Zagg Inc : Reports Record First Quarter Financial Results
05/03/2012| 04:10pm US/Eastern
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Record first quarter consolidated revenue of $55.5 million
GAAP diluted earnings of $0.16 per share
Adjusted EBITDA of $14.4 million
Cash flow from operations of over $14 million
Paid down $27 million in debt
ZAGG Inc (NASDAQ: ZAGG)
(www.ZAGG.com),
a market leader in innovative mobile device accessories, today announced
financial results for the first quarter ended March 31, 2012.
First Quarter Highlights (First quarter 2012 versus first quarter
2011)
Consolidated revenue increased 106% to $55.5 million
Adjusted EBITDA increased 166% to $14.4 million, or $0.46 per diluted
share
Gross margin of 48.5%
Generated over $14.0 million in operating cash flow
Ending cash and cash equivalents balance of $16.9 million
Reduction of term and revolving debt by an aggregate of $27.0 million
"We are pleased with our strong first quarter results, which reflect our
increased presence in our retail channel, the expansion of our product
offerings, and the underlying phenomenal demand for smartphones and
tablets," said Robert G. Pedersen II, CEO of ZAGG. "The operational
alignments we have put in place helped our results in the quarter. We
are seeing a tremendous level of employee unity and successful
integration with iFrogz into our company, which is translating into
improved sales, operational and financial performance of our business."
First Quarter Results
Consolidated revenue for the first quarter of 2012 increased 106% to
$55.5 million from $27.0 million in the same quarter last year. Revenue
by channel was 83% through indirect channels, 10% 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 first quarter of 2012 was $26.9 million or 48.5% of
net sales, representing a 97% increase, versus $13.6 million or 51% of
net sales in the first quarter of the prior year.
Operating income for the first quarter of 2012 was $10.2 million
compared to $4.9 million for the first quarter of 2011, an increase of
110%.
Net income attributable to stockholders for the first quarter of 2012
was $5.1 million or $0.16 per diluted share as compared to net income
attributable to stockholders of $3.3 million or $0.13 per diluted share
in the first quarter of 2011.
Adjusted EBITDA
ZAGG considers earnings before other income or expense; income tax
provision; depreciation and amortization; and share-based compensation
expense related to equity awards ("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 first quarter of 2012 was $14.4 million versus
$5.4 million in the first quarter of 2011, representing an increase of
166% over prior year's results, or $0.46 per diluted share versus $0.21
per diluted share in the first quarter last year.
Outlook
ZAGG reiterates its full year guidance for 2012 revenue in excess of
$250 million and Adjusted EBITDA of $55 million -- $60 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 5:00 p.m. EDT to review these
results. Participants may access via the Internet at the
event website and on the Company website at: http://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 # 74099556. 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, and stock-based compensation, 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.
ZAGG INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(Unaudited)
March 31,
December 31,
2012
2011
ASSETS
Current assets
Cash and cash equivalents
$
16,856
$
26,433
Accounts receivable, net of allowances of $2,166 in 2012 and $2,070
in 2011
36,374
45,450
Inventories
25,656
29,622
Prepaid expenses and other current assets
5,387
1,593
Deferred income tax assets
5,063
5,132
Total current assets
89,336
108,230
Equity method investment in HzO
4,416
4,879
Property and equipment,net of accumulated
depreciation at $2,101 in 2012 and $1,857 in 2011
4,423
4,162
Goodwill
6,925
6,925
Intangible assets, net of accumulated amortization at $6,424
in 2012 and $3,989 in 2011
71,255
73,691
Deferred income tax assets
82
82
Note receivable
1,099
1,349
Other assets
3,051
3,010
Total assets
$
180,587
$
202,328
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
$
16,637
$
16,013
Income taxes payable
2,223
4,294
Accrued liabilities
2,348
3,886
Accrued wages and wage related expenses
1,420
1,468
Deferred revenue
288
320
Current portion of note payable
-
2,372
Sales returns liability
5,163
5,387
Total current liabilities
28,079
33,740
Revolving line of credit
1,627
23,332
Noncurrent portion of note payable
41,000
42,628
Total liabilities
70,706
99,700
Stockholders' equity
Common stock, $0.001 par value; 100,000 shares authorized; 30,236
and 29,782 shares issued and outstanding, respectively
30
30
Additional paid-in capital
72,409
70,248
Cumulative translation adjustment
(53
)
(33
)
Note receivable collaterlized by stock
(566
)
(566
)
Retained earnings
38,061
32,949
Total stockholders' equity
109,881
102,628
Total liabilities and stockholders' equity
$
180,587
$
202,328
ZAGG INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31, 2012
March 31, 2011
Net sales
$
55,480
$
26,976
Cost of sales
28,547
13,330
Gross profit
26,933
13,646
Operating expenses:
Advertising and marketing
2,441
2,512
Selling, general and administrative
11,842
6,220
Amortization of definite-lived intangibles
2,422
50
Total operating expenses
16,705
8,782
Income from operations
10,228
4,864
Other income (expense):
Interest expense
(1,521
)
(11
)
Loss from equity method investment in HzO
(463
)
-
Interest and other income
(147
)
-
Total other income (expense)
(2,131
)
(11
)
Income before provision for income taxes
8,097
4,853
Income tax provision
(2,985
)
(1,595
)
Net income
5,112
3,258
Net loss attributable to noncontrolling interest
-
52
Net income attributable to stockholders
$
5,112
$
3,310
Earnings per share attributable to stockholders:
Basic earnings per share
$
0.17
$
0.14
Diluted earnings per share
$
0.16
$
0.13
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 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
March 31, 2012
March 31, 2011
Net income attributable to stockholders in accordance with GAAP
$
5,112
$
3,310
Adjustments:
a.
Stock based compensation expense
1,342
304
b.
Depreciation and amortization
2,804
176
c.
Provision for income taxes
2,985
1,595
d.
Other (income) expense
2,131
11
Adjusted EBITDA
$
14,374
$
5,396
Diluted Adjusted EBITDA per common share
$
0.46
$
0.21
Weighted average number of shares outstanding - diluted
31,417
26,216
Investor Relations: Genesis Select Corp. Kim
Rogers-Carrete, 949-429-7408 krogersc@genesisselect.com or Media: Lane
PR Amber Roberts, 212-302-5964 Amber@lanepr.com or Company: ZAGG
Inc. Nathan Nelson, 801-263-0699 ext. 107 nnelson@zagg.com
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