WHITE PLAINS, N.Y., March 4, 2021 /PRNewswire/ -- Turtle Beach Corporation (Nasdaq: HEAR), a leading gaming accessory business, reported financial results for the fourth quarter and full year ended December 31, 2020.

Turtle Beach (www.turtlebeach.com) is a leading gaming accessory brand offering a wide selection of cutting-edge, award-winning gaming headsets. Whether you're a professional esports athlete, hardcore gamer, casual player, or just starting out, Turtle Beach has the gaming headset to help you truly master your skills. Innovative and advanced technology, amazing high-quality gaming audio, crystal-clear communication, lightweight and comfortable designs, and ease-of-use are just a few features that make Turtle Beach a fan-favorite brand for gamers the world over. Designed for Xbox, PlayStation®, and Nintendo consoles as well as for PC, Mac®, and mobile/tablet devices, owning a Turtle Beach gaming headset gives you the competitive advantage. Hear Everything. Defeat Everyone.™ The Company's shares are traded on the Nasdaq Exchange under the symbol: HEAR. (PRNewsfoto/Turtle Beach Corporation)

2020 Full-Year Summary vs. 2019:

  • Net revenue was $360.1 million ($357.9 million in constant currency), an increase of 53% compared to $234.7 million;
  • Net income of $38.7 million, or $2.37 per diluted share, compared to net income of $17.9 million, or $1.04 per share, reflecting an increase of 116% in net income and 127% in EPS;
  • Adjusted EBITDA was $61.4 million, up 169% compared to $22.8 million; and
  • Cash flow from operations was $51.0 million, up 29% compared to $39.4 million.

Fourth Quarter Summary vs. Year-Ago Quarter:

  • Net revenue was $132.9 million ($131.2 million in constant currency) versus $101.8 million;
  • Net income of $16.3 million, or $0.93 per diluted share, compared to net income of $20.4 million, or $1.29 per diluted share;
  • Adjusted EBITDA was $23.6 million, compared to $16.6 million; and
  • Cash flow from operations was $18.4 million, compared to $12.1 million.

"As indicated in our recent pre-announcement, our 2020 sales and adjusted EBITDA were the highest in our company's history," said Juergen Stark, Chairman and CEO, Turtle Beach Corporation. "A great portfolio of products and our leading brand combined with excellent operational execution enabled us to outpace the rest of the console headset market as that market experienced significant growth from both existing and new gamers last year. That plus more than doubling our ROCCAT PC accessories business both through expansion of the portfolio and further development of that brand enabled us to deliver record results.  

"While the gaming accessories market may slow a bit in 2021 because of how strong growth was in 2020, we expect that our continued growth in PC accessories, as well as entry into new categories will allow us to grow revenues to record levels in 2021. And we plan to continue to invest in product and brand development throughout 2021 to position ourselves for continued growth and further expand our leadership position in gaming accessories."

2020 Financial Results

Net revenue in 2020 reached the highest level of annual sales in Turtle Beach's history, at $360.1 million, up 53% compared to $234.7 million in 2019. The revenue increase was driven by strong demand for gaming accessories among both new and existing gamers as well non-gaming usage of headsets by people working and learning from-home, especially following stay-at-home orders initiated in March of last year. Quick reaction to rapid increases in demand, excellent supply chain execution, and strong coordination with retail partners globally contributed significantly to the Company's ability to capture the surge in market demand. In addition, the launches of new console video game console systems from Sony PlayStation and Microsoft Xbox helped spark additional consumer demand. The launch of new PC accessories led to a more than doubling of sales of ROCCAT PC headsets, mice and keyboards. On a constant currency basis, revenue in 2020 was $357.9 million.

Gross margin in 2020 was 37.2% compared to 33.5% in 2019. The increase in gross margin was driven by significantly lower than normal promotional spending due to strong demand and industrywide supply constraints, a favorable business mix and better fixed cost leverage, partially offset by higher air freight costs.

Operating expenses in 2020 were $84.6 million compared to $68.3 million in 2019 due primarily to sales and marketing costs that drove revenue growth, R&D investments in new categories, higher general and administrative costs resulting from the inclusion of ROCCAT for the full year of 2020 and higher performance-based expenses. As a percentage of net revenue, operating expenses in 2020 were 23.5% compared to 29.1% in 2019.

Net income in 2020 was $38.7 million, or $2.37 per diluted share, compared to $17.9 million or $1.04 per diluted share in 2019. Excluding a number of adjustments to net income in both periods (as summarized below in Table 4), adjusted net income (as defined below in "Non-GAAP Financial Measures") in 2020 was $36.3 million, or $2.22 per diluted share, compared to $11.6 million or $0.74 per diluted share, and increase of over 200%. The full-year weighted average diluted share count for 2020 was 16.4 million compared to 15.7 million in 2019.

Adjusted EBITDA (as defined below in "Non-GAAP Financial Measures") in 2020 was $61.4 million compared to $22.8 million in 2019.

Fourth Quarter 2020 Financial Results

Net revenue in the fourth quarter of 2020 was $132.9 million, up 31% compared to $101.8 million in the year-ago quarter. The growth was strong across both console headsets as well as PC accessories, and in all geographies. Drivers of this growth were the same factors that drove the full-year increase in sales.  On a constant currency basis, revenue in the fourth quarter of 2020 was $131.2 million.

Gross margin in the fourth quarter of 2020 was 35.8% compared to 35.1% in the fourth quarter of 2019. The increase in gross margin was the result of lower promotional spending, favorable business mix and leverage of fixed operating costs, partially offset by higher air freight costs.

Operating expenses in the fourth quarter of 2020 were $27.6 million compared to $22.3 million in the 2019 period due primarily to sales and marketing costs that drove revenue growth and increased R&D investments in new categories designed to drive future growth. As a percentage of net revenue, operating expenses in the fourth quarter of 2020 were 20.8% compared to 21.9% in the fourth quarter of 2019.

Net income in the fourth quarter of 2020 was $16.3 million, or $0.93 per diluted share, compared to $20.4 million, or $1.29 per diluted share in the year-ago quarter. Excluding a number of adjustments in both periods (as summarized below in Table 4), adjusted net income (as defined below in "Non-GAAP Financial Measures") in the fourth quarter of 2020 was $14.8 million, or $0.84 per diluted share, compared to $13.0 million, or $0.83 per share, in the corresponding period in 2019. For the fourth quarter, the weighted average diluted share count was 17.6 million for 2020 compared to 15.7 million for 2019.  The year-over-year increase in the diluted share count is primarily the result of lower assumed shares repurchased under the treasury method for calculating diluted shares.

Adjusted EBITDA (as defined below in "Non-GAAP Financial Measures") in the fourth quarter of 2020 was $23.6 million, an increase of 42% compared to $16.6 million in the year-ago quarter.

Balance Sheet and Cash Flow Highlights

At December 31, 2020, the Company had $46.7 million of cash and cash equivalents with no outstanding debt, including under its revolving line of credit. This compares to $8.2 million of cash and cash equivalents with $15.7 million of outstanding debt under its revolving credit facility at December 31, 2019, reflecting a $54 million improvement in net cash. The company delivered cash flow from operations of $51.0 million in 2020, which marks the third consecutive year of at least $39 million of cash flow from operations.

2021 Outlook         

For the full year 2021, the Company expects revenue to be approximately $370 million reflecting the target of continued growth from our 2020 record revenue levels. Adjusted EBITDA is expected to be approximately $45 million, reflecting a category-leading target of 12% EBITDA margin while enabling significant investments to expand the Company's market share in the PC accessories market, including the newly entered microphone market, and position the company for continued growth. Adjusted net income per diluted share is expected to be approximately $1.35.

For the first quarter of 2021, the Company expects revenue to be approximately $88 million. Like 2020, revenue phasing in 2021 is expected to be somewhat unusual, with a higher percentage of full year revenue in the first quarter compared to an unusually low percentage of revenue in the first quarter of 2020. Adjusted EBITDA is expected to be approximately $14.0 million. Adjusted net income per diluted share is expected to be approximately $0.45.  

Certain non-GAAP measures included in our financial outlook were not reconciled to the comparable GAAP financial measures because the GAAP measures are not accessible on a forward-looking basis. We are unable to reconcile these forward looking non-GAAP financial measures to the most directly comparable GAAP measures without the investment of undue time, cost and other resources because we are currently unable to predict with a reasonable degree of certainty as a result of the variability, complexity, and lack of visibility with respect to certain items that would be expected to impact GAAP measures for these periods but would not impact the non-GAAP measures. Such items may include other income (expense), provision for income taxes and stock-based compensation and other items. The unavailable information could be material to the Company's actual results for such periods.   

Conference Call Details

Turtle Beach Corporation will hold a conference call today, March 4, 2021, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern) to discuss its fourth quarter and full year 2020 results.

CEO Juergen Stark and CFO John Hanson will host the call, followed by a question and answer session.

Conference Call Details:
Date: Thursday, March 4, 2021
Time: 5:00 p.m. ET / 2:00 p.m. PT
Toll-Free Dial-in Number: (877) 303-9855
International Dial-in Number: (408) 337-0154
Conference ID: 6695389

For the conference call, please dial-in 5-10 minutes prior to the start time and an operator will register your name and organization. If you have any difficulty with the conference call, please contact Gateway Investor Relations at (949) 574-3860.

The conference call will be broadcast live and available for replay here and via the investor relations section of the Company's website at www.turtlebeachcorp.com.

A replay of the conference call will be available after 8:00 p.m. ET on the same day through March 11, 2021.

Toll-Free Replay Number: (855) 859-2056
International Replay Number: (404) 537-3406
Replay ID: 6695389

Non-GAAP Financial Measures

In addition to its reported results, the Company has included in this earnings release certain financial results, including adjusted EBITDA, adjusted net income, and constant currency revenue that the Securities and Exchange Commission defines as "non-GAAP financial measures." Management believes that such non-GAAP financial measures, when read in conjunction with the Company's reported results, can provide useful supplemental information for investors analyzing period-to-period comparisons of the Company's results. "Adjusted Net Income" is defined as net income excluding (i) integration and transaction costs related to acquisitions, (ii) the effect of the mark-to-market requirement of the financial instrument obligation, (iii) any change in fair value of contingent consideration and (iv) the release of valuation allowances on deferred tax assets. "Adjusted EBITDA" is defined by the Company as net income (loss) before interest, taxes, depreciation and amortization, stock-based compensation (non-cash), and certain non-recurring items that we believe are not representative of core operations (e.g., the integration and transaction costs related to the ROCCAT acquisition, the mark-to-market adjustment for the financial instrument obligation and the change in fair value of contingent consideration). "Constant currency revenue" is defined by the Company as revenue excluding the impacts of fluctuations in exchange rates from prior periods. These non-GAAP financial measures are presented because management uses non-GAAP financial measures to evaluate the Company's operating performance, to perform financial planning, and to determine incentive compensation. Therefore, the Company believes that the presentation of non-GAAP financial measures provides useful supplementary information to, and facilitates additional analysis by, investors.  The presented non-GAAP financial measures exclude items that management does not believe reflect the Company's core operating performance because such items are inherently unusual, non-operating, unpredictable, non-recurring, or non-cash. See a reconciliation of GAAP results to Adjusted Net Income and Adjusted EBITDA included below for each of the three months and years ended December 31, 2020 and 2019.

About Turtle Beach Corporation

Turtle Beach Corporation (https://corp.turtlebeach.com) is one of the world's leading gaming accessory providers. The Turtle Beach brand (www.turtlebeach.com) is known for pioneering first-to-market features and patented innovations in high-quality, comfort-driven headsets for all levels of gamer, making it a fan-favorite brand and the market leader in console gaming audio for the last decade. Turtle Beach's ROCCAT brand (www.roccat.org) combines detail-loving German innovation with a genuine passion for designing the best PC gaming products. Under the ROCCAT brand, Turtle Beach creates award-winning keyboards, mice, headsets, mousepads, and other PC accessories. Turtle Beach's Neat Microphones brand (www.neatmic.com) creates high-quality USB and analog microphones for gamers, streamers, and professionals that embrace cutting-edge technology and design. Turtle Beach's shares are traded on the Nasdaq Exchange under the symbol: HEAR.

Cautionary Note on Forward-Looking Statements

This press release includes forward-looking information and statements within the meaning of the federal securities laws. Except for historical information contained in this release, statements in this release may constitute forward-looking statements regarding assumptions, projections, expectations, targets, intentions or beliefs about future events. Statements containing the words "may", "could", "would", "should", "believe", "expect", "anticipate", "plan", "estimate", "target", "goal", "project", "intend" and similar expressions, or the negatives thereof, constitute forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. Forward-looking statements are based on management's current belief and expectations, as well as assumptions made by, and information currently available to, management.

While the Company believes that its expectations are based upon reasonable assumptions, there can be no assurances that its goals and strategy will be realized. Numerous factors, including risks and uncertainties, may affect actual results and may cause results to differ materially from those expressed in forward-looking statements made by the Company or on its behalf. Some of these factors include, but are not limited to, risks related to, the substantial uncertainties inherent in the acceptance of existing and future products, the difficulty of commercializing and protecting new technology, the impact of competitive products and pricing, general business and economic conditions, risks associated with the expansion of our business including the integration of any businesses we acquire and the integration of such businesses within our internal control over financial reporting and operations, our indebtedness, the Company's liquidity, and other factors discussed in our public filings, including the risk factors included in  the Company's most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q,  and the Company's other periodic reports. Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the Securities and Exchange Commission, the Company is under no obligation to publicly update or revise any forward-looking statement after the date of this release whether as a result of new information, future developments or otherwise.

All trademarks are the property of their respective owners.

Turtle Beach Corporation

Condensed Consolidated Balance Sheets

(in thousands, except par value and share amounts)


Table 1.


December 31,



December 31,



2020



2019



(unaudited)


ASSETS

(in thousands, except par value and share amounts)


Current Assets:








Cash and cash equivalents

$

46,681



$

8,249


Accounts receivable, net


43,867




44,530


Inventories


71,301




45,711


Prepaid expenses and other current assets


8,127




4,057


Total Current Assets


169,976




102,547


Property and equipment, net


6,575




3,962


Deferred income taxes


6,946




7,439


Goodwill


8,178




8,515


Intangible assets, net


5,138




6,011


Other assets


6,640




2,877


Total Assets

$

203,453



$

131,351


LIABILITIES AND STOCKHOLDERS' EQUITY








Current Liabilities:








Revolving credit facility

$



$

15,655


Accounts payable


42,529




22,511


Other current liabilities


36,122




26,422


Total Current Liabilities


78,651




64,588


Deferred income taxes


128




153


Other liabilities


8,275




3,223


Total Liabilities


87,054




67,964


Commitments and Contingencies








Stockholders' Equity








Common stock, $0.001 par value - 25,000,000 shares authorized; 15,475,504 and 14,488,152 shares issued and outstanding as of December 31, 2020 and 2019, respectively


15




14


Additional paid-in capital


190,568




176,776


Accumulated deficit


(74,773)




(113,519)


Accumulated other comprehensive income


589




116


Total Stockholders' Equity


116,399




63,387


Total Liabilities and Stockholders' Equity

$

203,453



$

131,351


 

Turtle Beach Corporation

Condensed Consolidated Statements of Operations

(in thousands, except per-share data)

(unaudited)


Table 2.


Three Months Ended



Twelve Months Ended



December 31,



December 31,



December 31,



December 31,



2020



2019



2020



2019


Net revenue

$

132,912



$

101,764



$

360,093



$

234,663


Cost of revenue


85,272




66,052




226,305




155,950


Gross profit


47,640




35,712




133,788




78,713


Operating expenses:
















Selling and marketing


17,715




14,053




46,779




38,634


Research and development


3,577




2,468




12,265




7,856


General and administrative


6,345




5,739




25,577




21,796


Total operating expenses


27,637




22,260




84,621




68,286


Operating income


20,003




13,452




49,167




10,427


Interest expense


112




334




467




929


Other non-operating expense (income), net


(2,237)




(779)




(3,757)




(2,209)


Income before income tax


22,128




13,897




52,457




11,707


Income tax expense (benefit)


5,825




(6,489)




13,711




(6,237)


Net income

$

16,303



$

20,386



$

38,746



$

17,944


















Net income per share
















Basic

$

1.07



$

1.41



$

2.62



$

1.24


Diluted

$

0.93



$

1.29



$

2.37



$

1.04


Weighted average number of shares:
















Basic


15,272




14,501




14,801




14,483


Diluted


17,573




15,748




16,365




15,688


 

Turtle Beach Corporation

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


Table 3.


Year Ended



December 31, 2020



December 31, 2019










CASH FLOWS FROM OPERATING ACTIVITIES

$

51,049



$

39,374










CASH FLOWS FROM INVESTING ACTIVITIES


(5,663)




(14,579)










CASH FLOWS FROM FINANCING ACTIVITIES








Borrowings on revolving credit facilities


323,593




219,910


Repayment of revolving credit facilities


(339,248)




(241,640)


Proceeds from sale of equity securities


4,373




-


Proceeds from exercise of stock options and warrants


4,195




330


Repurchase of common stock


-




(2,525)


Repurchase of common stock to satisfy employee tax withholding obligations


(325)




(255)


Net cash used for financing activities


(7,412)




(24,180)


Effect of exchange rate changes on cash and cash equivalents


458




556


Net increase in cash and cash equivalents


38,432




1,171


Cash and cash equivalents - beginning of period


8,249




7,078


Cash and cash equivalents - end of period

$

46,681



$

8,249


 

Turtle Beach Corporation

Reconciliation of GAAP and Non-GAAP Measures

(in thousands, except per-share data)

(unaudited)


Table 4.


Three Months Ended



Year Ended



December 31,

2020



December 31,

2019



December 31,

2020



December 31,

2019


Net Income
















GAAP Net Income

$

16,303



$

20,386



$

38,746



$

17,944


















Adjustments, net of tax:
















Gain on financial instrument obligation











(1,601)


Release of valuation allowance





(7,439)







(7,439)


Gain on acquisition-related settlement








(1,702)





Change in fair value of contingent consideration


(1,631)




(422)




(1,121)




(422)


Acquisition integration costs


124




499




405




3,154


Non-GAAP Earnings

$

14,796



$

13,024



$

36,328



$

11,636


















Diluted Earnings Per Share
















GAAP- Diluted

$

0.93



$

1.29



$

2.37



$

1.04


















Gain on financial instrument obligation












Release of valuation allowance





(0.47)







(0.47)


Gain on acquisition-related settlement








(0.10)





Change in fair value of contingent consideration


(0.09)




(0.03)




(0.07)




(0.03)


Acquisition integration costs


0.01




0.03




0.02




0.20


Non-GAAP- Diluted

$

0.84



$

0.83



$

2.22



$

0.74


 

Turtle Beach Corporation

GAAP to Adjusted EBITDA Reconciliation

(in thousands)

(unaudited)


Table 5.


Three Months Ended



December 31, 2020












Adj









As


Adj


Adj


Stock





Adj



Reported


Depreciation


Amortization


Compensation


Other (1)


EBITDA


Net revenue

$

132,912


$

-


$

-


$

-


$

-


$

132,912


Cost of revenue


85,272



(537)



-



(305)



-



84,430


Gross Profit


47,640



537



-



305



-



48,482





















Operating expenses


27,637



(520)



(224)



(1,268)



(168)



25,457





















Operating income


20,003



1,057



224



1,573



168



23,025





















Interest expense


112

















Other non-operating expense (income), net


(2,237)












1,631



(606)





















Income before income tax


22,128

















Income tax expense


5,825

















Net income

$

16,303








Adjusted EBITDA


$

23,631









































Year Ended



December 31, 2020












Adj









As


Adj


Adj


Stock





Adj



Reported


Depreciation


Amortization


Compensation


Other (1)


EBITDA


Net revenue

$

360,093


$

-


$

-


$

-


$

-


$

360,093


Cost of revenue


226,305



(2,365)



-



(928)



-



223,012


Gross Profit


133,788



2,365



-



928



-



137,081





















Operating expenses


84,621



(1,994)



(889)



(4,621)



(550)



76,567





















Operating income


49,167



4,359



889



5,549



550



60,514





















Interest expense


467

















Other non-operating expense (income), net


(3,757)












2,823



(934)





















Income before income tax


52,457

















Income tax expense


13,711

















Net income

$

38,746








Adjusted EBITDA


$

61,448




(1)

Other includes certain business acquisition costs, gain on an acquisition-related settlement and change in fair value of contingent consideration.

 

Turtle Beach Corporation

GAAP to Adjusted EBITDA Reconciliation

(in thousands)

(unaudited)


Table 5. (continued)


Three Months Ended



December 31, 2019












Adj









As


Adj


Adj


Stock





Adj



Reported


Depreciation


Amortization


Compensation


Other (2)


EBITDA


Net revenue

$

101,764


$

-


$

-


$

-


$

-


$

101,764


Cost of revenue


66,052



(601)



-



(74)



-



65,377


Gross Profit


35,712



601



-



74



-



36,388





















Operating expenses


22,260



(478)



(229)



(929)



(555)



20,070





















Operating income


13,452



1,079



229



1,003



555



16,317





















Interest expense


334

















Other non-operating expense (income), net


(780)












471



(309)





















Income before income tax


13,897

















Income tax benefit


(6,489)

















Net income

$

20,386








Adjusted EBITDA


$

16,626









































Year Ended



December 31, 2019












Adj









As


Adj


Adj


Stock





Adj



Reported


Depreciation


Amortization


Compensation


Other (2)


EBITDA


Net revenue

$

234,663


$

-


$

-


$

-


$

-


$

234,663


Cost of revenue


155,950



(1,950)



-



(150)



-



153,850


Gross Profit


78,713



1,950



-



150



-



80,813





















Operating expenses


68,286



(2,606)



(642)



(3,408)



(3,516)



58,114





















Operating income


10,427



4,556



642



3,558



3,516



22,699





















Interest expense


929

















Other non-operating expense (income), net


(2,209)












2,072



(137)





















Income before income tax


11,707

















Income tax benefit


(6,237)

















Net income

$

17,944








Adjusted EBITDA


$

22,836




(2)

Other includes certain business acquisition costs and a gain (loss) on financial instrument obligation.

 

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SOURCE Turtle Beach Corporation

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