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Q4 2012 Earnings Call

February 26, 2013 5:00 pm ET


Kimberly Rogers-Carrete

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

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


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

Paul Coster - JP Morgan Chase & Co, Research Division

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

Michael Latimore - Northland Capital Markets, Research Division

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

David S. Strasser - Janney Montgomery Scott LLC, Research Division



Good day, ladies and gentlemen, and welcome to ZAGG's Fourth Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded is being recorded. I would now like to hand the conference over to Ms. Kim Rogers-Carrete, Genesis Select, Investor Relations firm for ZAGG Inc. Ma'am, you may begin.

Kimberly Rogers-Carrete

Good afternoon, ladies and gentlemen, and thank you for joining us today for the ZAGG Inc. fourth quarter 2012 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 fourth 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.

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 one 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 Securities 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: EBITDA, adjusted EBITDA and pro forma net income attributable to shareholders. 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. Thank you for joining us on the call today, my first in the CEO role. As many of you are aware, the Board of Directors engaged Heidrick & Struggles to conduct an outside third-party CEO search last year. After an exhaustive search that included over 70 candidates and 6 finalists, I was asked to serve as the CEO of ZAGG in early December. It's an honor to serve in this capacity at such a fantastic company. I have been engaged with ZAGG since I joined the board in October of 2010 and had the opportunity to work closely with management on the acquisition and integration of iFrogz in June of 2011. Later that year, discussions began about my joining the company in the role of COO and President, which I did in December of 2011. At that time, it was obvious that the company needed to establish operational and product disciplines. With the support of senior management and the Board of Directors, we set about to unify the company and employees around 3 corporate objectives: product, brand and distribution. With the support and buy-in of the leadership team, we began organizing and aligning ZAGG to build a business that could scale and provide a solid foundation for continued growth. I am pleased to say that today, we are seeing the benefits of those efforts that we have been working on for over a year.

One of the most evident benefits of the unified strategic objectives has been the establishment of product management as a ZAGG discipline. At CES last month, the company introduced over 70 new SKUs, including several Hero products, as well as announced 2 new product categories for 2013. The response from our retail partners to the new ZAGG products has been fantastic. The media reaction to the new products was also very strong, with dozens of favorable product reviews in a multitude of widely distributed publications.

While we introduced a number of great products at CES, 2 products that we are very excited about are the iFrogz Caliber Advantage game controller and the ZAGG Origin desktop speaker system, both of which will launch in the first half of 2013. The Caliber Advantage is the first analog gaming case designed to provide a console gaming experience for mobile devices and was developed in cooperation with industry-leading software developers. It also represents the company's first product introduction that does not fall squarely into the definition of an accessory. The ZAGG Origin is a premium 2-in-1 desktop speaker, which won Got To Be Mobile's Best Accessory award at CES and features a Bluetooth-enabled portable speaker combined with a high-quality desktop system all in one unit. At $249, the Origin is posed to compete with higher-priced offerings that do not deliver the functionality and sound performance.

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