ZAGG - Earnings call transcript Q2 2018

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Operator

Good afternoon, ladies and gentlemen, and welcome to the ZAGG second quarter 2018 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 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

afternoon the you financial ZAGG Good today results. joining to review second and Victor. for thank us Thanks, quarter XXXX

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

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

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

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

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

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

Chris Ahern

Thank And gains basis points. to key afternoon, increased financial It's today. adjusted increased Thank been for months. nearly $XX strong income improved million. you, And XXX million. for our a Net $XXX start margins Sales notably to achieved metrics, EBITDA Gross six good by improved on you to call the million. good as Brendon. we $XX XX% for everyone. XX% XXXX of the joining each very year-to-date us

including were communicated protection the the Galaxy of screen InvisibleShield sales QX core in Our also performance us OEM full-year back devices, results line introduced achieve spring we track second on May. and available driven for was to we quarter all SX. in strong outlook for new products by our keep solid this with and major expectations, Samsung line established our

America. throughout and innovative North our On program Europe we've InvisibleShield addition, In expand continued to Demand

than X,XXX instantly solution ISOD space and to produce maximize to for available them devices the limited their as for reminder, retailers efficiently mobile a more a in allows supply As is shelf great screen market. it protection

quarter, charging a in battery portable pads includes the that we which packs the May. launched growing and charging wireless wireless experienced now increased back ecosystem new wireless we compact kit of charge mophie universal During products, and high-speech travel our for battery demand also cases and

more partnership the most to screen in XXX recently an entered these products partnership With On North times US XXX America. critical Cell goal the cases, destinations this Importantly, to results our and they portable share and largest and and same-day screen ensure exciting maintain more by when new The device. – locations protection ZAGG than ever, protection our while of effort at major the Demand packs, protection charge our premium our battery the CPR and InvisibleShield refurbishing world-class all will supported partnership, screen with invisible and across Phone device devices strong number first locations water strengthening screen cell services. our market-leading in for premier protection, as when with into have is franchise phone growing franchise make break are align warranty services, In Canada repair than two replacement for Repair, support InvisibleShield convenient to allowed us consumer in buy categories an two battery they fastest category. attachment repair position we franchise and also and the sales, position the protected

new They under million the The I that Then, authorization. of made that fits There acquisition as leaving rugged announce BRAVEN, perfectly premium repurchased acquisition am a back; still the of outlined factors in activity. category. large the market immediately you'll remember and To award-winning approximately acquisition. our an the QX we business property and segments available audio announced strong As and deal we creators and end, million with that $X that of after $X category. buying leverage. closed, BRAVEN common and intellectual we board category into associated were our down can today, pleased mophie the attractive. the million of audio debt size current this product brand portfolio of tuck-in stock quarter, May, our M&A that highly during several of cash, innovators the now Bluetooth potential to presence $XX.X our have paid growing of were, the we one, uses two, our we with a call has extends from all stock

distribution, the a leverage been portfolio, have us upside retail there's they brand relationships we which with extensive strong While as scale our provides limited a to large rapidly opportunity company.

product expertise core on accelerate place going drive already-strong and in at ZAGG. Finally, team, The growth product to teams drive a and objectives we in the are business, the most have side the brand, distribution and improved importantly, of profitability sales world-class adding acquiring plan leverage innovation, to our further and excellence four we especially to forward. product, to BRAVEN is operational engineering

remainder over outlook growth the of range driven full screen channel growth we combined international We $XXX and Looking ahead, be still million we new reiterating to on for and excited achieving online products as core distribution Expansion InvisibleShield protection to category, about expectations in the expect year. of capitalize second our be million prospects continued QX our With XXXX. our our of continue opportunities. to continue direct-to-consumer net continued $XXX business. growth expand to in by the we're and in the projections sales our for with for the half, the

I Brad half sales details business as high-growth the drive reiterate his continue in in of market the I my wireless focus segment. our to our closing, provide comments. now Brad. early strong on outlook we will of role on will this that offering Additionally, in year and expect charging was and call XXXX value. I reinforcing remains we In this want expand that growth more the when second to in sustained place growth generating over product solid ZAGG during CO foundation profitable the shareholder turn assumed increased to towards

Brad Holiday

products take many add focus our my included improvements quarterly comments million and in our patent margins additional by mophie market. a percent million ecosystem, earlier per mophie per sales, to last line by of to $XX.X to expectations, our a the of mix would performance. supplemental I XX% continued protection performance this XX.X due year sales, outstanding financial just all performance. margins, details XX shares with will support partially of remarks and initiatives screen in I products. did Adjusted additional not XXXX integration, results expenses. financial of the sales, Since X% our a in due like outstanding. $X increased Chris. last million result million compared recur information margins strong improved in of a financial operating year-to-date improved few cost international XXX Thanks, Gross growth to in and protection on points charging charge to decreased share headcount as of growing XX% on $XXX related to share wireless the across screen increased our minutes improved a so leverage and QX loss a to improvement higher on on were synergies million record to year-to-date today, offset $X.XX business. to sales a our and increase some impairment the increases expenses compared Earnings sales EBITDA financial year $X.XX basis issued increased Operating Sales that shares due in to as our year on were to in of increased to

period to debt management continued receivable increased remains turns across strengthen. and quality compared wireless-related in year. to and $XX to in sales increase $XX The turns XX% X.X overall the of same sheet million million increased compared chain improved forecasting, is to of million improvement full which to two Net X% sales the channel X.X DSOs year is compared $XX June which to a last ago, compared brands. Importantly, in inventory due of to receivables overall due supply partially very and Compared inventory our year. consolidated to to debt, to full offset year increased decreased improved last year turn due X.X to the to Consolidated times has XX inventory our million new days last management continued less cash, to higher times XX $X primarily Inventory our by compared products, to all incremental to last good. processes. balance days inventory a accounts XXXX and to

– in meet this liquidity stock repurchase on flow, With and We of have our no fund virtually no to – our particular outstanding consistently to greater priorities acquisitions. regards to debt, been sufficient focus strong debt, demands share tuck-in outstanding our allows order us and cash to have to repurchase. With service opportunity our business. the acquisitions

the to addition and the a acquisitions, continue key opportunity four have rugged as product, with million XX.X focus distribution Bluetooth As just of past authorization development during product of team to IP the of objectives balanced driving BRAVEN brand, repurchasing already excellence. They brand the our evaluated operational we and $X have With and of our speakers, a completed in excellent million we our outdoor approximately against strong audio and the to Directors. use we mid acquisition point granted our brand is premium shareholder retail both shares mentioned, the is worth by BRAVEN believe quarter, future a Chris domestically We in value. of on and can at this to with we grow remaining that targeted price significantly distribution acquisition, portfolio we believe that cash our regards Board sales. segment. We second as internationally

can office, acquisition. we quickly successfully with and supply that Additionally, back implemented our value our chain by we process at after mophie S&OP leveraging the add

in longer-term and where addition up sales. short-term both for to support plans developing brand be to increased bringing to need currently back to their the are they suppliers We

back Over their as chain leverage resources. will and expenses our BRAVEN office margins expect against operating would to supply EBITDA to accretive the term, long already-existing we we our be

the in dollars the we absorb expenses. not For have balance operating of expect will couple would a of of sales, much of but year, to terms million

Gross BRAVEN from we've this a no million year, our unchanged upside X% the margins last fall visibility to Sales we of the to XX% the So, are remain the but we'll of from provide on sales or year. estimated our again, after remain update Once this as compared don't update much timing growth mid at to later in with range. which an XX% get are to million our there low changes update balance plans. we to a exception an annual for expect last growth of tax $XXX lowering. to to better chance had rate, $XXX guidance,

XX% We as tax are gain lowering estimated to of our the better on XX% to impact from rate the tax new continue law we visibility changes.

million maintaining now shares EPS we end are the to or EBITDA for XX.X year. open the of $XX our incremental call of maintaining to that, are guidance With We operating EBITDA based the estimate $X.XX we at million $X.XX will questions. BRAVEN $XX through million on outstanding and average the expense despite

Operator

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

You may begin.

Mike Malouf

first my guys, little Maybe gross Thanks, taking a for for Great. margins. on questions. bit Brad. just Can we focus

year-over-year. As improvement at protection, screen through. you nicely protection of know side on the we as And screen mophie some quite quarter I look actually you've up gotten go sort was every

expected I'm if bit a margin there higher. the the have be profit of the gross just little would I on So, offsets wondering margins gross was gross kind any on side, side? Thanks. to

Brad Holiday

screen quarter. us we the biggest of really about product expensive a more SX, talked the was We it the with out was protection impact launch the manufacture. past. glass. majority the Yeah, That's during curved Mike. The got for that in of just a to And

tend lower margins. be they little bit in So, to typically a

Mike Malouf

Got it.

then, power looks be cases And of of to to with what sort for. the business, regards was quite like mophie relative I side Okay. continue weak to looking it the

that with think not having the do I for Apple to phones. just has the product

a the XX? iPhone wondering to Just you date us little could if up on on going bit what's with get

Chris Ahern

Chris It's Mike. here. Yeah,

you So, the this we would the for certification that tell have the would certification we iPhone Received anticipate it's but quarter continue X Plus. liked, I achieve and than XX. to we certification. slower on the X would in for we progress work will

Mike Malouf

since similar almost or releases? quite the type to months next expect months is This since see we nine release. for would And – timing release generation that eight now a you're on unusual

it X wondering if I'm another into up we that year, so, will the that's take up? get the months is coming later release look likely X this it And to to product

Chris Ahern

unlikely, Mike. say No. I it's would

from needed we've release what new terms this the learned the iPhone was lot X. new with I of testing think in a with requirements,

time. that we'll to would lot than we I market this anticipate a So, quicker be were

Mike Malouf

you final to expect, little in wireless side. least you lot the just question. you store. a Can about I on preview talk have Can then, what And mophie's timing little new a know one around specifically on bit products, us give at anyway a based

Chris Ahern

of terms we what or just what's In coming released? up

Mike Malouf

end up, back-to-school Anything the holidays. that's say coming for of or

Chris Ahern

products will that. I say, don't typically some the for end trend. on We of No. back have count What year new we the nice

Mike Malouf

Okay, my right. taking for great. All questions. Thanks

Chris Ahern

Thanks, Mike.

Operator

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

may begin. You

Dave King

Thanks. Good afternoon, guys.

Chris Ahern

Dave. Hey,

Dave King

question last that to follow-up a Maybe there.

expect announced? like you material new at products do be still yet we products. the products the other to announcement fairly charging sounds half, that year? benefit of from announced product we or Apple station have that last think second have we it terms should In the from had Is year's wireless launches, Lightning you How still another to power guys a similar connector that about…? what this get Could event, you

Chris Ahern

ecosystems. you an Dave, say, What is couldn't wireless Apple at What comment I look cetera. event, on in can would I tell we et we is

say, wireless products ecosystem that I we So, outside are power we of connector the the the around developing. announced, would we with have, just that stations, will Lightening whole

bring ecosystem second the that half. products continue we and we really in to particularly can to market, the new feel like So, wireless

Dave King

how the forward? connector contribution okay. that in? then, Okay, Stores it that to look about And should you think as Apple Is helps. product, That particularly many for exclusive? expect revenue Lightning the we And and we how it then, from do be one,

Chris Ahern

Apple exclusive globally. so Stores all Yes, it's in

within of it's line we say, would what guided. I contribution, revenue the of terms In in terms

Dave King

that it And just at that a then, for time point? or is of Okay. nonexclusive some become exclusivity, does period

Chris Ahern

of our the look can for we at the for channel. exclusive develop rest requirements I channel rest specifically tell is to we you It's But can continue of No. Apple. what and

Dave King

the sounds on Thank Brad. the thanks explanation you improvement gross the Okay. amount margins, of good good a bit, in are It color. Where gears now? a terms that, margins for mophie on you. of Switching That's had there. like

Brad Holiday

the give to continue year-over-year we details see a Yes, of mophie. upside but we brand, bit improvement make with we don't and within still quite

bought, going at the you upper into XXs. would of kind upper them we're don't when said tell get to in able peak, we to still were had be believe that And we they back XXs. already think we I their their that

with So, that, we're they comfortable continue improve, to Dave. but

Dave King

how a facility? from you funding you potential Okay, draw the on existing on on And BRAVEN, little color cash Do or that the then, any bit have on synergies think you debt Are it expect down then, to more we And on the from there side? more revenue should cost helps. side do there? lastly me, Thanks. the Is balance you've about it? got?

Brad Holiday

for cash Dave. That happened after paid the We yeah. So, quarters. it,

the but, of X. So, that We net almost the down was our will debt you show saw, on up. end quarter line, drew the just at as

people our we their the to they on what small in have maybe – assets. acquired, XX, $X With I new what us, engineers. million, quality from liquidity team call here call what we So, regards less we of have for plenty XX very XX working intellectual I the of than designers net and yeah, Their locally high property minutes and capital, Utah, acquired, would a then credit facility. of road their down just basically

So, part parent That office. of their was back no really there's really company.

This think we've our to line not resources that quickly we and rapidly. very a in get past. to bring that was product exactly what it the really in quickly talked on about quickly. is distributed, do you they So, brand distribution and office, able we'll did hands we had for dissimilar acquisition what be can to if will is that pretty under because And more into them would grow we we of maybe very love back the to that will. expand the then, us our and distribution kind But limited really, upside this integrate of is just we keyboards high-quality

it's week. – about still only been we're a So,

we're the our But on about do, the excited we we work a long-term fit of feel we're kinds and but So, potential exactly it that to into very really these are of have lot wheelhouse. well opportunity. acquisitions

Dave King

hear. And Great luck of the the year. thanks good questions taking for and Okay. to rest the with

Brad Holiday

Dave. Thanks,

Chris Ahern

Thanks, Dave.

Operator

[Operator from Instructions]. of Sinderen And next FBR. from B. our question Riley Jeff Van the line comes

Jeff Van Sinderen

to increased. Great screen everyone. Hi, the see protection international

color the was protection half your how think for you give then, how should was more us segment metrics iPhones? international any speak fill then, new that on if domestic could Any wondering, growth much we in or metrics could screen around And Just of be business the would sell-in much for versus QX. about that channel helpful. about more how of you there, And second sell-through? there

Chris Ahern

Jeff. Yeah,

I primarily was sell-through, sell-in Demand. So, would internationally, it and say, On both by driven InvisibleShield

So, recently it's and that about system in that there called very continues us. It speak Europe. nearly And, We've retailers just one grow of essentially, strongly earnings demand right service to branched into we in-store. across larger every on the report. for

So, see sell-through. strongly, system. that with really feel And here not selling just it's sell-in product, it's to service. some actually selling and well both it's as America North in we're starting traction We a a

Brad Holiday

So, Chris, will part, on ISOD units that they also. machines that, in have CPR, those is

it's good in to it US chance launch a the market. really So,

Chris Ahern

sure. went. say, the would major would page. happy and GSX year, And the how second the a of back in business the strong a carriers good with the retailers you market, screen very, are tell we in protection were very was, anticipating us end that for domestic launch I I Yeah, in us terms for of we our our then, And launch and all and for

Brad Holiday

And would you would tell weeks there add, X channel. – it to I like on range. the in Jeff, one I be really think weeks mid-single how that, and above we in other look track digit mid more to just there's monitor I channel. as to I we'd always many have is, just to say, hand at we XX out We in and it, would I still upside thing weeks it

good So, see I channel the we healthy very is think and sell-throughs. that retail continue to

protection So, by business. We screen that. continued we're there's think in encouraged upside the

Jeff Van Sinderen

that Okay, is rest on line? product product that's the to for margins that Stores, materially line is margin a charging the in the pretty higher good the with then, to of mophie hear. exclusive for product the And you or much in Apple

Chris Ahern

the would the have we line. on rest of Jeff, the say, that pretty line it's much products I with in mophie

Jeff Van Sinderen

Okay.

first just like revenues, And – pretty guidance just that's wondering and gross you weren't about – lot this, mophie there product. interesting revenue Okay, their them. but on follow-up on you good – that? margins years' can we of then, wondering any can what or helpful. some much higher, guys there that what or attached in BRAVEN, of sense It wondering but give not that kind than what think of just about a just know they business business? don't of the to I lower sounds you asking be, IP be do Are some would margins to think have too and a guess, maybe should couple maybe how revenues

Chris Ahern

the I of year, Yeah. be it would Jeff, with minimal. will say, remainder the

channel, We come to will in update But we assess once back it XXXX. an I sales probably go-to-market plan. with be QX in material our would expect

I above it's in would line for say margins, or mophie, with where would Regarding we instance. be

our think margins. accretive to it be I can So,

Jeff Van Sinderen

Okay, I great rest That's the take offline. have. to hear. We all Thanks.

Chris Ahern

Jeff. Thanks,

Brad Holiday

Thanks, Jeff.

Operator

next line Ladenburg. the our from from question And Hickman Jon of comes

You may begin.

Jonathan Hickman

for debt down about this Hey, and did cash cash you call the my thank of Brad, know flow did you worth you or could taking million quarter? quarter? walk stock. How pay $X you through I the you generate paid question. actually for my –

Brad Holiday

here. Taylor generated we I have sitting is don't right Yeah, don't that front $XX me. in – million. of right I

Jonathan Hickman

the For quarter, okay.

and Okay. All my answered. questions other asked were

just talk to I'll okay? later, you So,

Brad Holiday

Okay.

Thanks. Jon. good, Sounds

Chris Ahern

Jon. Thanks,

Operator

questions showing turn for time. further I'm no And this I'd closing to like to back at speakers it remarks.

Chris Ahern

all you for for look our you. the on QX during updating progress call. joining us I earnings our QX to call. Okay. forward Thank you Thank

Operator

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

ZAGG (ZAGG) 31 Jul 182018 Q2 Earnings call transcript