San
Diego, CA – February
7, 2019 – Turtle Beach Corporation (Nasdaq: HEAR), the leading gaming
headset and audio accessory company, is providing selected preliminary fourth quarter
and full year 2018 results.
Based
on preliminary unaudited information, Turtle Beach expects to report fourth
quarter 2018 sales between $109 million and $111 million, an increase of at
least 37% compared to $79.7 million reported in the fourth quarter of 2017 and above
prior guidance of approximately $94 million. For the full year 2018, sales are
expected to be between $285 million and $287 million, up at least 90% compared
to $149.1 million in 2017 and above prior guidance of approximately $270
million.
“Driving
our sales results was another strong quarter of great product performance and
market share expansion,” said Juergen Stark, CEO, Turtle Beach. “According to NPD, our North America market share
increased steadily throughout 2018, ending at 46.1% for the year compared to
42.4% in 2017. Our share was 47.6% for the fourth quarter of 2018 compared to
45.5% in 2017 and 47.6% for the month of December 2018, compared to 46.0% in
December 2017 in North America. In fact, for the month of December, according
to NPD, the top seven headsets in the North America market were from Turtle
Beach.1 We believe these market share increases are the result of
our innovative, high-quality products, strong brand, and excellent retail partnerships.”
In
addition to the better-than-expected sales, the company expects to show significant
leverage of operating costs. Fourth quarter gross margin is expected to exceed
38% compared to 37.6% last year. For the full year, gross margin is expected to
be approximately 38% compared to 34.2% in 2017 and above our prior guidance of
approximately 37%.
Preliminary
diluted earnings per share for the fourth quarter are expected to be between
$1.27 and $1.34, compared to last year’s fourth quarter diluted earnings per
share of $1.15, and well above the prior guidance of $1.02. For the full year
2018, preliminary diluted earnings per share are expected to be between $2.88
and $2.95, compared to a net loss of ($0.26) per diluted share in 2017, and
well above prior guidance of $2.55 per diluted share. Actual reported earnings
per share for both periods are subject to increase from any further release of
valuation allowances.
Adjusted
EBITDA in the fourth quarter is expected to be between $23 million and $25
million, up at least 33% compared to last year’s fourth quarter of $17.2
million. This compares to prior adjusted EBITDA guidance of approximately $21
million. Adjusted EBITDA for the full year 2018 is expected to be between $56
million and $58 million, compared to $11.6 million in 2017 and prior guidance
of approximately $54 million. Adjusted EBITDA for the fourth quarter and full
year 2018 includes charges of approximately $1.5 million and $1.6 million,
respectively, for the early repayment of the outstanding subordinated notes and
the term loans.
Commenting
on the preliminary 2018 results, Mr. Stark added, “Starting with the loan
renegotiation and retirement of the Series B preferred stock early in the year
and then with the strong market, our share gains, and excellent execution
throughout the year, we’ve had a truly transformational year, nicely capped off
by paying down, ahead of schedule, all the remaining long-term debt in
December.”
Turtle
Beach expects to report fourth quarter and full year 2018 results and introduce
its 2019 outlook in mid-March 2019.
1Source: The NPD
Group/Retail Tracking Service/Video Games/Dollars/U.S and Canada/Jan -Dec 2018
and Dec 2018 update.
Important Note on 2018 Preliminary Estimates:
The financial information included
herein for the fourth quarter and full year 2018 are preliminary, unaudited
estimates and may change materially, including as a result of the finalization
of financial statements for the Company’s fourth quarter and full year ended
December 31, 2018, review of inventory levels that could require additional
reserves, review of sales-related reserves, review of the provision for income
taxes, completion of the Company’s audit by the Company’s independent
registered public accounting firm, and other factors and adjustments related to
the Company’s financial reporting process. The preceding estimates are based on
the Company’s internal estimates and information available as of the date
hereof. There can be no assurance that our final results for the year will not
differ from these estimates and that such changes will not be material; accordingly,
these statements should not be viewed or relied upon as a substitute for
complete audited financial statements to be prepared in accordance with generally
accepted accounting principles (GAAP) or as a measure of our actual
performance. The Company’s final audited results for fourth quarter and full
year 2018 are expected to be released by mid-March 2019.
The Company has included in this release of
preliminary results adjusted EBITDA, which the Securities and Exchange
Commission defines as a “non-GAAP financial measure.” Management believes that
adjusted EBITDA, when read in conjunction with the Company’s GAAP financial
measures, can provide useful supplemental information for investors analyzing
period-to-period comparisons of 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. The Company will provide a reconciliation of non-GAAP measures to
the related GAAP measure in its fourth quarter and full year 2018 earnings
release in mid-March 2019.
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.TM 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”, “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.
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, the risk that changes to these
preliminary results will be required as a result of completing the financial reporting
closing process and financial audit, determination of any valuation allowances,
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, the Company’s continued listing on
the Nasdaq, 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.
For Investor Information, Contact:
Cody Slach
Investor Relations
Liolios
949.574.3860
hear@liolios.com
For Media Information, Contact:
MacLean Marshall
Sr. Director – Brand & PR/Communications
Turtle Beach Corp.
858.914.5093
maclean.marshall@turtlebeach.com