ZAGG (ZAGG) 8-K Results of Operations and Financial Condition

ZAGG INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

(Unaudited)

		March 31, 2018			December 31, 2017
ASSETS
Current assets:
	Cash and cash equivalents	$	17,745		$	24,989
	Accounts receivable, net of allowances of $474 and $734	73,894			123,220
	Inventories	78,891			75,046
	Prepaid expenses and other current assets	4,529			4,547
Total current assets		175,059			227,802
Property and equipment, net of accumulated depreciation of $12,979 and $12,540		12,794			13,444
Goodwill		12,272			12,272
Intangible assets, net of accumulated amortization of $69,440 and $66,639		36,443			39,244
Deferred income tax assets		24,084			24,403
Other assets		3,803			3,426
Total assets		$	264,455		$	320,591
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable	$	54,798		$	96,472
	Income tax payable	2,291			2,052
	Accrued liabilities	9,214			10,515
	Sales returns liability	30,913			32,189
	Accrued wages and wage related expenses	7,775			5,652
	Deferred revenue	—			315
	Line of credit	—			23,475
	Current portion of long-term debt, net of deferred loan costs of $141	—			13,922
Total current liabilities		104,991			184,592
Line of credit		22,038			—
Total liabilities		127,029			184,592
Stockholders' equity:
	Common stock, $0.001 par value; 100,000 shares authorized; 34,416 and 34,104 shares issued	34			34
	Additional paid-in capital	94,134			96,145
	Accumulated other comprehensive loss	(59		)	(348		)
	Treasury stock, 6,065 and 6,065 common shares at cost	(37,637		)	(37,637		)
	Retained earnings	80,954			77,805
Total stockholders' equity		137,426			135,999
Total liabilities and stockholders' equity		$	264,455		$	320,591

ZAGG INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

		Three Months Ended
		March 31, 2018			March 31, 2017
Net sales		$	112,066		$	92,946
Cost of sales		74,474			64,340
Gross profit		37,592			28,606
Operating expenses:
	Advertising and marketing	2,594			3,006
	Selling, general and administrative	24,307			27,054
	Transaction costs	—			215
	Impairment of intangible asset	—			1,959
	Amortization of intangible assets	2,772			3,021
Total operating expenses		29,673			35,255
Income (loss) from operations		7,919			(6,649		)
Other income (expense):
	Interest expense	(500		)	(490		)
	Other income (expense)	495			(20		)
Total other expense		(5		)	(510		)
Income (loss) before provision for income taxes		7,914			(7,159		)
Income tax (provision) benefit		(885		)	1,021
Net income (loss)		$	7,029		$	(6,138	)
Earnings (loss) per share attributable to stockholders:
	Basic earnings (loss) per share	$	0.25		$	(0.22	)
	Diluted earnings (loss) per share	$	0.24		$	(0.22	)

ZAGG INC AND SUBSIDIARIES

RECONCILIATION OF NON- U.S. GAAP FINANCIAL INFORMATION TO U.S. GAAP

(in thousands)

(Unaudited)

Unaudited Supplemental Data
The following information is not a financial measure under generally accepted accounting principles (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 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.
			Three Months Ended
Adjusted EBITDA Reconciliation			March 31, 2018		March 31, 2017
Net income (loss) in accordance with U.S. GAAP			$	7,029	$	(6,138	)
	Adjustments:
	a.	Stock-based compensation expense	601		670
	b.	Depreciation and amortization	5,030		5,781
	c.	Impairment of intangible assets	—		1,959
	d.	Other income (expense)	5		510
	e.	mophie transaction expenses	—		215
	f.	mophie restructuring charges	—		414
	g.	mophie employee retention bonus	—		300
	h.	Income tax provision (benefit)	885		(1,021		)
Adjusted EBITDA			$	13,550	$	2,690

			Years Ended
			Actual		Guidance*
Adjusted EBITDA Reconciliation			December 31, 2017		December 31, 2018
Net income (loss) in accordance with U.S. GAAP			$	15,100	$	40,200
	Adjustments:
	a.	Stock-based compensation expense	3,602		3,667
	b.	Depreciation and amortization	21,888		18,358
	c.	Impairment of intangible assets	1,959		—
	d.	Other expense	1,383		1,375
	e.	mophie restructuring charges	437		—
	f.	mophie employee retention bonus	346		—
	g.	Income tax provision	28,252		14,900
Adjusted EBITDA			$	72,967	$	78,500

*Midpoint of 2018 guidance