Net Revenue up 22% to $24 Million; Management Raises 2016 Outlook, Including Significant
Increase to a Positive Adjusted EBITDA -
Diego, CA – May 10, 2016 – Turtle Beach Corporation (NASDAQ: HEAR), a leading audio technology company, reported financial
the first quarter ended March 31, 2016.
Quarter Highlights vs. Same Year-Ago Quarter
revenue increased 22% to $24.0 million with headset net revenue up 21% to $23.7
profit increased 8% to $3.4 million with headset gross profit up 42% to $4.7
million (headset gross margin up 290 basis points to 19.9%).
expenses were reduced by 16% to $13.1 million.
· Consolidated adjusted EBITDA improved to $(6.3) million
compared to $(9.7) million, with headset adjusted EBITDA improving to $(3.2)
million compared to $(6.7) million.
momentum we established in our business at the end of 2015 has continued in the
first quarter,” said Juergen Stark, CEO, Turtle Beach
Corporation. “Net revenue was up 22%, while our higher
margin new-gen headset sales increased 64% compared to the year-ago quarter.
This continues to be driven by robust sell-through of our new-gen headset
portfolio in both domestic and European retail channels.
results were reinforced by recent NPD data that shows Turtle Beach continuing
to outpace a healthy, double-digit growing gaming market in both units and
revenue share. In fact, we ended the first quarter with 41.6% revenue share, up
110 basis points from the same time last year.
believe we are well-positioned to continue growing headset revenue and
profitability, supported by our Elite Pro gaming headset launch this summer.
The line is expected to define the future of eSports gaming audio equipment,
delivering best-in-class audio performance for game sound and team chat, plus
innovative comfort-driven technologies to help ensure players stay cool under
fire. Recognizing this step-change in competitive gaming audio accessories,
OpTic Gaming – one of the most prolific eSports teams in the world – selected
Turtle Beach and the all-new Elite Pro line as their official gaming audio gear
our HyperSound business, we experienced steady revenue growth in the first
quarter, with a significant contributor being the March launch in Europe. Hearing
healthcare offices that are fully trained and actively selling the product continue
to convert prospects to customers at a rate of over 20%. Our priority has now shifted
to refining the sales approach and more quickly scaling fully active offices. To
that end, May is ‘Better Hearing & Speech’ month, and we have organized a
targeted media campaign to drive awareness. This includes digital, radio,
newspaper and press campaigns focused on the Southern California and Florida Gulf
“As the HyperSound business continues to
grow, we plan to look at other market opportunities for our unique directed
audio technology. For example, we recently showcased a
potential add-on feature for HyperSound Clear™ 500P directed towards the
50-plus million Americans that experience tinnitus, more commonly known as
‘ringing in the ears.’ As we pursue this opportunity, along with the continued
rollout to hearing healthcare offices both domestically and abroad, we expect
to carefully manage our investment with the continued goal of positive
consolidated EBITDA for 2016.”
First Quarter 2016 Financial Results
Net revenue in
the first quarter increased 22% to $24.0 million compared to
in the year-ago quarter. The increase was primarily attributable to a 21%
increase in headset sales due to continued robust sell-through of the new-gen
Gross profit in the first quarter
increased 8% to $3.4 million compared to $3.1 million in the year-ago quarter. Gross
margin was 14.0% compared to 15.8% in the first quarter of 2015. A 290 basis
improvement in headset gross margin was offset by non-cash intangible asset
amortization costs associated with the launch of HyperSound Clear 500P. Higher
margin new-gen headsets contributed 86% of revenues in the first quarter, up
from 64% during the same period in 2015.
Operating expenses in the first quarter declined 16% to $13.1
million compared to $15.7 million in the same period of 2015. The decrease was
attributable to strong cost management in the headset business, which more than
offset modest additional investments to ramp HyperSound Clear 500P sales
Adjusted EBITDA (as defined below in “Non-GAAP Financial
Measures”) on a consolidated basis improved to $(6.3) million compared to $(9.7) million in the
The large improvement was primarily driven by strong new-gen headset sales and
cost reduction initiatives. Adjusted EBITDA for the headset business improved to $(3.2) million in the first quarter compared to $(6.7) million in the
loss in the first quarter was $12.0 million
or $(0.26) per diluted
compared to a net loss of $10.6 million
$(0.25) per diluted share in the year-ago quarter. The year-ago quarter
included a $3.4 million income tax benefit (approximately $0.08 per diluted
share) versus a $0.1 million income tax expense in the first quarter of 2016
due to the full valuation allowance recorded in the third quarter of 2015.
Balance Sheet Highlights
The Company ended March 31, 2016 with approximately $3.2
million of cash and cash equivalents compared to $7.1 million at December 31,
2015. Given the availability under the Company’s $60 million revolving credit
facility, Turtle Beach generally does not hold a large cash balance.
As of March 31, 2016, outstanding debt principal was $35.5 million
to $68.1 million at December 31, 2015. The decrease in debt was due to a $31.9
million reduction in the Company’s revolving credit facility, which was driven
by cash receipts from strong holiday sales and the February 2016 follow-on
public offering. The Company only had a small balance on its revolver at the
end of the first quarter.
Increased 2016 Outlook
the second quarter of 2016, Turtle Beach expects net revenue to increase
11% to approximately $25.0 million compared to $22.6 million in the second quarter of 2015.
Adjusted EBITDA is expected to improve to approximately $(6.0) million compared to $(8.2) million in the second
quarter of 2015. Net loss for the second quarter is expected to be approximately $(0.23) per diluted share, compared to a net loss of $(0.23) per diluted share
in the second quarter of 2015. The second quarter of 2015 included a $3.1
million income tax benefit associated with the Company’s deferred tax assets.
No such benefit is expected to occur in the second quarter of 2016 due to the
full valuation allowance recorded in the third quarter of 2015.
the full year 2016, Turtle Beach now expects net revenue to increase 1% to 8%
and range between $165-$175 million (up from $160-$172 million in its March 24,
2016 outlook) compared to $162.7 million in 2015. The Company now expects to generate
$0-$2 million in consolidated adjusted EBITDA in 2016 (up significantly from an
implied consolidated adjusted EBITDA of $(5) million in the March outlook)
compared to $(11.4) million in 2015. In HyperSound, the Company expects to hold
its investment to below $12 million in 2016 by growing revenues and carefully
managing operating expenses. Net loss in 2016 is expected to range between $(0.46)-$(0.50)
per diluted share based upon 48.6 million shares outstanding, compared to a net
loss of $(1.96) per diluted share in 2015.
Conference Call Details
Turtle Beach Corporation will hold a conference call today, May 10, 2016 at 1:30 p.m. Pacific time (4:30 p.m. Eastern) to discuss its
first quarter 2016 results.
CEO Juergen Stark and CFO John Hanson will host the call, followed by a question and
May 10, 2016
p.m. ET / 1:30 p.m. PT
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/hq2x5xn8 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 May 17, 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 ended March 31, 2016 and 2015.
adjusted EBITDA outlook for the second quarter and full year 2016 have not been
reconciled to the Company’s net loss outlook for the same periods because certain items
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
second 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. 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 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 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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Turtle Beach Corp.