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ZAGG, Inc. Reports Fourth Quarter and Full Year 2009 Financial Results

SALT LAKE CITY - (BUSINESS WIRE) - ZAGG Inc. (NASDAQ: ZAGG) (www.ZAGG.com), a leading producer of mobile electronics accessories including the popular invisibleSHIELD and ZAGGaudio brands, today announced financial results for the fourth quarter and full year ended December 31, 2009.

Financial Results

Revenue for the fourth quarter was $11.3 million, a 50% increase from the fourth quarter of 2008, and a 16% sequential increase as compared to the third quarter of 2009. Revenue for the full year was $38.4 million, a 94% increase from $19.8 million in 2008.

Gross profit for the fourth quarter was $6.1 million, or 54% of sales, compared to $3.8 million, or 52% of sales in the fourth quarter of 2008. Gross profit for the full year was $22.1 million, or 58% of sales, compared to $13.2 million, or 67% of sales in 2008.

Net income for the fourth quarter was $0.3 million or $0.01 per share as compared to net income of $1.1 million or $0.06 per share in the fourth quarter of 2008. Net income for the full year was $3.4 million or $0.15 per share as compared to net income of $2.1 million or $0.11 per share in the prior year.

During the fourth quarter, the Company took one-time charges of $1.2 million or $0.05 per share related to the following items:

• Notes receivable and related interest receivable of $0.7 million or $0.03 per share
• Reserves against accounts receivable of $0.4 million or $0.02 per share
• Inventory obsolescence reserves of $0.1 million

"We are very pleased with our record revenue growth again for 2009, and our continued acceptance in the retail channel with our flagship product, the invisibleSHIELD," said Robert G. Pedersen II, President and CEO of ZAGG. "The Electronic Mobile Device accessories market is a huge opportunity for ZAGG, and we have made a firm entry into this sector with products that will take market share and serve the consumers' needs."

Business highlights

During the fourth quarter, we announced new distribution into Cricket's retail stores, as well as a distribution agreement announced with T-Mobile in Germany for the invisibleSHIELD. T-Mobile is the exclusive seller of the Apple iPhone in Germany.

An important milestone during the quarter was our NASDAQ listing in early November.

As a part of our strategy to broaden our product offering, ZAGG released a new ZAGG audio line, ZAGGbuds and ZAGGsmartbuds in the fourth quarter. We also launched ZAGGskins, customizable invisibleSHIELD protection for mobile devices. The products were launched on the ZAGG website, and we are seeing good sell-through on both lines.

ZAGG continues to make progress with two initiatives announced before year-end: the ZAGGbox media center and HzO, a water blocking system for personal electronics that ZAGG has retained the exclusive marketing rights to; both of which are important to the long-term strategy of the company.

Adjusted EBITDA

ZAGG considers earnings before other income or expense; income tax provision or benefit; impairment losses; depreciation and amortization; and share-based compensation expense related to stock and stock options ("Adjusted EBITDA" ) to be important financial indicators 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 interest, income tax provision or benefit, depreciation and amortization, impairment losses, share-based compensation and other non-cash charges.

Adjusted EBITDA for the fourth quarter of 2009 was $1.7 million or $0.07 per share versus $1.1 million or $0.06 per share in the fourth quarter of 2008. For the full year, Adjusted EBITDA was $7.3 million or $0.32 per share versus $3.0 million or $0.15 per share in the prior year.

Conference Call

A conference call will be held today at 5:00 p.m. Eastern Time to review these results. Interested parties can follow the call via the Internet at ZAGG's Investor Relations page. The call will be available for replay for 30 days by dialing 1-877-660-6853 and entering account number 286 and call ID number 346764. A podcast of the event will also be available online or via Investor Calendar's RSS feed.

For more information about ZAGG, please visit www.ZAGG.com.

Non-GAAP Financial Disclosure:

Investors are cautioned that the Adjusted EBITDA, or earnings/(loss) before other income/(expense), taxes, depreciation and amortization, impairment losses and stock-based compensation, and adjusted net income, or net income excluding amortization of intangible assets and share-based compensation expense related to stock and stock options, information 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.

About ZAGG, Inc.:

ZAGG is dedicated to protecting and enhancing the mobile experience. ZAGG designs, manufactures, and distributes protective clear coverings and accessories for consumer electronic and hand-held devices, worldwide under the brand names invisibleSHIELD(TM) and ZAGGaudio(TM). ZAGG has also introduced appSpace, a powerful recommendation engine for the fast-growing mobile app market, combined with the networking power of social media. The invisibleSHIELD is a protective, high-tech patented film covering, designed for iPods, laptops, cell phones, digital cameras, PDAs, watch faces, GPS systems, gaming devices, and other items. The patent-pending invisibleSHIELD application of clear protective film covering a device is the first scratch protection solution of its kind on the market, and has sold millions of units. Currently, ZAGG offers over 4,000 precision pre-cut designs with a lifetime replacement warranty through ZAGG.com, major retailers like Best Buy, Radio Shack, and Cricket, resellers, college bookstores, Mac stores, mall kiosks, and other online retailers. The company continues to increase its product lines to offer additional electronic accessories and services to its tech-savvy customer base, including upcoming technologies like ZAGGbox(TM), introduced at CES 2010, and HzO(TM), a breakthrough gadget waterproofing technology. For more product or investor information please visit the company's web site at www.ZAGG.com.

ZAGG INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
				Three months ended								Twelve months ended
				December 31, 2009				December 31, 2008				December 31, 2009				December 31, 2008
Net sales				$	11,397,588			$	7,330,791			$	38,361,747			$	19,791,603
Cost of sales					5,252,598				2,673,715				16,308,501				6,593,718
Gross profit					6,144,990				4,657,076				22,053,246				13,197,885
Operating expenses:
	Advertising and marketing				1,676,947				1,492,659				5,845,801				3,976,015
	Selling, general and administrative				3,696,282				2,127,383				10,497,394				6,842,921
Total operating expenses					5,373,229				3,620,042				16,343,195				10,818,936
Income from operations					771,761				1,037,034				5,710,051				2,378,949
Other income (expense):
	Interest expense				(166,791	)			(2,552	)			(231,445	)			(6,022	)
	Interest and other income				(106,548	)			49,154				34,833				227,223
Total other (expense) income					(273,339	)			46,602				(196,612	)			221,201
Income before provision for income taxes					498,422				1,083,636				5,513,439				2,600,150
Income tax provision					(247,578	)			65,048				(2,132,010	)			(501,188	)
Net income				$	250,844			$	1,148,684			$	3,381,429			$	2,098,962
Basic net income per common share				$	0.01			$	0.06			$	0.16			$	0.11
Diluted net income per common share				$	0.01			$	0.06			$	0.15			$	0.11
Weighted average number of shares outstanding - basic					21,701,829				19,154,104				20,633,812				18,956,290
Weighted average number of shares outstanding - diluted					23,852,584				19,315,043				22,989,039				19,290,502

ZAGG INCORPORATED AND SUBSIDIARY
RECONCILIATION OF NON-GAAP FINANCICAL INFORMATION TO GAAP
(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.
				Three months ended							Twelve months ended
				December 31, 2009			December 31, 2008				December 31, 2009			December 31, 2008
Net income in accordance with GAAP				$	250,844		$	1,148,684			$	3,381,429		$	2,098,962
	Add/(less):
	a.	Impairment of notes receivable and related interest			712,000			-				712,000			-
	b.	Stock based compensation expense			166,011			58,361				664,792			416,992
	c.	Depreciation and amortization			71,156			48,312				243,119			160,544
	d.	Provision for (benefit from) income taxes			247,578			(65,048	)			2,132,010			501,188
	e.	Other expense (income)			273,339			(46,602	)			196,612			(221,201	)
Adjusted EBITDA				$	1,720,928		$	1,143,707			$	7,329,962		$	2,956,485
Diluted Adjusted EBITDA per common share				$	0.07		$	0.06			$	0.32		$	0.15
Weighted average number of shares outstanding - diluted					23,852,584			19,315,043				22,989,039			19,290,502

ZAGG INCORPORATED AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
					December 31,
					2009				2008
ASSETS
Current assets
	Cash				$	4,970,756			$	1,065,652
	Accounts receivable, net					5,450,722				3,593,887
	Inventories					3,695,840				1,913,297
	Prepaid expenses and other current assets					1,836,335				676,077
	Notes receivable					75,000				513,000
	Convertible bridge loan					1,151,000				-
	Deferred income tax assets					255,653				81,663
Total current assets						17,435,306				7,843,576
Property and equipment, net						887,705				549,370
Deferred income tax assets						446,154				4,937
Deposits and other assets						9,688				9,688
Intangible assets, net						119,627				47,344
Total assets					$	18,898,480			$	8,454,915
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
	Notes payable				$	-			$	20,223
	Accounts payable					2,781,425				1,626,390
	Accrued liabilities					1,252,461				212,754
	Accrued wages and wage related expenses					164,495				121,112
	Deferred revenue					262,937				366,590
	Sales returns liability					550,201				291,119
Total current liabilities						5,011,519				2,638,188
Total liabilities						5,011,519				2,638,188
Stockholders' equity
	Common stock, $0.001 par value; 50,000,000 shares authorized; 21,711,862 and 19,163,995 shares issued and outstanding, respectively					21,712				19,165
	Additional paid-in capital					9,239,285				4,547,618
	Cumulative translation adjustment					(112,039	)			(106,630	)
	Retained earnings					4,738,003				1,356,574
Total stockholders' equity						13,886,961				5,816,727
Total liabilities and stockholders' equity					$	18,898,480			$	8,454,915

Media:
ZAGG Inc.
Nathan Nelson, 801-263-0699 ext. 107
nnelson@zagg.com
or
Investor Relations:
Genesis Select Corp.
Kim Rogers-Carrete, 303-415-0200
krogersc@genesisselect.com