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Anyone playing ZAGG today? Reported some big increases on top & bottom lines. Stock getting plenty of volume already. Wonder if it'll move back to the mid-teens?


ZAGG Inc Reports Record Financial Results for Fourth Quarter and Full Year 2011

* Record fourth quarter consolidated revenue of $67.5 million
* Record annual consolidated revenue of $179.1 million
* Record GAAP diluted earnings of $0.32 per share for fourth quarter
* Record GAAP diluted earnings of $0.63 per share for 2011
* Exceed full year guidance and consensus estimates
* Record operating cash flow



SALT LAKE CITY--(BUSINESS WIRE)--

ZAGG Inc (NASDAQ: ZAGG) (www.ZAGG.com), a market leader in innovative mobile device accessories, today announced financial results for the fourth quarter and full year ended December 31, 2011.

Fourth Quarter Highlights (Fourth quarter 2011 versus fourth quarter 2010)

* Net sales increased 131% to $67.5 million, including iFrogz contribution
* Gross margin improved sequentially to 46%; 48% after inventory write-up adjustment
* Non-GAAP earnings of $0.27 per diluted share
* Adjusted EBITDA increase of 186% to $18.7 million, or $0.60 per diluted share
* Generated over $7.0 million in operating cash flow
* Ending cash and cash equivalents balance of $26.4 million

"ZAGG performed exceptionally well with record fourth quarter revenue and earnings, as the result of strong holiday sales, record online sales and an expanded SKU presence at our indirect channel to big-box retail partners for both ZAGG and iFrogz branded products,” said Robert G. Pedersen II, CEO of ZAGG. “With the operating initiatives we have put in place, and our alignment around a product-centric structure, we are building a company that can keep pace with the global growth we are seeing for mobile device accessories in 2012 and beyond."

Fourth Quarter Results

Net sales for the fourth quarter of 2011 increased 131% to $67.5 million from $29.3 million in the same quarter last year. Revenue by channel was 82% through indirect channels, 12% through ZAGG.com and iFrogz.com, 5% through the company’s mall cart and kiosk programs, and 1% from shipping and handling.

Gross profit for the fourth quarter was $31.4 million or 46% of net sales, representing a 135% increase, versus $13.4 million or 46% of net sales in the fourth quarter of the prior year. Gross profit for the quarter was impacted by the fair-value write-up of iFrogz inventory as a part of purchase accounting. Excluding the inventory adjustment on the iFrogz inventories, gross profit was $32.2 million or 48% of net sales.

In the quarter, ZAGG incurred an impairment charge of $0.4 million on its note receivable. ZAGG also recorded a $1.9 million gain on the deconsolidation of HzO as ZAGG no longer has a controlling interest in HzO. Operating income for the fourth quarter was $14.4 million compared to $6.1 million for the fourth quarter of 2010 and $4.6 million for the previous quarter.

Net income attributable to stockholders for the fourth quarter was $9.9 million or $0.32 per diluted share as compared to net income attributable to stockholders of $3.4 million or $0.13 per diluted share in the fourth quarter of 2010. Excluding the fair value write-up of inventory of iFrogz goods sold in the quarter of $0.9 million, the impairment of the note receivable of $0.4 million, the $1.9 million gain recognized on the deconsolidation of HzO, and the related tax effects of these adjustments to GAAP net income, fourth quarter net income would have been $8.6 million or $0.27 per diluted share.

Adjusted EBITDA

ZAGG considers earnings before other income or expense; income tax provision; impairment losses; depreciation and amortization; acquisition expenses; inventory basis increase related to acquisition; non-controlling interest; and share-based compensation expense related to equity awards ("Adjusted EBITDA") to be an important financial indicator of the Company's operational strength and the performance of its business. These results should be considered in addition to results prepared in accordance with generally accepted accounting principles ("GAAP"), but should not be considered as a substitute for, or superior to, GAAP results.

A reconciliation of the differences between Adjusted EBITDA and the most comparable financial measure calculated and presented in accordance with GAAP, is presented under the heading "Reconciliation of Non-GAAP Financial Information to GAAP" immediately following the Condensed Consolidated Statements of Operations included below.

The difference between Adjusted EBITDA per share, a non-GAAP measure, and GAAP EPS, is other income or expense, income tax provision, depreciation and amortization, impairment losses, acquisition expenses, inventory basis increase related to acquisition, non-controlling interest, and share-based compensation.

Adjusted EBITDA for the fourth quarter of 2011 was $18.7 million versus $6.5 million in the fourth quarter of 2010, representing an increase of 186% over prior year’s results or $0.60 per diluted share versus $0.27 per diluted share in the fourth quarter last year.

Outlook

Guidance for 2012 revenue is in excess of $250 million and Adjusted EBITDA of $55 million — $60 million. This compares to reported revenue for 2011 of $179.1 million and Adjusted EBITDA of $45.3 million.

Conference Call

A conference call will be held today at 5:00 p.m. EST to review these results. Participants may access via the Internet at the event website and on the Company website at: http://investors.zagg.com. The call will be available for replay for 30 days by dialing 1-855-859-2056, Conference ID #53092569. A podcast of the event will also be available online or via Investor Calendar's RSS feed.

Non-GAAP Financial Disclosure

Investors are cautioned that the Adjusted EBITDA, or earnings before other income, income tax provision, impairment losses, depreciation and amortization, acquisition expenses, inventory basis increases related to acquisition, non-controlling interest and stock-based compensation, contained in this press release are not financial measures under generally accepted accounting principles. In addition, they should not be construed as alternatives to any other measures of performance determined in accordance with generally accepted accounting principles, or as indicators 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 it is helpful to some investors as a measure of our performance. 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 current results with our results from other reporting periods and with the results of other companies.

Safe Harbor Statement

This release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" describe future expectations, plans, results, or strategies and are generally preceded by words such as "may," "future," "plan" or "planned," "will" or "should," "expected," "anticipates," "draft," "eventually" or "projected." You are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements as a result of various factors, and other risks identified in filings made by the company with the Securities and Exchange Commission.
ZAGG INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
(Unaudited)


December 31, December 31,
2011 2010

ASSETS

Current assets
Cash and cash equivalents $ 26,433 $ 2,373
Accounts receivable, net of allowances of $2,070 in 2011 and $904 in 2010 45,450 17,669
Inventories 29,622 17,947
Prepaid expenses and other current assets 1,593 2,620
Related party other asset - 3,900
Deferred income tax assets 5,018 2,196

Total current assets 108,116 46,705

Investment in HzO 4,879 -

Property and equipment, net of accumulated depreciation at $1,801 in 2011 and $852 in 2010 4,162 1,497

Goodwill 6,925 -

Intangible assets, net of accumulated amortization at $3,989 in 2011 and $28 in 2010 73,691 9,167

Note receivable 1,349 -

Other assets 3,010 63

Total assets $ 202,132 $ 57,432

LIABILITIES AND EQUITY

Current liabilities
Accounts payable $ 16,013 $ 12,122
Income taxes payable 3,998 8,031
Accrued liabilities 3,886 240
Accrued wages and wage related expenses 1,468 303
Deferred revenue 320 295
Current portion of note payable 2,372 31
Sales returns liability 5,387 2,068

Total current liabilities 33,444 23,090

Deferred income tax liability 100 1,561

Revolving line of credit 23,332 -

Noncurrent portion of note payable 42,628 -

Total liabilities 99,504 24,651

Redeemable noncontrolling interest - -

Stockholders' equity
Common stock, $0.001 par value; 100,000 shares authorized; 29,782 and 23,925 shares issued and outstanding, respectively
30 24
Additional paid-in capital 70,248 15,495
Cumulative translation adjustment (33) (60)
Note receivable collateralized by stock (566) -
Retained earnings 32,949 14,701

Total stockholders' equity 102,628 30,160

Noncontrolling interest - 2,621

Total equity 102,628 32,781

Total liabilities and equity $ 202,132 $ 57,432
ZAGG INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)



Three Months Ended Twelve Months Ended
December 31, 2011 December 31, 2010 December 31, 2011 December 31, 2010


Net sales $ 67,492 $ 29,253 $ 179,125 $ 76,135
Cost of sales 36,122 15,898 97,201 38,738

Gross profit 31,370 13,355 81,924 37,397

Operating expenses:
Advertising and marketing 2,367 1,509 10,246 5,067
Selling, general and administrative 14,624 5,742 43,541 15,516

Total operating expenses 16,991 7,251 53,787 20,583

Income from operations 14,379 6,104 28,137 16,814

Other income (expense):
Interest expense (1,452 ) - (3,022 ) (243 )
Gain on deconsolidation of HzO 1,906 - 1,906 -
Interest and other income (123 ) (11 ) (19 ) 7

Total other income (expense) 331 (11 ) (1,135 ) (236 )

Income before provision for income taxes 14,710 6,093 27,002 16,578

Income tax provision (5,083 ) (2,726 ) (9,418 ) (6,650 )

Net income 9,627 3,367 17,584 9,928

Net loss attributable to noncontrolling interest 319 35 664 35

Net income attributable to stockholders $ 9,946 $ 3,402 $ 18,248 $ 9,963

Earnings per share attributable to stockholders:

Basic earnings per share $ 0.34 $ 0.14 $ 0.67 $ 0.44

Diluted earnings per share $ 0.32 $ 0.13 $ 0.63 $ 0.41
ZAGG INC AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP
(in thousands, except per share amounts)
(Unaudited)


Unaudited Supplemental Data

The following information is not a financial measure under generally accepted accounting principals (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 one 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.


Adjusted EBITDA Reconciliation Three Months Ended Twelve Months Ended

December 31, 2011
December 31, 2010 December 31, 2011 December 31, 2010


Net income attributable to stockholders in accordance with GAAP $ 9,946 $ 3,402 $ 18,248 $ 9,963

Adjustments:

a.


Stock based compensation expense 584 317 3,258 993
b.


Depreciation and amortization 2,463 109 5,926 348
c.


iFrogz acquisition expenses - - 1,947 -
d.



iFrogz inventory fair value write-up
864 - 4,506 -
e.


Provision for income taxes 5,083 2,726 9,418 6,650
f.


Impairment of note receivable 418 - 1,489 -
g.



Other (income) expense
(331 ) 11 1,135 236
h.


Noncontrolling interest (319 ) (35 ) (664 ) (35 )

Adjusted EBITDA $ 18,708 $ 6,530 $ 45,263 $ 18,155

Diluted Adjusted EBITDA per common share $ 0.60 $ 0.27 $ 1.56 $ 0.75



Non-GAAP Reconciliation Three Months Ended Twelve Months Ended
December 31, 2011 December 31, 2010 December 31, 2011 December 31, 2010


Net income attributable to stockholders in accordance with GAAP $ 9,946 $ 3,402 $ 18,248 $ 9,963

Adjustments:

a.


Modification of stock option - - 1,560 -
b.


iFrogz acquisition expenses - - 1,947 -
c.



iFrogz inventory fair value write-up
864 - 4,506 -
d.


Impairment of note receivable 418 - 1,489 -
e.


Gain on deconsolidation of HzO (1,906 ) - (1,906 ) -
f.


Income tax effects (755 ) - (3,576 ) -

Non-GAAP net income attributable to stockholders $ 8,567 $ 3,402 $ 22,268 $ 9,963

Non-GAAP EPS attributable to stockholders $ 0.27 $ 0.14 $ 0.77 $ 0.41

Weighted average number of shares outstanding - diluted 31,378 24,585 29,082 24,262

Contact:
Investor Relations:
Genesis Select Corp.
Kim Rogers-Carrete, 949-429-7408
[e-mail]
or
Media:
Lane PR
Amber Roberts, 212-302-5964
[e-mail]
or
Company:
ZAGG Inc
Nathan Nelson, 801-263-0699 ext. 107
[e-mail]