Nathan Winters
Chief Financial Officer at Zebra Technologies
Thank you, Anders.
Let's start with the P&L on Slide 7. In Q4, net sales increased 2.5%, including the impact of currency and acquisitions, and 3.9% on an organic basis. Our Asset Intelligence and Tracking segment increased 13.5%, driven by double-digit growth in printing. Enterprise Visibility and Mobility segment sales were approximately flat with mixed performance among our offerings. We realized particularly strong growth in data capture solutions including RFID, as well as rugged tablets.
Mobile computing sales declined primarily due to challenging prior-year compares, particularly in EMEA. We also drove growth across Services and Software with strong service attach rates. Performance was mixed across all regions. North American sales increased 11%, helped by the recovery from supply chain challenges and strength in data capture and printing. EMEA sales declined 7%, primarily due to the 5-point impact of our suspension of sales into Russia in March as well as lower sales to large customers in Northern Europe.
Asia Pacific sales grew 3% with strength in Japan and growth in China despite COVID challenges late in the quarter. And Latin America sales increased 7% with strong growth in Brazil and Mexico. Adjusted gross margin decreased 10 basis points to 45.6% due to FX, offset by lower premium supply chain costs. Adjusted operating expenses were lower, improving by 100 basis points as a percent of sales, primarily due to lower incentive compensation and effective cost management.
Fourth quarter adjusted EBITDA margin was 22.5%, an 80 basis-point increase driven by operating expense scaling. Non-GAAP earnings per diluted share was $4.75, a 4.6% year-over-year increase. Turning now to the balance sheet and cash flow highlights on Slide 8. In 2022, we generated $413 million of free cash flow. Although Q4 was strong, the full-year was significantly lower than last year, primarily due to a higher use of working capital due to elevated inventory, higher incentive compensation payments given our exceptional 2021 performance, and $135 million of previously announced settlement payments which are scheduled to conclude in Q1 of 2024.
In 2022, we invested approximately $880 million in the Matrox Imaging acquisition to expand our Machine Vision solutions offering. We made $751 million of share repurchases and invested $12 million in venture investments. We ended the year at a comfortable 1.6 times net debt to adjusted EBITDA leverage ratio and with more than $1.4 billion of capacity on our revolving credit facility.
On Slide 9 we highlight premium supply chain costs which have continued to improve from peak levels. The actions we have taken to redesign products, targeted price increases as well as improving freight rates and capacity, have enabled us to reduce component purchases on the spot market and reduce the freight cost impact.
Additionally, we've increased the volume of printer shipments on ocean from air, which will contribute to reduce freight costs through 2023. In Q4, we incurred premium supply chain costs of $25 million as compared to the pre-pandemic baseline which was favorable to what we had anticipated in our prior outlook and $38 million lower than the prior year. We are expecting these premium supply-chain costs to steadily decline in 2023.
Let's now turn to our outlook. Customer demand and our order pipeline remained healthy, yet we continue to see some softening of demand in elongated sales cycles that we referenced last quarter due to the uncertain macro-environment. We are taking a cautious approach to our sales outlook and expense management while working to right-size our inventory levels.
For the first quarter, our sales are expected to decline between 4% and 1% compared to the prior year. Our outlook assumes a 3-point negative impact from foreign currency changes and a 150 basis-point additive impact from recent acquisitions. This translates to expectations of negative 1% organic growth which includes a 1-point headwind from sales into Russia last year.
We anticipate Q1 adjusted EBITDA margin to be approximately 21%, driven by higher gross margin from improving supply-chain costs despite significant FX headwinds. We expect premium supply chain costs to be approximately $20 million in Q1 and nearly $50 million year-over-year reduction. Non-GAAP diluted EPS is expected to be in the range of $3.70 to $4.
For the full-year 2023, we anticipate net sales to be in the range of a 3% decline and 1% growth. This outlook assumes a 50 basis-point net negative impact from foreign currency changes and acquisitions as FX headwinds moderate throughout the year. We anticipate full-year adjusted EBITDA margin between 22% and 23%. We expect premium supply-chain costs of approximately $50 million for the year with continued improvement in product availability. We have also proactively managed operating expenses as evidenced by opex scaling in Q4 and recent targeted restructuring actions as we enter 2023, which enabled us to preserve strategic investments in the business.
We expect our free cash flow to be at least $650 million for the year, which reflects the benefit of working down elevated inventory levels through the year, higher cash taxes, and $180 million of previously announced settlement payments. Please reference additional modeling assumptions shown on Slide 10. Note that the cost of borrowing is expected to be approximately 5% to 6% this year, and our non-GAAP tax rate is expected to be approximately 19% due to the United Kingdom Corporate tax rate increase.
With that, I will turn the call to Bill to discuss how we are advancing our Enterprise Asset Intelligence vision.
