ZAGG Inc Reports Record Second Quarter Financial Results

Please select the service you want to use:

• Newsvine
• Digg
• Delicious
• StumbleUpon
• Technorati
• Buzz
• Favorites
• Google Reader

Close

• Consolidated revenue of $61.6 million
• Operating income of $10.8 million
• GAAP diluted earnings of $0.18 per share
• Adjusted EBITDA of $15.1 million, or $0.48 per diluted share

SALT LAKE CITY--(BUSINESS WIRE)-- ZAGG Inc (NASDAQ: ZAGG) ( www.ZAGG.com), a market leader in innovative mobile device accessories and technologies, today announced financial results for the second quarter ended June 30, 2012.

Second Quarter Highlights (second quarter 2012 versus second quarter 2011)

• Consolidated revenue increased 59% to $61.6 million
• Operating income up 154% to $10.8 million
• Gross margin of 46.1%
• Diluted EPS increased 80% to $0.18
• Adjusted EBITDA increased 60% to $15.1 million, or $0.48 per diluted share

"Our results this quarter reflect our ability to introduce creative product solutions and increase distribution for our new accessories in the indirect channel. ZAGG is the founder and leader in the tablet keyboard and folio space, and continues to be the top-selling brand for our retailers," said Robert G. Pedersen II, CEO of ZAGG. "Our product-centric focus is paying off with a product pipeline that is more robust than ever. We look to extend our market leadership position in our existing product lines and continue to create new product categories."

Second Quarter Results

Consolidated revenue for the second quarter of 2012 increased 59% to $61.6 million from $38.8 million in the same quarter last year. Revenue by channel was 79% through indirect channels, 14% through ZAGG.com and iFrogz.com, 6% through the company's mall cart and kiosk programs, and 1% from shipping and handling.

Gross profit for the second quarter of 2012 was $28.4 million or 46.1% of net sales, representing a 60% increase, versus $17.8 million or 45.8% of net sales in the second quarter of the prior year.

Operating income for the second quarter of 2012 was $10.8 million compared to $4.2 million for the second quarter of 2011, an increase of 154%.

Net income attributable to stockholders for the second quarter of 2012 was $5.8 million or $0.18 per diluted share as compared to net income attributable to stockholders of $2.7 million or $0.10 per diluted share in the second quarter of 2011.

Adjusted EBITDA

ZAGG considers earnings before other income or expense; income tax provision; depreciation and amortization; share-based compensation expense related to equity awards; iFrogz acquisition expenses; iFrogz inventory fair value write-up; and noncontrolling interests ("Adjusted EBITDA") to be an important financial indicator of the Company's operational strength and the performance of its business. 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 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.

The difference between Adjusted EBITDA per share, a non-GAAP measure, and GAAP EPS, is other income or expense, income tax provision, depreciation and amortization, and share-based compensation.

Adjusted EBITDA for the second quarter of 2012 was $15.1 million versus $9.5 million of adjusted EBITDA in the second quarter of 2011, representing an increase of 60% over prior year's second quarter results, or $0.48 per diluted share versus $0.35 per diluted share in the second quarter last year.

Outlook

ZAGG is raising full year guidance for 2012 revenue to $256 million and Adjusted EBITDA of $56 million - $61 million. This compares to reported revenue for 2011 of $179.1 million and Adjusted EBITDA of $45.3 million.

Conference Call

A conference call will be held today at 5:30 p.m. ET to review these results. Participants may access via the Internet at the event website and on the Company website at: investors.ZAGG.com. The call replay will be available for 30 days, and can be accessed online or toll-free at (855) 859-2056, Conference ID # 10082792. A webcast playback of the conference call will be archived investors.ZAGG.com for one year. A podcast of the event will also be available online.

Non-GAAP Financial Disclosure

Investors are cautioned that the Adjusted EBITDA, or earnings before other income or expense, income tax provision, depreciation and amortization, stock-based compensation, iFrogz acquisition expenses, iFrogz inventory fair value write-up, and noncontrolling interests 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. 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. We disclaim any obligation to update any forward looking statement contained in this release.

About ZAGG Inc:

ZAGG Inc, based in Salt Lake City, with offices in Logan, UT, and Shannon, Ireland, prides itself on offering premium quality and superior service. ZAGG is a market leader in innovative mobile device accessories that protect, personalize, and enhance the mobile experience. The company designs, produces, and distributes branded screen protection under the invisibleSHIELD® brand, keyboards, keyboard cases, earbuds, mobile power solutions and device cleaning accessories under the family of ZAGG® brands. In addition, the company designs, produces and distributes cases, earbuds and headphones under the iFrogz™ brands in the value-priced lifestyle sector. The company's products are sold worldwide in leading consumer and electronics retailers, wireless retailers and their affiliates, and through the ZAGG website. For more information, visit ZAGG.com

ZAGG INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
(Unaudited)
								June 30,					December 31,
								2012					2011
ASSETS
Current assets
	Cash and cash equivalents							$	12,480				$	26,433
	Accounts receivable, net of allowances of $2,555 in 2012 and $2,070 in 2011								40,463					45,450
	Inventories								34,214					29,622
	Prepaid expenses and other current assets								5,875					1,593
	Deferred income tax assets								5,902					5,132
Total current assets									98,934					108,230
Investment in HzO									3,943					4,879
Property and equipment,net of accumulated depreciation at $2,428 in 2012 and $1,857 in 2011									4,746					4,162
Deferred income tax assets									82					82
Goodwill									6,925					6,925
Intangible assets, net of accumulated amortization at $8,912 in 2012 and $3,989 in 2011									68,839					73,691
Note receivable									583					1,349
Other assets									3,279					3,010
Total assets								$	187,331				$	202,328
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
	Accounts payable							$	16,298				$	16,013
	Income taxes payable								916					4,294
	Accrued liabilities								2,235					3,886
	Accrued wages and wage related expenses								1,312					1,468
	Deferred revenue								346					320
	Current portion of note payable								-					2,372
	Sales returns liability								5,524					5,387
Total current liabilities									26,631					33,740
Revolving line of credit									2,612					23,332
Noncurrent portion of note payable									41,000					42,628
Total liabilities									70,243					99,700
Stockholders' equity
	Common stock, $0.001 par value; 100,000 shares authorized; 30,326 and 29,782 shares issued and outstanding, respectively								30					30
	Additional paid-in capital								74,153					70,248
	Accumulated other comprehensive income								(401	)				(33	)
	Note receivable collateralized by stock								(566	)				(566	)
	Retained earnings								43,872					32,949
Total stockholders' equity									117,088					102,628
Total liabilities and stockholders' equity								$	187,331				$	202,328

ZAGG INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
							Three Months Ended									Six Months Ended
							June 30, 2012				June 30, 2011					June 30, 2012				June 30, 2011
Net sales							$	61,636			$	38,788				$	117,115			$	65,765
Cost of sales								33,231				21,027					61,777				34,357
Gross profit								28,405				17,761					55,338				31,408
Operating expenses:
	Advertising and marketing							2,301				2,616					4,743				5,128
	Selling, general and administrative							12,848				10,189					24,590				16,410
	Amortization of definite-lived intangibles							2,469				710					4,891				760
Total operating expenses								17,618				13,515					34,224				22,298
Income from operations								10,787				4,246					21,114				9,110
Other income (expense):
	Interest expense							(986	)			(159	)				(2,507	)			(170	)
	Loss from equity method investment in HzO							(473	)			-					(936	)			-
	Other income and (expense)							224				8					(22	)			8
Total other expense								(1,235	)			(151	)				(3,465	)			(162	)
Income before provision for income taxes								9,552				4,095					17,649				8,948
Income tax provision								(3,740	)			(1,497	)				(6,726	)			(3,091	)
Net income								5,812				2,598					10,923				5,857
Net loss attributable to noncontrolling interest								-				145					-				196
Net income attributable to stockholders							$	5,812			$	2,743				$	10,923			$	6,053
Earnings per share attributable to stockholders:
	Basic earnings per share						$	0.19			$	0.11				$	0.36			$	0.25
	Diluted earnings per share						$	0.18			$	0.10				$	0.35			$	0.23

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 an alternative to any other measures of performance determined in accordance with GAAP, or as an indicator of our operating performance, liquidity or cash flows 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 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 other reporting periods and with the results of other companies.
Adjusted EBITDA Reconciliation								Three Months Ended										Six Months Ended
								June 30, 2012			June 30, 2011							June 30, 2012			June 30, 2011
Net income attributable to stockholders in accordance with GAAP								$	5,812		$	2,743						$	10,923		$	6,053
	Adjustments:
	a.	Stock based compensation expense							1,494			1,962							2,836			2,268
	b.	Depreciation and amortization							2,862			878							5,679			1,055
	c.	iFrogz acquisition expenses							-			1,816							-			1,825
	d.	iFrogz inventory fair value write up							-			579							-			579
	e.	Provision for income taxes							3,740			1,497							6,726			3,091
	f.	Other (income) expense							1,235			151							3,465			162
	g.	Noncontrolling interest							-			(145	)						-			(196	)
Adjusted EBITDA								$	15,143		$	9,481						$	29,629		$	14,837
Diluted Adjusted EBITDA per common share								$	0.48		$	0.35						$	0.94		$	0.55
Weighted average number of shares outstanding - diluted									31,738			27,279							31,577			26,749

Investor Relations:
Genesis Select Corp.
Kim Rogers-Carrete, 949-429-7408
krogersc@genesisselect.com
or
Media:
Lane PR
Jane Taber, 503-546-7888
jane@lanepr.com
or
Company:
ZAGG Inc.
Nathan Nelson, 801-263-0699 ext. 107
nnelson@zagg.com

Source: ZAGG Inc

News Provided by Acquire Media