ZAGG (ZAGG) 9 Nov 202020 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the ZAGG's Third Quarter 2020 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 call is being recorded. Thank you. to conference like host, to now Mr. would turn over the your I Frey. Brendon Please go ahead.

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

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

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

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

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

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

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

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

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

you you hope safe Thanks, on Brendon, to everyone and to and healthy. today's thank We your families be and continue call.

ZAGG our am our the our never quarter start serving and by protect quality Firstly, the proud enhance that and teams partners see how our globe. extremely entire and consumers thanking with lost of product I devices. let me to across team reacted through sight

the see our the ongoing it from encouraged health second third our given Over results face the were was the continue significantly we and course with compared the exceed pleasing pandemic by quarter its the improved to performance impact quarter, challenges We expectations. on and to of our recent economy.

our head environment over in the operations and our which business provided much work put stronger good with the we position and season. company managing expenses, months, selling to Our as into past adapting has the the reducing momentum included a inventories has busiest several financial aggressively retail current

at third quarter Looking in detail. more our

now working our net year-over-year partners under balance efforts, action normalized closely re-opening with we protection able June and ourselves store to doors This the successfully to reopened uptick debt continue on larger decisive quarter-end experienced quick July with financial in incredibly compared year, resume growth trend of to the as few for in I'll levels. been and $XX and customers margin our levels operations a online we As sell-through protection. and August last back from temper their detail company September, pressure EBITDA improved did we with saw throughout discussed ensuring receivable, our consistently sales a bit Taylor the viability call some we the enacted where improved additional both our sell-through continued several to and sequential during compared Inventory and I Starting on our a in and significant weeks flow, our when we stronger, into pandemic a categories more year's exceeding August, power in of of organization. still a QX in from saving year-ago significant but nice even expenses, taking a sheet, QX. compared cost decrease the color this April in generated difficult up with wanted from adjusted conditions, to compared This go and to to was period, gross We earlier nimble from million By of some position but revenue a headwinds us. reported and quarter. improvement in more the drop we million. of through nicely for revenue was store year. a in accounts expanding last brick-and-mortar navigate roughly freight positive this Despite in with it in XX% from exit delivered our pandemic. third quarter greater we $XX share reduce the the cash year-ago, XX%. combined $XXX come the at year-over-year highlights. to represents sequential With balance last to closed, on provide as second QX decrease to basis. some million we’ve performance, be have DSOs recently market Despite ended will continues $XXX a respect measures overall we categories. our in retail priority more the challenging through channel our operating million Thanks higher declined COVID-XX, revenue to the market most period

We digital our continue on strategy. to build overall wellness

product protector high-energy visible hero colors been screen to that a VisionGuard, have peak to a years now, can damaging or has screen the exposure our the For changing blue light resolution. reduce without effects, few

units this now XX sold technology. have over with million We

and all introduced strategy, we XX InvisibleShield year, which UV produced screen and available stores. also and In this lineup year works geared all Phone toward up this This addition, is Staph newest protectors coli wellness surface kills mobile Earlier our product digital technology. bacteria. the of with our entire to E. beyond iPhone XX.X% Sanitizer devices our now in now our includes new antimicrobial include for which

year products and this our cases and this brand on through the the to resonating led We've consumers GearX's strategy right SXX benefit excitement earlier differentiated retailers and XX antimicrobial DXO impact launch. efforts in consumers, and protective to is the owners Samsung Our with driving devices protection and from protecting recent their space sell-through screen The is iPhone emphasis to beyond combination technology our All awareness the distribution. of as to GearX this starting growth feature enhancement expand many launch our of now technology. also cases Galaxy especially amongst of increasing with shelf expanded with with protect success, and accounts. greater good has

partners. multiple GearX brand, to growth momentum distribution mophie In and of charge during on the our line devices With ability of iPhone new conveniently This continued wireless and accelerates including the expanded our to in These new the innovations through see GearX introduction many growing XX, now across I'm excited available power focused new exciting central is the carrier category, charging launched XXXX. products providing a one location. QX, all solutions. of of are

is addition, allowing evolution users phone our pack This new on the to last consumer's normal juice using detachable used with without phone not specific or pack, device feature launched mophie new In connect. that easily we charge month, represents popular case. demand a product an is battery of juice their and

Our HALO more QVC perform time partnership of a spending channel, the and given brand planned the which for airings been home. well holiday HSN, QX continues our number productive number consumers at busy period. a particularly time with on brands and a during with has QVC to of is

majority combined prospects continuing the we of year. sell-through our ahead for our partner U.S. weekly now improve, about and the solid optimistic the feel of trends, open Looking remainder direct-to-consumer to with with doors

behavior there's good of deal a holiday in countries still with season shopping our uncertainty several the capitalize channel to we which engage on demand While we implemented brands. this regardless well including on of effect have impact consumer lockdowns, are about recently the positioned to virus the believe that chooses will how Europe

efforts last to the we our record belief for I our long-term quarters, in to sanitization improving fourth consumers planning by antimicrobial, currently quarter around are the declines continue quarter are and We two their quarter will year-over-year UV increase levels light as from digital am blue sales. QX even the we've confident on and the enhance tough we driven facing for in protection look have wellness. set comparison are company, experienced solutions increasingly third past revenue that year's will that

will believe and productivity home. increased also We priority another be from consumer comfort

our We focus lives our to accomplish will growing needs. these continue enhancing on technology in

certain to the what includes and as emerge economy am the conditions confident This stronger and pandemic industry, lower normalize products right fully categories business. will our we to company. have impact will of have difficult decision steps and margin know core when discontinue simplify to taken global While on lines that it the remains our I from COVID-XX and our a

rollout better from nimble Taylor. and on I benefits hand company, the value multiyear for the now shareholders. service our a retail increased consumers, will of tailwinds call brand and As to core and over the can XG, with category from a consolidation, capitalize margin ZAGG generate our more partners

second. performance details our $XXX were a today, issued to third QX quarter shopping quarterly second million. with in with puts number percentage Thanks, and to of good and on year-over-year by to the more profit pushed enabled a million difficult on residual to to like takes comments to year-over-year pleased the almost net at After it of sales gross very a some retail QX, Overall, as including lower net effects sell-through duty and which in basis orders refunds profit saw freight I supplemental allow $XX our by we from by quarter the throughout increase than net sales new reopen launch benefit delay a of quarter a the devices Chris. a air experience. This a were XX% the consecutive I'll sale additional that information gross air was compare. being duty QX into few would historical Apple along Since approximately performance. a offset the momentum That earlier from sales in-store of saw benefit just impacted minutes year-over-year discuss expedited increased There made we at financial expected improvements the COVID-XX, of margins retail the XX%. to which financial some excess decreased a lower our decreased and during quarter add XX% us outlets averages. freight more million. take that the said, of in were higher we rates, financial exiting difficult many and with are rates as $XXX third continue which inventory combined quarter, of momentum detail normal included

U.S. to will given since be our subject of receivable, quarter. gross the from certain broker maybe paid This fourth from And refund. inventory previously an received in margin the date, benefit basis that from income to recorded at on end of China subject of duties balance duty this August, $X.X $X.X to We and the exclusion continue in early we work million impact XXXX, we statement in we points then quarter. approximately expect duties by net be XXXX, imports capitalized work the for QX refunded. statement during of documentation late duties with to Based profit XXXX in starting reduction throughout sheet the China, customs that refund late completed in notice or paid on On to of a work imported was to income quarter volume receivable XXX products closely million refunds, refund is submitting the The a sold customs. approximately ongoing. offset

refund I our to on quite bit to result the compared additional XX% call. mentioned, to operating COVID-XX $XX The various was due any work decreased QX on still provide expected measures quarter our decrease refund impacts expenses or remaining million approximately update left we'll last of implemented demand. we the cost-cutting on as primarily upside there's year. and during next fourth do of a As complete an the submissions to a

million the through fourth individuals adjusted customer furlough we be to spend product some launches last conscious continue decision care, but way on reduction in decreases the our time. offset The focused months, I period. all in operating $XX for I difficult was Over last several a items we've just quarter overall sales this profit made the reasons $XX in support decline from year we mentioned. discussed. million margin and that These and linked to the by ensure bring to the to navigate is prior-year expenses versus EBITDA to versus were decreased gross QX back

accounts the balance compared Compared the prior-year period. million receivable Turning sheet. ago, reduction to decreased $XX XX% to a due the to to sales to year in

million to quality first a our from DSOs receivables days. our good. remains million. the of end However, $XX the approximately of XX compared to was improved reduction significantly The very of quarter, Inventory $XX XX million at $XX days

quarter, closely monitor on ensure as we to sell-through, forecast inventory the levels took purchasing. customer conservative During a customer inventory we third inventory didn't retail and we approach to overextend

At which from the result, that quarter and influence COVID-XX generated point, quarter continued the some end of to monitor consolidated we a third sell-through first continued COVID-XX as of the incur period. from purchasing year million As forecasts, to in XXXX. million QX the at debt prior-year during factors $XX improved. million continue we cash $X quarter, will decreased retail this quarter due operations compared headwinds plan in related $XX negative pandemic. last end Net less to during charges but incremental continue debt our approximately demand of did to is cash at will to $XX flow the million conservatively to to compared due the uncertainties the increased Despite million the closely the cash to third operating of we we the $XX airfreight expedited

allocation the COVID-XX received initiatives the XXXX under discussed from last credit. cost-cutting line that confidence The us amount CARES to credit with April, $XXX on loan of the combined continuing we'll amended million $XXX we've headwinds working and the This available the during line the funding undertaken capital focus increase the remain put business. we QX total our expansion, credit under As call, capital will navigate has on successfully of gives to we throughout needs facility, to that and on the our of remainder the service restructuring million. Act,

August. of As we we XXXX, than quarter look to when visibility we have the now definitely did better fourth we last spoke in

However, COVID-XX demand. uncertainty around to create retail continues worldwide

we this will Given be providing uncertainty, guidance this annual market not time. at

third view However, EBITDA strong we retail and over net given sequential the positive our and sell-through expect current adjusted trends, of customer quarter. growth sales orders

excess of next some the year-to-date compared our during mentioned, XXXX expect to sell-through the as historical inventory. We fourth quarter improve see we'll gross though I pressure over few margins quarters as averages we to mid-XXs

for has different the than to from disruptive expect $XX million other XXs We COVID-XX high low range been quarter. expenses to business. our fourth extremely companies, of total any in operating same the to be No

steps reduce period stronger the we've by I'm open the the fixed company taken entered. and with ensure exit liquidity, confident restructure now that when up adequate that, as for business, will COVID-XX However, With questions. we we costs this impacted much a we'll than call to

Davidson. line from Your first [Operator Instructions] you. comes the D.A. Elliot Alper of question from Thank

open. is line Your

you. Thank Great.

and I with just Are guess, So specifically seeing more? for geographic have to any that restrictions thanks sales changes fourth in those geographies that could quarter-to-date sales mix? the about sales and sequential less any you trends the the have info on talk material specifically, quarter. compared you

Yes.

of couple notes. Just a

from was we're will of Apple we good benefiting be had successful shifted little sequential that. from we're maybe than Overall, seems the obviously, And though, million It revenue. that at market. previously, $X in phones. kind experienced QX there sales benefit the really bit to later into QX happening obviously of which doing of sell-through a launch With look seeing the very

QX well. So really, really off starting

at no remarks terms definitely of in mentioned in expansion. least mentioned are some mix. terms of our in geo Chris that prepared in some In our international locations. Chris geo of geos, we seeing headwinds shutdowns change his material

wireless kind remains have overall, impact so definitely back COVID signs think we're going getting a bit open. and that's deemed in QX And I strong cloud those we're that normal more But obviously, to a Though over to been of seeing everything. some to remains a as the to it how locations experience. of However, dealers remained seen be essential, demand. have as those

Okay. And fourth versus then kind may have that talk different of holiday the year maybe December implications on historically what you from season shifting into Great. quarter, Apple aside quarter? this any about the kind launch and can the and of the

The over are days Yes. obviously, starting are to over some spreading months. the of they more to see the one a we retailers thing seems – strategy, Black but taking be is that are Friday all number it

going be So that's something different. that's to

I still from to think screen number would sell-through the strong and and other week. our still cases early attachment about to we're the quite very And Amazon. both But take obviously have going a we that's of that actually online market this zagg.com given pretty protection the see I are say optimistic through a on devices sell-through, strong. we're

Elliot. good we have for think season holiday some runway the I overall, So

Okay. you. Great. Thank

Thank you.

Yes. Thanks, Elliot.

Matt next Dhane Your question from Instructions] comes [Operator the Management. from Tieton of line Capital

Your line open. is

expediting just idea were? Great. that a to costs Thank put number incurred quarter, those significant was us the give how shipping you some you. in could better on I hoping the third you

in it to down. resulted move we I And up it in act end, expedited did Yes. the my to remarks, unfortunately, And and some at we're inventory have it charges. bit picked run airfreight quickly balancing as a It was sell-through between $X of prepared million with million. and was mentioned a $X trying as where

you quarter, the that to reoccur is like expecting a feel it place in are now? fourth or and have you – you're caught up Same for you better

question. It's Yes. a great

still is have I from probably importing other one kind that's of rates bit increased impacted chasing us, company different no The overseas, of little a globally. demand. every think of freight we're generally, than also just that's kind thing

I And that. be so to a of that's also little impacted probably there's think it. But bit going

is a it's upside seen we've wanted given definitely had balancing As planning. we are careful, bit of And unfortunately, and a We mentioned, pandemic to which we've or but fortunately the I act. how chase to much inventory great, those. be some

I of which our little still spend and think the sales, some QX probably also bit will so freight. chasing we're impact on a And then obviously

wanted Great. China the regime? Also you've quickly now production this And or about tariff with been presidency, you moving are out production I new out I on about that really change of to ask, some if of China. Does could view moving know thinking your how the situation. Biden

Yes.

sure I up that think doesn't we're and base our Matt, setting change continued diversify our the we're it across to business. make Ultimately, strategy. looking CM company for

now and of We've the power China. a piloted still we're outside wireless So following both have quarter had screen good very strategy. successfully detection where we've

to able supply it when is is a needed. still not a strategy, Obviously, it big chain gives to what ability we're So just that perspective. our but like China shift at tariff us of be looking from part I our

perspective. at business it really from we're Now continuity looking a

you Thank Great. both.

Matt. Thanks,

Thanks, Matt.

I'm Chris closing further Ahern the Mr. question Thank to showing Instructions] conference like back remarks. you. [Operator for turn any time. this at I would now no to Gentlemen,

again our Thank Have forward safe. report. joining you. a great We everyone earnings QX on you Thank evening to and updating QX. stay for everybody you look

call. Ladies all concludes conference joining. you today's and for gentlemen, this Thank

now disconnect. may You