Diego, CA – March 24, 2016 – Turtle Beach Corporation (NASDAQ: HEAR), a leading audio technology company, reported financial
the fourth quarter and
full year ended December
dominant #1 console gaming headset position with ~44% U.S. revenue share in the
five new products in the quarter, adding to the Company’s strong new-gen
portfolio which was up 31% year-over-year in the fourth quarter
revenues over 85% of fourth quarter headset sales
· Gross margin increased 110 basis points to 29.1% compared to
28.0% in the fourth quarter of 2014
HyperSound Clear™ 500P into the
hearing loss market with high consumer satisfaction
delivered revenue and adjusted EBITDA above our guidance range in the fourth
quarter, driven by strong holiday sales in our headset business,” said Juergen Stark, CEO, Turtle Beach Corporation. “New-gen
headset sales increased 31% compared to the year-ago quarter, driven by the launch
of five new core models for the holiday season, each of which performed well at
retail and continued to drive our market share even higher. These results were despite
the strong dollar’s negative impact on our international business and a more
rapid than expected decline in old-gen revenues, which were down to less than
12% of our sales in the fourth quarter. In addition, robust holiday
sell-through reduced our channel inventory and positioned us well for 2016.
fact, sell-through trends have remained strong during the first quarter, driven
by increased traffic in the retail channel and the further adoption of our
completely transitioned new-gen product portfolio. We remain well positioned to
continue this growth throughout the year, especially as old-gen is now expected
to be well under 10% of our headset business in 2016. We expect this will help drive
improved margins and increased profitability.
October marked the launch of HyperSound Clear 500P, our revolutionary new home
audio system that helps people hear the television better. Our two primary
goals of the launch were to ensure customer satisfaction and demonstrate
success in a small amount of hearing healthcare offices, and we’ve accomplished
those goals. The hearing healthcare offices that are fully trained and actively
selling the product have provided early consumer survey feedback indicating
high satisfaction. In addition, the small group of offices that we’ve fully
trained are converting prospects to customers at a rate of over 20%.
priority will now shift to refining the sales approach and more quickly scaling
fully active offices. As this
business continues to grow, we will look at other market opportunities for our
unique directed audio technology. For example, in late February, we
launched HyperSound Clear 500P in Europe—a market which is actually slightly
larger than the U.S. in terms of hearing aid revenues. Since HyperSound Clear
500P is a medical product, there were unique requirements and extensive
certification activities that needed to be accomplished to enable us to start
Fourth Quarter 2015 Financial Results
Net revenue in
the fourth quarter was $84.6 million
compared to $92.3 million
in the year-ago quarter. The decrease was primarily attributable to an overall decline in sales of old-gen
headsets and softer international sales, partially offset by a 31% increase in new-gen
Gross profit in the fourth quarter was $24.6 million compared to $25.8 million
the year-ago quarter. Gross margin increased 110 basis points to 29.1% compared to 28.0% in the fourth quarter of 2014. The increase was driven by a product mix shift to next-gen headsets,
including the release of certain new models
for the holiday season, the continued channel mix shift
as well as the Company’s supply chain initiatives to reduce cost of goods sold.
Operating expenses, excluding an impairment charge, for the fourth quarter
were $18.3 million, down slightly from $18.6 million in the same period of
2014. The decrease was attributable to cost reductions in the headset business
which more than offset investments to ramp HyperSound sales efforts.
Adjusted EBITDA (as defined below in “Non-GAAP Financial Measures”) on a consolidated basis was $9.9
million, reflecting investments of approximately $4.1 million in the HyperSound business, compared to consolidated
adjusted EBITDA of $10.4 million in
the year-ago quarter, which
included $3.3 million in HyperSound investments. Adjusted EBITDA for the headset
2% to $14.0 million in the fourth quarter from $13.7 million in the year-ago quarter.
loss in the fourth quarter was $46.5 million
or $(1.09) per diluted
compared to net income of $2.4 million
$0.06 per diluted share in the year-ago quarter. Net loss in the fourth
quarter of 2015 included a $49.8 million goodwill impairment charge, which U.S.
GAAP accounting rules required as part of the annual impairment test. Excluding
this charge, net income in the fourth quarter increased 39% to $3.3 million or
$0.08 per diluted share.
Full Year 2015 Financial Results
Net revenue in
was $162.7 million compared to
in 2014. The decline was due to
the aforementioned strong dollar impact on the Company’s international business
and a more rapid than expected decline in old-gen revenues, partially offset by
the success of the new-gen headset portfolio.
Gross profit in 2015 was $40.7 million compared to $50.7 million
2014. Gross margin was 25.0% compared to
27.2% in 2014. Gross margin was negatively impacted by higher promotional
credits to clear old-gen and licensed headset inventory, incremental costs
associated with the Company’s new refurbishment model, contract manufacturer
transitions, and higher third party licensing and royalty costs associated with
discontinued legacy license agreements.
excluding the impairment charge, in 2015
were $65.3 million, up slightly from $64.5 million in 2014. This was due to increased HyperSound investments
in preparation for the October 2015 launch.
Adjusted EBITDA (as defined below in “Non-GAAP Financial
Measures”) was a loss of $11.4 million, including investments of approximately
$13.8 million in the HyperSound business, compared to adjusted EBITDA of $2.0
million in 2014, which included $10.0 million in HyperSound investments. Adjusted EBITDA for the headset business was $2.4 million
in 2015 compared to $12.0 million in 2014.
Net loss in 2015 was $82.9 million or $(1.96) per
diluted share, compared to a net loss of $15.5 million or $(0.39) per diluted
share in 2014. The decline was driven by the aforementioned goodwill impairment
charge, the Company’s continued investment in the HyperSound business, as well
as an $8.5 million non-cash valuation allowance. Excluding the tax valuation
expense and goodwill impairment, net loss in 2015 was $24.6 million or $(0.58) per
Balance Sheet Highlights
The Company ended the year with approximately $7.1
million of cash and cash equivalents compared to $7.9 million at December 31,
2014. Inventories were down 32% to $26.1 million compared to $38.4 million at
the end of 2014 due to the strong 2015 holiday sell-through. Accounts payable
were down 50% to $17.7 million compared to $35.5 million at December 31, 2014
due to solid inventory management, particularly lower payables to the Company’s
As of December 31, 2015, outstanding debt principal was $68.1 million
to $44.6 million at December 31, 2014. The increase in debt was primarily due to
the establishment of a new $15 million term loan in the third quarter, which
improved the capital structure and enhanced liquidity.
February 5, 2016, Turtle Beach completed a follow-on public offering of
5,000,000 shares and a concurrent private placement of 1,700,000 shares for $6.2
million in net proceeds. Insiders (SG VTB Holdings, LLC, Turtle Beach’s largest
stockholder; Ronald Doornink, Turtle Beach’s Chairman of the Board; and Juergen
Stark, Turtle Beach’s Chief Executive Officer) purchased over half of the
offering ($3.15 million). Turtle Beach is using all net proceeds from the transactions
for working capital and general corporate purposes, including applying the
proceeds against the outstanding principal balance of its working capital line
the first quarter of 2016, Turtle Beach expects net revenue to increase
10% to approximately $21.7 million compared to $19.7 million in the first quarter of 2015.
Adjusted EBITDA is expected to improve to a loss of approximately $9 million compared to a loss of $9.7 million in the year-ago quarter. Net loss for the first
quarter is expected to be approximately $0.32 per diluted share, compared to a net loss of $0.25 per diluted share
in the first quarter of 2015.
the full year 2016, the Company continues to expect net revenue to range
between $160-$172 million compared to $162.7 million in 2015. Included within
these expectations is 12-16% growth in new-gen headset revenues to $140-$145
million, a 60-70% decline in old-gen headset revenues to $8-$10 million, approximately
$7-$10 million in HyperSound revenue, and $5-$7 million in other headset and
Company continues to expect headset gross margins to increase 400 basis points
to 30% in 2016 with a roughly 4x increase in headset adjusted EBITDA to
approximately $9 million. In the HyperSound business, gross margin is expected
to be 40-50% (excluding amortization) by the fourth quarter with a modest
reduction in net investment to below $14 million in 2016 as revenues and
operating expenses scale.
Conference Call Details
Turtle Beach Corporation will hold a conference call today, March 24, 2016 at 1:30 p.m. Pacific time (4:30 p.m. Eastern) to discuss its
fourth quarter and full year 2015 results
CEO Juergen Stark and CFO John Hanson will host the call, followed by a question and
Date: Thursday, March
p.m. PT / 4:30 p.m. ET
Dial-in Number: (877) 303-9855
Dial-in Number: (408) 337-0154
Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the
conference call, please contact Liolios at (949) 574-3860.
conference call will be broadcast live and available for replay at http://edge.media-server.com/m/p/qhg8nex4 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 4:30 p.m. Pacific Time on the same
day through March 31, 2016.
Replay Number: (855) 859-2056
Replay Number: (404) 537-3406
Non-GAAP Financial Measures
addition to its reported results, the Company has included in this earnings release
certain financial results, including adjusted EBITDA 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
results, can provide useful supplemental information
for investors analyzing period to period comparisons
the Company's results. “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. See a reconciliation of GAAP results to adjusted EBITDA included below for the three months and year ended December 31, 2015 and 2014.
adjusted EBITDA outlook for the first quarter and full year 2016 have not been reconciled to the Company’s net loss outlook for the same
periods because certain items that would impact interest expense, provision
for income taxes and stock-based compensation,
which are reconciling items between net loss and adjusted EBITDA,
cannot be reasonably predicted. Accordingly, reconciliation of adjusted EBITDA outlook to net loss outlook for the
first quarter of and
full year 2016 is not available without unreasonable effort.
Turtle Beach Corporation
Beach Corporation (http://corp.turtlebeach.com)
designs innovative, market-leading audio products for the consumer, healthcare
and commercial sectors. Under its award-winning Turtle Beach
the Company has been the clear market share leader for the past five-plus years
with its wide selection of acclaimed gaming headsets for use with Xbox One
and PlayStation®4, as well as personal computers and mobile/tablet
devices. Under the HyperSound brand (www.hypersound.com),
the Company markets pioneering directed audio solutions that have applications
in hearing healthcare, digital signage and kiosks and consumer electronics. The
Company's shares are traded on the NASDAQ Exchange under the symbol: HEAR.
Cautionary Note on Forward-Looking Statements
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. Forward looking statements
are based on management’s statements containing the words “may”, “could”,
“would”, “should”, “believe”, “expect”, “anticipate”, “plan”, “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.
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 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 implementation of any businesses we acquire, our indebtedness,
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 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.
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Liolios Turtle Beach Corp.