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

ZAGG INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

(Unaudited)

		June 30, 2018		December 31, 2017
ASSETS
Current assets:
	Cash and cash equivalents	$	18,582	$	24,989
	Accounts receivable, net of allowances of $431 and $734	83,990		123,220
	Inventories	69,662		75,046
	Income tax receivable	1,285		—
	Prepaid expenses and other current assets	5,463		4,547
Total current assets		178,982		227,802
Property and equipment, net of accumulated depreciation of $14,212 and $12,540		12,532		13,444
Goodwill		12,272		12,272
Intangible assets, net of accumulated amortization of $72,253 and $66,639		33,630		39,244
Deferred income tax assets		23,914		24,403
Other assets		3,846		3,426
Total assets		$	265,176	$	320,591
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable	$	60,372	$	96,472
	Income tax payable	—		2,052
	Accrued liabilities	6,838		8,168
	Sales returns liability	34,620		34,536
	Accrued wages and wage related expenses	5,836		5,652
	Deferred revenue	—		315
	Current portion of line of credit	—		23,475
	Current portion of long-term debt, net of deferred loan costs of $0 and $141	—		13,922
Total current liabilities		107,666		184,592
Non-current portion of line of credit		20,000		—
Total liabilities		127,666		184,592
Stockholders' equity:
	Common stock, $0.001 par value; 100,000 shares authorized; 34,423 and 34,104 shares issued	34		34
	Additional paid-in capital	94,977		96,145
	Accumulated other comprehensive loss	(1,028)		(348)
	Treasury stock, 6,247 and 6,065 common shares at cost	(40,643)		(37,637)
	Retained earnings	84,170		77,805
Total stockholders' equity		137,510		135,999
Total liabilities and stockholders' equity		$	265,176	$	320,591

ZAGG INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

		Three Months Ended				Six Months Ended
		June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
Net sales		$	118,565	$	115,227	$	230,631	$	208,173
Cost of sales		80,908		79,403		155,381		143,743
Gross profit		37,657		35,824		75,250		64,430
Operating expenses:
	Advertising and marketing	2,638		2,070		5,233		5,076
	Selling, general and administrative	27,035		24,952		51,342		52,006
	Transaction costs	18		300		18		515
	Impairment of intangible asset	—		—		—		1,959
	Amortization of intangible assets	2,773		3,005		5,545		6,026
Total operating expenses		32,464		30,327		62,138		65,582
Income (loss) from operations		5,193		5,497		13,112		(1,152)
Other income (expense):
	Interest expense	(346)		(619)		(846)		(1,110)
	Other (expense) income	(681)		67		(186)		48
Total other expense		(1,027)		(552)		(1,032)		(1,062)
Income (loss) before provision for income taxes		4,166		4,945		12,080		(2,214)
Income tax provision		(951)		(1,542)		(1,835)		(521)
Net income (loss)		$	3,215	$	3,403	$	10,245	$	(2,735)
Earnings (loss) per share attributable to stockholders:
	Basic earnings (loss) per share	$	0.11	$	0.12	$	0.36	$	(0.10)
	Diluted earnings (loss) per share	$	0.11	$	0.12	$	0.36	$	(0.10)

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				Six Months Ended
Adjusted EBITDA Reconciliation		June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
Net income (loss) in accordance with U.S. GAAP		$	3,215	$	3,403	$	10,245	$	(2,735)
Adjustments:
a.	Stock-based compensation expense	807		966		1,408		1,636
b.	Depreciation and amortization	4,200		5,233		9,230		11,022
c.	Impairment of intangible asset	—		—		—		1,959
d.	Other expense, net	1,027		552		1,032		1,062
e.	Transaction expenses	18		300		18		515
f.	mophie restructuring charges	—		23		—		437
g.	mophie employee retention bonus	—		46		—		346
h.	Consulting fee to former CEO	700		—		700		—
i.	Income tax provision	951		1,542		1,835		521
Adjusted EBITDA		$	10,918	$	12,065	$	24,468	$	14,763

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