ZAGG Management Discusses Q3 2013 Results - Earnings Call Transcript

| About: ZAGG Inc (ZAGG)


Q3 2013 Earnings Call

November 05, 2013 5:00 pm ET


Kimberly Rogers-Carrete

Randall L. Hales - Chief Executive Officer, President and Director

Brandon T. O'Brien - Chief Financial Officer, Principal Accounting Officer and Corporate Secretary


Isela Soto - Roth Capital Partners, LLC, Research Division

Ross Licero - Craig-Hallum Capital Group LLC, Research Division

Paul Coster - JP Morgan Chase & Co, Research Division

Jon R. Hickman - Ladenburg Thalmann & Co. Inc., Research Division

John M. Chambers - BNY Mellon Fund Advisers


Good day, ladies and gentlemen and thank you for standing by. Welcome to the ZAGG Inc. Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference may be recorded.

I would like to introduce our host for today, Ms. Kim Rogers, with Genesis Select, Investor Relations for ZAGG Inc. Ma'am, please go ahead.

Kimberly Rogers-Carrete

Thank you, operator. Good afternoon, ladies and gentlemen, and thank you for joining us today for the ZAGG Inc. third quarter 2013 conference call. On the call today from the company are: Randy Hales, President and Chief Executive Officer; along with ZAGG's Chief Financial Officer, Brandon O'Brien.

By now, everyone should have access to the third quarter earnings press release. If you have not received a copy of the release, it can be found on the Investor Relations portion of the ZAGG website at This call is being recorded and a podcast of the conference call will also be archived on the ZAGG Investor Relations webpage under Events for 1 year.

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

These statements do not guarantee future performance, and speak only as of the date hereof. We refer all of you to the risk factors contained in ZAGG's annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Security and Exchange Commission for a more detailed discussion on the factors that can cause actual results to differ materially from those projected in any forward-looking statements.

ZAGG assumes no obligation to revise any forward-looking statements that may be made in today's release or call.

Please note that on today's call, in addition to discussing the GAAP financial results and the outlook for the company, the following pro forma financial measures will be discussed: adjusted EBITDA and pro forma net income. An explanation of ZAGG's use of these non-GAAP financial measures in this call and the reconciliation between GAAP and non-GAAP measures required by SEC Regulation G is included in ZAGG's press release today, which again can be found on the Investor Relations section of the company's website.

The non-GAAP information is not a substitute for any performance measure derived in accordance with GAAP, and the use of such non-GAAP measures has limitations, which are detailed in the company's press release.

And with that, I'd now like to turn the call over to Randy Hales. Randy?

Randall L. Hales

Thank you Kim. Good morning -- good afternoon, everyone, and thank you for taking the time to join us as we review the third quarter results.

Consistent with the preliminary results we issued on October 10, revenue for the third quarter came in at $49.9 million with gross margin of 44.3% and adjusted EBITDA of $10.2 million. Net income for the quarter was $3.2 million and GAAP EPS was $0.10.

During the quarter, we continued to pay down debt and have now reduced our long-term debt to $20 million. So far this year, we have paid down our debt by $26.2 million as of the end of the third quarter, and currently enjoy an effective interest rate of less than 1%.

For the second quarter in a row, we've demonstrated an ability to maximize our profitability during a period of topline compression. We've done this by focusing on expenses and implementing several new disciplines that will continue to support improved profitability and cash generation.

In the third quarter of 2013, both our operating margin and EBITDA percentages improved over the third quarter of 2012 on lower sales. These results clearly demonstrate our ability to maximize operational efficiencies. Having said that, we are keenly aware that improved profitability alone will not drive the shareholder value that we are all looking for.

However, the work we've done this year will provide a foundation to support renewed revenue growth in 2014. There are 2 factors, both of which are sales related, that have contributed to our need to lower guidance through the end of the year. The first is related to our lack of sales execution and the second is the fact that our invisibleSHIELD sales have decreased with the introduction of alternative products.

I'm going to first address the sales execution issues. Simply put, we did not sell more to existing customers, and we did not expand our distribution domestically or internationally as our plan called for this year.

During the second quarter, the execution shortfall was discussed with our sales leadership and they were provided an opportunity to reverse the sales decline and demonstrate an ability to tactically execute against our original plan.

We saw some limited progress, but ultimately commitments were not met. Over the last several weeks, we have made numerous changes focused on positioning us to get back to revenue growth again. Several team members have new assignments that maximize their strengths, while others were let go as we focused on hiring talent with prior relevant experience.

Some of our recent hires include: a new wholesale and franchise team manager; a new international sales team manager; a new sales manager for Latin America; and several new account managers. We have engaged Heidrick & Struggles to conduct a search for a new EVP of Sales, with the goal of having that individual onboard early in the first quarter of next year.

In the interim, the sales leadership is reporting directly to me. We have also engaged outside resources to help identify opportunities to drive both near and long-term revenue growth. We've recently announced 2 new agreements, one with Dick Smith, a the consumer electronics retailer in Australia, and D&H Distributing, the largest domestic distributor in the education market.

We are moving rapidly to ensure a return to revenue growth in 2014, as our new sales leadership and account management teams improve productivity and rebuild momentum in our business. With regard to the invisibleSHIELD product line, it continues to be the category leader in film protection. But recently we have seen our revenue decline due to a lack of major device launches, no new form factor change with the iPhone 5S and the introduction of alternative protection devices, or products.

In recent quarters, the market has embraced more rugged and waterproof protective case options. ZAGG recently launched it's first rugged case, the Arsenal, designed to maximize device protection and capitalize on this popular trend.

Glass screen protection has also emerged in the mobile category, and is displacing some of our invisibleSHIELD sales. We are in the process of introducing a unique invisibleSHIELD glass that will strengthen our device protection product offering.

Along with bringing these two new products to market, we are bringing creative product solutions to our core invisibleSHIELD product line. Last month, we initiated infield testing with our new, produce on demand film technology. This patent-pending technology allows our retailers to produce an invisibleSHIELD in less than a minute for nearly any device by accessing our extensive cloud-based library.

This system also allows us to have invisibleSHIELDS at retail within hours of new device launches. The benefits to our retail partners include: having product at launch for all new devices; a reduction in the working capital required to support in-store inventory; and not having to turn a customer away because they don't have a shield for that customer's specific device.

I'm going to now take the next few minutes to talk about our other product categories and what steps are being taken to ensure we remain a leader in mobile computing accessories. As you know, Apple launched the new iPad Air, and we are pleased to have been the first to market, with 2 innovative keyboards priced at $99. Both are ultra thin, Bluetooth keyboards, featuring a patent pending pivoting hinge that allows users to place the iPad at virtually any viewing angle, similar to a laptop screen. Because the hinge is placed at the back of the keyboard, there is room for a larger, more functional keyboard and additional battery capacity. Both keyboards feature backlit keys and powerful batteries that hold a charge for several months.

We also introduced two other creative keyboards in the third quarter. The ZAGGkeys Universal is a thin, lightweight, full-sized keyboard, featuring an ergonomic, curved design that is compatible with all leading mobile operating systems, thus the name, Universal. It ships with a protective case that doubles as a stand, making it a great keyboard solution for most -- almost all tablets and smartphones.

We were also the first to ship a keyboard folio designed specifically for the Samsung Galaxy Note 8. Our keyboard innovation will continue at CES, with additional creative keyboards solutions that support our reputation for being first to market, with features not currently available in tablet keyboards.

CES will provide a platform for the company to introduce creative product solutions in all 3 audio categories that we participate in: personal, portable and desktop. We received some encouraging news recently with regard to the performance of our personal audio products. Market research indicates that over the past 12 months, iFrogz has had the #2 best-selling in-ear audio product by unit volume and the #1 over-the-ear headphone under $15, also by unit volume.

As most of you know, we've have been working on mobile gaming all year. The Apple iOS 7 announcement in early June caused us to have to hit the reset button with our planned controller launch. But since that time, we have made great strides to enter the category in a big way in 2014.

We see this as a growth opportunity that will gain momentum next year, as our controller strategy is launched and the best-selling software titles continue to be converted to the mobile platform. We will also be introducing several new products at CES in our power management category. These products will represent the most compact, powerful and complete power management tools we have introduced to date, and will send a clear message that we believe in this category, and are committed to being a leader in it.

I want to conclude my remarks by talking about operations and some of the initiatives that are helping us drive improved profitability. Jason Schwartz joined the ZAGG team in August as our COO, and he has quickly assumed the lead on several projects that will continue to advance the company operationally.

In a very short time, he has earned the trust and respect of our team, and also that of our diverse supply chain. He has been looking closely at what in-house functions may be better served by third-party providers. Later this week, our customer service function will be outsourced to a service provider located just minutes from the ZAGG headquarters.

The majority of our current customer service employees will be hired by the new company, to ensure continuity and retain our resident product expertise. This change will improve our overall level of customer service with extended hours and weekend coverage, while reducing the associated expense in 2014 and beyond.

Another idea -- I'm sorry, another area of Jason's focus is within our supply chain, where he is in the process of implementing changes that will shorten lead times, drive more efficient product logistics and order fulfillment, as well as improving payment terms. I look forward to updating you on our progress over the next several quarters.

In spite of declining revenue, our collective initiatives are driving more profitability and improved free cash flow, which is resulting in a stronger balance sheet by paying down our outstanding debt. This improved profitability will provide flexibility for us to consider strategic partnerships and small, opportunistic acquisitions once we return to core business growth. Looking ahead, we will continue to maximize profitability and cash flow with a reorganized sales team under new leadership, a strong product management focus and a renewed focus on growing distribution. As our sales growth resumes next year, we will continue to keep our cost structure down and drive value to the bottom line. We are making the necessary changes to improve shareholder value.

At this point in time, I'd like to turn the call over to Brandon, who will go over the financial results in detail. Brandon?

Brandon T. O'Brien

Thank you, Randy. And thank you for joining us today to review our third quarter 2013, financial results. As stated in today's release, we will be disclosing consolidated financial results reflecting our primary operations within the United States, as well as our international operations from ZAGG International, our wholly-owned subsidiary operating out of Shannon, Ireland.

In the call today, I will speak only to consolidated results, unless otherwise stated. The financial statements provided in today's release reflect consolidated Q3 2013 financial details, so you may refer to them for further clarification.

Revenue for the quarter was $49.9 million versus $59.8 million in the quarter from the prior year, representing year-over-year decline of approximately 17%. The year-over-year compare was primarily impacted by: softer sales due to the lack of sales execution that Randy referred to; increased market competition, primarily due to the commercial success of rugged and waterproof cases; the absence of meaningful expansion in our distribution channels; and product expansion with existing customers progressing more slowly than originally expected.

Looking ahead into the fourth quarter, and taking into consideration the missed sales opportunities in the third quarter, we anticipate that sales will be below our targeted levels for the remainder of 2013.

As a result, we are lowering our revenue guidance to a range of $212 million to $218 million, from the previous range of $245 million to $252 million. We are also lowering our adjusted EBITDA guidance to a range of $37.5 million to $39.5 million from the previous range of $41 million to $42.2 million.

Although we are lowering our EBITDA guidance on a dollar basis, I would like to point out that despite the decrease in revenue, we are able to maintain our EBITDA percentage at 17% due to our continued efforts on cost containment. The breakdown for the sources of revenue is as follows: For the quarter, 84% of sales came from our retail channel, versus 83% in the same period last year. 8% of sales were from and, versus 11% in the same quarter last year, and 8% were from the kiosk and standalone stores, versus 6% in the same quarter last year. International sales accounted for 12% of total revenues in the quarter, versus 9% in the same quarter last year. As Randy mentioned, we have just announced a new Head of International Sales, who will run to our global expansion opportunity in 2014. Revenues from the invisibleSHIELD product line were 47% of net sales versus 51% in the same quarter of last year, and the keyboard product line contributed 28% of net sales, versus 19% in the same quarter of last year.

Gross profit for the quarter was $22.1 million versus $26.6 million in the same quarter of last year, which translates into gross margins for the quarter of 44.3% versus 44.5% for the prior-year period. Gross profit decreased slightly with our decline in overall sales, but consistent compared to prior-year period. The biggest impact of keeping margins consistent on a year-over-year basis has been our focus on reducing airfreight expenses during 2013.

Compared to the first and second quarters of 2013, margins during Q3 2013 benefited from an increase in the percentage of overall sales, attributable to higher margin products such as the invisibleSHIELD.

Operating income in the quarter was $6.4 million versus $7.1 million in the same period last year. Operating margins for the quarter were 12.9% compared to 11.9% for the same period last year.

Operating expenses in the quarter were lower compared to last year, due to reductions in advertising and marketing expense; $1.4 million in payroll and stock-based compensation expense incurred during the third quarter of 2012, related to the departure of our former CEO that did not recur in 2013;

an overall reduction in stock-based compensation expense, due to the decrease in grants and the decline in the company stock price, as compared to grants in the prior years; and other declines in other, selling, general and administrative expenses, due to cost control initiatives instituted by the company during the second quarter of 2013. The effective tax rate for the quarter was 43.3% compared to 36.6% for the same period last year. Our effective tax rate was higher than normal during the period, due to some nondeductible expenses related to our amortization of our investment in HzO. We anticipate our tax rate for the remainder of the year to average closer to 39%.

Net income in the quarter came in at $3.2 million versus $3.4 million in the same quarter last year. Our fully diluted share count for the quarter was 31.5 million shares.

At September 30, 2013, we had $0.5 million outstanding options, $0.4 million outstanding warrants and $0.4 million outstanding restricted stock grants. We use the treasury method of -- in calculating our diluted shares outstanding. Our fully diluted earnings per share were $0.10 for the quarter, consistent with last year's third quarter EPS of $0.11.

During the third quarter, we incurred the following noncash charges, which we have tax-affected in the calculation of pro forma EPS, assuming a statutory rate of 38.25%: $0.8 million or $0.02 related to stock-based compensation; $2.4 million or $0.05 related to amortization of intangible assets; and $0.6 million or $0.02 related to our equity method investment in HzO. These losses are not tax-deductible, so the loss has not been tax-affected.

Pro forma net income for the third quarter of 2013 was $5.9 million or $0.19 per diluted share as compared to pro forma net income of $7 million or $0.22 per diluted share in the third quarter of 2012. Total noncash charges, net of tax, included in the calculation of pro forma net income totaled $2.7 million in the quarter, or $0.09 per diluted share.

Adjusted EBITDA for the quarter came in at $10.2 million, compared to $12 million for the third quarter of 2012.

Turning to the balance sheet. Working capital at the end of the quarter was $74.3 million, compared to working capital of $89.4 million on December 31, 2012. We reported a cash balance of $12.7 million. During the quarter, we paid down $4.7 million on our line of credit, and $2 million on the term loan. At September 30, 2013, the balance on our line of credit was 0, and the term loan balance was $20 million.

At the end of 2012, our total debt was $46.2 million, and as of the end of the third quarter, we have paid down $26.2 million.

Operating cash flow for the third quarter 2013 was over $6 million, compared to the same period last year of $3.3 million. As of the end of the third quarter, we have generated over $25 million in cash flow from operations.

Accounts receivable for the quarter were $32.4 million as compared to $54.6 million at December 31, 2013. DSOs in the quarter were 60 compared to 57 for the quarter ended December 31, 2013. We remain comfortable with the quality of our accounts receivable.

Inventories for the quarter were $50.7 million compared to $40 million at December 31, 2013. Inventories continue to be one of our largest asset categories, and we are continuing to refine our processes and management to best optimize our inventory levels.

Our COO, Jason Schwartz, has made inventory optimization a primary focus, as well as the assessment of our complete supply chain and shipping. Inventory levels are higher in the quarter, as management prepared for expected fourth quarter demand.

HzO continues to win customers and expanded their operations. We are pleased with the progress that the management team at HzO is continuing to make. You can refer to the HzO website at for additional information related to HzO's operations.

At September 30, 2013, our ownership percentage in HzO was 22.7%. In October 2013, HzO received an additional $3.1 million in funding from third-party investors, which reduced ZAGG's ownership interest in HzO to 19.7%.

With that, I'd like to turn the call back over to Randy.

Randall L. Hales

Thank you, Brandon. We'll now turn the call over to the operator to guide us through the Q&A.

Question-and-Answer Session


[Operator Instructions] Our first question comes from the line of from Dave King from Roth Capital Partners.

Isela Soto - Roth Capital Partners, LLC, Research Division

This is actually Isela Soto on for Dave King. I guess, first off, do you expect any impact from the later release date of the Mini, particularly in context of it being an entirely new product last year?

Randall L. Hales

Yes. We -- thank you for the question. We enjoyed a nice bump last year, because of the release of the Mini, this -- during this timeframe. And with the change being very minimal this year, we don't expect a significant uptick.

Isela Soto - Roth Capital Partners, LLC, Research Division

Okay, that helps. And then, if could just give us more color on what drove the decline for iFrogz, that would be helpful.

Randall L. Hales

Yes the -- so the iFrogz brand --

Brandon T. O'Brien

Personal audio has been the -- what's declined majorly at iFrogz. We did see some declines in cases as well. But the personal audio category is down a bit. That's obviously, one of the most competitive categories that we operate in. We have -- we do know that iFrogz is a top-selling brand, according to market research in the category that it plays in, but there is competition there. And that's the -- where we saw the decline year-over-year.

Randall L. Hales

And I might just add, that iFrogz brand, we talked about it in previous calls, tends to be a little bit more trend-driven, a little more fashion-oriented, so we see more churn and burn in the product line in general, not just in the personal audio, although that's where much of the decline has come from in recent months. But cases tends to play out that same way.


And our next question comes from the line of Mike Malouf from Craig-Hallum.

Ross Licero - Craig-Hallum Capital Group LLC, Research Division

This is Ross Licero on for Mike. Could you give us a little more color on the inventory, what it's composed of and what the strategy is, going forward, for that inventory?

Brandon T. O'Brien

Yes, you bet. The inventory -- the majority of our inventory is finished goods. A lot of that is product we have ordered from -- shipped over from China and the break end's about -- it's 94% is coming from finished goods, 6% in raw materials. We were ramping up, with the fourth quarter, is typically our strongest quarter, and so we did see an increase in inventory, as we went into the fourth quarter for some of the products that we were setting into the marketplace. That is a focus for us, as I alluded to in my comments. Jason is focused on that to make sure that we're managing those levels optimally. We look at that every month, we look at any slow moving, any obsolete goods and to the extent that we identify that in our inventory, we make the appropriate reserves. So we're comfortable with the carrying balance, as far as the realizability of that inventory. But that doesn't take away from the fact that it is a focus for us, to make sure that we get those levels down to a more optimal level.

Ross Licero - Craig-Hallum Capital Group LLC, Research Division

Okay, great. And with regards to the transformation of the sales team and sales effort, can you give us a little more color on that, is the force going to be larger, or -- I guess, any clarification there would help?

Randall L. Hales

Yes. It definitely is going to be larger. We've identified a number of key accounts, both in the domestic market and in the international market that we are not currently selling to. We're making assignments and we're having to add some talent to go out and knock on those doors. So definitely the sales force will be larger. We're also bringing in more experienced account management individuals who have had been there, done that, had experience in the channels, particularly with retail. And on the international front, the people that have been in-country or in-region and have enjoyed success in the past with like products.

Ross Licero - Craig-Hallum Capital Group LLC, Research Division

Okay, great. And do you expect that having an impact on margins as these new guys ramp-up business?

Randall L. Hales

It's a good question because we know that as we extend internationally, there will be some pressure on margins. It's interesting too, in that Brandon, as he went through the report, talked about the mix change. And typically what we've seen is, when we have a mix change, like we have less invisibleSHIELD, more of the other products, gross margins get compressed. We actually, because of a lot of our cost control initiatives, we are able to maintain gross margin in the mid-40s. But we're pretty comfortable, still at this point in time, guiding to the low '40s for this year.


And our next question comes from the line of Paul Coster from JPMorgan.

Paul Coster - JP Morgan Chase & Co, Research Division

You'd spoke of 2014 returning to growth. How do you sort of depict that statement? Is this more of an aspiration, or is it a, sort of -- is it a target around which you have some confidence? And why you are you making that -- what feels like a commitment, anyway, ahead of bringing in the Head of Sales?

Randall L. Hales

Yes, I think, Paul, a lot of that is driven by seeing the talent that we're bringing in now. I think the best way to think of it at this point in time is to know that we're investing in getting back to a position of growth. We're bringing in the right people, both onto our team and also reaching out to some outside sources that can help us drive revenue, and we feel confident in the plan that we're putting together, of which we'll go into great detail early next year, when we release guidance and go through the fourth quarter call. But we are building for growth, I think is probably the best way to say that. And we're encouraged by the level of talent that we're bringing in right now.

Paul Coster - JP Morgan Chase & Co, Research Division

What, in retrospect, went wrong with the Calypso, sort of, version 1 game controller? It sort of, it felt like it was the right product at the right time, and it turned out to be nothing of the sort. And what can we sort of take from that lesson that you sort of reassures us it won't happen again next year, when you bring out the products?

Randall L. Hales

Yes. It's one of those that we learned an awful lot of about the gaming industry. But what happened was entirely out of our control, we had the device ready to go, it worked, we had software titles converted, and then Apple made the announcement in early June, that they were going to set a new standard for game controllers, of which, all of us, that were moving in that direction had to stop and, no pun intended, hit the reset button. And it was a kind of, game over, down the direction or the path we were headed, and we had to realign with what Apple announced they would support. And that was both good and bad. Bad in the fact that we weren't able to get our controller into market, but good from the perspective that they set a common standard for gaming, going forward, that allowed the software title companies to convert their titles with confidence. It caused us to have to start over and build a lightning port controller, and work very closely with Apple, all the way through the process, showing them what our design looks like, what progress we're making, how the software interfaces with the controller and so on, and at this point in time, we are working with them to get approval, to be able to put that product on the market, and as soon as that approval's granted, we'll enter the category in a big way.


[Operator Instructions] Our next question comes from the line of Jon Hickman from Ladenburg.

Jon R. Hickman - Ladenburg Thalmann & Co. Inc., Research Division

Randy, could you talk or expound on your comment about your retailers being able to create any form factor in the invisibleSHIELD, or do you -- are you giving them a die-cutting machine? Or what's going on there?

Randall L. Hales

Yes, Jon. Thank you for joining us. The technology that we're out in the market with now, in kind of an alpha test phase, you think of it as a desktop printer-sized unit. But it -- they have that unit in-store. They can access our cloud-based database of designs and bring down any design and cut it within 60 seconds, and have it ready to go on -- in a customer's device. So, in the past, the retailers were limited to carrying just the best-selling invisibleSHIELDs, and having to turn a lot of customers away. They won't have to do that any longer. Also, as I mentioned, it allows us to have product at launch within hours of us getting on our hands on the device. Today, our current method is get the device, create our design, send it off for manufacturing and then ship in to our customers. And so it's a cumbersome cycle that is almost eliminated with this new device.

John M. Chambers - BNY Mellon Fund Advisers

So is this like 3D printing? Is that what you're doing? I mean, do you -- are you print -- How does your printer cut the film to size?

Randall L. Hales

Yes. You were closer when you described it at first. It's a -- think of it as a desktop plotter, it's a small desktop plotter that has the ability to cut our film.

John M. Chambers - BNY Mellon Fund Advisers

How big -- what size can you go up to? Like laptops, small TVs, what?

Randall L. Hales

Yes, a laptop would be as large as we would go. And then all the way down to even watch faces.

John M. Chambers - BNY Mellon Fund Advisers

Okay. Then I want to go back to the question about the sales staff. So your -- the sales staff that you had like quarter ago, they just didn't have the skill set to expand into other distribution channels and internationally?

Randall L. Hales

I would've said yes. They were obviously the team, yes, for the most part that drove our sales successfully for a number of years in that very entrepreneurial, startup phase. For some reason, though -- well, not for some reason, it's a fairly normal cycle, I think the company outgrew, perhaps their experience, when it came to a phase of maturation -- where we were, instead of taking orders, having to get out and sell much more aggressively. And then strategically planning for that, and tactically executing against it. How do you go open up new distribution channels that you've never been in? Who do you talk to, how do you get those doors open, how do you get that moving? We are seem to get somewhat comfortable with the customers that were part of the ZAGG family, and stopped that whole expansion mode. That was probably even compounded more so when we started talking about getting out internationally. We just grew past a level of experience that was here at ZAGG.

John M. Chambers - BNY Mellon Fund Advisers

And then, one last question. At CES, the products that you introduced last year pretty much did not contribute anything to this year's sales. So, tell me that's going to be different?

Randall L. Hales

That will be different. I'm actually happy to tell you. Yes, in 2014. Yes, the two biggies, we've kind of talked about the game controller. That one, the game changed for all of us mid-year, and so we had to start over on that. We've addressed it. We had some real challenging technical problems with the Origin speaker system that are now resolved, with the right factory, and that product is currently shipping to us and will be out in distribution shortly. And I believe that our product focus is much more rigorous and disciplined going into this CES show than it was last year. In most cases, we are already out starting the selling process with our customers on those products that will be officially launched and featured at CES.


Thank you. And that concludes our question-and-answer session for today. I would like to turn the conference back to ZAGG Inc. for any closing comments.

Randall L. Hales

Thank you. We certainly appreciate all of you taking the time to call in. And we look forward to talking to you in the coming quarters, as we announce further improvements operationally, the improvements that we expect to see with our selling organization, and believe that we are well-positioned to start creating and driving some shareholder value through ZAGG once again. So thank you for joining us.


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

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