ZBRA
#So just as a reference point, so when we announced the deal, the euro was basically $1.33 and we're at [a base] roughly $1.10 up to $1.08.
So as you can imagine it, has a big impact on our top line and our profitability.
That said, we still expect at the end of three years, which is when we said we announced the deal, that we would get to the 18% to 20%.
So my point would be is, even with that FX, we feel confident with the synergies that we're doing, with leverage on the business ---+ in other words, our OpEx is going to grow at a slower rate than our revenue.
And that's because of a lot of integration efforts that are going on, we still feel comfortable with the 18% to 20% that we quoted, when we announced the deal, even with the FX.
Yes, one point to add maybe here.
Most of our competitors are dollar-denominated companies.
And I would say, pretty much everybody's supply chain is predominantly dollar-denominated.
So there's nobody who really gets a windfall by having a lot more costs in Europe, say.
There's certainly some who have more costs in Europe.
But it's on the margin, so I think that everybody is more or less in the same boat.
To that point, as again we mentioned a quarter or so ago, that we increased the prices in Europe.
Nice thing is our business continues to grow very strongly even with those price increases.
So I think that's another positive thing for our ability to drive towards the 18% to 20% EBITDA margin.
Well, I think a couple things.
Number one is in the first quarter and the second quarter, we had a fair amount of costs that didn't come over.
So for example, we didn't have a full complement of finance people.
So when you look at our expense, even though some of these areas will increase as the year progresses a tad, relative to what the baseline was when we acquired the business, it's still below what that baseline was, that pro forma number.
The other piece is our top line continues to grow at a rate much faster than our OpEx.
So that by definition gives us our ---+ helps us drive our margin improvement.
I think one thing we're trying to be clear on, is that we're driving towards net synergy improvement.
So if you really look at it gross, we're doing very well in things we have identified, but we need to make sure that after the increases that we're still net $150 million of savings in year two.
So that's why you're seeing not the savings in absolute dollars from the first quarter, because some of those costs really didn't come over when we acquired the business.
The net number is what we expect to pull out of the business, and the target I would suggest you focus on is the EBITDA margin of 18% to 20%.
So the point would be is, as we drive and are more successful in some of these synergies, we really want to invest IT in the business.
So for example, we're continuing to invest in our mobile computer business to expand Android, be able to provide good Windows solutions.
So it's not like everything comes down necessarily to the bottom line in terms of dollars, but when we get the EBITDA margin of 18% to 20%, that's sort of the hard target, I think as an investor you should focus on.
Next question, please.
Our debt to EBITDA has improved modestly from, obviously when we did the deal.
Again, we paid down $130 million.
We see the second half that we'll continue to generate strong cash flows to further pay down our debt.
But as far as buying back shares, I think we're ---+ I don't want to say I think, we are absolutely committed to reducing our leverage to 3 times debt to EBITDA over the next three years.
So I don't think anybody should expect us to be buying back stock for the near-term.
So there's a lot of things that separate those.
One of the accounts we talked about was actually a win-back, that had already installed a very prominent smartphone, and we were able to win them back to our platform.
So it was not say, an incumbent Zebra account.
The reason they did that, was they recognized that our total cost of ownership turns out to be much better.
Our devices are much more designed for the use cases that these customers have, particularly within the Enterprise.
So a greater control of the operating system environment, much greater security.
You can control the applications they use.
The ruggedness of the device.
You have battery life that lasts the entire shift.
Many of these customers are also heavy scanners ---+ use the device for scanning, and our scan capability is much improved, compared to any consumer device.
So we have probably 10 different features or functions that really distinguish us, compared to our smartphone competitors.
I would add two more.
Especially as ---+for those customers who consider Android, remember there are two choices, Windows 10 and an Android.
For those customers that consider Android, we've invested heavily in extensions to Android that ensure the security and the longevity of the platform.
And those are key factors when people make decisions that they don't find to the same degree on consumer devices.
We're making good ---+ we're making very good progress.
I think one thing we recently completed was implementing CRM program that's supporting the sales group, it gives <UNK> and his team visibility to the pipeline.
So as <UNK> was talking about visibility, I think one thing is we [have an] integrated tool, that was his plan.
I think, generally everything is on plan.
We realize that this is a big task, but we have the right people working on it.
So I think we're generally on task for what we're looking to accomplish.
As a percentage of growth, obviously the third quarter last year was much stronger.
So as we mentioned, the second half as far as year-over-year growth is going to be a little bit more difficult than first half as we go forward.
I think we give a range, because we know that some of these large deals are very binary, you either win them or you lose them.
I think in the second quarter, we ended up winning a deal, which by the way the customer requested.
I don't want to use the word demanded, but they strongly requested that we deliver in the quarter, which was different than our forecast.
So a lot of this stuff is very lumpy.
I don't know <UNK> or <UNK>, if you have any more color on the back half.
I think, we believe that ---+ we started off with a very strong backlog.
We had good backlog going into Q3, and the bookings trends certainly support the guidance we've given.
But you also got to remember that Q3, particularly Q3 last year from an enterprise perspective, there was a big bounce-up from Q2.
So the two comps are a little bit harder, but we still feel we have very good sales momentum.
The pipeline is very good for Q3 and for Q4 and beyond.
So we feel good about where we are from a revenue perspective.
And if we go back to when we first combined the businesses, I think that was one of the big concerns that, could we get growth out of the business.
And I feel good at what we've been able to achieve so far, and the trajectory we are on, that we are growing healthily.
We are able to compete against consumer devices, and create the very solid, very profitable business.
It was a little stronger than what we would normally see.
But we still have to win the majority of the business in the quarter.
It's not like it's orders of magnitude ---+ the difference.
Thank you.
This concludes our call for today.
Thank you for joining us.
