0000950170-22-024679.txt : 20221114 0000950170-22-024679.hdr.sgml : 20221114 20221114071642 ACCESSION NUMBER: 0000950170-22-024679 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 72 CONFORMED PERIOD OF REPORT: 20220930 FILED AS OF DATE: 20221114 DATE AS OF CHANGE: 20221114 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: 221380178 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-20220930.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 September 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

img251917603_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 October 31, 2022 was 16,556,960.


INDEX

 

 

 

Page

 

 

 

PART I. FINANCIAL INFORMATION

2

 

 

 

Item 1.

Financial Statements (unaudited)

2

 

 

 

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021

2

 

 

 

 

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

3

 

 

 

 

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

4

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021

5

 

 

 

 

Condensed Consolidated Statement of Stockholder's Equity (Deficit) for the Three and Nine Months Ended September 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

35

 

 

 

Item 5.

Other Information

35

 

 

 

Item 6.

Exhibits

36

 

 

SIGNATURES

37

 

 

1


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Turtle Beach Corporation

Condensed Consolidated Statements of Operations

(unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(in thousands, except per-share data)

 

Net revenue

 

$

51,304

 

 

$

85,307

 

 

$

139,266

 

 

$

256,924

 

Cost of revenue

 

 

44,046

 

 

 

56,034

 

 

 

110,097

 

 

 

164,086

 

Gross profit

 

 

7,258

 

 

 

29,273

 

 

 

29,169

 

 

 

92,838

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

10,550

 

 

 

14,301

 

 

 

32,966

 

 

 

41,524

 

Research and development

 

 

4,400

 

 

 

4,520

 

 

 

14,788

 

 

 

12,929

 

General and administrative

 

 

6,006

 

 

 

8,962

 

 

 

24,773

 

 

 

24,172

 

Total operating expenses

 

 

20,956

 

 

 

27,783

 

 

 

72,527

 

 

 

78,625

 

Operating income (loss)

 

 

(13,698

)

 

 

1,490

 

 

 

(43,358

)

 

 

14,213

 

Interest expense

 

 

450

 

 

 

101

 

 

 

643

 

 

 

271

 

Other non-operating expense, net

 

 

2,255

 

 

 

585

 

 

 

4,083

 

 

 

1,099

 

Income (loss) before income tax

 

 

(16,403

)

 

 

804

 

 

 

(48,084

)

 

 

12,843

 

Income tax expense (benefit)

 

 

(4,392

)

 

 

(1,819

)

 

 

(11,771

)

 

 

(339

)

Net income (loss)

 

$

(12,011

)

 

$

2,623

 

 

$

(36,313

)

 

$

13,182

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.73

)

 

$

0.16

 

 

$

(2.21

)

 

$

0.83

 

Diluted

 

$

(0.73

)

 

$

0.14

 

 

$

(2.21

)

 

$

0.72

 

Weighted average number of shares:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

16,541

 

 

 

16,079

 

 

 

16,413

 

 

 

15,852

 

Diluted

 

 

16,541

 

 

 

18,335

 

 

 

16,413

 

 

 

18,248

 

 

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

 

 

Nine Months Ended

 

 

 

September 30,
2022

 

 

September 30,
2021

 

 

September 30,
2022

 

 

September 30,
2021

 

 

 

(in thousands)

 

Net income (loss)

 

$

(12,011

)

 

$

2,623

 

 

$

(36,313

)

 

$

13,182

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(612

)

 

 

(460

)

 

 

(2,131

)

 

 

(366

)

Other comprehensive income (loss)

 

 

(612

)

 

 

(460

)

 

 

(2,131

)

 

 

(366

)

Comprehensive income (loss)

 

$

(12,623

)

 

$

2,163

 

 

$

(38,444

)

 

$

12,816

 

 

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

3


Turtle Beach Corporation

Condensed Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

(in thousands, except par value and share amounts)

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

10,505

 

 

$

37,720

 

Accounts receivable, net

 

 

30,139

 

 

 

35,953

 

Inventories

 

 

118,439

 

 

 

101,933

 

Prepaid expenses and other current assets

 

 

12,382

 

 

 

17,506

 

Total Current Assets

 

 

171,465

 

 

 

193,112

 

Property and equipment, net

 

 

5,435

 

 

 

6,955

 

Deferred income taxes

 

 

17,059

 

 

 

5,899

 

Goodwill

 

 

10,686

 

 

 

10,686

 

Intangible assets, net

 

 

4,793

 

 

 

5,788

 

Other assets

 

 

7,846

 

 

 

8,065

 

Total Assets

 

$

217,284

 

 

$

230,505

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Revolving credit facility

 

$

44,618

 

 

$

 

Accounts payable

 

 

29,719

 

 

 

40,475

 

Other current liabilities

 

 

23,124

 

 

 

37,693

 

Total Current Liabilities

 

 

97,461

 

 

 

78,168

 

Income tax payable

 

 

3,526

 

 

 

3,774

 

Other liabilities

 

 

6,968

 

 

 

7,194

 

Total Liabilities

 

 

107,955

 

 

 

89,136

 

Commitments and Contingencies

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

Common stock, $0.001 par value - 25,000,000 shares authorized; 16,556,798 and 16,168,147 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

 

 

17

 

 

 

16

 

Additional paid-in capital

 

 

204,681

 

 

 

198,278

 

Accumulated deficit

 

 

(93,365

)

 

 

(57,052

)

Accumulated other comprehensive income (loss)

 

 

(2,004

)

 

 

127

 

Total Stockholders’ Equity

 

 

109,329

 

 

 

141,369

 

Total Liabilities and Stockholders’ Equity

 

$

217,284

 

 

$

230,505

 

 

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

4


Turtle Beach Corporation

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30, 2022

 

 

September 30, 2021

 

 

 

(in thousands)

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income (loss)

 

$

(36,313

)

 

$

13,182

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

3,533

 

 

 

2,919

 

Amortization of intangible assets

 

 

931

 

 

 

946

 

Amortization of debt financing costs

 

 

142

 

 

 

142

 

Stock-based compensation

 

 

5,775

 

 

 

5,225

 

Deferred income taxes

 

 

(11,160

)

 

 

(1,692

)

Change in sales returns reserve

 

 

(4,561

)

 

 

(3,676

)

Provision for obsolete inventory

 

 

962

 

 

 

1,628

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

Accounts receivable

 

 

9,834

 

 

 

10,554

 

Inventories

 

 

(24,611

)

 

 

(43,614

)

Accounts payable

 

 

(11,452

)

 

 

11,994

 

Prepaid expenses and other assets

 

 

2,626

 

 

 

(8,490

)

Income taxes payable

 

 

645

 

 

 

(7,367

)

Other liabilities

 

 

(5,873

)

 

 

7,970

 

Net cash provided by (used for) operating activities

 

 

(69,522

)

 

 

(10,279

)

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,895

)

 

 

(4,545

)

Acquisition of a business, net of cash acquired

 

 

 

 

 

(2,500

)

Net cash used for investing activities

 

 

(1,895

)

 

 

(7,045

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Borrowings on revolving credit facilities

 

 

91,945

 

 

 

120,858

 

Repayment of revolving credit facilities

 

 

(47,327

)

 

 

(120,858

)

Proceeds from exercise of stock options and warrants

 

 

626

 

 

 

4,408

 

Repurchase of common stock to satisfy employee tax withholding obligations

 

 

 

 

 

(463

)

Repurchase of common stock

 

 

 

 

 

(4,882

)

Net cash provided by (used for) financing activities

 

 

45,244

 

 

 

(937

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(1,042

)

 

 

(362

)

Net increase (decrease) in cash and cash equivalents

 

 

(27,215

)

 

 

(18,623

)

Cash and cash equivalents - beginning of period

 

 

37,720

 

 

 

46,681

 

Cash and cash equivalents - end of period

 

$

10,505

 

 

$

28,058

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF INFORMATION

 

 

 

 

 

 

Cash paid for interest

 

$

376

 

 

$

130

 

Cash paid (received) for income taxes

 

$

(2,340

)

 

$

8,045

 

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

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(12,011

)

 

 

 

 

 

(12,011

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(612

)

 

 

(612

)

Issuance of restricted stock

 

 

16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options exercised

 

 

14

 

 

 

 

 

 

88

 

 

 

 

 

 

 

 

 

88

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,211

 

 

 

 

 

 

 

 

 

2,211

 

Balance at September 30, 2022

 

 

16,556

 

 

$

17

 

 

$

204,681

 

 

$

(93,365

)

 

$

(2,004

)

 

$

109,329

 

 

 

 

 

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

)