ZAGG Inc - FORM 8-K - EX-99.1 - November 9, 2020

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8-K - 8-K - ZAGG Inczagg-20201109.htm
EX-99.3 - EX-99.3 - ZAGG Inca0930208kex993.htm
EX-99.2 - EX-99.2 - ZAGG Inca0930208kex992.htm

ZAGG INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except par value amounts)
(Unaudited)
September 30, 2020December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents$16,115 $17,801 
Accounts receivable, net of allowances of $1,088 and $1,143
91,196 142,804 
Income tax receivable7,980 — 
Inventories80,024 144,944 
Prepaid expenses and other current assets8,539 6,124 
Total current assets203,854 311,673 
Property and equipment, net of accumulated depreciation of $14,354 and $14,159
15,759 18,019 
Intangible assets, net of accumulated amortization of $105,168 and $95,632
51,704 63,110 
Deferred income tax assets, net23,680 22,657 
Operating lease right of use assets9,890 9,636 
Goodwill24,920 43,569 
Other assets243 567 
Total assets$330,050 $469,231 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$60,142 $87,303 
Income tax payable— 5,266 
Sales returns liability25,668 43,853 
Accrued wages and wage related expenses6,225 6,328 
Accrued liabilities5,440 15,164 
Current portion of other long-term liabilities662 — 
Current portion of operating lease liabilities2,786 2,099 
Total current liabilities100,923 160,013 
Line of credit87,655 107,140 
Operating lease liabilities9,915 10,599 
Other long-term liabilities8,782 — 
Total liabilities207,275 277,752 
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 capital120,188 116,533 
Accumulated other comprehensive loss(962)(1,631)
Retained earnings53,967 126,995 
Total stockholders’ equity122,775 191,479 
Total liabilities and stockholders’ equity$330,050 $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 Nine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Net sales$115,456 $146,488 $283,554 $332,034 
Cost of sales77,023 92,143 240,751 216,108 
Gross profit38,433 54,345 42,803 115,926 
Operating expenses:
Advertising and marketing3,218 4,129 10,063 13,228 
Selling, general, and administrative23,849 33,967 80,185 100,036 
Transaction costs72 547 468 1,168 
Impairment of goodwill— — 18,649 — 
Loss on disposal of intangible assets and equipment— 96 3,683 102 
Amortization of intangible assets3,357 3,948 10,258 13,013 
Total operating expenses30,496 42,687 123,306 127,547 
Income (loss) from operations7,937 11,658 (80,503)(11,621)
Other income (expense):
Interest expense(885)(1,221)(3,375)(3,334)
Other income (expense)867 (462)1,086 214 
Total other expense(18)(1,683)(2,289)(3,120)
Income (loss) before provision for income taxes7,919 9,975 (82,792)(14,741)
Income tax (provision) benefit(1,700)(1,293)10,123 3,663 
Net income (loss)$6,219 $8,682 $(72,669)$(11,078)
Earnings (loss) per share attributable to stockholders:
Basic earnings (loss) per share$0.21 $0.30 $(2.44)$(0.38)
Diluted earnings (loss) per share$0.21 $0.30 $(2.44)$(0.38)



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 EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Net income (loss) in accordance with U.S. GAAP$6,219 $8,682 $(72,669)$(11,078)
Adjustments:
a.Stock-based compensation expense1,326 632 3,930 3,291 
b.Depreciation and amortization5,090 5,751 15,435 18,007 
c.Other expense, net18 1,683 2,289 3,120 
d.Transaction costs72 547 468 1,168 
e.BRAVEN employee retention bonus— — — 93 
f.Former CFO retention bonus— — — 110 
g.Inventory step-up amount in connection with acquisition of HALO— — — 589 
h.Severance expense258 1,818 786 2,225 
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.Adjustment to fair value of acquisition contingent consideration— 355 — 355 
m.Income tax provision (benefit)1,700 1,293 (10,123)(3,663)
Total adjustments8,464 12,079 79,950 25,295 
Adjusted EBITDA$14,683 $20,761 $7,281 $14,217 



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 EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Gross profit in accordance with U.S. GAAP$38,433 $54,345 $42,803 $115,926 
Adjustment:
March 2020 inventory write-down— — 44,833 — 
Adjusted gross profit$38,433 $54,345 $87,636 $115,926 
Adjusted gross profit margin33 %37 %31 %35 %


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