Turtle Beach (HEAR) - 2025 Q1 - Quarterly Results

Q1 2025 Performance Summary Financial Highlights Turtle Beach reported strong Q1 2025 results with a 14% increase in net revenue to $63.9 million and a 470 basis point improvement in gross margin to 36.6% Q1 2025 Key Financial Metrics vs. Q1 2024 | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $63.9 million | $55.8 million | +14% | | Gross Margin | 36.6% | 31.8% | +470 bps | | Net Income (Loss) | $(0.7) million | $0.2 million | - | | Adjusted EBITDA | $4.1 million | $1.4 million | +193% | | Cash Flow from Operations | $40.5 million | $27.3 million | +48% | - The company authorized a new $75 million stock repurchase program, signaling confidence in its future prospects[1][5][6] Management Commentary & Strategy The CEO attributed the strong Q1 growth, despite market headwinds, to the accretive acquisition of PDP and strong execution - Q1 growth was driven by incremental revenue and margin from the March 2024 acquisition of PDP, which helped offset a decline in the broader gaming accessories market[3] - In response to potential tariffs, the company has transitioned significant production out of China, with post-Q1 U.S. supply from China being less than 10%, and Vietnam becoming the primary source[4] - The company remains confident in its initiatives and ability to drive shareholder value, focusing on profitability, operational efficiency, and growth to adapt to evolving economic conditions[7] Capital Management Share Repurchase Program The company has authorized a new $75 million stock repurchase program set to expire on May 6, 2027, with $1.8 million repurchased in Q1 2025 - A new stock repurchase program of up to $75 million has been authorized, scheduled to expire on May 6, 2027[8][6] Share Repurchase Activity | Period | Amount Repurchased | | :--- | :--- | | Q1 2025 | $1.8 million | | Since Q2 2024 (Total) | $29.5 million (1.9M shares) | Balance Sheet and Cash Flow As of March 31, 2025, the company had net debt of $43.6 million and generated $40.5 million in cash flow from operations - As of March 31, 2025, net debt stood at $43.6 million[9] - Generated $40.5 million in cash flow from operations in Q1 2025, marking the highest level since 2019[9][5] Full Year 2025 Outlook Revised Financial Guidance Turtle Beach has revised its full-year 2025 financial outlook due to macroeconomic uncertainty and recent industry announcements regarding new game releases - The 2025 financial outlook was revised due to macroeconomic uncertainty and changes in new game release schedules[10] Full Year 2025 Financial Outlook | Metric | Guidance Range | | :--- | :--- | | Net Revenues | $340 million - $360 million | | Adjusted EBITDA | $47 million - $53 million | Consolidated Financial Statements (Unaudited) Condensed Consolidated Statements of Operations For the three months ended March 31, 2025, the company reported net revenue of $63.9 million and a net loss of $(0.7) million Q1 2025 vs Q1 2024 Statement of Operations (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net revenue | $63,901 | $55,848 | | Gross profit | $23,367 | $17,786 | | Operating income (loss) | $1,536 | $(5,713) | | Net income (loss) | $(664) | $155 | | Diluted net loss per share | $(0.03) | $0.01 | Condensed Consolidated Balance Sheets As of March 31, 2025, total assets were $247.0 million, total liabilities were $126.2 million, and total stockholders' equity was $120.9 million Balance Sheet Summary (in thousands) | Line Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $11,684 | $12,995 | | Inventories | $73,664 | $71,251 | | Total Assets | $247,024 | $298,861 | | Total Liabilities | $126,150 | $178,257 | | Total Stockholders' Equity | $120,874 | $120,604 | Condensed Consolidated Statements of Cash Flows For the first three months of 2025, net cash provided by operating activities was $40.5 million, with net cash used for financing activities of $(44.9) million Cash Flow Summary for Three Months Ended March 31 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $40,452 | $27,257 | | Net cash provided by (used for) investing activities | $2,349 | $(76,225) | | Net cash (used for) provided by financing activities | $(44,877) | $47,983 | | Net decrease in cash and cash equivalents | $(1,311) | $(910) | GAAP to Adjusted EBITDA Reconciliation The company reconciled its Q1 2025 net loss of $(0.7) million to an Adjusted EBITDA of $4.1 million, compared to $1.4 million in Q1 2024 Adjusted EBITDA Reconciliation for Q1 (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net (loss) income | $(664) | $155 | | Adjustments | $4,714 | $1,294 | | Adjusted EBITDA | $4,050 | $1,449 | - Major adjustments in Q1 2025 included $3.1 million for depreciation & amortization, $1.9 million for stock-based compensation, and a $(3.4) million insurance recovery related to a prior inventory loss[29] Supplementary Information Conference Call Information Turtle Beach hosted a conference call and webcast on May 8, 2025, to discuss its first-quarter results and provide commentary on its 2025 outlook - A conference call was held on May 8, 2025, to discuss Q1 results and the 2025 outlook[11] - A webcast replay is available on the investor relations website at corp.turtlebeach.com[12] Non-GAAP Financial Measures The company utilizes non-GAAP financial measures, such as Adjusted EBITDA, to offer investors supplemental information for period-to-period comparisons - The company uses non-GAAP measures like Adjusted EBITDA to evaluate operating performance and for financial planning[14] - A reconciliation of the full-year 2025 Adjusted EBITDA guidance to its GAAP equivalent, net income (loss), is not provided due to the variability and unpredictability of certain reconciling items[15]