ZAGG INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except par value amounts)
(Unaudited)
September 30, 2019 | December 31, 2018 | ||||||||||||||||
ASSETS | |||||||||||||||||
Current assets: | |||||||||||||||||
Cash and cash equivalents | $ | 14,669 | $ | 15,793 | |||||||||||||
Accounts receivable, net of allowances of $879 and $885 | 135,345 | 156,667 | |||||||||||||||
Income tax receivable | 3,007 | 375 | |||||||||||||||
Inventories | 138,452 | 82,919 | |||||||||||||||
Prepaid expenses and other current assets | 4,871 | 5,473 | |||||||||||||||
Total current assets | 296,344 | 261,227 | |||||||||||||||
Property and equipment, net of accumulated depreciation of $14,801 and $11,844 | 18,644 | 16,118 | |||||||||||||||
Intangible assets, net of accumulated amortization of $91,640 and $78,627 | 67,102 | 52,054 | |||||||||||||||
Deferred income tax assets | 13,994 | 19,403 | |||||||||||||||
Operating lease right of use assets | 10,067 | — | |||||||||||||||
Goodwill | 43,569 | 27,638 | |||||||||||||||
Other assets | 1,103 | 1,571 | |||||||||||||||
Total assets | $ | 450,823 | $ | 378,011 | |||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||
Current liabilities: | |||||||||||||||||
Accounts payable | $ | 97,978 | $ | 80,908 | |||||||||||||
Sales returns liability | 41,244 | 54,432 | |||||||||||||||
Accrued wages and wage related expenses | 6,934 | 6,624 | |||||||||||||||
Accrued liabilities | 18,911 | 13,723 | |||||||||||||||
Current portion of operating lease liabilities | 2,129 | — | |||||||||||||||
Total current liabilities | 167,196 | 155,687 | |||||||||||||||
Line of credit | 111,363 | 58,363 | |||||||||||||||
Operating lease liabilities | 11,135 | — | |||||||||||||||
Other long-term liabilities | — | 5,470 | |||||||||||||||
Total liabilities | 289,694 | 219,520 | |||||||||||||||
Stockholders’ equity: | |||||||||||||||||
Common stock, $0.001 par value; 100,000 shares authorized; 36,163 and 34,457 shares issued | 36 | 34 | |||||||||||||||
Treasury stock, 7,055 and 6,983 common shares at cost | (50,455) | (49,733) | |||||||||||||||
Additional paid-in capital | 111,917 | 96,486 | |||||||||||||||
Accumulated other comprehensive loss | (2,366) | (1,410) | |||||||||||||||
Retained earnings | 101,997 | 113,114 | |||||||||||||||
Total stockholders’ equity | 161,129 | 158,491 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 450,823 | $ | 378,011 |
ZAGG INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in thousands, except per share amounts)
(Unaudited)
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||||||||||||||
September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | ||||||||||||||||||||||||||||||||
Net sales | $ | 146,488 | $ | 141,087 | $ | 332,034 | $ | 371,718 | |||||||||||||||||||||||||||
Cost of sales | 92,143 | 88,916 | 216,108 | 244,297 | |||||||||||||||||||||||||||||||
Gross profit | 54,345 | 52,171 | 115,926 | 127,421 | |||||||||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||||||
Advertising and marketing | 4,129 | 3,089 | 13,228 | 8,322 | |||||||||||||||||||||||||||||||
Selling, general and administrative | 34,063 | 27,349 | 100,138 | 78,692 | |||||||||||||||||||||||||||||||
Transaction costs | 547 | 618 | 1,168 | 635 | |||||||||||||||||||||||||||||||
Amortization of intangible assets | 3,948 | 2,859 | 13,013 | 8,404 | |||||||||||||||||||||||||||||||
Total operating expenses | 42,687 | 33,915 | 127,547 | 96,053 | |||||||||||||||||||||||||||||||
Income (loss) from operations | 11,658 | 18,256 | (11,621) | 31,368 | |||||||||||||||||||||||||||||||
Other (expense) income: | |||||||||||||||||||||||||||||||||||
Interest expense | (1,221) | (286) | (3,334) | (1,132) | |||||||||||||||||||||||||||||||
Other (expense) income | (462) | (176) | 214 | (362) | |||||||||||||||||||||||||||||||
Total other expense | (1,683) | (462) | (3,120) | (1,494) | |||||||||||||||||||||||||||||||
Income (loss) before provision for income taxes | 9,975 | 17,794 | (14,741) | 29,874 | |||||||||||||||||||||||||||||||
Income tax (provision) benefit | (1,293) | (3,168) | 3,663 | (5,003) | |||||||||||||||||||||||||||||||
Net income (loss) | $ | 8,682 | $ | 14,626 | $ | (11,078) | $ | 24,871 | |||||||||||||||||||||||||||
Earnings (loss) per share attributable to stockholders: | |||||||||||||||||||||||||||||||||||
Basic earnings (loss) per share | $ | 0.30 | $ | 0.52 | $ | (0.38) | $ | 0.88 | |||||||||||||||||||||||||||
Diluted earnings (loss) per share | $ | 0.30 | $ | 0.51 | $ | (0.38) | $ | 0.87 |
ZAGG INC AND SUBSIDIARIES
RECONCILIATION OF NON-U.S. GAAP FINANCIAL INFORMATION TO U.S. GAAP
(Amounts in thousands)
(Unaudited)
UNAUDITED SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||
The following information are not financial measures prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In addition, they should not be construed as an alternative to any other measures of performance determined in accordance with U.S. 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 these measures are helpful to some investors as a measure of our operations. We caution investors that non-U.S. 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 | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) in accordance with U.S. GAAP | $ | 8,682 | $ | 14,626 | $ | (11,078) | $ | 24,871 | ||||||||||||||||||||||||||||||||||||||||||
Adjustments: | ||||||||||||||||||||||||||||||||||||||||||||||||||
a. | Stock-based compensation expense | 632 | 757 | 3,291 | 2,165 | |||||||||||||||||||||||||||||||||||||||||||||
b. | Depreciation and amortization | 5,751 | 4,099 | 18,007 | 13,330 | |||||||||||||||||||||||||||||||||||||||||||||
c. | Other expense, net | 1,683 | 462 | 3,120 | 1,494 | |||||||||||||||||||||||||||||||||||||||||||||
d. | Transaction costs | 547 | 618 | 1,168 | 635 | |||||||||||||||||||||||||||||||||||||||||||||
e. | BRAVEN employee retention bonus | — | — | 93 | — | |||||||||||||||||||||||||||||||||||||||||||||
f. | Former CFO retention bonus | — | — | 110 | — | |||||||||||||||||||||||||||||||||||||||||||||
g. | Inventory step-up amount in connection with acquisitions in 2018 and 2019 | — | 72 | 589 | 72 | |||||||||||||||||||||||||||||||||||||||||||||
h. | Consulting fee to former CEO | — | — | — | 700 | |||||||||||||||||||||||||||||||||||||||||||||
i. | Restructuring expenses | 1,818 | — | 2,225 | — | |||||||||||||||||||||||||||||||||||||||||||||
j. | Adjustment to fair value of acquisition contingent consideration | 355 | — | 355 | — | |||||||||||||||||||||||||||||||||||||||||||||
k. | Income tax provision (benefit) | 1,293 | 3,168 | (3,663) | 5,003 | |||||||||||||||||||||||||||||||||||||||||||||
Total Adjustments | 12,079 | 9,176 | 25,295 | 23,399 | ||||||||||||||||||||||||||||||||||||||||||||||
Adjusted EBITDA | $ | 20,761 | $ | 23,802 | $ | 14,217 | $ | 48,270 |
ZAGG INC AND SUBSIDIARIES
RECONCILIATION OF NON-U.S. GAAP FINANCIAL INFORMATION TO U.S. GAAP
(Amounts in thousands, except per share amounts)
(Unaudited)
DILUTED OPERATING (LOSS) EARNINGS PER SHARE RECONCILIATION | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||
September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | ||||||||||||||||||||||||||||||||||||||
Net income (loss) in accordance with U.S. GAAP | $ | 8,682 | $ | 14,626 | $ | (11,078) | $ | 24,871 | |||||||||||||||||||||||||||||||||
Adjustments: | |||||||||||||||||||||||||||||||||||||||||
a. | Amortization expense related to 2018 and 2019 acquisitions | 1,975 | — | 5,926 | — | ||||||||||||||||||||||||||||||||||||
b. | Transaction costs | 547 | — | 1,168 | — | ||||||||||||||||||||||||||||||||||||
c. | Inventory step-up amount in connection with acquisitions in 2018 and 2019 | — | — | 589 | — | ||||||||||||||||||||||||||||||||||||
d. | BRAVEN employee retention bonus | — | — | 93 | — | ||||||||||||||||||||||||||||||||||||
e. | Restructuring expenses | 1,818 | — | 2,225 | — | ||||||||||||||||||||||||||||||||||||
f. | Stock-based compensation issued as retention | 341 | — | 1,031 | — | ||||||||||||||||||||||||||||||||||||
g. | Adjustment to fair value of acquisition contingent consideration | 355 | — | 355 | — | ||||||||||||||||||||||||||||||||||||
Total adjustments before tax | 5,036 | — | 11,387 | — | |||||||||||||||||||||||||||||||||||||
Tax effect 1 | (1,363) | — | (3,075) | — | |||||||||||||||||||||||||||||||||||||
Adjustments, net of tax | 3,673 | — | 8,312 | — | |||||||||||||||||||||||||||||||||||||
Adjusted net income (loss) | $ | 12,355 | $ | 14,626 | $ | (2,766) | $ | 24,871 | |||||||||||||||||||||||||||||||||
Diluted shares outstanding | 29,127 | 28,563 | 29,009 | 28,640 | |||||||||||||||||||||||||||||||||||||
Diluted operating earnings (loss) per share | $ | 0.42 | $ | 0.51 | $ | (0.10) | $ | 0.87 |
1 Income tax effect calculated using the estimated 2019 statutory rate of 27.04%