0000950170-22-015597.txt : 20220808 0000950170-22-015597.hdr.sgml : 20220808 20220808170230 ACCESSION NUMBER: 0000950170-22-015597 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 73 CONFORMED PERIOD OF REPORT: 20220630 FILED AS OF DATE: 20220808 DATE AS OF CHANGE: 20220808 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Turtle Beach Corp CENTRAL INDEX KEY: 0001493761 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 272767540 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-35465 FILM NUMBER: 221145257 BUSINESS ADDRESS: STREET 1: 44 SOUTH BROADWAY STREET 2: 4TH FLOOR CITY: WHITE PLAINS STATE: NY ZIP: 10601 BUSINESS PHONE: 888-496-8001 MAIL ADDRESS: STREET 1: 44 SOUTH BROADWAY STREET 2: 4TH FLOOR CITY: WHITE PLAINS STATE: NY ZIP: 10601 FORMER COMPANY: FORMER CONFORMED NAME: Parametric Sound Corp DATE OF NAME CHANGE: 20100609 10-Q 1 hear-20220630.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

 

Commission File Number: 001-35465

img251914720_0.jpg  

TURTLE BEACH CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada

27-2767540

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

44 South Broadway, 4th Floor

White Plains, New York

10601

(Address of principal executive offices)

(Zip Code)

 

(888) 496-8001

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbols

Name of each exchange on which registered

Common Stock, par value $0.001

HEAR

The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

The number of shares of the registrant’s Common Stock, par value $0.001 per share, outstanding on July 31, 2022 was 16,526,393.


INDEX

 

 

 

Page

 

 

 

PART I. FINANCIAL INFORMATION

2

 

 

 

Item 1.

Financial Statements (unaudited)

2

 

 

 

 

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2022 and 2021

2

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2022 and 2021

3

 

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021

4

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021

5

 

 

 

 

Condensed Consolidated Statement of Stockholder's Equity (Deficit) for the Three and Six Months Ended June 30, 2022 and 2021

6

 

 

 

 

Notes to Condensed Consolidated Financial Statements

7

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

 

 

 

Item 4.

Controls and Procedures

24

 

 

 

PART II. OTHER INFORMATION

25

 

 

 

Item 1.

Legal Proceedings

25

 

 

 

Item 1A.

Risk Factors

25

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

36

 

 

 

Item 5.

Other Information

36

 

 

 

Item 6.

Exhibits

37

 

 

SIGNATURES

38

 

 

1


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Turtle Beach Corporation

Condensed Consolidated Statements of Operations

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(in thousands, except per-share data)

 

Net revenue

 

$

41,300

 

 

$

78,564

 

 

$

87,962

 

 

$

171,617

 

Cost of revenue

 

 

33,418

 

 

 

49,854

 

 

 

66,051

 

 

 

108,052

 

Gross profit

 

 

7,882

 

 

 

28,710

 

 

 

21,911

 

 

 

63,565

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

11,587

 

 

 

15,678

 

 

 

22,416

 

 

 

27,223

 

Research and development

 

 

5,136

 

 

 

4,416

 

 

 

10,388

 

 

 

8,409

 

General and administrative

 

 

12,532

 

 

 

8,173

 

 

 

18,767

 

 

 

15,210

 

Total operating expenses

 

 

29,255

 

 

 

28,267

 

 

 

51,571

 

 

 

50,842

 

Operating income (loss)

 

 

(21,373

)

 

 

443

 

 

 

(29,660

)

 

 

12,723

 

Interest expense

 

 

84

 

 

 

73

 

 

 

193

 

 

 

170

 

Other non-operating expense, net

 

 

1,109

 

 

 

(65

)

 

 

1,828

 

 

 

514

 

Income (loss) before income tax

 

 

(22,566

)

 

 

435

 

 

 

(31,681

)

 

 

12,039

 

Income tax expense (benefit)

 

 

(4,740

)

 

 

(1,286

)

 

 

(7,379

)

 

 

1,480

 

Net income (loss)

 

$

(17,826

)

 

$

1,721

 

 

$

(24,302

)

 

$

10,559

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(1.08

)

 

$

0.11

 

 

$

(1.49

)

 

$

0.67

 

Diluted

 

$

(1.08

)

 

$

0.09

 

 

$

(1.49

)

 

$

0.58

 

Weighted average number of shares:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

16,500

 

 

 

15,920

 

 

 

16,348

 

 

 

15,737

 

Diluted

 

 

16,500

 

 

 

18,329

 

 

 

16,348

 

 

 

18,204

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited)

2


Turtle Beach Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss)

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,
2022

 

 

June 30,
2021

 

 

June 30,
2022

 

 

June 30,
2021

 

 

 

(in thousands)

 

Net income (loss)

 

$

(17,826

)

 

$

1,721

 

 

$

(24,302

)

 

$

10,559

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(1,090

)

 

 

805

 

 

 

(1,519

)

 

 

94

 

Other comprehensive income (loss)

 

 

(1,090

)

 

 

805

 

 

 

(1,519

)

 

 

94

 

Comprehensive income (loss)

 

$

(18,916

)

 

$

2,526

 

 

$

(25,821

)

 

$

10,653

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited)

3


Turtle Beach Corporation

Condensed Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

(in thousands, except par value and share amounts)

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

10,877

 

 

$

37,720

 

Accounts receivable, net

 

 

8,551

 

 

 

35,953

 

Inventories

 

 

120,694

 

 

 

101,933

 

Prepaid expenses and other current assets

 

 

13,606

 

 

 

17,506

 

Total Current Assets

 

 

153,728

 

 

 

193,112

 

Property and equipment, net

 

 

6,144

 

 

 

6,955

 

Deferred income taxes

 

 

13,009

 

 

 

5,899

 

Goodwill

 

 

10,686

 

 

 

10,686

 

Intangible assets, net

 

 

5,126

 

 

 

5,788

 

Other assets

 

 

8,261

 

 

 

8,065

 

Total Assets

 

$

196,954

 

 

$

230,505

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Revolving credit facility

 

$

15,707

 

 

$

 

Accounts payable

 

 

31,030

 

 

 

40,475

 

Other current liabilities

 

 

19,456

 

 

 

37,693

 

Total Current Liabilities

 

 

66,193

 

 

 

78,168

 

Income tax payable

 

 

3,774

 

 

 

3,774

 

Other liabilities

 

 

7,334

 

 

 

7,194

 

Total Liabilities

 

 

77,301

 

 

 

89,136

 

Commitments and Contingencies

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

Common stock, $0.001 par value - 25,000,000 shares authorized; 16,526,393 and 16,168,147 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

 

 

17

 

 

 

16

 

Additional paid-in capital

 

 

202,382

 

 

 

198,278

 

Accumulated deficit

 

 

(81,354

)

 

 

(57,052

)

Accumulated other comprehensive income (loss)

 

 

(1,392

)

 

 

127

 

Total Stockholders’ Equity

 

 

119,653

 

 

 

141,369

 

Total Liabilities and Stockholders’ Equity

 

$

196,954

 

 

$

230,505

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited)

4


Turtle Beach Corporation

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

 

Six Months Ended

 

 

 

June 30, 2022

 

 

June 30, 2021

 

 

 

(in thousands)

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income (loss)

 

$

(24,302

)

 

$

10,559

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

2,458

 

 

 

1,847

 

Amortization of intangible assets

 

 

623

 

 

 

625

 

Amortization of debt financing costs

 

 

94

 

 

 

95

 

Stock-based compensation

 

 

3,567

 

 

 

3,727

 

Deferred income taxes

 

 

(7,110

)

 

 

(101

)

Change in sales returns reserve

 

 

(4,992

)

 

 

(4,186

)

Provision for obsolete inventory

 

 

(1,289

)

 

 

783

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

Accounts receivable

 

 

32,152

 

 

 

20,028

 

Inventories

 

 

(21,288

)

 

 

(11,413

)

Accounts payable

 

 

(9,914

)

 

 

4,580

 

Prepaid expenses and other assets

 

 

1,055

 

 

 

(11,299

)

Income taxes payable

 

 

1,550

 

 

 

(6,850

)

Other liabilities

 

 

(13,851

)

 

 

4,053

 

Net cash provided by (used for) operating activities

 

 

(41,247

)

 

 

12,448

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,207

)

 

 

(3,316

)

Acquisition of a business, net of cash acquired

 

 

 

 

 

(2,500

)

Net cash used for investing activities

 

 

(1,207

)

 

 

(5,816

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Borrowings on revolving credit facilities

 

 

36,209

 

 

 

120,858

 

Repayment of revolving credit facilities

 

 

(20,502

)

 

 

(120,858

)

Proceeds from exercise of stock options and warrants

 

 

538

 

 

 

3,262

 

Repurchase of common stock to satisfy employee tax withholding obligations

 

 

 

 

 

(463

)

Net cash provided by financing activities

 

 

16,245

 

 

 

2,799

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(634

)

 

 

85

 

Net increase (decrease) in cash and cash equivalents

 

 

(26,843

)

 

 

9,516

 

Cash and cash equivalents - beginning of period

 

 

37,720

 

 

 

46,681

 

Cash and cash equivalents - end of period

 

$

10,877

 

 

$

56,197

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF INFORMATION

 

 

 

 

 

 

Cash paid for interest

 

$

108

 

 

$

88

 

Cash paid (received) for income taxes

 

$

(2,539

)

 

$

8,041

 

See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited)

5


Turtle Beach Corporation

Condensed Consolidated Statement of StockholdersEquity (Deficit)

(unaudited)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Total

 

 

 

(in thousands)

 

Balance at December 31, 2021

 

 

16,168

 

 

$

16

 

 

$

198,278

 

 

$

(57,052

)

 

$

127

 

 

$

141,369

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(6,476

)

 

 

 

 

 

(6,476

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(429

)

 

 

(429

)

Issuance of restricted stock

 

 

30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options exercised

 

 

47

 

 

 

 

 

 

361

 

 

 

 

 

 

 

 

 

361

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,537

 

 

 

 

 

 

 

 

 

1,537

 

Balance at March 31, 2022

 

 

16,245

 

 

$

16

 

 

$

200,176

 

 

$

(63,528

)

 

$

(302

)

 

$

136,362

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(17,826

)

 

 

 

 

 

(17,826

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,090

)

 

 

(1,090

)

Issuance of restricted stock

 

 

257

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options exercised

 

 

24

 

 

 

1

 

 

 

176

 

 

 

 

 

 

 

 

 

177

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,030

 

 

 

 

 

 

 

 

 

2,030

 

Balance at June 30, 2022

 

 

16,526

 

 

$

17

 

 

$

202,382

 

 

$

(81,354

)

 

$

(1,392

)

 

$

119,653

 

 

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Total

 

 

 

(in thousands)

 

Balance at December 31, 2020

 

 

15,476

 

 

 

15

 

 

 

190,568

 

 

 

(74,773

)

 

 

589

 

 

$

116,399

 

Net income

 

 

 

 

 

 

 

 

 

 

 

8,838

 

 

 

 

 

 

8,838

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(711

)

 

 

(711

)

Issuance of restricted stock

 

 

26

 

 

 

 

 

 

113

 

 

 

 

 

 

 

 

 

113

 

Repurchase of common stock and retirement of related treasury shares

 

 

(6

)

 

 

 

 

 

(215

)

 

 

 

 

 

 

 

 

(215

)

Stock options exercised

 

 

159

 

 

 

1

 

 

 

911

 

 

 

 

 

 

 

 

 

912

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,786

 

 

 

 

 

 

 

 

 

1,786

 

Balance at March 31, 2021

 

 

15,655

 

 

$

16

 

 

$

193,163

 

 

$

(65,935

)

 

$

(122

)

 

$

127,122

 

Net income

 

 

 

 

 

 

 

 

 

 

 

1,721

 

 

 

 

 

 

1,721

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

805

 

 

 

805

 

Issuance of restricted stock

 

 

202

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Repurchase of common stock and retirement of related treasury shares

 

 

(9

)

 

 

 

 

 

(248

)

 

 

 

 

 

 

 

 

(248

)

Stock options exercised

 

 

217