Zebra Technologies Corporation (NASDAQ:ZBRA) Q1 2018 Earnings Conference Call Transcript
May 08, 2018 • 08:30 am ET
order backlog gives us the confidence to raise our full year outlook for sales, margin and free cash flow.
With that, I'll now turn the call over to Olivier to review our financial results and to provide the details of our revised 2018 outlook.
Thank you, Anders. Let us begin with a walk through the P&L. As you can see on slide six, sales grew 9.8% in the first quarter driven by solid results in each of our reporting segments and growth across all four regions. Enterprise visibility and mobility segment sales increased 11.7% led by robust demand in mobile computing. Asset Intelligence and Tracking segment sales increased 6.4% driven by strong growth in printing. Sales of services were higher with continued strength in our Visibility Services Applications and Zebra Retail Solutions.
Turning to our regions. Sales growth in North America was 9% driven by demand for our mobile computing devices due to the ongoing conversion to Android, particularly in the retail sector as well as solid printer sales through the channel. EMEA sales increased 13% with broad-based strength and exceptionally strong mobile computing sales.
Sales in Asia-Pacific were up 5% driven by strength in the manufacturing sector and solid growth in printing products. Sales grew throughout most of the region. Our business in China has been recovering nicely and we are seeing increased end market demand for our tailored product offering.
Latin-America sales increased 7% attributable to exceptionally strong sales in mobile computing and data capture products. Consolidated gross profit increased $64 million or 16% from the prior period on higher sales volume. Adjusted gross margin increased 130 basis point primarily driven by improved go-to-market execution, favorable business mix shift in both operating segments and the appreciation of the euro over the past year. Adjusted operating expenses increased $10 million from the prior period, primarily reflecting growth in the business and higher incentive compensation expense due to improved business performance.
First quarter 2018 adjusted EBITDA margin was 20.9%, a 370 basis point increased from the prior period. This was driven by higher gross margin and operating expense leverage on higher sales due to our disciplined approach to profitable growth. In addition to EBITDA margin expansion, lower interest cost and the decreased tax rate drove non-GAAP earnings per diluted share to $2.56, a 87% increase year-over-year.
Turning now to the balance sheet and cash flow highlights on slide seven. At quarter end, we had $2.1 billion of viable rate debt on the balance sheet of which more than $500 million is hedged with interest rates swaps for 2018. As a reminder, in late 2017, we locked in an incremental $800 million of floating to fixed rate swaps that would become effective in December 2018 for an overall notional swap value of $1.3 billion. Due to the favorable timing of this transaction, we realized a $12 million non-cash gaining Q1 which we have excluded from our non-GAAP results. In Q1, we paid down $95 million of debt principal supported by strong