Good day, and welcome to the second quarter 2023 Zebra Technologies earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mike Steele, Vice President, Investor Relations. Please go ahead. Good morning, and welcome to Zebra's second quarter conference call. This presentation is being simulcast on our website at investors.zebra.com and will be archived there for at least one year. Our forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially, and we refer you to the factors discussed in our SEC filings. During this call, we will reference non-GAAP financial measures as we describe our business performance. You can find reconciliations at the end of this slide presentation and in today's earnings press release. Throughout this presentation, unless otherwise indicated, our references to sales growth are year-over-year on a constant currency basis and exclude results from recently acquired businesses for the 12 months following each acquisition. Additionally, note that our Asset Intelligence & Tracking segment now includes our RFID solutions, and we have recast quarterly segment results since 2021 in a schedule included in the appendix of our earnings press release. This presentation will include prepared remarks from Bill Burns, our Chief Executive Officer, and Nathan Winters, our Chief Financial Officer. Bill will begin with our second quarter results, then Nathan will provide additional detail on the financials and discuss our revised 2023 outlook. Bill will conclude with progress made on advancing our Enterprise Asset Intelligence vision. Following the prepared remarks, Joe Heel, our Chief Revenue Officer, will join us as we take your questions. Now let's turn to slide four as I hand it over to Bill. Thank you, Mike. Good morning, and thank you for joining us. Our second quarter results were impacted by weakening demand and cautious customer spending behavior across our end markets. While these results are certainly disappointing to us, we'll spend some time today discussing the drivers that are having the greatest impact, as well as the actions we are taking to control what we can in a difficult demand environment, including our expanded cost reduction initiatives. For the quarter, we realized sales of $1.2 billion, a 16% decline from the prior year, an adjusted EBITDA margin of 21.2%, a 70 basis point decrease, and a non-GAAP diluted earnings per share of $3.29, a 29% decrease from the prior year. Let me now put these results in context. On our last quarter call, we discussed a broader softening of industry demand as customers tightened their CapEx budgets and IT device spending slows. During the second quarter, those trends accelerated as we saw more cautious spending behavior by our customers of all sizes across our vertical end markets and regions. While all end markets declined, demand was weakest in retail and e-commerce and transportation and logistics, as many customers are absorbing capacity they built out during the pandemic. These dynamics have been exacerbated by our distributors' focus on reducing their inventory levels, which accounted for approximately 20% of our Q2 sales decline. Our distribution channel has been aggressively driving down inventory as end user demand has slowed, product lead times have recovered, and the cost of holding working capital has increased. Although global macro indicators have been resilient, the goods economy has underperformed the services economy, and certain key indicators most relevant to our industry have become significantly weaker, including IT device spending. This particular metric has been most correlated with mobile computing, where sales declines have accelerated year to date, following more than two years of very strong demand. Growth across RFID, data capture, supplies, services, and software were bright spots in the quarter. From a profitability perspective, improved gross margin and cost controls enable us to achieve our EBITDA margin and EPS outlook for the second quarter. In our current market environment, swift action is needed, and we are taking a number of steps to position us to deliver profitable growth and improve free cash flow. Slide five summarizes key industry challenges that have intensified since our prior update and our actions to address and mitigate the impacts. These actions include: reducing spending across the organization, including additional restructuring actions to drive an incremental $65 million of net annualized operating savings as we exit 2023, increasing our focus on accelerating growth in under-penetrated markets, continue to work closely with our customers as they continue to digitize and automate their environments. Our revised full year outlook incorporates the slowdown and deceleration across our end markets, including a significant reduction in near term demand in the mobile computing market, destocking by our distributors, as well as a partial year benefit of our expanded restructuring actions. Given our limited visibility in this environment, we are cautious in our assumptions and not expecting a recovery in 2023. We expect the reset of our cost structure and shift of our go-to-market resources to drive sales growth and improve profitability as our end markets recover. We'll continue to take an agile approach to managing through this uncertain near-term environment. I will now turn the call over to Nathan to review our Q2 financial results and provide additional details on our revised 2023 outlook. Thank you, Bill. Let's start with the P&L on slide seven. In Q2, net sales decreased 17.3%, including the impact of currency and acquisitions, and were 16% lower on an organic basis. Our Asset Intelligence & Tracking segment was flat. Strengthen RFID and supplies was offset by a decline in printing as we lap particularly strong prior year results. Enterprise Visibility & Mobility segment sales declined 23.6%, driven by a sharp decline in mobile computing, partially offset by growth in data capture solutions. We drove organic growth across service and software with strong service attach rates. Sales declined across our regions, driven by broad-based double-digit declines in mobile computing. In North America, sales decreased 11%. EMEA sales declined 24%, with pronounced weakness in Eastern Europe. Asia Pacific sales decreased 17%, driven by China and India, with growth in Japan and Australia. Latin America sales decreased 6%, partially offset by growth in Brazil and Mexico. Adjusted gross margin increased 200 basis points to 48%, primarily due to lower premium supply chain costs and favorable business mix and pricing, partially offset by expense deleveraging and unfavorable FX. We are pleased to see gross margins recovering from the inflationary headwinds we experienced over the past couple of years. Adjusted operating expenses delevered 310 basis points as a% of sales, partially offset by lower incentive compensation and cost controls. Note that as we began to see demand soften, we announced incremental restructuring plans that are expected to drive $65 million of net annualized operating expense savings as they are implemented. Including previous actions taken over the past year, our total net annual cost savings is $85 million. Second quarter adjusted EBITDA margin was 21.2%, a 70 basis point decrease, driven by operating expense deleveraging, partially offset by improved gross margin. Non-GAAP diluted earnings per share was $3.29, a 29% year-over-year decrease. Increased interest expense contributed to the decline, partially offset by fewer shares outstanding. Turning now to the balance sheet and cash flow on slide eight. For the first half of 2023, negative free cash flow of $144 million was unfavorable to the prior year period, primarily due to a greater use of net working capital due to higher cash taxes and payments for inventory, and $45 million of previously announced quarterly settlement payments, which are scheduled to conclude in Q1 of 2024, partially offset by lower incentive compensation payments. In the first half of 2023, we also made $52 million of share repurchases and invested $1 million in our venture portfolio. We ended the quarter at a 1.8 x net debt to adjusted EBITDA leverage ratio, which is below the top end of our target range of 2.5x, and had approximately $1.1 billion of capacity on our revolving credit facility. On slide nine, we highlight the impact of premium supply chain costs on our gross margin over the past 2.5 years. The actions we have taken to redesign products and increase price, along with improving freight rates and capacity, have enabled us to avoid component purchases on the spot market and reduce the freight cost impact. In Q2, we incurred premium supply chain costs of an incremental $5 million as compared to the pre-pandemic baseline, and $51 million lower than the prior year quarter. As we enter the third quarter, we believe these costs will have been fully mitigated, which is a key lever to margin recovery. Let's now turn to our outlook. As we enter the third quarter, we are seeing sharp, broad-based declines across most of our product offerings, which continue to be amplified by its distributors recalibrating their inventory to lower demand trends. Our Q3 sales are expected to decline between 30%-35% compared to the prior year. This outlook assumes double-digit declines across each of our core product categories, with distributor destocking accounting for approximately one-third of the decline. We anticipate Q3 adjusted EBITDA margin to be between 10%-12%, driven by expense deleveraging from lower sales volume, partially offset by higher gross margin from cycling $30 million of premium supply chain costs in the prior year period. Non-GAAP diluted EPS is expected to be in the range of $0.60-$1.00. Given our Q2 results and the continued challenging demand environment, we are significantly reducing our full-year outlook, expecting a sales decline between 20% and 23%. This assumes the Q3 sales trajectory continues through the remainder of the year. We are seeing broad-based declines across our end markets as we enter the second half, with significant uncertainty in this environment. We expect full-year adjusted EBITDA margin of approximately 18%. We expect increased deleveraging on significantly reduced sales volumes expectations, partially offset by early benefits from cost reduction actions, as most of the actions will be implemented by early Q4. We plan to continue to align our cost structure with the long-term trajectory of our business. We now expect free cash flow to be positive in the second half, but negative for the year, given lower sales and earnings expectations. Our cash flow will be impacted by new restructuring charges, increased cash taxes due to the change in R&D expense regulation, and $180 million of previously announced settlement payments. We continue to be focused on right-sizing inventory on our balance sheet as component lead times have normalized. We now expect minimal inventory reduction in 2023 due to our lowered sales outlook. We are focused on achieving 100% cash conversion over a cycle, which is one of the metrics in our long-term incentive compensation plan. Please reference additional modeling assumptions shown on slide 10. Note that we have improved our expected 2023 non-GAAP tax rate by one point due to favorable geographic mix. With that, I will turn the call back to Bill to discuss how we are advancing our Enterprise Asset Intelligence vision. Thank you, Nathan. While sales are pressured near term, over the long term, our solutions remain essential to our customers' operations, we are well positioned to benefit from the secular trends to digitize and automate workflows across our served markets. We are focused on advancing our Enterprise Asset Intelligence vision by elevating Zebra as a premier solutions provider through our compelling portfolio. By transforming workflows with our proven solutions, Zebra's customers can effectively address their complex operational challenges, including scarcity of labor and the need to improve productivity. We empower the workforce to execute tasks more effectively by navigating constant change in near real time, utilizing insights driven by our advanced software capabilities, such as machine learning and prescriptive analytics. Turning to slide 13. I would like to highlight several key megatrends which support Zebra's growth and customer value propositions over the long term. These include automation, mobility and cloud computing, and artificial intelligence. Our customers rely on Zebra to help them take advantage of these key megatrends, which drive their growth strategies. As you can see on slide 14, Zebra's enterprise mobile computers are critical to the front line of business. We are excited about our innovation roadmap and new solution launches that advance our value proposition. Labor is a scarce resource, and leveraging technology is a key way our customers can advance their operations. Our solutions empower enterprises to increase collaboration and productivity, and better serve customers, shoppers, and patients by enabling an expanding number of use cases across our end markets. Our enterprise mobile computing installed base has expanded significantly over the past several years due to the proliferation of use cases, and the investment in Zebra solutions should rebound as technology refreshes are reprioritized. On slide 15, we highlight a few areas that are advancing our capabilities to serve our customers' evolving needs and are expected to be profitable growth drivers for Zebra as we continue to scale them. Collectively, these offerings are approaching $500 million of annualized sales and have a long runway for growth. First, we are a leader in advanced location solutions through RFID. We have been driving strong double-digit growth in recent years with the heightened importance of real-time inventory accuracy. We are now addressing an expanding set of use cases throughout the supply chain, including our previously announced large win with a global transportation logistics provider, which highlights the long-term growth opportunity for RFID solutions. Second, we believe investments in our machine vision business, which is accretive to our gross and EBITDA margins, positions us well for long-term growth. We continue to invest in innovation and go-to-market efforts to further diversify and scale in attractive subcategories. Strong growth in certain end markets, including warehouse distribution and electric vehicle manufacturing, has partially offset weakness in the semiconductor industry. An example of our recent success is a win with a U.S.-based global auto manufacturer who has been transitioning to electric vehicle production. The ease of use of our solutions was a key differentiator as the manufacturer capitalized on the disruption in the auto market to modernize its processes with more flexible solutions. Lastly, our workflow optimization software offerings include workforce and task management, communication and collaboration tools, inventory visibility, and demand planning. Recent notable wins include our workforce management solution for location staffing at a large North America bank, and our retail demand forecasting solution for a North America consumer packaged goods company. The actions we are taking to improve profitability of our software offerings, including migration to a cloud-based platform, are expected to enable software to become EBITDA margin accretive in 2024. In closing, our long-term conviction in our business remains unchanged. While customer spend is pressured near term, over the long term, we believe we are well positioned to benefit from secular trends to digitize and automate workflows. We will work to continue to elevate our position with customers through our comprehensive portfolio of solutions, while taking the actions needed to improve profitability and position us for success, both in the current environment and in the future. I will now hand it back to Mike. Thanks, Bill. We'll now open the call to 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. To ask a question, you may press star, then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Tommy Moll with Stephens. Please go ahead. Good morning, and thank you for taking my questions. Morning. Morning, Tommy. Bill, you referenced the reset of the trajectory for e-commerce, including parcel. I wanted to dig in on that a little bit. Do you have any sense of how long that reset appears to, to need, going forward? How widespread is this? I, and I ask that second part because there's certainly one fairly high profile, maybe the most high profile end user there, where these trends, I think, are well known at this point. Anything you could do to highlight and maybe other examples would be helpful as well. Thank you. Yeah, I think overall that we've said that, you know, what we're seeing in the, in the market is that, you know, as the, the goods economy is clearly, you know, weaker than the service economy, which is, you know, resulting in, you know, we're seeing, more of our customers really absorbing the capacity that they bought through the pandemic, and that extends beyond just the largest, you know, e-commerce retailer we've talked about in the past, but to other e-commerce, even, you know, our retail customers and, and into transportation logistics customers as well. We've seen softness now spread into other markets. But specific to your question, I think that, you know, I guess maybe a good example of that is, is recently we've seen, you know, a large, you know, logistics company talk about really what's been detrimental to their volumes, right? I think it is this idea that the overall, you know, industrial economy is slowing, right? Clearly, focused on goods and not services. They've said, look, you know, that's slowing, obviously, because of all the macroeconomic indicators, right? Inflation, interest rates, you know, slowdown in global trade. It's also being driven by, you know, consumers buying less, right? Then this, you know, reset of e-commerce, you know, coming out of the pandemic to levels of, you know, purchases of goods slowing down, you know, transportation, logistics, package delivery as well, which has really been detrimental to the entire, you know, industry overall from a volume perspective. We're seeing this additional capacity built out in e-commerce players. We're seeing it in retail, and I wouldn't say it as much as, you know, excess capacity as is really they have what they need for now, and as the goods economy slows, they eventually will come back and buy more. For today, they've got what they need. We're seeing it move into parcel delivery with transportation logistics, but also spread into other markets as well. As you know, in first quarter, we talked about slowing down of large orders and large customers. We've seen that move into mid-tier and smaller customers as well. It's more broad-based than we had seen in the past, and we think it really is the two years of very strong demand we've seen, especially in mobile computing across our entire customer base, is now being absorbed, you know, into the marketplace, and ultimately that's why we're seeing the decline in the short term. That will come back. As the macro indicators come back, as people buy more goods than services, as, you know, they use this extra capacity within their environments, they will buy more from us, and we'll see that, you know, inflection point at some point, but right now we're not seeing it. We're clearly seeing our demand be pressured because of it. Bill, you mentioned an inflection point, which is the theme for my second question here. I'm using the midpoints of your revenue guidance for the third quarter and the full year, just looking at what's implied in the fourth quarter. At least on the midpoints, it looks like the implication is from third quarter to fourth quarter, revenue steps up somewhere in the mid-single digit range on a percentage basis. I just want to unpack that a little bit. Is that an inflection that you think you have visibility to? Is it just there's some ranges in here, you know, it depends on what you want to assume within those ranges. Is there anything you can point to maybe that's impacting 3 Q disproportionately but not 4 Q? Thank you. Yeah, kind of a, a combination answer there probably is that, you know, overall, we would say that, you know, why do we believe our guide, right? As we looked at Q3 and, and Q4, clearly in, in Q3, you're seeing more, you know, destocking from a distribution perspective than you are, you know, in, in Q4. I think that we've taken an approach that basically for the guide for Q3 and full year, where we see the demand trends that, you know, will continue, that began to deteriorate really in, in Q1 and continue through Q2, will continue, from a booking and sales velocity perspective, it'll remain about the same for the full year. We're assuming that, you know, a significantly lower conversion of opportunities within our pipeline than historical levels, just because of these push outs of large orders, you know, by our customers. We've removed expectations really for recovery in year-end, you know, or at year-end in fourth quarter. The reason you see the uptick there is really because. We're seeing an oversize effect of our distributors destocking inventory levels as their end demand continues to slow. Ultimately, our sales out of distribution, when that slows, they hold a specific days on hand inventory, and they need to buy less from us. They're selling less out, they need less in inventory. I think that we see an oversize effect when end demand slows. In fourth quarter, we're seeing less of this destocking than we were in Q3. The destocking is also driven by the fact that our delivery times have shortened and their cost of capital has gone up. There's pressure on inventory and to lower those inventory levels, really, as their end demand has slowed, and we're seeing a bit less of that in fourth quarter. That's really the trajectory we're seeing around. You know, we believe ultimately we're, you know, seeing in the process of seeing really the bottom in Q3 and Q4, and do see an inflection point, you know, in 2024. The difference between Q3 and Q4 is really predominantly based on inventory, destocking levels, and we expect to exit, you know, year-end with the right levels of inventory for what is, you know, the end demand that our distributors are seeing. We see destocking taking place through the second half of the year and then being really at the right levels for the demand that our distributors are seeing as we end the year. Thank you, Bill. I'll turn it back. Our next question comes from Damian Karas with UBS. Please go ahead. Hey, good morning, everyone. Good morning. Bill, maybe you could just elaborate a little bit on the demand environment for your end customers, kind of, you know, moving past the, the, the distribution, destocking impacts. You know, you talked about declines across all end markets and all customers. I mean, what do you think are the biggest drivers of that change over the past few months here? You know, is it your end customers really are facing sales pressures and budgetary constraints? Or, or do you think to some extent, you know, your customers are just feeling a lot better about their productivity, now that, you know, supply chains have almost, you know, kind of uniformly eased across the globe? Yeah, maybe I'll start, and then I'll add, you know, Joe can jump in as well. Really, if we look back to our May call, we talked about broader softening of, you know, industry demands, those trends really have accelerated in Q2 as we saw, you know, more cautious spending on the part, you know, of our customers. Again, after two years of really strong demand for, you know, our products and solutions. We see this as really broader global macro weakness, but we've seen particular impact, you know, from that in EMEA and in China. In China, we expected more recovery out of COVID that we haven't seen and in slower, you know, economic factors within China. Retail and e-commerce, as we talked about, you know, a little bit earlier on Tommy's question, really is, you know, driving that, that trend as they're absorbing capacity, but, you know, coming out of the pandemic, but we've seen it more broad across other industries as well, as we worked our way through, you know, Q2. We're seeing an increased number of pushouts from a, a project perspective as well, or those projects being reduced in size. Joe will talk a little bit more about that, you know, overall. I would say that, you know, the dynamics that we're seeing around distribution is one element of it, but the end demand clearly has slowed, and that's what's driving the distribution. You know, destocking of inventory is really about end demand. That's really. After two years of really strong demand, we're now ultimately seeing that, you know, it really is in Zebra. We're seeing this, you know, across industry trends like IT device spending, that, you know, ultimately, you know, we're seeing that same trend, that, that IT device spending is correlated to our mobile computing market, which we see as, as the biggest impact of, of this slowdown. It's, it's really, you know, broad-based across IT devices and, and, you know, through that, we expect to continue to outperform our competition. Clearly disappointing demand levels from an end market. Maybe Joe wants to jump in. Yeah, maybe a little bit of additional color. First, the declines in our larger customers were larger than the declines in our mid-tier and small or run rate business, as we would call it. That helps us understand this better because we track, of course, we have direct contact with our large customers, and we, we see what's happening to individual deals there. What we've been seeing is that a lot of those deals, hundreds of millions of dollars, have pushed out of the first half into the future, or in some cases, have disappeared as deals altogether. I'll give you some examples of those, but before I do, this behavior has accelerated in the second quarter. For example, in North America, the amount of pushouts that we've seen relative to the first quarter has tripled. Let me give you just a few examples, right, so you can you, you, you see what, what's driving this and what's happening, right? At the beginning of Q3, we had a grocer who came to us and said, "I want to buy $4 million worth of your mobile computers." Midway through the quarter, they said, "We're not going to do this deal in Q2. We're going to do it in Q3." I'm sorry, I said Q3 at the beginning. My mistake. They came at the beginning of Q2-... said we want to buy this. Midway through the quarter, they said, "We now want to do this deal in Q3 rather than in Q2." A good example of what we would call a pushout. We also had another grocer who, at the beginning of the quarter, was indicating that they're going to buy over $5 million worth of mobile computers. They came and said, "We now want to do, take these $5 million of mobile computers, but we want to buy them over the next five quarters, equally distributed," which, of course, delays our revenue trajectory. We also had a DIY retailer who wanted to buy $7 million at the beginning of Q2, and came to us during the quarter and said, "My budgets have been cut. I can't do this project right now anymore. We'll do it sometime in the future, but I can't tell you when." These are three different examples that all impact our Q2 revenue and indicate that our customers' budgets are under pressure to the extent that they're trying to extend out when they buy from us, which, which diminishes our revenue. Hopefully, that's helpful. Yeah, that's all very helpful. Could you maybe tell us, like, what proportion of firm orders you've, you've actually seen canceled? I can answer that directly. We have had no, or virtually no firm orders canceled. All of what I was describing to you were movements in our pipeline. Generally, we have not seen orders that we've already taken or backlogged, canceled. Got it. Okay, appreciate it. Then the bright spot in the quarter seems to be the gross margin recovery. You know, should we be thinking 48% is the appropriate, you know, run rate for gross margin? Given your portfolio of assets now, with Machine Vision and AMRs and so forth, you know, is there possibly some upside to gross margin down the road? This is Nathan. Again, as you mentioned, I'd say gross margin was a bright spot in the second quarter, hitting 48%, which we haven't achieved that level since the first half of 2021, when we had, you know, a bit more revenue and the euro was at a $1.20. Obviously, the bright spot in the quarter, including the reduction in the premium supply chain costs, down to $5 million, and then negligible as we enter the second half of the year, due to all the, you know, nice work by the team, redesigning products, getting our printer capacity back on ocean. Again, I think we feel, we feel good about gross margin. I think that's a. The 48% is a new, you know, baseline. There will be fluctuations, you know, as we move quarter to quarter based on deal size. You know, that is one dynamic that's helping us with the, the lack of large deals is a, a benefit to gross margin. There's other tailwinds that we have going through the remainder of the year, including FX, assuming it stays at its current level. I think that's the, the right watermark, but I'd say quarter to quarter, there'll be fluctuations, as with just the general mix, and business dynamics. Our next question comes from James Ricchiuti with Needham & Company. Please go ahead. Hi, thank you. You know, so as we think about the Q3 guidance and the, the implied outlook for, for Q4, it sounds like you're expecting, at least geographically, some worsening conditions in North America, just to be, you know, if we look at what the organic decline was in Q2. Is that the way to think about how the geographic distribution looks into the second half of the year? Yes, maybe I can give just a, a little bit more, more color on the, on the guide, and then to your point on the, some of the regional dynamics is, just to reiterate what Bill mentioned earlier. You know, the guide is supported by the most recent sales and bookings velocity, and we're, you know, not assuming any type of recovery as we enter the quarter or as we move through the quarter. You really see that, I'd say, across all our geographies. I think that it's... If you look at the similarities across each region, they're, they're very similar in terms of being impacted by mobile computing, tougher year-on-year comps for the business like print. What we effectively done is said: What is that velocity we're seeing in the end markets? How does that continue through the third quarter and into the fourth quarter? Again, removing, you know, some of the, the upside or opportunities to ensure that we have the right baseline to build from, from here. I'd say the dynamics are very similar, across each of the regions as we go through the second half. Does your guidance assume slowing in the areas of the business that have been relative bright spots? You highlighted data capture, RFID, and, you know, the recurring business, the supply service presumably holds up a little bit better. What, what kind of assumptions are you making for, for these areas that, that have been more of a bright spot for you? Yeah, I would say that, you know, RFID continues to, to be a bright spot and, and continue to see growth across, you know, multiple applications, not just retail. Our supplies business continues to, to be positive from, you know, not just an RFID perspective, but a broader supplies business and in our Temptime, you know, acquisition as well. Services and, and software, we think will be, you know, clearly bright spots in the, in the second half year. Data capture is a, you know, a tougher compare in second half. I think what you're still seeing is in print and data capture solutions, a fair amount of variation across supply chain availability in 2022 that we're cycling through in 2023. You see... ... strong growth in first half, you know, with tough compares in second half across those businesses, which still remain challenging from as you look at the numbers overall, that you're still seeing the supply chain dynamic take place, in comparison from prior years. Data capture solutions is just a tough compare in second half. Yeah, thank you. Our next question comes from Meta Marshall with Morgan Stanley. Please go ahead. Great. Thanks. I guess just putting into context, you know, do you think you're seeing the greatest impact to the refresh business, which is elongating hardware cycles? Is this just slowdown in new builds or slowdown in new use cases? I guess I'm just trying to get a sense of, you know, you compared yourself to the mobile IT market. We've seen some lengthening in refresh cycles in those markets over time as devices improve. You know, is this just lengthening refresh cycles that may be more permanent or just kind of more macro impact to new builds or, or new use cases? I think we're seeing, you know, clearly that the refresh cycles, you know, we would say, you know, are, are elongated as, as people are, you know, using those assets and making tough, you know, business decisions at the moment. They can only hold off, you know, so long in, in those, you know, technology refreshes. You've got to remember, the strong demand over the last two years has put a lot more devices in the hands of, you know, frontline workers. When they go to refresh those devices, that will be a higher number of devices that they refresh. In the short term, they're, they're consuming, you know, capacity they built, in, you know, e-commerce and transportation logistics and, and even our, you know, retail customers, where they've bought a lot of devices, you know, through the pandemic, and they've got to work through those devices, but eventually they will buy more. We're still seeing, you know, there's still a, a great opportunity for us to continue to, you know, underserved hands, more devices in the hands of frontline workers across all of our vertical markets. Joe can talk a little bit about more about that. I, I think we're still seeing that there's, you know, plenty of bright spots for, for new applications for our devices and leveraging our retail software, for instance, on our devices within retail and, and communication, collaboration, you know, visibility, you know, AI and leveraging, you know, workers with, you know, more information, leveraging your mobile devices. The longer term trends continue despite the challenges in short-term demand. Joe, do you want to add to that? Yeah, I would, I would underline that specifically that I think what we're seeing is an extension of the sales cycles, not a diminishing set of use cases in any way. In fact, I think it's almost the opposite. The examples I gave earlier were all examples of extending sales cycles. What we're seeing with our customers is that, in fact, they're discovering during this period how they can use their devices and the Zebra solutions for more use cases. We're seeing more use cases in the store, like communication or flexible checkout, advising customers on where to find goods and products in the store, are being added to the devices that they have. We're, of course, fueling that because we're releasing new use cases. For example, we just released the ability to take payment directly on our devices, right? I would say very clearly it's an elongation of sales cycles. New use cases are alive and well. Got it. Maybe just, do you expect any, you noted that you were renegotiating some supply agreements. Is there expected to be any cash charges with those, or just anything we should be mindful of as part of the restructure? No, not as part, not as part of the restructuring, Meta, in terms of obviously the, the team's working on, renegotiating supply agreements to, to maximize cash, with the, with the demand changes. We'll work each one of those and, and make sure it's the right, you know, economic decision for the short and, and long term. That, that is not included as any part of the restructuring charges. Our next question comes from Brian Drab with William Blair. Please go ahead. Good morning. This is Tyler Hooton on for Brian. Thanks for taking my questions. Hi, Tyler. Hi. Just starting off with pricing, I believe you may have mentioned the full year benefit before. I was just wondering if that has changed due to, you know, even more softening and what you would expect from volume growth. Is there any... Do Do you, can you give us an expectation for full year benefit from pricing? We expect the full year pricing benefit to be around two points. It's a little bit higher than our previous guide, with the most recent price increases that went into effect late in the second quarter. We're actually seeing those actions hold and stick in the market. I'd say it's, you know, again, about two points for the year. I think just to, you know, again, these were very specific, targeted actions, not broad-based, and it's something we monitor, you know, constantly to ensure that we're competitive in the market and that, you know, I wouldn't say any part of the volume decline is related to the pricing actions, again, because most of these are broad-based across the industry and very targeted at where there's opportunity to ensure we maintain our market share position in each of the markets and products we, we operate in. Okay, thank you for that. Just following up, can you describe the opportunities that you're seeing with the government, like what products, et cetera? Has this been an unexpected contribution in 2023? Will that be supplemental to your sales volume when other demand picks up? Thank you. This is Joe Heel. Yeah, we've been working with governments around the world and have been seeing an increasing level of demand and opportunity there. Of course, we have commensurately increased the resources that we have put into this. Where we saw the North American government is the largest part of that, and of course, there are multiple different levels of that. State and local has been a growth area for us for some time, specifically, for example, outfitting police forces with tablets in their cars or parking enforcement, handheld devices with mobile printers have been the staple of our business there. Recently, where we've been successful and have expanded our engagement is with federal and state governments. There are, of course, some very large contracts. You can see contracts with defense and in logistics areas that are increasingly important. We've seen an increase in interest in those same levels in governments outside of the U.S. Of course, that has a little bit to do with some of the geopolitical situation that we find ourselves in, and the governments needing, in particular, the types of solutions we provide to enhance the logistics behind some of those operations. Our next question comes from Keith Housum, with Northcoast Research. Please go ahead. Good morning, guys. Hey, I was hoping you could unpack the- Good morning, Keith. I was hoping you could unpack the commentary regarding the customers digesting what they previously bought. You know, certainly we're aware of, you know, one or two e-commerce guys that probably overbought, but I guess if people are digesting what they previously bought, are they, are they questioning the ROI that they previously experienced? I mean, perhaps just a little bit more color around the digestion commentary. Yeah, Keith, I mean, They're not questioning the ROI at all. They're clearly, you know, seeing the, the benefit of, of our, you know, devices that are mission-critical, you know, in their environment. What they're really seeing is that, you know, that extends beyond e-commerce to, you know, parcel delivery, for instance. We're seeing that in our T&L customers that are saying, you know, if you look at what they've said around parcel delivery, you know, the entire industry is down as the result of, you know, kind of e-commerce resetting to kind of pre-pandemic growth rates, and they build out capacity, assuming it was going to be much, you know, stronger than that. I would say in retail, they've bought the devices they have, so I wouldn't say it's absorbing beyond what they need in most cases. Now, some bought ahead because of, you know, supply chain challenges, right? They knew that they needed the devices, they bought ahead for a project, but in most cases, they just have what they need. They're, you know, I think to the earlier question, continuing to use those devices in, in other applications or just making tough budget decisions that ultimately they'd like to buy more, but they're leveraging what they have today instead of, you know, purchasing new, because there's pressure from either CFOs and others on IT, you know, spending and CapEx within their environments and uncertain macro environment. I think it's in some cases, using capacity. In other cases, it's just leveraging what they have today, and they don't need any more. In some cases, they bought ahead, because of, you know, supply chain challenges. You know, we saw a significant increase in demand over the last two years, and, and now we're seeing, you know, ultimately that demand slow, and then we'll see growth from here. Joe, maybe you want to add something. Maybe, to make it concrete, let me give, again, just a few examples, right? If you're in a retailer, you buy our devices, typically with an expectation of a growth trajectory, which means how many associates you will have in your store or how many new stores you will open. Those retailers, that, some of the examples I gave earlier, had planned for a certain growth trajectory, and then they've seen that growth trajectory change and lower. As a result, the ROI hasn't really changed for them, but they just see a lower demand trajectory, which then they're translating into lower purchases with us, right? I'm looking at, I have four pages, of individual deals that we looked through, and where customers have done exactly this. Here's an example of one where it says, "Customers working through gear they already have on hand, not ready for additional orders until Q3." That's literally the type of thing we're hearing, and I don't think it has anything to do with the ROI. It's simply about the expectation for demand. All right. I, I appreciate that. As I follow up, is the same issue extending to the machine vision and robotics segment? Perhaps any commentary you can offer on how that's progressing. We feel good about our machine vision business. You know, when we acquired the Matrox, you know, at the same time, we developed organically solutions in the low end of that range in fixed industrial scanning, and we acquired, you know, Adaptive Vision, which gave us software capabilities around things like optical character recognition. We knew when we acquired Matrox, that they were heavily weighted in their sales to the semiconductor industry, and we all know that has slowed. Our objective all along was to really diversify that customer base. As a smaller private company, ultimately, they hadn't made the investments to go to market that we're making diversify it. We're seeing that the diversification is working. Our focus on things like electric vehicles, electric, vehicle battery manufacturing, pharmaceuticals, really a, a broader push for us into manufacturing, is, is working. As we're, you know, driving into, you know, also into e-commerce opportunities, you know, T&L, you know, we're seeing that the traction of diversification work within the business, despite the challenges with semiconductor in the short term, which we were well aware of when acquiring the business. I'd say our organic investments as well are paying off, in that space. From a robotics perspective, I think it's just early days. You know, we've got working solutions today, moving, you know, pallets at, at customers, for goods transport. We have goods being transported on smaller-sized robots in, in multiple different applications. We're OEM-ing some of our robots in, in hospital environments, delivering pharmaceuticals. We're picking e-commerce orders. That was one of the areas we've invested in since owning the business beyond just goods transport. It's still early days. It's a small business, and, you know, there's a large growth trajectory expected, you know, in that marketplace today, but it just takes time. You got to, you know, do early pilots with customers. You got to prove in the ROI, and ultimately you see, you know, deployments and growth, you know, beyond that. We feel, you know, okay about our robotics business. It's just small at the moment. Great. Thank you. Our next question comes from Joe Giordano with TD Cowen. Please go ahead. Hey, guys. Good morning. Good morning. I kind of wanted to just square up, you know, the, the commentary about push out and your customers kind of changing. I, I guess, like, if we step back, big picture, everything we hear, granted the industrial economy, the data has been pretty horrible. I guess the takeaway has been that the consumer has been really resilient, and the, the consumer recession that people saw coming isn't happening or hasn't happened. Like, how do you square that commentary with what you're hearing directly from your customers who are, you know, kind of lever to those consumers, who maybe aren't getting as bad as people thought? I mean, I think we're seeing it, and I, I think you're seeing more people point to this, that it really is, you know, the service economy that's holding up, right? It's, you know, I think coming out of COVID, people are looking for more experiences. They're doing more travel this summer. They're saying: "Look, I'm going to take that, you know, trip, no matter whether the, you know, the, the cost of the flights or vacation are, are more expensive than it was in the past. I, I'm going to go do that." I mean, I, I don't know about you, but every flight I get on, every seat's taken, right? I think from a goods perspective, we clearly are, you know, seeing a slowdown in, in, in, customers buying, you know, goods. Think of, Joe mentioned the, you know, DIY retailers, right? As, as the, you know, interest rates have gone up, you know, new housing sales have gone down, and therefore, people buy less from, you know, do-it-yourself, you know, retailers, as an example. You know, I think, you know, people a lot-- bought a lot of goods during COVID for their homes that, you know, now they've-- they're spending on, on experiences instead. I think that while we're seeing the broader economy hold up, I think we're seeing, you know, goods, you know, purchases decline, and we're seeing that in, in where e-commerce is still growing. It's now reset, you know, back to a, a, a more traditional growth rate off the very highs we saw, you know, through the pandemic, which is then flows through to how many parcels were delivered from e-commerce. I think that the, you know, as Joe said, the expectations within our retail customers, brick-and-mortar retail, of how much they are going to sell, has slowed. All that is, you know, playing a role in this. I think that, you know, it's really around goods versus services in the macro environment. Apologies if you said this already. I'm I'm kind of multitasking a couple calls here, can you comment on what Matrox did specifically in the quarter on growth and maybe where they're at year to date? Yeah. I think that, you know, I said earlier in the call that, you know, we're happy with the machine vision progress we've made with the Matrox acquisition, the acquisition of Adaptive Vision and our organic investment in machine vision. We knew when we purchased that business that it was heavily weighted towards semiconductor, one of the objectives we have is for Joe and our marketing teams to focus on expanding markets beyond, you know, semiconductor into, you know, pharmaceutical, electrical vehicle manufacturing, transportation, logistics, e-commerce, that are all big users of machine vision and fixed industrial scanning. We're seeing, you know, early progress and wins in that area. We're pretty happy with the progress overall. I think that, you know, we're excited about the machine vision business overall. It's, it's closely adjacent to our scanning business, and, and we're seeing good results so far, despite the headwinds associated with semiconductor. Our next question comes from Brad Hewitt with Wolfe Research. Please go ahead. Hi, good morning, thanks for taking my question. Absolutely. I'm curious, curious if you could elaborate more on what's embedded in your second half guidance in terms of pipeline conversion rates and any further project deferrals, and then also what drives your confidence that the full year guide is properly de-risked from here? Maybe I'll start. Again, if you look at the, you know, what's embedded in the guide for the second half, you know, one, it's supported by the most recent sales velocity. If you look, we are assuming significantly lower conversion rates on our pipeline of opportunities than we've had historically used due to the continued pushouts of orders that we've discussed earlier in the call. Again, a much lower conversion rate assumption on those deals. Again, the other impact, which is you have to include, is this the over our size impact of destocking within the channel. Again, we're assuming kind of that similar type of velocity through the year end. I think the, the other important assumption is, we're not assuming there's any type of potential year-end spending or new large deployments in the fourth quarter, which we typically see, as we approach the end of the year. I'd say probably as we look beyond, right, the second half, you know, our customers can only hold off so long on, you know, deployments of our products. They're really, you know, mission-critical in their environments as they look to serve the other customers, and over time, they will, you know, use the excess capacity they've purchased or, you know, we'll see the macro environment get better from a goods economy perspective, and they will begin to buy, buy again. I think that. You know, long term, we see that, you know, our value proposition remains very strong with our customers. Our relationships remain strong and, you know, across all of our core markets, our adjacencies to, to those core markets and our expansion investments will all continue to, to grow again as, as we see things from the macro environment, you know, improve and our customers work through some of the, you know, demand that they've created over the last couple of years and the, and the purchases they've made, you know, will continue to grow again. Okay, that's helpful. I'm curious what you're seeing in your run rate business and how you expect that business to trend in the second half of the year. Also, does your guidance assume any negative mix shift from a softening in run rate in the second half? Yeah, as we, as we said earlier, we saw, you know, reduction in the velocity of our run rate business, particularly in the second half of Q2, so, you know, kind of late, late May and into June. We're assuming that trajectory continues through the remainder of the year. I'd say, you know, no further deterioration, but definitely not any type of incremental improvement. Also that's why you see as you go into the fourth quarter, kind of the year-on-year comps get more challenging, which is why you see the increase in terms of the year-on-year decline in the fourth quarter greater than it is in the third quarter. Just as that, that velocity continues and no assumed improvement, the, the comps get tougher as we move through the end of the year. Our next question comes from Rob Mason with Baird. Please go ahead. Yes, good morning. Good morning. I mean, it looks like the run rate business has followed the large project business lower. I think you indicated earlier that's typically the pattern. I'm curious if, if you think about a recovery scenario, you know, perhaps looking out in the next year or whenever this happens, would you expect the run rate business to also follow the larger project business up? You know, has just the, you know, what's happened in retail in particular, you know, changed that dynamic? I'm not sure that retail is overrepresented in large project, but maybe my impression is it might be. I think in the. You know, historically, we've seen, you know, large deals, you know, are the, the first to decline and, and the first to recover, right? That's what we've, you know, historically seen, and we'd expect the same here. The mid-tier and, and run rate has slowed, clearly, in second quarter, and, and that likely, you know, you don't see as, as large in effect, as quickly in, in that business. See a longer term trajectory and then, you know, the, the reverse of that as it recovers. You know, as you said, we would expect large deals to recover first and then mid-tier and run rate to follow, you know, in that recovery is, is how we typically see it. You see more, you know, pronounced swings in large deals than you do certainly in run rate or, or mid-tier. Understood. Then just as a follow-up, Nathan, how, how are you feeling about inventory, inventory obsolescence risk at this point? You know, if, if a pause were to last, you know, multiple quarters, you know, how long of a pause, you know, before that becomes a greater risk? Yeah, you know, look, overall, I think the, you know, obviously, we, we would. We were expecting better results on inventory as we entered the year. I think the team is doing everything in our control, working with our suppliers, to reduce the committed volumes that are coming in. It's obviously a challenge, though, as the volume has continued to decline. We're, you know, kind of chasing down when it relates to the inbound inventory supply that we have coming in. Look, I, when I look at E&O, I think, you know, again, there's always risk in a technology business. That's, that's not different. Where we have supply, it's, you know, primarily in our run rate, kind of high volume type of business. When the volume returns, you know, w- we have the components for it. You know, this isn't, you know, unique SKUs or products for, you know, kind of one-off type products we have in the portfolio. The vast majority is around kind of our mainstream product portfolio. Again, as the volume recovers, we'll, we'll burn through that component inventory, and that's, that's their value. If you look at where the primary increase is at, it's in components. This isn't fully finished goods, which again, gives us that flexibility to, to flex between different SKUs, different customers that we have, given that most of the increase is in components sitting at our tier one manufacturing partners. Our last question comes from Guy Hardwick with Credit Suisse. Please go ahead. Hi, good morning. Morning. Morning. Just trying to sort of dissect your, your comments on channel inventories and runway business. I think, Nathan, you said, the guidance in Q3, 1/3 of it is accounted for by channel destocking. But I think you said that continues at kind of a similar rate in Q4. Just wondering what are the kind of the very latest indicators you're seeing in terms of sellout from the channel? Has there been any signs of stabilization yet? If not, I mean, what is your, your kind of view where channel inventories could be at the end of the year? I mean, will the destocking continue into next year? Yeah, maybe just to clarify. If you look at the, the guidance assumptions for the third and fourth quarter, it assumes a similar velocity of, of demand. That includes, you know, 80% of our business is the channel. That kind of similar velocity from Q3 to Q4. You have the, again, the outsized impact of destocking in the third quarter. We do not plan to destock as much in the fourth quarter as, again, the... That's really the driver of the sequential improvement in our revenue between Q3 and Q4, is that, is that differential. The expectation is that we will exit the year with our days on hand balance in, in the distributors at its, you know, at its normalized level where we expect the business to be, so that we go into 2024 with both that kind of run rate trajectory and the inventory balances in the channel appropriately set, so we have a clean slate as we enter 2024. I mean, if we take a kind of three or four-year view on channel inventories, would you expect channel inventories to be back to pre-pandemic levels in terms of days on hand? Or would it still be elevated relative to, say, you know, 2019, 2020 levels? Yeah. Again, two different, two different points. I think from a, from a days on hand, we've, we've always stayed relatively within the boundaries we have as a business. That's, we measure our partners and channel partners on that. It's part of their incentive plan. Again, the absolute dollars increased over the last two to three years in balance as our revenue increased, and those balances are declining now that our volume's declining. The, we again, we, we spent a lot of time with our partners ensuring that they have the right levels of days on hand inventory to support the business. Those vary by product family, by, by region, and, and what the business needs are. Again, we're a little bit higher than that range today, just given the, the velocity decline we saw late in the second quarter. We're gonna get that corrected here in the third and then a little bit more in the fourth, so that we go into 2024 again with a clean sheet. This concludes our question and answer session. I would like to turn the conference back over to Mr. Burns for any closing remarks. Yeah, while our spend is pressured, certainly in near term, over the long term, we believe that we are well positioned to benefit from secular trends to digitize and automate, you know, workflows within our customers' environments. To wrap up, I'd like to just thank our customers, partners, and employees for their support and dedication over, you know, to our long-term success. Have a great day, everybody. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.