ZBRA US Equity☆

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

This section generally discusses fiscal 2024 and 2023 items and year-over-year comparisons between 2024 and 2023. Discussions of 2022 items and year-over-year comparisons between 2023 and 2022 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, 2023 for that discussion.

Overview

The Company is a global leader in providing Enterprise Asset Intelligence (“EAI”) offerings 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 offerings. 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, RFID and RTLS offerings, and supplies, including temperature-monitoring labels, and services.

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

2024 Financial Summary and Other Recent Developments

•Net sales were $4,981 million in the current year compared to $4,584 million in the prior year.

•Operating income was $742 million in the current year compared to $481 million in the prior year.

•Net income was $528 million, or $10.18 per diluted share in the current year, compared to Net income of $296 million, or $5.72 per diluted share in the prior year.

•Net cash provided by operating activities was $1,013 million in the current year compared to net cash used in operating activities of $4 million in the prior year.

As we entered 2024, we saw the stabilization of distributor inventory levels in both of our segments and the beginning of a modest recovery in demand trends in certain of our offerings within our EVM segment. The demand trend recovery broadened across offerings within both segments beginning in the second half of the year contributing to improved revenue and profitability. As we look ahead to 2025, we expect increased uncertainty and volatility in global trade policy and foreign currency exchange rates.

The Company completed its actions under the 2022 Productivity Plan in the current year. Total charges associated with the 2022 Productivity Plan and the U.S. voluntary retirement plan (“VRP”), which was completed in 2023, were $127 million, including $17 million recorded in the current year. The costs of these actions are classified within Exit and restructuring on the Consolidated Statements of Operations. Together, these programs have impacted over 9% of our global employee base and have generated approximately $120 million of annualized net cost savings, primarily within Operating expenses.

In the second quarter, the Company completed a private offering of $500 million senior unsecured notes (the “Senior Notes”) with a 6.5% fixed interest rate; the proceeds of which, were partially used to repay outstanding debt. Additionally, with the issuance of the fixed rate Senior Notes, the Company terminated its interest rate swap agreements which were intended to result in a fixed interest rate on a portion of our variable rate debt.

On December 27, 2024, the Company entered into a definitive agreement to acquire Photoneo, a leading developer and manufacturer of 3D machine vision offerings. The purchase price of approximately €60 million is expected to be funded with cash on hand. The transaction is subject to customary closing conditions and is expected to close in the first quarter of 2025. The acquired business will become part of the EVM segment.

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Results of Operations: Year Ended 2024 versus 2023 and Year Ended 2023 versus 2022

Consolidated Results of Operations

(amounts in millions, except percentages)

Net sales:

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

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

Year Ended December 31, As a Percentage of Net sales

Settlement and related costs — — 372 — % — % 6.4 %

Amortization of intangible assets 104 104 136 NM NM NM

Acquisition and integration costs 6 6 21 NM NM NM

Exit and restructuring costs 17 98 14 NM NM NM

Consolidated Organic Net sales growth (decline):

Year Ended December 31,

Reported GAAP Consolidated Net sales growth (decline) 8.7 % (20.7) %

Adjustments:

Impact of foreign currency translations (1) (0.6) % 1.4 %

Impact of acquisitions (2) — % (0.5) %

Consolidated Organic Net sales growth (decline) (3) 8.1 % (19.8) %

(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 as well as removing realized cash flow hedge gains and losses from both the current and prior year periods.

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

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

2024 compared to 2023

Total Net sales increased $397 million or 8.7% compared to the prior year reflecting growth in our EVM segment that was partially offset by a slight decline in our AIT segment as the current year recovery in demand trends benefited EVM earlier in the year than AIT. Excluding the effects of foreign currency changes and acquisitions, Consolidated Organic Net sales increased by 8.1%.

Gross margin increased to 48.4% for the current year compared to 46.3% in the prior year. The increase was primarily due to volume leverage, higher service and software margins, lower freight rates, and lower inventory-related charges. Gross margin was higher in both segments, particularly EVM.

Operating expenses for the years ended December 31, 2024 and 2023 were $1,671 million and $1,642 million, or 33.5% and 35.8% of Net sales, respectively. Current year Operating expenses were higher than the prior year primarily due to higher incentive compensation, partially offset by lower Exit and restructuring costs and incremental savings largely attributed to our Exit and restructuring actions.

Operating income was $742 million for the current year compared to $481 million for the prior year. The increase was due to higher Gross profit partially offset by higher Operating expenses.

Net income increased 78.4% compared to the prior year primarily due to higher Operating income, as described above, as well as lower Interest (expense) income, net which included higher interest rate swap gains and interest income in the current year.

The Company’s effective tax rates for the years ended December 31, 2024 and December 31, 2023 were 16.9% and 11.4%, respectively. The increase in the effective tax rate compared to the prior year was primarily due to lower rate benefits from tax credits and discrete items as well as higher state income taxes.

Diluted earnings per share increased to $10.18 as compared to $5.72 in the prior year primarily due to higher Net income.

Results of Operations by Segment

The following commentary should be read in conjunction with the financial results of each reportable 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 Amortization of intangible assets, Acquisition and integration costs, Exit and restructuring costs, as well as certain other non-recurring costs (such as the Settlement costs in 2022, impairment of goodwill and other intangibles, and business acquisition purchase accounting adjustments).

Asset Intelligence & Tracking Segment (“AIT”)

(amounts in millions, except percentages)

Net sales:

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AIT Organic Net sales (decline):

Year Ended December 31,

AIT Reported GAAP Net sales (decline) (0.2) % (10.1) %

Adjustments:

Impact of foreign currency translations (1) (0.7) % 1.3 %

AIT Organic Net sales (decline) (2) (0.9) % (8.8) %

(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 as well as removing realized cash flow hedge gains and losses from both the current and prior year periods.

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

2024 compared to 2023

Total Net sales for AIT decreased $4 million or 0.2% compared to the prior year primarily due to lower sales of printing products and supplies, partially offset by favorable foreign currency changes and higher sales of RFID products. Excluding the impact of foreign currency changes, AIT Organic Net sales decreased by 0.9%.

Gross margin increased to 48.1% in the current year compared to 47.7% for the prior year primarily due to favorable foreign currency changes, partially offset by higher inventory-related charges.

Operating income decreased 3.2% in the current year compared to the prior year due to higher Operating expenses partially offset by higher Gross profit.

Enterprise Visibility & Mobility Segment (“EVM”)

(amounts in millions, except percentages)

Net sales:

EVM Organic Net sales growth (decline):

Year Ended December 31,

EVM Reported GAAP Net sales growth (decline) 13.7 % (25.6) %

Adjustments:

Impact of foreign currency translations (1) (0.5) % 1.5 %

Impact of acquisitions (2) — % (0.8) %

EVM Organic Net sales growth (decline) (3) 13.2 % (24.9) %

(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

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translating the current period results at the currency exchange rates used in the comparable prior year period as well as removing realized cash flow hedge gains and losses from both the current and prior year periods.

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

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

2024 compared to 2023

Total Net sales for EVM increased $401 million or 13.7% compared to the prior year primarily due to higher sales of mobile computing products, and services and software, partially offset by lower sales of data capture products. Excluding the impacts of foreign currency changes and acquisitions, EVM Organic Net sales increased by 13.2%.

Gross margin increased to 48.6% in the current year compared to 45.6% for the prior year primarily due to volume leverage, favorable business mix, higher service and software margins, lower inventory-related charges, and lower freight rates.

Operating income for the current year increased 55.7% compared to the prior year due to higher Gross profit partially offset by higher Operating expenses.

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):

Cash flow provided by (used in):

Effect of exchange rates on cash balances (3) — — (3) —

2024 vs. 2023

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

•$1,017 million change in operating activities primarily due to the timing of cash payments and the reduction of overall inventory levels, lower legal settlement, income tax, and employee incentive compensation payments, higher cash receipts on interest rate swaps attributed to the termination of those agreements, as well as overall improved operating profits.

•$307 million change in financing activities primarily due to current year net debt repayments as a portion of the recently issued Senior Notes was utilized to reduce total debt, compared to net borrowings in the prior year.

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Company Debt

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

December 31,

Senior Notes 500 —

Revolving Credit Facility — 413

Receivables Financing Facilities 108 129

Less: Debt issuance costs (9) (2)

Less: Unamortized discounts (3) (4)

Less: Current portion of debt (79) (173)

Term Loan A

The principal on Term Loan A is due in quarterly installments, with the next quarterly installment due in the second quarter of 2026 and the majority due upon maturity in 2027. The Company has and 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, 2024, the Term Loan A interest rate was 5.71%. Interest payments are made monthly and are subject to variable rates plus an applicable margin.

Senior Notes

In the second quarter of 2024, the Company completed a private offering of $500 million senior unsecured notes (the “Senior Notes”) with a 6.5% fixed interest rate. The net proceeds of the issuance, after deducting debt issuance costs which were deferred, were approximately $492 million. The Senior Notes mature on June 1, 2032, and interest is payable semi-annually in arrears in June and December of each year, commencing on December 1, 2024. 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.

The Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by certain of Zebra’s existing and future subsidiaries. The Senior Notes contain covenants that, among other things, limit the ability of Zebra to: (i) grant or incur liens; (ii) have its subsidiaries guarantee debt without becoming guarantors; and (iii) merge or consolidate with another company or sell all or substantially all of its assets.

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, 2024, the Company had letters of credit totaling $10 million, which reduced funds available for borrowings under the Revolving Credit Facility from $1,500 million to $1,490 million. As of December 31, 2024, the Revolving Credit Facility had an average interest rate of 5.68%. 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 Facility

As of December 31, 2024, the Company has a Receivables Financing Facility with a borrowing limit of up to $180 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 this facility as secured borrowings. During the first quarter of 2024, the Company amended this facility to extend the maturity to March 19, 2027 but otherwise did not substantially change the terms of the facility.

As of December 31, 2024, the Company’s Consolidated Balance Sheets included $638 million of gross receivables that were pledged under the facility. As of December 31, 2024, $108 million had been borrowed, of which $79 million was classified as current. Borrowings under the facility bear interest at a variable rate plus an applicable margin. As of December 31, 2024, the facility had an average interest rate of 5.38%. Interest is paid monthly on these borrowings.

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

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Receivables Factoring

The Company has a Receivables Factoring arrangement, pursuant to which certain receivables originated from the EMEA and Asia-Pacific regions up to a maximum of €75 million, as amended, are sold to a bank without recourse in exchange for cash. Transactions under the Receivables Factoring arrangement are accounted for as sales and the related receivables are removed from the Company’s balance sheet. The Company does not maintain any beneficial interest in the receivables sold. The bank’s purchase of eligible receivables is subject to a maximum amount of uncollected receivables. The Company services the receivables on behalf of the bank, 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 Cash flows from operating activities on the Consolidated Statements of Cash Flows, while sale proceeds in excess of the fair value of factored receivables are reflected in Cash flows from financing activities on the Consolidated Statements of Cash Flows.

As of December 31, 2024 and 2023, there were a total of $28 million and $56 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 $51 million and $112 million of obligations that were not yet remitted to the bank as of December 31, 2024 and 2023, respectively. These obligations are included within Accrued liabilities on the Consolidated Balance Sheets, with changes in such obligations reflected within Cash flows from 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.

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. The 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, 2024, the Company repurchased 130,560 shares of common stock for approximately $47 million. As of December 31, 2024, the Company has cumulatively repurchased 539,574 shares of common stock for approximately $154 million, resulting in a remaining amount of share repurchases authorized under the plans of $846 million. Subsequent to the year ended December 31, 2024, the Company has repurchased 128,466 shares of common stock for approximately $50 million through February 6, 2025.

Future Cash Requirements

We believe that our Cash and cash equivalents, which totaled $901 million as of December 31, 2024, 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 $52 million and $33 million as of December 31, 2024 and 2023, respectively. We do not expect that Cash and cash equivalents held by foreign subsidiaries will need to be repatriated 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 — The Company has 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, 2024, these multi-year commitments were approximately $138 million. This amount excludes routine purchase orders for goods and services, as well as amounts already reflected within Current liabilities 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 $210 million associated with the Company’s debt facilities in 2025. This expected use of cash is based on the Company’s current borrowings and applicable interest rates and margins as of December 31, 2024, and includes principal and interest payments. 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.

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•Leases obligations — We lease various manufacturing and repair facilities, distribution centers, research facilities, sales and administrative offices, equipment, and vehicles. As of December 31, 2024, the Company’s fixed lease commitments totaled $233 million, of which $46 million is payable in 2025. 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 $60 million to $70 million on capital expenditures in 2025.

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 significant to our financial statements.

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 offerings, 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

Our goodwill impairment testing includes a comparison of the estimated fair value of each of our reporting units to its carrying value. Fair value determinations require judgment and can be 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 impairment testing, most recently completed in the fourth quarter of 2024, 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 offerings 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.

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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 (decline), AIT Organic Net sales (decline), and EVM Organic Net sales growth (decline) – 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.

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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 exposure is primarily tied to the Secured Overnight Financing Rate (“SOFR”). We periodically use interest rate derivative contracts, including interest rate swaps, to mitigate 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, fix a portion of variable rate debt. Generally, under these interest rate swaps, we agree with a counterparty to exchange variable rate for fixed rate interest amounts with an agreed upon notional amount.

As of December 31, 2024, approximately $1.7 billion of our $2.2 billion of total debt outstanding had 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 $17 million. 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 offerings in approximately 176 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 $1 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) 41

Consolidated Balance Sheets as of December 31, 2024 and 2023 43

Notes to Consolidated Financial Statements 48

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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, 2024 and 2023, 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, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, 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, 2024, 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 13, 2025 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 Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosure to which it relates.

Accounting for Income Taxes

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/s/ Ernst & Young LLP

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

Chicago, Illinois

February 13, 2025

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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

December 31,

Assets

Current assets:

Cash and cash equivalents $ 901 $ 137

Income tax receivable 20 63

Prepaid expenses and other current assets 134 147

Property, plant and equipment, net 305 309

Right-of-use lease assets 167 169

Liabilities and Stockholders' Equity

Current liabilities:

Current portion of long-term debt $ 79 $ 173

Income taxes payable 36 7

Long-term lease liabilities 155 152

Deferred income taxes 57 67

Long-term deferred revenue 304 312

Other long-term liabilities 70 94

Stockholders’ Equity:

Preferred stock, $.01 par value; authorized 10,000,000 shares; none issued — —

Additional paid-in capital 669 615

Accumulated other comprehensive loss (44) (54)

Total Liabilities and Stockholders’ Equity $ 7,968 $ 7,306

See accompanying Notes to Consolidated Financial Statements.

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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

Year Ended December 31,

Net sales:

Cost of sales:

Operating expenses:

Settlement and related costs — — 372

Acquisition and integration costs 6 6 21

Exit and restructuring costs 17 98 14

Other income (loss), net:

Foreign exchange gain (loss) 5 (2) (3)

Interest (expense) income, net (98) (133) 23

Other expense, net (14) (12) (5)

Total Other (expense) income, net (107) (147) 15

See accompanying Notes to Consolidated Financial Statements.

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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

Year Ended December 31,

Other comprehensive income (loss), net of tax:

Changes in unrealized gains (losses) on sales hedging 27 6 (29)

Foreign currency translation adjustment (17) 6 (8)

See accompanying Notes to Consolidated Financial Statements.

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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except share data)

Share-based compensation — — 88 — — — 88

Foreign currency translation adjustment — — — — — (8) (8)

Share-based compensation — — 55 — — — 55

Repurchase of common stock (194,319) — — (52) — — (52)

Foreign currency translation adjustment — — — — — 6 6

Share-based compensation — — 89 — — — 89

Repurchase of common stock (130,560) — — (47) — — (47)

Foreign currency translation adjustment — — — — — (17) (17)

Certain prior period amounts have been reclassified to conform with the current period presentation.

See accompanying Notes to Consolidated Financial Statements.

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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

Year Ended December 31,

Cash flows from operating activities:

Share-based compensation 89 55 88

Deferred income taxes (94) (36) (210)

Unrealized gain on forward interest rate swaps (31) (9) (83)

Changes in operating assets and liabilities:

Accounts receivable, net (181) 249 (5)

Cash receipts (payments) on forward interest rate swaps 86 26 (6)

Other operating activities (1) 9 (13)

Net cash provided by (used in) operating activities 1,013 (4) 488

Cash flows from investing activities:

Acquisition of businesses, net of cash acquired — — (881)

Purchases of property, plant and equipment (59) (87) (75)

Proceeds from sale (purchases) of short-term investments 5 (4) —

Purchases of long-term investments (3) (1) (12)

Net cash used in investing activities (57) (92) (968)

Cash flows from financing activities:

Payment of debt issuance costs, extinguishment costs and discounts (9) — (8)

Payments for repurchases of common stock (47) (52) (751)

Net payments related to share-based compensation plans (30) (8) (14)

Net cash (used in) provided by financing activities (190) 117 253

Cash and cash equivalents at end of period $ 901 $ 137 $ 105

Supplemental disclosures of cash flow information:

Interest paid inclusive of forward interest rate swaps $ 55 $ 111 $ 58

Certain prior period amounts included in Net cash provided by (used in) operating activities have been reclassified to conform with the current period presentation.

See accompanying Notes to Consolidated Financial Statements.

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ZEBRA TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Description of Business and Basis of Presentation

Zebra Technologies Corporation and its subsidiaries (“Zebra” or the “Company”) is a global leader providing innovative Enterprise Asset Intelligence (“EAI”) offerings in the automatic identification and data capture offerings industry. We design, manufacture, and sell a broad range of offerings, including cloud-based software subscriptions, that capture and move data. We also provide a full range of services, including maintenance, technical support, repair, managed and professional services. End-users of our offerings include those in retail and e-commerce, manufacturing, transportation and logistics, healthcare, public sector, and other industries. We provide our offerings globally through a direct sales force and an extensive network of channel partners.

Note 2 Significant Accounting Policies

Principles of Consolidation

These accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the U.S. and include the accounts of Zebra and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Fiscal Calendar

The Company’s fiscal year is a 52-week period ending on December 31. Interim fiscal quarters end on a Saturday and generally include 13 weeks of operating activity. During the 2024 fiscal year, the Company’s quarter end dates were March 30, June 29, September 28, and December 31.

Use of Estimates

These consolidated financial statements were prepared using estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period as further discussed in the following footnotes to the Consolidated Financial Statements. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash consists primarily of deposits with banks. Cash equivalents include deposits with banks and other highly liquid investments with original maturities of less than or equal to three months. Cash equivalents are readily convertible to known amounts of cash and are so near their maturity that they present insignificant risk of a change in value because of changes in interest rates.

Accounts Receivable

Accounts receivable consist primarily of amounts due to us from our customers, net of variable consideration and an allowance for doubtful accounts, in the normal course of business. Collateral on trade accounts receivable is generally not required. The Company maintains an allowance for doubtful accounts for estimated uncollectible accounts receivable that is based on expected credit losses. Expected credit losses are estimated based on historical loss experience, the durations of outstanding trade receivables, and expectations of the future economic environment. Accounts are written off against the allowance account when they are determined to be no longer collectible.

Inventories

Inventories are stated at the lower of a moving-average cost (which approximates cost on a first-in, first-out basis) and net realizable value. Manufactured inventory cost includes materials, labor, and manufacturing overhead. Purchased inventory cost also includes internal purchasing overhead costs. Raw material inventories primarily consist of product components as well as supplies used in repair operations. Provisions are made to reduce excess and obsolete inventories to their estimated net realizable values as well as to record liabilities on non-cancellable purchase commitments. These provisions are based on forecasted demand, experience with specific customers or suppliers, the age and nature of the inventory or committed purchase, and the ability to redistribute inventory to other programs or rework it into other consumable inventory as well as renegotiate contractual terms with suppliers.

Property, Plant and Equipment

Property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is computed primarily using the straight-line method over the estimated useful lives of the various classes of property, plant and equipment, which are thirty

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years for buildings and range from three to ten years for all other asset categories. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or ten years.

Leases

The Company recognizes right-of-use (“ROU”) assets and lease liabilities for its lease commitments with terms greater than one year. Contractual options to extend or terminate lease agreements are reflected in the lease term when they are reasonably certain to be exercised. The initial measurement of ROU assets and lease liabilities is based on the present value of future lease payments over the lease term as of the commencement date. In determining future lease payments, the Company has elected not to separate lease and non-lease components. As the Company’s lease arrangements do not provide an implicit interest rate, we apply the Company’s incremental borrowing rate based on the information available at the commencement date in determining the present value of future lease payments. Relevant information used in determining the Company’s incremental borrowing rate includes the duration of the lease, the transaction currency of the lease, and the Company’s credit risk relative to risk-free market rates. The Company’s ROU assets also include any initial direct costs incurred and exclude lease incentives. The Company’s lease agreements do not contain any significant residual value guarantees or restrictive covenants. All leases of the Company are classified as operating leases, with lease expense being recognized on a straight-line basis.

Income Taxes

The Company accounts for income taxes under the liability method in accordance with Accounting Standards Codification (“ASC”) 740 Topic, Income Taxes. Accordingly, deferred income taxes are provided for the future tax consequences attributable to differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. Deferred tax assets and liabilities are measured using tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is established when necessary to reduce deferred tax assets to the amount that is more likely than not to be realized. The Company recognizes the benefit of tax positions when it is more likely than not to be sustained on its technical merits. The Company recognizes interest and penalties related to income tax matters as part of income tax expense. The Company has elected consolidated tax filings in certain of its jurisdictions which may allow the group to offset one member’s income with losses of other members in the current period and on a carryover basis. The income tax effects of non-inventory intra-entity asset transfers are recognized in the period in which the transfer occurs. The Company classifies its balance sheet accounts by applying jurisdictional netting principles for locations where consolidated tax filing elections are in place.

U.S. tax law contains the Global Intangible Low-Taxed Income (“GILTI”), Base Erosion Anti-Avoidance Tax (“BEAT”), and Deduction for Foreign-Derived Intangible Income (“FDII”) provisions, which relate to the taxation of certain foreign income. The Company recognizes its GILTI, BEAT, and FDII inclusions, when applicable, within income tax expense in the year included in its U.S. tax return.

Goodwill

Goodwill is tested annually for impairment, or more frequently if indicators of impairment exist. When evaluating goodwill for impairment as part of our annual assessment, we include consideration of current events and circumstances. Our annual impairment testing also includes a comparison of the estimated fair value of each reporting unit to its carrying value. If the carrying value of a reporting unit exceeds its estimated fair value, goodwill would be considered to be impaired and reduced to its implied fair value. We estimate the fair value of reporting units by using a weighted combination of the income and market approaches. The income approach requires management to estimate projected future operating and cash flow results, economic projections, and discount rates. The market approach estimates fair value using comparable marketplace fair value data from within a comparable industry group.

We most recently performed our annual goodwill impairment testing in the fourth quarter of 2024 which did not result in any impairment. See Note 6, Goodwill and Other Intangibles for additional information.

Other Intangible Assets

Other intangible assets consist primarily of technology and patent rights, customer and other relationships, and trade names. These assets, which are generally acquired through business combinations, are recorded at fair value upon acquisition and amortized on a straight-line basis over the asset’s useful life which typically ranges from two to eleven years.

Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of

The Company accounts for long-lived assets in accordance with the provisions of ASC Topic 360, Property, Plant and Equipment, whichrequires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the sum of the undiscounted cash flows expected to result from the use and the eventual disposition of the asset. If such assets are impaired, the impairment to be recognized is the excess of the carrying amount over the fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

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Investments in Securities

The Company’s investments primarily include equity securities that are accounted for at cost, adjusted for impairment losses or changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. These investments are primarily in venture capital backed technology companies where the Company's ownership interest is less than 20% and the Company does not have the ability to exercise significant influence. See Note 8, Investments for additional information.

Revenue Recognition

Revenues are primarily comprised of sales of hardware, supplies, services, and software offerings. We recognize revenues when we transfer control of promised goods or services to our customers in an amount that reflects the consideration that we expect to receive, which includes estimates of variable consideration, in exchange for those goods or services. We are typically the principal in all elements of our transactions and record Net sales and Cost of sales on a gross basis. Substantially all revenues for tangible products, supplies, and perpetual or term software licenses are recognized at a point in time, which is generally upon shipment, when control and the risks and rewards of ownership have transferred to the customer, and the Company has a contractual right to payment. Revenues for our service offerings and Company-hosted software and solution offerings are typically recognized over time. Our service offerings include repair and maintenance service contracts, as well as professional services such as installation, integration and provisioning that typically occur in the early stages of a project. The average life of repair and maintenance service contracts is approximately three years. Professional service arrangements range in duration from a day to several weeks or months.

The Company elects to exclude sales and other governmental taxes that are collected by the Company from a customer, from the transaction price. The Company also considers shipping and handling activities as part of its fulfillment costs and not as a separate performance obligation. See Note 3, Revenues for additional information.

Research and Development Costs

Research and development (“R&D”) costs include:

•Salaries, benefits, and other R&D personnel related costs;

•Consulting and other outside services used in the R&D process;

•Engineering supplies;

•Engineering related information systems costs; and

•Allocation of building and related costs.

R&D costs are expensed as incurred, including those associated with developing and maintaining software within our customer offerings. The Company typically applies a dynamic and iterative approach to developing customer product and software offerings as well as ongoing software maintenance, and feature and functionality enhancement releases, and accordingly, such costs do not meet capitalization criteria.

Advertising

Advertising costs are expensed as incurred. These costs totaled $28 million, $31 million and $33 million for the years ended 2024, 2023 and 2022, respectively.

Warranties

In general, the Company provides warranty coverage of one year on mobile computers and batteries. Printers are warrantied from one to three years, depending on the product. Advanced data capture products are warrantied from one to five years, depending on the product. Thermal printheads are warrantied from six months to one year, depending on the product, and battery-based products, such as location tags, are covered by a 90-day warranty. A provision for warranty expense is adjusted quarterly based on historical and expected warranty experience.

Contingencies

The Company establishes a liability for loss contingencies when the loss is both probable and estimable. See Note 14, Accrued Liabilities, Commitments and Contingencies for additional information.

Fair Value of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Our financial assets and liabilities that are accounted for at fair value have generally included our employee deferred compensation plan investments, foreign currency forwards, and interest rate swaps. In accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”), we recognize derivative instruments and hedging activities as either assets or liabilities on the Consolidated Balance Sheets and measure them at fair value. Accounting for the

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gains and losses on our derivatives resulting from changes in fair value is dependent on the use of the derivative and whether it is designated and qualifies for hedge accounting.

The Company utilizes foreign currency forwards to hedge certain foreign currency exposures. We use broker quotations or market transactions, in either the listed or over-the-counter markets, to value our foreign currency exchange contracts. The Company also periodically utilizes interest rate swaps to hedge a portion of the variability in future cash flows on debt. We use relevant observable market inputs at quoted intervals, such as forward yield curves and the Company’s own credit risk, to value our interest rate swaps. See Note 11, Derivative Instruments for additional information on the Company’s derivatives and hedging activities.

The Company’s securities held for its deferred compensation plans are measured at fair value using quoted prices in active markets for identical assets. If active markets for identical assets are not available to determine fair value, then we use quoted prices for similar assets or inputs that are observable either directly or indirectly.

The carrying amounts of cash and cash equivalents, receivables, and accounts payable approximate fair value due to the short-term nature of those financial instruments. See Note 10, Fair Value Measurements for information related to financial assets and liabilities carried at fair value.

Share-Based Compensation

The Company has share-based compensation plans and an employee stock purchase plan under which shares of Class A Common Stock are available for future grant and purchase. The Company recognizes compensation costs over the vesting period of awards, which is typically three years, net of estimated forfeitures. Compensation costs associated with awards with graded vesting terms are recognized on a straight-line basis. See Note 15, Share-Based Compensation for additional information.

Foreign Currency Translation

The balance sheet accounts of the Company’s subsidiaries that have not designated the U.S. Dollar as its functional currency are translated into U.S. Dollars using the period-end exchange rate, and statement of earnings items are translated using the average exchange rate for the period. The resulting translation gains or losses are recorded in Stockholders’ equity as a cumulative translation adjustment, which is a component of AOCI within the Consolidated Balance Sheets.

Acquisitions

We account for acquired businesses using the acquisition method of accounting which requires that the purchase price be allocated to the identifiable assets acquired and liabilities assumed, generally measured 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 assets, such as intangible assets, can be complex and require judgment. Critical estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from revenues and the determination of discount rates. Management’s estimates of fair value are based on estimates and assumptions utilized as part of the purchase price allocation process and are believed to be reasonable; however, elements of these estimates and assumptions are inherently uncertain and subject to refinement during the measurement period, which is up to one year after the acquisition date.

Recently Adopted Accounting Pronouncements

In the current year, the Company adopted Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires retrospective disclosure of significant segment expenses and other segment items on an annual and interim basis. Additionally, it requires disclosure of the title and position of the Chief Operating Decision Maker (“CODM”). This ASU did not have an impact on our results of operations, cash flows, or financial condition.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires an annual tabular effective tax rate reconciliation disclosure including information for specified categories and jurisdiction levels, as well as, disclosure of income taxes paid, net of refunds received, disaggregated by federal, state/local, and significant foreign jurisdiction. This ASU will be effective for the Company’s fiscal December 31, 2025 year-end, with early adoption permitted. We are assessing the impact of this guidance on our disclosures; it will not have an impact on our results of operations, cash flows, or financial condition.

In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses, which requires disaggregated disclosure of certain categories of expenses that are included within expense captions presented on the Consolidated Statements of Operations on an annual and interim basis. This ASU will be effective for the Company’s fiscal

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December 31, 2027 year-end and interim periods thereafter, with early adoption permitted. We are assessing the impact of this guidance on our disclosures; it will not have an impact on our results of operations, cash flows, or financial condition.

Note 3 Revenues

The Company recognizes revenue to depict the transfer of goods, solutions or services to a customer at an amount that reflects the consideration which it expects to receive for providing those goods, solutions or services. To determine total expected consideration, the Company estimates elements of variable consideration, which primarily include product rights of return, rebates, and other incentives. These estimates are developed using the expected value method and are reviewed and updated, as necessary, at each reporting period. Revenues, inclusive of variable consideration, are recognized to the extent it is probable that a significant reversal in cumulative revenues recognized will not occur in future periods.

We enter into contracts that may include combinations of tangible products, services, solutions and software offerings, which are generally capable of being distinct and accounted for as separate performance obligations. We evaluate whether two or more contracts should be combined and accounted for as a single contract and whether the combined or single contract has more than one performance obligation. This evaluation requires judgment, and the decision to combine a group of contracts or separate the combined or single contract into multiple distinct performance obligations may impact the amount of revenue recorded in a reporting period. We deem performance obligations to be distinct if the customer can benefit from the product or service on its own or together with readily available resources (“capable of being distinct”) and if the transfer of products, solutions or services is separately identifiable from other promises in the contract (“distinct within the context of the contract”).

For contract arrangements that include multiple performance obligations, we allocate the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices for each performance obligation. In general, standalone selling prices are observable for tangible products and software licenses, while standalone selling prices for professional services, repair and maintenance services, and solutions are developed primarily with an expected cost-plus margin approach. Regional pricing, marketing strategies, and business practices are evaluated to derive estimated standalone selling prices.

The Company recognizes revenue for each performance obligation upon transfer of control of the promised goods or services. Control is deemed to have been transferred when the customer has the ability to direct the use of and has obtained substantially all of the remaining benefits from the goods and services. The determination of whether control transfers at a point in time or over time requires judgment and includes our consideration of the following: 1) whether the customer simultaneously receives and consumes the benefits provided as the Company performs its promises; 2) whether the Company’s performance creates or enhances an asset that is under control of the customer; and 3) whether the Company’s performance does not create an asset with an alternative use to the Company, while the Company has an enforceable right to payment for its performance completed to date.

Revenues for tangible products are generally recognized upon shipment, whereas revenues for services and solution offerings are generally recognized over time by using an output or time-based method, assuming all other criteria for revenue recognition have been met. Revenues for software are recognized either upon delivery or over time using a time-based method, depending on how control is transferred to the customer. In cases where a bundle of products, services, solutions and/or software are delivered to the customer, judgment is required to select the method of progress which best reflects the transfer of control.

Disaggregation of Revenue

The following table presents our Net sales disaggregated by product category for each of our segments, AIT and EVM, for the years ended December 31, 2024, 2023 and 2022 (in millions):

Segment Tangible Products Services and Software Total

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Segment Tangible Products Services and Software Total

Segment Tangible Products Services and Software Total

In addition, refer to Note 20, Segment Information & Geographic Data for Net sales to customers by geographic region.

Performance Obligations

The Company’s remaining performance obligations relate to services and software solutions. The aggregated transaction price allocated to remaining performance obligations for arrangements with an original term exceeding one year was $1.19 billion and $1.13 billion, inclusive of deferred revenue, as of December 31, 2024 and 2023, respectively. On average, remaining performance obligations as of December 31, 2024 and 2023 are expected to be recognized over a period of approximately two years.

Contract Balances

Progress on satisfying performance obligations under contracts with customers related to billed revenues is reflected on the Consolidated Balance Sheets in Accounts receivable, net. Progress on satisfying performance obligations under contracts with customers related to unbilled revenues (“contract assets”) is reflected on the Consolidated Balance Sheets as Prepaid expenses and other current assets for revenues expected to be billed within the next twelve months, and Other long-term assets for revenues expected to be billed thereafter. The total contract asset balances were $11 million and $16 million as of December 31, 2024 and 2023, respectively. These contract assets result from timing differences between billing and satisfying performance obligations, as well as the impact from the allocation of the transaction price among performance obligations for contracts that include multiple performance obligations. Contract assets are evaluated for impairment and no impairment losses have been recognized during the years ended December 31, 2024, 2023 and 2022, respectively.

Deferred revenue on the Consolidated Balance Sheets consists of payments and billings in advance of our performance. The combined short-term and long-term deferred revenue balances were $757 million and $770 million as of December 31, 2024 and 2023, respectively. The Company recognized $455 million, $432 million and $399 million in revenue that was previously included in the beginning balance of deferred revenue during the years ended December 31, 2024, 2023 and 2022, respectively.

Our payment terms vary by the type and location of our customer and the products, solutions or services offered. The time between invoicing and when payment is due is not significant. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined that our contracts do not include a significant financing component.

Costs to Obtain a Contract

Our incremental direct costs of obtaining a contract, which consist of sales commissions and incremental fringe benefits, are deferred and amortized over the weighted-average contract term. The incremental costs to obtain a contract are derived at a portfolio level and amortized on a straight-line basis. The total ending balance of deferred costs to obtain a contract, which are recorded in Prepaid expenses and other current assets or Other long-term assets on the Consolidated Balance Sheets, depending on the timing of expected amortization, was $38 million and $42 million as of December 31, 2024 and 2023, respectively. Amortization expense, which is recorded in Selling and marketing expense on the Consolidated Statements of Operations, was $29 million, $26 million and $21 million during the years ended December 31, 2024, 2023 and 2022, respectively. Incremental costs of obtaining a contract are expensed as incurred if the amortization period would otherwise be one year or less.

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Note 4 Inventories

The categories of Inventories, net are as follows (in millions):

Work in process 4 4

Total Inventories, net $ 693 $ 804

(1) Raw material inventories primarily consist of product components as well as supplies used in repair operations.

Note 5 Business Acquisitions

Matrox

On June 3, 2022, the Company acquired Matrox Electronic Systems Ltd. (“Matrox”), a developer of advanced machine vision components and software. Through its acquisition of Matrox, the Company significantly expanded its machine vision products and software offerings.

The acquisition was accounted for under the acquisition method of accounting for business combinations. The Company’s final purchase consideration was $881 million comprised of cash paid, net of Matrox’s cash on-hand.

The Company utilized estimated fair values as of the acquisition date to allocate the total purchase consideration to the identifiable assets acquired and liabilities assumed. The fair value of the net assets acquired was based on several estimates and assumptions, as well as customary valuation techniques, primarily the excess earnings method for customer relationships as well as the relief from royalty method for technology and patent intangible assets.

The purchase price allocation to assets acquired and liabilities assumed was as follows (in millions):

Identifiable intangible assets $ 297

Inventory 31

Other assets acquired 24

Deferred tax liabilities (78)

Other liabilities assumed (32)

Net assets acquired $ 242

Goodwill on acquisition 639

Total purchase price $ 881

The $639 million of goodwill, which is non-deductible for tax purposes, has been allocated to the EVM segment and principally relates to the planned global expansion and integration of Matrox into the Company’s machine vision offerings.

The purchase price allocation to identifiable intangible assets acquired was as follows:

Fair Value (in millions) Useful Life (in years)

Customer and other relationships $ 232 11

Technology and patents 63 7

Trade names 2 2

Total identifiable intangible assets $ 297

The operating results have been included in the Company’s Consolidated Balance Sheets and Statements of Operations beginning on the acquisition date. The Company has not included unaudited pro forma results for the year preceding the acquisition, as doing so would not yield materially different results.

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Acquisition and integration costs

The Company incurred $6 million, $6 million and $21 million of acquisition-related costs during the years ended December 31, 2024, 2023 and 2022, respectively. These costs are included within Acquisition and integration costs on the Consolidated Statements of Operations and are primarily related to third-party transaction and advisory fees, and integration activities associated with our business acquisitions.

Photoneo

On December 27, 2024, the Company entered into a definitive agreement to acquire Photoneo, a leading developer and manufacturer of 3D machine vision solutions. The purchase price of approximately €60 million is expected to be funded with cash on hand. The transaction is subject to customary closing conditions and is expected to close in the first quarter of 2025. The acquired business will become part of the EVM segment.

Note 6 Goodwill and Other Intangibles

Goodwill

Changes in the net carrying value of goodwill by segment were as follows (in millions):

AIT EVM Total

Foreign exchange impact — (4) (4)

See Note 5, Business Acquisitions for further details related to the Company’s acquisitions and purchase price allocation adjustments.

The Company’s goodwill balance consists of four reporting units. The Company completed its annual goodwill impairment testing during the fourth quarter of 2024 utilizing a quantitative approach. The estimated fair value of each reporting unit exceeded its carrying value by at least 150%. No events occurred during the fiscal years ended 2024, 2023 or 2022 that indicated it was more likely than not that our goodwill was impaired.

Other Intangibles, net

The balances in Other Intangibles, net consisted of the following (in millions):

Amortized intangible assets

Amortization expense was $104 million, $104 million and $136 million for fiscal years ended 2024, 2023 and 2022, respectively.

Estimated future intangible asset amortization expense is as follows (in millions):

Year Ended December 31,

Thereafter 73

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Note 7 Property, Plant and Equipment

Property, plant and equipment, net is comprised of the following (in millions):

December 31,

Machinery and equipment 377 343

Furniture and office equipment 33 34

Software and computer equipment 107 104

Projects in progress 43 44

Property, plant and equipment, gross $ 781 $ 731

Less accumulated depreciation (476) (422)

Property, plant and equipment, net $ 305 $ 309

Depreciation expense was $68 million, $72 million and $68 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Note 8Investments

The carrying value of the Company’s long-term investments was $110 million and $113 million as of December 31, 2024 and 2023, respectively, which are included in Other long-term assets on the Consolidated Balances Sheets. The Company paid $3 million, $1 million and $12 million for the purchases of long-term investments during the years ended December 31, 2024, 2023 and 2022, respectively. Net gains and losses related to the Company’s long-term investments are included within Other expense, net on the Consolidated Statements of Operations. The Company recognized net losses of $6 million during the year ended December 31, 2024. Net gains and losses were not significant for the years ended December 31, 2023 and 2022.

Note 9 Exit and Restructuring Costs

Total charges associated with the 2022 Productivity Plan, which was completed in the third quarter of 2024, and the U.S. voluntary retirement plan, which was completed in 2023, were $127 million, including $17 million, $98 million and $12 million for the years ended December 31, 2024, 2023 and 2022 respectively.The costs of these plans are classified within Exit and restructuring on the Consolidated Statements of Operations. The Company’s remaining payment obligations of $4 million, are reflected within Accrued liabilities on the Consolidated Balance Sheets.

The rollforward of the liability associated with Exit and restructuring activities is:

Exit and restructuring charges 17

Non-cash utilization (3)

Cash payments (32)

The Company incurred Exit and restructuring costs, under previously announced programs of $2 million for the year ended December 31, 2022.

Note 10 Fair Value Measurements

Financial assets and liabilities are measured using inputs from three levels of the fair value hierarchy in accordance with ASC Topic 820, Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into the following three broad levels:

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•Level 1: Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs (e.g. U.S. Treasuries and money market funds).

•Level 2: Observable prices that are based on inputs not quoted in active markets but corroborated by market data.

•Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs. In addition, the Company considers counterparty credit risk in the assessment of fair value.

The Company’s financial assets and liabilities carried at fair value as of December 31, 2024 are classified below (in millions):

Level 1 Level 2 Level 3 Total

Assets:

Foreign exchange contracts (1) $ 1 $ 30 $ — $ 31

Investments related to the deferred compensation plan 41 — — 41

Total Assets at fair value $ 42 $ 30 $ — $ 72

Liabilities:

Liabilities related to the deferred compensation plan $ 41 $ — $ — $ 41

Total Liabilities at fair value $ 41 $ — $ — $ 41

The Company’s financial assets and liabilities carried at fair value as of December 31, 2023 are classified below (in millions):

Level 1 Level 2 Level 3 Total

Assets:

Forward interest rate swap contracts (2) $ — $ 83 $ — $ 83

Investments related to the deferred compensation plan 41 — — 41

Total Assets at fair value $ 41 $ 83 $ — $ 124

Liabilities:

Foreign exchange contracts (1) $ 1 $ 6 $ — $ 7

Forward interest rate swap contracts (2) — 28 — 28

Liabilities related to the deferred compensation plan 41 — — 41

Total Liabilities at fair value $ 42 $ 34 $ — $ 76

(1)The fair value of the foreign exchange contracts is calculated as follows:

•Fair value of forward contracts associated with forecasted sales hedges is calculated using the period-end exchange rate adjusted for current forward points.

•Fair value of hedges against net assets denominated in foreign currencies is calculated at the period-end exchange rate adjusted for current forward points unless the hedge has been traded but not settled at period-end (Level 2). If this is the case, the fair value is calculated at the rate at which the hedge is being settled (Level 1).

(2)The fair value of forward interest rate swaps is based upon a valuation model that uses relevant observable market inputs at the quoted intervals, such as forward yield curves, and is adjusted for the Company’s credit risk and the interest rate swap terms.

Note 11 Derivative Instruments

In the normal course of business, the Company is exposed to global market risks, including the effects of changes in foreign currency exchange rates and interest rates. The Company uses derivative instruments to manage its exposure to such risks and may elect to designate certain derivatives as hedging instruments under ASC Topic 815, Derivatives and Hedging (“ASC 815”). The Company formally documents all relationships between designated hedging instruments and hedged items as well as its risk management objectives and strategies for undertaking hedge transactions. The Company does not hold or issue derivatives for trading or speculative purposes.

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In accordance with ASC 815, the Company recognizes derivative instruments as either assets or liabilities on the Consolidated Balance Sheets and measures them at fair value. The following table presents the fair value of its derivative instruments (in millions):

Asset (Liability)

Fair Values as of December 31,

Derivative instruments designated as hedges:

Foreign exchange contracts Prepaid expenses and other current assets $ 30 $ —

Foreign exchange contracts Accrued liabilities — (6)

Total derivative instruments designated as hedges $ 30 $ (6)

Derivative instruments not designated as hedges:

Foreign exchange contracts Prepaid expenses and other current assets $ 1 $ —

Forward interest rate swaps Prepaid expenses and other current assets — 34

Forward interest rate swaps Other long-term assets — 49

Foreign exchange contracts Accrued liabilities — (1)

Forward interest rate swaps Accrued liabilities — (12)

Forward interest rate swaps Other long-term liabilities — (16)

Total derivative instruments not designated as hedges $ 1 $ 54

Total net derivative asset $ 31 $ 48

The following table presents the net gains (losses) from changes in fair values of derivatives that are not designated as hedges (in millions):

Gains (Losses) Recognized in Income

Statements of Operations Classification Year Ended December 31,

Derivative instruments not designated as hedges:

Foreign exchange contracts Foreign exchange gain (loss) $ 4 $ (4) $ 2

Forward interest rate swaps Interest (expense) income, net 31 9 83

Total net gain recognized in income $ 35 $ 5 $ 85

Activities related to derivative instruments are reflected within Net cash provided by (used in) operating activities on the Consolidated Statements of Cash Flows.

Credit and Market Risk Management

Financial instruments, including derivatives, expose the Company to counterparty credit risk of nonperformance and to market risk related to currency exchange rate and interest rate fluctuations. The Company manages its exposure to counterparty credit risk by establishing minimum credit standards, diversifying its counterparties, and monitoring its concentrations of credit. The Company’s counterparties are commercial banks with expertise in derivative financial instruments. The Company evaluates the impact of market risk on the fair value and cash flows of its derivative and other financial instruments by considering reasonably possible changes in interest rates and currency exchange rates. The Company continually monitors the creditworthiness of the customers to which it grants credit terms in the normal course of business. The terms and conditions of the Company’s credit policies are designed to mitigate concentrations of credit risk.

The Company’s master netting and other similar arrangements with the respective counterparties allow for net settlement under certain conditions, which are designed to reduce credit risk by permitting net settlement with the same counterparty. We present the assets and liabilities of our derivative financial instruments, for which we have net settlement agreements in place, on a net basis on the Consolidated Balance Sheets. If the derivative financial instruments had been presented gross on the Consolidated Balance Sheets, the asset and liability positions would have not been significant as of December 31, 2024 and December 31, 2023, respectively.

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Foreign Currency Exchange Risk Management

The Company conducts business on a multinational basis in a variety of foreign currencies. Exposure to market risk for changes in foreign currency exchange rates arises primarily from Euro-denominated external revenues, cross-border financing activities between subsidiaries, and foreign currency denominated monetary assets and liabilities. The Company manages its objective of preserving the economic value of non-functional currency denominated cash flows by initially hedging transaction exposures with natural offsets and, once these opportunities have been exhausted, through foreign exchange forward and option contracts, as deemed appropriate.

The Company manages the exchange rate risk of anticipated Euro-denominated sales using forward contracts, which typically mature within twelve months of execution. The Company designates these derivative contracts as cash flow hedges. Unrealized gains and losses on these contracts are deferred in Accumulated other comprehensive income (loss) (“AOCI”) on the Consolidated Balance Sheets until the contract is settled and the hedged sale is realized. The realized gain or loss is then recorded as an adjustment to Net sales on the Consolidated Statements of Operations. Realized amounts reclassified to Net sales were $11 million of gains for the year ended December 31, 2024, $15 million of losses for the year ended December 31, 2023 and $87 million of gains for the year ended December 31, 2022. As of December 31, 2024 and 2023, the notional amounts of the Company’s foreign exchange cash flow hedges were €592 million and €485 million, respectively. The Company has reviewed its cash flow hedges for effectiveness and determined that they are highly effective.

The Company uses forward contracts, which are not designated as hedging instruments, to manage its exposures related to net assets denominated in foreign currencies. These forward contracts typically mature within one month after execution. Monetary gains and losses on these forward contracts are recorded in income and are generally offset by the transaction gains and losses related to their net asset positions. The notional values and the net fair values of these outstanding contracts were as follows (in millions):

December 31,

Notional balance of outstanding contracts:

British Pound/U.S. Dollar £ 5 £ 11

Euro/U.S. Dollar € 146 € 80

Euro/Czech Koruna € 16 € 17

Japanese Yen/U.S. Dollar ¥ 360 ¥ 685

Singapore Dollar/U.S. Dollar S$ 23 S$ 14

Mexican Peso/U.S. Dollar Mex$ 142 Mex$ 144

Polish Zloty/U.S. Dollar zł 53 zł 116

Net fair value of assets (liabilities) of outstanding contracts $ 1 $ (1)

Interest Rate Risk Management

The Company is exposed to market risk associated with interest rate payments on its borrowings under a term loan (“Term Loan A”), Revolving Credit Facility, and Receivables Financing Facilities, which bear interest at variable rates plus applicable margins. The Company manages its exposure to changes in interest rates by issuing both fixed and variable rate borrowings as well as periodically utilizing interest rate swaps to economically hedge interest rate exposure based on current and projected market conditions.

In the second quarter of 2024, the Company terminated all of its interest rate swap agreements, none of which were designated as hedges, resulting in a $77 million cash receipt that is classified within Cash flows from operating activities on the Consolidated Statements of Cash Flows. Total cash receipts for the fiscal year ended 2024 were $86 million.

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Note 12 Long-Term Debt

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

December 31,

Senior Notes 500 —

Revolving Credit Facility — 413

Receivables Financing Facilities 108 129

Less: Debt issuance costs (9) (2)

Less: Unamortized discounts (3) (4)

Less: Current portion of debt (79) (173)

As of December 31, 2024, the future maturities of debt are as follows (in millions):

Total future maturities of debt $ 2,183

All borrowings as of December 31, 2024 were denominated in U.S. Dollars.

The estimated fair value of the Company’s debt approximated $2.2 billion as of both December 31, 2024 and 2023, respectively. These fair value amounts, developed based on inputs classified as Level 2 within the fair value hierarchy, represent the estimated value at which the Company’s lenders could trade its debt within the financial markets and do not represent the settlement value of these liabilities to the Company. The fair value of debt will continue to vary each period based on a number of factors, including fluctuations in market interest rates as well as changes to the Company’s credit ratings.

Term Loan A

The principal on Term Loan A is due in quarterly installments, with the next quarterly installment due in the second quarter of 2026 and the majority due upon maturity in 2027. The Company has and 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, 2024, the Term Loan A interest rate was 5.71%. Interest payments are made monthly and are subject to variable rates plus an applicable margin.

Senior Notes

In the second quarter of 2024, the Company completed a private offering of $500 million senior unsecured notes (the “Senior Notes”) with a 6.5% fixed interest rate. The net proceeds of the issuance, after deducting debt issuance costs which were deferred, were approximately $492 million. The Senior Notes mature on June 1, 2032, and interest is payable semi-annually in arrears in June and December of each year, commencing on December 1, 2024. 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.

The Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by certain of Zebra’s existing and future subsidiaries. The Senior Notes contain covenants that, among other things, limit the ability of Zebra to: (i) grant or incur liens; (ii) have its subsidiaries guarantee debt without becoming guarantors; and (iii) merge or consolidate with another company or sell all or substantially all of its assets.

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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, 2024, the Company had letters of credit totaling $10 million, which reduced funds available for borrowings under the Revolving Credit Facility from $1,500 million to $1,490 million. As of December 31, 2024, the Revolving Credit Facility had an average interest rate of 5.68%. 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 Facility

As of December 31, 2024, the Company has a Receivables Financing Facility with a borrowing limit of up to $180 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 this facility as secured borrowings. During the first quarter of 2024, the Company amended this facility to extend the maturity to March 19, 2027 but otherwise did not substantially change the terms of the facility.

As of December 31, 2024, the Company’s Consolidated Balance Sheets included $638 million of gross receivables that were pledged under the facility. As of December 31, 2024, $108 million had been borrowed, of which $79 million was classified as current. Borrowings under the facility bear interest at a variable rate plus an applicable margin. As of December 31, 2024, the facility had an average interest rate of 5.38%. Interest is paid monthly on these borrowings.

The Company’s borrowings described above include terms and conditions that limit the incurrence of additional borrowings and require that certain financial ratios be maintained at designated levels.

The Company periodically uses interest rate swaps to manage the interest rate risk associated with its debt. See Note 11, Derivative Instruments for further information.

As of December 31, 2024, the Company was in compliance with all debt covenants.

Note 13 Leases

The Company leases various manufacturing and repair facilities, distribution centers, research facilities, sales and administrative offices, equipment, and vehicles. All leases are classified as operating leases with remaining terms of up to 10 years, with certain leases containing renewal options and termination options. The Company records ROU assets and lease liabilities on the Consolidated Balance Sheets associated with the fixed lease and non-lease payments of leases with terms greater than one year.

The following table presents activities associated with our leases (in millions):

December 31,

Fixed lease expenses $ 50 $ 52 $ 48

Variable lease expenses 20 35 40

Total lease expenses $ 70 $ 87 $ 88

Cash paid for leases $ 72 $ 82 $ 93

ROU assets obtained in exchange for lease obligations $ 44 $ 55 $ 72

Reductions of ROU assets and lease liabilities (7) (1) (4)

Net non-cash increases to ROU assets and lease liabilities $ 37 $ 54 $ 68

Variable lease expenses incurred were not included in the measurement of the Company’s ROU assets and lease liabilities. These expenses consisted primarily of distribution center service costs that were based on product distribution volumes, as well as non-fixed common area maintenance, real estate taxes, and other operating costs associated with various facility leases. Expenses related to short-term leases were not significant.

Cash payments for leases are included within Net cash provided by (used in) operating activities on the Consolidated Statements of Cash Flows.

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ROU assets obtained in exchange for lease obligations include new lease arrangements entered into by the Company as well as contract modifications that extend lease terms and/or provide us additional rights, changes in assessments that render it reasonably certain that lease renewal options will be exercised based on facts and circumstances that arose during the period, as well as lease arrangements obtained through acquisitions.

Reductions of the Company’s ROU assets and lease liabilities generally relate to modifications to lease agreements that result in a reduction to future minimum lease payments, as well as changes in assessments that render it no longer reasonably certain that lease renewal options will be exercised based on facts and circumstances that arose during the period. The Company’s reduction of ROU assets and lease liabilities during 2024, 2023 and 2022 were not significant.

The weighted average remaining term of the Company’s leases was approximately 6 years each as of December 31, 2024, 2023 and 2022. The weighted average discount rate used to measure the ROU assets and lease liabilities was approximately 6% as of both December 31, 2024 and December 31, 2023, respectively, and 5% as of December 31, 2022.

Future minimum lease payments under non-cancellable leases as of December 31, 2024 were as follows (in millions):

Thereafter 59

Total future minimum lease payments $ 233

Less: Interest (42)

Present value of lease liabilities $ 191

Reported as of December 31, 2024: