ZAGG Inc Reports Second Quarter 2014 Revenue of $50.2 Million, GAAP EPS $0.03

ZAGG Inc Reports Second Quarter 2014 Revenue of $50.2 Million, GAAP EPS $0.03

  *Tablet keyboard sales up 30% versus the second quarter of 2013
  *Net sales of $50.2 million
  *Adjusted EBITDA of $5.3 million
  *Pro forma net income of $2.7 million
  *Cash flow from operations of $6.7 million
  *Reiterates 2014 net sales and Adjusted EBITDA guidance

SALT LAKE CITY, August 5, 2014 (GLOBE NEWSWIRE) -- ZAGG Inc (Nasdaq:ZAGG), a
leading mobile device accessories company, announced today financial results
for the second quarter ended June 30, 2014.

"This quarter's results were driven by better execution with our existing tier
one customers. We sold a record number of new SKUs and also saw higher product
sell-through due to improved shelf presence and new point-of-sale fixtures.
InvisibleShield™ Glass has experienced very strong sales even without a major
new device launch," said Randy Hales, president and CEO. "Typically, the
second quarter is our weakest quarter of the year, so our performance this
quarter is very encouraging. A focused effort by all members of the ZAGG team
and great execution against our strategic objectives in product, brand, and
distribution have helped ZAGG stabilize revenues and set the path to renewed
growth in the second half of the year."

Second Quarter Highlights (second quarter 2014 versus second quarter 2013)

  *Net sales of $50.2 million versus $51.2 million
  *Gross margins of 33.5% versus 42.1%
  *GAAP diluted EPS of $0.03 versus $0.09
  *Adjusted EBITDA of $5.3 million versus $10.5 million
  *Generated $6.7 million in operating cash flow
  *Screen protection sales represented 36% of net sales versus 38%
  *Keyboard sales represented 34% of net sales versus 25%

Second Quarter Results

Net sales for the second quarter of 2014 were $50.2 million, a slight decrease
of 2% versus $51.2 million in the same quarter last year.

Revenue by channel was as follows: indirect channels 90%; ZAGG.com and
iFrogz.com 5%; Kiosks and standalone stores 5%.

Gross profit for the second quarter was $16.8 million or 33.5% of net sales,
versus $21.5 million or 42.1% of net sales in the prior year quarter.

Operating income for the second quarter of 2014 was $1.6 million compared to
operating income of $5.4 million for the second quarter of 2013.

Net income for the second quarter of 2014 was $0.8 million or $0.03 per
diluted share, as compared to net income of $2.8 million or $0.09 per diluted
share in the second quarter of 2013.

Pro forma net income for the second quarter of 2014 was $2.7 million or $0.09
per diluted share, as compared to pro forma net income of $6.3 million or
$0.20 per diluted share in the second quarter of 2013.

Adjusted EBITDA for the second quarter of 2014 was $5.3 million versus $10.5
million of Adjusted EBITDA in the second quarter of 2013.

About Non-GAAP Financial Information

ZAGG considers earnings before stock-based compensation expense, depreciation
and amortization, impairment of investment in private company, other
income/expense, 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 in private company, 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 reiterates its full year 2014 guidance of net sales of $218.0
million - $228.0 million and full year Adjusted EBITDA of $32.0 million -
$34.0 million. Gross margins are anticipated to be in the mid-to-high 30's.

Conference Call

A conference call will be held today at 5:00 p.m. ET 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, impairment of a private
investment in a private company, other income/expense, and provision for
income taxes) and pro forma net income (earnings before stock-based
compensation expense, amortization, and other income/expense [excluding cash
interest expense], impairment of a private investment in a private company,
net of tax effects where applicable) contained in this press release are not
financial measures under GAAP. In addition, they should not be construed as
alternatives to any other measures of performance determined in accordance
with GAAP, or as indicators of 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 earnings per share. We present this
financial information because we believe that it is helpful to some investors
as a measure of 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 current results with
results from other reporting periods and with the results of other companies.

Safe Harbor Statement

In addition to the historical information contained in this press release,
this release contains (and oral communications made by ZAGG may contain)
statements that relate to future events and expectations and, as such,
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Any statements that express, or
involve discussions as to, expectations, beliefs, plans, objectives, outlook,
assumptions or future events or performance, often, but not always, through
the use of words or phrases such as "anticipates," "believes," "estimates,"
"expects," "intends," "plans," "predicts," "projects," "targets" or similar
expressions, are not statements of historical facts and may be
forward-looking. 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. In addition to any assumptions and other factors
and matters referred to specifically in connection with such forward-looking
statements, factors that could cause actual results or outcomes to differ
materially from those contained in forward-looking statements include the
following: (a) the ability to design, produce, and distribute the creative
product solutions required to retain existing customers and to attract new
customers; (b) building and maintaining marketing and distribution functions
sufficient to gain meaningful international market share for ZAGG's products;
(c) the ability to respond quickly with appropriate products after the
adoption and introduction of new mobile devices by major manufacturers like
Samsung and Apple; (d) changes or delays in announced launch schedules for new
mobile devices by major manufacturers like Samsung and Apple; (e) the impact
of inconsistent quality or reliability of new product offerings; (f) the
impact of lower profit margins in certain new product categories; (g) a shift
in customer demand from high gross margin products to products with lower
gross margins; (h) the impacts of changes in economic conditions, including on
customer demand; (i) the failure of information systems or technology
solutions or the failure to secure information system data, failure to comply
with privacy laws, security breaches, or the effect on the company from cyber
attacks, terrorist incidents, or the threat of terrorist incidents; and (j)
adoption of or changes in accounting policies, principles, or estimates. Any
forward-looking statement speaks only as of the date on which such statement
is made. New factors emerge from time to time and it is not possible for
management to predict all such factors, nor can it assess the impact of any
such factor on the business or the extent to which any factor, or combination
of factors, may cause results to differ materially from those contained in any
forward-looking statement. Readers should also review the risks and
uncertainties listed in ZAGG's most recent Annual Report on Form 10-K and
other reports the company files with the U.S. Securities and Exchange
Commission, including (but not limited to) Item 1A - "Risk Factors" in the
Form 10-K and Management's Discussion and Analysis of Financial Condition and
Results of Operations and the risks described therein from time to time. ZAGG
disclaims any obligation to update publicly any forward-looking information,
whether in response to new information, future events, or otherwise, except as
required by applicable law.

ZAGG INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
(Unaudited)
                                                                
                                                                
                                                      June 30,   December 31,
                                                      2014       2013
                                                                
ASSETS                                                           
                                                                
Current assets                                                   
Cash and cash equivalents                              $12,226  $15,031
Accounts receivable, net of allowances of $2,570 in    42,043    46,591
2014 and $2,540 in 2013
Inventories                                            39,367    44,539
Prepaid expenses and other current assets              1,322     2,403
Deferred income tax assets                             8,009     7,917
                                                                
Total current assets                                   102,967   116,481
                                                                
Property and equipment, net of accumulated             5,341     5,004
depreciation at $6,928 in 2014 and $5,778 in 2013
                                                                
Intangible assets, net of accumulated amortization at  36,318    41,219
$28,332 in 2014 and $23,431 in 2013
                                                                
Deferred income tax assets                             11,981    11,377
                                                                
Note receivable                                        801       801
                                                                
Other assets                                           549       588
                                                                
Total assets                                           $157,957 $175,470
                                                                
LIABILITIES AND STOCKHOLDERS' EQUITY                            
                                                                
Current liabilities                                              
Accounts payable                                       $21,066  $15,207
Income taxes payable                                   688       6,359
Accrued liabilities                                    2,382     2,608
Accrued wages and wage related expenses                1,401     891
Deferred revenue                                       57        159
Sales returns liability                                7,089     7,872
                                                                
Total current liabilities                              32,683    33,096
                                                                
Revolving line of credit                               --       17,543
                                                                
Total liabilities                                      32,683    50,639
                                                                
Stockholders' equity                                            
Common stock, $0.001 par value; 100,000 shares                   
authorized;
32,608 and 32,331 shares issued in 2014 and 2013,      33        32
respectively
Additional paid-in capital                             84,078    82,807
Accumulated other comprehensive income (loss)          (28)      93
Note receivable collateralized by stock                (348)     (348)
Treasury stock, 2,312 and 1,756 common shares in 2014  (12,485)  (9,997)
and 2013 respectively, at cost
Retained earnings                                      54,024    52,244
                                                                
Total stockholders' equity                             125,274   124,831
                                                                
Total liabilities and stockholders' equity             $157,957 $175,470


ZAGG INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
                                                             
                                                             
                                                             
                      Three Months Ended         Six Months Ended
                      June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2013
                                                             
                                                             
Net sales              $50,154     $51,198     $99,157     $102,669
Cost of sales          33,367       29,663       64,592       62,135
                                                             
Gross profit           16,787       21,535       34,565       40,534
                                                             
Operating expenses:                                           
Advertising and        1,378        1,914        3,386        4,253
marketing
Selling, general and   11,402       11,831       22,805       24,110
administrative
Amortization of
definite-lived         2,427        2,374        4,855        4,748
intangibles
                                                             
Total operating        15,207       16,119       31,046       33,111
expenses
                                                             
Income from operations 1,580        5,416        3,519        7,423
                                                             
Other income                                                  
(expense):
Interest expense       (40)         (144)        (83)         (371)
Loss from equity
method investment in   --          (617)        --          (1,224)
HzO
Other income and       24           (27)         113          (47)
(expense)
                                                             
Total other income     (16)         (788)        30           (1,642)
(expense)
                                                             
Income before
provision for income   1,564        4,628        3,549        5,781
taxes
                                                             
Income tax provision   (771)        (1,854)      (1,769)      (2,130)
                                                             
Net income            $793        $2,774      $1,780      $3,651
                                                             
Earnings per share:                                           
                                                             
Basic earnings per     $0.03       $0.09       $0.06       $0.12
share
                                                             
Diluted earnings per   $0.03       $0.09       $0.06       $0.12
share


ZAGG INC AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP
(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
financial information because we believe that it is helpful to some investors
as a 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 other reporting periods and with the results of other companies.
                                                             
Adjusted EBITDA        Three months ended        Six months ended
Reconciliation
                      June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2013
                                                             
                                                             
Net income in          $793        $2,774      $1,780      $3,651
accordance with GAAP
                                                             
Adjustments:                                                  
                                                             
a. Stock based         650          1,331        1,171        2,368
compensation expense
b. Depreciation and    3,052        3,120        6,072        6,214
amortization
c. Impairment of
investment in private  --          591          --          591
company
d. Other (income)      16           788          (30)         1,642
expense
e. Provision for       771          1,854        1,769        2,130
income taxes
                                                             
Adjusted EBITDA        $5,282      $10,458     $10,762     $16,596
                                                             
                                                             
Pro forma Net Income
Reconciliation - Three Three months ended        Six months ended
and Six Months Ended
June 30, 2014 and 2013
                      June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2013
                                                             
                                                             
Net income in          $793        $2,774      $1,780      $3,651
accordance with GAAP
                                                             
Adjustments:                                                  
                                                             
a. Stock based         650          1,331        1,171        2,368
compensation expense
b. Amortization of     2,453        2,394        4,900        4,782
intangibles
c. Other (income)
expense excluding cash
interest expense and   (8)          57           (81)         107
loss on equity method
investment
d. Loss on equity      --          617          --          1,224
method investment
e. Impairment of
investment in private  --          591          --          591
company
f. Income tax effects  (1,184)*     (1,447)      (2,291)*     (2,776)*
                                                             
Pro forma net income  $2,704      $6,317      $5,479      $9,947
                                                             
Pro forma diluted EPS $0.09       $0.20       $0.18       $0.32
                                                             
Weighted average
number of shares       30,575       31,218       30,718       31,471
outstanding - diluted
                                                             
* For comparative purposes, we applied an annualized statutory tax rate of
38.25%

CONTACT: Investor Relations:
         ZAGG Inc
         Kim Rogers
         801-506-7008
         kim.rogers@zagg.com
        
         Media:
         Method Communications
         Matt Reichman
         801-461-9778
         matt@methodcommunications.com
        
         Zachary Allen
         801-461-9751
         zachary@methodcommunications.com
        
         Company:
         ZAGG Inc
         Nathan Nelson
         801-506-7341
         nnelson@zagg.com

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