ZAGG - Earnings call transcript Q4 2017

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Operator

Good afternoon, ladies and gentlemen and welcome to the ZAGG Fourth Quarter and Full Year 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode to prevent background noise.

We will have a question-and-answer session later and the instructions will be given at that time.

As a reminder, this conference is being recorded.

Now I'd like to welcome and turn the call to Brendon Frey of ICR. begin. may you Brendon,

Brendon Frey

Good review thank and the results. XXXX Bruce. us full for today financial to ZAGG afternoon, you, you and joining year Thank fourth quarter

Chief we Holiday; then Brad Chris we comments, call Brad Ahern, Executive the Hales, On will Financial Chief and have for Incoming will session. Randy call ZAGG's Chief open today, President the a and and Officer. Executive the review Officer; Officer, prepared Randy question-and-answer and their

issued today Our the earnings fourth release was PM quarter at closed Time. X:XX after approximately press market Eastern

a a financial website the As this on to earnings follow-on also we on release, document Relations we've Investor X-K. published the SEC Form supplemental our to furnished information and

www.zagg.com in Financials Quarterly under all the section the can our documents You find at our Results tab. earning website on Investor Relations

call this Relations ZAGG the a one year. and archived the Events for podcast Investor be will conference tab recording are We call at webpage the under of

the prepared we but our statements of the begin, to, certain your the limited would statements remind and like or These forward-looking response and to Before that we not may include, estimate additional statements in forward-looking the remarks project speak questions. hereof. statements for date future to statements future contain are operations of Company. Company or These performance guarantee do results of not that and management outlook make the performance everyone as

XX-Q can today's measure. is may Randy EBITDA, in to Report the today's accordance no we of Commission. statements call, will adjusted in by between ZAGG's Exchange measures non-GAAP now, the Factors detailed results with in and use cause revise For Risk Investor with of a financial G a this discussing materially made be discuss An call Form found GAAP results in outlook to and substitute use ZAGG's on which to The non-GAAP GAAP I Please all can financial required release again financial Hales. and press has website. such that statements, ZAGG the and Relations of those discussion in on release in of Quarterly measures included call today, and in performance measure to derived Reports Annual is be actual information to non-GAAP the for the reconciliation any you factors ZAGG's detailed contained forward-looking release. projected press note refer Form forward-looking the XX-K obligation we that SEC the non-GAAP the on explanation Company, not measure call. Company's GAAP Securities addition non-GAAP section the Randy? And filed to more the assumes any the on or that turn from any differ Regulation this on in and would over a which of limitations, for are the the like Company's

Randy Hales

The ZAGG Company's and XXXX. our and focus a X corporate Good our begin hardwork achieving for to of success remarks us wanted result achieving I is for by today. afternoon you employees their targets our to thanking entire the commitment joining thank on objectives. team my direct in year

objectives strong has into been while that period continue a culture unprecedented support to shareholder During future. embraced of the will this growth, well our value maximizing

only at our several market has two for new in and number our newest the quarter wireless accessory. of successful our the coupled $XXX for demand launch the driven by record all-time starting years. with charge behind results, with million Samsung Mophie charge has Now solidified market builder been pat wireless a momentum fourth of Net market quarterly increased an XX% our been of to for The very who successful quarter. leading position onto sales in for portfolio has products strong

as XXXX. product we were end. of bill remained our first two at appropriate initially customers continued through While major months levels and the all able to has constrained, retail to of has year to Inventory sell-through supply by strong was consistent

management in strong wireless or operating new forecasting our Mophie's of the fourth through of Mophie's ecosystem increased products improved a expense continue points support market year-over-year to XXX quarter Gross the strengthen of and will pipeline $XX have margins meaningfully of which margin leverage branded robust increase a topline combination leader. products strides great fueled Mophie roughly basis that improvement adjusted inventory and EBITDA position processes. significant growth, a XXXX. The We made million organization margins as as improving

nearly in positive line flow international which a continued in XXXX net of year debt our and generated all net our of InvisibleShield strong Net to and strength we to power products, business. was of guidance the brands million our increased Turning and in increase became XX% year; contribution in was year. year performance by was profitable protection reduce our business cash XXXX sales to their by the Mophie screen positions This by our doubled year in million the to increased their full $XX The $XX achieving a XX% as early perspective Mophie of at strong $XXX end to range. from EBITDA $XX categories. a year million a strengthened high generated product management sales end sales end in share allowed equally driven record one breaking increase revenue the the full number driven the from areas of XXXX compared an year at market respected InvisibleShield of our Full to products, us XXXX. adjusted multi-sales. a million,

protection reached by As battery market dollar shared record Group, of while ended XX%, management frame respectively. Mophie and the XXXX high share line and the InvisibleShield's with cases power NPD XX% reported a XX%

the continue expanded our sales double-digit InvisibleShield protection of distribution will of in which capitalize international by in screen growth products channel million $XXX as driven For direct-to-consumer and and continued XXXX, we we our opportunities. our $XXX business, projecting new to are be net growth category million expansion online to

estimate high growth be strong expect market growth $XX we million as second offering in $XX we to Additionally, and $X.XX. of in EPS mid-XXs the million, and of expand wireless segment. product between charging our to range, low margins sales to gross this $X.XX EBITDA XXXX adjusted during We the half in

deliver on and Brad. increased will positioned this shift year, the we many a confident lie now and for Company for Looking Company OEM has is to over turn industry well to value ahead come. to beyond wireless. believe will years our and strong call long growing runway that shareholders the our the I'm brands, leading opportunities the given growth relationships capitalized towards I

Brad Holiday

Since additional performance just included today, were supplemental like performance. the our on financial recent financial financial minutes of a information issued Thanks, quarterly take in to many earlier our some comments to details few add Randy. I would

primarily new larger XX% offsetting XXXX growth mentioned, year a year. increased an our multi-branded in during and reporting of of demand the this end products. XX.X% at a guidance a holiday trying customers our for the the XX% international drove XX% as to new as for a year product and by to to the driven of in categories charge at strong improved shipments sales for quarter improvements our were already of rates space high As in the our screen on we strong of air increase expedite same freight great pads key our many XX% increase multi-wireless Partially all the did XX was the job much our came freight chain supply XX% before wireless of Gross protection basis with their customers. our end respectively. by that products levels higher expediting domestic sales improvement unusually was margins to Consolidated power Geographically, of fourth key time increased fronts. increased on base. sales of driven expense points in band to net Sales charge our

rates expect to We more have Chinese transportation demand them [ph] and return these some seen returns levels. levels space as to New normalized to after for would in historical Year more update

the took gross as one spend biggest SG&A of strong Adjusted increase contributed year. In opposed in-store program of sales from reasons XXXX. opportunity unplanned million expenses which our recorded in margins, addition, gross in driven marketing advantage they an leverage $XX customers the promotional with by This sell-through of operating EBITDA contribution and including XX% million, last to increase the compared were was funds support improved these to we our an multi-business. are $XX.X was to on and I an Since higher margins during in-store, during expense. quarter just positive a mentioned to

included noted law information the in financial signed in provided some Reform December. detail the the As today, into Act of supplemental impact Tax we on

of end to repatriation expense our the foreign on at reform, XXXX, a we record As resulted incremental as our assets balance well of This of tax deferred charge tax tax will quarter. revalue in sheet million the fourth $XX result tax to as an on earnings. in this a require

the consolidated balance strengthen. last X.Xx and higher due remains inventory XXXX. our XX million partially to months. balance multi-business our our improved the quarter in of improved continued high the we million last outstanding management sheet DSOs The result offset increased year Inventory of very XX of sales inventory on down Importantly, to past overall chain quality has a of forecasting, $XXX X.Xx respect to to year, inventory inventory to good. the over which due all improvement to in to incremental implemented debt charge to last to was of multi-acquisition the increased after across this X% of compared $XX the primarily credit XX% by the new debt, supply continue facility, at days quarterly compared receivable brands. a to returns Accounts our $XX overall have of to improved $XX days and as XX March from compared same by million manage processes channel management wireless in our our to and Consolidated to reduced our year. receivables million With past period pad continued end

decreased consolidated debt which to net Our million debt $XX compared last less $XX to year. million XX% cash is

We have of sufficient our liquidity demands to meet business. the

replacing our we lower credit facility note, asset-backed next which current covenant heads a new We and up would new rates flows. that for our interest better side this as advance. facility a conference our credit be we This based to to call, with lines completed a just have [ph], be is As credit before manage cash with suited slightly to easier are on would you we give continue considering so grow. in business wanted could light is

XXXX, As look of of million to at XX%. forward we we growth or to X% $XXX $XXX million sales estimate

discussed transition markets, our power our in in the included online and will inventory As improve This Randy one have in sales forecasting international directly a mentioned, operating where headwind be guidance currently expansion we basis. [ph] retail this certain to growth a to change model is customers protection continued is year-over-year transact management our with screen on direct-to-consumer continued driven capability A growth past in X and by that will increase of and using our from a term this distributor channel partner. we what categories. positively margins longer and impact our key PL

XX% period continues transition the sales guidance fulfilling in to this XXXX. approximately amount X% half the first it's ZAGG sales were these XX% orders of We higher for estimate be resulting growth the by compared will inventory our distributor when in to annual of make historical During we would first to to impacted $XX until million. of trends. sales sales half annual by XXXX with this approximately have represent If is consistent customers adversely change, approximately depleted, our been sales not key

plus tax complexity to of accounting this current upto estimate improvement percentage due second year than sales year the in will first includes expect have XX% state an tax the new mix seen would provide international XX% be initiative. one half Because estimated this in and year rate circumstances product We federal of refine and we rate to and to within effective of which higher some result taxes. to the mid-XXs direct-to-consumer past new a quarter the year product consistent power of tax law efficiencies new impact on have estimate to an margins and companies related last the Additionally, the to of be facts the components. we launches development continued gross with that rules to We in or customer low allow this them. the law, in offsetting increases estimate of with based

shares in on We earnings will average keep you updated if estimate. changes on rate, are there $X.XX based we million this calls Using per notable of future $X.XX this outstanding. tax XX.X share to estimate any

to million over back We turn adjusted range from Randy. also $XX call to million. $XX EBITDA the With estimate that, I'll to

Randy Hales

you, Thank Brad.

afternoon, retirement press of the the ZAGG employees President I a from of as as As issued and It's have and of you for growth grateful my in accessories been and Board my I'm served this with has embracing to have creation. additional extremely past the objectives ZAGG. years. for release leader have on that for from matured startup privilege The the announced mobile corporate from Directors annual the to served we shareholder to X our billion. saw for our CEO the ZAGG four Company global revenues value a a foundation likely over $X.X catalyst

key in have work strength at A values been we become executive striving team and while for of ensure earnestly orderly corporate time best influence times. Board bench the the and being our positive communities We live X establishing culture and a activity work. to succeeded and in embraces to company executive transitions has the building that leadership which to all the in

of of to closely One new and been take at with on here highlights assignments ZAGG time the has talented my the well is Company. prepared team working that lead executive our

filling Company and the instrumental Ahern release, past skills roles. for call the President. about to the advisor Brian is new of in the the the friendship, our executive a their has XXXX I enthusiastic I them been balance Brian CEO has be partnership the continue are team open support Both you bright, I experience an outstanding the and most executive perfect and more Company years next level. senior business to as through and growth to and the extremely to serving rapid The and point questions. significant several look over of couldn't two in future with in press leaders to who like announced up will forward position Chris as time, the end with At as our your As driving Stech accepted this take the shareholder. of the years. we'd of over for the Chris roles. in continuing supporter ZAGG a support huge have Thank

Operator

Malouf And the of first Instructions] line from comes question Craig-Hallum our Capital. with [Operator Mike

Your is now open. line

Mike Malouf

charging $XX.X on focus us million management, Can pads. could I year power a you the up side, driven in wireless If from charging in that the the in wireless what quarter? just lot give in obviously a Thanks. wireless last did how you mostly of give just that's sense estimate, $XXX million to or wireless revenue much many $XXX was the And that? then charging pads million in of us for how by is charging

Brad Holiday

we XXs. charge go a sales we this If power kind a we that that base our end sales that at the well forecast would before had about we kind break at combination $XX and and out wireless will new last last the go the we be to high look the year category. as going you take that ecosystem which as comment wireless we've just that a would continued to of million charge the wireless it $XXX of meant at of as current about under in million and pad I of range, forward business million our all guidance introduced that launching pad $XX up that about be products we is forward, as talked We come look and don't ended time, of in of we high

products. really So it's multiple a combination of

Mike Malouf

million going about looks guidance at $XXX of charging and almost to the it of you're of million some wireless areas base business of look look million at look like quarter $XXX So million of of $XX to pads the you then last way charging increase of a 'XX growth -- in of only accounted when less from million than you've the business. then for the you your if take $XX of -- that one at and other sold million pads given from sort $XXX you revenue, $XX just

I'm much would think get not pads one do sense taking you why as as just wireless So are charging of maybe to think? trying off a

Randy Hales

cycle. bit the a what you're of think seeing I is

when sales around flat designed Apple efficiently rates pad watching know, most Apple always to new devices. you and essentially Apple, launched year-over-year are was in and this particular with You are even tax news the iPhone charge was wireless devices down if highest work those to

that is launch bump of big experienced cycle. is we down just that that So until will the of kind there we backside on now another and anticipate that that taper again

here intend in week the we'll they same you of as does when it In the or but impact so, launches devices SX see fact, have release does know. little as Samsung's another to a pickup Apple with

Brad Holiday

I And you pointed of of the that we out growth products drivers in if the all would of online international Mike talked that are about thing and direct-to-consumer year, inclusive we've just too. those add, big will, next things kind other terms for all

So we you're this and provide had though is category the in product also even is constraint guidance as there, a but of we also oranges reality year were by we and we big international obviously of kind of combining big specifically don't get shipped we product terms did the apples breakout in. U.S., lot a in load

Mike Malouf

haven't a case time. actually squeeze power as X that on last an actually -- case I'm period, -- time that is had the what's there with down I'm done wondering I see out that going cases could I've official And iPhone I power get you noticed and a quarter well? longest I cases? in remember [ph] this non-introduction for has you've there sense. so of What going to case power the with on the then, in think And the for and just were been and thought a the is trying long you has iPhone no Mophie you power why a XX power that X have new year,

Randy Hales

power Yes, for big for so plus run, the get to in same X the we we reason that the didn't is uses a actually the for year. XX and the this case pipeline loaded new support so

iPhoneXX cycle pushed normal, through the later we what and the go -- the in approval into was year. call then Additionally, which have it this to late MFI they process

most have a because factor sale new we a year-over-year was pipeline of didn't change. form it So just for

Mike Malouf

gain Mophie a a about bit the why an on you sale had little talk that from dispute; that and You was can EBITDA?

Randy Hales

we time associated and in we was -- together adjust excluded know it all in etcetera, timing in closed it's this in expenses from reason but of we were bed that included it put sides what but upto we and operating, everything adjusted [ph], be since documentation didn't EBITDA. now, charges was the catch all but the included had dialogues operation. what was the it the was to it of final, terms the we because we try to cash we would in it that of to it's and out it real point we some we that just or called EBITDA excluding the of EBITDA and long and It's call not the kind So in excluded final, and it with our netted how etcetera of because of out

Operator

Mike our line comes And from question Northland next [ph] of the Capital. from

open. now is line Your

Nick Altmann

actually our for is questions. Altmann, This Nick taking thanks

in regards what year-over-year one, first category of the protection in units? did screen terms that to Just category, grow

Randy Hales

was. category the growth XX% what was

Nick Altmann

And that's dollars? or in units

Randy Hales

our business overall or about talking Are the dollars. talking you you was are That category?

Nick Altmann

Your business.

Randy Hales

XX%. Yes,

Brad Holiday

to share the evidenced in been these is continued market market was calls. which but market XX% in that growth we've share The sharing we

Randy Hales

the we So outpaced category.

Nick Altmann

year-over-year? street way; it ASPs just, guess framing in stable I for another And factor were

Randy Hales

Yes.

Nick Altmann

phones, or a idea a have to you consumers those? purchase little pads; Just like screen guys protectors happening it are delay Is there wireless consumers when is of there? do in regards bit purchasing the their charging any when

Randy Hales

buy carriers, attaching the Most when you finance handset. what's are together phones, look the happening at can carriers along accessories them are putting their where especially with you of when they your the in bundles

position. come at rates and point back easiest attach the right So highest

Brad Holiday

probably realizing because at right get highest to rate up, home the are of sales there is you so trying it, bottle some attach follow-on They be you phone. buy purchase one, the if may may but

Operator

question comes next line of Dave King ROTH from the our from And Capital.

Your now line open. is

Dave King

XX, get charge the a you be stores on I half or do it the for a you guess first question even to you fire received -- on do on be approval expect that do approval in expect maybe power earlier follow-up yet? the out them X to pads those there? with expect to sold And cases; those has and

Randy Hales

in-store a of approvals. Just and the that the Dave, will The clarification that now, is yes, XX there point on be and we're that X encouraged has very already process forthcoming. in is

Brad Holiday

form between change the no is factor so X, XX there worked. and Yes, that the

Randy Hales

the So has specific there was it the same it's never device. but know people any for X works branded, new been

Dave King

how category. then could of And you're the should X% next think screen if from growth dual that I the about as how glass guidance on we but protectors, the about just a shared we there? be kind the bit cases; think I benefit And it think you XX% for getting pads to Thanks. for that would you any bit guess I of a think know, on year, might you little charge thinking little clarifications. sell-through maybe follow-up color about by

Brad Holiday

said it. really categories in expected we about my think additional So see growth I and as all was that to the outlook we what

both international take power to screen the that just and Online think think after certainly geographically, in channel are going you at we double-digits. and product we're we a see If to assessment markets we protection. strong by direct-to-consumer to look growth, to go grow are expect going continue

Dave King

these And share impacts we what Mophie for there; can the just And then marketing think negative -- puts some also the the but freight I guess protectors? are much thanks. -- then, overall, And you segments, product then, instant did power baseline and margins that? what within so where margin, and -- like was as screen are takes the the particularly due about sounds trend were gross how impact; if maybe how of it

Randy Hales

load we're all and just that's expect with The to expect we've is about the you so we talked all across that's a forward consistent do So improvement overall, this mid-XXs managing we net my year. what we new categories is we've of in in we've in be as do product that kind through development, product continued as I targets better set it we're We which efficiency, comments mentioned how for categories. if a seen we'll through for just demand power in to any for trying we're achieving kind power, the those, have planning what increases as for offset and components offset we high we'll of is, batteries, will. offset industry; go side see the efficiencies,

we're where So flat kind margins holding up to this low that's that why Does relatively that with of we year, ended mid-XXs. help?

Dave King

was about perspective. I just and what to freight I quarter, been I'm had a modeled the I the might does. margin the It quarter; curious what also sense have obviously is from in-store a impact guess than of from XX% fourth lower get because gross trying

aware I'm products so trying be anything the Thanks. there of what the there, off? to a puts to And get margins sense are specifically and is on takes and

Randy Hales

would of we had. down I Yes, headwinds it sight. to if kind it's pretty freight big at you to Obviously, EBITDA. it was from gross margins, jump want overall, look was good Initially, just

at been at million. promotional $XX opportunities and at you these of the on look our the the guidance, take a operating low what had marketing freight million headwinds that earlier, a all roughly Had you a this end backed about of look of year, our would of $X EBITDA if were. take Mike but have you out think were litigation If asked and earnings at higher than gain that and EBITDA we I the we question for

if the I So the takes, the you that puts tell and you litigation settlement. the will saw headwinds gain would on outweighed we

gives color. you little more that hopefully, So a

Operator

line the comes Jack question next our from And B.Riley. of from [ph]

open. now is line Your

Unidentified Analyst

about transition remarks? there? impacting distributor speak half your more touched that first understand you prepared Could on to you little involved what's a trying the bit Just

Randy Hales

Sure.

period a one-time to right are revenues, forecast as inventory their when help that it to I recognize business distributor balance and situation; information our of and inventory if their for just heavily just of in make in easier without transitioning just and is better they we look multi, customers, the mostly with; book many utilized a now of any not is and majority and it's key made call long-term the is think start of the at hit will acquisition they really start now and able to book right a direct if got some currently we the I relied accounts, around sales inventory retail But you wheel appropriate a what relationships have biggest just goes customers. distributor get with also the to because one as interruption then BestBuy sense customers don't we it but now because more Does time. It's us think direct terms directly for forecasting start we our when and accounts warehouse them I trying makes there a is -- once being do. make accounts able our management shipping these and we with be and the directly to to to sure revenues -- goal sure for want distributor superior to Mophie we're distributor. that's to us we [indiscernible] do of so a is will all those those at like use they help? that into to distributor relationships, out to that we've we've there we I it a take for mean etcetera, we distributor from -- to one regards those We're inventory got to and what right and identified support bringing which work really basically So distributor we shipping doing

Unidentified Analyst

say this Yes, margin that transition? you benefit helps. that gross And then, should did from

Randy Hales

Company should what Yes, gross this way with finalize should. overall. long-term -- What a frankly, will that probably now we'll right mark-ups need long-term operating we're those that there just just I said to with of are is do some our customers, work, through to going it the know be is margin the is benefit but working margin they it associated to and and we share that

Unidentified Analyst

or And quarterly share we then should don't margin to about provide know helpful might you you can QX. how else but be know? about anything mix and thinking product be gross I guidance in around anything that that modeling just

Brad Holiday

out tried reiterate to my that. remarks, in it I me let Yes, point

some which a would over into should first years. look actually the revenue the that we we from second QX past we've the and what got be that other at than half; second first be split of consistent and to the things in we charging we it under about several the have half we As half, very reality half. expecting about Probably are second higher estimated plus had year; experienced more in with products expectation so half, pad the come of but originally take XX-XX first was product XX-XX is half

QX; of QX to first are probably will a some so reason bit launched year. Now model quarter bit products second being QX, of the of majority will within in of it half be that new and have this plus half, could would we QX a would we'll to expect and that between shift expect percent as really, the slightly year higher compared a last we a higher last impact mix that percentage little compared as of a distributor that first is which the probably a hit we're assuming for

Operator

Hickman Ladenburg question of last line Thalmann. our from the And you. from comes Thank Jon

open. now is line Your

Jon Hickman

bye, team. all to congratulations hopefully, get answered to questions. disappear actually before have say talk just guys and we my you the I'd good Randy, like from You

Randy Hales

Thank you, Jon.

Operator

you. Thank

I'd call Now turn Hales to to closing Randy for comments. back your over like the

Randy Hales

us talking Thank months And it's you day. XXXX couple of joining for look great for Have again, call to a on talk. today. you you. we forward quarter just our first thank a Well, to the

Operator

for conference. participation the may Ladies your you you thank and program great does disconnect. a gentlemen, conclude today's day. have in and This Everyone, all

ZAGG (ZAGG) 7 Mar 182017 Q4 Earnings call transcript