Web Site
Google Finance
SEC Filing
May 24, 2013
2013 Q1 Data
Check list:
1.Major Business.
(1) InvisibleShield brand: Screen protector. 40% and percentage is down. High margin.
(2) ZAGG Brand: tablet Keyboard, cover, speakers, around 25%. Lower margin.
(3) iFrogz Brand: Cases, headphones, speakers, game controls. 25%-30%. Lower margin.
Major customers: Bestbuy :30% Walmart: 12%.
2.Balance sheet.
Recent Price: $5.09, Tangible book value: $2.05, Share outstanding: 31m, (31.7m diluted) Market Cap:$160m.
Current asset:$115m, Current liability:$33m, Debt:$42m, Inventory:$41m, Cash:$23m.
3.Credit facility.
At Dec 2012:
24m Term loan. 24m outstanding. LIBOR+1.25%
60m Line of credit. 17.7m outstanding. LIBOR+1.25%
4.Financial data by years. (in million$)
| 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | |
|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 264 | 179 | 76 | 38 | 19 | 5.1 | 2.8 | 0.7 | ||
| OP Income | 33.5 | 28.1 | 16.8 | 5.7 | 2.4 | (1.2) | (0.2) | 0.2 | ||
| Income/s | 0.46 | 0.63 | 0.44 | 0.15 | 0.11 | (0.05) | (0.01 | 0.02 | ||
| CF-WC | 40 | 21.9 | 9.5 | 4.1 | 3.1 | 0.2 | ||||
| CAPX | 2.8 | 53* | 2.9 | 0.5 | 0.4 | 0.1 | ||||
| Cash | 20.2 | 26.4 | 2.4 | 5.0 | 1.1 | 2.1 | ||||
| Debt | 46.2 | 68.3 | 0 | 0 | 0 | 0 |
No dividend so far.
5.Cost structure
Leasing obligations. Flexible cost structure or fixed cost structure? Cost controls.
6.Insider holding, options, Insider trading info, share buy back.
Robert Pedersen: Former CEO: 2.3m 7.6%
Brandon T. O’Brien: CFO: 634k 2.1%
Derek M. Smith: VP. 443k 1.4%
7.Management compensation.
Top 4 over $6m for 2012, including $1m for former CEO. $3m for 2011.
Options outstanding : 1.1m
8.Employee numbers. Revenue/Employee. Compensation/Employee.
237 employees at end of 2012
9.Industry comparison.
Major competitors in the same industry. Whether the business is competitive?
10.Auditor
KPMG
11.Major events.
Acquired iFrogz at 2011 for $50m + 4.4m shares of ZAGG
At Aug. 2012, its CEO and founder Robert Pedersen resigned because of a sell of the company's stock due to a margin call. Almost all directors since changed. Had been quite a bit of story. Even before that at December 2011 this already happened once.
From June 2009 to Sept. 2011, Lorence Harmer, one of its director, engaged in a product called ZAGGbox with his own company. Totally the ZAGG paid the company about $4.1m and basically it is a fraud. Later he quit the director. The company just got $1.2m back.
The company had spent over $4 million$in HzO inc. Which is an water proof technology. It seems not doing very well.
12.Comments.
(1) The CEO change is actually not bad for the company given that the new CEO is more capable to run a bigger business based on his past experience.
(2) Both revenue and income of Q1 2013 is down compare to last year. Due to reorganize of sales channels and lack of new apple device release. I view this as temporary. However, the grows will slow down or even flat. Still I believe it is at least a flat business with good growing potential.
(3) It is grows margin will keep go down as invisible shield protector will account less for its business.
(4) The company got some ugly stories in the past including its former CEO and director. That is the major reason the stock is cheap now. However, there is quite a change with a new CEO and all new 5 independent directors except the old CFO still in position.
(5) There are many writing from different analysts in the past questioned about the company. The major concern is about the whether the company's financial report is true.
(a) Doubt about the management. Those were true or partially true. But some are not related. With the CEO and directors change. This shouldn't remain as a concern.
http://www.scribd.com/doc/45466615/ZAGG-Presentation-12-14-10-Final-2
http://www.thefinancialinvestigator.com/?p=402
http://www.thefinancialinvestigator.com/?p=390
(a) At 2011, people think the company's revenue was overstated with fake inventory number. However, as two years past, and the new KPMG audit for two years. There seems less doubt.
(b) There was a doubt about the company's cash flow and cash balance, later it turned out not true. Especially in 2012 the company paid down $20m debt, in Q1 2013, paid down $4m debt and repurchased $6m stocks.
(c) There is concern about the rising inventory level. The inventory number might be made up and actually worth much less. However, Currently it is about less than one quarter revenue which is not that bad. Also it is inline with revenue grows. Overall, this indeed remains as a concern and should be closely monitored.
(d) There is a doubt about its return policy with Best Buy. Basically it is the same concern about inventory.
http://www.citronresearch.com/zagg-what-a-mess-under-those-covers/
(6) It is hard to give a quality score for this company. Based on the past, it should be 9 which both revenue and income is growing. Based on current, it might just 7 because the grows seems stopped. Overall, I give it a 7.5. Might adjust it once it is more clear in the future.
(7) It is hard to give a base price as well. The book value is low, the average income is not good since there are quite a lot write offs included. So I use average FCF-WC for the past 3 years which is around $20m/year. This number also includes stock based compensation which is $5.7m, $3.3m, $1m for the 2012 to 2010 year. Removing those compensation it comes $17m/year. The base price is 17/31.7*15=$8.04/share
(8) Although there were many questioning about the company in the past. I view them as good since there are no fraud found so far and seems less possible in future. The company actually is more stable than before. Of course there are some concerns. Mainly whether it could remain innovative and remain current cash flow.
Updated Aug. 08, 2013
Q2 2013 Data
Current Price $4.85
(1) Revenue is still down in Q2 from $61m to $51m.
(2) Pay down debt, now balance is $26.6m. Cash $13.6m
(3) FCF-WC for first two quarters is $5.2m and $7.4m. Remove the $2.4m stock based compensation, it still comes $10.2m for the two quarters. It is better than the $17/year average.
(4) In my opinion, the company is actually doing pretty OK.
Updated Nov. 06, 2013
Q3 2013 Data
Current Price $4.10
(1)Revenue down from $60m last year to $50.
(2) Debt balance is now $20m.
(3) FCF-WC for Q3 is $6m. stock based compensation for 3 quarters is $3.1m
(4) Tangible book value close to $2.4.
(5) It is not getting much worse but the stock price did.
Updated Nov. 12, 2014
Q3 2014 Data
Price drop from $6.7 to under $5 after release. Current Price $5.80
(1)Revenue back to $60m.
(2)Write down inventory by $9.6m
(3) FCF-WC for 3Q 2014 is $14m including the $9.6m in inventory write down.
(4) Tangible book value close to $2.9.
(5) It is hard to analysis the inventory write down. No previous experience.
