Turtle Beach Corporation (Nasdaq: HEAR), a leading gaming headset
and accessories brand, today reported financial results for the
second quarter ended June 30, 2024.
Second Quarter Highlights
- Net revenue was $76.5 million, an
increase of 59% compared to the prior year period.
- Net loss was $(7.5) million or
($0.35) per share compared to a net loss of ($15.9) million or
($0.93) net loss per share in the prior year period.
- Adjusted EBITDA was $3.0 million,
an improvement of $8.7 million compared to an Adjusted EBITDA loss
of ($5.7) million in the prior year period.
“We're proud to report another quarter of strong
performance for Turtle Beach, as we saw continued momentum in our
business, significant gross margin expansion, further execution of
our cost-reduction initiatives, and the integration of PDP that is
ahead of schedule,” said Cris Keirn, CEO, Turtle Beach
Corporation.
“Our second quarter results reflect the team’s
unwavering commitment to execution, as we have married the rapid
integration of a significant acquisition with our ongoing focus on
proactive cost management, all the while providing best-in-class
and innovative products to our customers. In the quarter, Turtle
Beach continued to demonstrate its market-leading position in
gaming headsets while simultaneously overseeing meaningful share
gains in gaming controllers. At the same time, the benefits of the
PDP acquisition highlight a scale and diversification advantage
that are paving the way for Turtle Beach to stand apart in the
competitive gaming equipment market.”
“Revenue for the quarter reached $76.5 million,
a significant 59% increase year-over-year, bolstered by the
successful ongoing integration of PDP and robust demand for our
leading products. Even excluding PDP, we saw healthy organic growth
of 15%. This growth, coupled with our ongoing efficiency
initiatives, led to a substantial improvement in profitability,
with Adjusted EBITDA reaching $3.0 million for the quarter.
“The integration of PDP is already yielding
synergies and expanding our market opportunities. Our unyielding
focus on margin expansion is evident in our results, driven by
optimized cost structures and operational efficiencies. We're
particularly pleased with our ability to generate strong cash flow
from operations, which has allowed us to repurchase approximately
$15 million of our stock this quarter—the largest repurchase in our
history. This action underscores our confidence in Turtle Beach's
trajectory and our commitment to enhancing shareholder value.
“Looking ahead, we're excited about what we are
seeing in our product pipeline, the strategic advantages gained
from the PDP acquisition, and our ongoing efforts to enhance
profitability while driving growth. As a result, we're raising our
full-year guidance for Adjusted EBITDA, reflecting our optimism for
the remainder of 2024.”
Share Repurchase Update and
Implementation of Rule 10b5-1 PlanDuring the second
quarter ended June 30, 2024, the Company repurchased approximately
952,000 shares of common stock for an aggregate purchase price of
$15.2 million. The Company has approximately $31.4 million
remaining to repurchase shares under its share repurchase program
which expires on April 9, 2025.
In our ongoing commitment to return capital to
shareholders, the Company will continue to repurchase shares
opportunisitically in the market through open market purchases or
privately negotiated transactions. Additionally, the Board of
Directors is pleased to announce that it has successfully
negotiated amendments to the Company’s credit agreements, providing
additional flexibility for share repurchases, which will allow for
the implementation of an ongoing formulaic share repurchase
program, commonly referred to as a Rule 10b5-1 plan. The Company
will provide regular updates to shareholders on the results of its
ongoing share repurchase program at the end of each quarter.
Balance Sheet and Cash Flow
SummaryAt June 30, 2024, the Company had net debt of $61.2
million, comprised of $73.6 million of borrowings and $12.5 million
of cash. Inventories at June 30, 2024 were $73.3 million compared
to $44.0 million at December 31, 2023 which now includes PDP. Cash
flow from operations for the six months ended June 30, 2024 was
$14.6 million compared to $24.2 million for the six months ended at
June 30, 2023.
OutlookTurtle Beach is updating
its 2024 outlook. The Company is maintaining its guidance for net
revenue for the full year ending December 31, 2024, to be between
$370 and $380 million. This revenue range, translates to 43-47%
growth year-over-year.
The Company currently expects Adjusted EBITDA
for the full year ending December 31, 2024, to be between $53 and
$56 million, up from the prior range of between $51 million to $54
million compared to $6.5 million of Adjusted EBITDA for 2023.
The aforementioned 2024 guidance ranges include
operations of PDP beginning March 13, 2024.
Earnings Conference Call and Webcast
DetailsTurtle Beach will host a conference call and audio
webcast today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time),
during which management will discuss second quarter results and
provide commentary on business performance and its current outlook
for 2024. A question-and-answer session will follow the prepared
remarks.
The conference call may be accessed by telephone
by going to the following link (registration link) where dial-in
details will be provided.
A live audio webcast of the earnings conference
call may be accessed on Turtle Beach’s website at
www.corp.turtlebeach.com, along with a copy of this press release
and an investor slide presentation. An audio replay of the call
will be available on the Company’s investor relations website for a
limited period of time.
About Turtle Beach
CorporationTurtle Beach Corporation (the “Company”)
(www.turtlebeachcorp.com) is one of the world’s leading gaming
accessory providers. The Company’s namesake Turtle Beach brand
(www.turtlebeach.com) is known for designing best-selling gaming
headsets, top-rated game controllers, award-winning PC gaming
peripherals, and groundbreaking gaming simulation accessories.
Innovation, first-to-market features, a broad range of products for
all types of gamers, and top-rated customer support have made
Turtle Beach a fan-favorite brand and the market leader in console
gaming audio for over a decade. Turtle Beach Corporation acquired
Performance Designed Products (www.pdp.com) in 2024. Turtle Beach’s
shares are traded on the Nasdaq Exchange under the symbol:
HEAR.
Non-GAAP Financial MeasuresIn
addition to its reported results, the Company has included in this
earnings release certain financial metrics, including Adjusted
EBITDA, that the Securities and Exchange Commission define 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. Non-GAAP financial measures are not an
alternative to the Company’s GAAP financial results and may not be
calculated in the same manner as similar measures presented by
other companies. “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 special items that we believe are not representative
of core operations, as further described in Table 4. 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 non-GAAP financial measures included herein 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 EBITDA included as Table
4 below for each of the three and six months ended June 30, 2023
and June 30, 2024.
By providing full year 2024 Adjusted EBITDA
guidance, the Company provided its expectation of a forward-looking
non-GAAP financial measure. Information reconciling full year 2024
Adjusted EBITDA to its most directly comparable GAAP financial
measure, net income (loss), is unavailable to the Company without
unreasonable effort due to the variability, complexity, and lack of
visibility with respect to certain reconciling items between
Adjusted EBITDA and net income (loss), including other income
(expense), provision for income taxes and stock-based compensation.
These items cannot be reasonably and accurately predicted without
the investment of undue time, cost and other resources and,
accordingly, a reconciliation of the Company’s Adjusted EBITDA
outlook to its net income (loss) outlook for such periods is not
provided. These reconciling items could be material to the
Company’s actual results for such periods.
Cautionary Note on Forward-Looking
StatementsThis 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
beliefs 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 logistic and supply chain challenges, 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, 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 filed with the Securities
and Exchange Commission. 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.
CONTACTS
Investors:hear@icrinc.com(646)
277-1285
Public Relations &
Media:MacLean MarshallSr.
Director, Global CommunicationsTurtle Beach
Corporation(858)
914-5093maclean.marshall@turtlebeach.com
|
Turtle Beach Corporation |
Condensed Consolidated Statements of
Operations |
(in thousands, except per-share data) |
(unaudited) |
|
Table
1. |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Net revenue |
|
$ |
76,478 |
|
|
$ |
47,982 |
|
|
$ |
132,326 |
|
|
$ |
99,426 |
|
Cost of revenue |
|
|
53,402 |
|
|
|
36,110 |
|
|
|
91,464 |
|
|
|
73,415 |
|
Gross profit |
|
|
23,076 |
|
|
|
11,872 |
|
|
|
40,862 |
|
|
|
26,011 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing |
|
|
13,741 |
|
|
|
10,351 |
|
|
|
22,754 |
|
|
|
19,874 |
|
Research and development |
|
|
4,589 |
|
|
|
4,189 |
|
|
|
8,491 |
|
|
|
8,290 |
|
General and administrative |
|
|
7,463 |
|
|
|
13,125 |
|
|
|
13,137 |
|
|
|
20,132 |
|
Acquisition-related cost |
|
|
1,394 |
|
|
|
— |
|
|
|
6,304 |
|
|
|
— |
|
Total operating expenses |
|
|
27,187 |
|
|
|
27,665 |
|
|
|
50,686 |
|
|
|
48,296 |
|
Operating loss |
|
|
(4,111 |
) |
|
|
(15,793 |
) |
|
|
(9,824 |
) |
|
|
(22,285 |
) |
Interest expense |
|
|
2,220 |
|
|
|
(17 |
) |
|
|
2,370 |
|
|
|
146 |
|
Other non-operating expense,
net |
|
|
352 |
|
|
|
198 |
|
|
|
722 |
|
|
|
318 |
|
Loss before income tax |
|
|
(6,683 |
) |
|
|
(15,974 |
) |
|
|
(12,916 |
) |
|
|
(22,749 |
) |
Income tax expense
(benefit) |
|
|
841 |
|
|
|
(54 |
) |
|
|
(5,547 |
) |
|
|
(124 |
) |
Net loss |
|
$ |
(7,524 |
) |
|
$ |
(15,920 |
) |
|
$ |
(7,369 |
) |
|
$ |
(22,625 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.35 |
) |
|
$ |
(0.93 |
) |
|
$ |
(0.37 |
) |
|
$ |
(1.34 |
) |
Diluted |
|
$ |
(0.35 |
) |
|
$ |
(0.93 |
) |
|
$ |
(0.37 |
) |
|
$ |
(1.34 |
) |
Weighted average number of
shares: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
21,252 |
|
|
|
17,156 |
|
|
|
19,795 |
|
|
|
16,869 |
|
Diluted |
|
|
21,252 |
|
|
|
17,156 |
|
|
|
19,795 |
|
|
|
16,869 |
|
Turtle Beach Corporation |
Condensed Consolidated Balance Sheets |
(in thousands, except par value and share amounts) |
|
Table
2. |
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2024 |
|
|
2023 |
|
|
|
(unaudited) |
|
|
|
|
ASSETS |
|
|
|
Current Assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
12,462 |
|
|
$ |
18,726 |
|
Accounts receivable, net |
|
|
46,474 |
|
|
|
54,390 |
|
Inventories |
|
|
73,347 |
|
|
|
44,019 |
|
Prepaid expenses and other current assets |
|
|
11,380 |
|
|
|
7,720 |
|
Total Current Assets |
|
|
143,663 |
|
|
|
124,855 |
|
Property and equipment,
net |
|
|
6,295 |
|
|
|
4,824 |
|
Goodwill |
|
|
56,762 |
|
|
|
10,686 |
|
Intangible assets, net |
|
|
46,683 |
|
|
|
1,734 |
|
Other assets |
|
|
10,985 |
|
|
|
7,868 |
|
Total Assets |
|
$ |
264,388 |
|
|
$ |
149,967 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
Revolving credit facility |
|
$ |
24,029 |
|
|
$ |
— |
|
Accounts payable |
|
|
48,380 |
|
|
|
26,908 |
|
Other current liabilities |
|
|
30,827 |
|
|
|
29,424 |
|
Total Current Liabilities |
|
|
103,236 |
|
|
|
56,332 |
|
Debt, non-current |
|
|
45,772 |
|
|
|
— |
|
Income tax payable |
|
|
1,508 |
|
|
|
1,546 |
|
Other liabilities |
|
|
8,611 |
|
|
|
7,012 |
|
Total Liabilities |
|
|
159,127 |
|
|
|
64,890 |
|
Commitments and
Contingencies |
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
|
Common stock |
|
|
21 |
|
|
|
18 |
|
Additional paid-in capital |
|
|
247,917 |
|
|
|
220,185 |
|
Accumulated deficit |
|
|
(141,646 |
) |
|
|
(134,277 |
) |
Accumulated other comprehensive loss |
|
|
(1,031 |
) |
|
|
(849 |
) |
Total Stockholders’ Equity |
|
|
105,261 |
|
|
|
85,077 |
|
Total Liabilities and Stockholders’ Equity |
|
$ |
264,388 |
|
|
$ |
149,967 |
|
Turtle Beach Corporation |
Condensed Consolidated Statements of Cash
Flows |
(in thousands) |
(unaudited) |
|
Table
3. |
|
|
Six Months Ended |
|
|
|
June 30, 2024 |
|
|
June 30, 2023 |
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
$ |
14,613 |
|
|
$ |
24,210 |
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES |
|
|
(79,261 |
) |
|
|
(1,252 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES |
|
|
|
|
|
|
Borrowings on revolving credit facilities |
|
|
80,288 |
|
|
|
99,785 |
|
Repayment of revolving credit facilities |
|
|
(56,259 |
) |
|
|
(118,838 |
) |
Proceeds of term loan |
|
|
50,000 |
|
|
|
— |
|
Repayment of term loan |
|
|
(417 |
) |
|
|
— |
|
Proceeds from exercise of stock options and warrants |
|
|
2,941 |
|
|
|
1,358 |
|
Repurchase of common stock |
|
|
(15,207 |
) |
|
|
(974 |
) |
Debt Issuance Costs |
|
|
(3,170 |
) |
|
|
(80 |
) |
Net cash provided by (used for) financing activities |
|
|
58,176 |
|
|
|
(18,749 |
) |
Effect of exchange rate
changes on cash |
|
|
208 |
|
|
|
182 |
|
Net decrease in cash |
|
|
(6,264 |
) |
|
|
4,391 |
|
Cash - beginning of
period |
|
|
18,726 |
|
|
|
11,396 |
|
Cash - end of period |
|
$ |
12,462 |
|
|
$ |
15,787 |
|
Turtle Beach Corporation |
GAAP to Adjusted EBITDA Reconciliation |
(in thousands) |
|
Table 4. |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
|
(in thousands) |
|
Net loss |
|
$ |
(7,524 |
) |
|
$ |
(15,920 |
) |
|
$ |
(7,369 |
) |
|
$ |
(22,625 |
) |
Interest expense |
|
|
2,220 |
|
|
|
(17 |
) |
|
|
2,370 |
|
|
|
146 |
|
Depreciation and
amortization |
|
|
3,306 |
|
|
|
1,219 |
|
|
|
4,782 |
|
|
|
2,461 |
|
Stock-based compensation |
|
|
846 |
|
|
|
4,970 |
|
|
|
1,951 |
|
|
|
6,929 |
|
Income tax benefit (1) |
|
|
841 |
|
|
|
(54 |
) |
|
|
(5,547 |
) |
|
|
(124 |
) |
Restructuring expense (2) |
|
|
706 |
|
|
|
— |
|
|
|
747 |
|
|
|
— |
|
CEO transition related costs
(3) |
|
|
— |
|
|
|
2,874 |
|
|
|
— |
|
|
|
2,874 |
|
Business transaction expense
(4) |
|
|
1,394 |
|
|
|
— |
|
|
|
6,304 |
|
|
|
— |
|
Incremental costs on acquired
inventory (5) |
|
|
1,251 |
|
|
|
— |
|
|
|
1,251 |
|
|
|
— |
|
Proxy contest and other
(6) |
|
|
4 |
|
|
|
1,273 |
|
|
|
4 |
|
|
|
1,842 |
|
Adjusted EBITDA |
|
$ |
3,044 |
|
|
$ |
(5,655 |
) |
|
$ |
4,493 |
|
|
$ |
(8,497 |
) |
(1) An income tax benefit of $7.0 million was recorded in the three
months ended March 31, 2024 as a result of the reversal of a
portion of the Company’s deferred tax asset valuation allowance.(2)
Restructuring charges are expenses that are paid in connection with
reorganization of our operations. These costs primarily include
severance and related benefits.(3) CEO transition related expense
includes one-time costs associated with the separation of its
former CEO. Such costs included severance, bonus, medical benefits
and the tax impact of accelerated vesting of stock-based
compensation.(4) Business transaction expense includes one-time
costs we incurred in connection with acquisitions including
professional fees such as legal and accounting along with other
certain integration related costs of the acquisition.(5) Costs
relate to the step up of acquired PDP finished goods inventory to
fair market value as required under GAAP purchase accounting. This
step up in value over original cost is recorded as a charge to cost
of revenue as such inventory is sold.(6) Proxy contest and other
primarily includes one-time legal and other professional fees
associated with proxy challenges presented by certain shareholder
activists. |
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