Turtle Beach (HEAR) - 2024 Q4 - Annual Results

Executive Summary Fourth Quarter 2024 Highlights Turtle Beach Corporation achieved record financial results in Q4 2024, with significant year-over-year growth in net revenue, net income, and Adjusted EBITDA, driven by its next-generation gaming accessories lineup and streamlined operations | Metric | Q4 2024 | Q4 2023 | | :---------------- | :---------- | :---------- | | Net Revenue | $146.1M | $99.5M | | Net Income | $20.1M | $8.6M | | Diluted EPS | $0.95 | $0.47 | | Adjusted EBITDA | $35.7M | $14.0M | - Net revenue increased by 47% year-over-year[1][4] - Adjusted EBITDA increased by 156% compared to the prior year period[1][4] - Gross margin expanded by 500 basis points to 37.0% for the fourth quarter[5] Full Year 2024 Highlights The company reported its largest revenue year in history for 2024, with substantial growth in net revenue and Adjusted EBITDA, marking a significant turnaround from a net loss in the prior year, largely accelerated by the PDP acquisition | Metric | FY 2024 | FY 2023 | | :---------------- | :---------- | :---------- | | Net Revenue | $372.8M | $258.1M | | Net Income (Loss) | $16.2M | $(17.7)M | | Diluted EPS | $0.78 | $(1.03) | | Adjusted EBITDA | $56.4M | $6.5M | - Net revenue increased by 44% compared to the prior year[4] - Gross margin expanded by 530 basis points to 34.6% for the full year[5] CEO Commentary and Strategic Overview CEO Cris Keirn emphasized the transformational year in 2024, driven by record performance, the highly accretive integration of PDP, and a focused approach on profitable scale and diversification - The integration of PDP has meaningfully enhanced the company's scale and market reach[2] - Expected to realize more than $13 million in annual synergies from the PDP acquisition, surpassing initial expectations[3] - Committed to pursuing potential complementary products and companies accretive to the leading gaming accessories portfolio[3] Financial Performance Details Condensed Consolidated Statements of Operations The Condensed Consolidated Statements of Operations reflect strong financial improvements for both the fourth quarter and full year 2024, with significant increases in net revenue, gross profit, and a shift from an operating loss to income year-over-year | Metric (in thousands) | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :-------------------- | :------ | :------ | :------ | :------ | | Net revenue | $146,077 | $99,538 | $372,766 | $258,122 | | Gross profit | $53,989 | $31,804 | $128,982 | $75,504 | | Operating income (loss) | $23,430 | $8,359 | $20,029 | $(16,443) | | Net income (loss) | $20,139 | $8,552 | $16,183 | $(17,679) | | Diluted EPS | $0.95 | $0.47 | $0.78 | $(1.03) | Condensed Consolidated Balance Sheets The balance sheet at December 31, 2024, shows a substantial increase in total assets, primarily due to the PDP acquisition, which significantly boosted goodwill and intangible assets | Metric (in thousands) | Dec 31, 2024 | Dec 31, 2023 | | :-------------------- | :----------- | :----------- | | Total Current Assets | $188,371 | $124,855 | | Goodwill | $52,942 | $10,686 | | Intangible assets, net | $42,398 | $1,734 | | Total Assets | $298,861 | $149,967 | | Total Liabilities | $178,257 | $64,890 | | Total Stockholders' Equity | $120,604 | $85,077 | - Net debt at December 31, 2024, was $85.4 million, comprised of $98.4 million of borrowings less $13.0 million of cash[7] - Inventories at December 31, 2024, including PDP, were $71.3 million compared to $44.0 million at December 31, 2023[7] Condensed Consolidated Statements of Cash Flows Cash flow from operating activities decreased in 2024, while investing activities saw a substantial outflow primarily due to the acquisition of a business | Metric (in thousands) | FY 2024 | FY 2023 | | :-------------------- | :------ | :------ | | Net cash provided by operating activities | $5,761 | $27,044 | | Net cash used for investing activities | $(82,208) | $(2,159) | | Net cash provided by (used for) financing activities | $71,051 | $(17,846) | | Net increase (decrease) in cash and cash equivalents | $(5,731) | $7,330 | | Cash and cash equivalents - end of period | $12,995 | $18,726 | - Acquisition of a business, net of cash acquired, resulted in a cash outflow of $77.3 million in FY2024[25] GAAP to Adjusted EBITDA Reconciliation The reconciliation highlights the adjustments made to net income (loss) to arrive at Adjusted EBITDA, which saw substantial growth in both Q4 and the full year 2024, reflecting the impact of non-recurring items and the company's core operational performance | Metric (in thousands) | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :-------------------- | :------ | :------ | :------ | :------ | | Net income (loss) | $20,139 | $8,552 | $16,183 | $(17,679) | | Interest expense | $2,986 | $251 | $8,068 | $504 | | Depreciation and amortization | $3,287 | $1,166 | $11,391 | $4,839 | | Stock-based compensation | $2,725 | $3,429 | $6,172 | $11,983 | | Acquisition-related cost | $1,018 | $653 | $10,832 | $653 | | Loss on inventory in transit | $3,398 | — | $3,398 | — | | Adjusted EBITDA | $35,656 | $13,954 | $56,417 | $6,494 | - Adjusted EBITDA for the full year 2024 was $56.4 million, a significant increase from $6.5 million in the prior year[4][27] Business Operations and Strategy Share Repurchase Update Turtle Beach continued its share repurchase program, executing its largest buyback in history during 2024, demonstrating a commitment to returning capital to shareholders and confidence in the company's future value - For the full year ended December 31, 2024, the Company repurchased 1.8 million shares for an aggregate purchase price of $27.8 million, or $15.39 per share[6] - As of December 31, 2024, $18.8 million remained to repurchase shares under the program expiring April 9, 2025[6] - This represents the largest share buyback in the Company's history, highlighting dedication to returning capital to shareholders[5] PDP Acquisition and Synergies The acquisition of Performance Designed Products (PDP) in 2024 was a strategic move that significantly expanded Turtle Beach's market reach and scale - The highly accretive integration of PDP has meaningfully enhanced the company's scale and market reach[2] - Expected to realize more than $13 million in annual synergies from the PDP acquisition, surpassing initial expectations[3] - Committed to pursuing potential complementary products and companies accretive to the leading gaming accessories portfolio[3] Strategic Product Initiatives Turtle Beach is actively focusing on organic growth through strategic product initiatives, including the development of a next-generation platform design aimed at improving product performance for gamers while simultaneously enhancing cost efficiency - Focusing on strategic initiatives in core product offerings to propel growth independent of acquisitions[5] - Several 2024 product launches were built on a next-generation platform design, combining best-in-class product performance with significant improvements to the cost structure[5] Financial Outlook and Long-Term Goals Full Year 2025 Guidance Turtle Beach initiated its full year 2025 guidance, projecting revenue growth driven by incremental PDP contributions and an anticipated strong second half for gaming accessories markets, despite expected headwinds in the first half | Metric | FY 2025 Guidance | | :---------------- | :--------------- | | Net Revenues | $395M - $405M | | Adjusted EBITDA | $68M - $72M | - Adjusted EBITDA guidance translates to between 21% to 28% expected growth year-over-year[10] - Full year revenue growth is projected to be primarily driven by nearly three months of incremental PDP contributions in Q1 2025, followed by a strong second half of the year for gaming accessories markets and expected Company share growth[8] Long-Term Financial Targets The company reiterated its long-term goal for revenue CAGR and increased its expectations for both gross margin and Adjusted EBITDA margins, signaling confidence in sustained profitable growth and operational efficiency - Reiterating long-term goals of a 10%+ revenue CAGR[10] - Now focused on a mid-to-high-30's gross margin percentage[10] - Increased expectations for mid-to-high-teens percentage Adjusted EBITDA margins[10] Additional Information Earnings Conference Call and Webcast Details Details for the conference call and audio webcast held on March 13, 2025, where management discussed fourth quarter results, business performance, and the current outlook for 2025 - Conference call and audio webcast held on March 13, 2025, at 5:00 p.m. Eastern Time[11] - Access available by telephone (877-407-0792 domestic / 201-689-8263 international) or live audio webcast on www.corp.turtlebeach.com[11](index=11&type=chunk)[12] About Turtle Beach Corporation Turtle Beach Corporation is a leading global provider of gaming accessories, recognized for its best-selling gaming headsets, controllers, PC peripherals, and simulation accessories - One of the world's leading gaming accessory providers[13] - Known for designing best-selling gaming headsets, top-rated game controllers, award-winning PC gaming peripherals, and groundbreaking gaming simulation accessories[13] - Acquired Performance Designed Products LLC (www.pdp.com) in 2024[13] Non-GAAP Financial Measures Explanation This section defines Adjusted EBITDA as a non-GAAP financial measure used by management for evaluating operating performance, financial planning, and incentive compensation - Adjusted EBITDA is defined as net income (loss) before interest, taxes, depreciation and amortization, stock-based compensation (non-cash), and certain non-recurring special items[14] - Management uses non-GAAP financial measures to evaluate operating performance, perform financial planning, and determine incentive compensation[14] - Information reconciling full year 2025 Adjusted EBITDA to its most directly comparable GAAP financial measure, net income (loss), is unavailable without unreasonable effort[15] Cautionary Note on Forward-Looking Statements The press release contains forward-looking statements that are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from expectations - 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[16] - The company is under no obligation to publicly update or revise any forward-looking statement after the date of this release[17] Contacts Contact information for investor relations and public relations/media inquiries is provided for interested parties - Investors can contact tbch@icrinc.com or (646) 277-1285[19] - Public Relations & Media inquiries can be directed to MacLean Marshall at maclean.marshall@turtlebeach.com or (858) 914-5093[19]