0000950170-23-060382.txt : 20231107 0000950170-23-060382.hdr.sgml : 20231107 20231107170033 ACCESSION NUMBER: 0000950170-23-060382 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 74 CONFORMED PERIOD OF REPORT: 20230930 FILED AS OF DATE: 20231107 DATE AS OF CHANGE: 20231107 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: 231384924 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-20230930.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, 2023

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

img252841124_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

Preferred Stock Purchase Rights

N/A

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, 2023 was 17,404,013.

 


 

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, 2023 and 2022

2

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2023 and 2022

3

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022

4

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022

5

 

 

 

 

Condensed Consolidated Statement of Stockholder's Equity for the Three and Nine Months Ended September 30, 2023 and 2022

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

25

 

 

 

Item 5.

Other Information

25

 

 

 

Item 6.

Exhibits

26

 

 

SIGNATURES

27

 

 

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,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands, except per-share data)

 

Net revenue

 

$

59,158

 

 

$

51,304

 

 

$

158,584

 

 

$

139,266

 

Cost of revenue

 

 

41,469

 

 

 

44,046

 

 

 

114,884

 

 

 

110,097

 

Gross profit

 

 

17,689

 

 

 

7,258

 

 

 

43,700

 

 

 

29,169

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

10,583

 

 

 

10,550

 

 

 

30,457

 

 

 

32,966

 

Research and development

 

 

4,380

 

 

 

4,400

 

 

 

12,670

 

 

 

14,788

 

General and administrative

 

 

5,243

 

 

 

6,006

 

 

 

25,375

 

 

 

24,773

 

Total operating expenses

 

 

20,206

 

 

 

20,956

 

 

 

68,502

 

 

 

72,527

 

Operating loss

 

 

(2,517

)

 

 

(13,698

)

 

 

(24,802

)

 

 

(43,358

)

Interest expense

 

 

107

 

 

 

450

 

 

 

253

 

 

 

643

 

Other non-operating expense, net

 

 

481

 

 

 

2,255

 

 

 

799

 

 

 

4,083

 

Loss before income tax

 

 

(3,105

)

 

 

(16,403

)

 

 

(25,854

)

 

 

(48,084

)

Income tax expense (benefit)

 

 

501

 

 

 

(4,392

)

 

 

377

 

 

 

(11,771

)

Net loss

 

$

(3,606

)

 

$

(12,011

)

 

$

(26,231

)

 

$

(36,313

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.21

)

 

$

(0.73

)

 

$

(1.54

)

 

$

(2.21

)

Diluted

 

$

(0.21

)

 

$

(0.73

)

 

$

(1.54

)

 

$

(2.21

)

Weighted average number of shares:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

17,345

 

 

 

16,541

 

 

 

17,029

 

 

 

16,413

 

Diluted

 

 

17,345

 

 

 

16,541

 

 

 

17,029

 

 

 

16,413

 

 

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,
2023

 

 

September 30,
2022

 

 

September 30,
2023

 

 

September 30,
2022

 

 

 

(in thousands)

 

Net loss

 

$

(3,606

)

 

$

(12,011

)

 

$

(26,231

)

 

$

(36,313

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(16

)

 

 

(612

)

 

 

394

 

 

 

(2,131

)

Other comprehensive income (loss)

 

 

(16

)

 

 

(612

)

 

 

394

 

 

 

(2,131

)

Comprehensive loss

 

$

(3,622

)

 

$

(12,623

)

 

$

(25,837

)

 

$

(38,444

)

 

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

3


 

Turtle Beach Corporation

Condensed Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

(in thousands, except par value and share amounts)

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

12,340

 

 

$

11,396

 

Accounts receivable, net

 

 

33,816

 

 

 

43,336

 

Inventories

 

 

76,024

 

 

 

71,252

 

Prepaid expenses and other current assets

 

 

8,775

 

 

 

9,196

 

Total Current Assets

 

 

130,955

 

 

 

135,180

 

Property and equipment, net

 

 

4,828

 

 

 

6,362

 

Goodwill

 

 

10,686

 

 

 

10,686

 

Intangible assets, net

 

 

1,976

 

 

 

2,612

 

Other assets

 

 

7,858

 

 

 

8,547

 

Total Assets

 

$

156,303

 

 

$

163,387

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Revolving credit facility

 

$

13,261

 

 

$

19,053

 

Accounts payable

 

 

39,198

 

 

 

19,846

 

Other current liabilities

 

 

22,014

 

 

 

25,433

 

Total Current Liabilities

 

 

74,473

 

 

 

64,332

 

Income tax payable

 

 

2,204

 

 

 

2,076

 

Other liabilities

 

 

7,224

 

 

 

8,038

 

Total Liabilities

 

 

83,901

 

 

 

74,446

 

Commitments and Contingencies

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

Common stock, $0.001 par value - 25,000,000 shares authorized; 17,404,013 and 16,569,173 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

 

 

17

 

 

 

17

 

Additional paid-in capital

 

 

216,214

 

 

 

206,916

 

Accumulated deficit

 

 

(142,829

)

 

 

(116,598

)

Accumulated other comprehensive income (loss)

 

 

(1,000

)

 

 

(1,394

)

Total Stockholders’ Equity

 

 

72,402

 

 

 

88,941

 

Total Liabilities and Stockholders’ Equity

 

$

156,303

 

 

$

163,387

 

 

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, 2023

 

 

September 30, 2022

 

 

 

(in thousands)

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net loss

 

$

(26,231

)

 

$

(36,313

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

2,912

 

 

 

3,533

 

Amortization of intangible assets

 

 

761

 

 

 

931

 

Amortization of debt financing costs

 

 

108

 

 

 

142

 

Stock-based compensation

 

 

8,554

 

 

 

5,775

 

Deferred income taxes

 

 

(178

)

 

 

(11,160

)

Change in sales returns reserve

 

 

(2,473

)

 

 

(4,561

)

Provision for obsolete inventory

 

 

200

 

 

 

962

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

Accounts receivable

 

 

12,563

 

 

 

9,834

 

Inventories

 

 

(4,986

)

 

 

(24,611

)

Accounts payable

 

 

19,072

 

 

 

(11,452

)

Prepaid expenses and other assets

 

 

385

 

 

 

2,626

 

Income taxes payable

 

 

126

 

 

 

645

 

Other liabilities

 

 

(2,869

)

 

 

(5,873

)

Net cash provided by (used for) operating activities

 

 

7,944

 

 

 

(69,522

)

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,924

)

 

 

(1,895

)

Net cash used for investing activities

 

 

(1,924

)

 

 

(1,895

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Borrowings on revolving credit facilities

 

 

149,995

 

 

 

91,945

 

Repayment of revolving credit facilities

 

 

(155,787

)

 

 

(47,327

)

Proceeds from exercise of stock options and warrants

 

 

1,718

 

 

 

626

 

Repurchase of common stock

 

 

(974

)

 

 

 

Debt issuance costs

 

 

(80

)

 

 

 

Net cash provided by (used for) financing activities

 

 

(5,128

)

 

 

45,244

 

Effect of exchange rate changes on cash and cash equivalents

 

 

52

 

 

 

(1,042

)

Net increase (decrease) in cash and cash equivalents

 

 

944

 

 

 

(27,215

)

Cash and cash equivalents - beginning of period

 

 

11,396

 

 

 

37,720

 

Cash and cash equivalents - end of period

 

$

12,340

 

 

$

10,505

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF INFORMATION

 

 

 

 

 

 

Cash paid for interest

 

$

283

 

 

$

376

 

Cash paid (received) for income taxes

 

$

175

 

 

$

(2,340

)

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

5


 

Turtle Beach Corporation

Condensed Consolidated Statement of StockholdersEquity

(unaudited)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Total

 

 

 

(in thousands)

 

Balance at December 31, 2022

 

 

16,569

 

 

$

17

 

 

$

206,916

 

 

$

(116,598

)

 

$

(1,394

)

 

$

88,941

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(6,705

)

 

 

 

 

 

(6,705

)

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

445

 

 

 

445

 

Issuance of restricted stock

 

 

14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Stock options exercised

 

 

21

 

 

 

 

 

 

124

 

 

 

 

 

 

 

 

 

124

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,959

 

 

 

 

 

 

 

 

 

1,959

 

Balance at March 31, 2023

 

 

16,604

 

 

$

17

 

 

$

208,999

 

 

$

(123,303

)

 

$

(949

)

 

$

84,764

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(15,920

)

 

 

 

 

 

(15,920

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35

)

 

 

(35

)

Issuance of restricted stock

 

 

469

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Stock options exercised

 

 

322

 

 

 

 

 

 

1,234

 

 

 

 

 

 

 

 

 

1,234

 

Stock-based compensation

 

 

 

 

 

 

 

 

4,986

 

 

 

 

 

 

 

 

 

4,986

 

Repurchase of common stock

 

 

(86

)

 

 

 

 

 

(974

)

 

 

 

 

 

 

 

 

(974

)

Balance at June 30, 2023

 

 

17,309

 

 

$

17

 

 

$

214,245

 

 

$

(139,223

)

 

$

(984

)

 

$

74,055

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(3,606

)

 

 

 

 

 

(3,606

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16

)

 

 

(16

)

Issuance of restricted stock

 

 

24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Stock options exercised

 

 

76

 

 

 

 

 

 

360

 

 

 

 

 

 

 

 

 

360

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,609

 

 

 

 

 

 

 

 

 

1,609

 

Balance at September 30, 2023

 

 

17,409

 

 

$

17

 

 

$

216,214

 

 

$

(142,829

)

 

$

(1,000

)

 

$

72,402

 

 

 

 

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 income

 

 

 

 

 

 

 

 

 

 

 

(17,826

)

 

 

 

 

 

(17,826

)

Other comprehensive income, 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