AP NEWS

ZAGG Reports Record Third Quarter 2018 Results

November 6, 2018

SALT LAKE CITY, Nov. 06, 2018 (GLOBE NEWSWIRE) -- ZAGG Inc (Nasdaq: ZAGG), a leading global mobile lifestyle company, today announced financial results for the third quarter ended September 30, 2018.

Third Quarter 2018 Highlights (Comparisons versus Third Quarter 2017)

-- Net sales of $141.1 million, an increase of 5% compared to $134.4 million -- Gross profit of 37% compared to 36% -- Net income of $14.6 million compared to $9.8 million -- Diluted earnings per share of $0.51 compared to $0.34 -- Adjusted EBITDA of $23.8 million compared to $22.4 million

Year-to-Date 2018 Highlights (Comparisons versus Year-to-Date 2017)

-- Net sales of $371.7 million, an increase of 9% compared to $342.6 million -- Gross profit of 34% compared to 33% -- Net income of $24.9 million compared to $7.0 million -- Diluted earnings per share of $0.87 compared to $0.25 -- Adjusted EBITDA of $48.3 million compared to $37.2 million

“Our record third quarter was highlighted by strong growth in screen protection sales which fueled meaningful gains in gross margin and operating profit,” commented Chris Ahern, Chief Executive Officer. “We are also encouraged by the performance of our wireless charging business, which continues to gain market share following the launch of our mophie wireless charge pad just 12 months ago. With respect to power cases, we recently received certification for mophie’s iPhone X compatible juice pack and expect to have product in market ahead of the holiday selling season. That said, this is later than our most recent expectations, which has put some near-term pressure on our top-line and required us to reduce our full-year revenue outlook. Looking ahead, we remain confident about the longer-term growth prospects for ZAGG and I am confident that we have the right resources and plans in place to successfully capitalize on these opportunities.”

Third Quarter Results (in millions, except per share amounts)

Three Months Ended September September 30, 2018 30, 2017 Net sales $ 141.1 $ 134.4 Gross profit $ 52.2 $ 48.4 Gross profit margin 37 % 36 % Net income $ 14.6 $ 9.8 Diluted earnings per share $ 0.51 $ 0.34 Adjusted EBITDA $ 23.8 $ 22.4

Net sales increased 5% to $141.1 million, the highest third quarter sales result in ZAGG’s history, compared to $134.4 million. The increase in net sales was primarily attributable to (1) increased sales of screen protection products driven by the new iPhone® launch as well as the introduction of the Glass + VisionGuard® screen protection products, and (2) the increase in sales of our power management products, specifically related to wireless charging accessories. These increases were partially offset by a decrease in sales of power cases and audio.

Gross profit increased 8% to $52.2 million (37% of net sales) compared to $48.4 million (36% of net sales). The increase in gross profit margin was primarily attributable to the mix of screen protection products, our highest margin product category, which increased to 63% of net sales compared to 57% of net sales during the three months ended September 30, 2018.

Operating expenses increased 4% to $33.9 million (24% of net sales) compared to $32.5 million (24% of net sales). The increase in operating expenses was primarily attributable to (1) increases in headcount to support additional growth of the Company, and (2) transaction costs incurred in connection with the acquisition of BRAVEN. These increases were partially offset by a decrease in depreciation expense resulting from lower carrying amounts of property and equipment during the three months ended September 30, 2018.

Net income increased 50% to $14.6 million compared to $9.8 million. Diluted earnings per share increased 51% to $0.51 (on 28.6 million shares) compared to $0.34 (on 28.4 million shares).

Adjusted EBITDA increased 6% to $23.8 million compared to $22.4 million.

Year-to-Date Results (in millions, except per share amounts)

Nine Months Ended September September 30, 2018 30, 2017 Net sales $ 371.7 $ 342.6 Gross profit $ 127.4 $ 112.8 Gross profit margin 34 % 33 % Net income $ 24.9 $ 7.0 Diluted earnings per share $ 0.87 $ 0.25 Adjusted EBITDA $ 48.3 $ 37.2

Net sales increased 9% to $371.7 million, the highest third quarter year-to-date sales result in ZAGG’s history, compared to $342.6 million. The increase in net sales was primarily attributable to (1) the increase in sales of our power management products, specifically related to wireless charging accessories, and (2) increases in screen protection products driven by the new iPhone launch as well as the introduction of the Glass + VisionGuard screen protection products. These increases were partially offset by a decrease in sales of power cases and audio.

Gross profit increased 13% to $127.4 million (34% of net sales) compared to $112.8 million (33% of net sales). The increase in gross profit margin was primarily attributable to the mix of screen protection products, our highest margin product category, which increased to approximately 56% of net sales compared to approximately 52% of net sales for the nine months ended September 30, 2018.

Operating expenses decreased 2% to $96.1 million (26% of net sales) compared to $98.0 million (29% of net sales). The decrease in operating expenses was primarily attributable to (1) a decrease in depreciation expense, (2) a $2.0 million charge in 2017 related to the impairment of a patent that did not recur in 2018, and (3) operating expense synergies realized related to the mophie integration. These decreases in operating expense were partially offset by increases in headcount to support additional growth of the Company.

Net income increased 253% to $24.9 million compared to net income of $7.0 million. Diluted earnings per share increased 248% to $0.87 (on 28.6 million shares) compared to $0.25 (on 28.2 million shares).

Adjusted EBITDA increased 30% to $48.3 million compared to $37.2 million.

2018 Business Outlook

The Company updated its annual guidance for 2018 as follows:

-- Due to the delay in the juice pack® certification, net sales of approximately $535 million -- Gross profit margin as a percentage of net sales in the low to mid 30′s range -- Adjusted EBITDA at the low end of the current range of $77 million to $80 million -- Diluted earnings per share of $1.30 to $1.40 -- Annual effective tax rate of approximately 24% compared to approximately 25% in the last annual business outlook

Conference Call

A conference call will be held today, November 6, 2018, at 5:00 p.m. Eastern to review these results. Interested parties may access via the Internet on the Company’s website at: investors.zagg.com (the URLs are included here in this exhibit as inactive textual references and information contained on, or accessible through, our websites is not a part of, and is not incorporated by reference into, this report).

About Non-GAAP Financial Information

This press release includes Adjusted EBITDA as a non-GAAP financial measure. Readers are cautioned that Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, other expense, transaction costs, mophie restructuring charges, mophie employee retention bonus, consulting fee to former CEO, inventory step-up amount in conjunction with the BRAVEN acquisition, and impairment of intangible asset) is not a financial measure under U.S. 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 because we believe that it is helpful to some investors as a measure 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 to the most directly comparable GAAP measures in the supplemental financial information attached to this press release.

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 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 outlook 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 impacts of inconsistent quality or reliability of new product offerings; g. the impacts of lower profit margins in certain new and existing product categories, including certain mophie products; h. the impacts of changes in global 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. the impacts of increased tariffs and international trade disputes; l. adoption of or changes in accounting policies, principles, or estimates; and m. changes in tax laws and regulations.

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 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 press release 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.

About ZAGG Inc

ZAGG Inc (NASDAQ:ZAGG) is a global leader in accessories and technologies that empower mobile lifestyles. The Company has an award-winning product portfolio that includes screen protection, mobile keyboards, power management solutions, social tech, and personal audio sold under the ZAGG®, mophie®, InvisibleShield®, IFROGZ® and BRAVEN® brands. ZAGG has operations in the United States, Ireland, and China. ZAGG products are available worldwide, and can be found at leading retailers including Best Buy, Verizon, AT&T, Sprint, Walmart, Target, Walgreens and Amazon.com. For more information, please visit the Company’s websites at www.zagg.com and www.mophie.com and follow us on Facebook, Twitter and Instagram.

CONTACT:

Investor Relations:ICR Inc.Brendon Frey203-682-8216brendon.frey@icrinc.com

Company:ZAGG IncJeff DuBois801-506-7336jeff.dubois@ZAGG.com

ZAGG INC AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par value) (Unaudited) September December 30, 2018 31, 2017 ASSETS Current assets: Cash and cash equivalents $ 17,780 $ 24,989 Accounts receivable, net of allowances of $707 and $734 115,801 123,220 Income tax receivable 941 — Inventories 78,666 75,046 Prepaid expenses and other current assets 6,649 4,547 Total current assets 219,837 227,802 Property and equipment, net of accumulated depreciation of $15,284 and $12,540 13,936 13,444 Intangible assets, net of accumulated amortization of $75,151 and $66,639 32,505 39,244 Deferred income tax assets 22,134 24,403 Goodwill 12,570 12,272 Other assets 1,667 3,426 Total assets $ 302,649 $ 320,591 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 67,355 $ 96,472 Income tax payable — 2,052 Sales returns liability 43,506 34,536 Accrued wages and wage related expenses 5,812 5,652 Accrued liabilities 8,091 8,168 Deferred revenue — 315 Current portion of line of credit — 23,475 Current portion of long-term debt, net of deferred loan costs of $0 and $141 — 13,922 Total current liabilities 124,764 184,592 Non-current portion of line of credit 28,000 — Total liabilities 152,764 184,592 Stockholders’ equity: Common stock, $0.001 par value; 100,000 shares authorized; 34,433 and 34,104 shares 34 34 issued Treasury stock, 6,448 and 6,065 common shares at cost (43,734 ) (37,637 ) Additional paid-in capital 95,642 96,145 Accumulated other comprehensive loss (853 ) (348 ) Retained earnings 98,796 77,805 Total stockholders’ equity 149,885 135,999 Total liabilities and stockholders’ equity $ 302,649 $ 320,591 - ------- - - ------- -

ZAGG INC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended September September September September 30, 2018 30, 2017 30, 2018 30, 2017 Net sales $ 141,087 $ 134,398 $ 371,718 $ 342,571 Cost of sales 88,916 86,006 244,297 229,749 Gross profit 52,171 48,392 127,421 112,822 Operating expenses: Advertising and marketing 3,089 2,627 8,322 7,703 Selling, general and administrative 27,349 26,720 78,692 78,727 Transaction costs 618 96 635 611 Impairment of intangible asset — — — 1,959 Amortization of intangible assets 2,859 3,014 8,404 9,040 Total operating expenses 33,915 32,457 96,053 98,040 Income from operations 18,256 15,935 31,368 14,782 Other income (expense): Interest expense (286 ) (417 ) (1,132 ) (1,527 ) Other (expense) income (176 ) 18 (362 ) 67 Total other expense (462 ) (399 ) (1,494 ) (1,460 ) Income before provision for income 17,794 15,536 29,874 13,322 taxes Income tax provision (3,168 ) (5,760 ) (5,003 ) (6,281 ) Net income $ 14,626 $ 9,776 $ 24,871 $ 7,041 Earnings per share attributable to stockholders: Basic earnings per share $ 0.52 $ 0.35 $ 0.88 $ 0.25 Diluted earnings per share $ 0.51 $ 0.34 $ 0.87 $ 0.25 - ------- - - ------- - - ------- - - ------- -

ZAGG INC AND SUBSIDIARIES RECONCILIATION OF NON-U.S. GAAP FINANCIAL INFORMATION TO U.S. GAAP (in thousands) (Unaudited) UNAUDITED SUPPLEMENTAL DATA The following information is not a financial measure under generally accepted accounting principles (“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 a 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 Nine Months Ended ADJUSTED EBITDA RECONCILIATION September September September September 30, 2018 30, 2017 30, 2018 30, 2017 Net income in accordance with U.S. GAAP $ 14,626 $ 9,776 $ 24,871 $ 7,041 Adjustments: a. Stock-based compensation expense 757 899 2,165 2,536 b. Depreciation and amortization 4,099 5,486 13,329 16,505 c. Impairment of intangible asset — — — 1,959 d. Other expense, net 462 399 1,494 1,460 e. Transaction costs 618 96 635 611 f. mophie restructuring charges — — — 437 g. mophie employee retention bonus — — — 346 h. Inventory step-up amount in connection with the BRAVEN Acquisition 72 — 72 — i. Consulting fee to former CEO — — 700 — j. Income tax provision 3,168 5,760 5,003 6,281 Total Adjustments 9,176 12,640 23,398 30,135 Adjusted EBITDA $ 23,802 $ 22,416 $ 48,269 $ 37,176 - ------ - ------ - ------ - ------

ZAGG INC AND SUBSIDIARIES RECONCILIATION OF NON-U.S. GAAP FINANCIAL INFORMATION TO U.S. GAAP (in thousands) (Unaudited) Years Ended Guidance Actual ADJUSTED EBITDA December December RECONCILIATION (CONTINUED) 31, 2018 31, 2017 Net income in accordance $ 39,400 $ 15,100 with U.S. GAAP Adjustments: a. Adjustments to net income 25,200 29,615 b. Income tax provision 12,400 28,252 Total Adjustments 37,600 57,867 Adjusted EBITDA $ 77,000 $ 72,967 - ------ - ------

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