ZAGG Inc's (ZAGG) CEO Randall Hales on Q1 2014 Results - Earnings Call Transcript

| About: ZAGG Inc (ZAGG)


Q1 2014 Earnings Call

May 06, 2014 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


David M. King - Roth Capital Partners, LLC, Research Division

Michael Fawzy Malouf - Craig-Hallum Capital Group LLC, Research Division

Ryan MacDonald - Northland Capital Markets, Research Division


Good day, ladies and gentlemen, and welcome to the ZAGG Inc first quarter earnings conference call. [Operator Instructions] As a reminder, today's conference is being recorded.

I would now like to turn the call over to Kim Rogers of Genesis Select, Investor Relations Firm for ZAGG Inc.

Kimberly Rogers-Carrete

Thank you, Jamie. Good afternoon, ladies and gentlemen, and thank you for joining us today for the ZAGG Inc First Quarter 2014 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 earnings press release that went out after the close of market today. If you have not received a copy of the release, it can be found on the Investor Relations portion of the ZAGG website.

This call is being recorded and a podcast of the conference call will also be archived on the ZAGG Investor Relations web page 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 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. For a more detailed discussion on factors that can cause actual results to differ materially from those projected in any forward-looking statements, we refer 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 Securities and Exchange Commission.

ZAGG assumes no obligation to revise any forward-looking statements that may be made in today's release or call. Please note that on the call today, in addition to discussing the GAAP financial results and the outlook for the company, the following pro forma financial measures will be discussed as well: 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 afternoon, everyone, and thank you for joining us today. I want to start by complementing our team on our first quarter results, that reflect a lot of hard work and focused effort by the entire organization. Both our top and bottom line were stronger than expected for the quarter. We extended our track record of generating cash for the 7th consecutive quarter, and again executing on our 2nd stock repurchase, while reducing our bank line balance to 0. We implemented new and improved disciplines in product management to better align our internal product launch timing with our customer's buying cycles. We saw a decrease of $5.5 million in our inventory balances during what is traditionally the slowest quarter of the year. We are experiencing a strong launch of our invisibleSHIELD Glass product and continue to see growth in tablet keyboards. We recently strengthened our entire leadership team, with the hiring of a new EVP of Global Sales. We're glad to see this early-year momentum supporting the execution of our 2014 plan, and it allows us to feel comfortable reiterating the annual guidance we provided in February of $218 million to $228 million in revenue and $32 million to $34 million of adjusted EBITDA.

While the first quarter revenue was down 4.8% on a year-over-year compare, the rate at which sales decreased slowed to the lowest rate of decline since the slowdown began over 15 months ago.

As I've mentioned on our last call, we anticipate the second quarter to also decline on a year-over-year basis. We are working diligently to implement our product, brand and distribution strategies to address and eventually reverse the causes of the revenue decrease.

As implied by our guidance, we anticipate 2014 annual sales to end slightly up, with a return to growth in the second half of the year and the momentum from 2014 to carry us into 2015. Due to product mix trending in which our high-gross margin screen protection product line represents a smaller percentage of revenues, along with our initiatives to reduce excess inventory and an increase investment of in-store merchandising, we expect gross margins to continue to be in the mid- to high-30s for the remainder of the year. Throughout this period of revenue compression, we have carefully managed our expenses and reduced operating costs, allowing us to generate sufficient cash flow to entirely pay off our debt from the iFrogz acquisition, which included a $17.5 million payment in the first quarter, the completion of a $10 million share repurchase in 2013, and the reinstatement of another $10 million share repurchase program for 2014, and generate $11.9 million in operating cash flow this quarter.

With a return to modest revenue growth later this year, we anticipate continued free cash flow from operations sufficient to continue to fund the growth of our business and provide flexibility with how we achieve that growth. I am very pleased to announce the addition of our new EVP of Sales, Brian Stech. Brian has held numerous leadership positions in sales throughout his career in the consumer electronics industry and brings a comprehensive understanding of the rapidly evolving industry that we compete in. Brian's involvement in expanding customer relationships and building new distribution throughout his career, will bring a higher level of organization and focus to attaining our ongoing sales objectives.

His addition to the ZAGG executive team is an important step toward achieving our objective to win shares strategically through building targeted domestic and international distribution.

Another important change currently underway is the transition of our order fulfillment and distribution to RR Donnelley. Both our Best Buy and Walmart business is now distributed through RR Donnelley and the balance of our retail business will be transitioned by June 15.

This improvement in supply chain management is a key strategic move to win market share and support our future growth plans. This step will help us improve our inventory management, while providing a higher level of service to our customers. The 2014 product management efforts have been implemented with an emphasis on winning shares strategically. Our product managers are focused on making sure we continue to introduce creative product solutions in each of our 6 product categories. We've been working hard to make sure that we have the right product assortment that allows for a simplified selling process, while helping our retailers better promote the unique features and benefits of ZAGG products. We have moved to semiannual product launch cycles that correspond with our retailer resets, thus allowing our sales team to be in front of our customers earlier in the selling cycle. To further support our product initiatives, we've created a virtual product supermarket that allows our sales team to easily build customized product presentations, complete with marketing strategies and media content that is tailored specifically for each retail customer's unique needs, further improving our product and brand positioning with both retailers and end consumers.

Almost 3/4 of our revenues are generated by our 2 largest product categories: screen protection and tablet keyboards. This is the first quarter in the company's history in which tablet keyboards have surpassed screen protection as a percentage of sales, which is not surprising given that Apple has sold over 210 million iPads since the product launched. Based on the outlook for tablets, both iOS and Android, we continue to see a lot of opportunity in this product category.

Tablet keyboards offer the single most significant user experience enhancement to the functionality and productivity of tablets. And now that Microsoft has released Office for the iPad, enterprise adoption of tablets and tablet keyboards should grow more quickly. We are actively engaged in several strategies that would help position ZAGG keyboards as a preferred enterprise tablet productivity solution. ZAGG has the best reviewed, highest rated, and #1 selling tablet keyboard in the industry. We are now working with our retail partners to improve in-store merchandising and product support that will help to educate consumers about the features and benefits of ZAGG tablet keyboards. ZAGG was instrumental in creating the tablet keyboard category and we are determined to both -- to lead both innovation and sales in the category.

Beginning in June and extending through the end of this year, we will bring into market our best keyboards ever, for both the Android and the iOS operating systems.

These keyboards will feature longer battery life, improved user interfaces, enhanced user benefits, and in some cases they will be targeted to specific demographics.

We will be supporting these releases with new in-store displays and merchandising in the third quarter. We are working hard to stabilize our screen protection business, and have identified opportunities to be more competitive and leverage our brand into a larger market.

We started with simplifying the product line to pre-products offering a good, better, and best assortment for our customers. In the first quarter, we launched the invisibleSHIELD Glass at Best Buy, and today its sales have exceeded expectations. As of April 1, we've made the invisibleSHIELD Glass available to the rest of our distribution.

It's a great product that adds another level of protection to expensive smartphone screens. Market research indicates that cracked, chipped or broken screens continue to be the most frequently reported damage to mobile devices.

Our screen protection sales continue to follow successful mobile device launch trends. The Samsung Galaxy S5 released in April was very well received with sales up over 30% on a day 1 versus the release of the S4. And as a result, we've seen strong invisibleSHIELD sale through for this phone.

The invisibleSHIELD On Demand is being rolled out to our ZAGG-branded locations, and is scheduled for limited retail location testing during the quarter. We are continuing to work with our retail partners for a broader introduction in the third quarter.

Keep in mind, this product is designed to provide additional sell-through and retail lift at locations that support an assisted sale model. We will be releasing a refreshed invisibleSHIELD product line early in the third quarter supported by a strong messaging campaign. We have recently introduced a new installation process that will become the standard in all 3 invisibleSHIELD products. It was designed with the end-user in mind and allows for a nearly error-free installation, even for first-time customers installing at home.

Our 2 higher price point invisibleSHIELD products, use a new dry application process and adhere in seconds using our easy align tabs. If you've recently installed an invisibleSHIELD Glass on your phone, you're familiar with the simple installation process.

One of our newest portable audio products is the iFrogz Tadpole Bluetooth speaker, it's the smallest Bluetooth speaker in the market, with an extremely compact design and bold sound, making it a best-in-class audio product. The Tadpole's playful colors and value-oriented price point has produced incredible market reception. Nearly all the retailers who have seen the product have either already ordered it or are making plans to bring it into their stores.

I mentioned in our last call that historically, our e-commerce approach has been focused on driving business to our own website. We are in the middle of implementing initiatives to broaden our overall online strategy, and develop deeper relationships with key online retailers and the .com divisions of our brick-and-mortar customers.

During 2014, we will be aggregating content and disseminating it consistently through the entire e-commerce channel. Next week, we will launch a significantly revamped ZAGG website that will provide a preview of style, content and promotion that you can expect from our e-commerce initiatives going forward.

I hope you will all stop by and shop at in the coming weeks, and help us kick off a new phase of e-commerce growth. Growth will require continued investment of capital and talent, and the promotion of our key strategies going forward. This year, we look to grow keyboard, audio and power management categories, while stabilizing the screen protection and case categories.

Our pipeline of new products -- new product opportunities is stronger than ever as we enjoy a constant flow of great ideas from the both inside and outside the company. As a result of a disciplined vetting process, we prioritize and advance only the best concepts that will best position us to win shares strategically, support our initiatives, strengthen our brand and help us to expand distribution. As we move through the year and make progress on our strategic initiatives, I am confident we have the right formula to return to growth.

With that, I'd now like to turn the call over to Brandon for a detailed review of our first quarter financial results. Brandon?

Brandon T. O'Brien

Thank you, Randy. And thank you to everyone for joining us on the call today. I will be reviewing our first quarter 2014 financial results in detail. As stated in today's release, we will be disclosing consolidated financial results reflecting our primary operations in the United States, as well as our operations from ZAGG International, our wholly-owned subsidiary operating in Shannon, Ireland. In the call today I will speak only of consolidated results unless otherwise stated. The financial statements provided in today's release reflect consolidated Q1 2014 financial details so you may refer to them for further clarifications. Net sales for the quarter were $49 million versus $51.5 million in the prior-year quarter, representing a year-over-year decline of approximately 4.8%.

As Randy mentioned, we experienced strong tablet keyboard sales in the quarter, but the decline in our screen protection and case categories versus last year was due to continued market competition in those key categories and a decline in our online sales.

For the first quarter, 34% of our net sales came from the screen protection product category versus 44% in the same quarter of last year. Keyboards represented 38% of our net sales, compared to 32% in the same quarter last year.

The breakdown for the sources of net sales is as follows: for the quarter, 88% of sales came from our retail channel versus 83% in the same period last year; 6% of sales are from and versus 12% in the same quarter last year; and 6% was from the kiosks and standalone stores versus 5% in the same quarter last year. International sales accounted for 15% of total net sales in the quarter versus 10% in the same quarter last year. Gross profit for the quarter was $17.8 million versus $19 million in the same quarter last year, which translates into gross margins from the quarter of 36.3% versus 36.9% for the prior-year period.

Gross margins were primarily impacted in the quarter by the product mix shift, with lower screen protection sales in a quarter compared to prior periods. Operating income in the quarter was $1.9 million or a margin of 4% versus operating income of $2 million or a margin of 3.9% in the same period last year.

An important corporate goal is cost-containment, though we will continue to invest in personnel, marketing and brand building to help grow the business. We also incurred $0.5 million in noncash stock compensation expense during the quarter, compared to $1 million in the same quarter of last year. Stock-based compensation declined due to a decrease in grants to employees.

We are working diligently to keep costs contained, while we work to get back to top line growth. I attend the monthly budget review meetings with each department head and stress the importance of keeping costs in line. With this discipline instilled in the organization, when we return to top line growth, we should see some nice leverage in the operating model of the company.

For the quarter, our effective tax rate came in at 50.3%, compared to 24% in the prior-year quarter. During the first quarter of 2013, the reduced tax rate was largely due to a tax law passed during the quarter that allowed a research and development credit for activities incurred during 2012.

During the first quarter of 2014, the increased tax rate was primarily due to losses incurred in low tax rate jurisdictions that do not benefit the overall corporate tax rate.

Net income in the quarter came in at $1 million versus net income of $0.9 million in the same quarter in the prior year. Our fully diluted share count for the quarter was 30,864,119 shares.

At March 31, 2014, we had 337,631 outstanding options, 390,000 outstanding warrants, and 478,635 outstanding restricted stock grants. We used the treasury method in calculating our diluted shares outstanding.

Our fully diluted earnings per share were $0.03 for the quarter versus fully diluted earnings per share of $0.03 in the same period last year. During the first quarter, we incurred the following noncash charges, which we have tax affected [ph] assuming a statutory rate of 38.25% in the calculation of pro forma EPS, $0.5 million or $0.01 related to stock-based compensation; and $2.4 million or $0.05 related to amortization of intangible assets. Pro forma net income for the first quarter of 2014 was $2.8 million or $0.09 per diluted share, as compared to pro forma net income of $3.6 million or $0.11 per diluted share in the first quarter of 2013.

Total noncash charges, net of tax, included in the calculation of pro forma net income totaled $1.8 million in the quarter or $0.06 per diluted share. Adjusted EBITDA for the quarter came in at $5.5 million, compared to $6.1 million for the first quarter of 2013.

Although we were not as profitable as the prior year, given the decline in profit margin, this EBITDA result is very positive.

Turning to the balance sheet. Working capital at the end of the quarter was $67.4 million, compared to working capital of $83.4 million at December 31, 2013. We reported a cash balance at March 31 of $6.5 million. The decrease in cash is the result of positive cash flow from operations of $11.9 million, which was partially offset by debt repayments and the purchase of treasury stock. At the end of the first quarter, we have no remaining debt on the balance sheet.

During the quarter, we made a payment of $17.5 million on a line of credit leaving a 0 balance. And the term loan balance was paid off in its entirety as of the end of 2013. We also purchased $2.5 million in ZAGG stock during the quarter.

We analyze and discuss purchases of ZAGG stock quarterly with the board to determine future open market purchase activity. Accounts receivable for the quarter were $36.6 million, as compared to $46.6 million at December 31, 2013.

DSOs in the first quarter were 67.2, compared to 64.2 for the quarter ended December 31, 2013. We are comfortable with the quality of our accounts receivable. Inventories for the quarter ended at $39.1 million, compared to $44.5 million at December 31, 2013. The decrease in inventories is related to increased discipline in our inventory management and reduction of excess inventory through discount channels. We have budgeted some impact on our gross margin as we work through excess levels of inventory for the remainder of the year.

We continue to evaluate inventory on a monthly basis and reserve against slow-moving inventory as needed. As Randy mentioned in his comments earlier, we are reiterating our guidance for 2014, taking into consideration the impact of our domestic, international sales initiatives, the opportunity for our new products with upcoming resets at our large domestic retailers and the potential expansion of our overall distribution channel to have a positive impact on quarterly revenues in the second half of 2014. Since most of the initiatives are recently initiated, and we are seeing the beginnings of improvements on a number of fronts, we still are experiencing a compression in net sales, which we anticipate continuing into the next quarter.

We remain comfortable with our previously stated forecast of modest growth in net sales for 2014 with guidance for net sales in the range of $218 million to $228 million and adjusted EBITDA in the range of $32 million to $34 million. We are also forecasting annual gross margins in the mid- to high-30s for the full year.

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

Randall L. Hales

Thank you, Brandon. And at this time, I will go ahead and turn the call over to the operator for the Q&A.

Question-and-Answer Session


[Operator Instructions] The first question comes from Dave King from Roth Capital.

David M. King - Roth Capital Partners, LLC, Research Division

I guess, first off, the margin this quarter, it looked like it held in pretty well. It sounds like the decline year-over-year, I guess, was some of that was mixed. But I guess, I would have thought that mix would have contributed to a bigger decline. And I think some of the things you've done to work down inventory, I think you guys had thought that maybe that would weigh a little bit. I guess, Brandon, could you talk about sort of the different puts and takes, and then how we should be thinking about that, in terms of from a puts and takes perspective -- inventories, mix, all that, as we think about the rest of the year versus that guidance you guys laid out?

Randall L. Hales

Yes, you bet. I mean the number that we came in at, the biggest impact did come from a mix shift, as we transition to more of the -- of keyboards making a bigger portion and the screen protection coming down. We still are -- our pricing with our keyboards is still great. We don't have a lot of pressure there. As we move forward, there may be additional pressures related to that, but for now, Dave, we're very comfortable with the model that we have put out there with margins in the mid- to upper-30s. And at this point, don't see anything that would move us off of that.

David M. King - Roth Capital Partners, LLC, Research Division

Okay. And then, so then, were there any -- in terms of being able to work down some of your inventory, how did those -- it sounds like anything you did this quarter, well, I guess, was -- anything you did this quarter, was that having -- was that in line with your expectations in terms of what you guys had reserved previously? Were there any changes in the reserve this period? How are you guys thinking about that?

Randall L. Hales

Yes, we're always looking at the reserves, so the stuff that we were able to move through, was stuff that we already had taken reserve on. We look at that each month, and if we need to increase the reserve, we do. We've got a very robust process now where we review slower moving inventory. We've got the buy-in of all the senior managers, the sales team and they present different opportunities, and we evaluate those on a case-by-case basis and move forward accordingly. But we've been able to move those inventory levels at -- where we've already taken reserves against them and we haven't had to increase those substantially.

David M. King - Roth Capital Partners, LLC, Research Division

Okay, okay. And you haven't had the -- and you haven't reduced them at all then? It sounds like then.

Randall L. Hales

The reserve levels?

David M. King - Roth Capital Partners, LLC, Research Division


Randall L. Hales

Yes. They remain relatively constant. I mean, there's stuff that goes in, stuff that goes off, but it remains relatively constant as a percentage of the overall inventory.

David M. King - Roth Capital Partners, LLC, Research Division

Okay. So the most of it was mix. Okay. And then, in terms of the EBITDA guidance that you laid out for the year, it looked like EBITDA was down about 10% year-over-year in the first quarter, like you're still kind of guiding to. I think it's like a -- if I take the mid-point, like a 16% decline in EBITDA for the year, but there is a reacceleration in growth. Are you still expecting growth on the top line in the back half, I guess? What's the -- what's kind of the offset there? Is there more spending to come with that increase in revenue? How should we be modeling that expense line or thinking about some of the different investments you guys are making?

Randall L. Hales

Yes, I mean, we've modeled -- the EBITDA is right around 15%. So as we get to some of the back half growth, there will be some investments into some merchandising. We've got some fixtures that will go into some of our stores that we have modeled in there. So there will be some increased expense there, but still, overall, we're comfortable with that 15% EBITDA margin for the year.


The next question comes from Mike Malouf from Craig-Hallum.

Michael Fawzy Malouf - Craig-Hallum Capital Group LLC, Research Division

As we look at -- it sounds like you have a lot of significant product launches here in the second half, starting in the third quarter. Can you talk a little bit about the gross margin impact of those, or is that going to have any either positive or negative effects on that?

Randall L. Hales

Yes, Mike. So one of the charges that our product managers have taken is to ensure that products being introduced are either gross margin neutral to the category or accretive. And so, you shouldn't see significant change in gross margin by category that we're currently in. We also have some operating initiatives underway now to help our acquisition costs, and hopefully support gross margin in those categories.

Michael Fawzy Malouf - Craig-Hallum Capital Group LLC, Research Division

Is that the same for the -- the machine that's going to go into some of these retail outlets?

Brandon T. O'Brien

Yes, so the invisibleSHIELD On Demand machine is an opportunity for us to sustain gross margins that we've experienced over time in that category of invisibleSHIELD. It doesn't decrease those margins or cull them down.

Michael Fawzy Malouf - Craig-Hallum Capital Group LLC, Research Division

Okay. So based on sort of keeping the gross margins similar for each category, the Glass that you introduced this year, is that -- are those margins in line with the invisibleSHIELD, sort of traditional invisibleSHIELD, as we know it?

Randall L. Hales

Yes, very close.

Michael Fawzy Malouf - Craig-Hallum Capital Group LLC, Research Division

Okay, great. And then, can you talk a little bit about why the online business has fallen off so much? That's a pretty dramatic fall off in revenues, especially given that revenues are down, but the percentage of revenues are down almost in half.

Brandon T. O'Brien

Yes. That is one area of our business that has, I think, caught all us off guard a little bit. And I believe, if you go back and look at what our original strategy was, to drive all of our online sales through our website. It's harder and harder in the online world today to capture that audience and direct them back. People are shopping at the .coms of our brick-and-mortar customers that they trust and have a relationship with, and of course, Amazon and other e-tailers that are just growing in prominence. And our strategy has not embraced them in the past. And so, as that shift has occurred, we haven't followed suit with that. That's why the revamp right now, underway to aggregate content and disseminate that information across all of e-commerce channels and not have such an emphasis on just directing traffic back to our own website. So we believe that we'll enter a phase of online expansion again during the year, but we don't anticipate seeing our own web sales return to the rates that they were at, historically.


[Operator Instructions] The next question comes from Ryan MacDonald from Northland Capital.

Ryan MacDonald - Northland Capital Markets, Research Division

Starting with the tablet keyboards, and obviously, it was pretty strong growing year-over-year, can you maybe talk a bit more about what attributed to that -- I mean, I think, if we looked at what Apple had reported earlier, iPad, iPad sales seem to be fairly weak even considering it being a Q1. I mean, are you starting to see growth in Samsung, or I mean, can you just give a little more color to us surrounding that?

Randall L. Hales

Yes, I think what's happened, Ryan, in general, people that have purchased tablets are now finding that there are great productivity tools when combined with a keyboard. Initially, it was -- a tablet was really a content consumption device. And now with the great software coming in the market that create more productivity opportunities, not the least of which is the Microsoft Office Suites being available for tablets, people have a greater interest in content creation. And so I think that is causing the keyboards to grow, both for people in the installed base who have had tablets and are now enhancing their productivity on the tablet, but also, the attachment at initial sale I would say, is increasing. So those 2 factors or that factor of people wanting to be a more productive tool I think is driving the sales increases that we're seeing in tablet keyboards.

Ryan MacDonald - Northland Capital Markets, Research Division

And can you clarify, I know you have the partnership with Samsung, when you'll start to see some benefit from that? I know and I think there was an increased amount of stores that you'll be able to get into with that partnership, and is that going to be only domestic or will that be internationally as well?

Randall L. Hales

Yes. So during the first quarter, we saw a pretty significant pickup in our international businesses. Brandon broke that out, you saw that it bumped up from historically 9%, 10% to 15% of revenue in the first quarter. And that was largely driven by international sales of our Samsung Cover-Fit keyboard. And so that partnership has worked very well for us. It's still new and we're kind of feeling our way through that. But you will see, as we go through the year, more keyboards designed for the iOS platform and specifically, Samsung tablets. And it does give us a license to hunt in some distribution that we didn't have before.

Ryan MacDonald - Northland Capital Markets, Research Division

And do you -- what do you think international revenue can -- what levels do you think it can get up to as a percentage of total sales?

Randall L. Hales

Well, we would love for it to be much stronger than it is, obviously. And we really believe that, Ryan, that we're still in the very early stages of our product and brand extensions into the international markets. So you'll see that we're continuing to make changes. We're hiring some new talent internationally, that we will be announcing here during the second quarter and adding resources there. So while we expect some nice growth this year, double-digit growth internationally, we still think it's just the tip of the iceberg. And in time, looking out 4, 5, 6 years, we'd love to see international represent a strong portion of our total revenue.

Ryan MacDonald - Northland Capital Markets, Research Division

And then just one final question. You have been talking a lot about the stabilization of the invisibleSHIELD business this year. I'm just curious as to, does this -- this guidance include or does it already have baked in -- a new launch from Apple with a new iPhone in the fall or would a new launch provide upside to what you're looking at for the year, so far?

Randall L. Hales

No, we -- it is currently baked in. We've anticipated that, knowing that it was very likely Apple would go through a form factor change in the iPhone this year. So that is baked in the current guidance.


I'm showing no further questions. I would now like to turn the call back over to Randy Hales.

Randall L. Hales

Thank you, again, for joining us today to discuss our first quarter results. And while we made a lot of progress during the first quarter on many fronts, we still have opportunities for continued growth and development. With our leadership team focused on a well-developed strategic plan, we remain committed to improving shareholder value through better execution, introducing outstanding new products that will serve to strengthen our brands and expanding our distribution opportunities. Thank you for joining us today, and we look forward to updating you again on our next earnings call.


Ladies and gentlemen, that does conclude the conference for today. Again, thank you for your participation. You may all disconnect. Have a good day.

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