EX-99.1 2 hear-ex99_1.htm EX-99.1 EX-99.1

 

Exhibit 99.1

 

TURTLE BEACH CORPORATION ANNOUNCES SECOND QUARTER 2024 RESULTS AND RAISES FULL YEAR OUTLOOK

- Second Quarter Net Revenue of $76.5 million, up 59% Year-over-Year -

- Raising Full Year 2024 Guidance on Continued Execution Strength -

- Repurchased $15 Million of Common Shares in the Second Quarter -

- Highlight Intention to Continue Share Repurchases at Attractive Price Levels -

 

WHITE PLAINS, N.Y. – August 8, 2024 – 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 Plan


 

During 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 Summary

At 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.

Outlook

Turtle 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 Details

Turtle 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 Corporation

Turtle 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 Measures

In 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 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 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.
 


 

All trademarks are the property of their respective owners.

CONTACTS:

Investors:

hear@icrinc.com

(646) 277-1285

 

Public Relations & Media:

MacLean Marshall

Sr. Director, Global Communications

Turtle Beach Corporation

858.914.5093

maclean.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.