HEAR - Earnings call transcript Q3 2024 | Turtle Beach Corporation

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Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Turtle Beach Corporation Third Quarter 2024 Conference Call. [Operator Instructions] I will now turn the call over to Chuck Corney from the Investor Relations team. Chuck, you may begin.

Unknown Attendee

operator. Thanks, we'll details the XXXX the call, this release results. referring that afternoon company's be today's press to filed On third quarter of on find the This press earnings presentation website available is the latest turtlebeach.com the information supplements page discussed at also press Relations call. company's you'll on where that Investor today's release releases the

Investor a Presentations section and recording the on Events of Finally, today. the the Relations company's available later call will be website of

during about this some operations within containing that be beliefs will, made may, Beach current forward-looking the the expectations. Please and constitute differ as believe, statements. uncertainties may involve of statements call comments management's the These and federal aware include securities anticipate Corporation's the materially expectations of that meaning such from statements laws. company's words and future Statements company's cause could results similar could, results expect, to Turtle expressions forward-looking risks the and regarding

reasonable are While the results materially. company upon may and actual to believes factors expectations differ cause that based affect results may assumptions, its numerous

limitation, update described after publicly reports, and which or safe forward-looking also those Commission factors encourages this in company and periodic its the to from in not conference risk may that Securities undertake to our with cause identify any review today's and annual events its statements. specific revise in Form materially actual results forward-looking call. differ or does or statements on XX-K the The company and the factors So press risk without you release including, report harbor filings contained Exchange other statements

or company supplement providing non-GAAP its principles prepared call accordance to that accepted with United financial notes information that information. we'll that The States a the on be in company generally in GAAP. accounting information as discussing is The also

the tables a release find presentation. these GAAP in and of reported reconciliation today's provided can results company's to reconciliation metrics the and earnings You

Chief Hanson, and Chris. I'll with Keirn, Financial today over that, Chief are John the Executive turn Chris call the Officer. Hosting to Officer; call And

Cristopher Keirn

third Thanks, towards quarter of quarter, Jack. Good which the progress our delighted We're call. gaming highlighted to tremendous report integration momentum Turtle is strong popularity running Beach sustained earnings to XXXX the and continued the accessories of the PDP, ahead of afternoon, everyone, and brand, our in welcome another schedule.

acquisition as and strategic in and Best especially controllers, broadened has fans. accessories continues XXXX of of just category. elevated last presence feature X Turtle hardware PDP consumer about Further, strong And electronics in Our and brand Brands in across speak month for more significantly quality a I'll further reputation categories, to peripherals brand Times gaming our reach gain top shortly. gaming which World's Beach's our was several named reach the

robust the our experienced leading portfolio. early scale our demand in of and increased diversification, revenue the of stages driven for We're growth accessories benefits we are quarter, our by leadership across This and strengthening the our gaming categories. increased realizing expanded of which advantages

Turtle a to commitment apart the gaming market. leader to continuous unwavering accessories in and Beach set continues innovation, Our execution as growth top-tier

$XX.X year. was to XX% million, Beach last up the third the For revenue same quarter, quarter Turtle compared

were Excluding up XX% PDP to last revenues contributions, year. compared

XXX definitely using Our in unique and review dream. a our the the right of XXX cross-play a the of sales the market growth site products best gaming our strong latest technology. industry noted continues multi-platform driven success the X headsets is headset, that Games our the like multi-platform headset portfolio Stealth now of gamers be premium to ongoing by Stealth groundbreaking X and Gen in game wireless rant

boosting lower our recent promotional profitability. spend, to achieved launches, this sales with Thanks we our significantly quarter

strike. the ahead reflect saw which activity Considering the designed we during load-ins, the to these earlier-than-anticipated results of mitigate port accelerated strong full our was unchanged. year the revenue remains quarter, guidance impact as Additionally, retail revenue load-ins holidays our from potential

EBITDA quarter improvement the same the million $XX.X to compared period in the last $X Our a for substantial million, was adjusted year.

accessories We market, are growth been continues flat. outpace which pleased to to for gaming of has U.S. gaming the that the overall see roughly year-to-date X%

points Our headsets. compared revenue increased headsets to our of the quarter gaming share following XXX previous new in basis QX launch wireless the

Additional share X new during gains are the headset. the XXX upcoming of following holidays launch Stealth Gen wireless anticipated our mid-QX premium

increase significantly controllers and game U.S. third-party markets to the continued growth best-selling we're the year-to-date. and Ultra, Turtle Turtle XX.X% nearly to In third Beach retail BFG category, Victrix and with Notably, X%. outpace pads of Beach second controller the controller revenue Stealth growth sales the year-to-date a market, our Pro pads compared game

Our share in Qatar controller XX% for perfect with Fortnite controllers, Riffmaster continue the music Festival category the wireless U.S. dominating

On enhance the operational profitability to resulting in continue side, we gains. our efficiencies, substantial expense

been purchase to to gross expect product reduced somewhat of new Our by our promotional are optimization focused following our expected which forward. cost quarter for a spending seen noting PDP. XX.X% ROCCAT It's either for accounting expanded quarter we that the third year-over-year normal recent charges would of basis successful launches, ongoing points margin levels in excluding the brand of integration holiday XX.X% moving the of have margin reserves result transition QX. We've XXX gross worth as which increase to and and initiatives continue PDP

synergies growth. combined $XX original value. very to We to drive Our from and total anticipate opportunities well, a million million, newly our we integration of $XX is portfolio million. exciting, estimate are ahead annual The expanded progressing achieving of $XX market surpassing continues exceeding product runway foresee of PDP and now schedule for our long-term

anticipate we enhanced and lineups our long-term Beyond relationships. product the acquisition to are customer strong synergies, revenue due that there synergies cost

SKU this expansion platform margin our of optimization that underlying our previously share fundamentals With represents price third increased of driving generation outlook our we value, stock buy EBITDA rationalization, strong great portfolio up launch to prior through the our back coupled to our a continue year drive all range and to $XX of to from continue $XX and $XX our million, communicated during the products. of full we with result is initiatives, million our quarter. raising $XX The we're range Furthermore, cash to our next-generation that including guidance million adjusted of view million. positive

In million a resources of the million. our This our repurchases both continued of bringing in our Turtle $XX.X year-to-date are $XX.X repurchased it. we underscores our stock, shareholder enhancing We trajectory confidence in our quarter, believe and vision, our commitment we about approximately behind to to value Beach's putting and value.

the to expand and us. operational our about leveraging Looking successfully to opportunities ahead, in we on leadership. which excited we We'll innovation focus are market are front many of continue excellence,

of our remain strengthen best-in-class gaming value broader product accessories in shareholders position gamers Our providing worldwide. further and upcoming We PDP ongoing market. launches and the for to integration delivering committed will our products the to

through us more in John the financials will detail. now John? take

John Hanson

and everyone. Chris, good Thanks, afternoon,

by As ago third to our driven period compared and revenue our the from XX% sales Chris quarter products was XXXX $XX.X noted, approximately and PDP. year That's of of million. increase increased an

Excluding the positive increased our to impact our from results strength XX% year revenue products, across the the highlighting of net approximately last the PDP compared board.

improvement lower to the was by of was offset last XXX partially Gross margin basis driven mix quarter point due quarter The product to compared represents royalty higher which by promotional year in increase the third third spend, to reduced costs XX.X% freight the a compared and of XXXX. costs, XX.X% business.

Operating going PDP. ROCCAT have related purchase which in XX.X%. transition forward, are $XX.X gross the third reserves acquisition million million continue brand expected ago Excluding to margins to would costs million PDP year of $XX.X been and were the not expenses and include compared charges accounting $X.X to a quarter in

XX.X% expense is were in items, nonrecurring of revenue is our initiatives improvement This enhancing excluding a driven strategic goals. balance expenses, to improvement achieve primarily our by an from efforts and XX.X% better Operating revenue, year. management prior which between the

$XX.X adjusted LTM greater EBITDA year million, The ago the on higher operating costs improvement combined year-over-year million EBITDA revenue, the is and to improved of period. basis, $XX improvement compared an is efficiencies million to expenses. margins leverage. a $X in improved revenues quarter by with result now and expense third $XX.X primarily and significant million Our higher adjusted On is driven which both the

negative $X.X or compared a a year net ago. $X.XX was diluted income or a quarter per loss per share Our net positive million $X.XX third to of $X.X million share diluted

$XX.X used At under our last end, outstanding to year. debt and comprised inventory. of offset the term million Turning at $XX.X PDP by balance line million cash. loan quarter million added non-PDP for were acquisition. addition and the debt credit initiatives the of outstanding in of to debt $XX.X compared partially our The point million this million end million $XX.X this we we $XX.X $XXX.X continued inventory $XX on of million net revolving at reduction product to $XXX.X was PDP quarter million had of balance sheet. and comprised is outstanding Inventories

$XX.X we $XX.XX, during through about mentioned, approximately price an average Chris As the shares million to quarter, XXX,XXX share our repurchased of shareholders for repurchase program. returning

the price, confidence value. shareholder the levels share and our attractive of to This delivering strong company's Given and commitment continued the the growth the its demonstrates long-term company and in prospects initiative our trajectory. of fundamentals

have the buyback of we under in plan. end, As remaining potential quarter XX.X million buybacks

We in review. share consider quarterly will buybacks continue to our allocation capital

to turning guidance. Now

which between We and and PDP strong EBITDA continue $XXX progressing raising for progress XXXX. compared we midpoint front revenue XX% XXXX. $XXX growth to full adjusted are full on million equates the be to year the the million, guidance at integration margin to smoothly, expect With our year to

EBITDA to be between increases million million, our the million $XX.X guidance. and prior adjusted We which from million, $XX expect year midpoint $X up full $XX to

the contributions our reminder, PDP when a from close we As March XXXX guidance on beginning XX, includes XXXX transaction.

Chris now And to Chris? for call back comments. turn over additional I'll the

Cristopher Keirn

John. Thanks,

also product As acquisition expanded has our year, clear we our are strategic The of reflect but enhance our the operational paying it's transformation only initiatives offerings not over PDP on our that capabilities. past off.

We on improved are efficiencies our and from market reach. in and positioned The expanded capitalize to growth. better drive already sustainable opportunities this synergies are market operational evident now acquisition

remains to innovation, execution commitment growth and unwavering. Our

us continuously are and groundbreaking and the pivot that drive we they We in market. just apart product and Recent set coming technology competitive technologies cross-play our will this will features controller the like accessories the quarters. gaming exploring confident to testament are growth are meaningful the innovations stealth latest in new that commitment,

lineup to gamers. critical to our and season resonate is will that with we about cater well The consumers. with demand refreshed the our and amazing of diverse well Looking the robust a strong, products optimistic ahead holiday industry, that season, We confident period innovative our we're are needs a for anticipate prospects. prepared of products are holiday

customers. our their about execution entire our for to gaming remain recognize excited renewed a this high want contributions, another We're quarter. our and and which confident shareholders note on for to delivered value Turtle strong and year XXXX Beach and to drive for and close strategy I out team thank at efforts growth have excellent beyond and

turn let's that, to Q&A. with And

Operator

using before [Operator are Instructions] pressing leave keys. please first question. One any moment, If the you your handset speaker a for phone, please,

Partners. Your of first comes from Capital question McGowan from line Sean the ROTH

Sean McGowan

to I'll versus fair. little a increase PC? about bit color, a color maybe and be or Chris. just then X that how year-over-year market share you more share, just couple a circle headset kind can little ask clarification the and give back of you're talking breaks business more console on or When changes But out

Cristopher Keirn

Sean, Sure. question. great

when Atlas drained So across XXX, that. and to Air about new year, look we upgraded XXX talked prior headsets this at that line. we we've quarter channel QX wireless introduced last our the We you in the really Stealth

We've we've expected old launches. done we've QX So the quarter, up of to then XXXs the we share Stealth channel with drained And loss XXX. saw of thing. the Stealth generation third the and reloaded new those mid in channel here the same some the

to that prior launches our about quarter we're Stealth So at look up though we into from as go for the as we when we Even and with draining ahead, on new we to in trends, expect continue the basis were XXX those channel holiday. look you XXXs the QX. points the build

As holiday share do, we up the normally normally during we pick season.

the be to this time that expect case We as well.

Sean McGowan

newer it I console when like like And realized about how as switch? not some -- but I Or of PC, it's that looking? used as the be, is what relevant versus to the say Okay. console

Cristopher Keirn

as point. We actually how that gamers multi-platform Sircana console the combined know into gaming across you've using a their reflect you the does very headset categorize they much lot days. it categories the a well because that And up X great now category. are PC really way industry. headsets, probably these like accessories, and that's seen Yes, switched They've

headsets in at and our were U.S. look headsets up it do But QX, you if PC, console year-over-year break So in on believe PC I the if up are points you the between we larger seeing are console the well -- gains XXX our down as here. side. PC basis

we market. in these new seeing products as the So get . both we're gains on

Sean McGowan

And a of of housekeeping type couple kinds then for John, Okay. you, things.

to say step-up forward. you going you when don't the the inventory PDP brand So in proceed ROCCAT expect

we the just mean to on You fourth won't in be see I specific quarter. that want any quarter.

John Hanson

Right.

PDP to step-up any inventory brand QX charges but and that relative part took as expect of And is now we additional is both that completed. the relative ROCCAT, in QX completed reserves So not transition that for we then do work. that, to

Sean McGowan

Okay.

I So does could margins fourth dare, quarter the if mean excess of see in that in we gross XX%.

John Hanson

upper the in think -- certainly, higher Black and around holidays. there in XX% cetera, some what Monday, I promotional would the range. is Well, We be QX they'll in et for Friday, activity typically

are but our is forward our certainly the that the upper will of so which rate which we've range, offset going previously But the disclosed. XXs, in -- And other target aggregated margins margins, run benefits. our some

Sean McGowan

my quarter, fourth Okay. quarter in G&A acquisition exclude them, then you don't the bounces you given to John, increase fourth have G&A around the recurring is business there be of And Should the -- in we do, have third quarter? you the guess, the last fourth expenses Great. quarter would that I we well, quarter? in a those fourth relationship expect question, if in kind historically. in And maybe do the meaningful G&A of

John Hanson

be to is to ahead a were to back QX, in it's add integration-related certainly we've historically done you slightly smoothly So noted some you . which we exclude they'll as what much invest would rise as we which progressing And integration obviously, that to would expect export do at in more EBITDA, schedule, work, you of what expenses as here. lower you're if in Sean, Chris earlier, although QX terms but is queue. marketing, expenses, level. and of continue incur

Operator

from Crum question line next Stifel. of your comes the Drew And from

Andrew Crum

avoid quarter. Chris, strikes you about talked pulling potential the port shipments forward to during some

Given that enter respect performance, with and that you to as does you based where leave on channel inventory your retail XQ?

Cristopher Keirn

inventory point, QX. as good. what we're Channel as it's at Yes. we really higher into looks would levels at Drew, normal we I November, normal into be exited it would it And this say, holiday. heading really now than I call saw

of So prepping holidays. from any strikes. or are for those in temporary previous, it any it, let's X-week we as pull call the retailers maybe a was as looks shipments to really a looking November, holiday them so port a But on into avoid now normal delays very in few to get potential it normal compared call

Andrew Crum

Got it.

That's year-on-year, promo And John, fourth over think spend spend promo during XQ quarter higher mentioned Okay. kind But a you fourth we of I at would should last just you anticipate quarter? anticipate in increase looking that versus XQ. helpful. this then, sequential

John Hanson

the wireless we're bigger. and market. of now products the got the that have -- Certainly, coming out Yes. We've more new we are

So higher we be year-over-year. the the yes, to is, answer marketing do yes, here expect

Andrew Crum

last the X address Should pay plans do stock? both? of cash the your off to year? for through or outstanding of around to uses balance on expect maybe the revolver then me. And continue sense. back you Or plan buy just you balance to Makes X the you maybe we Okay. Can

John Hanson

Sure.

but So the We primarily to do focused answer the on holiday, the do payment little . an function as the extent we different look with to more down it's buy additional to terms extended, yes, obviously, as that. be for then paying would back, our of ABL a be going is will they do is, us certain there shares opportunity well have to during a retailers, collections. cash

Operator

comes line Group. Maxim Jack question And from Codera from of your next the

Jack Codera

Jack for is Jack Codera Viterra. in This calling

holiday have to XQ business seasonality? are to total do if the any fit. in But Going kind you roughly XX% to I know into differences contribute they're expecting into you expect both of similar number? very PDP of terms electronics, season, continue that that revenue you back consumer

Cristopher Keirn

question, Jack. Good Yes.

will it that pretty normal. be think I

now special combined businesses controllers seasonality RIFFMASTER, the like the the of historic headsets, business. at some headset controllers, to similar look You very between specialty the

So I would say, yes.

Jack Codera

the saw just mentioned And are Are mix highlighted refreshed kind in any giving holiday are I helpful. the How confidence portfolio. you in the were That's data a helpful, the viewing of some Any Okay. there which strong would other. presentation, you individual indicators season? that other and consumer? X then in helpful. you points there product color like be

Cristopher Keirn

you enjoying launch. Yes. Call When gaming look benefits general, Sure. of at strong in industry the of a all very Duty we're the

Op industry. that. X That's extremely numbers everybody the well, on seen the in lots doing probably good Black of is from engagement for You've gamers.

market We've help pandemic to some replacement seeing happy think the cycle also here on really historically. continued we're see drive that. We're holiday. We even of will that purchases. that of through benefits seen So the

last those last and spiked So lot to in, of late that started gaming really sustained purchases outperforming XXXX, of this why a year couple of those market we XXXX. see and weeks holiday for are -- the really XXXX categories in all peripherals when kick you're everyone seeing lot that's and accessories A that's accessories, back the purchases in of sustained year. the broader really and

market So of carry tech that's we've got we new products we've in purchases -- ton for a There's because know the out there of share out and additional that drive lot think releases going gamers. great drive new the got in through we a holiday. new to

we're to excited going we're and holiday. feeling that's about So good that's why the look, about how

Operator

of [Operator question Partners. Sean next Instructions] the from Your McGowan ROTH comes line Capital from

Sean McGowan

of to marketing also all gross of gross selling, be margin the that in seen the level? going be Will it kind split year-over-year. and between is and sequentially Both margin? Or

John Hanson

Yes.

to reasons, as is for to . do But the It's yes, marketing OpEx, the spend, talk it's very a So So different the et with From the over perspective the cetera. a OpEx dynamics margin quarter, outside my about Monday, gross expect impacting. all marketing right? we really when fourth Black Sean? margin important. reference we then And in there's overall and well quarter rise Friday big right? Cyber market as QX promotional

Sean McGowan

Right.

last planning on of about some Can of us launch have -- update with some the launched imminently . of then or either for things the you headsets, segments? me and an going talk -- bit for on you give And one, categories Chris. Okay. little a what's new truly outside on new to some controllers

Cristopher Keirn

of the refreshed in bit Sure. a here keyboards Sure. Yes. mice and the We've quarter.

saw transition ROCCAT, got Turtle PC. Beach seeing some earlier side, historically launched, X. that out mice the as we into CONE PC reviews product We're great and the the category. on help good at the for us that will Cont on gamers was us come we headset flagship That You brand looking we're seeing those as very in new there the with the along mentioned results, support

with that's when happy job team there, has the X on a So the there. moving obviously, brand the to team brand always progress a and . has job from fantastic done large a and other, done transition great the task we're the

music, interesting other controllers of us categories, the really Some year. for specialty this are

an so own market million as of look to the team we sales did of product. the you million XX% at job That far around, example, want this of for year. $X.X retail I that. or which If that $X RIFFMASTER a launching is market great say,

the So fun there, of are some traditional those headset gaining Epic and and we've with is gamers nice things and got of space. outside traction for that play categories. doing out is new of with normal It's to been Festival Fortnite sort for controllers great upside that's that them really the gear to in us. a that that some Fortnite surprise The see

stick really So in products up some as that's the cool got fight really well. category coming exciting. We've also

fun Turtle coming the between the some year. Beach and with really company and holiday just So out portfolios in here into next . combined stuff just

Operator

Martin And OpCo. of your question comes next from Yang the line from

Martin Yang

The a very question looks this have year, product a design. have regarding do the design refreshed especially we both --

with desktop consistent changes app. similar also think your I are

there on implies other how talk is maybe both assets that new design future can product categories? in anything So product regarding about you your the and and

John Hanson

seeing desktop and results not on app a love seeing business R&D and the we've years the cool done to also question. year. performance some platforming products financial This over externally. external lot something talk great out mix and helping to as is improvements the on to team you're we on there. chipsets, design bring internally on our in The of that We've that great well the of exciting with products of move you bring all and really this in that made job really has the you're It's the about investments really noted some new products to commonized market just in the these XXX several last a these into made really of gamers. these there Martin, and product as investments our some new that's what products

functionality So moving excited feel going all new about all products, the we look you're and innovation products. these forward from the on are in that's great the to of see the It's us what front.

power that the new got the the adds that's that industry. and brain the With we've to it on all these behind products gaming board, got team expertise we've just in PDP

So market. love for pride and noticing, of one. that of we organization in kind I take thank these the great products to bringing It's deal whole through a we something here number you

Martin Yang

concurrent potential question to Are games headsets for Call next season? in games the Duty: to holiday about you lip into example, the from . Ops My launching how feel of the of your higher of -- Black a is you some Great. new have because uplift of demand seeing be profile holiday X about a of seems crop season, traction. a lot

Cristopher Keirn

Duty. always the launch effect has with good Call space see across a a we're when accessories It you like seeing strong of Yes.

out always QX into the drive go another as us surprise product, there surprises, lift get and seem you the that some That every that's some sustain, it for you as continues our catalyst nice guidance for did lift, we anticipate you in weeks. be which get XXXX. that launches But to We that seen included for new so have have over last to we few could if some So engagement. year if year.

This for good the is why we're feeling holiday gaming. about

at If there that a position the don't been really have market you QX. games with all that doing really like here good see in to we accessories you how new noted, off products we're falling see in here with We as think Call great of strong look the all a year, out on Duty, holiday.

So some out. and how us positioned We've lot we're you feeling part yet, this of time of let's how X are good huge we're got see -- plays ahead last months in. But the know, year here the of a as going years. heavy our a always of about very

Operator

remarks. further no Keirn, time. are There Mr. questions CEO, call will this to the closing hand at back for I any Cristopher now

Cristopher Keirn

Thank everyone, you, the Have day. joining operator, and . a great call. thanks, for

Operator

you for for Thank participating. that you. Thank our today. all And concludes conference

You may now disconnect.

Turtle Beach (TBCH) 7 Nov 242024 Q3 Earnings call transcript