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Zagg Inc (ZAGG) Q4 2018 Earnings Conference Call Transcript

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Zagg Inc  (NASDAQ: ZAGG)
Q4 2018 Earnings Conference Call
March 12, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the ZAGG Fourth Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Brendon Frey. Sir, you may begin.

Brendon Frey -- Managing Director

Thank you, Ashley. Good afternoon, and thank you for joining us today to review the ZAGG fourth quarter 2018 financial results.

On the call today, we have Chris Ahern, Chief Executive Officer; Brad Holiday, Chief Financial Officer; as well as Taylor Smith, Vice President of Finance Accounting and incoming CFO. Following Chris and Brad's prepared comments, we will open the call up for a question-and-answer session.

Our fourth quarter earnings press release issued today after the market closed at approximately 4:00 p.m. Eastern time. As a follow on to the earnings release, we published a supplemental financial information on our Investor Relations website. We also furnished this document to the SEC on Form 8-K. You can find all our earnings documents on our Investor Relations website at www.zagg.com in the Quarterly Results section under the Financials tab.

We are recording this call, and a podcast of the conference call will be archived at the ZAGG Investor Relations webpage under the Events tab 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 for the performance of the Company. These statements do not guarantee future performance and speak as of the date hereof.

For a more detailed discussion on the factors that can cause actual results to differ materially from those projected in any forward-looking statements, 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. 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, we will discuss adjusted EBITDA and diluted operating earnings per share, both non-GAAP financial measures. 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 now, I'd like to turn the call over to Chris Ahern? Chris.

Chris Ahern -- Chief Executive Officer

Thank you, Brendon.

Good afternoon, and thank you for taking the time to join us on our 2018 Q4 earnings call.

Fiscal 2018 was a significant and successful year for ZAGG. Looking back, we accomplished a lot with a number of important milestones. Most notably, we delivered record revenue and earnings, realigned our organization and added new talent to better support growth, accelerated international expansion, we outlined the path to our long-term goal of $1 billion in revenue and mid-teens adjusted EBITDA margins, we completed three acquisitions that diversify our business and provide the Company with exciting new growth vehicles. We were able to execute all of these even as we faced some sizable headwinds. This included a delay in certification for the mophie new iPhone juice pack that we estimate was worth approximately $40 million in revenue in 2018 and a slowdown of smartphone sales devices, particularly in the fourth quarter, which we expect will continue to be a headwind through 2019 for our device-specific products like screen protection and battery cases.

For the year, revenue increased 4% to $538 million, driven by increased demand for InvisibleShield screen protection products, including our latest innovation Glass + VisionGuard, combined with higher sales of our mophie power management products related to wireless charging accessories and portable batteries. The growth in screen protection helped fuel a 200 basis point improvement in gross margin, which along with the benefit of US tax reform, propelled earnings per share to $1.38, the highest level in the Company's history and near top-end of our guidance range.

With regards to the fourth quarter, sales were down compared to last year but in line with expectations as we lapped the launch of and sell-in of our initial wireless charge pad a year ago, combined with the impact of the juice pack demand from the delay. Helping partially offset these declines was a double-digit increase in screen protection, driven by strong demand for VisionGuard products, strong international growth and some domestic retailer request for early deliveries ahead of potential tariff increase.

Similar to our full year results, the increased penetration of screen protection business contributed to a meaningful gain in gross margin, while fourth quarter operating expenses reflect incremental expenses and transaction costs associated with the recent acquisitions.

On top of our record full year results, 2018 was a busy period on the M&A front. When we hosted our Investor Day in September, we communicated our long-term goal of achieving $1 billion in annual sales and mid-teen adjusted EBITDA margins through the combination of both organic and inorganic growth. Since the event, I'm very pleased with the progress we've made, adding three great brands and a host of talented people to the ZAGG family.

Starting in July, we acquired BRAVEN, the category creator and innovator of premium rugged Bluetooth audio category. BRAVEN is a premium brand with an award-winning product and intellectual property portfolio that immediately extended our presence into a new segment of the large and growing audio category. In BRAVEN, we also acquired a world-class team, especially on the product engineering side of the business, to drive product innovation, adding to the already strong teams in place at ZAGG.

At the end of November, we completed the purchase of Gear4, the UK's Number 1 smartphone case brand and one of the fastest-growing case brands in several global markets. Featuring exclusively licensed D3O technology that tenets to most advanced impact and shock-absorbing material currently used in professional sports, industrial and military equipment applications.

Gear4's product portfolio is highly differentiated compared to competition. As the trend of more costly handset looks set to continue, the combination of Gear4 and InvisibleShield gives ZAGG a powerful leadership position in the increasingly important protection category.

More recently, we acquired HALO in early January. HALO is a leading direct-to-consumer mobile accessory company with a rich history of developing innovative power products and a long-standing reputation as one of the top-selling electronic (ph) brands with QVC.

We believe the home shopping channel, which is new to ZAGG, offers some compelling opportunities for further growth of the HALO brand and new distribution potential for several of our other brands as well. We are very excited to have added these three strong brands to our portfolio in such a short period of time.

The healthy operating cash flows generated by our existing businesses allowed us to pay down the debt associated with the 2016 mophie acquisition, putting the Company in a great position to leverage a strong balance sheet and execute on these opportunities as they became available. The plan is to take a break on M&A for the time being to ensure we successfully integrate these new brands both culturally and operationally and set them up for sustained success.

Part of this processes is reshaping how we do our overall business internally in order to format the right go-to-market strategies. Historically, ZAGG has been heavily weighted toward screen protection with the majority of sales coming from this one category and a few key accounts. With the work we've done significantly growing our network of retail partners, expanding outside the US and diversifying our brand and product mix, we are moving forward to focus on capturing additional market share of four primary categories: protection, power, audio and productivity orders.

Protection, as its own, will include all our products in the protecting OEM devices such as screen protection and protective cases and is led by our InvisibleShield and Gear4 brands. As I said earlier, with the ever-increasing cost of devices, we are confident that protection is only going to grow in importance with today's global mobile consumer.

Powering comes as battery cases, portable power, wireless charging, power cables and adapters and other power applications that fall into the mophie and HALO brands. Power is one of the biggest consumer needs of today and this should only increase in the future thanks to the introduction of 5G, so many new apps and the heavy use of streaming and location-driven devices. We feel this category is poised for continued growth.

Audio is a large and growing category that we've played in for years with our entry-level iFrogz brand. The recent acquisition of BRAVEN provides us with a slightly larger, albeit small footprint into the important category and more importantly, the permission to operate in the mid-tier to higher end of the market.

Lastly, the productivity category includes keyboards and other accessories that had increased a consumer's productivity. While this is the smallest of our categories, it is one that we have an opportunity to potentially grow the fastest through new, innovative product introductions.

As we think about 2019, we are excited with the number of opportunities we believe exist in our business. Our near-term excitement has been somewhat tempered by slowdown in the smartphone sales over the past 12 months, particularly in the fourth quarter, which we think will be a headwind for the device-specific products like screen protection and juice packs. We are working hard to mitigate this impact through innovative new product launches like our Juice Pack Access, which charges wirelessly, allowing consumers to utilize the Lightning port for audio and the expansion of existing technologies including our Glass + VisionGuard that helps filter harmful blue light from device screens.

Taking all of this into account, we are targeting 2019 sales in the range of $610 million to $630 million, representing a growth of 13% to 17% year-over-year. In addition to the base contributions from our three recent acquisitions, this guidance assumes each of our newly acquired brands to grow in the region of 5% to 10% compared with our 2018 full year performance.

In terms of organic growth, we are forecasting revenues to increase low-single digits, led by International, up mid-to-high teens. This outlook takes into consideration the recent softness in devices plus the early deliveries of some domestic shipments in late 2018, ahead of potential tariff increase, offset by a partial recovery in our juice pack sales following Apple's (ph) delayed launch.

Brad will go into more details in the guidance in a moment, but for 2019, we are targeting adjusted EBITDA between $82 million and $86 million. Being this our first year of owning BRAVEN, Gear4 and HALO, we have tried to make incremental investments in all three brands to drive increased consumer awareness and ensure each is well positioned to capitalize on the distribution opportunities we believe exist, both in North America and internationally.

While these additional investments will put some pressure on our 2019 adjusted EBITDA margins, we are confident this decision would help accelerate growth and quickly put ZAGG back into the path toward mid-teens adjusted EBITDA targets.

In closing, I want to thank all the ZAGG employees for their hard work and dedication executing our growth and profit improvement plans in 2018. I would especially like to thank Brad Holiday for his contributions to our success, not just this past year, but throughout his tenure as Chief Financial Officer. Thankfully, Brad delayed his retirement plans nearly four years ago when he agreed to come on -- off our board and take the CFO role. He's been instrumental in helping transform ZAGG into the Company it is today and building a strong foundation for the future. Brad recently decided to step down as CFO effective March 31 and transition to a newly created position of Senior Vice President of Finance and Strategic Projects. I'm very appreciative of Brad's willingness to stay on with the team in a new role that will give him more time to spend with his family.

At the same time, I'm extremely pleased that Taylor Smith has been appointed our next Chief Financial Officer. Taylor has brought his hard work in, with over 16 years of financial experience, including the past eight years at ZAGG, most recently as Vice President of Finance and Accounting. He's a great new addition to our senior leadership team, and I'm looking forward to working more closely with Taylor.

With that, I would like to turn the call over to Brad.

Bradley J. Holiday -- Chief Financial Officer

Thank you, Chris.

With our fourth quarter and full year P&L performance covered in both the earnings release and supplemental financial information posted on our Investor Relations site, I'm going to focus my comments on our balance sheet and outlook, then we will open the call for questions.

Our balance sheet remained strong at the end of the year. Compared to a year ago, accounts receivable increased 27% to $157 million due primarily to the timing of sales during the fourth quarter and holiday payment terms extended to keep customers, with corresponding DSOs increasing for the same reason to 87 days compared to 64 days last year. The quality of our receivables remains very good.

Inventory increased 10% to $83 million compared to the same period last year due primarily to the incremental inventory associated with our recent acquisitions and slightly higher levels in international to support their growth. Consolidated inventory turns were flat compared to last year at 6.8 times, excluding acquisitions, and improved compared to 5.8 times in 2016.

During the quarter, the company repurchased $6 million worth of shares and $12 million for the full year. On March 11, the Board of Directors approved a new share repurchase authorization of $20 million and canceled the previous authorization that had approximately $5 million remaining in authorization. As a side note, the Company has repurchased nearly $50 million of stock over the past six years at an average price of $7 per share.

Net debt, which is consolidated debt less cash, increased to $43 million compared to $12 million last year. This represents debt leverage of less than 1 times adjusted EBITDA on a trailing 12-month basis. Excluding cash paid for acquisitions and share repurchase during the year, the Company would've had no debt at the end of the year.

CapEx for the year was $7 million, which when combined with cash tax payments of $9 million, resulted in free cash flow of $60 million for the year. With regards to our free cash flow, our priorities have consistently been, in no particular order: to service our outstanding debt; repurchase stock; and fund tuck-in acquisitions.

Given our recent activities, our focus for the next several months will be paying down our debt to give us additional flexibility to fund potential future M&A opportunities and opportunistically buy back our stock.

Lastly, I want to spend a few minutes discussing our annual guidance for 2019. As Chris mentioned, our net sales are currently estimated at $610 million to $630 million or a growth of 13% to 17%. The key assumptions built into the sales range include: 5% to 10% growth from our recent acquisitions compared to their 2018 actual results, which combined, totaled approximately $69 million for the full year; organic growth of 1% to 4% compared to 2018. This takes into consideration international growth in the mid-to-upper teens as we continue to see strong expansion in Europe and Asia Pacific; a recovery of the juice pack business that was adversely impacted because of the timing of the OEM certification. Our new juice pack access will help recover a portion of both -- of sales lost in 2018. However, we don't expect our juice pack business to return to '17 levels now that Apple has introduced their own battery case.

Offsetting these tailwinds, we expect headwinds from a slowdown in OEM device sales that we experienced during the fourth quarter and that they will continue into 2019. In addition, as Chris mentioned, certain customers purchased additional inventory ahead of year-end as a hedge against anticipated tariff increases which is impacting first quarter sales as this inventory is sold through.

Gross margins are estimated to be in the mid-30% range, roughly flat compared to '18. This takes into consideration operational improvements, offset by lower mix of our higher-margin screen protection products as we integrate our new acquisitions. We estimate our annual tax rate at this time to be approximately 25%, and we'll provide updates as we progress through the year.

We expect that transaction-related expenses associated with the recent BRAVEN, Gear4 and HALO acquisitions will make year-over-year EPS comparisons somewhat difficult. And in fact, given that HALO was only acquired in January of 2019, we are still in the process of determining the purchase accounting and ultimate impact to 2019 earnings. To assist in better comparing '18 and '19 earnings per share, we will guide to operating earnings per share, which excludes the tax-affected impact of these transaction-related expenses, including amortization from 2018 and 2019 acquisitions.

We are estimating operating earnings per share of $1.47 to $1.60 compared to $1.44 in '18 on approximately 29.9 million shares outstanding. We believe this is a better representation of our operating results and allows an apples-to-apples comparison with prior year.

Adjusted EBITDA for 2019 is estimated to be at $82 million to $86 million. This assumes incremental expenses associated with marketing, product placement and other miscellaneous expenses to build meaningful sales traction for our newly acquired brands. While a bit dilutive this first year, post-acquisition, we feel we will get a more accretive benefit long term by maximizing product placement as quickly as possible.

Free cash flow at the midpoint of our range is estimated to be approximately $65 million. This assumes CapEx of $8 million to $10 million and cash taxes paid of approximately $9.5 million.

One other consideration in building your models is the timing of sales and associated profit. We currently expect the majority of sales associated with these acquisitions will occur in the second half of the year. This aligns the Gear4 sales with the second half OEM device launch and HALO sales with their traditional third and fourth quarter sales on QVC. And for BRAVEN, we are planning a fall launch of their new products into the market. This doesn't mean there won't be sales for these brands in the first half but most will occur in the second half. Our best estimate at this time is that 30% to 35% of annual sales will fall in the first half, with 65% to 70% in the second half.

While we typically don't give quarterly guidance, given the number of moving parts that we -- and that we are more than two-thirds of the way through the first quarter, we want to share some specific details to help you understand the change in year-over-year performance.

We currently estimate Q1 sales to be in the range of $75 million to $80 million compared to $112 million last year. This takes into consideration a tough comparison with last year's heavy mophie-charged bad load-in shipments, the impact from the continued slowdown in OEM device sales and the tariff pull-forward. Adjusted EBITDA is expected to be negative for the first quarter. This is due to the lower sales and the full expenses associated with the acquisitions which I already mentioned will generate a majority of their sales during the second half of the year.

Given these Q1 headwinds, we expect the first half of 2019 adjusted EBITDA to be in the single digits, but to accelerate in the second half as we leverage our fixed-cost base in a period of significant revenue growth.

With that, I will now open the call for questions.

Questions and Answers:

Operator

(Operator Instructions) And our first question comes from the line of Mike Malouf with Craig-Hallum. Your line is now open.

Mike Malouf -- Craig-Hallum -- Analyst

Hey, guys. Thanks for taking my questions.

Chris Ahern -- Chief Executive Officer

Sure, Mike.

Mike Malouf -- Craig-Hallum -- Analyst

So, if we could just start on the acquisition front, particularly with HALO and Gear4. Can you give us a sense of what kind of visibility you have into those numbers? And in particular, with regards to HALO, when you talk about some of the synergies with the ZAGG brands, can you give us a little bit more color on that opportunity as we get into the second half?

Chris Ahern -- Chief Executive Officer

Yes, sure, Mike. It's Chris here. So related to the question around HALO, so basically HALO's strength is the channel with QVC and HSN. And we do see a lot of synergies in terms of -- as we look across the rest of our portfolio and brands, there will clearly be some opportunities in the year, and as we look forward into Q3, Q4 whereby we could leverage some of the technologies and portfolios from our other brands. So there is opportunity, both as it relates to right now, we're really focused on having HALO culturally fit in with ZAGG and make sure we execute on their plan for this year.

Mike Malouf -- Craig-Hallum -- Analyst

Okay. And then just -- can you give us a sense of how much was presold -- or not presold, but certainly drawn into the fourth quarter because of the tariff situation?

Chris Ahern -- Chief Executive Officer

Yes, it's hard to put a number on it because obviously, we were getting orders which are standard run rate as well. But I will tell you it's not super heavy in terms of sell-in. We're quite comfortable where we are, but it's low-single digits.

Bradley J. Holiday -- Chief Financial Officer

Yes, Mike. This is Brad. It really is a tough number to estimate just because you mix them up with the normal sell-through orders. And the way sell-through weeks on hand is calculated is based on the prior four- to six-week sell-through. So obviously that shifts as you get through the holiday season. I think, across the entire business, as I looked at it toward the end of January, it was a month to two months max, a little bit heavier toward the tariff-related products. But once again, it's not an easy number just to calculate. That's just an estimate. But it didn't seem to be a crazy number overall, but it was really to meet the demands or some of their requests for additional inventory. And to be totally frank, we didn't ship everything they wanted because we just didn't want to get too far out in front of it.

Mike Malouf -- Craig-Hallum -- Analyst

Okay, great. And then just a final question. When you said 30% to 35% of sales in the first half and 65% to 70%, were you talking about overall -- your overall sales, or were you specifically talking about the acquisitions?

Bradley J. Holiday -- Chief Financial Officer

No, overall sales. I think the acquisitions are going to be probably more kind of 90% in the back half of the year, mainly because for Gear4, we're working hard now to try to get product placement. But many times, you don't get those placed before the new devices are launched in the fall. HALO has typically been Q3, Q4. That's just kind of the nature of their business. And BRAVEN, really, their major product launches will be coming in the second half. So I'd almost call the acquisitions more of a 10% front half and 90%. So it kind of skews the numbers this year. As we go forward though and as we start to get placement, it'll balance out as we go forward, but this particular year, it's going to skew more dramatically than it has in the past.

Mike Malouf -- Craig-Hallum -- Analyst

Okay, great. Thanks for the help.

Bradley J. Holiday -- Chief Financial Officer

You bet.

Operator

Thank you. And the next question comes from the line of Thomas Forte with D.A. Davidson. Your line is now open.

Thomas Forte -- D.A. Davidson -- Analyst

Great. Thanks for taking my questions. So I have two questions. One, on your InvisibleShield On Demand effort, how far has that rolled out? And to what extent is that helping you with your international sales? And then also on international sales, and I guess distribution, in general, when do you feel like you have all your new acquisitions fully integrated into your distribution? And do you intend to sell all those products internationally as well? Thanks.

Chris Ahern -- Chief Executive Officer

Hey, Tom. It's Chris. Yes, so great questions. ISoD is still, I will tell you, the main driving force for us internationally. It's continued to open doors. We're very pleased with it. We're still not done, so there's a number of growth opportunities internationally for ISoD this year. And it's not even on just potentially new doors, but it is also the innovation on ISoD in terms of incorporating the blue light filter technology we have into ISoD, potentially looking at more B2B-type opportunities with ISoD. So there's a lot of opportunity internationally as well as here domestically with ISoD. We're really pleased with how that's performing.

And as regards to your question on the acquisitions, we would be very pleased, and I think we're on track to be fully integrated with these acquisitions through the end of the year. We have a dedicated integration team assigned with each of the acquisitions. So we feel very strongly and very good where we are right now in terms of having those integrations completed by the end of the year.

Bradley J. Holiday -- Chief Financial Officer

Yes, and I would just add one thing, Tom. I think for HALO, the majority of their sales really got started internationally. So we see the bigger opportunity to expand domestically, but there's still expansion opportunities now that you start to combine them with our portfolio of all of our products to open doors. The HALO has been more US-centric, so there are opportunities internationally, but it's more US-centric. And then we believe that BRAVEN will be certainly expanded internationally.

Thomas Forte -- D.A. Davidson -- Analyst

Clear. And one quick follow-up and thanks for those answers. On the VisionGuard, how should we think about the opportunity to extend that beyond smartphone, so to the tablets, laptops and other screens? And then how should we think about -- I know that there's some licensing involved, but how should we think about the relative gross profitability of that versus your product portfolio in general?

Chris Ahern -- Chief Executive Officer

Yes, so thanks. The first part of your question, Tom, is we are going to -- actually, we had just expanded into some iPad models, and we continue to look at where it makes sense as it pertains to notebooks, et cetera, and some -- actually, some laptops, right, as it pertains to B2B opportunities. So we're really looking across the spectrum of mobility when it comes to that technology. Regards to margins, I would say it's similar. It's not taking down the margin. It's very, very similar to what we have on screen protection today.

Thomas Forte -- D.A. Davidson -- Analyst

Great. Thank you very much for taking my questions.

Chris Ahern -- Chief Executive Officer

No problem.

Bradley J. Holiday -- Chief Financial Officer

Thank you.

Operator

Thank you. And our next question comes from the line of Dave King with Roth Capital Partners. Your line is now open.

Dave King -- Roth Capital Partners -- Analyst

Thanks. Afternoon, guys.

Chris Ahern -- Chief Executive Officer

Hey, Dave.

Dave King -- Roth Capital Partners -- Analyst

Hey. I guess first on the guidance, how much of the $5 million to $10 million in incremental EBITDA is coming from the three acquisitions? And I guess, just how much incremental investment are you making in HALO and Gear4 in '19?

Bradley J. Holiday -- Chief Financial Officer

Yes, Dave, we don't give that specific detail. What we said originally with all the acquisitions that it would be accretive from an EBITDA perspective. I would tell you, year one, it may not be, just because we have to stand up some of these acquisitions, and we want to get placement quickly. So there'll be in-store marketing and POS and other things that we need to do. But long term, as we look out over two to three, four years, right, it will be very accretive, if you will. So we just don't provide that level of detail, but overall, long term it will be accretive to what our historical EBITDA margins has been, probably not in the year -- first year because we do have expenses and only partial year sales for some of them, but we're also going to be investing also.

Dave King -- Roth Capital Partners -- Analyst

Okay. Understood. I mean maybe asking it differently, were they previously doing kind of mid-teens EBITDA margins or...

Bradley J. Holiday -- Chief Financial Officer

They were doing better than our -- yes, historically, they were stronger than our historical margins, so yes.

Dave King -- Roth Capital Partners -- Analyst

Okay. The reason I'm asking, I'm just trying to get a sense of how to think about it vis-a-vis the $87 million, I think you paid for them. So I was just trying to get a sense of how much you paid versus how much you're going to get and some of that kind of stuff. Okay, in trying to understand the organic trends a little bit better by segment and the quarterly progression you guided to, I think it was 30% to 35% in the first half for overall revenue, it sounds like. I think that implies sort of down 15% organically or a $35 million reduction in the first half. Is that mainly or all due to power management then? Is that -- could half of that charge pad kind of sell-through revenue not repeat? Or are there other puts, if you will, to that because it seems like the power case business might actually help to offset some of that?

Bradley J. Holiday -- Chief Financial Officer

Yes, our assumptions, Dave, as we sit and look at kind of the first half and what the headwinds are, is certainly, we're lapping a big launch of the wireless charge pads. And that's not an insignificant amount because we did load a lot into the first quarter of last year. I think the second headwind that we're trying to assume we don't know where it's going to shake out is just the slowdown in devices sales, which will have an impact on all of our device-related items. And then the third one, probably in order, would be kind of the pull forward of some of the pre-tariff products that got pulled into fourth quarter. That would probably be the order of magnitude as I look at it right now.

Dave King -- Roth Capital Partners -- Analyst

Okay, that helps. So then should we be assuming that screen protectors will be down in the first half? I mean you were still be able to do, I think, up double digits, I want to say, in the fourth quarter even with some of these headwinds.

Bradley J. Holiday -- Chief Financial Officer

Yes. I think that's one that we're really trying to make some broad assumptions on right now. I'd tell you that if you take a look at the overall screen protection business, I think the category grew, Taylor, help me out, 12% on a trailing 12 months. Saw it slow down a little bit in the fourth quarter, but it still grew. But I think on the good news that we're seeing is we've always talked about attach rates. And as the price of the devices got more expensive, we expected the attach rates to improve. And I think a couple of years ago, we were looking kind of in the mid-teens, and I think in '17, we got up into the higher teens, and now, in '18, we've kind of ticked over 20%. So our efforts to go out and train our customers as well as I think the consumer is paying more for a phone and wanting to protect it so they can trade it in has offset a little bit of the headwinds that we're probably going to see on the device sales.

It also makes us very pleased with the acquisition for Gear4, because as Chris talked about, we're going to start looking at our business in -- major category is protection, and that includes both screen protection, VisionGuard as well as Gear4 cases. So we think as we continue to drive attach rates, we'll be able to offset some of that softness. I don't know how long the softness will last in device sales. I just can't predict it. I think there's always going to be a demand for devices. I just don't know where it's going to settle out. But right now we're assuming that the softness we saw in Q4 carries over into '19, probably more predominantly in Q1 for us. And that we'll just work at continuing to drive attach rates. Chris, anything you would add?

Chris Ahern -- Chief Executive Officer

No, I think you have summed it up perfectly, Brad.

Bradley J. Holiday -- Chief Financial Officer

Does that help, Dave?

Dave King -- Roth Capital Partners -- Analyst

No, it does. I mean it sounds like some of it's really more Apple driven than anything else, and it's tough to know until we see what their next slate of devices is going to be, so -- this will makes sense. One last quick one for me. So on the juice pack, did it get MFi approval now for XS, now that it's sold in Target and Verizon? Just trying to better understand that. It sounds like it's not going to beat Apple, but do you expect to still be able to get additional distribution at other retailers?

Chris Ahern -- Chief Executive Officer

Yes, so our juice pack access is going to be -- you'll see it the end of this month in most of our major retailers and carriers. So yes, it's getting placement. To your question around the certification, we have an MFi product on our juice pack that's currently going through the approval process.

Dave King -- Roth Capital Partners -- Analyst

Okay. All right. Thanks for taking all my questions, guys.

Bradley J. Holiday -- Chief Financial Officer

Thanks, Dave.

Operator

Thank you. And our next question comes from the line of Jeff Van Sinderen with B. Riley FBR. Your line is now open.

Jeff Van Sinderen -- B. Riley FBR -- Analyst

Hi, everyone. I think you briefly mentioned in your prepared comments, but can you just give us your assessment of the competition from Apple with their own Apple-branded battery packs? And what is happening with a number of SKUs that Apple carries in mophie juice pack versus what they previously carried changing? Maybe just give us a sense of the trend there.

Chris Ahern -- Chief Executive Officer

Yes. Sure, Jeff. It's Chris here. So yes, Apple obviously announced their own battery pack which is in their retail stores, so we will not have mophie juice pack in the Apple retail stores. What I will tell you is we've coexisted previously in terms of Apple having a battery pack and mophie having a juice pack. So we still feel good about the technology we've brought with the juice pack access. Obviously, it's leveraging the wireless technology. There's more color variants, and I believe the price point that we've put out there at $99, is a very compelling proposition for the consumers. So while it's competition and Apple has their solution, we still feel good about our solution in the rest of the channel.

Jeff Van Sinderen -- B. Riley FBR -- Analyst

Okay. And just to clarify, did you expect them to come out with this? Or was it a surprise to you that came out with their own battery packs?

Chris Ahern -- Chief Executive Officer

I would say we had nothing to do with that, that was an Apple decision. So we weren't privy to that information.

Jeff Van Sinderen -- B. Riley FBR -- Analyst

Okay, got it. And then I know it's early, but any thoughts on how you might provide screen protection for foldable phones just because people are starting to talk about that now? Do you think it will be more likely a flexible film? Or how are you thinking about the foldable market as that emerges?

Chris Ahern -- Chief Executive Officer

Yes, great question, right. So I would tell you that our R&D started as the devices become more curved. So even with the curved devices, it's very, very difficult to bring to market a really good screen protector. So we've been doing a lot of work back -- I think it was like the S6 or S7 when they started becoming curved devices. So we've had a number of years to perfect it. I think this year, in terms of our launch for the latest Samsung devices, we're very happy with the solution we have in the market. As it pertains to folded phones, we're looking at it. There's a lot of R&D going into it, and we would expect we will be ready when the time is right. But right now, we don't have a solution per se for the foldable phone.

Jeff Van Sinderen -- B. Riley FBR -- Analyst

Okay. And then if I could just squeeze one more in, because I think this has been sort of a topic recently. It appears that Samsung was shipping, I know, one of its phones, I guess, with its own screen protector, perhaps not the most robust screen protector. Just wondering how does that relate to the broader demand picture for OLED screens which tend to scratch really easily? Just wondered if there might be an opportunity for you there that hasn't been talked about yet.

Chris Ahern -- Chief Executive Officer

Yes. Sure, great questions. So I will tell you there's still a really good demand for premium screen protection. Obviously, Samsung came up with their solution. I think that was more around the consumer experience on the fingerprint technology and possibly, worries that a screen protector would not work with their technology. What I can tell you is, as a business, we work very closely with them on a partnership through the SMART process, whereby our solutions are working and approved. As I said, we feel really good about it. And as it pertains to OLED, OLED screens will continue to need screen protection. So we continue on the pathway around innovation on screen protection. I feel really good what the team had done with this year's lineup. And even look better in terms of protection category that Brad mentioned, now we have the full 360 protection with -- be it screen protection and cases. So on the whole, I think it's an opportunity, Jeff.

Jeff Van Sinderen -- B. Riley FBR -- Analyst

Okay, great. Thanks for taking my questions.

Chris Ahern -- Chief Executive Officer

Thank you, sir.

Operator

Thank you. And our last question comes from the line of Jon Hickman with Ladenburg. Your line is now open.

Jon Hickman -- Ladenburg -- Analyst

Hey, I'm sorry. All my questions have been asked and answered.

Chris Ahern -- Chief Executive Officer

Okay, Jon.

Bradley J. Holiday -- Chief Financial Officer

Very good. Thanks, Jon. Thank you.

Operator

Thank you. Ladies and gentlemen, this concludes today's Q&A session. I would now like to turn the call back over to Chris Ahern for any closing remarks.

Chris Ahern -- Chief Executive Officer

Okay. Thank you all for joining us for our 2018 Q4 earnings call. I look forward to updating you on our Q1 performance. Thank you for joining us.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone, have a wonderful day.

Duration: 39 minutes

Call participants:

Brendon Frey -- Managing Director

Chris Ahern -- Chief Executive Officer

Bradley J. Holiday -- Chief Financial Officer

Mike Malouf -- Craig-Hallum -- Analyst

Thomas Forte -- D.A. Davidson -- Analyst

Dave King -- Roth Capital Partners -- Analyst

Jeff Van Sinderen -- B. Riley FBR -- Analyst

Jon Hickman -- Ladenburg -- Analyst

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