Good morning, everyone and welcome to the Q1 2016 Zebra Technologies Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please also note that today's event is being recorded. At this time, I'd like to turn the conference call over to Mike Steele, Vice President, Investor Relations. Please go ahead.

Good morning and thank you for joining us. Today's conference call and slide presentation will include prepared remarks from Anders Gustafsson, our Chief Executive Officer; and Mike Smiley, our Chief Financial Officer. Anders will begin by discussing our first quarter highlights and key drivers of the results. Mike will then provide more detail on the financials and discuss our 2016 outlook. Anders will conclude with an overview of our strategic priorities in 2016 and a brief update on our integration of the Enterprise business. Following the prepared remarks, Joe Heel, our Senior Vice President of Global Sales will join us as we take your questions. This presentation is being simulcast on our website at investors.zebra.com and will be archived there for at least one year. Before we begin, I need to inform you that certain statements made on this call include forward-looking statements which are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect the company's current expectations concerning future events and are subject to a number of factors and uncertainties that could cause actual results to differ materially. A detailed discussion of these factors and uncertainties is contained in the company's filings with the Securities and Exchange Commission. During this call, we will make reference to non-GAAP financial measures, as we describe business performance. You can find reconciliations of our GAAP to non-GAAP results in today's earnings press release. Now, I'll turn the call over to Anders. Anders Gustafsson - Chief Executive Officer & Director: Thank you, Mike. Good morning, everyone, and thank you for joining us. It was clearly a challenging quarter as the softening demand we began to see in late 2015, particularly in North America, unexpectedly persisted through the end of the first quarter. As a result,…

Thanks Anders. As you can see on slide five, adjusted net sales for the first quarter were $850 million, a 3% decline year-over-year on a constant currency basis. Enterprise adjusted sales were $537 million, down 4% year-over-year on a constant currency basis. Data capture and services declined while mobile computing sales increased slightly. We saw the steepest decline in data capture due to a difficult comparison, as we realized especially strong demand in Q1 2015. Wireless LAN sales, which represents approximately 3% of total Zebra, also were lower than last year. Legacy Zebra sales were $313 million, down 3% on a constant currency basis, against 19% growth in Q1 2015. This is largely driven by a decline in location solution sales related to last year's NFL contract. Our supplies business resumed growth in Q1 while printer sales declined slightly. As Anders mentioned, sales in North America declined 7%, with the sharpest decline in data capture offset by modest growth in mobile computing. EMEA generated modest growth, up 1% from a year ago on a constant currency basis. Slight growth in mobile computing, data capture and supplies were partially offset by lower printer sales. Sales in Asia-Pacific grew 10% in constant currency, led by strong performance in China. We saw growth in all major product categories. The growing middle class is creating healthy momentum in e-commerce and healthcare and driving growth in China and India. In Latin America, sales declined 15% as the result of a continued difficult macroeconomic environment, particularly in Brazil. Sales grew slightly in Mexico, where we are seeing signs of stabilization and have an improving pipeline of opportunities. Adjusted gross margin was 46.2%, at the high-end of our expectations and in line with the prior period. The benefits from integration synergies, including lower service costs, were partially…

Thanks, Anders. We've reserved the balance of the hour for Q&A. We ask that you limit yourself to one question and one follow-up so that we can get to as many of you as possible. Jamie, please let our callers know how to ask a question.

Before we start, just real quick, I wanted to clarify something that I – in my prepared remarks, I mentioned that in our – achieving our goal of $300 million of debt repayment, I said that our working capital would provide $30 million of cash. Well, that number should be $100 million. I just want to make sure that's correct for everyone. Thank you.

And our first question comes from Paul Coster from JPMorgan. Please go ahead with your question.

Yeah. Thanks. Two questions. The first one really is to do with sales-out versus sales-in, in the United States. Can you just sort of clarify which products we are talking about? And what is this telling us about the sort of confidence of the distributors versus the end customers? And then I have a follow up. Anders Gustafsson - Chief Executive Officer & Director: Yeah. We saw the same trend in North America, Europe and Latin America, where the end markets were a little weaker than what the distribution partners had expected at the beginning of the period. So, when their expectations are tempered a little bit, tempered down a bit, they tend to reduce their inventory positions, in order to maintain the same level of days on hand. But for us that means that basically sales-out continues at a reasonable clip, but they can then satisfy that with inventory in hand for some time. So for us, our revenue recorded becomes less, while the sales-out, which is a better indication of the health of the end markets, continues at the better pace.

Okay. And then the follow-up question Anders is that, I think people will be forgiving if this is an air pocket that's cyclical in nature. I think the concern is that there is competition, there's commoditization, substitution by smartphones of some of the MSI business, and that some of the secular growth isn't as strong as perhaps depicted. So, can you just sort of give us some sense of whether there's an – what your view of the competitive landscape and the commoditization risk currently is and whether that's also impacting you in addition to the cyclical slowdown here? Anders Gustafsson - Chief Executive Officer & Director: Yeah. Our industry is clearly competitive. We always said it's a competitive industry, but it is also fairly fragmented. Zebra is the clear market leader, and if you go back to 2015, we gained share across all our main product lines globally, and early indications are that we held or gained share in the first quarter here also. So, I think the cost for the difficulty we're seeing is much more macro in nature. I think we certainly feel that we are very well positioned to continue to expand our leadership position in the industry. And our customers view us now much more as being strategic to them, our solutions are well respected and needed by our customers and I think we're very well aligned – our solution is very well aligned with our customers priorities.

Okay. Thank you.

Our next question comes from Brian Drab from William Blair. Please go ahead with your question. Brian P. Drab - William Blair & Co. LLC: Good morning. Thanks for taking my questions. First one is just on OpEx is up slightly year-over-year and the expectation was for it to be flat to slightly down. Mike you mentioned the litigation expense, I guess that's related to the lawsuit around the NFL technology, I'm just wondering if you could comment further on why OpEx was up slightly year-over-year versus your expectation for flat to down? And are those litigation costs something that – is that a headwind we should be expecting to be around through the balance of 2016, do you have any idea?

Yeah. The majority of that increase is related to a settlement, so fortunately settlements don't incur additional costs, so that shouldn't be ongoing. It's related to an IP matter, and it's not the – it's not related to the NFL. I think that one thing we would want people to take away is that, we have been aggressively managing our cost. And I think as we put out our forecast for Q2, we're seeing slightly lower year-over-year OpEx as we go into the second quarter, so OpEx is getting a lot of focus from management at this point. Brian P. Drab - William Blair & Co. LLC: Is that settlement – does that settlement account for the discrepancy between what you are expecting for OpEx versus the actual result?

Most of it. There's a little bit also of healthcare. Healthcare is a difficult item to forecast. And so, depending upon the actual employee health issues it goes up and goes down. So the biggest – the biggest one is the litigation related to the IP. I'd say the next one is healthcare. Brian P. Drab - William Blair & Co. LLC: Okay. Thanks. And then can I just ask too, is there any way you could quantify what we were talking about in the last caller's question related to the sell-through for the channel. Anders you mentioned that the channel is seeing growth, what sort of growth are they seeing, how big is the discrepancy between your sales versus what the channel is seeing? Anders Gustafsson - Chief Executive Officer & Director: Yeah. I don't think we can quantify it in real dollar terms, but the channel sales were slightly negative for us in North America, but they were on the sales-in basis, but they are positive on the sales-out basis. So there was a difference, but I wouldn't say that that would be – that's not the sole reason for why we missed our numbers. Brian P. Drab - William Blair & Co. LLC: Understood. Do you have any sense for the inventory level going into the second quarter in the channel? Anders Gustafsson - Chief Executive Officer & Director: Yeah. We believe that the inventory level going into the channel is appropriate. And we are forecasting basically a neutral sales in and sales out for the second quarter. Brian P. Drab - William Blair & Co. LLC: Okay. Thanks very much. Anders Gustafsson - Chief Executive Officer & Director: Yeah.

Our next question comes from Keith Housum from Northcoast Research. Please go ahead with your question.

Good morning, gentlemen. Anders Gustafsson - Chief Executive Officer & Director: Good morning.

Good morning, guys. If I could just follow-up on the performance of the legacy Zebra business during the quarter, I just want to clarify, how the business performed excluding the Location Solutions Group?

Effectively, it was fairly flat except for Location Solutions. Location Solutions was the major change from year-to-year.

Okay, great. And as we look at the first quarter guidance and the second quarter guidance, obviously, compared to full year, you guys are expecting significant growth, I think even in second half of the year, what gives you guys the confidence in that? Is it the larger deals, is it your pipeline as you guys are exiting the quarter? Anders Gustafsson - Chief Executive Officer & Director: Yeah. So, we have confidence in our 2016 outlook as we've outlined here now. We certainly had persistent macro headwinds in the first quarter. It's a big drive. And when we look at the markets going forward, we don't believe that they are getting worse. If anything that feels like Q2 is getting a bit better, but we want to have a cautious tone I guess to this, and we've also taken a more cautious assessment of some of the assumptions that we used to build up our forecast. So, I think on the last call, we talked about our close rates for the deals we have in the pipeline, they ended up being lower than what we had expected, lower than what we had seen in the last five years, based on both the budgets being pushed out, but also more C-level people changes where they kind of came in and put a freeze on some projects until they could figure out what the new IT strategy and IT projects priorities should be. And we're also assuming some longer sales cycle based on what we've seen here in the quarter. But we do expect stabilization in the second quarter, and we would expect to have sequential growth, but we're forecasting basically sequential growth in line with historical trends when we look at what the business has done quarter-over-quarter over the last five years. It gives us a sense of what's normal, so we don't want to – we're not pushing beyond that particularly. And as I said earlier, sales-out versus sales-in we're forecasting to be neutral. Our partner community they were very bullish beginning of the year at the end of last year, beginning of this year, and they continue to remain very optimistic. So that gives us some confidence. We launched our new partner program, PartnerConnect in April, that we believe will help us drive some enthusiasm around our brand and recruit some more partners and win more business, and we have a good pipeline, we do have a very strong pipeline for the business.

Great. So you said that they are – they are just being pushed out and not being cancelled, but deals are in the pipeline? Correct. Anders Gustafsson - Chief Executive Officer & Director: Yeah. The vast-vast majority of them are just being pushed out some to Q2, some further out. We don't expect that trend will totally stop. I suspect that we will see some continued push out from Q2 to Q3, but it will diminish as the year goes by. And our – we have not lost anymore deals than we would normally do, so this is not about we losing deals. This is deals getting pushed out.

Okay. Thank you.

Our next question comes from James Faucette from Morgan Stanley. Please go ahead with your question. James E. Faucette - Morgan Stanley & Co. LLC: Thanks very much. I guess I have two questions. First, gross margins seems to have rebounded in the first quarter. And I'm wondering kind of, if you can give a little color what drove that, was that mix or were there build material changes, et cetera? And then I have kind of a longer-term question or specifically related to 2017, is that if we look, you're continuing to talk about getting below three times debt-to-EBITDA type ratios, but – and it seems like they're indicating that part of that will come through the commitment to pay down the $350 million in debt, but at the same time I think at least what we're seeing today is that, the earnings outlook for 2017 probably looks a little dimmer today. And then also it seems like you're also reducing a little bit your synergies benefits expectations, so I'm just wondering if you can help us bridge a little more directly what you think you may have to do or how you can get those ratios? ?Thank you.

Yeah. This is Mike. And so, there is a couple of questions in there and I'll start with the gross margin. I think, first of all, we were very pleased with the results in the first quarter from a gross margin standpoint. One of the nice things that we saw there was our services margin improved meaningfully in the first quarter, which helped, obviously the synergy work we've been doing on the procurement side has helped us. We see as the year goes on that we'll continue to benefit from further work that's been done on the procurement side. Volume will also improve. So, from what I think was a very solid first quarter, we see that continuing to improve through the end of the year. So, when you look at the cash flow available for re-payment of our debt, part of it's going to come from the stronger margins to offset some of the top-line dampening that we've been sharing. As far as the ability to reach our three times net debt to EBITDA, there is a couple of things that I want to highlight is that when we set the $350 million for 2017, we weren't assuming that all of our cash for 2017 would be necessary to get down to that three times debt to EBITDA, so there is – so as a result, if we achieve what our expectations are in 2017 even with what we had prior to our current change, we could have done more than $350 million and we still see an easy path getting to the $350 million. As far as the $300 million for this year, again just to reiterate, we said that we expect our EBITDA margin to improve from last year. And as I tried to clarify earlier, working…

Our next question comes from Richard Eastman from Robert W. Baird. Please go ahead with your question. Richard Eastman - Robert W. Baird & Co., Inc. (Broker): Yes. Thank you. Anders, could you just speak a little bit. I just want to dig down into this dynamic around the push-out of the deals. We continue to pick up, obviously the omni-channel spend is still pretty healthy. We do have this Android/Microsoft operating language conversion on the mobile computing side. I'm just curious, what is the genesis of the push-outs? I mean, the spending in the omni-channel, and you commented earlier that your retail business was down. But that spending in the omni-channel seems to be somewhat independent of the health of the retailers, given that they're supporting their online spending infrastructure, or their online shipment infrastructure. So maybe you could just help us understand the context of these push-outs and maybe the timing of that? Anders Gustafsson - Chief Executive Officer & Director: Yeah. I'll start a little broad, a little high, and then I'll kind of narrow myself down to more the omni-channel activities, but first I'd say the corrections we saw in the stock market in late 2015, early 2016, that happened as people were starting to put together their 2016 operating budgets. So I think that caused people to wonder, should I lean into 2016 or should I lean out of it. So, I think people took a little longer to finalize their budgets, they took a little longer to hand down those budgets to their operating units. So it took longer for basically the businesses to get back to business again. And also in retail specifically I think the Christmas season was kind of uneven between the different retailers. And the omni-channel activities for retailers, it's…

Our next question comes from Jeff Kessler from Imperial Capital. Please go ahead with your question.

I'd like to drill down on the – sorry, on your pipeline a little bit. Could you describe the nature of what's in the pipeline from a – let's just say from a functional or perhaps from a vertical market point of view, and what gives you that confidence that that pipeline is going to have a good gross margin in it? Anders Gustafsson - Chief Executive Officer & Director: Yeah. So, I'll start and then I'll hand over to Joe Heel here also. But we've driven a lot of discipline around how we manage our pipelines, making sure all the deals get put into the pipeline. So, we have as good a visibility into all the opportunities that we work on to make a quarter. We categorize all the opportunities based on, if it's something that's high likelihood, medium likelihood or less likelihood and then we have our run rate business too in there. So, there's a number of different components that we look at historical, statistical conversation rates to add up to our forecast, and that's worked very well for us for many years. The conversion rates were lower in Q1 than they've been before and that we had not anticipated that. We think that's because of the uncertainty in the economy and budgets getting pushed out later and so forth, not something that is systematic. Thinking more episodic. I think Joe can probably give you a little bit more color around exactly how we use the pipelines?

Yeah. So, what we're seeing in the pipelines is very much a product of what Anders described happened in the first quarter in terms of some of the deals in particular in retail pushing out. Those deals are in our pipeline going forward and the ones that we see there are the more significant investment decisions in particular things related to for example the operating system migrations. Those are big decisions that the retailers need to make and they were affected by this hesitation that they perhaps sensed in the first quarter. But we see those in our pipeline where the customers are planning to do those operating system migrations. The other things that we see in the pipeline are the new products. We've released a significant number of new products as you've seen over the last one to two quarters and those are beginning to take hold in our pipeline as are some of the new technologies that we have developed in some cases with customers. So that's a good summary of what we're seeing.

Okay. Also, on the incremental $30 million that you have – or $50 million, assuming that you expect to save in synergies this year. You mentioned that a portion of that is going to go to, I believe, $30 million or $20 million will go to gross margin and the rest is going to go into operating expense. Is this a – is this in effect an incremental improvement over improving the margin than you saw in the first round of expense – of synergies?

Yeah, this is Mike. So yes it's $50 million, $30 million of it is cost to goods sold, $20 million is OpEx. Again this is improvements from 2015 and for the OpEx, a portion of it is just actions that happened in last year will have a full year effect in 2016. The cost of goods sold is primarily procurement related items where you have to sort of burn through old inventory at higher prices before you can process through your P&L, the lower cost items that you negotiated previously.

Okay. So interpreting that last sense, you are saying that essentially by doing that. The margin on cost of goods should continue to be helped by what you're doing right there on that $30 million?

Yeah, so we talked about the gross margin. As we go through the year, we see – obviously we're affected year-over-year by FX headwinds, right. So that is a negative impact for us on our gross margins. We saw actually in the first quarter of 60 basis points. That's offset by the synergy benefits that we saw, services improvements in margins that we talked about in the first quarter, we expect it continues through the full year. And then as we forecast it, our revenue is going to increase, our volume is going to increase as the year progresses, and that will also help us. So as we've talked about gross margins, though we've done – considering the headwinds of FX, we had very strong Q1 and we expect that to continue through the end of the year.

Okay, great. Thank you very much.

Yes.

Our next question comes from Andrew Spinola from Wells Fargo. Please go ahead with your question.

Anders, I wanted to ask you about the long-term EBITDA guidance of 18% to 20%. When you've talked about that in the past, you've sort of referred to it as not just a range that you hope to be in just for a moment and then back below it, but a range you hope to operate in on a consistent basis. As you can imagine after this quarter and the lower guidance, it's starting to look fairly far out into the future, and even the low end of that range is looking more difficult to achieve. So it would seem to me there's going to need to be an inflection here in the expenses or the gross margin to reach that range by the end of 2017. So I'm wondering two things. One, do you still feel like that range is the range you will be in as opposed to just a peak range? And at what point in 2016 and 2017 will we start to see this inflection that you can get to that? Anders Gustafsson - Chief Executive Officer & Director: So, first, we are confident that that's still a very appropriate range for us and we expect to be within that range more consistently. I think the original target was for that to happen as a run rate as we exit 2017. So, I think that what we saw here in the first quarter is much more driven by short-term economic issues that seems like many other companies have been hit by too, not a structural issue to us or our industry. We feel we have good growth opportunities. We have good opportunity to expand our gross margin, expand our EBITDA margin as well. So, I feel that's a very appropriate and doable target for us.

Yeah. Just to follow-on Andrew, just not to belabor the point, but if we had – the exchange rate – the goals that you talked about were set and we did the acquisition. And at that point, the exchange rate for the euro was a about a $1.33. So, if we were still in that environment today, our EBITDA margin would be 19.8% for the first quarter. So, I think from a management standpoint, as Anders is saying for us to still hold onto this 18% to 20% EBITDA margin. I'm hoping people will realize that we are managing in a very, very challenging environment. That said, as I mentioned on the previous question, we still see in the year, we had very strong Q1 gross margin. We see that improving through the year. We have – we're managing our OpEx carefully and I would say that within our current OpEx, there are certain integration, or two-system dis-synergies, which is in the middle of 2017 should reduce pretty dramatically – meaningfully I don't want to say all of a sudden OpEx falls off the table, but that will help us further drive towards the EBITDA margin that we're still holding on to and are confident we'll achieve. Anders Gustafsson - Chief Executive Officer & Director: It's a very important goal for us. We have set a lot of internal targets around that also to align the entire organization towards these things. So, we clearly see this as one of our absolute top priorities, and one that we feel very good about our ability to meet.

Thanks. And I also wanted to ask you about this recent sort of interesting product introduction by Cognex. Just wondering if you have any thoughts on that product instruction in terms of sort of philosophically does it change your view at all on the effectiveness of smartphone products for some in this space, or make you think anything differently about how to approach the market for some of these products? Anders Gustafsson - Chief Executive Officer & Director: No. As I said earlier, we have a competitive market. It's a very fragmented market. There's lots of competitors coming in and out of our market. We are the clear market leader and we gain share in 2015, we certainly expect to continue to gain share in 2016. So, we're not focused on anyone particular competitor. We're looking at how do we make sure that we can execute our plans. There're obviously a number of players with different sleds out there. So it's not something radically new for the industry, so I feel comfortable with our competitive position and our ability to continue to grow and expand our market share.

Thanks, Anders.

And ladies and gentlemen, at this time we've reached the end of today's question-and-answer session. I'd like to turn the conference call back over to Mike Steele for any closing remarks.

We appreciate all your questions today and have a great rest of your day.

Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.