Turtle Beach (HEAR) 8 Aug 242024 Q2 Earnings call transcript

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Turtle Beach Second Quarter 2024 Conference Call. [Operator Instructions] As a reminder, the conference is being recorded.

I'll now turn the call over to [indiscernible] from Investor Relations team. begin. may you Charles,

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

Please Events meaning include forward-looking such statements be the anticipate call and similar laws. within of that beliefs call expect, containing believe, a the the Statements will company's about words website be and expressions could, later on expectations this company's of the constitute securities recording statements. the will, today. may, section as federal Presentation of the forward-looking aware of some during comments the Finally, available made may

These and statements results current future company's results Beach operations differ could the expectations. materially and regarding Corporation's cause from management's Turtle to involve that uncertainties risks

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

our limitation, and safe periodic statements. Commission, encourages report results also in and specific its may from annual or the in Securities to with materially review today's and its reports, cause in statements the company the factors So events press risk and Form without forward-looking you on risk XX-K described release including, other harbor those actual identify which factors that filings to contained Exchange differ

information. in that a we'll information be in notes accounting this on call, The update accordance non-GAAP revise to GAAP. States accepted company conference the financial company generally or after forward-looking call. any not or The company supplement that information does statements also principles prepared publicly providing United undertake this with as is discussing to

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

With Officer. and Executive today Cris? Financial Hanson, call over to the Cris Cris. John Keirn, Chief that, call are I'll Chief the Officer; turn Hosting

XXXX Thanks, everyone, [indiscernible]. afternoon, Good and quarter to our earnings call. second welcome

get to milestone. financial I'd we to into an important a like moment Before results, the take acknowledge

that has You've Financial integral intent John tremendous an John, contributions Hanson, our our part esteemed all his have his has announcement to team personally wish all him to best of the a us been informed John with been enjoyed retire. of have in success. our and seen Officer, today retirement. partnership and we invaluable I the Chief leadership

the second pleased results. momentum results that the transformational to reflect of of Turning PDP. combined our portfolio cost with our and quarter that to ongoing continued acquisition very our in drove share initiatives success strong I'm business optimization

in enable we that newly a are us position and gaining across scale leadership the categories. combined As diversification to stages of company, our expand advantages early

sustained a execution to innovation, Our us competitive accessories market. apart highly and world-class in unwavering commitment gaming sets growth

that QX reduced Our our last Even was the planned. contribution. quarter as our driven growth To up by end, second spending we reflect up full as promotional PDP XX% for this results roughly excluding was commitment. year-over-year, of compared demand XX% which revenues products, for even PDP quarter quarter year. included revenue leading million, contributions, $XX.X first revenue to were higher Robust

gaming and of XXXX. XX%, We for industry accessories the U.S. U.S. first up overall growth gaming headsets X% compared exceeding market half controller for see Turning approximately so single-digit overall approximately is first markets XXXX revenue are low to up third-party to have the markets Circana, and growth of XX% half the of respectively. year-to-date, accessory overall value to gaming accessory the According performance gaming XXXX. the far driving markets the in the growth. gaming outperformed the that U.S.

and models along replacements to this We for is features. the with start of [indiscernible] growth pandemic upgrade due new believe purchases

expect drive continued foreseeable factors We future. in gaming to the accessories growth both

a leader headsets, PC our wireless controllers driving to newly As peripherals growth and with contribute these we launched to and premium PDP. market continue across categories, in Turtle Beach

For the Beach GenX Xbox #X Stealth #X for for XXX first gaming the June. launch, abundance sales we're U.S. and box, review other models new IGN each Both and Turtle in have month headsets the and after tech games of as for praise from Stealth and the best and example, publications. with the an XXX named full reviewers notable in received fans best-selling of industry alike by wireless headsets

of gave Atlas also gaming PC the most the one to review as We open headsets calling unique headset, X best List, score out industry's out there. XX and debuted loaded added for it wireless of a IGN Air highly their gaming which the first back headsets

of Additionally, gear, furthering wireless the Epic's music PC Festival Turtle billion in quickly peripherals April, by U.S. full our Controller and become compatibility season best-selling a line Fortnite as coinciding instrument gaming X PDP's branded Riffmaster also we industry's PC launched controller May, $X.X introduced the reported reach Beach Guitar market. massive update has with into in Circana. In the

categories Our keyboard, by their lightweight [indiscernible] [indiscernible]. incredibly masterpiece, features TKL and and groundbreaking the respective latest the products Vulcan highly our Pro headlined PC ergonomic X responsive are in introduced and air customizable mouse

improved the all gross substantially we basis to of a during including continue the year. operational progress in improvement make $X.X to We delivered quarter last million quarter point same XXXX. million was the quarter, quarter, across our compared as to an excellent compared expansion in profitability $X of Adjusted aspects EBITDA same XXX the in margin significant efficiencies business

raising XXXX will provide $XX of our our enhanced range guidance financial results. $XX EBITDA half profitability of a to to million. With the John year million we additional first our details on in adjusted year, the full are

market rapid expanding progress opportunities. and our positive, integration PDP the has ahead from high industry on potential execute other we've partners are we schedule. acquiring company and and for realizing made in to customers Since retail March, continuing been which already combined Feedback of of we're synergies overwhelmingly

expansion drive to portfolio In product next-generation we previously platformed rationalization, PDP SKU and the from our our of acquisition, communicated initiatives from benefits addition optimization continuing clear our are launches. margin to

from operations. These ability strong accelerated all flow improvements generate have cash our to

and the we sheet, balance during is our underscores that approximately are confidence our largest our offers quarter. outlook and share Beach's price in of strength compelling in history the both the our stock trajectory repurchased resources Turtle our commitment our value. our the second repurchase Given believe of our shareholder we $XX This We value, million a in and it. enhancing behind vision, our and to putting view

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

good afternoon to and Chris, Thanks, everyone.

that being and Turtle thousands employees, our entire global Beach we the it has leadership how thankful Before world-class built the this I to begin Board. company. team of customers special co-executive say me is been I'm the of years pleasure who today last very part let a the as of the it with XX to company enjoyable a for to financials, incredibly and and officers and well my the team help success thanks make Chris as shareholders as have

have we has partnership extraordinary. developed been The

evident phase. As executing transition very time and an the our to this is opportune is well, it next for results, organization in me to

on the Now go. quarter to we

to quarter the grew mentioned, revenue million. $XX.X year-over-year in As second XX% Chris

results. second the The -- by our year the year-over-year. a non-PDP As PDP full quarter grew full with PDP driven quarter or very reminder, primarily revenue very healthy revenue and was a XX% first increase in XX% is

products. increased controller and driven growth was of non-PDP organic our sales headset by The

we lower down as ahead XX.X% turned a to freight reminder, XXX cost deliberately second and our new of inventory channel these products. product positive by XX.X% revenue improvement. experienced in initiatives, of basis the of headset compared a improvement and to and first and our wireless Gross being the was As from platforming year-over-year That is we optimization QX, in margin we equates reduced anticipated, headsets launch was accessories. as The driven year. last promotional trend PC quarter, quarter more from spend. the the margin In launch levels impact efficient lower rebranded costs that point product a

compared As is QX. costs continue the expected and we the to as expect earnings costs acquisition. wireless quarter included to launch the related in to in This products. year, the ago. shifts were to mix year quarter forward the expenses with accessories $XX.X we PDP new a going on $XX.X new rebranding realizing of This million stated $X.X improvement the to product Operating PC in last the million products in the margins lower second begin call, million

second operating declined acquisition-related quarter year-over-year. approximately expenses costs, these nonrecurring X% Excluding

million change On primarily ongoing from revenue-enhancing expenses, driven XX% a an a This versus ago operating EBITDA $X.X our approximately greater our costs the positive goals. that adjusted better higher efficiencies $X.X excluding relative basis, loss the is period. EBITDA million and The between were acquisition-related $X by is of to a the which with year. balance initiatives combined and prior expenses of year second in revenues million on expense with achieve to efforts proactive XX% in adjusted result nonrecurring improved revenue, improvement by management quarter of an cost

an On is adjusted million. basis, approximately LTM $XX EBITDA

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

on, million history. we X repurchased of our share. This our at largest an price per touched Chris average was shares shares. $XX.XX our of bought during just quarter, the of made As shy repurchase $XX.X of we've in shares million We approximately the

Looking options focused continues evaluating cash, the share repurchases. generate on all the capital, forward, redeploying Board business is to for including additional as

have, -- existing our we to continue existing always we will business. business invest in in As our

amendments implementation through XXbX-X establishment excess In to shareholders with we have the formulaic for repurchases addition, that negotiated committed forward, of provide rule us agreements additional credit end, option. a To to repurchase returning This plan. cash allow to successfully going remain share to flexibility our and plan for a repurchases. we that share provides

accretive Lastly, also value long right the term, we for a strategy are our generate as over and as shareholders. immediately acquisitions component make that remain capital earnings to believe our allocation the strategically sense of and they long

guidance. to turning Now

equates year XXXX. PDP to $XXX which compared underway, guidance behind XX% our between We full integration continue to us are a a year growth the million for expect of half raising to the to year With EBITDA strong and and we full adjusted first be revenue million, $XXX XXXX.

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

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

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

strategic progress first teams. half that results remain our we with Thanks, recently optimistic synergies and pleased In and for continue John. year and benefits summary, to we're will with of combined the the additional realize our

for everywhere. We shareholders continue products our best-in-class to and for prioritize gamers creation value

Looking flow. the excited our we're ongoing continued product ahead, PDP and efforts and profitability to cash about from strategic maximize our integration, and advantages upcoming gains launches,

express our passion to for the my work year success. support. is strategic team you members to our and a of again goals. half tirelessly of instrumental And in want work to and once We've trust one first to I thank and our gratitude your investors, our achieve team of amazing every great our who had hard the

can for we operator, that, With line questions. the open

of of Sean question line the McGowan first Our Instructions] comes ROTH. from [Operator

pleasure say, capacities with John, absolute I'll Before years. see in the I get to sorry And to you been it's questions, I'll to to be wanted the with while multiple see pigs. be an the go, you just happy over working whistling I you

congratulate. So,

inventory of couple retail you balanced? as well? questions. say A we -- that some Would restock the flowing the would Or Chris, third now inventory of kind see into could you additional say quarter is

way. did the Yes. Great comment John. for Great what We you Sean. question, see there, by

is the the the reloaded in PC and with up. right now new inventory how channel. shape. channel in We've we QX much then wireless RIFFMASTER pleased retail where it healthy transitions coming back the We're our products. So That's channel the within looking pretty and had in really is strained

out right retail balanced at now there really it's So globally.

pandemic sort impacts. So had few we've through we're all years of over the of the the and of that unwinding past some

and levels So the retailers right right when that think -- about channel good the the now inventory, feeling I feel carrying like at moment. they're at we about so it's level that think that . are we

to relative increasing not necessarily But Okay. their -- appetite sales.

years, That end pushed interesting you QX it the will into this of of where is the is later. holiday year. Historically, the get come -- QX, to what will at couple happens as see this be last and

year the of weeks X last strong. last the -- really year know, you As we were

could around interesting And more see and as some again react move purchase I So that. to between of and it waited the see always kind kind that have retailers We think revenue to we have retailers would be QX how of year than QX. historical. to this waited see consumers

half. So be but we're that back ready . interesting, the will go for to

Okay. John, questions. couple financial a of of kind detailed

additional for much transaction inventory flush the balance year. and to kind the the P&L through is how So left additional step-up expense of of

was in to it's in . range. as the -- the the step-up, $XXX,XXX probably rounded quarter, $X.X it's $X.X and detailed $X in step-up balance PDP inventory relative in it QX the the up. So Q. we But million was million it's year, $X.XXX million to the million, for actually the of

Okay.

done. mostly it's So

Yes.

Okay. out today Q was -- ago? Is while little the a

but it is SEC the unless filed. was out be should behind, It was

the what did excluding inventory the the in is addition, for ROCCAT reserve inventory in inventory $X.X an million. -- book rebranding PDP for see an quarter queue for gross for second the margins, XX.X%. look, So that approximately you'll were step-up, reserve in the totaled we But ROCCAT quarter that, our the

our XX% So adjust take X when you for margins gross out quarter. the were nonrecurring those items, and

going next said, the as as our into and we product we're our get back generation so to platform through be the mid-XXs. getting And margins, we've to

QX, for the portion you XX% lower and which . items, quarter. the at for happened quarter adjust wireless with the products only launch, associated when a these had So in of cost we're late X the with we

from So -- a perspective. positioned well we're very margin we're

adjustment brought you the up XX%. that of glad I'm And

you look those Or margin? that kind the Or was was what without at look as down? number, it if it it it adjustments, like to bring PDP would of you So neutral. that say would accretive overall did

it's relatively think I neutral.

been You really we quickly look similarities. that to yes, relatively lot -- reason the we've anticipated. able part play The realize in, That's of at it's a than categories we been of more neutral.

been have efforts similar a Some their coming of some of of a very appreciate here, and kind they've similar Really the PDP synergies the positive and completed great those and categories, has integration work very job. in, in very come done operations. been has experience team

the So to the flowing the acquisition, how -- in the were similar that kind line I businesses through think gross prior well. we're as seeing margin of

P&L to And question, we back the point through run earlier from additional this expenses to be should forward? be for looking the transaction

work yes, that be is That'll integration related, but ongoing.

past, throughout right, the integration As ongoing be we've XXXX. be work stated in will the year that will

be we and there additional additional there So will -- . some be things. will other expenses estate sort out real

we the My the should quarter higher last the Dutch read Chris, question upper fact end repurchased shares you, previously into paid anything of was range? for the price the average the announced in tender is that than for

in it's for function the we window We a I of think open -- available timing. were the purchasing had company.

and -- those the we've so continue to make comments. And we in said to want purchases as

don't that I no, So into read would it. know I anything

and we price about to against that. that will be, execute good have stock in our where ability think high we the I feel confidence

be we continue are opportunistic a to and value ton think particularly where be looking to we're of that's why to had, there's we repurchases. about So today,

of the Our Drew of next question from Stifel. comes line Crum

John, congratulations luck of you. and best to

I'm pretty still it would we PDP, the is and the seeing if there? I for of related wane is the languishing? to end in And a color Any couple is there the anything in the of upgrade second a ahead consumption go you're for think EBITDA. into half, we provide? hardware you your been it -- of you sales be influencing the PDP demand way weak can helpful. as specifics see have occasions PDP Is mentioned guidance typically business any of at schedule. And is Nintendo integration cycle. Any this curious on hardware year-to-date,

Sure. Great so at you PDP. look work the questions. integration the When far with

work, We've a the to the gone And teams about really our had really a and been year. of move portfolio the PDP management the We've effort that's portfolio. of great work lot come part able through the through business totally that and that it's we've those portion the the the the from a conclusions, to mentioned, system here Beach business. been teams, work, I appreciate the we've and over Rocket lot of a We're end-to-end with with which partners retailers participation complete integration talked a As good quickly Turtle with last of optimization. distribution to negotiations portfolio collaborative our perspective. that with between with forward decisions lot been to combined and a how we make already on

ahead what's really schedule for us. that's running So of

are along today. We here that we far as we path didn't anticipate as be sit as we'd

So does and dive into there for business us for synergies. up as some those costs open we and that, -- revenue that potential upsides and future we think those the really look

And sort contributing there, related that a some we that's raise influencing sooner QX. there's so those to able far than the the -- in to So a realize we as as of that. were right, bit for here guide, That's of to thought. portion that of

businesses On the every up hardware next get time gamers is Any this second you're there question cycle, in right. strength of on as see it's we've through Nintendo you're you around the still seen hardware closer showing more going a very than going are Nintendo, closer. dip right anticipating business now, out and to strong. that the is But Nintendo some that underlying of likely the

track is of there's premium of would. things multiple Riffmaster as we really strong of diversified the and are these business from platforms, the new very including the some to products, the platforms side some all controller that seeing across it PDP PDP progress Fortunately, on well in the [indiscernible] hoped we're business front, allowing controller

the looks what new wait like like. built will already that's there timing year. the a into side Nintendo looks for of to little and that as be bit the hardware guidance a what people likely dip the on But But see

Rees next [Operator from question Instructions] comes Wilbur Our line of Alicia Securities. the of

little I to on about A market little within including a see could bit deck market general the more be talk would that category, the qualitative just everyone. we in know on the the about you're SIMs, color you information the just seeing John. I'm basis. quarter, wanted headset. nice your thinking share market if a segments Congrats, if position the in in different each there's get a share. could But what and on appreciated. really I the

for the Lisa. Thanks question, Sure.

you headsets but business XX-XX be business else. different certainly to talked split of sort going acquisition and our be much headset are from contributor ahead, when range our categories, continue certainly that our about an categories, recall XX% like look That's within and core other of the nearly of somewhere core everything to So some We where you the strongest the half for growing more the shifted to past, it's look the if across our we've coming business in to categories. in the revenue, between with with you're controllers other kind of with expansion XX% in mix.

diversification. So that that's about of benefits part combined with we the of And PDP. good one feel really now company

are challenges up the are is of I would hardware, and up. a low It's And XX%. Looking business. gaming but this is segment the proxy, still The for segment. up at having headsets digits, categories, They're the on is some those as you are that good accessories about segments accessories gaming growth. rest data, this The performing know, up broader stronger pretty say, single than which definitely X%, broader U.S. exceeding year.

I we and drained there the the slightly half headsets growth really replenishing, launch what back June XXX as for shares as essentially it months share see we're channel with out and happened on were new XXX the We June. and as as to in we're we the we positive in to dipped of in mentioned, happy getting knew products, the Our year would, there. first several

platforms positioning these into business doing the for all segment very The and for across we performing segment us controllers there, products, BFG us. And is biggest our by really controllers for and share and back that Ultra, that PDP our us. we're couple next there. us. for half segment Stealth of new premium own well good of So growth really growth as in well strong feeling head about really Controllers, driven driving a extremely driving

the strongest the good for year-over-year. XX% that up one of first a are we're controllers segments Third-party of portion half growth. That's and driving

We're we're of I over, points there. well XXX half. think, gaining share up the share first over basis growth So in

So primary those categories are X the for us.

we're holding half, products. our to We've PC, growing see We've those placements headsets. We PC mice and the the pretty PC along anticipate look keyboard and You got back on in on of steady do good launched new side. headset some with we're new there growth the at front, products.

racing I XX% the in the it's We've And from [indiscernible] for And simulation. the U.S., you up build then still side, continue asked SIM that that #X have roughly for both early perspective single share us recently then out that for in and a just we some racing share on finally, we'll days category we're SKU XX% to categories in SKU, the think in [indiscernible] about and category. had entered to we very category, -- growth the range

of that relatively America talk flat from if declines versus in year-over-year different at terms about throughout Asia. talk as some well. all PDP, color. may. uptick North But no qualitatively from And seen that well, America in could Asia much, categories, as in your appreciate particularly if that's in the you EMEA declines all We've Regionally, North so you some uptick appreciate in can the the surprise. holding and as other, if how competitors well was one we I then the . least about I

we happening something close keep it's eye Great there a regionally. what's on Yes. Sure. question. And

exposure have Asia. we little us, very to For

up year-over-year, business. of our it's revenues percentages but total are in slightly Our single-digit Asia low

hasn't really slowness there. on impacted the that So us

and business to slightly timing acquisition For flowing higher from percent the roughly then Europe. Americas XX% become it has anywhere of the depending the a with XX% PDP, the of portion through of XX-or-so business through Americas, on our

seeing breakdown. the rough U.S. market strength in we're the gaming. that's for But So

of there, concentration so with high our And that's playing well for business us.

of comes question the Andrew line of Oppenheimer. next Northcutt Our from

Andrew is for on This Bart.

Just one quick one from me.

kind made have on pretty good proactive guys ongoing You of management. expense your progress

So about going runway here we . incremental how should forward? from for think the expenses

we've an great a going think -- progress our on right? efficiencies synergies that to is new there's savings. on. some and believe of This Sure. of OpEx, of portfolio Great tools goods, we'll We supply focusing top opportunities so We've all we're continue got We've And some ongoing perform that, the cost to that also operational for question. looking we're lot great there, process focus It's to continue chain us. then and around end-to-end we more working that some better. help integration technologies something there. and and on made our the introduced of realize through those is we've got and going, teams on actually the to

believe keep low. going for structure cost we results that us And all and drive of to it and those to are that yield continue

questions it no time. to I at Keirn am like remarks. for I turn this Chris now further back to showing would closing

and Thank for you, operator, you, day. joining everyone, a great Have us. thank

program. conference. participation for does conclude in you your the Thank This today's

You may now disconnect.