ZAGG (ZAGG) 6 Nov 182018 Q3 Earnings call transcript

Good afternoon, ladies and gentlemen, and welcome to the ZAGG Third 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,

Good review thank XXXX the Livia. us financial for today to ZAGG afternoon you, you and joining results. Thank third quarter

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

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

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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 I 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

performances delay from Thank and fueled and for protection, afternoon, We today. Thank the achieve but for pack. these iPhone EPS you, strong screen record results and products. good juice of in on our you strong call portable were X Unfortunately quarter charging offset adjusted Brendan, EBITDA everyone. the revenue, for certification wireless the batteries joining demand partially twelve the categories by us

pack. further iPhone in tackling the today, key you and protection, InvisibleShield through the screen new selling X each more September. then great be updated in launches example ISoD year. product line tremendous digital on walk of XX% for shelf increased limited with numbers time, in same we've This InvisibleShield great of sales same to service drive partnership last true for versus discuss eye devices ahead Starting long-range our At growing without blurred of innovative drivers to VisionGuard strong that continue quarter, our North a I'll screen the questions. light largest strategy call quarter We go the in take the aging to for protection late later is happy expand program. experienced competitors tariff the separate sleep the Glass InvisibleShield harmful through products have including VisionGuard we children. how you shown walk light technology screen received Europe primarily most innovative produced Phone through with been with filters recent solution features we most growth protective After category reflects in the both by its market. in and touch the are As More eye which iPhone emitted very out affecting + the detail and US innovate, for guidance especially juice the + Eyesafe higher launch newest our wide on-demand recently strain, the the has it's will we'll which franchise third and digital by Brad that consumers. round our increases. and and to a display. of blue the in space patented the from retailers colors InvisibleShield's the we've date our how consumers well we fastest success to VisionGuard Glass from device variety retailers ASPs categories. has which now mobile included to expanded premature for had been part the continued America. throughout instantly used protection screens, of disruption, Repair, Blue in contribute repair to of vision Cell

and network US are next their Along XXX two refurbishing over of and the in of few ensuring rolling while footprint for this iPhone received locations we certification you cases, times for creating your same-day When respect and buy the your pack, you services, recently we quarter as are screen are well Canada, market a mophie CPR repair for protected ISoD to time protection selling cell in expect locations consumer attachment. phone impacted each out we to We the device the franchise machines to and premier product at supported juice anticipated devices full-year compatible in With to device. process the we for number power across outlook. with and disapproval We globally when the as as X repair and season. the years. our the negatively and ZAGG critical QX sales its increase the delay getting holiday XXX that expect had the expands total

recapture disappointed we While our very to are this we are in business plans in grow delay, XXXX. confident this in and

has even share dominant note I think a with its of in year-to-date, maintained that in it's sales power position mophie cases important market with decline XX%. the approximately to

and portable we number includes up products, to management, ecosystem Turning high-speed were continue for battery solid wireless see now charging growing battery of of universal cases sales packs as and XX% wireless demand which to products. our power mophie charging a

stations rebound the even to across retail, the third our fundamentals summarize, fully do the at outside we channels. pack in charge of we the sized certification year and York. and remain quarter, of the is wireless those year, the screen of primarily maybe we strong juice as additional all as long-term again growth pad shipments wireless next charger comparison better pack consideration I community our similarly planned from point vent new and place a products out during this expected sales quarter pack performance portal have with to distribution thanks expect September in recently launch products in launch load-in delay, mount we we the business desk travel juice growth juice which devices. our our including year the slightly into products. And to in fourth globally, charging protection, strong out remain I launched for want investment our wireless of the although products During compact batteries plan played quarter power tough meeting don't took as kit and laid the our initial mount a feel and last which launch To continue strong about charging to Apple guidance. of for creates The we confident that taking New our announced for the quarter of out said, Apple Lightning to our throughout

three reiterate the $X key net drivers me over revenue plan of five to the reach to Let billion next our in years.

They of mophie, channels. to new BRAVEN, drive innovation well IFROGZ brands. We as do organic our ZAGG, and for network distribution categories, geographies portfolio to within opportunities and in growth penetrate a strong adjacent include business. First product and lifestyle each this powerful stack InvisibleShield, is of our as all leveraging mobile calories now existing see

and position in new profitability. rugged growing We us further active Additionally, Bluetooth leverage with recently growth and our segments our front large to product in creator audio category offerings, enhance acquired the diversify sheets strong the be of BRAVEN authentic balance plan the M&A premium provides the we audio accelerate space. and which to our

these imports portfolio, of our BRAVEN the engineering mitigate officials pursue government options certain While quickly IP impact meeting currently working fuelling existing with roadmap business suppliers, products or reclassifications. to initiatives within local ways with exploring class been and a cost and tariffs of and that scale possible their screen a network can our by wireless team. and audio we tariffs to distribution protection world manufacturing our in a in of into our charging round terms strong brand September, We've globally. in includes investor on Chinese innovation small is the diligently We announced the outside with working China sales our volume, driving categories. including alternative new reduction of government exemptions believe Since fantastic

are account fourth for proposed effect the in we for and January the guidance Xst. inventory scheduled initial bringing went ahead September of that XXXX increase XXth additional the in takes next into in Our increase quarter into XX%

we'll a will price offset Brad the efforts beyond, quarter impact through be to call of third terms more over of in and margins. financials we and increases now and that hand the the to XXXX majority details. to who through I'll I our of just our gross guidance mentioned combination able the believe select go In

increases financial X% of of just respect a some to comments earlier growth Year-to-date to performance. decrease the $XXX detail Thanks categories. like in by cases. to continued to offset screen sales These year-to-date our a included million Chris. with of increased partially quarterly in were the performance today, power record issued and minutes would sales management take our our protection, product of information power I financial due Since were supplemental to a year-to-date and our the many financial add additional few

As Chris negatively approximately iPhone by in and delay the to We impacted juice million. received certification. X mentioned, September had expected the $XX this occur for the just QX pack

estimate the pleased we'll during also later compared we strong forecast. we a remain sales While for the holiday that our selling in season, basis the higher million improved that of launch QX by year. at are primarily retail by with of due sales sales approximately and $XX a date impact have to will a previous percent XXX screen Gross mix margins as points protection product

increased Our compared XXXX expenses operating in charge reduction to X% a that patent and These year, not decreased year this due did in $X a to and recur expense. headcount amortization the depreciation impairment to reductions million due last million by operating were support partially on increase in improved margins business. increases our XX% and offset leverage to $XX growing expenses. improve Adjusted to EBITDA sales,

per to Our on XX.X shares $X.XX to share year. $X.XX last increased XX.X compared earnings outstanding on million million outstanding shares

our our year. Importantly, increased and products. last debt to Net improved chain less to channel wireless $XX last improvements to supply receivables the consolidated to year use BRAVEN. higher due $X million to continued which days had XXXX two DSOs year to Net the charging year of XX the of buyback X% QX, X.Xx inventory new to to year. to of debt quarter receivable forecasting, period cash inventory year to million Consolidated compared sales. $XXX to to zero we management compared incremental last The XX% $XX due debt not would have remains the last $X to close inventory invested of purchase same very compared the ago has to increased overall ZAGG strengthen million the has to sheet been end to for Xx last sales in cash in at last increased a increase quarters good. timing to over days the decreased due continued and due of launches compared million balance and returns in million stock compared accounts million XX $XX processes. quality Inventory product primarily compared to third

flexibility business. to service debt We in low With meet have cash sufficient the acquisitions. outstanding us to our been liquidity have flow, continued priorities of With our consistently demands focus repurchase. repurchase and this allows the in our particular debt, stock investment no to order on regards outstanding fund and share our to acquisitions

and remaining additional repurchased SEC have in During in board approximately the purchase share filings. million stock A an our $X quick on authorization. $XX we comment million quarter, third

filings, of addition next in process to in share quarterly expires the that SX we're In normal statement our QX updating few registration the our months.

the current no to take plans to wanted SX maintain I good as reiterate access to tariff filing SX sure few we on to the few We one we're governance. active taking days. corporate also wanted they saw have no current an a when public We surprised markets, matter the minutes but the in some situation. make a of actions the was of next that

outside certain apply China, with products to items US to As several few passing spend in Chris including on along exemptions annual inventory exploring for product increases manufacturing for want of our year-end, for our sites our and mentioned, activities mitigation Last, to we're Customs elected actively with minutes of working working costs, focusing advance I a suppliers purchasing reduce price guidance. our certain impacted officials tariff discussing and products. alternate

approved the that we've for selling the As at we delayed season. product mentioned, can the was year, retail recently pack so holiday has X throughout for been juice iPhone the but have certification

However, range which of compared product annual growth impacted be sales $XXX power year-to-date are launch QX the our power The $XX on million million protection previous our of to projections basis the million. this until screen now management. $XX down in we this and of million offset million. to revenue partially has Because been of to $XXX adversely with $XXX able case a delay additional with approximately by annual approximately estimate sales we've

low Our earnings last of XX%, that the improve remain of million into for EBITDA turn, be estimated that, to to the range XX.X on range is the estimate our are to $XX is million. original end margins expected and consideration share sales was we our low XXs. million our guidance to approximately will outstanding. of million weighted our which lower adjusting open tax annual now outlook half $X.XX rate $X.XX shares now our and we expect gross With guidance questions. estimate per guidance to to estimate the is a of due in unchanged to takes and now which to to $X.XX a EPS the will mid- XX% annual slightly We our compared of lower now of $XX earlier $XX guidance based call the in $X.XX. This tax rate approximately lower Adjusted

Hallum. coming question Craig the Malouf line first Our Instructions] from [Operator of Mike from

Your line is open.

in million with is then look do of sort call still it's kind $XX you XR? with Thanks million. can much for my an that I had $XX And you give Meaning Can side? you XS case I down In based be numbers XXXX revenue stamped the It focus to Great. like got what's follow-up a did approvals you when more let's guess on your was? we it schedule, as once approved what's of going on these product This questions. sort out probably. about year little about XX it just on you going if this to a going out? category subsequent Thanks. robust as $XX have bit the XX% of Is power on the cases us pretty the products. update think million on guys doesn't and taking on on as

Yes, thanks Mike.

main get calls the the So devices going terms tell those that I type us brought able for a of year in testing work category. relevant team would to was as certification first back revenue. of said for to the the I I being previous is process of would to wireless as in see you I very last The thing for I still protocol see and to through around. us difficult The more the time. testing were guess basically the suite in

certification how after confident those receiving just work -- feel we we how parameters. really but the So within to

we in devices, timeframe packs. at primarily this devices packs at newer for quicker be can we new the QX year we newer a a bringing strongly So look what bring the we'd out out is feel lot looking the juice as juice that

category So we want really we XXXX. one and see to it as capture real that relevant in

then percent. a like quarter what's Okay, bit looks And few international, for there? up Can was you on comment just us the on great. a a little international color only going on give of

Yes, sure.

So, firstly, we happy very performing. are with how international still

a outside this of project in year have of look did business for which partners, But load bit a you year. we big a that in the grow at we of QX that terms at of the expect. continues to that pace one If didn't quite our that last our project was that we

So has as next further international we we still feel go strongly growth year. the into

DA the Alper with Our next coming question of Elliot line from Davidson.

is line now Your open.

for Great, my question. taking thank you

blue Thank to would Regarding the the want with natural light beyond blue smartphone. you. products that smartphone? than in us the with future we other think InvisibleShield protection light, about should it How seems that consumers

great Elliot. Yes, question,

at our something currently it's So that with team. we're looking product

So an full our leverage as we it opportunity do further to see portfolio.

instance potentially a us channels. iPads laptops, it stream it's for and new opens and for So up revenue whole

with using actively are from we do at consumers. can taken has channels the positively revenue couldn't been we I We increase how and tell very, So very blue with it you lights. further launch. be looking happier

ROTH Our next question of line Dave Capital. coming the from King with

Your now line open. is

Thanks, good afternoon, guys.

power guidance from when approval think that we then to generate now cases, there, X in load- revenue that the the wireless revenue that much have and approval then was and cases talked how expect of the all impact enough thought change on lack wireless much QX in I growth the QX, attributable in was you on to better in on from how First guess you what follow-up just be front in like September segment the the in -- XXXX I do of offset the the that would for to MFi

we the your to in on question breakout by that have September so the the product, first time. don't fully but we back in in revenue part so certification expecting Yes, question of terms to the of second at point were MFi

wireless was that deliver guidance. So we plus feeling time that could a point it in of certification where combination our confident under the were having we of more at ecosystem

slippage MFi However, with impacted that the in negatively the certification us.

comfortable, feeling a we it of combination was So were where both

a quarter sounds Okay, since give it from the want revenue knowing than to like -- fourth to you in don't generate expect do number you

Yes.

from Okay cases, okay. power

prepared had expect get product Yes, Dave, we selling for at mentioned in our holidays the we that comments in to retail season. time

but sell because the in of will we for QX if only So-- we the sales through reorders lost lost the delay not kind time. of but timeframe some you that

down. $XX was New why but been estimate we guidance seen offset New So called would the get $XX once season, in time down we'll tell again of that we think that's to the lower selling is think of don't York it, if everything delay about million more we in here I year, in we've of much million year-to-date. sales of we juice line. just the the our we've holiday remainder most advance probably at we I just one we the is in packs was that downside have else When we've the were that were think were for -- of expectation were year end just I in the now but you you but when guidance that that offset this that kind out something about York,

we guidance. felt our with comfortable So still

kind were in we thinking puts that's $XX New there. that down million range, when of from we're about out XXX the which that behind So down us from York

business the strong and screen momentum. Okay, have Looks protectors. gears helps like to that that then continues switching

I to a think at it's of kind high-teens mid growing pace.

relates related hold that to thinking some was do what's of to QX of rate have device then demand to VisionGuard you that more due be expect And then kind the related of that of as Thanks. Is about it business? growth to that to now? forward? seen et this right iPhone And Assuming quarter selling way sort able it going segment to any cetera? --is it anything weighted more launch load-in you slowing timing that

you of Yes, innovation. it Dave, tell a would I perspective at look from

So happier I we earlier as we it's be any by retailers. how accepted launch with the couldn't been our consumers mentioned and blue light,

consumers product So to QX by be and if we any going it's retailers. innovative well other aside an in launch quarter accepted your

we're ourselves business drive and our at differentiate from we competition. the innovate looking So and to continue continuously how further really

that and terms we So when it launch. look around selling haven't later grow a pace slowness rate revenue seen strong. very point perspective, share. comes in your And We sales, we when can from at yes, continue our this it our with you was strongly in happy it market maintain we of and to the to attach and feel were

launches from be different So, haven't fair. no, we normal seen anything to

a Hey, of Dave. I couple would just add things,

the if you think the months phones expensive up. more that the what business which as and protection supports is which I it the them, that overall XX% at these as whole I think of screen XX last is on going category look get appears saying people screen protection, growth are up been financing we've

So that we're trend. pleased obviously with

VisionGuard, initial and now. to with manufacturing, load we're you bit applications regards think tell to it's lot more partner we complicated there that. little so working are in a that hard think to new that demand continue I And we got the of launched expand process, make. that but to a would chasing our right little a with we're I the for

at big in and the is hopefully channels and as that area put look the the iPads systems. of are One educational educational devices we more can into areas more

there. I us take the there'll product be think for opportunities to

of next the coming from B. line question Van Jeff Sinderen Riley. Our with

Your line is now open.

our taking wondering you business. more I Jeff Magnusen Richard what's happening thank with give if and Sinderen. is screen color on was domestic us Hi, for international for this Hello, call. in Van you

Yes, sure.

us with newer and as devices continue more. base consumer It's opportunity is the our just more out We it's really to for see and rate still are marketplace an we've as these our attach said. educating XX% a we growth. partners work and us, for come expensive. opportunity growing; drive The domestic, for rates further So attach

we see So opportunity still there.

In primarily with terms of it's international, ISoD. driven

on-demand InvisibleShield grow. continues the to So system

if open continue it's on and take could you doors to it's that demand. something around at innovation that again InvisibleShield look the more We to something blue with light, product that we

we both domestically runway further screen see So still and internationally growth for on protection.

screen So margin in Okay of still what so margin other has there or right? protection any better you kind power the improvement we maybe the progress as and XXXX? more QX through then can protector expect is management even screen

the Well, our always to I think for down that the screen we're costs certainly looking bit protection, a obviously tariff is on trying ways we're if with a that get of we can But will. right headwind work now. you

So very et it. in I us. we how maintain past, right at with looking But be think if followed sort given have just that freight company the material for now We're on coming I always think I looking margins or could costs at cetera. we tariffs I'd a that here just you ways think are transport of the happy our expand ways culture we always of to our to it's to working costs lower try whether if

But, that there. of really think bit always of have the that's one underlined. So is tariff the headwind now, I we a goals right

can improve freight, with once in we again management, say that looking think I margins air good are higher more of of higher or at the category products the ways The for cost ends to power us. driving less same would have regards forecasting ocean we're that at rely and it we the cost sold. I always whole can then falls goods go like we better up that which on we to

lot our trying margins. manage a of out to that just-- look different things are So to at figure there we're gross a always way we and

are if year-to-date. points you we year-to-date, think at XXX I look up basis we're where

I doing. think it's things just representative some that we're of the So of

Okay then one stand you wireless last of market one. in with the the charging? Where share do terms

Yes.

I wireless were share. we charging, around market XX% So last the on time looked

yes. two, Number

Our Mr. with line Jon Hickman last question of Ladenburg. coming from the

Your line is open. now

the VisionGuard system just I for on-demand on a Could the in available you the yet? is on-demand couple Hi. me questions. -- clarify have

Hi, Jon.

So not yet.

As to we're technology chasing Brad on too, that InvisibleShield product demand, demand intend But fully on mentioned we kind now. right yes. that of take to

mostly glass right. it's But products

will products It's but take we InvisibleShield. now for to all glass it

to to is to XXX the the out how going repair to it phone then take you cell that And -- long get product

answer because right to now, you set we're get of on focusing trying the tell glass. Difficult really demand the I devices to to Jon. for current on

we I getting We picture but for be the towards in in there tell you will year, sure get end product of will have QX. as the confident early out a we better year next

we current product products. at sell do But location in CPR packaged our the

So that they current carry screen not have do protection. only they of lineup ISoD our

it have they now. So

all what I now? That's Yes. outlets those --do meant. ISoD How of have

they No, not packaged The yet so ISoD product a that but but I'm saying be for have That's available. VisionGuard throughout addition. glass for the while not available we not have will film the for film.

have just do all means the of ISoD? Yes. do glass outlet those for ISoD have But you they

but just I ISoD -- film, be they the just for have film, We've locations. machines. to rolled so their to have of think a majority out is that They ISoD clear them

of the XXX to finished all be year. end would locations We Yes. by the

on And that several product shelf. may carry skews packaged in our glass the of of addition that to

Okay, -- And Asia breakout what's internationally, happening-- can for about thanks. us? Like you what

think No, I seeing Asia very it were in we're and like don't break we encouraging. when as from that, commented region we the out we but New is growth sub positive on York, that

growth growth Anything look we're you have selective would your are nice there. you over of who but cetera But to the expect add, and partners as that be very at we drivers et So one seeing we to Chris? would be one international. that

Asian So here the versus the can attach countries mean are like what in United rate of I States? you those accepting give us idea an

attach the tell We ANZ can What the don't have you attach I rates. are rates good.

we're be as countries whole, Europe, difficult across with would at but primarily Asia leading that for to So high-end retailers. our us as do it's as you focusing they look the very some on comparable a of

will next we a this we as your ahead of we Asia projections that year. to have I better for growth going So but picture our Jon, tell are you can

us for pretty Jon one add the with when Apple kind Asia of --certainly distribution and have would over that's up there because the that's has wireless is been I received. pads charge points thing And Asia, we launched we opened well

that I So power in products. into about particular been international more think China foray has

this closing showing Ahern no over Chris at further time, to would turn And you. Thank call the remarks. I'm back like questions. for I Mr. to

Okay. call. on much. the again forward We us Thank the for Thank joining to you you QX. all very QX updating for you look

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