First, taking a look at its Q4 numbers, the company reported a loss of ($0.08)/share, missing the $0.36 two analyst estimate by a wide margin. Furthermore, revenue of $114.9 million was light and ZAGG came in at the low end of its gross margin and adjusted EBITDA expectations. There were a couple primary issues which caused the softness. Specifically, the company reported during its conference call that a shortage of OEM devices through the end of the year impacted results -- which didn't recover as it anticipated. Also, ZAGG liquidated some older mophie products, its mobile battery case brand, during the holiday season, allowing it to clear inventory. This drove its gross margin down to 26% from 37% in the year ago period.
The good news, though, is that this transition year for mophie (acquired in Feb. 2016) is now behind the company. It has appointed a new President, initiated operational improvements, and has streamlined the business for growth in 2017. When ZAGG acquired the company, it had identified about $11 million in cost saving synergies. Now, it estimates its savings to be around $16 million, with $8 million achievable in 2017. Additionally, it accelerated the launch of its new "juice pack" product and has increased cell phone charging case prices by 15% since November.
With the successful transition underway and with an unconstrained mophie supply chain, ZAGG provided strong upside revenue guidance of $470-$500 million, well ahead of the $455.9 million Capital IQ Consensus. Other catalysts the company sees for this year is additional cost controls, increased distribution of new InvisibleShield products, expanded distribution of its IFROGZ audio products, and continued international growth.