Quarterly Report (10-q)
November 05 2020 - 05:03PM
Edgar (US Regulatory)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
☒ QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended September 30, 2020
or
☐ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from
to
Commission File Number: 001-35465
TURTLE BEACH CORPORATION
(Exact name of registrant as specified in its charter)
|
Nevada
|
27-2767540
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification Number)
|
|
|
|
|
44 South Broadway, 4th
Floor
White Plains, New York
|
10601
|
|
(Address of principal executive offices)
|
(Zip Code)
|
(888) 496-8001
(Registrant’s telephone number, including area code)
11011 Via Frontera, Suite A/B, San Diego, CA 92127
(Former name, former address and former fiscal year, if changed
since last report)
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class
|
Trading Symbols
|
Name of each exchange on which registered
|
|
Common Stock, par value $0.001
|
HEAR
|
Nasdaq
|
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). ☒ Yes
☐ No
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
|
Large accelerated filer
|
☐
|
|
Accelerated filer
|
☒
|
|
Non-accelerated filer
|
☐
|
|
Smaller reporting company
|
☒
|
|
Emerging growth company
|
☐
|
|
|
|
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). ☐ Yes
☒ No
The number of shares of the registrant’s Common Stock, par value
$0.001 per share, outstanding on October 31,2020 was
15,187,576.
INDEX
2
PART I.
FINANCIAL INFORMATION
Item 1.
Financial Statements.
Turtle Beach Corporation
Condensed Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
ASSETS
|
|
(in thousands, except par value and share amounts)
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
27,265
|
|
|
$
|
8,249
|
|
|
Accounts receivable, net
|
|
|
53,825
|
|
|
|
44,530
|
|
|
Inventories
|
|
|
79,453
|
|
|
|
45,711
|
|
|
Prepaid expenses and other current assets
|
|
|
8,451
|
|
|
|
4,057
|
|
|
Total Current Assets
|
|
|
168,994
|
|
|
|
102,547
|
|
|
Property and equipment, net
|
|
|
5,004
|
|
|
|
3,962
|
|
|
Deferred income taxes
|
|
|
7,800
|
|
|
|
7,439
|
|
|
Goodwill
|
|
|
8,178
|
|
|
|
8,515
|
|
|
Intangible assets, net
|
|
|
5,325
|
|
|
|
6,011
|
|
|
Other assets
|
|
|
6,230
|
|
|
|
2,877
|
|
|
Total Assets
|
|
$
|
201,531
|
|
|
$
|
131,351
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
Revolving credit facility
|
|
$
|
—
|
|
|
$
|
15,655
|
|
|
Accounts payable
|
|
|
63,699
|
|
|
|
22,511
|
|
|
Other current liabilities
|
|
|
34,432
|
|
|
|
26,422
|
|
|
Total Current Liabilities
|
|
|
98,131
|
|
|
|
64,588
|
|
|
Deferred income taxes
|
|
|
140
|
|
|
|
153
|
|
|
Other liabilities
|
|
|
7,524
|
|
|
|
3,223
|
|
|
Total Liabilities
|
|
|
105,795
|
|
|
|
67,964
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value - 25,000,000 shares authorized;
15,186,990 and 14,488,182 shares issued and outstanding as of
September 30, 2020 and December 31, 2019, respectively
|
|
|
15
|
|
|
|
14
|
|
|
Additional paid-in capital
|
|
|
187,065
|
|
|
|
176,776
|
|
|
Accumulated deficit
|
|
|
(91,076
|
)
|
|
|
(113,519
|
)
|
|
Accumulated other comprehensive income (loss)
|
|
|
(268
|
)
|
|
|
116
|
|
|
Total Stockholders’ Equity
|
|
|
95,736
|
|
|
|
63,387
|
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
201,531
|
|
|
$
|
131,351
|
|
See accompanying Notes to the Condensed Consolidated Financial
Statements (unaudited)
3
Turtle Beach Corporation
Condensed Consolidated Statements of Operations
(unaudited)
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(in thousands, except per-share data)
|
|
|
Net revenue
|
|
$
|
112,494
|
|
|
$
|
46,723
|
|
|
$
|
227,181
|
|
|
$
|
132,899
|
|
|
Cost of revenue
|
|
|
66,358
|
|
|
|
31,680
|
|
|
|
141,033
|
|
|
|
89,898
|
|
|
Gross profit
|
|
|
46,136
|
|
|
|
15,043
|
|
|
|
86,148
|
|
|
|
43,001
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing
|
|
|
11,857
|
|
|
|
10,150
|
|
|
|
29,064
|
|
|
|
24,581
|
|
|
Research and development
|
|
|
3,260
|
|
|
|
2,198
|
|
|
|
8,688
|
|
|
|
5,388
|
|
|
General and administrative
|
|
|
6,799
|
|
|
|
5,214
|
|
|
|
19,232
|
|
|
|
16,057
|
|
|
Total operating expenses
|
|
|
21,916
|
|
|
|
17,562
|
|
|
|
56,984
|
|
|
|
46,026
|
|
|
Operating income (loss)
|
|
|
24,220
|
|
|
|
(2,519
|
)
|
|
|
29,164
|
|
|
|
(3,025
|
)
|
|
Interest expense
|
|
|
103
|
|
|
|
240
|
|
|
|
355
|
|
|
|
595
|
|
|
Other non-operating expense (income), net
|
|
|
(101
|
)
|
|
|
302
|
|
|
|
(1,520
|
)
|
|
|
(1,430
|
)
|
|
Income (loss) before income tax
|
|
|
24,218
|
|
|
|
(3,061
|
)
|
|
|
30,329
|
|
|
|
(2,190
|
)
|
|
Income tax expense
|
|
|
6,424
|
|
|
|
63
|
|
|
|
7,886
|
|
|
|
252
|
|
|
Net income (loss)
|
|
$
|
17,794
|
|
|
$
|
(3,124
|
)
|
|
$
|
22,443
|
|
|
$
|
(2,442
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.20
|
|
|
$
|
(0.22
|
)
|
|
$
|
1.53
|
|
|
$
|
(0.17
|
)
|
|
Diluted
|
|
$
|
1.04
|
|
|
$
|
(0.22
|
)
|
|
$
|
1.41
|
|
|
$
|
(0.17
|
)
|
|
Weighted average number of shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
14,845
|
|
|
|
14,506
|
|
|
|
14,642
|
|
|
|
14,477
|
|
|
Diluted
|
|
|
17,154
|
|
|
|
14,506
|
|
|
|
15,961
|
|
|
|
14,477
|
|
See accompanying Notes to the Condensed Consolidated Financial
Statements (unaudited)
4
Turtle Beach Corporation
Condensed Consolidated Statements of Comprehensive Income
(Loss)
(unaudited)
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
2020
|
|
|
September 30,
2019
|
|
|
September 30,
2020
|
|
|
September 30,
2019
|
|
|
|
|
(in thousands)
|
|
|
Net income (loss)
|
|
$
|
17,794
|
|
|
$
|
(3,124
|
)
|
|
$
|
22,443
|
|
|
$
|
(2,442
|
)
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
548
|
|
|
|
(330
|
)
|
|
|
(384
|
)
|
|
|
(323
|
)
|
|
Other comprehensive income (loss)
|
|
|
548
|
|
|
|
(330
|
)
|
|
|
(384
|
)
|
|
|
(323
|
)
|
|
Comprehensive income (loss)
|
|
$
|
18,342
|
|
|
$
|
(3,454
|
)
|
|
$
|
22,059
|
|
|
$
|
(2,765
|
)
|
See accompanying Notes to the Condensed Consolidated Financial
Statements (unaudited)
5
Turtle Beach Corporation
Condensed Consolidated Statements of Cash Flows
(unaudited)
|
|
|
Nine Months Ended
|
|
|
|
|
September 30, 2020
|
|
|
September 30, 2019
|
|
|
|
|
(in thousands)
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
22,443
|
|
|
$
|
(2,442
|
)
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
3,302
|
|
|
|
3,477
|
|
|
Amortization of intangible assets
|
|
|
665
|
|
|
|
413
|
|
|
Amortization of debt financing costs
|
|
|
142
|
|
|
|
142
|
|
|
Stock-based compensation
|
|
|
3,977
|
|
|
|
2,555
|
|
|
Deferred income taxes
|
|
|
(375
|
)
|
|
|
—
|
|
|
Change in sales returns reserve
|
|
|
2,173
|
|
|
|
(4,262
|
)
|
|
Provision for obsolete inventory
|
|
|
2,216
|
|
|
|
2,081
|
|
|
Provision for doubtful accounts
|
|
|
—
|
|
|
|
(8
|
)
|
|
Unrealized gain on financial instrument obligation
|
|
|
—
|
|
|
|
(1,601
|
)
|
|
Increase in fair value of contingent consideration
|
|
|
510
|
|
|
|
—
|
|
|
Changes in operating assets and liabilities, net of
acquisitions:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(11,468
|
)
|
|
|
30,017
|
|
|
Inventories
|
|
|
(35,957
|
)
|
|
|
(12,622
|
)
|
|
Accounts payable
|
|
|
40,763
|
|
|
|
14,426
|
|
|
Prepaid expenses and other assets
|
|
|
(4,322
|
)
|
|
|
(1,005
|
)
|
|
Income taxes payable
|
|
|
6,769
|
|
|
|
(1,569
|
)
|
|
Other liabilities
|
|
|
1,800
|
|
|
|
(2,298
|
)
|
|
Net cash provided by operating activities
|
|
|
32,638
|
|
|
|
27,304
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(3,918
|
)
|
|
|
(1,628
|
)
|
|
Acquisition of a business, net of cash acquired
|
|
|
—
|
|
|
|
(12,667
|
)
|
|
Net cash used for investing activities
|
|
|
(3,918
|
)
|
|
|
(14,295
|
)
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Borrowings on revolving credit facilities
|
|
|
185,486
|
|
|
|
148,087
|
|
|
Repayment of revolving credit facilities
|
|
|
(201,141
|
)
|
|
|
(158,911
|
)
|
|
Proceeds from sale of equity securities
|
|
|
4,372
|
|
|
|
—
|
|
|
Proceeds from exercise of stock options and warrants
|
|
|
2,155
|
|
|
|
214
|
|
|
Repurchase of common stock
|
|
|
—
|
|
|
|
(1,941
|
)
|
|
Repurchase of common stock to satisfy employee tax withholding
obligations
|
|
|
(215
|
)
|
|
|
(201
|
)
|
|
Net cash used for financing activities
|
|
|
(9,343
|
)
|
|
|
(12,752
|
)
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(361
|
)
|
|
|
(298
|
)
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
19,016
|
|
|
|
(41
|
)
|
|
Cash and cash equivalents - beginning of period
|
|
|
8,249
|
|
|
|
7,078
|
|
|
Cash and cash equivalents - end of period
|
|
$
|
27,265
|
|
|
$
|
7,037
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF INFORMATION
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
245
|
|
|
$
|
488
|
|
|
Cash paid for income taxes
|
|
$
|
800
|
|
|
$
|
447
|
|
|
Reclassification of financial instrument obligation
|
|
$
|
—
|
|
|
$
|
6,248
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to the Condensed Consolidated Financial
Statements (unaudited)
6
Turtle Beach Corporation
Condensed Consolidated Statement of Stockholders’ Equity (Deficit)
(unaudited)
|
|
|
Common Stock
|
|
|
Additional
Paid-In
|
|
|
Accumulated
|
|
|
Accumulated
Other
Comprehensive
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Income (Loss)
|
|
|
Total
|
|
|
|
|
(in thousands)
|
|
|
Balance at December 31, 2019
|
|
|
14,488
|
|
|
$
|
14
|
|
|
$
|
176,776
|
|
|
$
|
(113,519
|
)
|
|
$
|
116
|
|
|
$
|
63,387
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,555
|
)
|
|
|
—
|
|
|
|
(3,555
|
)
|
|
Other comprehensive loss, net of tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(819
|
)
|
|
|
(819
|
)
|
|
Issuance of restricted stock
|
|
|
19
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
Repurchase of common stock and retirement of related treasury
shares
|
|
|
(7
|
)
|
|
|
—
|
|
|
|
(48
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(48
|
)
|
|
Stock options exercised
|
|
|
6
|
|
|
|
—
|
|
|
|
18
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
999
|
|
|
|
—
|
|
|
|
—
|
|
|
|
999
|
|
|
Balance at March 31, 2020
|
|
|
14,506
|
|
|
$
|
15
|
|
|
$
|
177,745
|
|
|
$
|
(117,074
|
)
|
|
$
|
(703
|
)
|
|
$
|
59,983
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,204
|
|
|
|
—
|
|
|
|
8,204
|
|
|
Other comprehensive income, net of tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(113
|
)
|
|
|
(113
|
)
|
|
Issuance of restricted stock
|
|
|
85
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Repurchase of common stock and retirement of related treasury
shares
|
|
|
(6
|
)
|
|
|
—
|
|
|
|
(60
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(60
|
)
|
|
Stock options exercised
|
|
|
9
|
|
|
|
—
|
|
|
|
41
|
|
|
|
—
|
|
|
|
—
|
|
|
|
41
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,406
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,406
|
|
|
Balance at June 30, 2020
|
|
|
14,594
|
|
|
|
15
|
|
|
|
179,132
|
|
|
|
(108,870
|
)
|
|
|
(816
|
)
|
|
|
69,461
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
17,794
|
|
|
|
—
|
|
|
|
17,794
|
|
|
Other comprehensive income, net of tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
548
|
|
|
|
548
|
|
|
Issuance of restricted stock
|
|
|
34
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Repurchase of common stock and retirement of related treasury
shares
|
|
|
(6
|
)
|
|
|
—
|
|
|
|
(107
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(107
|
)
|
|
Stock options exercised
|
|
|
327
|
|
|
|
—
|
|
|
|
2,096
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,096
|
|
|
Proceeds of sales of equity securities
|
|
|
238
|
|
|
|
—
|
|
|
|
4,372
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,372
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,572
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,572
|
|
|
Balance at September 30, 2020
|
|
|
15,187
|
|
|
$
|
15
|
|
|
$
|
187,065
|
|
|
$
|
(91,076
|
)
|
|
$
|
(268
|
)
|
|
$
|
95,736
|
|
7
Turtle Beach Corporation
Condensed Consolidated Statement of Stockholders’ Equity (Deficit)
(unaudited)
|
|
|
Common Stock
|
|
|
|
|
Additional
Paid-In
|
|
|
|
|
Accumulated
|
|
|
|
|
Accumulated
Other
Comprehensive
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
Amount
|
|
|
|
|
Capital
|
|
|
|
|
Deficit
|
|
|
|
|
Income (Loss)
|
|
|
|
|
Total
|
|
|
|
|
(in thousands)
|
|
|
Balance at December 31, 2018
|
|
|
14,268
|
|
|
|
|
$
|
14
|
|
|
|
|
$
|
169,421
|
|
|
|
|
$
|
(131,463
|
)
|
|
|
|
$
|
(476
|
)
|
|
|
|
$
|
37,496
|
|
|
Net income
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
3,055
|
|
|
|
|
|
—
|
|
|
|
|
|
3,055
|
|
|
Other comprehensive income, net of tax
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
165
|
|
|
|
|
|
165
|
|
|
Reclassification of financial instrument obligation
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
6,248
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
6,248
|
|
|
Issuance of restricted stock
|
|
|
12
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Repurchase of common stock and retirement of related treasury
shares
|
|
|
(6
|
)
|
|
|
|
|
—
|
|
|
|
|
|
(101
|
)
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(101
|
)
|
|
Issuance of common stock upon exercise of warrants
|
|
|
295
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Stock options exercised
|
|
|
6
|
|
|
|
|
|
—
|
|
|
|
|
|
23
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
23
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
522
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
522
|
|
|
Balance at March 31, 2019
|
|
|
14,575
|
|
|
|
|
$
|
14
|
|
|
|
|
$
|
176,113
|
|
|
|
|
$
|
(128,408
|
)
|
|
|
|
$
|
(311
|
)
|
|
|
|
$
|
47,408
|
|
|
Net loss
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(2,373
|
)
|
|
|
|
|
—
|
|
|
|
|
|
(2,373
|
)
|
|
Other comprehensive income, net of tax
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(158
|
)
|
|
|
|
|
(158
|
)
|
|
Issuance of restricted stock
|
|
|
56
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|