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| 8-K - 8-K - ZAGG Inc | a201806198kcoverletter.htm |
Investor Presentation Virtual Shareholder Meeting 2018 0
Cautionary note regarding forward-looking statements Forward-Looking Statements This presentation of ZAGG Inc (“ZAGG,” the “Company,” “we” or “us”) contains (and oral communications made by us may contain) “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "anticipate," "believe," "estimate," "expect," "intend," "plan," "predict," "project," "target," “future,” “seek,” “likely,” “strategy,” “may,” “should,” “will” and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding our guidance for the Company and statements that estimate or project future results of operations or the performance of the Company. 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: (a) the ability to design, produce, and distribute the creative product solutions required to retain existing customers and to attract new customers; (b) building and maintaining marketing and distribution functions sufficient to gain meaningful international market share for our products; (c) 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; (d) changes or delays in announced launch schedules for (or recalls or withdrawals of) new mobile devices by major manufacturers like Apple, Samsung, and Google; (e) the ability to successfully integrate new operations or acquisitions, (f) the impact of inconsistent quality or reliability of new product offerings; (g) the impact of lower profit margins in certain new and existing product categories, including certain mophie products; (h) the impacts of changes in economic conditions, including on customer demand; (i) managing inventory in light of constantly shifting consumer demand; (j) 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; (k) adoption of or changes in accounting policies, principles, or estimates; and (l) changes in tax laws and regulations. Any forward-looking statement made by us in this presentation speaks only as of the date of this presentation. 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 U.S. Securities and Exchange Commission, including (but not limited to) Item 1A - "Risk Factors" in the Form 10-K and Management's Discussion and Analysis of Financial Condition and Results of Operations and the risks described therein from time to time. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise. The forward-looking statements contained in this presentation are intended to qualify for the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. This presentation also contains estimates and other statistical data made by independent parties and by ZAGG relating to market share, growth and other industry data. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified the statistical and other industry data generated by independent parties and contained in this presentation and, accordingly, cannot guarantee their accuracy or completeness. In addition, projections, assumptions and estimates of our future performance and the future performance of the markets in which we compete are necessarily subject to a high degree of uncertainty and risk due to a variety of factors. These and other factors could cause results or outcomes to differ materially from those expressed in the estimates made by the independent parties and by ZAGG. Non-GAAP Financial Measures This presentation also includes certain non-GAAP financial measures, Adjusted EBITDA and Adjusted EBITDA Margin. Readers are cautioned that Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, other income (expense), mophie transaction expenses, mophie fair value inventory write-up related to acquisition, mophie restructuring charges, mophie employee retention bonus, loss on disputed mophie purchase price (2016 only), and impairment of intangible asset) and Adjusted EBITDA Margin (Adjusted EBITDA stated as a percentage of revenue) are not financial measures under US generally accepted accounting principles (“GAAP”). In addition, this financial information should not be construed as an alternative to any other measure of performance determined in accordance with GAAP, or as an indicator of 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. As such, it should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. We present Adjusted EBITDA and Adjusted EBITDA Margin because we believe that they are helpful to some investors as measures of performance. We caution readers that non-GAAP financial information, by its nature, departs from traditional accounting conventions. Accordingly, its use can make it difficult to compare current results with results from other reporting periods and with the financial results of other companies. We have provided a reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin to the most directly comparable GAAP measures, which is available in the appendix. 1
Chris Ahern – Background/Vision Experience Vision • General • Continue to embrace corporate objectives and values • ZAGG • Organized structure focused on growing business to $1B • Organic growth Strong product pipeline Expanding distribution Strong operations and customer relations • Leverage strong balance sheet and liquidity Targeted M&A Opportunistic share repurchase 2
Global leader in mobile lifestyle #1 market share (64%) #1 market share (27%) Leader in emerging wireless Battery cases External power charging category #1 market share (56%) #2 market share (24%) Key player in value position Screen protection Folio keyboards Audio Source: The NPD Group / Retail Tracking Service for the last three months ended December 31, 2017 except for folio keyboards, which is for the three months ended September 30, 2017; NPD data refers only to U.S. retail sales Note: Screen protection, battery cases, external power and folio keyboard market share based on dollar share. 3
Diversified Product portfolio aligned with consumer needs Keyboards Cases/ Investment protection Handset costs continue to rise Other Protecting trade-in value of device 1% Brittleness vs. scratch resistance screens Audio 1.5 billion smartphones sold in 2017 5% Extended power Larger screens and thinner devices are gaining popularity 5% Apps and increased phone usage drain battery at an alarming rate Power Cases “Our One Wish? Longer Battery Life” – Wall Street Journal 15% Mobile audio lifestyle 48% People are consuming increasing amounts of content – wireless options allow for more flexibility Mobile music listening has increased weekly headphone usage from 3 hours in 1980 to over 20 hours in 2016 Power Management 26% Connectivity & productivity Mobile traffic outpacing desktop traffic Increasing frequency of working remotely Screen Tablets being used for more than just consumption – Protection content creation $519M net sales 2017 4
Continue global distribution expansion Significant Americas door growth with additional penetration opportunities 64,496 34.8% 45,634 42,202 22.8% 24.7% 32,161 17.4% 25,065 13.5% 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Americas Door Count Americas % Total Door Penetration 5
Strong profitability Adjusted EBITDA1 ($mm) $78.5 $73.0 +8% +97% $42.2 $37.2 (12%) 3 2015 2016 2 2017 2018E Adjusted EBITDA 16% 9% 14% 14% margin % 1 Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, other income (expense), mophie transaction costs, mophie fair value inventory write-up related to acquisition, mophie restructuring charges, mophie employee retention bonus, and the loss on disputed mophie purchase price (2016) 2 mophie Adjusted EBITDA of ($16mm); ZAGG Adjusted EBITDA of $53mm 3 Midpoint of 2018 Adjusted EBITDA guidance provided on our Q118 earnings call held on May 8, 2018 6
Corporate objectives & values Integrity Ownership Care for People Passion Continuous Improvement Performance Sense of Urgency 7
Appendix
Non-GAAP reconciliation (annual periods) (amounts in thousands) Years Ended Actual Actual Actual Guidance1 December 31, 2015 December 31, 2016 December 31, 2017 December 31, 2018 Net income in accordance with GAAP $ 15,587 $ (15,587) $ 15,171 $ 40,200 Adjustments: a. Stock based compensation expense 3,893 3,830 3,602 3,667 b. Depreciation and amortization 12,923 22,270 21,888 18,358 c. Other (income) expense 166 2,199 1,383 1,375 d. Impairment of intangible asset - - 1,959 - e. mophie transaction costs 179 2,591 - - f. mophie fair value of inventory write-up - 2,586 - - g. mophie restructuring charges - 2,160 437 - h. mophie employee retention bonus - 841 346 - i. Loss on disputed mophie purchase price (2016) - 24,317 - - j. Recovery of reserves on note receivable (639) - - - k. Income tax expense (benefit) 10,111 (7,972) 28,605 14,900 Adjusted EBITDA $ 42,220 $ 37,235 $ 73,391 $ 78,500 Net sales in accordance with GAAP $ 269,311 $ 401,857 $ 519,495 $ 560,000 Adjusted EBITDA margin (Net sales/Adjusted EBITDA) 16% 9% 14% 14% 1 Midpoint of 2018 guidance provided on our Q118 earnings call held on May 8, 2018 9
The NPD Group, Inc. references References to the market shares information on slide #5 from The NPD Group Retail Tracking Services cited below: 1. The NPD Group Inc., U.S. Retail Tracking Service, Cell Phone Screen Protection, based on dollar sales, October 2017 – December 2017. 2. The NPD Group Inc., U.S. Retail Tracking Service, Cell Phone Device Protection, Charging Case, based on dollar sales, October 2017 – December 2017. 3. The NPD Group Inc., U.S. Retail Tracking Service, Mobile Power, Charge Type: Portable Power Packs, based on dollar sales, October 2017 – December 2017. 4. The NPD Group Inc., U.S. Retail Tracking Service, Tablet and e-readers – Cases, Keyboard Included, based on dollar sales, October 2017 – September 2017. References to the market shares information on slide #11 from The NPD Group Retail Tracking Services cited below: 1. The NPD Group Inc., U.S. Retail Tracking Service, Cell Phone Screen Protection, based on dollar sales, January 2014 – December 2017. References to the market shares information on slide #12 from The NPD Group Retail Tracking Services cited below: 1. The NPD Group Inc., U.S. Retail Tracking Service, Cell Phone Device Protection, Charging Case, based on dollar sales, October 2017 – December 2017. 2. The NPD Group Inc., U.S. Retail Tracking Service, Mobile Power, Charge Type: Portable Power Packs, based on dollar sales, October 2017 – December 2017. 10
Investor Presentation Virtual Shareholder Meeting 2018 investors.zagg.com 11