Third Quarter 2020 Review (Comparisons versus Third Quarter 2019)
- Net sales of
$115.5 million compared to$146.5 million - Gross profit margin of 33% compared to 37%
- Net income of
$6.2 million compared to$8.7 million - Diluted earnings per share of
$0.21 compared to$0.30 - Adjusted EBITDA of
$14.7 million compared to$20.8 million - Cash provided by operating activities of
$9 .4 million compared to cash used in operating activities of $(11.1) million
Year-to-Date 2020 Review (Comparisons versus Year-to-Date 2019)
- Net sales of
$283.6 million compared to$332.0 million - Gross profit margin of 15% compared to 35%. Excluding the
$44.8 million non-cash write-down of inventory inMarch 2020 , gross profit margin was 31% - Net loss, inclusive of a
$44.8 million non-cashMarch 2020 inventory write-down,$18 .6 million non-cash impairment on goodwill and$3 .7 million non-cash loss on disposal of intangible assets and equipment was$(72.7) million compared to$(11.1) million - Diluted loss per share of
$(2.44) compared to of$(0.38) - Adjusted EBITDA of
$7.3 million compared to$14.2 million - Cash provided by operating activities of
$17 .9 million compared to cash used in operating activities of $(24.8) million
“We have taken important steps to emerge from the pandemic a stronger company starting with discontinuing certain low margin products and categories, and simplifying other core lines of business. We have also made progress sharpening our top-line focus and advancing our digital wellness strategies. I am confident in the long-term course we have set for
Third Quarter 2020 Results (Comparisons versus Third Quarter 2019)
(Amounts in millions, except per share amounts)
For the Three Months Ended | |||||||
Net sales | $ | 115.5 | $ | 146.5 | |||
Gross profit | $ | 38.4 | $ | 54.3 | |||
Gross profit margin | 33 | % | 37 | % | |||
Net income | $ | 6.2 | $ | 8.7 | |||
Diluted earnings per share | $ | 0.21 | $ | 0.30 | |||
Adjusted EBITDA | $ | 14.7 | $ | 20.8 |
Net sales decreased 21% to
Gross profit was
Operating expenses decreased 29% to
Year-to-Date 2020 Results (Comparisons versus Year-to-Date 2019)
(Amounts in millions, except per share amounts)
For the Nine Months Ended | |||||||
Net sales | $ | 283.6 | $ | 332.0 | |||
Gross profit | $ | 42.8 | $ | 115.9 | |||
Gross profit margin | 15 | % | 35 | % | |||
Adjusted gross profit (excluding | $ | 87.6 | $ | 115.9 | |||
Adjusted gross profit margin (excluding | 31 | % | 35 | % | |||
Net loss | $ | (72.7 | ) | $ | (11.1 | ) | |
Diluted loss per share | $ | (2.44 | ) | $ | (0.38 | ) | |
Adjusted EBITDA | $ | 7.3 | $ | 14.2 |
Net sales decreased 15% to
Gross profit was
Operating expenses decreased 3% to
Balance Sheet Highlights (as of
Cash and cash equivalents | $ | 16.1 | $ | 17.8 | $ | 14.7 | |||||
Accounts receivable, net of allowances | $ | 91.2 | $ | 142.8 | $ | 135.3 | |||||
Inventories | $ | 80.0 | $ | 144.9 | $ | 138.5 | |||||
Line of credit | $ | 87.7 | $ | 107.1 | $ | 111.4 | |||||
CARES Act - Paycheck Protection Program loan | $ | 9.4 | $ | — | $ | — | |||||
Total debt outstanding | $ | 97.1 | $ | 107.1 | $ | 111.4 | |||||
Net debt (Total debt outstanding less cash) | $ | 81.0 | $ | 89.3 | $ | 96.7 | |||||
QTD Days sales outstanding (DSOs) | 73 | 69 | 87 |
2020 Business Outlook
As a result of ongoing disruption and uncertainty related to the global COVID-19 pandemic,
Conference Call
A conference call will be held today,
About Non-
This press release includes Adjusted EBITDA and adjusted gross profit excluding
Cautionary Note Regarding Forward-Looking Statements
This press release contains (and oral communications made by us may contain) “forward-looking statements” within the meaning of the safe harbor provisions of the
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:
- the impacts of certain environmental and health risks, including the recent outbreak of the coronavirus (COVID-19) and its potential effects on the Company's operations, sourcing from
China , and future demand for the Company's products for an uncertain duration of time; - the ability to design, produce, and distribute the creative product solutions required to retain existing customers and to attract new customers;
- building and maintaining marketing and distribution functions sufficient to gain meaningful international market share for our products;
- the ability to respond quickly with appropriate products after the adoption and introduction of new mobile devices by major manufacturers like Apple®, Samsung®, and Google®;
- changes or delays in announced launch schedules for (or recalls or withdrawals of) new mobile devices by major manufacturers like Apple, Samsung, and
Google ; - the ability to successfully integrate new operations or acquisitions;
- the impacts of inconsistent quality or reliability of new product offerings;
- the impacts of lower profit margins in certain new and existing product categories, including certain mophie products;
- the impacts of changes in economic conditions, including on customer demand;
- managing inventory in light of constantly shifting consumer demand;
- 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;
- changes in
U.S. and international trade policy and tariffs, including the effect of increases inU.S. -China tariffs on selected materials used in the manufacture of products sold by the Company which are sourced fromChina ; - adoption of or changes in accounting policies, principles, or estimates; and
- changes in the law, economic and financial conditions, including the effect of enactment of
U.S. tax reform or other tax law changes.
Any forward-looking statement made by us in this press release 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 our most recent Annual Report on Form 10-K and other reports we file with the
About
CONTACT:
Investor Relations:
203-682-8216
brendon.frey@icrinc.com
Company:
801-506-7336
jeff.dubois@ZAGG.com
ZAGG INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except par value amounts)
(Unaudited)
ASSETS | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 16,115 | $ | 17,801 | ||||||
Accounts receivable, net of allowances of | 91,196 | 142,804 | ||||||||
Income tax receivable | 7,980 | — | ||||||||
Inventories | 80,024 | 144,944 | ||||||||
Prepaid expenses and other current assets | 8,539 | 6,124 | ||||||||
Total current assets | 203,854 | 311,673 | ||||||||
Property and equipment, net of accumulated depreciation of | 15,759 | 18,019 | ||||||||
Intangible assets, net of accumulated amortization of | 51,704 | 63,110 | ||||||||
Deferred income tax assets, net | 23,680 | 22,657 | ||||||||
Operating lease right of use assets | 9,890 | 9,636 | ||||||||
24,920 | 43,569 | |||||||||
Other assets | 243 | 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 liability | 25,668 | 43,853 | ||||||||
Accrued wages and wage related expenses | 6,225 | 6,328 | ||||||||
Accrued liabilities | 5,440 | 15,164 | ||||||||
Current portion of other long-term liabilities | 662 | — | ||||||||
Current portion of operating lease liabilities | 2,786 | 2,099 | ||||||||
Total current liabilities | 100,923 | 160,013 | ||||||||
Line of credit | 87,655 | 107,140 | ||||||||
Operating lease liabilities | 9,915 | 10,599 | ||||||||
Other long-term liabilities | 8,782 | — | ||||||||
Total liabilities | 207,275 | 277,752 | ||||||||
Stockholders’ equity: | ||||||||||
Common stock, | 37 | 37 | ||||||||
(50,455 | ) | (50,455 | ) | |||||||
Additional paid-in capital | 120,188 | 116,533 | ||||||||
Accumulated other comprehensive loss | (962 | ) | (1,631 | ) | ||||||
Retained earnings | 53,967 | 126,995 | ||||||||
Total stockholders’ equity | 122,775 | 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 Ended | For the Nine Months Ended | |||||||||||||||||||
Net sales | $ | 115,456 | $ | 146,488 | $ | 283,554 | $ | 332,034 | ||||||||||||
Cost of sales | 77,023 | 92,143 | 240,751 | 216,108 | ||||||||||||||||
Gross profit | 38,433 | 54,345 | 42,803 | 115,926 | ||||||||||||||||
Operating expenses: | ||||||||||||||||||||
Advertising and marketing | 3,218 | 4,129 | 10,063 | 13,228 | ||||||||||||||||
Selling, general, and administrative | 23,849 | 33,967 | 80,185 | 100,036 | ||||||||||||||||
Transaction costs | 72 | 547 | 468 | 1,168 | ||||||||||||||||
Impairment of goodwill | — | — | 18,649 | — | ||||||||||||||||
Loss on disposal of intangible assets and equipment | — | 96 | 3,683 | 102 | ||||||||||||||||
Amortization of intangible assets | 3,357 | 3,948 | 10,258 | 13,013 | ||||||||||||||||
Total operating expenses | 30,496 | 42,687 | 123,306 | 127,547 | ||||||||||||||||
Income (loss) from operations | 7,937 | 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 taxes | 7,919 | 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-
(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 | ||||||||||||||||
ADJUSTED EBITDA RECONCILIATION | Three Months Ended | Nine Months Ended | ||||||||||||||
Net income (loss) in accordance with | $ | 6,219 | $ | 8,682 | $ | (72,669 | ) | $ | (11,078 | ) | ||||||
Adjustments: | ||||||||||||||||
a. | Stock-based compensation expense | 1,326 | 632 | 3,930 | 3,291 | |||||||||||
b. | Depreciation and amortization | 5,090 | 5,751 | 15,435 | 18,007 | |||||||||||
c. | Other expense, net | 18 | 1,683 | 2,289 | 3,120 | |||||||||||
d. | Transaction costs | 72 | 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 expense | 258 | 1,818 | 786 | 2,225 | |||||||||||
i. | — | — | 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 adjustments | 8,464 | 12,079 | 79,950 | 25,295 | ||||||||||||
Adjusted EBITDA | $ | 14,683 | $ | 20,761 | $ | 7,281 | $ | 14,217 |
ZAGG INC AND SUBSIDIARIES
RECONCILIATION OF NON-
(Amounts in thousands, except per share amounts)
(Unaudited)
GROSS PROFIT RECONCILIATION | Three Months Ended | Nine Months Ended | ||||||||||||||
Gross profit in accordance with | $ | 38,433 | $ | 54,345 | $ | 42,803 | $ | 115,926 | ||||||||
Adjustment: | ||||||||||||||||
— | — | 44,833 | — | |||||||||||||
Adjusted gross profit | $ | 38,433 | $ | 54,345 | $ | 87,636 | $ | 115,926 | ||||||||
Adjusted gross profit margin | 33 | % | 37 | % | 31 | % | 35 | % |
Source:
2020 GlobeNewswire, Inc., source