Turtle Beach Corp 8-K, filed Aug 8, 2024
Turtle Beach Corp (TBCH)
About this 8-K
Turtle Beach Corp filed this 8-K on August 8, 2024.
Items reported
- Item 2.02: Financial results
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report:
(Date of earliest event reported)
(Exact name of registrant as specified in its charter)
(Commission File Number)
|
|
|
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
|
|
(Address of principal executive offices) |
(Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
|
||
|
|
|
Title of each class |
Trading Symbols |
Name of each exchange on which registered |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
Item 2.02 - Results of Operations and Financial Condition.
On August 8, 2024, Turtle Beach Corporation (the “Company”) issued a press release announcing its financial results for its quarter ended June 30, 2024. A copy of that press release and the attached financial schedules are attached as Exhibit 99.1 to this report and incorporated herein by reference.
The information in this report (including Exhibit 99.1) is being furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.
Item 9.01 — Financial Statements and Exhibits
(d) Exhibits
|
|
|
|
Exhibit No. |
Description |
99.1 104 |
Press Release of the Company, dated August 8, 2024 Cover Page Interactive Data File (embedded within the Inline XBRL document)
|
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
|||
|
|
|
|
|
|
|
TURTLE BEACH CORPORATION |
|
|
|
|
Date: |
August 8, 2024 |
By: |
/s/ JOHN T. HANSON |
|
|
|
John T. Hanson Chief Financial Officer and Treasurer |
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
“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 |
) |