		782		635
Total Net sales	5,781		5,627		4,448
Cost of sales:
Tangible products	2,699		2,590		2,065
Services and software	458		409		380
Total Cost of sales	3,157		2,999		2,445
Gross profit	2,624		2,628		2,003
Operating expenses:
Selling and marketing	607		587		483
Research and development	570		567		453
General and administrative	375		348		304
Settlement and related costs	372		—		—
Amortization of intangible assets	136		115		78
Acquisition and integration costs	21		25		23
Exit and restructuring costs	14		7		11
Total Operating expenses	2,095		1,649		1,352
Operating income	529		979		651
Other (loss) income, net:
Foreign exchange loss	(3)		(5)		(18)
Interest income (expense), net	23		(5)		(76)
Other (expense) income, net	(5)		(1)		3
Total Other income (expense), net	15		(11)		(91)
Income before income tax	544		968		560
Income tax expense	81		131		56
Net income	$	463	$	837	$	504
Basic earnings per share	$	8.86	$	15.66	$	9.43
Diluted earnings per share	$	8.80	$	15.52	$	9.35

See accompanying Notes to Consolidated Financial Statements.

42

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

	Year Ended December 31,
	2022		2021		2020
Net income	$	463	$	837	$	504
Other comprehensive (loss) income, net of tax:
Changes in unrealized gains and losses on anticipated sales hedging transactions	(29)		46		(30)
Foreign currency translation adjustment	(8)		(6)		5
Comprehensive income	$	426	$	877	$	479

See accompanying Notes to Consolidated Financial Statements.

43

ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except share data)

	Class A Common Stock Shares	Class A Common Stock Value	Additional Paid-in Capital	Treasury Stock	Retained Earnings	Accumulated Other Comprehensive Loss	Total
Balance at December 31, 2019	54,002,932	$