Company
ZAGG Inc.
3855 South 500 West, Suite B
Salt Lake City, UT 84115
Phone: (801) 263-0699
Fax: (801) 263-1841
www.zagg.com
Contact
Investor Relations
Brandon T. O’Brien, CFO
Phone: (801) 263-0699
E-mail: Brandon@zagg.com
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Share Data
Symbol: (OTCBB: ZAGG)
52-Week Price Range: $0.56 - 1.17
Shares Outstanding: 18.97 million
Market Cap: $20.87 million
Balance Sheet Data
(as of June 30, 2008)
Total Assets: $3.12 million
Total Current Liabilities: $548,000
Shareholders’ Equity: $3.5 million
Book Value per Share: $0.18
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ZAGG Inc. develops invisibleSHIELD brand protection for electronic devices.
Consumer electronics spending has defied the gravitational pull of the global economic slowdown, and according to experts, it will continue to do so. A partnered forecast from the Consumer Electronics Association and research firm GfK Group expects the market’s 2009 growth to be nearly 10% worldwide and 22% in North America alone.
But for cash-strapped consumers trying to stretch their hard-earned dollars, protecting their pricey investments has become more important than ever. Enter ZAGG Inc. (OTCBB: ZAGG), a Utah-based company that uses a military-grade film to design protective coverings for consumer electronic products. ZAGG has recently seen robust growth in sales and increased demand for its products.
The company reported that its second-quarter 2008 sales soared nearly 250% over the same period in 2007. “We’re experiencing incredible growth,” says Robert G. Pedersen II, chairman and CEO. “In this day and age, people don’t get these high-end gadgets as a snob factor; they get them because they’re tools that help run their lives more efficiently.”
The growing significance of these devices in consumers’ everyday lives puts added value in maintaining their functionality. Recognizing this market demand, ZAGG’s technology protects popular devices like mobile phones and laptops without the bulky drawbacks of conventional plastics and rubber. The company’s invisibleSHIELD products are a thin, transparent film that safeguards devices from everyday wear and tear and more serious damage.
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“We took a film that was developed for the military to protect helicopter blades from getting scratched and chipped while going hundreds of miles an hour, and we applied it for consumer use to electronic devices,” Pedersen says. “It’s like a screen protector on steroids. It’s very malleable, not hard and stiff. And it’s not going to scratch like most screen protectors will.”
Founded in 2005, ZAGG has developed more than 2,500 different designs and cuts of the film, as well as a spray kit that prevents the bubbling effect. The product also peels away without leaving adhesive on the device. The company has posted several videos on its website, zagg.com, that displays the toughness of the shield material.
One of the videos shows testers gradually stacking 1,200 pounds of free weights to demonstrate the durability of the film. The film holds and subsequently displays its flexibility and resiliency by returning to its original form. In one test, they actually take a weed whacker to a protected iPhone. The result? No iPhones were harmed during the making of the video.
“We have a technology called Nano-Memory, which makes the film more scratch resistant,” Pedersen says. “Because when you push down into the film with a key or coin, rather than it being a hard surface where it will scratch, it’s actually malleable. So it has that memory technology where it will form-fit to whatever the edge that’s trying to put it down, and then it will come back to its original shape.”
ZAGG has benefited from the popularity of the iPhone. The company said recently that its invisibleSHIELD products are the top-selling iPhone 3G accessories, covering about 10% of the first 1 million phones sold by Apple. Pedersen expects to see his products’ popularity grow further with the next wave of smart phones, such as the Samsung Instinct and LG Voyager. The company is also directing attention to other areas in consumer electronics.
“We are going heavily into digital cameras and laptops right now,” Pedersen says. “There’s also a new line of iPods coming out soon, and that will be the next big push. Every time these multibillion-dollar companies spend hundreds of millions of dollars advertising their hot new gadget, we benefit. We ride the wave. And our sales continue to reach new plateaus.”
In the second-quarter 2008, ZAGG reported revenue of $2.74 million, compared to $804,458 a year ago. The company also swung to a profit of $174,703, or a penny per share, from a loss of $48,293, or break-even per share, a year ago.
Pedersen says ZAGG is looking at a few initiatives to boost growth, particularly through international expansion and penetrating the big-box retail and mass markets. The company’s products will soon be available in more local stores, malls, kiosks, and vending machines.
“Historically, we’ve been an Internet company, driving the majority of our revenues and sales through the website,” Pedersen says. “But we’ve made a turn where we’re shipping to some big-box retailers. In the third quarter of this year, our numbers will reflect shipments to Best Buy here in the U.S. and The Carphone Warehouse in the U.K. We’ve been very strong with early adopters. They’re familiar with our product, and now we’re able to see our brand expand out to the mass market.”
Pedersen has high hopes for this strategy, evident in ZAGG’s ambitious guidance for fiscal 2008 revenue. The company expects sales to more than double year-over-year in the range of $13 million to $14 million. In 2009, Pedersen hopes revenue will hit the $30 million mark. Shares of ZAGG broke the $1 barrier after the company reported its second-quarter results.
“Our stock price has really taken off,” he says. “There’s a lot of interest out there. We think that the stock is poised right now for enormous growth over the next six to eight months. If someone is interested in a small-cap stock that has enormous potential, intellectual property, profitability, no debt, and is on an upward pattern, I can’t think of a better company out there than ZAGG.”
RISKS: ZAGG Inc. intends to invest significantly in further expanding the company’s operations, market presence, and branding. As a result, expenditures in advertising will continue to increase. The company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors that could have a material adverse effect on its operations and future prospects include but are not limited to changes in economic conditions, availability of capital, interest rates, and competition. As a smaller company, ZAGG isn’t required to provide information regarding qualitative and quantitative market risks.
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