ZAGG Inc Reports Financial Results for Third Quarter 2013 *Net sales of $49.9 million *Adjusted EBITDA of $10.2 million *GAAP diluted EPS of $0.10 and pro forma diluted EPS of $0.19 *Cash flow from operations year-to-date of over $25.0 million *Paid down $6.6 million on line of credit and term note during the quarter *Revises 2013 revenue and Adjusted EBITDA guidance SALT LAKE CITY, Nov. 5, 2013 (GLOBE NEWSWIRE) -- ZAGG Inc (Nasdaq:ZAGG), a market leader in innovative mobile device accessories and technologies, today announced financial results for the third quarter ended September 30, 2013. "For the second quarter in a row, we've demonstrated the ability to maximize profitability during a period of top line compression by focusing on expenses and implementing several disciplines for managing our cost structure," said Randy Hales, president and CEO. "Looking ahead, we will continue to maximize profitability and cash flow with a reorganized sales team under new leadership, a strong product management focus, and a renewed focus on growing distribution. We are making the necessary changes to improve shareholder value." Third Quarter Highlights (third quarter 2013 versus third quarter 2012) *Net sales of $49.9 million versus $59.8 million *Gross margins of 44.3% versus 44.5% *GAAP diluted EPS of $0.10 versus $0.11 *Adjusted EBITDA of $10.2 million versus $12.0 million *Generated over $6.0 million in operating cash flow; over $25.0 million year-to-date *Paid down $4.6 million on line of credit and $2.0 million on term note *invisibleSHIELD sales represented 47% of net sales versus 51% *Keyboard sales represented 28% of net sales versus 19% *iFrogz Audio represented 14% of net sales versus 15% Third Quarter Results Net sales for the third quarter of 2013 decreased 17% to $49.9 million from $59.8 million in the same quarter last year. Revenue this quarter was impacted by the absence of meaningful expansion in our domestic and international distribution channels and as well as modest product expansion with existing customers. Revenue by channel was 84% through indirect channels, 8% through ZAGG.com and iFrogz.com and 8% through the Company's mall cart and kiosk programs. Gross profit for the third quarter was $22.1 million or 44.3% of net sales, versus $26.6 million or 44.5% of net sales in the prior year quarter. Operating income for the third quarter of 2013 was $6.4 million compared to operating income of $7.1 million for the third quarter of 2012. Net income for the third quarter of 2013 was $3.2 million or $0.10 per diluted share as compared to net income of $3.4 million or $0.11 per diluted share in the third quarter of 2012. Pro forma net income for the third quarter of 2013 was $5.9 million or $0.19 per diluted share as compared to pro forma net income of $7.0 million or $0.22 per diluted share in the third quarter of 2012. Adjusted EBITDA for the third quarter of 2013 was $10.2 million versus $12.0 million of Adjusted EBITDA in the third quarter of 2012. About Non-GAAP Financial Information ZAGG considers earnings before stock-based compensation expense, depreciation and amortization, other income/expense, impairment of investment, and provision for income taxes ("Adjusted EBITDA") to be an important financial indicator of the Company's operational strength and the performance of its business. In addition, ZAGG considers earnings before stock-based compensation expense, amortization, impairment of investment, and other income/expense (excluding cash interest expense), net of tax effects where applicable, ("pro forma net income") to be a valuable metric in respect of the operational performance of the Company. These results should be considered in addition to results prepared in accordance with generally accepted accounting principles ("GAAP"), but should not be considered as a substitute for, or superior to, GAAP results. A reconciliation of the differences between Adjusted EBITDA and pro forma net income, and the most comparable financial measure calculated and presented in accordance with GAAP, is presented under the heading "Reconciliation of Non-GAAP Financial Information to GAAP" immediately following the Condensed Consolidated Statements of Operations included below. Outlook The Company is revising full year revenue guidance for 2013 down to a range of $212.0 million - $218.0 million from the previous range of $245.0 million - $252.0 million. The Company is also revising full year Adjusted EBITDA guidance to $37.5 million - $ 39.5 million from the previous range of $41.0 million - $42.2 million. Conference Call A conference call will be held today at 5:00 p.m. EST to review these results. Interested parties may access via the Internet on the Company's website at: http://investors.zagg.com. Non-GAAP Financial Disclosure Investors are cautioned that the Adjusted EBITDA (earnings before stock-based compensation expense, depreciation and amortization, other income/expense, impairment of investment, and provision for income taxes) and pro forma net income (earnings before stock-based compensation expense, amortization, impairment of investment, and other income/expense [excluding cash interest expense], net of tax effects where applicable) contained in this press release are not financial measures under generally accepted accounting principles. In addition, they should not be construed as alternatives to any other measures of performance determined in accordance with generally accepted accounting principles, or as indicators of our operating performance, liquidity or cash flows generated by operating, investing and financing activities, as there may be significant factors or trends that they fail to address. For comparative purposes, we applied an annualized statutory tax rate of 38.25% to derive the pro forma net income and pro forma EPS. We present this financial information because we believe that it is helpful to some investors as a measure of our performance. We caution investors that non-GAAP financial information, by its nature, departs from traditional accounting conventions; accordingly, its use can make it difficult to compare our current results with our results from other reporting periods and with the results of other companies. Safe Harbor Statement This release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" describe future expectations, plans, results, or strategies and are generally preceded by words such as "may," "future," "plan" or "planned," "will" or "should," "expected," "anticipates," "draft," "eventually" or "projected." You are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements as a result of various factors, and other risks identified in filings made by the company with the Securities and Exchange Commission. About ZAGG Inc: ZAGG Inc and its subsidiaries (collectively, the "Company," or "ZAGG") design, produce, and distribute creative product solutions such as protective coverings, keyboards, keyboard cases, earbuds, portable batteries, and device cleaning accessories for mobile devices under the family of ZAGG brands. Within the family of the ZAGG brands are products sold under the following names: invisibleSHIELD®, ZAGGskins™, ZAGGbuds™, ZAGGsparq™, ZAGGfolio™, ZAGGmate™, ZAGGkeys™, ZAGGkeys PRO™, ZAGGkeys PRO Plus™, ZAGGkeys PROfolio, ZAGGkeys PROfolio+, and ZAGGkeys MINI 7. In addition, the Company designs, produces, and distributes cases, Near-Field Audio™ amplifying speakers, earbuds, traditional headphones, and gaming headphones for mobile devices under the family of iFrogz brands in the value-priced lifestyle sector. Within the iFrogz brand portfolio are products sold under the following names: iFrogz™, Earpollution™, Caliber™, and Animatone™. ZAGG INC AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par value) (Unaudited) September 30, December 31, 2013 2012 ASSETS Current assets Cash and cash equivalents $12,654 $20,177 Accounts receivable, net of allowances of $3,459 in 32,475 54,561 2013 and $2,974 in 2012 Inventories 50,714 39,988 Prepaid expenses and other current assets 3,127 9,547 Deferred income tax assets 7,372 6,912 Total current assets 106,342 131,185 Investment in HzO 177 2,013 Property and equipment, net of accumulated 4,823 4,862 depreciation at $5,233 in 2013 and $3,317 in 2012 Goodwill 1,484 1,484 Intangible assets, net of accumulated amortization 53,458 57,905 at $20,953 in 2013 and $13,790 in 2012 Deferred income tax assets 6,596 6,596 Note receivable 789 583 Other assets 687 1,457 Total assets $174,356 $206,085 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $13,048 $19,027 Income taxes payable 3,292 3,062 Accrued liabilities 2,452 3,754 Accrued wages and wage related expenses 1,149 2,554 Deferred revenue 174 722 Current portion of note payable 8,000 6,000 Sales returns liability 3,975 6,697 Total current liabilities 32,090 41,816 Revolving line of credit -- 22,173 Noncurrent portion of note payable 12,000 18,000 Total liabilities 44,090 81,989 Stockholders' equity Common stock, $0.001 par value; 100,000 shares authorized; 32,119 and 31,215 shares issued in 2013 32 31 and 2012, respectively Additional paid-in capital 82,270 77,234 Accumulated other comprehensive income 35 (57) Note receivable collateralized by stock (360) (566) Treasury stock, 797 and 0 common shares in 2013 and (5,999) -- 2012 respectively, at cost Retained earnings 54,288 47,454 Total stockholders' equity 130,266 124,096 Total liabilities and stockholders' equity $174,356 $206,085 ZAGG INC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2013 2012 2013 2012 Net sales $49,869 $59,828 $152,538 $176,943 Cost of sales 27,768 33,203 89,904 94,980 Gross profit 22,101 26,625 62,634 81,963 Operating expenses: Advertising and 2,340 3,378 6,593 8,181 marketing Selling, general and 10,904 13,707 35,014 38,237 administrative Amortization of definite-lived 2,421 2,422 7,169 7,313 intangibles Total operating 15,665 19,507 48,776 53,731 expenses Income from operations 6,436 7,118 13,858 28,232 Other expense: Interest expense (120) (1,012) (490) (3,519) Loss from equity method investment in (612) (545) (1,836) (1,481) HzO Other expense (89) (215) (136) (237) Total other expense (821) (1,772) (2,462) (5,237) Income before provision for income 5,615 5,346 11,396 22,995 taxes Income tax provision (2,431) (1,958) (4,562) (8,684) Net income 3,184 3,388 6,834 14,311 Earnings per share: Basic earnings per $0.10 $0.11 $0.22 $0.47 share Diluted earnings per $0.10 $0.11 $0.22 $0.45 share ZAGG INC AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP (in thousands, except per share amounts) (Unaudited) Unaudited Supplemental Data The following information is not a financial measure under generally accepted accounting principals (GAAP).In addition, it should not be construed as analternative to any other measures of performance determined in accordance with GAAP, or as an indicator of our operating performance, liquidity or cashflows generated by operating, investing and financing activities as there may be significant factors or trends that it fails to address.We present this financialinformation because we believe that it is helpful to some investors as one measure of our operations.We caution investors that non-GAAP financial information,by its nature, departs from traditional accounting conventions; accordingly, its use can make it difficult to compare our results with our results from otherreporting periods and with the results of other companies. Adjusted EBITDA Three Months Ended Nine Months Ended Reconciliation September 30, September 30, September 30, September 2013 2012 2013 30, 2012 Net income attributable to stockholders in $3,184 $3,388 $6,834 $14,311 accordance with GAAP Adjustments: a. Stock based 793 2,087 3,162 4,922 compensation expense b. Depreciation and 2,947 2,823 9,160 8,506 amortization c. Impairment of investment in private -- -- 591 -- company d. Provision for income 2,431 1,958 4,562 8,684 taxes e. Other (income) expense 821 1,772 2,462 5,237 Adjusted EBITDA $10,176 $12,028 $26,771 $41,660 Pro forma Net Income Three Months Ended Nine Months Ended Reconciliation September 30, September 30, September 30, September 2013 2012 2013 30, 2012 Net income in accordance $3,184 $3,388 $6,834 $14,311 with GAAP Adjustments: a. Stock based 793 2,087 3,162 4,922 compensation expense b. Amortization of 2,441 2,439 7,224 7,362 intangibles c. Impairment of investment in private -- -- 591 -- company d. Other (income) expense excluding cash interest 119 371 46 834 expense and loss on equity method investment e. Loss on equity method 612 545 1,836 1,481 investment f. Income tax effects (1,283) * (1,873) (4,216) * (5,018) Pro forma net income $5,866 $6,957 $15,477 $23,892 Pro forma EPS $0.19 $0.22 $0.49 $0.75 Weighted average number of shares outstanding - 31,466 31,734 31,493 31,647 diluted * For comparative purposes, we applied an annualized statutory tax rate of 38.25% CONTACT: Investor Relations: Genesis Select Corp. Kim Rogers, 303-415-0200 firstname.lastname@example.org or Media: LANE PR Jane Taber, 503-546-7888 email@example.com or Company: ZAGG Inc Nathan Nelson, 801-506-7341 firstname.lastname@example.org ZAGG Inc. logo
ZAGG Inc Reports Financial Results for Third Quarter 2013
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