Turtle Beach (US:HEAR)2022-11-13 16:00Financial Performance - Net revenue for the three months ended September 30, 2022, was $51.3 million, a decrease of 40% compared to $85.3 million in the same period of 2021[96]. - The net loss for the nine months ended September 30, 2022, was $36.3 million, compared to a net income of $13.2 million for the same period in 2021[95]. - Adjusted EBITDA for the three months ended September 30, 2022, was $(6.9) million, down from $6.7 million in the prior year[94]. - The gross profit for the three months ended September 30, 2022, was $7.3 million, significantly lower than $29.3 million in the same period of 2021[96]. - For the nine months ended September 30, 2022, net revenue was $139.3 million, down $117.7 million from $256.9 million in the same period of 2021, due to lower customer demand and global supply chain issues[100]. - Gross margin for the three months ended September 30, 2022 decreased to 14.1% from 34.3% in the prior year, impacted by a $5.3 million charge for potential excess components and higher promotional spending[99]. - Operating expenses for the three months ended September 30, 2022 totaled $20.96 million, a decrease from $27.78 million in the same period of 2021, primarily due to lower revenue-based expenses[103]. - Cash used for operating activities for the nine months ended September 30, 2022 was $69.5 million, a significant increase from $10.3 million used in the same period of 2021, driven by lower gross receipts and higher inventory levels[112]. - The effective tax rate for the three months ended September 30, 2022 was 26.8%, with an income tax benefit of $4.4 million, compared to an effective tax rate of (226.2%) in the same period of 2021[108]. Market Conditions - The ongoing global supply chain challenges have resulted in inflationary cost pressures and component shortages, negatively impacting sales and operations[92]. - The Company is facing market risk due to inflationary pressures, including higher labor-related costs and increased costs of goods and services[132]. - In 2022, the Company experienced a higher rate of inflation than in recent years, leading to increased costs in goods, selling expenses, and general and administrative expenses[132]. - Reduced consumer demand for products has been observed due to inflationary pressures, resulting in decreased sales[132]. - Inflationary pressures may negatively impact the Company's profit margins if selling prices do not increase alongside rising costs[132]. Market Opportunities - The global gaming accessories market is estimated to be over $9.0 billion, with more than 80% of that market located in the Americas and Europe[79]. - The global market for console headsets is estimated to be approximately $1.7 billion, driven by strong demand for PlayStation® and Xbox® consoles[83]. - The microphone market is estimated to be $2.1 billion, with digital/USB microphones accounting for roughly $700 million[90]. - The company expanded its total addressable market by $1 billion through the launch of new products in the gaming simulation and controller markets[91]. - The number of new gamers added globally from 2019 to 2022 totals nearly 400 million, indicating strong long-term growth prospects in the video game industry[82]. Financing and Compliance - Net cash provided by financing activities was $45.2 million during the nine months ended September 30, 2022, compared to a net cash outflow of $0.9 million in the same period of 2021, primarily from revolving credit facility borrowings[114]. - As of September 30, 2022, the company had $44.6 million in outstanding borrowings under its Credit Facility, with an interest rate of 7.50% for base rate loans[120]. - The company expects its current cash and cash equivalents, along with available credit, to be sufficient for anticipated short-term and long-term funding needs[115]. - The company is in compliance with all financial covenants under the Credit Facility, with excess borrowing availability of approximately $25.3 million as of September 30, 2022[124].