ZAGG Inc (Nasdaq:ZAGG), a leading global mobile lifestyle company,
today announced financial results for the second quarter and six
months ending June 30, 2017.
Second Quarter Highlights (Comparisons versus second
quarter 2016)
- Net sales of $115.2 million, a 15% increase compared to $99.8
million
- Gross margin of 31.1% compared to 30.9%
- Net income of $3.4 million compared to a net loss of ($1.0)
million
- Adjusted EBITDA of $12.1 million compared to $10.6
million
Year-to-Date Highlights (Comparisons versus six months
2016)
- Net sales of $208.2 million, a 28% increase compared to $162.3
million
- Net loss of ($2.7) million compared to a net loss of ($4.3)
million
- Adjusted EBITDA of $14.8 million compared to $15.6 million
Reiterates 2017 Full Year Outlook
- Net sales in the range of $470 million to $500 million
- Adjusted EBITDA in the range of $71 million to $75 million
“The strong momentum we experienced early in the year continued
in the second quarter,” commented Randy Hales, President and Chief
Executive Officer. “Our net sales for the first half of 2017
represent an all-time record for ZAGG Inc as well as the ZAGG and
mophie business units on an individual basis. Operating performance
at mophie continues to improve as a result of several initiatives
implemented since the acquisition. For the first time in several
years, the mophie business unit recorded positive Adjusted EBITDA
during the last two months of the second quarter and we expect this
trend to continue during the second half of the year.”
Mr. Hales continued, “We remain confident that we will achieve
our 2017 annual guidance of net sales in a range of $470 to $500
million and Adjusted EBITDA of $71 to $75 million, which includes a
positive contribution from the mophie business unit.”
Second Quarter Results |
(in millions, except per share amounts) |
June 30, 2017 |
June 30, 2016 |
Net Sales |
$115.2 |
$99.8 |
|
Gross Profit (Gross Profit %) |
$35.8 (31%) |
$30.9 (31%) |
Net Income (Loss) |
$3.4 |
($1.0) |
|
Earnings (Loss) per Share |
$0.12 |
($0.04) |
|
Adjusted EBITDA (margin %) |
$12.1 (10%) |
$10.6 (11%) |
Second Quarter ResultsNet sales for the second
quarter increased by 15% to $115.2 million, compared to $99.8
million in 2016. The increase in sales was driven primarily by
increased sales of screen protection and power management products
in key wireless and retail accounts both domestically and overseas.
Domestic sales increased 11% and international sales grew 56%
during the second quarter.
Gross profit was $35.8 million, or 31% of net sales, compared to
$30.9 million, or 31% of net sales in 2016.
Net income was $3.4 million, compared to a net loss of ($1.0)
million in 2016. Earnings per share was $0.12, on 28.2
million shares, compared to a loss per share of ($0.04), on 28.1
million shares.
Adjusted EBITDA was $12.1 million compared to $10.6 million.
Year-to-Date Results |
|
(in millions, except per share amounts) |
June 30, 2017 |
June 30, 2016 |
Net Sales |
$208.2 |
|
$162.3 |
|
Gross Profit (Gross Profit %) |
$64.4 (31%) |
$54.6 (34%) |
Net Loss |
($2.7) |
|
($4.3) |
|
|
Loss per Share |
($0.10) |
|
($0.16) |
|
|
Adjusted EBITDA (margin %) |
$14.8 (7%) |
$15.6 (10%) |
2017 Year-to-Date Results Net sales for 2017
increased 28% to $208.2 million, compared $162.3 million in 2016.
The increase in sales was primarily driven by a full six months of
mophie sales in 2017 (only four months of sales were included in
2016 as the acquisition occurred on March 3, 2016), and growth in
the screen protection, power management, and power case product
categories.
Gross profit increased to $64.4 million, or 31% of net sales,
compared to $54.6 million, or 34% of net sales. The decrease in
gross profit margin was primarily due to (1) a full six months of
mophie operations in 2017, which generate lower gross profit
margins than the historical ZAGG business unit, and (2) temporarily
lower gross profit margin on curved glass for the Samsung Galaxy
S8, compared to historical gross margins on non-curved glass
products.
Net loss was $(2.7) million, compared to a net loss of ($4.3)
million in 2016. Loss per share was $(0.10), on 28.0 million
shares, compared to a loss per share of ($0.16), on 27.9 million
shares.
Adjusted EBITDA was $14.8 million compared to $15.6 million for
the consolidated business in 2016.
2017 Business OutlookThe Company reiterated the
following annual guidance for 2017:
- Net sales of $470 to $500 million
- Gross margin in the low to mid 30 percent range
- Adjusted EBITDA of $71 to $75 million
- Annual effective tax rate of approximately 35%
The Company is unable to provide guidance for net income (loss),
and reconciliation of Adjusted EBITDA to net income (loss), as the
closest corresponding U.S. GAAP measure is not available without
unreasonable efforts on a forward-looking basis due to the
variability and complexity with respect to charges excluded from
this non-GAAP measure. In particular, these complexities
include the measures and effects of stock based compensation
expense that are directly impacted by unpredictable fluctuations in
our share price, and our tax expense that is directly impacted by
our taxable income. We expect the variability of these
charges could have a significant, and potentially unpredictable,
impact on our future U.S. GAAP results.
Conference CallA conference call will be held
today, August 1, 2017 at 5:00 p.m. EDT to review these results.
Interested parties may access via the Internet on the Company's
website at: investors.zagg.com.
About Non-GAAP Financial InformationReaders are
cautioned that Adjusted EBITDA (earnings before interest, taxes,
depreciation, amortization, stock-based compensation expense, other
income (expense), mophie transaction costs, mophie fair value
inventory write-up related to acquisition, mophie restructuring
charges, mophie employee retention bonus, and impairment of
intangible asset) is not a financial measure under US generally
accepted accounting principles (GAAP). In addition, this financial
information should not be construed as an alternative to any other
measure of performance determined in accordance with GAAP, or as an
indicator of 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 Adjusted EBITDA because we believe that it is
helpful to some investors as a measure of performance. We caution
readers 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 financial results of other
companies.
Safe Harbor StatementIn 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. Readers 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 ability to
successfully integrate new operations or acquisitions, including
mophie inc., (f) the impact of inconsistent quality or reliability
of new product offerings; (g) the impact of lower profit margins in
certain new and existing product categories; (h) the impacts of
changes in economic conditions, including on customer demand; (i)
managing inventory in light of constantly shifting consumer
demand; (j) 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 (k) 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.
About ZAGG IncZAGG Inc (NASDAQ:ZAGG) is a
global leader in accessories and technologies that empower mobile
lifestyles. The Company has an award-winning product portfolio that
includes screen protection, mobile keyboards, power management
solutions, social tech, and personal audio sold under the ZAGG®,
mophie®, InvisibleShield®, and IFROGZ® brands. ZAGG has operations
in the United States, Ireland, and China. ZAGG products are
available worldwide, and can be found at leading retailers
including Best Buy, Verizon, AT&T, Sprint, Walmart, Target,
Walgreens and Amazon.com. For more information, please visit the
company’s websites at www.zagg.com and www.mophie.com and
follow us on Facebook, Twitter and Instagram.
|
ZAGG INC AND SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(in thousands, except par value) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
Cash and cash equivalents |
$ |
14,330 |
|
|
$ |
11,604 |
|
|
Accounts receivable, net of allowances of $784 in 2017 and $824
in 2016 |
|
72,956 |
|
|
|
83,835 |
|
|
Inventories |
|
65,376 |
|
|
|
72,769 |
|
|
Prepaid expenses and other current assets |
|
3,717 |
|
|
|
3,414 |
|
|
Income tax receivable |
|
1,193 |
|
|
|
2,814 |
|
Total current assets |
|
157,572 |
|
|
|
174,436 |
|
|
|
|
|
|
|
|
Property and equipment, net of accumulated
depreciation of $21,856 in 2017 and $18,371 in 2016 |
|
15,631 |
|
|
|
17,755 |
|
Goodwill |
|
|
12,272 |
|
|
|
12,272 |
|
Intangible assets, net of accumulated amortization
of $60,556 in 2017 and $55,298 in 2016 |
|
45,327 |
|
|
|
53,362 |
|
Deferred income tax assets |
|
49,331 |
|
|
|
50,363 |
|
Other assets |
|
1,541 |
|
|
|
2,541 |
|
Total assets |
$ |
281,674 |
|
|
$ |
310,729 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Accounts payable |
$ |
62,237 |
|
|
$ |
85,022 |
|
|
Accrued liabilities |
|
22,798 |
|
|
|
22,216 |
|
|
Sales returns liability |
|
27,794 |
|
|
|
28,373 |
|
|
Accrued wages and wage related expenses |
|
5,635 |
|
|
|
6,169 |
|
|
Deferred revenue |
|
209 |
|
|
|
273 |
|
|
Line of credit |
|
30,683 |
|
|
|
31,307 |
|
|
Current portion of long-term debt, net of deferred loan costs
of $65 in 2017 and 2016 |
|
6,185 |
|
|
|
10,484 |
|
Total current liabilities |
|
155,541 |
|
|
|
183,844 |
|
|
|
|
|
|
|
|
Noncurrent portion of long-term debt, net of
deferred loan costs of $108 in 2017 and $141 in 2016 |
|
10,829 |
|
|
|
9,623 |
|
|
|
|
|
|
|
|
Total liabilities |
|
166,370 |
|
|
|
193,467 |
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
Common stock, $0.001 par value; 100,000 shares authorized; |
|
|
|
|
|
34,047 and 33,840 shares issued in 2017 and 2016,
respectively |
$ |
34 |
|
|
$ |
34 |
|
|
Additional paid-in capital |
|
94,207 |
|
|
|
92,782 |
|
|
Accumulated other comprehensive loss |
|
(1,270 |
) |
|
|
(2,114 |
) |
|
Treasury stock, 6,065 and 5,831 common shares in 2017 and 2016
respectively, at cost |
|
(37,637 |
) |
|
|
(36,145 |
) |
|
Retained earnings |
|
59,970 |
|
|
|
62,705 |
|
|
|
|
|
|
|
|
Total stockholders' equity |
|
115,304 |
|
|
|
117,262 |
|
Total liabilities and stockholders' equity |
$ |
281,674 |
|
|
$ |
310,729 |
|
|
|
|
|
|
|
|
ZAGG INC AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(in thousands, except per share
amounts) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, 2017 |
|
June 30, 2016 |
|
June 30, 2017 |
|
June 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
|
$ |
115,227 |
|
|
$ |
99,833 |
|
|
$ |
208,173 |
|
|
$ |
162,266 |
|
Cost of sales |
|
|
79,403 |
|
|
|
68,960 |
|
|
|
143,743 |
|
|
|
107,664 |
|
Gross profit |
|
|
35,824 |
|
|
|
30,873 |
|
|
|
64,430 |
|
|
|
54,602 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Advertising and marketing |
|
|
2,070 |
|
|
|
2,275 |
|
|
|
5,076 |
|
|
|
5,189 |
|
|
Selling, general and administrative |
|
|
24,952 |
|
|
|
24,880 |
|
|
|
52,006 |
|
|
|
44,635 |
|
|
Transaction costs |
|
|
300 |
|
|
|
305 |
|
|
|
515 |
|
|
|
2,322 |
|
|
Impairment of intangible asset |
|
|
- |
|
|
|
- |
|
|
|
1,959 |
|
|
|
- |
|
|
Amortization of long-lived intangibles |
|
|
3,005 |
|
|
|
4,765 |
|
|
|
6,026 |
|
|
|
7,511 |
|
Total operating expenses |
|
|
30,327 |
|
|
|
32,225 |
|
|
|
65,582 |
|
|
|
59,657 |
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
5,497 |
|
|
|
(1,352 |
) |
|
|
(1,152 |
) |
|
|
(5,055 |
) |
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
Interest
expense |
|
|
(619 |
) |
|
|
(604 |
) |
|
|
(1,110 |
) |
|
|
(792 |
) |
|
Other
income (expense) |
|
|
67 |
|
|
|
9 |
|
|
|
48 |
|
|
|
(191 |
) |
Total other expense |
|
|
(552 |
) |
|
|
(595 |
) |
|
|
(1,062 |
) |
|
|
(983 |
) |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for income
taxes |
|
|
4,945 |
|
|
|
(1,947 |
) |
|
|
(2,214 |
) |
|
|
(6,038 |
) |
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (provision) |
|
|
(1,542 |
) |
|
|
901 |
|
|
|
(521 |
) |
|
|
1,703 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) |
|
$ |
3,403 |
|
|
$ |
(1,046 |
) |
|
$ |
(2,735 |
) |
|
$ |
(4,335 |
) |
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share |
|
$ |
0.12 |
|
|
$ |
(0.04 |
) |
|
$ |
0.10 |
|
|
$ |
(0.16 |
) |
|
Diluted earnings (loss) per share |
|
$ |
0.12 |
|
|
$ |
(0.04 |
) |
|
$ |
0.10 |
|
|
$ |
(0.16 |
) |
|
|
|
|
|
|
|
|
|
|
|
ZAGG INC AND SUBSIDIARIES |
|
RECONCILIATION OF NON-GAAP FINANCIAL
INFORMATION TO GAAP |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Supplemental Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following is not a financial measure under generally accepted
accounting principals (GAAP). In addition, this 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 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 Reconciliation |
|
Three months ended |
|
Six months ended |
|
|
|
|
June 30, 2017 |
|
June 30, 2016 |
|
June 30, 2017 |
|
June 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss in accordance with GAAP |
|
$ |
3,403 |
|
$ |
(1,046 |
) |
|
$ |
(2,735 |
) |
|
$ |
(4,335 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a. |
Stock based
compensation expense |
|
|
966 |
|
|
957 |
|
|
|
1,636 |
|
|
|
2,291 |
|
|
|
|
b. |
Depreciation
and amortization |
|
|
5,233 |
|
|
7,232 |
|
|
|
11,022 |
|
|
|
11,494 |
|
|
|
|
c. |
Other (income)
expense |
|
|
552 |
|
|
595 |
|
|
|
1,062 |
|
|
|
983 |
|
|
|
|
d. |
mophie
transaction costs |
|
|
300 |
|
|
305 |
|
|
|
515 |
|
|
|
2,322 |
|
|
|
|
e. |
mophie fair
value inventory write-up related to acquisition |
|
|
- |
|
|
2,169 |
|
|
|
- |
|
|
|
3,325 |
|
|
|
|
f. |
mophie
restructuring charges |
|
|
23 |
|
|
1,062 |
|
|
|
438 |
|
|
|
1,062 |
|
|
|
|
g. |
mophie employee
retention bonus |
|
|
46 |
|
|
200 |
|
|
|
346 |
|
|
|
200 |
|
|
|
|
h. |
Impairment of
intangibles asset |
|
|
- |
|
|
- |
|
|
|
1,959 |
|
|
|
- |
|
|
|
|
i. |
Income tax
benefit |
|
|
1,542 |
|
|
(901 |
) |
|
|
521 |
|
|
|
(1,703 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
$ |
12,065 |
|
$ |
10,573 |
|
|
$ |
14,764 |
|
|
$ |
15,639 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTACT:
Investor Relations:
ICR Inc.
Brendon Frey
203-682-8216
brendon.frey@icrinc.com
Company:
ZAGG Inc
Jeff DuBois
801-506-7336
jeff.dubois@ZAGG.com
Media:
The Brand Amp
Katie Kotarak
949-438-1078
katie@thebrandamp.com
ZAGG (NASDAQ:ZAGG)
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ZAGG (NASDAQ:ZAGG)
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