Zebra Technologies Corporation (ZBRA) Q4 2022 Earnings Call Transcript

Zebra Technologies Corporation (NASDAQ:ZBRA) Q4 2022 Results Conference Call February 16, 2023 8:30 AM ET

Company Participants

Mike Steele - Head of IR

Anders Gustafsson - CEO

Nathan Winters - CFO

Bill Burns - Chief Product and Solutions Officer

Joe Heel - Chief Revenue Officer

Conference Call Participants

Damian Karas - UBS

Jim Ricchiuti - Needham & Company

Paul Chung - JP Morgan

Keith Housum - Northcoast Research

Meta Marshall - Morgan Stanley

Guy Hardwick - Credit Suisse

Rob Mason - Baird

Brian Drab - William Blair

Tommy Moll - Stephens

Operator

Good day, and invited to nan Fourth Quarter 2022 Zebra Technologies Earnings Conference Call. All participants will beryllium successful a listen-only mode. [Operator Instructions] After today’s position location will beryllium opportunity to inquire questions. Please note, this arena is being recorded.

I would now for illustration to move nan convention complete to Mike Steele, Vice President, Investor Relations. Please travel ahead.

Mike Steele

Good morning, and invited to Zebra's 4th fourth convention call. This position is being simulcast connected our website astatine investors.zebra.com, and will beryllium archived location for astatine slightest 1 year. Our forward-looking statements are based connected existent expectations and assumptions and are taxable to risks and uncertainties. Actual results could disagree materially owed to factors discussed successful our SEC filings.

During this call, we will reference non-GAAP financial measures arsenic we picture our business performance. You tin find reconciliations astatine nan extremity of this descent position and successful today's net property release. Throughout this presentation, unless different indicated, our references to income maturation are year-over-year connected a changeless rate ground and exclude results from precocious acquired businesses for nan 12 months pursuing each acquisition.

This position will see prepared remarks from Anders Gustafsson, our Chief Executive Officer; Bill Burns, our Chief Product and Solutions Officer; and Nathan Winters, our Chief Financial Officer. Anders will statesman pinch our 4th fourth highlights and an update connected nan antecedently announced CEO transition. Then Nathan will supply further item connected nan Q4 results and talk our 2023 outlook. Bill will reason pinch advancement made connected advancing our Enterprise Asset Intelligence vision. Following nan prepared remarks, Joe Heel, our Chief Revenue Officer, will subordinate america arsenic we return your questions.

Now let's move to Slide 4 arsenic I manus it complete to Anders.

Anders Gustafsson

Thank you, Mike. Good morning, and convey you for joining us. It was a beardown decorativeness to a challenging year, pinch income and profitability adjacent nan precocious extremity of our outlook. For nan quarter, we realized income maturation of astir 4%, an adjusted EBITDA separator of 22.5%, an 80-basis-point summation year-over-year. Non-GAAP diluted net per stock of $4.75, a 5% summation from nan anterior year, and beardown free rate flow. Our squad recovered from distribution challenges successful North America to thrust grounds income volumes, which much than offset softer income successful our EMEA region. From a solutions offering perspective, printing, information capture, tablets and RFID were agleam spots, much than offsetting little income of mobile computers.

Although we proceed to spot cautious spending behaviour pinch definite ample customers, request has mostly remained solid, pinch spot successful mini to midsized orders. We secured a number of breathtaking wins, helping to thrust a beardown year-end and momentum into 2023. These wins included a ample postal customer successful Asia who expects to amended productivity and ratio by equipping 70,000 message carriers pinch our mobile computing solutions. A British grocer expects to amended their shopper acquisition and thrust shop efficiencies by deploying 80,000 individual shopper devices. And nan European-based car shaper plans to alteration process betterment and value assurance on each stages of nan accumulation statement pinch 30,000 Zebra mobile computers.

From a profitability perspective, we expanded EBITDA separator and accrued EPS by scaling operating expenses and drove our strongest rate travel 4th of nan year. As you are aware, successful December, we announced that Bill Burns will win maine arsenic CEO effective March 1. Bill is nan perfect leader to proceed to beforehand our strategy and has nan afloat support of our Board and executive team. Throughout his career, Bill has maintained a beardown attraction connected culture, talent and innovation. He has been a cardinal personnel of Zebra's executive activity squad since joining america much than 7 years agone to lead and merge nan endeavor business, which we had conscionable acquired astatine nan time. Since nan announcement, Bill and I person been engaged gathering pinch stakeholders discussing nan modulation and Zebra's agleam future.

I've besides been taking this opportunity to convey our employees, suppliers and partners for their support and maturation collaboration done nan years arsenic we transformed our business. I look guardant to continuing to guarantee a soft modulation arsenic I presume nan domiciled of Executive Chair.

I will now move nan telephone complete to Nathan to reappraisal our Q4 financial results successful much item and talk our 2023 outlook.

Nathan Winters

Thank you, Anders. Let's commencement pinch nan P&L connected Slide 7. In Q4, nett income accrued 2.5%, including nan effect of rate and acquisitions, and 3.9% connected an integrated basis. Our Asset Intelligence and Tracking conception accrued 13.5%, driven by double-digit maturation successful printing. Enterprise Visibility and Mobility conception income were astir flat, pinch mixed capacity among our offerings. We realized peculiarly beardown maturation successful information seizure solutions, including RFID arsenic good arsenic rugged tablets. Mobile computing income declined, chiefly owed to challenging anterior twelvemonth compares, peculiarly successful EMEA. We besides drove maturation crossed services and package pinch beardown work connect rates.

Performance was mixed crossed our regions. North America income accrued 11%, helped by nan betterment from proviso concatenation challenges and spot successful information seizure and printing. EMEA income declined 7%, chiefly owed to nan 5-point effect of our suspension of income into Russia successful March arsenic good arsenic little income to ample customers successful Northern Europe. Asia-Pacific income grew 3%, pinch spot successful Japan and maturation successful China contempt COVID challenges precocious successful nan quarter. And Latin America income accrued 7%, pinch beardown maturation successful Brazil and Mexico.

Adjusted gross separator decreased 10 ground points to 45.6% owed to FX, offset by little premium proviso concatenation costs. Adjusted operating expenses were lower, improving by 100 ground points arsenic a percent of sales, chiefly owed to little inducement compensation and effective costs management. Fourth 4th adjusted EBITDA separator was 22.5%, an 80-basis-point summation driven by operating disbursal scaling. Non-GAAP net per diluted stock was $4.75, a 4.6% year-over-year increase.

Turning now to nan equilibrium expanse and rate travel highlights connected Slide 8. In 2022, we generated $413 cardinal of free rate flow. Although Q4 was strong, nan afloat twelvemonth was importantly little than past year, chiefly owed to a higher usage of moving superior owed to elevated inventory, higher inducement compensation payments fixed our exceptional 2021 performance, and $135 cardinal of antecedently announced colony payments, which are scheduled to reason successful Q1 of 2024.

In 2022, we invested astir $880 cardinal successful nan Matrox Imaging acquisition to grow our instrumentality imagination solutions offering. We made $751 cardinal of stock repurchases and invested $12 cardinal successful task investments. We ended nan twelvemonth astatine a comfortable 1.6 times nett indebtedness to adjusted EBITDA leverage ratio, and pinch much than $1.4 cardinal of capacity connected our revolving in installments facility.

On Slide 9, we item premium proviso concatenation costs, which person continued to amended from highest levels. The actions we person taken to redesign products, targeted value increases arsenic good arsenic improving freight rates and capacity person enabled america to trim constituent purchases connected nan spot marketplace and trim nan freight costs impact. Additionally, we person accrued nan measurement of printer shipments connected Ocean Premier, which will lend to reduced freight costs done 2023. In Q4, we incurred premium proviso concatenation costs of $25 cardinal arsenic compared to nan prepandemic baseline, which was favorable to what we had anticipated successful our anterior outlook, and $38 cardinal little than nan anterior year. We are expecting these premium proviso concatenation costs to steadily diminution successful 2023.

Let's now move to our outlook. Customer request and our bid pipeline remained healthy, yet we proceed to spot immoderate softening of request and elongated income cycles that we referenced past 4th done nan uncertain macro environment. We are taking a cautious attack to our income outlook and disbursal guidance while moving to rightsize our inventory levels. For nan first quarter, our income are expected to diminution betwixt 4% and 1% compared to nan anterior year. Our outlook assumes a 3-point antagonistic effect from overseas rate changes and a 150-basis-point additive effect from caller acquisitions. This translates to expectations of antagonistic 1% integrated growth, which includes a 1-point headwind from income into Russia past year. We expect Q1 adjusted EBITDA separator to beryllium astir 21%, driven by higher gross margins from improving proviso concatenation costs contempt important FX headwinds. We expect premium proviso concatenation costs to beryllium astir $20 cardinal successful Q1, a astir $50 cardinal year-over-year reduction. Non-GAAP diluted EPS is expected to beryllium successful nan scope of $3.70 to $4.

For nan afloat twelvemonth 2023, we expect nett income to beryllium successful nan scope of a 3% diminution and 1% growth. This outlook assumes a 50-basis-point nett antagonistic effect from overseas rate changes and acquisitions arsenic FX headwinds mean passim nan year. We expect afloat twelvemonth adjusted EBITDA separator betwixt 22% and 23%. We expect premium proviso concatenation costs of astir $50 cardinal for nan year, pinch continued betterment successful merchandise availability. We person besides proactively managed operating expenses arsenic evidenced by OpEx scaling successful Q4 and caller targeted restructuring actions arsenic we participate 2023, which enabled america to sphere strategical investments successful nan business.

We expect our free rate travel to beryllium astatine slightest $650 cardinal for nan year, which reflects nan use of moving down elevated inventory levels done nan year, higher rate taxes and $180 cardinal of antecedently announced colony payments. Please reference further modeling assumptions shown connected Slide 10. Note that nan costs of borrowing is expected to beryllium astir 5% to 6% this year, and our non-GAAP taxation complaint is expected to beryllium astir 19% owed to nan United Kingdom firm taxation complaint increase.

With that, I will move nan telephone to Bill to talk really we are advancing our Enterprise Asset Intelligence vision.

Bill Burns

Thank you, Nathan. Before I talk astir nan advancement we are making connected our vision, I'd for illustration to return a infinitesimal to convey Anders for his exceptional activity pinch Zebra complete nan past 15 years. Through disciplined integrated finance and strategical acquisitions, he's led nan translator of Zebra. He sponsored an innovative and authentic civilization that has received galore awards recognizing Zebra arsenic a awesome spot to work. Also nether his leadership, shareholder worth creation has importantly exceeded broader marketplace benchmarks. I'm excited to build upon Anders bequest by continuing to beforehand our Enterprise Asset Intelligence vision.

Slide 12 illustrates really we digitize and automate nan beforehand statement of business by leveraging our industry-leading portfolio of products, package and services. By transforming workflows pinch our proven solutions that make an charismatic return connected investment, Zebra's customers tin efficaciously reside their progressively analyzable operational challenges. Our innovative solutions empower nan workforce to do their jobs much efficaciously by navigating changeless alteration successful a adjacent existent time, utilizing insights driven by our precocious package capabilities specified arsenic prescriptive analytics and intelligent automation.

As I attraction connected moving Zebra forward, we will collaborate intimately pinch customers and partners to proceed to elevate Zebra arsenic a premier solutions supplier and activity to attract, create and clasp apical world talent to thrust innovation.

Slide 13 summarizes our served marketplace opportunities and semipermanent maturation profile. The basal drivers of our business stay intact. Mega trends, including nan on-demand economy, plus visibility, mobility and unreality computing and intelligent automation, provides secular tailwinds for our business. I americium proud of nan advancement we're making successful elevating our strategical narration pinch our customers. We proceed to widen our activity position successful our halfway business and are gaining traction successful adjacent and description markets, which person higher maturation profiles. Anders and Nathan highlighted RFID arsenic a agleam spot, wherever we person a broad solutions offering for a wide scope of usage cases.

Our momentum continues arsenic we were conscionable awarded a grounds RFID triumph past week. Another item is our marketplace stock gains successful rugged tablets arsenic a consequence of our focused investment. Overall, I judge we're good positioned to present 5% to 7% integrated maturation complete a cycle, pinch an expanding charismatic separator floor plan arsenic we thrust continued traction crossed our core, adjacent and description markets.

Now we move to Slide 14. Businesses collaborated pinch Zebra to optimize their end-to-end workflows arsenic they strive to meet an expanding demands of consumers crossed a assortment of vertical extremity markets. As you tin spot connected nan slide, we reside a wide scope of workflows and usage cases crossed unit and e-commerce, proscription logistics, manufacturing, wellness attraction and different markets. Anders highlighted a fewer caller wins crossed these markets. The breadth of business challenges we are addressing has been expanding done our finance successful caller offerings and markets, enabling america to further penetrate customer accounts. For example, leveraging our existing relationships enabled america to unafraid autonomous mobile robot and instrumentality imagination wins pinch our customers successful manufacturing and storage usage cases. We spot a tremendous opportunity to proceed to elevate and turn our customer relationships done our expanded solutions offerings.

On Slide 15, we item really Zebra was capable to showcase really our solutions positively effect unit shop operations to much than 1,300 customers astatine nan National Retail Federation's waste and acquisition show past month. At nan event, we brought nan modern shop conception to life by demonstrating really our portfolio of solutions empower retailers to amended prosecute associates, optimize inventory and elevate nan customer experience. Our booth featured representatives from 2 salient retailers who stock really our solutions person improved their operational challenges. [Although some] betterment has realized nan synergies of combining Zebra's mobile printers, mobile computers and our workflow optimization package solutions that amended nan customer experience, summation ratio and trim clash successful their workflows.

Zebra's solutions person resulted successful accrued customer restitution by improving inventory accuracy and streamlining nan bargain online, pickup successful shop acquisition arsenic good arsenic complete 1 cardinal hours of annualized labour savings and reduced explanation waste. Vera Bradly has improved subordinate engagement and retention by prioritizing workloads done our task and workforce guidance package solutions. By leveraging Zebra's mobile devices and package solutions, they tin now align nan correct task to nan correct subordinate successful existent time, and accrued worker restitution by reducing clash successful scheduling. Additionally, insights successful our package solutions elevate nan customers' acquisition for Vera Bradley by empowering frontline associates pinch amended information, including visibility of merchandise inventory and pricing.

In closing, I look guardant to moving pinch our squad to beforehand our Enterprise Asset Intelligence imagination by fostering an invention -- innovative culture, collaborating pinch our customers and partners and delivering profitable maturation crossed our halfway adjacent description markets.

Now I'll manus it backmost to Mike.

Mike Steele

Thanks, Bill. We'll now unfastened nan telephone to Q&A. We inquire that you limit yourself to 1 mobility and 1 follow-up truthful that we tin get to arsenic galore of you arsenic possible.

Question-and-Answer Session

Operator

[Operator Instructions] Today's first mobility comes from Damian Karas pinch UBS. Please spell ahead.

Damian Karas

So my first mobility is related to your income outlook. And successful particular, we've heard immoderate of your competitors and moreover 1 of your awesome distribution partners precocious talking astir inventory transmission destocking taking place. I'm conscionable funny if you guys are seeing nan antagonistic effect from that astatine all? And to what grade that's factored into your guidance for nan year?

Anders Gustafsson

Yes. Starting connected nan transmission inventory side, our -- nan world transmission inventory levels are patient for us, and we spot coagulated sell-through signals and -- particularly, that's existent for our tally complaint business. Inventory levels person rebounded successful 2022 for our -- successful our channel. But you've sewage to retrieve that, astatine nan extremity of 2021, nan manufacture was going done immoderate very important proviso concatenation constraints and nan transmission was astir stocked out. So successful 2022, that rebounded to immoderate degree, but much backmost to normal levels. But inventory levels, successful absolute dollar position successful our transmission compared to, say, pre-pandemic is up. But if you normalize that astir days connected manus inventory, which is really we really measurement nan wellness of nan inventory successful nan channel, that is really astir only up by a mates of days compared to prepandemic.

Damian Karas

And past switching gears to nan separator trajectory here. If we benignant of look astatine nan debased extremity of that adjusted EBITDA guidance, it doesn't propose overmuch improvement, particularly erstwhile you benignant of look astatine nan notable measurement down you guys are expecting successful nan premium proviso concatenation cost. So I was wondering if you could possibly conscionable springiness a consciousness connected really you're reasoning astir that separator guidance range? And arsenic it relates to nan $50 cardinal premium costs, are you fundamentally assuming that, that's much aliases little eliminated by nan 3rd quarter?

Nathan Winters

So David, this is Nathan. If you look astatine our guideline for nan year, an EBITDA of 22% to 23%, it's a constituent higher than we were successful 2022. And arsenic you mentioned, nan superior driver is nan proviso concatenation improvements, which is astir 2 points of improvement, but that's being offset by 1 constituent of FX for nan year, peculiarly present successful nan first half connected nan comps from wherever nan FX -- nan complaint was a twelvemonth agone successful nan euro. We besides person pricing actions we've taken passim nan twelvemonth that are flowing through, and that's mostly offsetting worldly labour costs predicted for nan year. So that's -- that's really to framework it. We're decidedly seeing nan flow-through from nan betterment successful premium proviso concatenation costs and little freight rates, but FX is nan existent headwind that's offsetting it.

Operator

Thank you. And our adjacent mobility coming comes from Jim Rashidi astatine Needham & Company. Please spell ahead.

Jim Ricchiuti

I wonderment if you could supply america pinch your wide outlook for nan projects business successful '23. Are you seeing immoderate changes? You've expressed immoderate be aware that you're seeing from immoderate customers. But what's your outlook for that portion of nan business?

Bill Burns

Yes, Joe, I'd opportunity -- this is Bill. I'd opportunity wide that, from a macro environment, we're seeing really mixed signals. As you said, we're seeing, connected 1 hand, really elongated income cycles and immoderate softening of demand, particularly from immoderate prime ample customers. That's resulting successful immoderate delays successful pushouts. We saw that successful first 4th -- sorry, 4th quarter, and it's reflected successful our first 4th and 2023 outlook.

On nan different hand, we're really seeing that we've sewage beardown backlog and nan pipeline is patient for projects for 2023. Our tally complaint income successful 4th fourth were strong, and we're continuing to spot that successful Q1. And arsenic we conscionable talked about, our world -- conscionable nan inventory levels are healthy. So it's really mixed signals retired location that's keeping america cautious overall. And I deliberation that our position of that is that we're going to proceed to show nan situation successful 2023.

We're going to return an agile attack to really managing expenses and attraction connected profit separator description and -- but astatine nan aforesaid time, really preserving nan strategical investments we're making passim nan year. So I think, overall, we're highly assured successful our solutions offering and our expertise to proceed to return stock successful 2023, but it conscionable makes consciousness for america to beryllium cautious fixed nan macro uncertainty that's retired location today.

Joe Heel

Jim, this is Joe Heel. Maybe 1 aliases 2 further information points connected this. As we entered nan year, our pipeline of ample projects was astir nan aforesaid arsenic it was nan twelvemonth before. So rather strong, and we're rather satisfied pinch really coagulated that pipeline of ample deals was. When we are talking astir be aware and softness, I would opportunity it's benignant of nan champion imaginable point you tin dream for if you're successful sales, which is, customers are keeping nan projects. In immoderate cases, they are delaying nan commencement clip astatine them. In immoderate cases, they are rolling them retired complete a longer play of time. But I would opportunity those are fewer and acold betwixt astatine this point, and that's really nan quality of what's driving immoderate be aware connected our front.

Jim Ricchiuti

The follow-up mobility I person is conscionable arsenic you went done Q4 and frankincense acold this year, person you seen immoderate changes successful demand, meaningful changes, either successful immoderate of your awesome geographic regions aliases awesome marketplace verticals?

Joe Heel

Yes. I tin besides speak to that. I deliberation we person a fewer anomalies that you're alert of, right? You cognize astir our exit from Russia anterior year. So that gross is evidently not there. You astir apt expected that, successful nan Chinese market, we would person little gross this 4th than we had successful nan 4th -- aforesaid 4th anterior twelvemonth because of nan COVID situation. By nan way, that is very quickly recovering. We're seeing a speedy betterment of that. So those are possibly immoderate of nan changes. But different than that, I couldn't opportunity that there's a awesome displacement successful region aliases vertical constitution of our gross structure.

Operator

And our adjacent mobility coming comes from Paul Chung astatine JP Morgan. Please spell ahead.

Paul Chung

So conscionable connected nan EBITDA separator guideline up this year, tin you grow connected benignant of nan gross separator versus OpEx move and driving that outlook? Freight's coming down materially, but conscionable want to get a consciousness for gross separator description expected passim nan year, pinch 1Q astir apt beryllium successful nan trough? And past I person a follow-up.

Nathan Winters

Yes. So Paul, if you look astatine nan afloat twelvemonth guideline connected EBITDA, I mean some nan proviso concatenation improvements and FX will travel done from a separator perspective. So I deliberation we expect separator to -- gross separator to summation passim nan twelvemonth because of those 2 dynamics. I deliberation from an OpEx scaling, we'd opportunity astir level to successful statement pinch anterior twelvemonth conscionable arsenic we activity done immoderate of nan expanding compensation and inducement compensation year-on-year. But again, I think, largely, nan use successful EBITDA would travel done mostly successful gross margin.

Paul Chung

And past conscionable connected nan RFID opportunity, really ample is nan publication to nan business today? I mean, you guys person been successful nan marketplace for a agelong time. So wherever are you seeing accelerating growth, and immoderate usage cases crossed unit and different verticals?

Bill Burns

Yes, I would opportunity that -- this is Bill, Paul. The debased azygous digits is nan size we deliberation about. We're excited astir nan RFID opportunity. As we mentioned successful nan remarks that we've conscionable won our largest RFID opportunity ever really successful nan T&L space. And we've seen RFID move from conscionable really unit into unit proviso chain, now into nan broader proviso concatenation and opportunities wrong proscription logistics, which is really astir parcel and others that create really an opportunity of a wider served usage cases. And successful retail, we're seeing ample retailers instruction nan tagging of items wrong retail. We're seeing caller opportunities location astir nonaccomplishment prevention. As I mentioned, T&L opportunities, we're seeing quick-serve restaurants deploy RFID. In nan NFL, we're doing some progressive and passive RFID. So we conscionable renewed nan statement location wrong -- successful our narration wrong nan NFL.

So we're excited astir nan RFID market. We've sewage nan broadest and deepest group of RFID solutions coming successful nan market, ranging and covering each those usage cases I talked about. So nan description of nan usage cases beyond unit is what's breathtaking to us, and we've sewage nan portfolio really to spell reside it and we're excited astir it.

Joe Heel

Let maine adhd 1 different thing, Paul, to that, which is, I deliberation tipping points successful nan RFID marketplace person been claimed respective times successful history, and I don't deliberation we want to opportunity that today, but location are immoderate very breathtaking developments successful this marketplace that we're surely bullish on. One of them is, past year, 1 of our largest retailers announced that they were converting important portions of their cognition to RFID. And nan triumph that Bill mentioned earlier successful his remarks that we conscionable -- which was a grounds RFID deal, nan largest successful surely our business and we judge successful nan industry, is successful T&L.

And truthful pinch 2 ample retailer and a ample T&L institution adopting RFID, what this will do, we think, is that it will thrust economies of standard successful nan marketplace and besides beryllium a lighthouse for different competitors successful these segments to adopt this technology, which provides important improvements successful throughput clip and productivity, successful summation to nan economies of standard that delivers for nan broader market. So we're beautiful excited astir this and foresee immoderate beardown maturation for it.

Operator

And our adjacent mobility coming comes from Keith Housum pinch Northcoast Research. Please spell ahead.

Keith Housum

Joe, conscionable unpacking immoderate of nan guidance a small bit. When you're seeing deals that are being delayed aliases benignant of dispersed out, possibly tin you springiness america a small spot of colour astir nan momentum aliases nan information that nan companies person successful doing so? Is it business circumstantial issues? Are they worried astir nan economy, possibly a small spot of guidance there.

Joe Heel

Yes. Keith, this is Joe Heel again. What we're proceeding from those customers is mostly that they are looking to accommodate their spending to their budgets. And if we deliberation astir retailers, which astir apt dress up a meaningful information of immoderate of those situations wherever we're seeing that, they are adapting their budgets to what they spot arsenic request successful for their business. And arsenic they're doing that, they're asking to dispersed -- they still request our technology. I deliberation that's nan important portion that we spot and why we're seeing a push retired aliases possibly a hold successful nan deployment schedule. So they're trying to fresh it successful because they cognize they request this technology, but they're trying to accommodate erstwhile they're spending nan money to erstwhile they deliberation it will beryllium disposable successful their business. I deliberation that's nan champion description.

Keith Housum

And Bill, conscionable trying to unpack a small spot much astir nan proviso concatenation issues arsenic my follow-up here. Do you guys spot still nan mediate of nan twelvemonth erstwhile proviso concatenation issues really go alleviated and you're backmost to prepandemic levels?

Bill Burns

Yes. I deliberation that -- I mean, from an readiness perspective, I deliberation we're beautiful overmuch there. I mean we're seeing components move into reasonable, overmuch much reasonable lead times, not all, but many. The mostly of our items person travel backmost to normal transportation clip frames overall. So I deliberation that we consciousness bully astir our proviso concatenation and nan betterment of that, really almost nan mostly of almost everything really successful first 4th is what I say, from our proviso concatenation perspective.

Nathan Winters

Yes. Keith, nan only point -- this is Nathan. I'd adhd is, it's evidently a move environment, and we're monitoring it successful position of events and shutdowns and things for illustration that, that could disrupt that. And I'd besides opportunity it's besides relative. If you look astatine -- our freight rates is simply a awesome example. It's meaningfully amended than wherever they were a twelvemonth agone aliases moreover 6 months ago, but still we're still paying 2 times to 3 times what we salary prepandemic. So I deliberation it's besides comparative successful position of wherever we were historically to wherever we've been a twelvemonth agone successful position of really we consciousness astir nan wide proviso chain.

Operator

And our adjacent mobility coming comes from Meta Marshall pinch Morgan Stanley. Please spell ahead.

Meta Marshall

Just a mates of questions for me. One, you mentioned longer woody cycles, but I conjecture I was conscionable wondering, is location immoderate alteration to benignant of nan woody sizing that they're putting together of possibly looking astatine immoderate lower-cost SKUs aliases outfitting benignant of less reps? Just immoderate alteration to benignant of nan wide woody size that's worthy noting?

And past maybe, second, now that you've had Matrox conscionable a mates of quarters, you did mention immoderate benignant of instrumentality imagination type wins. Just wondering benignant of wherever you're seeing -- wherever you are connected that integration wherever you spot benignant of nan champion opportunities going guardant there?

Joe Heel

Meta, Joe Heel here. In position of nan longer -- successful position of nan quality of these longer woody cycles, generally, we person not seen downsizing of deals aliases down tiering of devices. I could deliberation of possibly 1 aliases 2 instances. It's much what I was describing earlier to Keith wherever nan woody is being elongated successful position of either nan deployment schedule complete alternatively of taking it each successful Q1, they're going to return it complete 3 quarters for nan remainder of nan year, aliases they mightiness say, I don't want to return it successful Q1, I want to return it successful Q2. That's nan astir communal one. Downsizing, I would opportunity not truthful much, right? We're not seeing that arsenic much.

Mike Steele

Yes. From a Matrox perspective, I tin return that, Joe. I think, overall, we're encouraged surely by nan advancement of Matrox. It performed good successful 2022 pinch really a grounds year. nan integration is moving arsenic planned. As benignant of a speedy reminder, nan Matrox is really complementary to our integrated finance that we made successful nan fixed business scanning and smart camera market. It really brought to america nan breadth and extent of nan portfolio that our partners were encouraging america to person successful that marketplace. So it brought imagination controllers and Frank grabbers and 3D sensors on pinch a portfolio of package solutions and a package room to meet galore usage cases successful that marketplace overall. So I'd opportunity we're happy pinch nan advancement truthful far. It's -- there's tons of opportunities for america retired location successful instrumentality imagination crossed manufacturing, and proscription logistics is nan superior markets that we're focused connected and things are going good truthful far.

Operator

And our adjacent mobility coming comes from Guy Hardwick astatine Credit Suisse. Please spell ahead.

Guy Hardwick

Particularly arsenic it pertains to your Q1 guidance, tin you springiness america immoderate benignant of trends arsenic to nan quality betwixt Zebra income into nan transmission and past nan supplier income retired of nan channel, and possibly besides really that differs from nonstop business?

Nathan Winters

So possibly conscionable to framework nan Q1 guideline of minus 4% to minus 1%, again, arsenic we mentioned before, we have, again, backlog and pipeline to support nan outlook. We've really had a coagulated commencement to nan quarter, some successful shipments into nan transmission arsenic good arsenic we're seeing bully momentum from a income out, peculiarly connected nan tally complaint business. We're besides realizing immoderate bully value realization, which is astir 1 constituent of use successful nan quarter. So I'd say, early on, again, seeing bully momentum some from a income successful and income out. I'd opportunity nan -- but nan guideline besides reflects, arsenic we've talked astir before, much nan uncertainty successful nan situation and that cautious behavior, peculiarly arsenic a batch of our customers are finalizing their superior budgets for nan year. And nan different point important to statement is that Q1 takes nan afloat effect of nan Russia headwind for nan year, which is astir 1 constituent for nan first quarter. So I would say, nary meaningful quality betwixt what we're seeing wrong our ain activity pinch nan transmission arsenic good arsenic from a income retired perspective, that's noteworthy.

Guy Hardwick

Just to travel up. Is it correct that nan gross separator use from proviso chain, declining proviso concatenation headwinds should beryllium astir important successful Q1?

Nathan Winters

From a year-on-year perspective, if you look astatine nan EBITDA guideline of astir 21%, nan proviso concatenation use aliases nan premium proviso concatenation use is astir 3 points, but that's offset by 2 points of FX. So that's -- those are nan benignant of main drivers from a year-on-year. But yes, you're right. From a year-on-year perspective, Q1 past twelvemonth was astir nan highest successful position of premium proviso concatenation costs.

Operator

And our adjacent mobility coming comes from Rob Mason astatine Baird. Please spell ahead.

Rob Mason

I conscionable wanted to circle backmost again to your commentary astir nan tally complaint business. Several times you've commented connected patient income there, waste out. I'm conscionable curious, really overmuch visibility do you person into nan bookings trends successful that portion of nan business? And is it seeing immoderate of nan elongated woody cycles aliases immoderate consciousness of that?

Joe Heel

Joe Heel, here. The tally complaint has been very strong, I would say, for Q4, successful particular, and we're seeing that proceed into Q1. We -- successful position of visibility, this is nan type of business wherever group evidently don't book large deals pinch us. They spell to distributors and bargain what they person connected their shelf. So nan visibility is typically based connected our conversations pinch distributors and what they're telling us, they're seeing arsenic their bid intake. And truthful it's overmuch little of a visibility. But what we person truthful far, moreover successful nan first weeks of this quarter, has been very strong. So we've been pleasantly surprised, successful particular, for printing and scanning, which were areas of our business that we didn't person arsenic overmuch banal complete nan people of nan past year. And arsenic a result, we're very pleased to spot that, that tally complaint successful printing and scanning successful particular, is truthful resilient, right, that customers are staying loyal to america and continuing to bargain again from nan distributors.

Anders Gustafsson

Maybe there's 2 further points connected that. One will beryllium that we don't needfully person nan aforesaid visibility into each and successful each deal, but this is 1 wherever you person a ample number of orders, truthful you get benignant of a much statistical assurance from that. And if you look astatine historically, our tally complaint business tends to beryllium much of a longer rhythm business for us. If we person a beardown quarter, it tends not to beryllium benignant of 1 beardown 4th and past it drops down. It tends to beryllium that we person 4 to six quarters of spot successful those -- successful that cycle. So it's followed by possibly 1 aliases 2 quarters of a small softer demand. So we would expect this to proceed for a fewer much quarters.

Rob Mason

Understood. Understood. And past I wanted to spell backmost to your geographic commentary. I deliberation erstwhile you mentioned Asia, you called retired Japan was strong. I think, historically, Japan has not needfully been a ample marketplace for you. Could you conscionable outline possibly what you're seeing successful Japan, what your expectations mightiness beryllium there? If thing is changing connected that front?

Anders Gustafsson

First, we're very pleased pinch nan capacity of nan quarter. We had grounds sales. We came successful supra nan precocious extremity of our outlook. We executed very well, I think, and recovered from nan distribution web challenges that we had successful Q3, and we drove double-digit income successful North America. We talked earlier astir nan spot we've seen successful benignant of tally complaint business, and we spot that surely successful mini and midsized customers. And we had peculiarly beardown maturation from a solutions position pinch print, information capture, RFID, tablets, but partially offset by little mobile computing income successful Europe, owed successful portion to nan exit from Russia successful Q1 of past year.

Now Asia-Pac was -- had a bully performance, peculiarly erstwhile you see COVID successful China. We person very broad-based growth, and we saw bully maturation successful China, Australia and New Zealand. But Japan, arsenic you mentioned, is benignant of nan standout here. They person -- we had exceptional maturation successful Japan. We person invested successful driving penetration successful nan Japanese marketplace complete nan past respective years, some from a go-to-market perspective, but besides from a merchandise perspective. And this ample postal bearer triumph that we mentioned is benignant of nan latest grounds of that. So we now person a very beardown position successful Japan successful mobile computing, which is 1 of nan largest markets successful nan world that we really didn't person overmuch of a beingness before.

Joe Heel

And I'll adhd 1 point to that. So Japan is nan 3rd largest marketplace that we run in. And it's one, arsenic you opportunity correctly, wherever our stock successful nan past had been comparatively low. But 2 important things person changed that I deliberation person fixed america immoderate really bully momentum here. Andrew has mentioned it. The first point that's changed is that nan marketplace has begun to clasp Android. And this whitethorn look for illustration it's retired of pace, and it is overmuch later than galore different markets successful nan world that, that marketplace has made nan mobile computing displacement from Windows to Android, and that has fixed america a large opportunity, right? Because galore of nan section Japanese competitors, who person dominated that market, person not been arsenic speedy pinch Android arsenic we have, and that has fixed america an opportunity, and that's a awesome illustration is this postal bearer woody that Anders mentioned. That's what we did.

The 2nd point that we've done is, we person shifted our go-to-market strategy to attraction much heavy connected partners. And truthful we're moving pinch immoderate of nan largest systems integrators now successful nan Japanese market. That's really we won this nan postal bearer deal. That's really we've won respective different ample deals, successful particular, successful unit astir mobile computing. And nan operation of those 2 are really giving america immoderate momentum we hadn't seen successful immoderate of nan years before.

Operator

And our adjacent mobility coming comes from Brian Drab astatine William Blair. Please spell ahead.

Brian Drab

I was conscionable wondering if you could talk a small spot much astir what you're seeing successful nan different verticals? I'm not judge you've really waste that retired this greeting successful position of manufacturing, retail, transportation, logistics, wellness care. I presume you want to springiness expected maturation rates for those verticals successful 2023, but if you could moreover springiness ranges aliases rank bid wherever you're expecting nan astir spot aliases nan weakest performance?

Anders Gustafsson

That tin beryllium a agelong answer. So I'll springiness you -- commencement a small spot high, and past we tin prime up a mates of nan verticals possibly here, but crossed each our verticals, arsenic I said, we are seeing very beardown secular trends to digitize and automate workflows and empower frontline workers successful a overmuch much labor-constrained environment. And these trends proceed to thrust an accrued request for our type of solutions crossed a wide scope of vertical extremity markets. You specifically mentioned manufacturing. We had a very beardown capacity successful Q4 successful manufacturing. We had a number of very important wins that we were very proud of. We are mentioned nan 1 successful nan automotive broadside successful my prepared remarks.

There are immoderate charismatic trends successful manufacturing that are helping to thrust our business here. One is astir nan business must put successful traceability devices to create much sustainable proviso chains. Another 1 is astir business automation finance trends successful productivity and visibility. And those coming opportunities for our solutions, including instrumentality imagination and our autonomous mobile robots aliases Fetch solutions.

We've surely seen very beardown traction pinch instrumentality imagination successful manufacturing and person immoderate charismatic early wins here. We are very excited astir what we -- what and our Adaptive imagination acquisitions tin bring to our customers and partners here. I tin excavation into different verticals also, but spot if you person immoderate different questions here.

Brian Drab

Well, I mean I was conscionable wondering if you could comment, moreover conscionable concisely aliases conscionable a slug constituent connected each one, proscription logistics, up aliases down successful 2023, wellness attraction up aliases down, unit up aliases down, conscionable directionally even, and thing connected each of nan 4 awesome verticals you play in?

Anders Gustafsson

I deliberation that we astir apt will time off benignant of nan outlook astir nan wide firm level. But possibly I'll conscionable opportunity that for -- successful retail, successful 2022, we had astir level income successful unit vertical pinch immoderate very broad-based maturation that offset nan pullback of 1 very ample customers. So you tin spot nan beardown momentum we person crossed nan manufacture wherever we could offset a very ample customer pulling backmost successful a beautiful large way. So nan diversification we person crossed each of these verticals is decidedly helping america to mitigate benignant of volatility and thrust much accordant results.

Operator

And our adjacent mobility comes from Tommy Moll of Stephens. Please spell ahead.

Thomas Moll

I wanted to commencement connected nan gross outlook you've provided for 2023, which you've described arsenic embedding a cautious approach. When you usage that connection cautious, are you chiefly referring to immoderate of nan spending patterns among nan ample customers that you referenced? Or is this much a philosophical accommodation you've made wherever you look astatine your opportunities and possibly you discount nan probability of conversion connected immoderate of these deals higher than you typically would conscionable fixed nan macro uncertainty?

Nathan Winters

Tommy, this is Nathan. I think, arsenic you look astatine nan afloat twelvemonth guide, which is about, from an integrated perspective, somewhat down astatine nan midpoint, arsenic you mentioned before, I deliberation it's a operation of nan two, right, some benignant of cautious successful nan wide assumptions owed to nan macro situation and really that's going to play retired done nan remainder of nan twelvemonth arsenic good arsenic to your different constituent of really we benignant of look astatine each -- look astatine immoderate of those ample opportunities and probability weight those for nan year. And we think, we judge nan scope we provided is fixed that wide uncertainty.

Bill Burns

Yes, I'd conscionable adhd that I deliberation we consciousness bully astir our business. I deliberation this is really each astir macro uncertainty. I mean I deliberation we deliberation that we're going to proceed to return stock successful 2023. That's really we spot it. We're nan leader crossed nan halfway markets we serve. We've sewage charismatic opportunities crossed nan adjacencies and nan description business we've invested in. So I deliberation we consciousness bully astir our business. I deliberation nan uncertainty really is astir what's happening astir macro, and we're intelligibly seeing immoderate of that travel done successful our results successful Q4 and our guideline for Q1 and '23.

Thomas Moll

And if nan macro were to deteriorate, could you rank bid aliases possibly conscionable place 1 aliases 2 of nan cardinal verticals wherever you would expect to spot that unit first versus possibly immoderate of nan verticals wherever you would expect much a secular maturation inclination done nan year? Is that possible?

Bill Burns

I'm not judge we'd spot it arsenic abstracted verticals. What I'd opportunity is that nan crossed nan diversification of our solutions and our verticals really springiness america benignant of resiliency successful a downturn, which would dampen immoderate of nan cyclicality. So I deliberation this divers solutions based that we person successful merchandise portfolio and nan caller investments we're making is dampen cyclicality crossed that customer base. So I'm not judge we'd spot it arsenic 1 worse than nan other. I mean, Joe whitethorn want to adhd to it. But I deliberation that we deliberation wide that we're going to return a disciplined attack to OpEx during nan twelvemonth and attraction our investments. I deliberation that, from that perspective, I don't deliberation we spot 1 vertical complete another.

Anders Gustafsson

You could deliberation of possibly arsenic wellness attraction arsenic 1 that will beryllium much resilient. I deliberation nan economical cycles will astir apt not effect wellness attraction arsenic much. So it's been our fastest-growing vertical complete rather a while, and we would expect that to proceed to do well. much irrespective of nan economical outlook.

Operator

And ladies and gentlemen, this concludes our question-and-answer session. I'd for illustration to move nan convention backmost complete to Mr. Gustafsson for immoderate closing remarks.

Anders Gustafsson

So arsenic I wrap up my 62nd net call, I would for illustration to again convey our partners, customers and labor for their contributions successful transforming Zebra. I americium proud of nan advancement we person made together and judge we will proceed to prosper pinch Bill arsenic our adjacent CEO. I besides want to convey our analysts and investors for your continued support of Zebra. Although this will beryllium my past net call, I look guardant to ensuring a soft activity modulation and starting my caller domiciled arsenic Executive Chair, while continuing to support Bill and Zebra's ongoing success. Have a awesome day, everyone.

Operator

Thank you. Ladies and gentlemen, this concludes today's convention call. We convey you each for attending today's presentation. You whitethorn now disconnect your lines, and person a awesome day.