ZAGG - Earnings call transcript Q1 2019

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Operator

Good day ladies and gentlemen and welcome to the ZAGG's First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference Brendon Frey. begin. may you Sir,

Brendon Frey

thank first joining quarter and review today the ZAGG XXXX you afternoon us for to Good financial results.

today Smith, call Officer the we Ahern, Chris On Chief and Taylor Chief Officer. Financial have Executive

Taylor's and a for call session. Chris will open prepared Following question-and-answer the up we comments,

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

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

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

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

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

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

Chris Ahern

to and everyone by afternoon, time call our the Good main Brendon. year the you unfolding. you, us Thank for the QX reviewing of we anticipate our today. to which discuss with remainder thank were join I'm results going how consistent the then and outlook for taking today's start drivers

challenging we be few a business reasons. call, particularly headwinds. first expected previous to the the specific outlined we As earnings first core faced for top in a quarter very our perspective our half line From several

our from product pad charge last we roll up to partners. wireless First tough shipments category against our to retail out initial comparison was of our year, continue as many

quarter our accounts increase quarter. of several some accessories Second, charging Jan early on potential into wireless domestic protection of requested screen first X, which sales tariff fourth the the as we approach pull shipments and

wireless With year-to-date. increased been our margin flat contributions the mobile this, benefits revenue in acquired deduced back and for soft the product partially top two expenses newly top and of charging HALO, These have our of from carrying first on half-weighted, demand entire Third, by challenges our gross offset our quarter and protection higher geared point market sales been from smartphone had devices the from brands. for has sales significant which created additional meaningful access glass accessory heavily screen margins. as of The annual BRAVEN On full decline without de-leverage. lines. we're line the for in a our impact sales recent acquisitions resulted headwinds

progress and some each of past XXXX. we've during several the distribution will the challenges expect success And first that contribute months opportunities year for and to Over good fully beyond. made Despite new businesses. these our half product this

guidance confident for in are we established range year. to full We ability originally our and the the as within profitability sales deliver

acquired pull in launches our for of and second XXXX our forward America device in current as retail we Asia, we the continue core and carry up through brands Europe, our newly newly the our product the half. from charge Expanded shipments domestically fall loading new for factors environment sales first into Namely we footprint Latin that of traction the the exciting our launch and In success and the in Canada. build [indiscernible] difficult and we our acquired several core start wireless distribution year. further for access line to the Excluding into core that business, months. to products half QX close multi-brand the comparison benefit next with take the and charging this tough over We'll late the our quarter until brands. the affecting expect device products power second international wireless be business new not OEM will over in half anticipate negatively price, will two growth back will an

light innovation VisionGuard drive expanded campaigns. expect penetration [indiscernible] brand Protection as through customer blue InvisibleShield market and we awareness our in Screen to continue We

driving increased we're this X% launches our particularly with In rate at addition tax retail far.

for nice we're HSN line three with very strong our expand these opportunities some regard second We including the brands. With Truly to Wireless integration acquired on brands, our iFROGZ and progress expect for product as pleased products all to half continue up we placed audio on QVC. of

of we're timing's a integration outstanding In products. seen perspective. our reception ahead customer GearX from for plan fact We've

a In us the fact, with year. device the half this in placed for partners of second retail of in positions test as advance GearX key success four greater which month we've product launches the

we've secure launches second of able multiple wins holiday in sales placement, period. and the the to this advance Beyond been half distribution fall in

We product the are grown anticipated. our [ph] very excited We're towards as for nicely other out core the new that channel HALO our on The drained multiple half [indiscernible] also is second multiple QVC back walking not continued only but features [indiscernible]. We're of in in with revamp HALO XXXX, is brands. launched during piece half new channels BRAVEN penetration which in BRAVEN expecting investment line. strategic

the sales and sales features in our opportunity. confident through HALO brands closing, course we're various and us set it In overall As online air, other on we for are drives allows the strategic to maximize ZAGG. additional channels

mobile consumer and of research on we'll enhanced audio powerful drive portfolio the product marketing products by leading development and the We team the Our focus area be profitability. innovative increase continues of particularly protection, and power, tremendous to brands sustainable growth leverage the to that which lifestyle in serving distribution and productivity. [indiscernible] relationships

would the over to shareholders positioned Looking ahead ahead, we're generate and I Taylor. like call for well over that turn With prospects our that, lie we to value many capitalize the in global to long-term. increased the believe

Taylor Smith

associated XX% was take financial were some today. $XX earlier Chris. the recent forward financial load and few to charge screen Operating of into higher during primarily from acquisitions screen BRAVEN, lower margin supplemental million performance protection to primarily to year-over-year first of power fourth along included year. information in acquired I offsetting the quarter handsets sales our the the decreased impacted million the first category. sales $XX quarter continued products in of access Net the GearX pad in approximately sales Thanks as net last at year, launch of due percentage is XX% approximately HALO. a issued charge with just the sales Results these of of many compared which due guidance increase mix Gross the minutes call cases of comments by basis quarter financial from decreased launch on our to provided Since $XX well a the the newly new XXXX our the Galaxy sales impact last one, pulling end of of first product curved from of customer pack the of quarter like new higher two the to XX% profit difficult [indiscernible] to of certain high would our mophie of XXX new performance of impact tariff additional the and Partially the the million Samsung quarterly year to we protection the sales. a XXXX in a range were quarter. the juice of of points details first to compared continued increased handset on in expenses last impact the comparison add to slowdown a of three; last quarter as of during brands. first pads headwinds with as the due

on the XXXX. we're brands for of call, carrying As burden all full expense operating last we mentioned of new the these

sales decrease $XX.X versus half first for these A the year revenue company it negative the will and expense contribution The of million result half net and the in brands brands. lower XXXX. associated $X in million and occur acquired bulk gross prior this the of of our newly margins was with EBITDA year However the the because second will operating the be in of burden lower profitability of the Adjusted was the period.

very second million half the Inventory reason end with DSO's $XXX to customers acquisitions. the days XX% due end last holiday The more by extended to good of same of year. million quality payment to expect the Turning compared return the ago DSO's of period to to recent for increasing incremental corresponding increased receivable to associated and last our receivables due compared $XX to year of XX% Approximately the XXXX the balance XXX sheet, the year. historical with at to remains increased to same compared primarily to to levels was key accounts days we terms inventory increase XX to quarter.

the and the the seven of support the are product OEM to approximately third additional along levels inventory the with the inventory slightly down prior With excess from slowing due current during inventory higher were quarter. be second hand the increased down inventory of sold the period. Despite at acquisitions to increase times balance continue XXXX. to inventory on some sales to six in due XXXX through half first excluding turns handset its position times and of Consolidated will international skews growth year

historical year. time we in the low by improvement turns significant the to We the expect exit sevens back our and sixes high

cash of total In million repurchased $XX $X $X compared which operations $XX a of The quarter acquisitions three Net the newly company worth terms million of $XX particularly last share debt fund months. increased for million to brands. million repurchase the last shares share due year. and use repurchase, ongoing consolidated of debt acquired $XX during is less our the in the was cash, million to to to with approximately for for million, XX increase

percent for The $XXX our growth paid the XX company guidance cash $X be end discussing had would of are during mid have margins quarter. and XX% a the for of million months. million last acquisitions sales at Excluding XXs as Gross minutes share I estimated spend continue of be to or a of XX%. million sales. in repurchase to wanted XXXX. the expected $XXX still to few at debt Last, the to net Net to

expenses per is million estimate progress to our XX.X excludes and from on this time this the which compare amortization including XXXX We as at better to shares related tax BRAVEN share through impact the XX% million. approximately and meaningful updates to $X.XX we and range. $XX of acquisitions HALO expenses comparison apples-to-apples sales rate the placement be year. continue for other cash and translation prior Free year. results Adjusted to for assumes annual traction we'll still provide earnings we'll operating a believe and newly at estimated an tax our outstanding. define flow to be Operating between tax incremental with with expenditures estimated miscellaneous EBITDA the build which expense marketing, $XX as product our associated is million is $XX adjusted million and minus XXXX This approximately allow capital is $X.XX a GearX, expenses in We effected $X.XX brands. to estimated to of our cash midpoint acquired EBITDA representation approximately be the

in associated with second expect of As aligns second OEM with the quarter and sales their device traditional our sales to third year. we reiterated and March This the launches earnings QVC. and half majority recent discussed acquisitions HALO with on in sales fourth GearX call occur have today the half the sales we a of

of the For products their planning BRAVEN, we're into fall new launch a market.

time the the timing Adjusted from digits half EBITDA Our sales the is half approximately best the approximately estimate for mid-single sales. with expense second we'll device half. with associated be will acquisitions at down fall in questions. slow XX% in pressure is due the the sales with to annual the this of at XX% the and for open up to first now estimated that the negative first call coupled With that, in OEM

Operator

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

Mike Malouf

of where about cases? and you way down where get release you are the with of of and see sort we that Can the the just competition came the obviously off trying a sense year? share market and Can more a flush just playing that with battery out that out bit little you throughout to start

Taylor Smith

been cases, well. Online On month. has accepted retail been Reviews very Reception battery have is late really have with good. strong. very, basically the multi-customers maybe just our this we really, last month been been stores hitting

momentum market seen we a and had carry that. [indiscernible] of to we out acceptance own yes share, and to so dropped anticipated market have access we we're of line. the gets more market more their and last you've share brought obviously get pack the juice we that terms very In anticipated and But with the happy cases lead as more Apple

Mike Malouf

Now in? full you access plug this older any products is the as just to having well over other on having you're the wireless planted switch or without or clean the charging

Chris Ahern

because products. with different sets in that there's on play of packs We'll we with continue channels board can both

Mike Malouf

know regards acquisitions that's about you talked those with HALO about okay. bit been a acquisitions. potential a you IP a while the little little you little side? Got And out especially Can Can I where then to it, are bit with potentials the that the you flush just when lot now. talk synergies? made a we on

Chris Ahern

Since some channel real terms a our in brands brand those for entire one and across biggest had on not way us of house the would Yes, HALO I synergies QVC. we we've of of in HSN all say number being itself, terms is of brands. but opportunities the the just acquired positive actual meetings really HALO we've under see nice

in You'll half second hear about that this of year. more

you business If of at primarily a you warehousing from at where the XXXX. perspective. with to look But synergies look integration that's we will timing started HALO really focus are ahead for tell on and I we we their

Just finance, general from operations. support

terms and of end starting the ahead So we that of year, of integration. would we're much really get we to by the in done pretty anticipate

perspective. an it yes, some But where that we to whole came as opportunities with aspect very us. the They strong question. pleased across, we're a lot offense leverage for really the from of business at has looking So are, IP brought your we're IP it

Mike Malouf

just follow-up. then and final great Okay,

the revenue said you and you XX%. think that just can what the was expect for and Was XX%, XX you that, the that again, I over then go year? the XX

Chris Ahern

so for Yes, our of half will we first XX% achieved. be revenue the anticipate of

Mike Malouf

Total revenue negative in and single then that middle what a you is digits, said? the EBITDA

Chris Ahern

in the first correct That's half.

Mike Malouf

make positive in just slightly obviously second to okay. that, the quarter So

Chris Ahern

Yes.

Mike Malouf

for the Thanks help. Appreciated. a lot

Operator

Thomas Davidson. of Forte line the from comes question next Your with D.A.

Thomas Forte

on think the I [technical I'm difficulty].

Chris Ahern

your a line. of bit on There's feedback

Thomas Forte

[Technical difficulty].

Chris Ahern

go back you can We can Operator, question? to come Tom. to next the

Operator

from King next your Roth Partners. with Yes, line of comes question the Capital Dave

Dave King

QX. million up, I the like First it like looks year-on-year on $XX or so expenses think in the guidance, were

subsequent [indiscernible] specific looks quarters Following fair Are a you like guidance an increase seeing the talk over even end. and or cost you of the there QX. year It amount about? mainly less synergies that came acquisitions of the near could savings

Taylor Smith

for Yes the just generally if think I you OpEx at look year.

were come in because and those had think it cases some help to in planners savings cases, just cost add I about out. there some BRAVEN that in other GearX fund, and over some things there carve some some we've but didn't and was we being like so I out to carve talked both savings, are a think instance

probably for the for you between kind estimating you're full to look I and certain discretionary to if million playing out, more at XX.X% of of think guidance variable we're of QX looking bit QX, year that. And there's OpEx of we be million from a for kind the in kind we kind QX as to that compare and XX% of year to SG&A range then QX the back of the of QX, will little we $XX as ability it at $XX As nice is and a for year just on is that, beneficial some reduction - SG&A in be move the sales. QX amount expect on We'd but you pull have a into to QX. how and

sales profitability on what of in the that. if we as QX think with XX.X% line So right of to out the generally to for of full how is ability XX% QX in of year, of kind in we're back you're and have some we see the pull sales kind range projecting. you're But I rolling the and

Dave King

should And helps. we product now? about guiding It up that the we thinking lines? some side. quarter QX was especially I how sounds should benefit the power about expecting XX% be like I you're on Should be thinking guidance categories? particular the of like on towards that other this had cases the you're then feel decline revenue in, load up be to but mean Thanks. you then and for in like across the year-on-year. Okay various How

Taylor Smith

and simplify commentary. to couple first We productivity. some could the about years. probably additional audio over then some last of to screen impacted wireless the or of and so protection, power, say I our hopefully talked we reporting the tried talk and We've because protection CFO that of We're saw about trying categories headwinds the you quarter. generally. So in saw in have

of the products expect sell through of Some certainly cases continues that some retail. of pack second to into launched receive access into quarter. power of for We being now the benefit that juice the is

category generally probably screen an wireless for see protection year-over-year definitely down particular categories. those think whereas particular in increase I we're and that So we'd for

Dave King

quarter? quick in way I Then it? Was million $X.X perfect. is about HALO contribute that like right did - one. GearX one the guess more the it to be thinking How Okay, and much or so revenue

Taylor Smith

And so really a will little out. published of comes online sales. to when the online They run $X be XX-Q this later in so tend quarter it's lot a largely $X GearX HALO was in the year, approximately the was sales. million it related their programs QVC million. over during

Dave King

Okay, questions. rest for year. perfect. taking of luck Good the Thanks with the

Operator

question next the Your with Davidson. from of line comes Forte Thomas D.A.

Thomas Forte

So questions. wanted two ask to

to So doesn't your into while in them by not iPhones slowing me or is It unit improve of the to competencies the double-digit high your high your able I revenue. some distribution seeing end on and be had and companies helpful market units. number won't consistent M&A sales necessarily generate maybe you find mean historically your two, other the over, two sales One, basis. to low the the that first you're the business that necessarily seems acquisitions stock single-digit, it's and plugging then it been core acquire question you and misunderstanding was, of materially mispricing has one that

things? of the the Thanks. past? there both anything or have about HALO Is perform in way about those the suggest different talk other you would BRAVEN won't that or they can GearX that So

Chris Ahern

question. Great Tom. Thanks

There with very happy acquisitions. no, no your with very, are indifferent. question three to where answer we extremely So quickly. We're all is

well. opening as quarter look been as into internationally partners. I will new we're our play terms we've doors at of early think last reception come of from you of pleased brands base But When the that half or very a the number stating so. those with the also the account consumers, acquisitions very, we've our in been for second to

on at really, really acquisitions we so first point, with just put you'll the acquisitions. the What alone, new So we're really your see those of look some you second was performance Tom feedback nice up? half growth pleased from

Thomas Forte

in it Yes, the that you're sales first point for may was seeing well year-over-year that, necessarily not be iPhone. unit declines ideal

to you're opportunities market it revenue that the growth to is single-digit, think able high I of when comes historic wrongly overtime. means to going assuming performance double-digit generate device not low that leveraging your be mobile

Chris Ahern

basically obviously We're we what is sales on so larger and see the as through, quickly a number our terms device doubled our our it seen of really a that's in Outside next sell looking can quarter we of is of portfolio. terms it and kick help sell of point at all we into we to drive some and our at marketing units. products, which drive back seen look a of headwind that investing device. year taking the we've really in looking can and how of terms with a not coming obviously through help so the team, over just not year-on-year, some smartphone to at at [indiscernible] of specific team sell the year through, through lot exactly us drive some into we've retail help looking in particular. benefit educate consumers our roll through going we're sell MSM across specific activities OEM that, this pipe, down retailers sales that will in Also we're retailers, of of the the real XG really as so declines. Yes, diversification sales, We're help at those tied reports essentially quarter as campaigns of on extra that the

So are with we're very we pleased Tom. where

so this sales. to year been we've headwind. plans thanks is placed the increased confident with drive can your those while can pretty drive through I and We're we continue think a we question, sell to it continue for for that

Thomas Forte

Wonderful. Thank you Chris.

Operator

Jeff comes line of Van question B. the next Your Sinderen from with FBR. Riley

Jeff Van Sinderen

how you you're half the new the protection, in kicks so much around assuming assumptions we're in maybe I acquisitions particularly organic of feel you baked for and perhaps for launches. that Apple guess can domestic and key guess your guidance touch half. drivers, half And from I just you then touch the iPhone making for is XG, second remind Maybe on know second second us you've just screen rate could mentioned I the on of that in in. growth of into you what how coming growth just,

Chris Ahern

Yes just touch in in sure, key for so items us second the to the of half. some

launches So obviously we only larger not lot of second OEM we've us, of see opportunities new got growth the that nice for where seeing some more deals some ISO a in well but half that and we're particularly is we're internationally in doors. terms opening Jeff more

going So terms deals. traction of seeing very nice We're We're while device the launches. some the new new we're on confident we're down LATAM in on very, doors, what newer where partnerships confident ISO of with some in internationally.

we're the our learning's So and and taking it region Europe LATAM APAC region. from to really applying the

I've mentioned. continued domestically XG we're and those opportunities doors, So in new areas new seeing

a really in We technology I that see for into out. that business iron think kick the our to shot almost play rolled half, on like XXXX. comes second gets that more I as think in the do an as in really

can second of half to your So over the for if Taylor I hand question.

Taylor Smith

in year sales the year-over-year. of We in over in the majority play how year March as and talked the expected that's we in Certainly out back to XX% the increase happening call on acquisitions the be approximately about. talked half earlier year. the we expected we March about of so the core that we call Yes, business directionally said to acquisitions

business, of growth back the back headwinds to core talked just feel We about to certainly. we some of we've given of year and materialize front half the generally For that's going year. in X% the half good X% the the the had the of half, about in some so

Jeff Van Sinderen

given curved helpful. we QX, in we think as glass in that's then terms lower glass margin going toward And mix what Okay, the of curved shift particularly forward second should mix of half? the about anticipate in

Chris Ahern

lower we things our what been the the continue a with that margin we is. closely to to very margin, so curved so ensuring glass it is of it our in our all in obviously and which We've terms right make margin that product. and accretive, increase do CMs it Yes, working refine

However the margin devices some when to in through thinking about to chain OEM and you're side drive on with our we'll continue continue see really of of to half, particularly that. the work our second supply sell we

Taylor Smith

of And a to things Jeff I'd couple that. just add

talked in was first lot forward, recall, QX January if of we So of tariff some of half increase X. a was the the what was glass anticipation about you it the pulled thought on that flat tariff pull into we that

So opposed as into lot into QX to flat sold pulled that of QX. glass a being

was be that QX, little headwind just that for So because most - margin. GSXX, pulling glass flat launched margin as natural by a kind on and out it of of we of the had we was a bit lower

flat in margins the back products significantly the tend iPhone's we expect to and better front half. at half the of year, year half So back the so looked the in as to be we of than be

Jeff Van Sinderen

tougher outlook of year? wireless recently can Okay, touch and wireless touch on charging but just good. little the that I you on this And issues, half made for comparison second were know for you the there then just some charging? if a half can it second outlook

Chris Ahern

Yes, sure.

So some are QX, second of that half really, have roadmap Jeff, I'd we out of QX. coming really strong say products

as charging product at and go. the of office So through we've we've the home, ecosystem complete end year at always and the the back from your messaged, nicely and car on in launches staggered looked

last over had number weeks good. where really of the we're really, the of portfolio. feel a we review So going with We've

to that So about feel very to excited strongly come the very, and market. wireless second portfolio the half for for

Jeff Van Sinderen

QX. the for of in and Thanks great. taking my rest of Okay, questions luck best

Operator

further would back no showing to conference I'm questions the I Chris like to this at Ahern. time. turn

Chris Ahern

call. you us earnings speaking to for forward all you. all our QX Look Thank to results. joining you Thank QX XXXX our in for

Operator

you Ladies and your today's gentlemen, for conference. this participation wonderful a Thank day. and have concludes

may time. all You disconnect at this

ZAGG (ZAGG) 7 May 192019 Q1 Earnings call transcript