Turtle Beach Announces Fourth Quarter and Full Year 2023 Earnings Results
Fourth Quarter Summary vs.
-
Net revenue was
$99.5 million , a decrease of 1.3% compared to$100.9 million a year ago; -
Net income was
$8.6 million , or$0.47 per diluted share, compared to net loss of$23.2 million , or$1.40 per diluted share, a year ago; -
Adjusted EBITDA improved to
$14.0 million compared to$1.0 million a year ago.
2023 Full-Year Summary vs. 2022:
-
Net revenue was
$258.1 million , an increase of 7.5% compared to$240.2 million a year ago; -
Net loss was
$17.7 million , or$1.03 per diluted share, compared to$59.5 million , or$3.62 per diluted share, a year ago; -
Adjusted EBITDA improved to
$6.5 million compared to an Adjusted EBITDA loss of$29.9 million a year ago.
Management Commentary
“Turtle Beach’s resilience and adaptability have elevated our leadership position across gaming accessories,” said
“We continued to execute against our strategic pillars and ongoing cost management initiatives, which drove margin improvements ahead of our expectations. These initiatives, including portfolio optimization, SKU rationalization, and platformed product development, come into full effect in 2024. We look forward to realizing these benefits with dramatically improved business performance and a 2024 portfolio that will showcase groundbreaking product launches across key categories. We anticipate that these new products, along with our continued focus on multiple cost management initiatives, will result in significant improvements in Turtle Beach’s performance in 2024.
“We are incredibly optimistic about our 2024 prospects given our progress against optimizing the business for the future, our growth prospects in all our gaming categories driven by fantastic new product launches, and our focus on significantly increasing profitability. In addition, today we separately announced the highly accretive acquisition of PDP to significantly diversify our leadership position in gaming accessories, strengthen profitability and meaningfully enhance scale. We view this as a transformational change for the company and our growth prospects have never been stronger.
“Additionally, as part of our 2024 strategy, we will be consolidating all PC products, including mice, keyboards and headsets, under our best-selling Turtle
Fourth Quarter 2023 Financial Results
Net revenue in the fourth quarter of 2023 was
Gross margin in the fourth quarter of 2023 increased to 32.0%, the highest level in the past seven quarters, compared to 19.8% a year ago. This increase was driven primarily by lower freight costs and promotional spend. In the fourth quarter of 2022, the Company recorded a
Operating expenses in the fourth quarter of 2023 were
Net income in the fourth quarter of 2023 was
Adjusted EBITDA (as defined below in “Non-GAAP Financial Measures”) in the fourth quarter of 2023 improved to
2023 Financial Results
Net revenue in 2023 was
Gross margin in 2023 increased to 29.3%, compared to 20.5% a year ago. This increase was driven primarily by lower freight and logistics costs as the elevated freight rates driven by the pandemic normalized. In 2022, the Company recorded a
Operating expenses in 2023 were
Net loss in 2023 was
Adjusted EBITDA (as defined below in “Non-GAAP Financial Measures”) in 2023 improved to
Balance Sheet and Cash Flow Summary
At
Outlook
Accordingly, the Company expects 2024 net revenues to be in the range of
The Company further reiterates its long-term goals of a 10%+ revenue CAGR, a mid-30’s gross margin percentage, and is now focused on low to mid-teens percentage for Adjusted EBITDA margins.
Value Enhancement Committee Review
The Company today issued a separate press release announcing the outcome of the Board’s Value Enhancement Committee review, which can be found at https://corp.turtlebeach.com/press-releases/.
With respect to the Company's adjusted EBITDA outlook, 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
In conjunction with this announcement,
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
About
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 are only predictions and are not guarantees of performance. 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. The inclusion of such information should not be regarded as a representation by the Company, or any person, that the objectives of the Company will be achieved. 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 general business and economic conditions, inflationary pressures, the impact of competitive products and pricing, including promotional credits and discounts, optimizing our product portfolio, the substantial uncertainties inherent in the acceptance of existing and future products, our dependence on third parties to manufacture and transport our products, reductions in logistic and supply chain challenges and costs, reducing our cost of goods and operating expenses, the difficulty of commercializing and protecting new technology, risks associated with the future direction or governance of the Company, risks associated with the expansion of our business, including the integration of PDP and any other 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
All trademarks are the property of their respective owners.
Condensed Consolidated Statements of Operations (in thousands, except per-share data) (unaudited) |
||||||||||||||||
Table 1. |
||||||||||||||||
|
|
Three Months Ended |
|
|
Twelve Months Ended |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net revenue |
|
$ |
99,538 |
|
|
$ |
100,900 |
|
|
$ |
258,122 |
|
|
$ |
240,166 |
|
Cost of revenue |
|
|
67,734 |
|
|
|
80,882 |
|
|
|
182,618 |
|
|
|
190,979 |
|
Gross profit |
|
|
31,804 |
|
|
|
20,018 |
|
|
|
75,504 |
|
|
|
49,187 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling and marketing |
|
|
13,032 |
|
|
|
14,124 |
|
|
|
43,489 |
|
|
|
47,090 |
|
Research and development |
|
|
4,467 |
|
|
|
4,335 |
|
|
|
17,137 |
|
|
|
19,123 |
|
General and administrative |
|
|
5,946 |
|
|
|
7,785 |
|
|
|
31,321 |
|
|
|
32,558 |
|
|
|
|
- |
|
|
|
1,896 |
|
|
|
- |
|
|
|
1,896 |
|
Total operating expenses |
|
|
23,445 |
|
|
|
28,140 |
|
|
|
91,947 |
|
|
|
100,667 |
|
Operating income (loss) |
|
|
8,359 |
|
|
|
(8,122 |
) |
|
|
(16,443 |
) |
|
|
(51,480 |
) |
Interest expense |
|
|
251 |
|
|
|
577 |
|
|
|
504 |
|
|
|
1,220 |
|
Other non-operating expense (income), net |
|
|
(405 |
) |
|
|
(2,330 |
) |
|
|
394 |
|
|
|
1,753 |
|
Income (loss) before income tax |
|
|
8,513 |
|
|
|
(6,369 |
) |
|
|
(17,341 |
) |
|
|
(54,453 |
) |
Income tax expense benefit |
|
|
(39 |
) |
|
|
16,864 |
|
|
|
338 |
|
|
|
5,093 |
|
Net income (loss) |
|
$ |
8,552 |
|
|
$ |
(23,233 |
) |
|
$ |
(17,679 |
) |
|
$ |
(59,546 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
0.49 |
|
|
$ |
(1.40 |
) |
|
$ |
(1.03 |
) |
|
$ |
(3.62 |
) |
Diluted |
|
$ |
0.47 |
|
|
$ |
(1.40 |
) |
|
$ |
(1.03 |
) |
|
$ |
(3.62 |
) |
Weighted average number of shares: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
17,449 |
|
|
|
16,562 |
|
|
|
17,135 |
|
|
|
16,450 |
|
Diluted |
|
|
18,383 |
|
|
|
16,562 |
|
|
|
17,135 |
|
|
|
16,450 |
|
Condensed Consolidated Balance Sheets (in thousands, except par value and share amounts) |
||||||||
Table 2. |
||||||||
|
|
|
|
|
|
|
||
|
|
2023 |
|
|
2022 |
|
||
|
|
(unaudited) |
|
|
|
|
||
ASSETS |
|
(in thousands, except par value and share amounts) |
|
|||||
Current Assets: |
|
|
|
|
|
|
||
Cash |
|
$ |
18,726 |
|
|
$ |
11,396 |
|
Accounts receivable, net |
|
|
54,390 |
|
|
|
43,336 |
|
Inventories |
|
|
44,019 |
|
|
|
71,252 |
|
Prepaid expenses and other current assets |
|
|
7,720 |
|
|
|
9,196 |
|
Total Current Assets |
|
|
124,855 |
|
|
|
135,180 |
|
Property and equipment, net |
|
|
4,824 |
|
|
|
6,362 |
|
|
|
|
10,686 |
|
|
|
10,686 |
|
Intangible assets, net |
|
|
1,734 |
|
|
|
2,612 |
|
Other assets |
|
|
7,868 |
|
|
|
8,547 |
|
Total Assets |
|
$ |
149,967 |
|
|
$ |
163,387 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
||
Current Liabilities: |
|
|
|
|
|
|
||
Revolving credit facility |
|
$ |
— |
|
|
$ |
19,053 |
|
Accounts payable |
|
|
26,908 |
|
|
|
19,846 |
|
Other current liabilities |
|
|
29,424 |
|
|
|
25,433 |
|
Total Current Liabilities |
|
|
56,332 |
|
|
|
64,332 |
|
Income tax payable |
|
|
1,546 |
|
|
|
2,076 |
|
Other liabilities |
|
|
7,012 |
|
|
|
8,038 |
|
Total Liabilities |
|
|
64,890 |
|
|
|
74,446 |
|
Commitments and Contingencies |
|
|
|
|
|
|
||
Stockholders’ Equity |
|
|
|
|
|
|
||
Common stock, |
|
|
18 |
|
|
|
17 |
|
Additional paid-in capital |
|
|
220,185 |
|
|
|
206,916 |
|
Accumulated deficit |
|
|
(134,277 |
) |
|
|
(116,598 |
) |
Accumulated other comprehensive loss |
|
|
(849 |
) |
|
|
(1,394 |
) |
Total Stockholders’ Equity |
|
|
85,077 |
|
|
|
88,941 |
|
Total Liabilities and Stockholders’ Equity |
|
$ |
149,967 |
|
|
$ |
163,387 |
|
Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) |
||||||||
Table 3. |
||||||||
|
|
Year Ended |
|
|||||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
$ |
27,044 |
|
|
$ |
(41,846 |
) |
|
|
|
|
|
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
(2,159 |
) |
|
|
(3,549 |
) |
|
|
|
|
|
|
|
||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
||
Borrowings on revolving credit facilities |
|
|
210,210 |
|
|
|
91,945 |
|
Repayment of revolving credit facilities |
|
|
(229,263 |
) |
|
|
(72,892 |
) |
Proceeds from exercise of stock options and warrants |
|
|
2,261 |
|
|
|
653 |
|
Repurchase of common stock |
|
|
(974 |
) |
|
|
- |
|
Debt financing costs |
|
|
(80 |
) |
|
|
- |
|
Net cash provided by (used for) financing activities |
|
|
(17,846 |
) |
|
|
19,706 |
|
Effect of exchange rate changes on cash |
|
|
291 |
|
|
|
(635 |
) |
Net decrease in cash |
|
|
7,330 |
|
|
|
(26,324 |
) |
Cash - beginning of period |
|
|
11,396 |
|
|
|
37,720 |
|
Cash - end of period |
|
$ |
18,726 |
|
|
$ |
11,396 |
|
GAAP to Adjusted EBITDA Reconciliation (in thousands) |
||||||||||||||||
Table 4. |
||||||||||||||||
|
|
Three Months Ended |
|
|
Year Ended |
|
||||||||||
|
|
|
|
|
|
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Net income (loss) |
|
$ |
8,552 |
|
|
$ |
(23,233 |
) |
|
$ |
(17,679 |
) |
|
$ |
(59,546 |
) |
Interest expense |
|
|
251 |
|
|
|
577 |
|
|
|
504 |
|
|
|
1,220 |
|
Depreciation and amortization |
|
|
1,166 |
|
|
|
1,352 |
|
|
|
4,839 |
|
|
|
5,816 |
|
Stock-based compensation (1) |
|
|
3,429 |
|
|
|
2,209 |
|
|
|
11,983 |
|
|
|
7,984 |
|
Income tax expense |
|
|
(39 |
) |
|
|
16,864 |
|
|
|
338 |
|
|
|
5,093 |
|
Impairment charge (2) |
|
|
— |
|
|
|
1,896 |
|
|
|
— |
|
|
|
1,896 |
|
Restructuring expense (3) |
|
|
(43 |
) |
|
|
— |
|
|
|
1,061 |
|
|
|
556 |
|
CEO transition related costs (4) |
|
|
— |
|
|
|
— |
|
|
|
2,874 |
|
|
|
— |
|
Business transaction expense (5) |
|
|
653 |
|
|
|
— |
|
|
|
653 |
|
|
|
— |
|
Proxy contest and other (6) |
|
|
(15 |
) |
|
|
1,372 |
|
|
|
1,921 |
|
|
|
7,092 |
|
Adjusted EBITDA |
|
$ |
13,954 |
|
|
$ |
1,037 |
|
$ |
6,494 |
|
|
$ |
(29,889 |
) |
(1) Increase in stock-based compensation in the year ended |
(2) Impairment charge includes costs related to impairment of intangible assets. |
(3) Restructuring charges are expenses that are paid in connection with reorganization of our operations. These costs primarily include severance and related benefits. |
(4) CEO transition related expense includes one-time costs associated with the separation of its former CEO. Such costs included severance, bonus, medical benefits and the tax impact of accelerated vesting of stock-based compensation. |
(5) Business transaction expense includes one-time costs we incurred in connection with acquisitions including professional fees such as legal and accounting along with other certain integration related costs of the acquisitions. |
(6) Proxy contest and other primarily includes (one-time legal, other professional fees, as well as employee retention costs associated with proxy challenges presented by certain shareholder activists. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240313431086/en/
Sr. Director, Public Relations &
858.914.5093
maclean.marshall@turtlebeach.com
Investor Information:
949.574.3860
hear@gateway-grp.com
Source: