SAN DIEGO, May 8, 2019 /PRNewswire/ -- Turtle Beach
Corporation (Nasdaq: HEAR), the leading gaming headset and
audio accessory brand, reported financial results for the first
quarter ended March 31, 2019.
First Quarter Summary vs. Year-Ago Quarter (where
applicable):
- Net revenue increased 10% to a Q1 record of $44.8 million from $40.9
million;
- Net income up 56% to $3.1
million, or $0.09 per diluted
share (EPS excludes $1.6 million gain
on the financial instrument obligation), compared to $2.0 million, or $0.16 per diluted share;
- Adjusted EBITDA was $4.3 million
compared to $5.3 million;
- Cash and cash equivalents of $10.2
million with no outstanding debt at March 31, 2019; and
- Announced pending acquisition of leading PC gaming accessory
business ROCCAT, which is expected to significantly expand the
Company's presence in the PC accessories market.
"We reported another record quarter of revenue growth, which,
combined with strong prior year receivables, allowed us to grow our
cash position to all-time highs with zero debt," said Juergen Stark, CEO, Turtle Beach Corporation.
"This was in spite of challenging comparisons and an overall
decline in the console gaming headset market in the latter part of
the quarter, which we expected.
"Shifting to the remainder of the year, we anticipate gaining a
solid position in the PC gaming accessory market through the
pending acquisition of ROCCAT, which we anticipate will lead to
significant growth in sales and profits once it is fully
integrated. This acquisition will more than double our total
addressable market to $4.7 billion
and facilitate broader international expansion, both of which have
been strategic goals of the Company.
"Following a year of unprecedented growth, we continue to expect
that industry-wide sales of console gaming headsets will decline
year-over-year in 2019, but also believe that the base of gamers
seeking high-quality headsets for both console and PC has never
been higher and will lead to resumed growth in 2020 and beyond. We
are maintaining our prior guidance for 2019, and expect the year to
produce strong revenue and cash flow. We also continue to expect
our revenue to grow over the long-term at a compounded rate of
10%-20%. The recent decision by our board of directors to authorize
the repurchase of up to $15 million
of our stock over the next two years signals our continued
confidence in our prospects."
First Quarter 2019 Financial Results
Net revenue in the first quarter of 2019 increased 10% to
$44.8 million compared to
$40.9 million in the year-ago
quarter. This was the result of continued momentum coming out of
2018, primarily driven by the exceptionally strong slate of
triple-A game releases in holiday 2018.
Gross margin in the first quarter of 2019 was 33.0% compared to
36.8% in the first quarter of 2018. This expected decrease was
primarily due to anticipated higher promotional allowances,
including preparation for the RECON 70 launch, refurbishing costs
incurred to support higher revenue, as well as channel mix.
Operating expenses in the first quarter of 2019 increased to
$13.0 million from $11.2 million in the 2018 period due primarily to
an increase in marketing spend associated with the new RECON 70
series headset launch, as well as $0.8
million of transaction and integration costs related to the
pending ROCCAT acquisition.
Net income in the first quarter of 2019 increased 56% to
$3.1 million compared to $2.0 million in the year-ago quarter. The
increase was driven by a $1.6 million
gain from the mark-to-market adjustment of the financial instrument
obligation related to the non-cash settlement of the Series B
Preferred Stock in April 2018. As a
result of an amendment to the financial instrument obligation on
March 30, 2019, the warrants will no
longer be marked to market each period.
Net income per diluted share in the first quarter of 2019 was
$0.09 on 16.3 million weighted
average shares outstanding, compared to $0.16 on 12.4 million weighted average shares
outstanding in the year-ago quarter. Net income for diluted
earnings per share in the 2019 period excludes the $1.6 million gain on the financial instrument
obligation.
Adjusted net income (as defined below in "Non-GAAP Financial
Measures") in the first quarter of 2019, which excludes the
mark-to-market adjustment of the financial instrument obligation,
as well as costs incurred related to the pending ROCCAT
acquisition, was $2.2 million, or
$0.13 per diluted share, compared to
$2.0 million, or $0.16 per diluted share, in the 2018
period.
Adjusted EBITDA (as defined below in "Non-GAAP Financial
Measures") in the first quarter of 2019 was $4.3 million compared to $5.3 million in the year-ago quarter.
Balance Sheet Highlights
At March 31, 2019, the Company had
$10.2 million of cash and cash
equivalents with no outstanding debt. This compares to $4.3 million of cash and cash equivalents and
total debt outstanding of $53.8
million, which consisted of $22.6
million in subordinated debt, $9.3
million in term loans, $2.6
million of revolving debt, and $19.3
million outstanding for its Series B Preferred Stock
obligation at March 31, 2018. This
year-over-year increase in cash and repayment of all outstanding
debt primarily resulted from the Company's improved operational
performance.
On March 30, 2019, the Company
amended the warrant agreement issued in connection with the
non-cash settlement of the Series B Preferred Stock in April 2018. As a result, the warrants are no
longer accounted for as a financial instrument obligation and
reported as a liability that is marked to market each period with
changes in fair value reported in earnings. The warrants were
marked to market through March 30,
2019, following which time the warrants were accounted for
as an equity instrument with the fair value on that date
reclassified to additional paid-in-capital.
2019 Outlook
The Company's full year outlook for 2019 remains unchanged. Full
year revenue for 2019 is anticipated to include approximately
$20 million to $24 million from ROCCAT. Gross margin in 2019 is
expected to be in the range of 33% to 34%.
|
1st
Half '19
|
FY
'19
|
|
Guidance
|
Guidance
|
|
|
(unchanged)
|
|
|
|
Net
Revenue
|
$85M-$88M
|
$240M-$248M
|
|
|
|
GAAP EPS
|
($0.19)-($0.13)
|
$0.70-$0.90
|
|
|
|
Adjusted
EPS
|
($0.03)-$0.04
|
$0.90-$1.10
|
|
|
|
Fully Diluted
Shares
|
16.6M
|
16.6M
|
|
|
|
Adjusted
EBITDA
|
$4M-$5.5M
|
$27M-$31M
|
With respect to the Company's adjusted EBITDA outlook for the
first half and full year 2019, a reconciliation to its net income
(loss) outlook for the same periods has not been provided because
of 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.
Conference Call Details
Turtle Beach Corporation will hold a conference call today,
May 8, 2019, at 2:00 p.m. Pacific time (5:00 p.m. Eastern) to discuss its first quarter
2019 results.
CEO Juergen Stark and CFO
John Hanson will host the call,
followed by a question and answer session.
Conference Call
Details:
Date: Wednesday, May 8, 2019
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: 7568148
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 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
May 16, 2019.
Toll-Free Replay Number: (855)
859-2056
International Replay Number: (404) 537-3406
Replay ID: 7568148
Non-GAAP Financial Measures
In addition to its reported results, the Company has included in
this earnings release certain financial results, including adjusted
EBITDA and adjusted net income, 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 the effect of the mark-to-market
requirement of the financial instrument obligation and excluding
integration and transaction costs related to the acquisition of the
ROCCAT business. "Adjusted EBITDA" is defined by the Company as net
income (loss) before interest, taxes, depreciation and
amortization, stock-based compensation (non-cash), and certain
special items that we believe are not representative of core
operations (e.g., the mark-to-market adjustment for the financial
instrument obligation and the integration and transaction costs
related to the ROCCAT acquisition). 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 outside the control of
the Company or are inherently unusual, non-operating,
unpredictable, non-recurring, or non-cash. See a reconciliation of
GAAP results to adjusted EBITDA included below for the three months
ended March 31, 2019 and 2018.
About Turtle Beach Corporation
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.
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", "will", "could", "continue", "would",
"should", "believe", "expect", "anticipate", "plan", "goal",
"estimate", "target", "project", "intend" and similar expressions
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, 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
Company's liquidity, 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
inclusion of such businesses within our internal control over
financial reporting and operations, any indebtedness incurred, 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.
|
|
|
March 31,
2019
|
|
December 31,
2018
|
ASSETS
|
(unaudited)
|
|
|
Current
Assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
10,156
|
|
|
$
|
7,078
|
|
Accounts receivable,
net
|
12,461
|
|
|
52,797
|
|
Inventories
|
44,480
|
|
|
49,472
|
|
Prepaid expenses and
other current assets
|
4,785
|
|
|
4,469
|
|
Total Current
Assets
|
71,882
|
|
|
113,816
|
|
Property and
equipment, net
|
5,215
|
|
|
5,856
|
|
Intangible assets,
net
|
997
|
|
|
1,036
|
|
Other
assets
|
3,831
|
|
|
1,212
|
|
Total
Assets
|
$
|
81,925
|
|
|
$
|
121,920
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
Liabilities:
|
|
|
|
Revolving credit
facility
|
$
|
—
|
|
|
$
|
37,385
|
|
Accounts
payable
|
13,073
|
|
|
17,724
|
|
Other current
liabilities
|
16,580
|
|
|
18,488
|
|
Total Current
Liabilities
|
29,653
|
|
|
73,597
|
|
Deferred income
taxes
|
187
|
|
|
187
|
|
Financial instrument
obligation
|
—
|
|
|
7,848
|
|
Other
liabilities
|
4,677
|
|
|
2,792
|
|
Total
Liabilities
|
34,517
|
|
|
84,424
|
|
Commitments and
Contingencies
|
|
|
|
Stockholders'
Equity
|
|
|
|
Common stock, $0.001
par value - 100,000,000 shares authorized; 14,575,365 and
14,268,184 shares issued and outstanding as of March 31, 2019 and
December 31, 2018, respectively
|
14
|
|
|
14
|
|
Additional paid-in
capital
|
176,113
|
|
|
169,421
|
|
Accumulated
deficit
|
(128,408)
|
|
|
(131,463)
|
|
Accumulated other
comprehensive loss
|
(311)
|
|
|
(476)
|
|
Total Stockholders'
Equity
|
47,408
|
|
|
37,496
|
|
Total Liabilities and
Stockholders' Equity
|
$
|
81,925
|
|
|
$
|
121,920
|
|
Turtle Beach
Corporation
|
Condensed
Consolidated Statements of Operations
|
(in thousands, except
per-share data)
|
(unaudited)
|
|
Table
2.
|
|
|
Three Months
Ended
|
|
March 31,
2019
|
|
March 31,
2018
|
Net
revenue
|
$
|
44,846
|
|
|
$
|
40,886
|
|
Cost of
revenue
|
30,059
|
|
|
25,857
|
|
Gross
profit
|
14,787
|
|
|
15,029
|
|
Operating
expenses:
|
|
|
|
Selling and
marketing
|
6,881
|
|
|
5,929
|
|
Research and
development
|
1,456
|
|
|
1,329
|
|
General and
administrative
|
4,649
|
|
|
3,985
|
|
Total operating
expenses
|
12,986
|
|
|
11,243
|
|
Operating
income
|
1,801
|
|
|
3,786
|
|
Interest
expense
|
244
|
|
|
2,005
|
|
Other non-operating
expense (income), net
|
(1,662)
|
|
|
(245)
|
|
Income before income
tax
|
3,219
|
|
|
2,026
|
|
Income tax
expense
|
164
|
|
|
64
|
|
Net income
|
$
|
3,055
|
|
|
$
|
1,962
|
|
|
|
|
|
Net earnings (loss)
per share:
|
|
|
|
Basic
|
$
|
0.21
|
|
|
$
|
0.16
|
|
Diluted
(1)
|
$
|
0.09
|
|
|
$
|
0.16
|
|
Weighted average
number of shares:
|
|
|
|
Basic
|
14,336
|
|
|
12,347
|
|
Diluted
|
16,260
|
|
|
12,369
|
|
|
(1) Net income for
diluted earnings per share in the 2019 period excludes a $1.6
million gain on the financial instrument obligation.
|
Turtle Beach
Corporation
|
Condensed
Consolidated Statements of Cash Flows
|
(in
thousands)
|
(unaudited)
|
|
Table
3.
|
|
|
Three Months
Ended
|
|
March 31,
2019
|
|
March 31,
2018
|
CASH FLOWS FROM
OPERATING ACTIVITIES
|
40,962
|
|
|
38,045
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES
|
(557)
|
|
|
(354)
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES
|
|
|
|
Borrowings on
revolving credit facilities
|
48,119
|
|
|
37,571
|
|
Repayment of
revolving credit facilities
|
(85,504)
|
|
|
(73,396)
|
|
Repayment of term
loan
|
—
|
|
|
(2,485)
|
|
Proceeds from
exercise of stock options and warrants
|
23
|
|
|
—
|
|
Repurchase of
common stock in the settlement of restricted stock
|
(101)
|
|
|
—
|
|
Debt financing
costs
|
—
|
|
|
(175)
|
|
Net cash used for
financing activities
|
(37,463)
|
|
|
(38,485)
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
136
|
|
|
(118)
|
|
Net increase
(decrease) in cash and cash equivalents
|
3,078
|
|
|
(912)
|
|
Cash and cash
equivalents - beginning of period
|
7,078
|
|
|
5,247
|
|
Cash and cash
equivalents - end of period
|
$
|
10,156
|
|
|
$
|
4,335
|
|
Turtle Beach
Corporation
|
Reconciliation of
GAAP and Non-GAAP Measures
|
(in thousands, except
per-share data)
|
(unaudited)
|
|
Table
4.
|
|
|
Three Months
Ended
|
|
March 31,
2019
|
|
March 31,
2018
|
Net Income
(Loss)
|
|
GAAP Net
Income
|
$
|
3,055
|
|
|
$
|
1,962
|
|
|
|
|
|
Adjustments, net of
tax:
|
|
|
|
Gain on financial
instrument obligation
|
(1,601)
|
|
|
—
|
|
Acquisition
integration costs
|
721
|
|
|
—
|
|
Non-GAAP
Earnings
|
2,175
|
|
|
1,962
|
|
|
|
|
|
Diluted Earnings Per
Share
|
|
|
|
GAAP -
Diluted
|
$
|
0.09
|
|
|
$
|
0.16
|
|
|
|
|
|
Gain on financial
instrument obligation
|
$
|
—
|
|
|
$
|
—
|
|
Acquisition
integration costs
|
$
|
0.04
|
|
|
$
|
—
|
|
Non-GAAP -
Diluted
|
$
|
0.13
|
|
|
$
|
0.16
|
|
Turtle Beach
Corporation
|
GAAP to Adjusted
EBITDA Reconciliation
|
(in
thousands)
|
(unaudited)
|
|
Table
5.
|
|
|
Three Months
Ended
|
|
March 31,
2019
|
|
As
Reported
|
|
Adj
Depreciation
|
|
Adj
Amortization
|
|
Adj
Stock
Compensation
|
|
Other
(1)
|
|
Adj
EBITDA
|
Net
revenue
|
$
|
44,846
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
44,846
|
|
Cost of
revenue
|
30,059
|
|
|
(352)
|
|
|
—
|
|
|
125
|
|
|
—
|
|
|
29,832
|
|
Gross
profit
|
14,787
|
|
|
352
|
|
|
—
|
|
|
(125)
|
|
|
—
|
|
|
15,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expense
|
12,986
|
|
|
(688)
|
|
|
(62)
|
|
|
(647)
|
|
|
(780)
|
|
|
10,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
1,801
|
|
|
1,040
|
|
|
62
|
|
|
522
|
|
|
780
|
|
|
4,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
244
|
|
|
|
|
|
|
|
|
|
|
|
Other non-operating
expense (income), net
|
(1,662)
|
|
|
|
|
|
|
|
|
1,601
|
|
|
(61)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
tax
|
3,219
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
164
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
3,055
|
|
|
|
|
Adjusted
EBITDA
|
|
$
|
4,266
|
|
|
|
|
Three Months
Ended
|
|
March 31,
2018
|
|
As
Reported
|
|
Adj
Depreciation
|
|
Adj
Amortization
|
|
Adj
Stock
Compensation
|
|
Other
|
|
Adj
EBITDA
|
Net
revenue
|
$
|
40,886
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
40,886
|
|
Cost of
revenue
|
25,857
|
|
|
(120)
|
|
|
—
|
|
|
(18)
|
|
|
—
|
|
|
25,719
|
|
Gross
profit
|
15,029
|
|
|
120
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
15,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expense
|
11,243
|
|
|
(828)
|
|
|
(79)
|
|
|
(205)
|
|
|
—
|
|
|
10,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
3,786
|
|
|
948
|
|
|
79
|
|
|
223
|
|
|
—
|
|
|
5,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
2,005
|
|
|
|
|
|
|
|
|
|
|
|
Other non-operating
expense (income), net
|
(245)
|
|
|
|
|
|
|
|
|
|
|
(245)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
tax
|
2,026
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
64
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
1,962
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
$
|
5,281
|
|
|
(1) Other includes
certain business acquisition costs and a gain (loss) on financial
instrument obligation.
|
View original content to download
multimedia:http://www.prnewswire.com/news-releases/turtle-beach-reports-record-first-quarter-2019-results-300846629.html
SOURCE Turtle Beach Corporation