Good day, and welcome to the Fourth Quarter and Full Year 2025 Zebra Technologies Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Mike Steele, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to Zebra's Fourth Quarter Earnings Conference Call. This presentation is being simulcast on our website at investors.zebra.com and will be archived there for at least 1 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 with reconciliations shown at the end of this slide presentation and in our earnings press release. Throughout this presentation, unless otherwise indicated, our references to sales performance are year-on-year on a constant currency basis and exclude results from recently acquired businesses for 12 months. This presentation will include prepared remarks from Bill Burns, our Chief Executive Officer; and Nathan Winters, our Chief Financial Officer. Bill will begin with a discussion of our fourth quarter and full year results. Nathan will then provide additional detail and discuss our outlook. Bill will conclude with progress on advancing our strategic priorities. Following the prepared remarks, Bill and Nathan will take your questions. Now let's turn to Slide 4 as I hand it over to Bill.

Thank you, Mike. Good morning, and thank you for joining us. We delivered fourth quarter results above our outlook, driven by our team's strong execution and positive demand trend. Before discussing the quarter, I'd like to briefly reflect on the progress we have made over the past year on our vision to advance intelligent operations. In 2025, we expanded our connected frontline portfolio and customer base through the Elo Touch acquisition and expanded our 3D machine vision capabilities with the Photoneo acquisition. We advanced our market leadership with the introduction of our AI solutions for the front line, sharpened our focus on automation by exiting our Robotics business to prioritize areas where we see better growth opportunities, including RFID, machine vision and AI-powered solutions. Operationally, we delivered solid growth, generating strong free cash flow and deepened customer and partner relationships. For the fourth quarter, we realized sales of nearly $1.5 billion, a 10.6% increase or 2.5% on an organic basis from the prior year, and adjusted EBITDA margin of 22.1% and non-GAAP diluted earnings per share of $4.33, which was 8% higher than the prior year. We drove strong results in our Asia Pac and Latin America regions with EMEA returning to growth. Our healthcare, manufacturing and retail & e-commerce end markets grew, while transportation and logistics cycled strong compares in North America. Elo performed well in the quarter, and we are pleased with the early progress on driving synergies. We realized solid earnings growth by fully mitigating existing tariffs and driving operating expense leverage through productivity initiatives while continuing to invest in our market-leading solutions portfolio. For the full year, we achieved greater than 6% sales growth, in line with our long-term expectations and 17% non-GAAP diluted earnings per share growth. We also generated more than $800 million of free cash flow and closed on accretive acquisitions. Overall, our team executed well while navigating an uncertain environment. Our strong financial position enabled us to return significant value to shareholders with more than $300 million of repurchases in Q4 and nearly $600 million for the full year. Given our progress, our Board of Directors has expanded our authorization by $1 billion. We will continue to execute on our disciplined and balanced capital allocation strategy, prioritizing investments in our business that elevate our portfolio of solutions while consistently returning capital to our shareholders. We are well positioned as we enter 2026 and excited about the opportunities ahead. I will now turn the call over to Nathan to review our Q4 financial results and 2026 outlook.

Thank you, Bill. Let's start with the P&L on Slide 6. In Q4, total company sales increased 10.6% or 2.5% on an organic basis with growth across most categories. Our Connected Frontline segment grew 3.6%, led by mobile computing and our Asset Visibility & Automation segment grew 1.3%, led by printing and supplies. We realized solid performance across our regions. Asia Pacific sales increased 13%, led by Japan and India. Sales increased 8% in Latin America with double-digit growth in Mexico. In EMEA, sales increased 4% with solid growth in Northern Europe and Germany. And in North America, sales declined 1% as we cycled large order activity in the prior year, partly offset by solid run rate demand. Adjusted gross margin declined 50 basis points to 48.2%, primarily due to lower services and software margins. We fully mitigated current tariffs earlier than expected, thanks to our team's successful efforts, including supply chain moves, product portfolio rationalization and price execution. Adjusted operating expense leverage improved by 60 basis points. This resulted in fourth quarter adjusted EBITDA margin of 22.1%. Non-GAAP diluted earnings per share were $4.33, an 8% year-over-year increase and above the high end of our outlook. In Q4, we recognized $76 million of restructuring charges relating to the exit of our Robotics business and productivity initiatives. Turning now to the balance sheet and cash flow on Slide 7. For the full year, we generated free cash flow of $831 million or a conversion rate of 102%. At year-end, we held $125 million of cash with a modest debt leverage ratio of 2 and $1.2 billion of credit capacity. We have been deploying capital consistent with our allocation priorities. For the full year, we repurchased $587 million of stock and acquired Elo and Photoneo with cash on hand and our…

Thank you, Nathan. As we turn to Slide 10, Zebra remains well positioned to benefit from secular trends to digitize and automate workflows with our innovative portfolio of solutions, including purpose-built hardware, software and services. We deliver intelligent operations by digitally connecting people, assets and data to assist our customers with business-critical decisions that drive meaningful outcome. The $35 billion served market represents a significant growth opportunity. Zebra's complementary and synergistic segments position us well to capitalize on this opportunity. The Connected Frontline provides the digital touch points necessary to improve efficiency, collaboration and the customer experience. Our solutions include enterprise mobile computing, interactive displays, frontline software and AI agents. Asset Visibility & Automation gives assets a digital voice to automate environments with technology that scale through printing solutions, advanced data capture, RFID and machine vision. Turning to Slide 11. Zebra solutions enable our customers across a broad range of end markets to drive productivity and efficiency and improve the experience of their customers, shoppers and patients. We are accelerating our investments in RFID, machine vision and AI, further sharpening our strategic focus. Zebra is investing in RFID solutions that advance our leadership and support emerging use cases. Our next-generation mobile computers embed RFID reading capabilities to prepare our customers for the increased penetration of RFID tags across the supply chain. A North America telecommunications company recently selected our new RFID-enabled mobile computers for the retail location, replacing consumer devices. Our solution enables this customer to improve inventory accuracy and reduce shrink as well as lowering IT support costs over the product life cycle. We're excited about the momentum we are seeing in RFID adoption and our pipeline of opportunities. We are driving new opportunities in machine vision by investing in go-to-market initiatives for deeper engagement with our customers. There…

Thanks, Bill. We'll now open the call to Q&A. [Operator Instructions].

[Operator Instructions] Our first question today comes from Tommy Moll of Stephens.

First one for you on memory. Nathan, I think I heard you say that beginning in Q2, you anticipate a 2-point headwind that you can fully offset. So maybe we can just unpack that a little bit. 2-point, I presume you're just referencing a 2 percentage point hit to gross margin. And maybe you can give us some context how that progresses from Q2 and beyond, or maybe you can quantify for us some of the initiatives that you have in flight to try to offset that headwind.

Yes, for sure. No, that's correct to what we said in the statement. It's about a 2-point gross margin headwind on a gross basis. But obviously, the memory chip demand and price expectations have escalated quite a bit since the beginning of the year. But we are pursuing multiple mitigation strategies. It's no different than what we've done before, whether this was with tariffs or semiconductors. So we recently announced price increases globally over the past week, they will be effective in March. Practically working with our suppliers around spot buys, co-planning around the demand trends as well as looking for alternative memory sources and then a lot of work from our product teams on transitioning to some higher density memory. So again, quite a few active work streams in process. And if you look at the impact for '26, I mean, this is based on indicative pricing from our suppliers and where they see that going here over the next several quarters. The impact really begins in Q2 just based on the timing of those price increases as well as what we have in inventory going into the year. But we fully expect to mitigate that within the year, and that's embedded in our guidance. About half of that or 1 point is offset with -- just with other offsets we have in the business, whether that's the exit of the Robotics business, some tailwinds from some of the lower tariff rates as well as the actions the team has taken to mitigate the tariff exposure as well as some of the favorability in FX. And then the other half coming through with the -- as we realize the pricing benefits into Q2 and through the second half of the year as well as all the other mitigating actions the teams are currently working. So again -- and our teams have done a really great job at securing supply to meet the demand we have within the guidance. So a lot of work. It's obviously a dynamic, but I think, again, we feel good about where we're at with the work streams and working closely with our supply base.

And I want to follow up on the repurchase update you provided today. It sounds like you've already done $100 million through the year-to-date period. And so my question is with the new authorization and assuming your stock is at similar levels, is there any reason why you wouldn't -- or excuse me, why you would slow down the recent level of repurchase?

If you look -- I mean, if you just take a step back, ending the year from a debt leverage around 2x, we feel great about the overall capital structure, strong cash position, balance sheet is in good shape. So as we said, we repurchased $300 million of share repurchases in the fourth quarter. We have repurchased $100 million year-to-date leading into the call. So right now, we're targeting to do a share repurchase of around 50% of our full year free cash flow of $900 million. That will be primarily here in the first half of the year. So again, we continue to plan to be aggressive in the market here over the next several months. And this still provides ample flexibility as we enter the second half of the year based on our cash profile for the year.

The next question comes from Guy Hardwick of Barclays.

Bill, I think it's been a couple of years since you've referenced the pipeline. So I guess that's a very positive. So is Visibility improving, but just more specifically in the near term, it appears the midpoint of your Q1 revenue guidance, it suggests revenues are above -- Q1 revenues are above Q4, which is much better than seasonality. Any particular reasons for that? Is that Elo? Is it because of the pull forward from Q4 to Q3 makes an easier comparative? What other sort of issues are that? And is FX a big change sequentially?

Yes, I'd say that the strong finish to the year certainly is playing into this as we exceeded our outlook. 2025, we drove solid growth, 6% growth and then 17% EPS growth, greater than $800 million of free cash flow in what was an uncertain environment through the year. Elo added 2 points of sales growth, so -- to the year, leading to 8% growth for the full year, really advancing our offerings in the Connected Frontline segment and then also our capabilities across engaging customers in a digital way, certainly in that segment. So enhanced our modern store offering as well. We see that as we enter '26 that there's momentum, right, is that we see reacceleration of growth coming out of fourth quarter, led by manufacturing, our machine vision pipeline, momentum in RFID are all positives as we enter the year. We're seeing our customers continue to talk about investments in technology as we spent a lot of time with them at the National Retail Show. Really, we're focused on higher growth opportunities across the portfolio and to drive productivity within the business, as Nate talked about, kind of offsetting memory. So I think overall, we feel good as we enter the year and that the momentum is there to drive profitable growth in 2026.

And Guy, I think if you look at the Q1 guidance, as you mentioned, in line or roughly flat from where we were in Q4. I think a couple of things in play. One, if you just look back over the last couple of years, linearity has been anything but typical. So I think it's hard to say what has been typical linearity if you look back just that's happened over the past couple of years. But also, we didn't see, as we said in our guidance for the fourth quarter, kind of a surge in year-end spend. So we didn't see the same type of cyclical improvement from Q3 to Q4. And then Elo plays a small part, just not quite the same seasonality, more linear throughout the year. So I think all 3 of those play a factor in why -- along with just, as Bill mentioned, the demand environment all play a factor in why Q1 is kind of in line with Q4 and the top line.

So sorry, just on the memory issue, do you have much visibility to the back end of the year in terms of what could be the annualized impact as we kind of exit the year based on your discussions with your suppliers?

Yes. I mean, we -- I mean, really, the pricing we've gotten now is kind of through the middle of the year. So I think that's -- and obviously, that's what we've incorporated into the guide as well as some assumptions around just how that may play out in the back half. I think the way to think about it now would be you take the 2 points, really pull that over the back -- second, third and fourth quarter and then annualize that run rate on an annual basis. So it's not that much different from what we're seeing here in our '26 guide.

Our next question comes from Joe Giordano of TD Cowen.

Can you talk about, like -- I mean, it's a fairly wide-ish -- it's kind of a wide organic growth guide for the year. So maybe you could talk through, like, scenarios and what your visibility looks like and how you -- what would be required from, like, a market standpoint to get to that higher end and how, like, derisk is the low end?

Yes. Maybe just start with the full year guide, 11% at the midpoint, 22% EBITDA margin and double-digit EPS growth. So again, I think we feel good about the overall profile for the year. And as Bill mentioned, I think the underlying theme of that is entering the year with a strong pipeline, the momentum across different parts of our business, whether that's RFID, manufacturing, machine vision. And I think if you take a step back, we believe the guide provides a balanced view of the environment where we sit here today, including still some macro uncertainty out there, the memory component challenges with the opportunities that we see in the market. So if you look at the 11% midpoint, about 4 points of that is driven by underlying demand. Elo provides 5.5 points of the growth and FX is 1.5 points in there. And I think Visibility is pretty typical for what we see at this time of the year. So I think the range is really bound around the midpoint. It is more how we think about it in terms of circling around the midpoint. Obviously, the macro conditions, timing of deals all play a factor in kind of the balance between the low and high end of the range. But I think we're confident in the full year outlook based on everything we have today.

And just a follow-up. Can you talk about price just, like, bigger picture, has the way customers think about price of these types of electronics, like, structurally changed and maybe permanently changed? Like, is it -- I mean, how much of your revenue base now is almost, like, just pure pass-through of weird things that have happened, right, whether it's tariffs or memory or et cetera? Is it just, like, more acceptable behavior now and customers kind of can accept that price isn't just going to keep going down into, like, perpetuity for, like, existing products?

Yes, Joe, I'd say that the things like tariffs and memory and others have allowed us to raise price where along with our competitors as well, I think you're just seeing this across the industry that it's not possible to absorb the cost of tariff or memory, and we've got to raise price. And I think that -- look, our customers are price sensitive. We have competitors in the market. Our largest customers get our best pricing. That's just the way it works, and we continue to work with them to make sure they're seeing the value. And we're adding a lot of technology to our devices, not just we're raising price because we have to on memory and tariff and others, but also they're getting a lot of value, right? We've added RFID to all our next-generation mobile devices. We're increasing memory and processing speeds, working with our partners in Qualcomm and certainly Google on the OS to make sure that they can support AI models on the device. So they're seeing value in things like mobile computing. We're doing the same across the entire portfolio, adding AI capabilities to machine vision, continuing to enhance capabilities around scanning, our print portfolio, we're adding RFID printing to that portfolio. So there's a lot of value as well that our customers are getting from our solution. Certainly, there's price sensitivity and competition, and that all matters. But look, we don't have a choice but to raise price when memory and tariffs and others are so significant. But I think our customers understand that. They're seeing that across not just our segment, but many others.

Yes. And Joe, I think if you just look back at last year, even with the price increase we did in April, it still represented a little over 0.5 point of the full year organic growth. So still the vast majority of the growth last year was driven by underlying demand. So it clearly plays a part, but that underlying demand is still what drives -- what's going to ultimately drive the top line.

The next question comes from Rob Mason of RW Baird.

Maybe just an extension of that last question. I mean, as you think about the way you've laid out the guidance for the first quarter and how you're thinking about the balance of the year and when pricing goes into effect, are you giving any consideration to customers trying to get in front, moving projects, pulling those forward, trying to get ahead of some of the price increases or just uncertainty around memory in general?

Yes, Rob. So I think 2 points. On the first quarter, we're not expecting any type of pull-forward activity or that's not incorporated into the guidance. I mean, we just announced the price increase this past week. So obviously, the -- what we were seeing in the pipeline of opportunities was unaffected by the price announcement here just over the past week and just how we implement that with -- through our distribution channel with our partners in terms of honoring prior pricing that we have or updating the full backlog or what's sitting with our distributors. As we've done these price increases in the past, we really haven't seen a huge pull-in of demand just based on how we administer that through our channel as well as honoring some of the PCs, price concessions, we have with certain customers on deals. And then I think the other one, just as you look at the incremental price increase we announced this week, that's not been incorporated into the guide, similar to how we thought about last year. We want to monitor the impact. We just announced it. So obviously, that's being absorbed through the channel. So I think as we sit here today, we thought it was the right move to say what's -- really, what we're seeing from the underlying demand today. And then we'll update that as we go through the year in terms of how we see that as either incremental revenue or any type of trade-off with underlying demand.

Yes, I'd say that maybe just to add, Rob, that talking to our partners at our channel partner conferences, we've been through North America and Asia Pacific already. And the message they're sending to customers is, let's talk about these major projects early. Let's get those orders in, not the idea of to save on pricing or others, but more just to make sure we've got supply for them ultimately. And I think that's the message they're sending. So I don't see people buying early because of it. I think it's just a reality of what's happening across memory. But I think it allows our partners to have the conversation early with early visibility to especially larger opportunities with our customers to make sure that they understand that the more visibility we have the demand on the specific product they're looking to utilize, then we can go meet that demand with the memory we have.

Makes sense. And then, Bill, you mentioned this return to growth in machine vision. I think historically, we're aware of where you had some maybe overindexing to certain verticals. Are those the verticals that you're expecting to see recovery in? Or do you have some new ones that you're looking to, to drive that return to growth?

Yes. We see that machine vision is really an integral part of the Asset Visibility and Automation segment for us. And I think that the -- when we look at machine vision, we saw sequential growth in fourth quarter. So we feel good about that. We've seen some new wins, both in -- as you know, the machine vision market, there's 2 sides of that. One is T&L. So we've seen some large transportation logistics wins and the other inside manufacturing. So we've seen at the high end of our portfolio, some automobile manufacturing wins, so that coming back a bit. So I think manufacturing in general, on the machine vision side recovering in addition to T&L is a good sign. We expect sequential growth to continue through first half, but solid growth for the full year. I think the pipeline is -- we've been working hard to diversify the pipeline of customers, but everything across inspection, dock door, pack bench, scan tunnel, optical character recognition to a broad breadth of opportunities that the team is working on, I would say, as we're looking to diversify the business, as you said, into new vertical markets. I think our value proposition is strong. We've got -- we focus around ease of use, the unified software platform that we've brought across the portfolio. We've invested in go-to-market. We've changed out some leadership in the business, acquired Photoneo to have another offering at the high end of the market. So I think we feel good the market is recovering overall in machine vision as manufacturing recovers and T&L spends again in that environment. So we see solid growth, quite honestly, into 2026. So overall, I'd say we feel good.

Our next question comes from Keith Housum of Northcoast Research.

Sorry to harp on the memory issue a little bit more, but I appreciate, Nathan, the visibility through the first half of the year. But we're hearing more and more concerns around the industry, perhaps product shortages and limitations to sales in the second half of the year. Can you talk about any confidence you have that regardless of the price that you're going to have the availability there of the products?

Yes, of course. Look, I think the team -- as I mentioned earlier, the team has done a great job working with supply. As Bill mentioned, I mean, part of this message through the channel with our partners is getting the visibility on those projects to what SKU, what product you want and getting those visibility early allows us to then shape demand. So it's really around a bit of can we get the product as much as get the right memory for the right product that we need and making sure that, that precious components are going to the right product families as we build out the pipeline. So that's where the team is really focused on now is, I'd say, shaping demand, working with our customers around the particular SKUs they're looking for around projects maybe a bit earlier than normal so that as we build the build plan, work back through our supply chain, we're getting the right memory through the pipeline. And then the other thing the team is working actively is moving to the higher density memory, which a lot of that capacity plans to come online in the middle of the year. So part of that is also shifting to the newer memory, which, again, we expect for that supply to increase as we go to the back half of the year.

I think, Keith, maybe just -- I'll add really quick. Just strong supplier relationships is critical to this, and that we know coming out of COVID, that's critical for our business, and we've worked really hard to make sure that we've got the right relationships in place with our suppliers, and they're quite honestly, guiding us through this, as Nate said, we've -- months ago, we had the conversation around moving to new memory that would be more readily available. And we've got early samples of that. We're working with our other suppliers to go test that and make sure that we're ready. So we're doing everything our suppliers are asking us to go do to get the most access to memory we can. And those relationships really matter. And ultimately, we're working closely with them. And as Nate said, on the other side of it, on the partner and customer side to say, look, we don't want to build product and put memory in it that we don't need for customer demand. So we want to make sure we got the right SKU, the right product, the right timing around it. And the analysis we've done so far is that we're going to mitigate the pricing and we're going to have the supply we need. There's always some risk in that, but we feel good about where we stand today. The team has done a lot of work on this.

Okay. Great. In terms of that memory, is it primarily the mobile computers that are at risk here? Or is it also point of sale with Elo or printers? Is that experiencing some of the same issues? Or is it really concentrated in mobile devices?

Concentrated in mobile devices. Elo and the POS and kiosk business has similar, but it's predominantly in those 2 portfolios.

Look, again, the teams there are working closely together. Our supply chains are tied on exactly what we're doing from a pricing perspective, but also a supply perspective and leveraging the strengths of both of our -- both Elo and core Zebra to make sure we've got supply across both.

The next question comes from Andrew Buscaglia from BNP Paribas.

I just wanted to get a sense of these kind of customer conversations you're having in terms of what they're thinking for '26. It sounds like -- I mean, you have -- it sounds like you have a healthy backlog and your Q1 guidance implies some improving spending. But what is the -- what are the customers saying in terms of the biggest impetus to spend here? Is it like -- in the past, you talked about clarity around tariffs. Is it -- are they taking advantage of accelerating depreciation? And is there an upgrade cycle, maybe they just haven't bought in so many years and they got to move forward this year?

I'd say that the customer conversations are really around the idea that they're continuing to invest in their business, and that's across all verticals. We've spent -- even though it's early in the year, a lot of time with customers is -- I mentioned the National Retail Show, but our largest T&L customers because T&L is so critical to retail also were at that show. We've got our health care show coming up in HIMSS over the next X number of weeks. So we're preparing for that. So across all verticals, our customers are really talking about continuing to invest in their business and technology. I would say that we entered the year with a solid backlog and really a pipeline. We've got momentum, as Nate talked about, around our core business overall, including scanning, printing, mobile computing, but also manufacturing, seeing more strengths in that, which has been a focus area for us. EMEA returning to growth. I would say that the demand remains strong for Elo. So we're certainly excited about that acquisition. I think that the breadth and depth of our solutions portfolio, including the addition of Elo and the new opportunities around our AI suite and the idea that customers are thinking about how are they deploying AI at the front line of business overall, those conversations continue. And I think that customers are really focused on how do they serve their customers better and get better experiences, whether that's omnichannel or it's self-service or point of sale. They're talking about driving efficiencies within their business and how do I use our solutions to go do that across RFID, machine vision and others. And I think it's how do you increase inventory visibility, which is still challenging across our customer base, and that's everything from printing to scanning to our mobile devices. So I think that we're confident in delivering solid growth in '26. And our customers seem to be really focused on continuing to deploy technology across their business. And I would say, kind of playing their game, right? They've got a plan. They're executing on it, and there's been really no talk about kind of anyone holding back or others. It's all been kind of positive about what are their plans for '26 and what are the opportunities we have to work closely together.

Yes. Sort of on that note, a lot of people looking at things like the AI effect. And certainly, your customers are trying to find ways to leverage it and reduce costs and improve productivity. I'm wondering, years ago, you had this Windows-based devices shifting to Android, which prompted a big upgrade cycle. And I'm wondering, do you sense like these new AI products you're talking about, you've been talking about them for a while, could have a similar effect in terms of prompting new spending or an upgrade cycle here?

Yes. I would say that if you look at the portfolio overall in relation to AI, that we're uniquely positioned to where Zebra can position itself really to be the leading AI solutions provider for the front line. I say that in a couple of ways. One is that the Asset Visibility & Automation segment gives a digital voice to assets, to inventory that's necessary to feed AI models if you're going to leverage those at the front line of business. You have to have -- give everything a digital voice and have visibility to be able to leverage the AI model. The second thing is you need something to -- the output of the AI models, what needs to be done, you need to be able to connect that information to workers. And the way you do that is through mobile devices and our SaaS offerings like communication, collaboration, task management combined together, take the output of the model and allows a worker to drive a behavior or do something, put inventory on the shelf, move something in the back room to front of room, pick up a pallet and move it to the next location that drives ultimately the outcome in your business that gets you to be more effective and more efficient. So it plays a critical role across our whole portfolio. Specific to mobile computing, the idea of we've -- our latest mobile devices certainly will support memory processing power and others and the software to support AI models on the device or in the cloud. And we're seeing customers move to those devices as their next-generation device as they're beginning to refresh. So yes, we're seeing that, clearly, AI will drive the upgrade of those devices, ultimately higher ASPs on those devices with higher memory and also will have an opportunity for us across the idea of Enablers and Blueprints and Companions we talked about to be able to drive AI software revenue for ourselves as well.

Our next question comes from Piyush Avasthy of Citi.

I think you mentioned a decline in gross margins due to lower service and software margins. Can we double-click on software margin performance? Like, anything you want to call out? Is it just the investments that you guys are making that's pressuring the margins and when we can expect that to reverse? Like -- and anything on the receptivity of the software offering that you're coming out with, like, how the customers are kind of buying or procuring those, that would be helpful.

Yes, for sure. I think if you look at -- the real driver within the service and software margin impact is primarily -- and obviously, it represents the vast majority of the revenue is in the service portfolio and just higher repair costs that we've seen over the past couple of quarters. Now that -- the good thing is that the overall margin rate improved in the fourth quarter, improved from where we were in Q2 and Q3. But this is really due to the age of the installed base, and we're starting to see that play out in terms of driving the overall number of repairs. We expect to see that level out here as we go through the year and see that the overall margin for the services and software to be flat, kind of you look at it year-on-year throughout '26. Specific to software, the 2 real things the teams are working on. One is a lot of energy and efforts gone over the last couple of years. And so this is unifying the platform, bringing together kind of the architecture to ultimately lower the overall support costs that will improve margins as we go really into the back half of this year and into next as some of that effort is starting to come to a closure in terms of transitioning customers to the unified platform. And then like anything, then it's about scaling on that in terms of as revenue grows, getting to scale to drive gross margins further. So I think those are the 2 aspects. If you look at that line, it's really driven by service, but within software, a lot of work over the past couple of years around the platform and unifying the platform, and we're getting close to the end of that activity, which then gives us some runway to improve margins as we move forward.

Got you. Helpful. And Americas was soft in 4Q, and I understand that there were some really tough comps, but can you elaborate on the underlying demand environment and trends you're seeing in the region? And as you think of your 2026 guidance, like, based on your conversations with your customers, how do you think Americas is contributing to your '26 guidance?

Yes. I think that I would say that overall, we saw relative strength in fourth quarter in North America around small and midsized business. But as we talked about, cycling large order activity in T&L and retail in the fourth quarter. So I think we feel good about the pipeline of opportunities that is healthy in the business. I think it really is just cycling a compare. We didn't see large deals, very large deals in fourth quarter that we've seen in past year. Nate talked about that a little bit in the seasonality idea. So that's really what it's about. We feel across North America that all vertical markets, all product areas, we see no real challenges there other than a tough compare in fourth quarter. If you talk about the other regions, I would say, return to growth in EMEA, really driven by strength in North and Central Europe. I'd say double-digit growth we saw strong growth in mobile computing, print RFID, so broad-based. We're seeing opportunities in Europe around retail with personal shopper, refresh opportunities and new. So where the North America market is really more self-service checkout in kiosk where Elo plays. The European market is a combination of that as well as self-scan, which is a large opportunity for us, both in new customers and refresh opportunities. So those continue to move forward in EMEA. Asia Pac saw strong growth, 13% growth across most of the region. Japan and India certainly were bright spots. Those areas are places where we've been investing. Certainly, the amount of manufacturing investment happening in India, we've changed our go-to-market model in Japan several years ago, continue to win opportunities in Japan. Latin America, strong growth in Latin America, broad-based. I would say Brazil and Mexico outperformed with large retail deployments, but broad-based growth across Latin America. So we're not concerned at all about North America. It really is just truly cycling a compare. And we feel good about broad-based growth across the regions and product areas as we enter 2026.

The next question comes from Jim Ricchiuti of Needham & Company.

I know it's early. I'm wondering what kind of assumptions are you baking in for the large project business this year? What kind of visibility do you have? It sounds like just based on what you're hearing and the concerns around memory that maybe these discussions are happening earlier.

I'd say that given the installed base, right, certainly Zebra's installed base overall that these large -- very large orders are really tied to refresh cycles and activity across our customer base, and that remains an attractive opportunity for us overall. We're assuming a similar level of refresh activity in '26 that we saw in '25. And I'd say to remember that every customer's refresh cycle is different, right? It's really driven by things like supporting new applications, driving higher processing power and memory or new features like we just talked around on AI or new features like RFID being embedded in the devices. It's driven by obsolescence of OS or the security life cycle. It's driven by technology transitions, but everyone is on a different cycle. And I'd say that when customers refresh, the opportunity for us is not just the refresh cycle, but they typically buy more devices because they're extending their use cases and putting devices more in the hands of more associates overall across all industries. And we look at things like retail, the refresh cycle has really normalized over the last several years. And we're seeing some retailers spread their purchases over a longer time horizon. From a T&L customer perspective, I would say they refresh at a slower pace than retail, which is typically 4 to 5 years, driven by really the fact that the devices have higher durability and are using fewer applications than we see in retail. But as you said, those discussions are -- with large T&L customers are progressing. We're talking to them earlier about these refreshes. And the pipeline continues to grow for multiyear deployments that likely begin in '27. So in '26, we'd see about the same level as we saw in '25, but this is clearly an opportunity out there for us, and we would see that as these conversations continue to progress and progress earlier with challenges of things like memory, we get more and more visibility to the time frame from our customers.

You mentioned RFID several times. What kind of growth rate are you assuming in the RFID business this year? And are you seeing more of the activity coming from the emerging areas like food or the traditional areas, logistics and retail?

Yes. We see '26 high double-digit growth continuing in RFID. We had a strong year in -- over the last several years, including 2025, and we see that continuing. The opportunities have really been broad-based all the way across the supply chain from retail to transportation logistics to manufacturing, now opportunities in government. We're seeing clearly the move from retail apparel. We saw it move to broader merchandise inside retail. You mentioned fresh food inside grocery is a new opportunity in things like bakery and around the outside edge of the store, higher-margin perishable items, we're seeing the opportunity there. Parcel within T&L remains a large opportunity. Quick-serve restaurants. We think of automation always as -- but quick-serve restaurants are moving from pen and paper to RFID. We're seeing health care and just broader track and trace across the supply chain. So I think that we're seeing broad-based growth. We've got #1 share in fixed and handheld readers. We continue to have strength in our -- we're the leaders in RFID printers. Across our labels business, we're seeing strength. So I think it's broad-based. I think we're continuing to see the adoption. It's why we're adding RFID capabilities to the majority of our new mobile computing devices is that customers continue to want to adopt RFID within their environment. So really broad-based and not driven by just one industry or segment, but across all the vertical markets we serve.

The next question comes from Brad Hewitt of Wolfe Research.

So curious how you see channel inventories as they stand today. And does the guide embed any meaningful changes in channel inventory levels as you progress through the year?

Brad, no, we've seen channel inventories as we exit were in good shape, pretty similar to what we saw at the end of last year. So no meaningful change. You definitely see variability quarter-to-quarter, just whether that's timing of deployments on their end, prepping for year-end, et cetera. So quarter-to-quarter, you see some variability. But I think as we look at the full year picture, no major changes in terms of days -- measuring it on days on hand. So how much are they carrying on a daily basis. And we don't expect a material change in that as we go through the year.

Okay. That's helpful. And now that the tariff situation seems to have stabilized a little bit overall, have you guys seen any change in customer willingness to go ahead with projects versus 3 months ago? And to what degree is any macro-driven change in customer sentiment baked into your 2026 outlook?

I'd say that customers were, on the retail side, a bit concerned overall about just the secondary effect of tariffs as they've had to push that through on their inventory to their customers ultimately. But I think that we're really beyond that. That's all kind of flowed through their supply chains and they've had to raise price in the places that they have. So I'd say that, again, these conversations with customers today, there hasn't been concerns of tariff raised. There's always challenges -- there may be future challenges around trade, but we don't see those as of today. The bigger challenge, as we talked about multiple times in the call is probably memory that we -- we're going to mitigate in the year. So I think tariffs have not factored into a lot of conversations with customers at this point.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Burns for any closing remarks.

I'd like to thank our employees and partners for delivering a solid 2025 results. We certainly -- as we look ahead, we're focused on advancing our portfolio of solutions and driving profitable growth across our business. Thank you, everyone.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.