ZAGG Inc - FORM 8-K - EX-99.1 - August 4, 2020

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8-K - 8-K - ZAGG Inczagg-20200804.htm
EX-99.3 - EX-99.3 - ZAGG Inca0630208kex993.htm
EX-99.2 - EX-99.2 - ZAGG Inca0630208kex992.htm

ZAGG INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except par value amounts)
(Unaudited)
June 30, 2020December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents$17,314  $17,801  
Accounts receivable, net of allowances of $2,000 and $1,143
63,090  142,804  
Income tax receivable5,666  —  
Inventories91,328  144,944  
Prepaid expenses and other current assets4,900  6,124  
Total current assets182,298  311,673  
Property and equipment, net of accumulated depreciation of $12,865 and $14,159
15,926  18,019  
Intangible assets, net of accumulated amortization of $101,810 and $95,632
55,061  63,110  
Deferred income tax assets, net23,704  22,657  
Operating lease right of use assets10,456  9,636  
Goodwill24,920  43,569  
Other assets428  567  
Total assets$312,793  $469,231  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$44,945  $87,303  
Income tax payable—  5,266  
Sales returns liability25,660  43,853  
Accrued wages and wage related expenses5,254  6,328  
Accrued liabilities7,087  15,164  
Current portion of operating lease liabilities2,774  2,099  
Total current liabilities85,720  160,013  
Line of credit92,040  107,140  
Operating lease liabilities10,631  10,599  
Other long-term liabilities9,444  —  
Total liabilities197,835  277,752  
Stockholders’ equity:
Common stock, $0.001 par value; 100,000 shares authorized; 36,884 and 36,610 shares issued
37  37  
Treasury stock, 7,055 and 7,055 common shares at cost
(50,455) (50,455) 
Additional paid-in capital118,862  116,533  
Accumulated other comprehensive loss(1,234) (1,631) 
Retained earnings47,748  126,995  
Total stockholders’ equity114,958  191,479  
Total liabilities and stockholders’ equity$312,793  $469,231  



ZAGG INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in thousands, except per share amounts)
(Unaudited)
For the Three Months EndedFor the Six Months Ended
June 30, 2020June 30, 2019June 30, 2020June 30, 2019
Net sales$77,117  $106,796  $168,098  $185,546  
Cost of sales53,805  69,037  163,728  123,965  
Gross profit23,312  37,759  4,370  61,581  
Operating expenses:
Advertising and marketing2,419  4,514  6,845  9,099  
Selling, general and administrative23,743  34,483  56,336  66,069  
Transaction costs51  374  396  621  
Impairment of goodwill—  —  18,649  —  
Loss on disposal of intangible assets and equipment—  8  3,683  6  
Amortization of intangible assets3,357  4,599  6,901  9,065  
Total operating expenses29,570  43,978  92,810  84,860  
Loss from operations(6,258) (6,219) (88,440) (23,279) 
Other (expense) income:
Interest expense(956) (1,103) (2,490) (2,113) 
Other income217  1,192  219  676  
Total other (expense) income(739) 89  (2,271) (1,437) 
Loss before provision for income taxes(6,997) (6,130) (90,711) (24,716) 
Income tax benefit3,664  794  11,823  4,956  
Net loss$(3,333) $(5,336) $(78,888) $(19,760) 
Loss per share attributable to stockholders:
Basic loss per share$(0.11) $(0.18) $(2.65) $(0.68) 
Diluted loss per share$(0.11) $(0.18) $(2.65) $(0.68) 



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 adjusted EBITDA, adjusted gross profit and adjusted gross profit margin 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 they fail 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 RECONCILIATIONThree Months EndedSix Months Ended
June 30, 2020June 30, 2019June 30, 2020June 30, 2019
Net loss in accordance with U.S. GAAP$(3,333) $(5,336) $(78,888) $(19,760) 
Adjustments:
a.Stock-based compensation expense1,310  1,475  2,604  2,660  
b.Depreciation and amortization4,969  6,199  10,345  12,256  
c.Other expense (income), net739  (89) 2,271  1,437  
d.Transaction costs51  374  396  621  
e.BRAVEN employee retention bonus—  46  —  93  
f.Former CFO retention bonus—  —  —  110  
g.Inventory step-up amount in connection with acquisition of HALO—  142  —  573  
h.Severance expense—  407  528  407  
i.March 2020 inventory write-down—  —  44,833  —  
j.Impairment of goodwill—  —  18,649  —  
k.Loss on disposal of intangible assets and equipment—  —  3,683  —  
l.Income tax benefit(3,664) (794) (11,823) (4,956) 
Total adjustments3,405  7,760  71,486  13,201  
Adjusted EBITDA$72  $2,424  $(7,402) $(6,559) 



ZAGG INC AND SUBSIDIARIES
RECONCILIATION OF NON-U.S. GAAP FINANCIAL INFORMATION TO U.S. GAAP
(Amounts in thousands, except per share amounts)
(Unaudited)
GROSS PROFIT RECONCILIATIONThree Months EndedSix Months Ended
June 30, 2020June 30, 2019June 30, 2020June 30, 2019
Gross profit in accordance with U.S. GAAP$23,312  $37,759  $4,370  $61,581  
Adjustment:
March 2020 inventory write-down—  —  44,833  —  
Adjusted gross profit$23,312  $37,759  $49,203  $61,581  
Adjusted gross profit margin30 %35 %29 %33 %


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