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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Turtle Beach Corporation | NASDAQ:HEAR | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.43 | -2.83% | 14.76 | 14.75 | 14.76 | 15.27 | 14.65 | 15.10 | 181,338 | 19:38:18 |
Nevada
|
27-2767540
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification Number)
|
|
|
11011 Via Frontera, Suite A/B
San Diego, California
|
92127
|
(Address of principal executive offices)
|
(Zip Code)
|
|
|
|
Page
|
PART I. FINANCIAL INFORMATION
|
|
|
|
|
|
Item 1.
|
Financial Statements (unaudited)
|
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 3.
|
||
|
|
|
Item 4.
|
||
|
|
|
Item 5.
|
||
|
|
|
PART II. OTHER INFORMATION
|
||
|
|
|
Item 1.
|
||
|
|
|
Item 1A.
|
||
|
|
|
Item 6.
|
||
|
|
|
SIGNATURES
|
|
June 30,
2017 |
|
December 31, 2016
|
||||
ASSETS
|
(in thousands, except par value and share amounts)
|
||||||
Current Assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
1,238
|
|
|
$
|
6,183
|
|
Accounts receivable, net
|
9,995
|
|
|
54,633
|
|
||
Inventories
|
20,916
|
|
|
21,698
|
|
||
Prepaid expenses and other current assets
|
4,712
|
|
|
4,121
|
|
||
Total Current Assets
|
36,861
|
|
|
86,635
|
|
||
Property and equipment, net
|
3,348
|
|
|
4,311
|
|
||
Intangible assets, net
|
1,529
|
|
|
1,618
|
|
||
Deferred income taxes
|
586
|
|
|
543
|
|
||
Other assets
|
1,310
|
|
|
1,693
|
|
||
Total Assets
|
$
|
43,634
|
|
|
$
|
94,800
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|||
Current Liabilities:
|
|
|
|
|
|||
Revolving credit facilities
|
$
|
5,176
|
|
|
$
|
35,905
|
|
Term loan
|
4,626
|
|
|
2,647
|
|
||
Accounts payable
|
12,070
|
|
|
11,927
|
|
||
Other current liabilities
|
10,455
|
|
|
16,414
|
|
||
Total Current Liabilities
|
32,327
|
|
|
66,893
|
|
||
Term loan, long-term portion
|
8,306
|
|
|
10,442
|
|
||
Series B redeemable preferred stock
|
18,181
|
|
|
17,480
|
|
||
Subordinated notes - related party
|
19,289
|
|
|
17,881
|
|
||
Other liabilities
|
2,239
|
|
|
2,800
|
|
||
Total Liabilities
|
80,342
|
|
|
115,496
|
|
||
Commitments and Contingencies
|
|
|
|
||||
Stockholders' Equity (Deficit)
|
|
|
|
|
|
||
Common stock, $0.001 par value - 100,000,000 shares authorized; 49,386,006 and 49,251,336 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively
|
49
|
|
|
49
|
|
||
Additional paid-in capital
|
147,432
|
|
|
146,615
|
|
||
Accumulated deficit
|
(183,787
|
)
|
|
(166,800
|
)
|
||
Accumulated other comprehensive loss
|
(402
|
)
|
|
(560
|
)
|
||
Total Stockholders' Equity (Deficit)
|
(36,708
|
)
|
|
(20,696
|
)
|
||
Total Liabilities and Stockholders' Equity (Deficit)
|
$
|
43,634
|
|
|
$
|
94,800
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
2017 |
|
June 30,
2016 |
|
June 30,
2017 |
|
June 30,
2016 |
||||||||
|
(in thousands, except per-share data)
|
||||||||||||||
Net Revenue
|
$
|
19,112
|
|
|
$
|
29,362
|
|
|
$
|
33,464
|
|
|
$
|
53,390
|
|
Cost of Revenue
|
12,811
|
|
|
24,249
|
|
|
24,947
|
|
|
44,915
|
|
||||
Gross Profit
|
6,301
|
|
|
5,113
|
|
|
8,517
|
|
|
8,475
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Selling and marketing
|
5,529
|
|
|
7,121
|
|
|
9,978
|
|
|
12,721
|
|
||||
Research and development
|
1,697
|
|
|
2,040
|
|
|
3,087
|
|
|
4,064
|
|
||||
General and administrative
|
4,070
|
|
|
5,287
|
|
|
8,241
|
|
|
10,570
|
|
||||
Goodwill and intangible asset impairment
|
—
|
|
|
31,152
|
|
|
—
|
|
|
31,152
|
|
||||
Restructuring charges
|
(30
|
)
|
|
—
|
|
|
268
|
|
|
225
|
|
||||
Total operating expenses
|
11,266
|
|
|
45,600
|
|
|
21,574
|
|
|
58,732
|
|
||||
Operating loss
|
(4,965
|
)
|
|
(40,487
|
)
|
|
(13,057
|
)
|
|
(50,257
|
)
|
||||
Interest expense
|
1,835
|
|
|
1,686
|
|
|
3,675
|
|
|
3,465
|
|
||||
Other non-operating expense (income), net
|
(214
|
)
|
|
704
|
|
|
(265
|
)
|
|
1,069
|
|
||||
Loss before income tax expense
|
(6,586
|
)
|
|
(42,877
|
)
|
|
(16,467
|
)
|
|
(54,791
|
)
|
||||
Income tax expense (benefit)
|
475
|
|
|
(304
|
)
|
|
520
|
|
|
(207
|
)
|
||||
Net loss
|
$
|
(7,061
|
)
|
|
$
|
(42,573
|
)
|
|
$
|
(16,987
|
)
|
|
$
|
(54,584
|
)
|
|
|
|
|
|
|
|
|
||||||||
Net loss per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.14
|
)
|
|
$
|
(0.86
|
)
|
|
$
|
(0.34
|
)
|
|
$
|
(1.14
|
)
|
Diluted
|
$
|
(0.14
|
)
|
|
$
|
(0.86
|
)
|
|
$
|
(0.34
|
)
|
|
$
|
(1.14
|
)
|
Weighted average number of shares:
|
|
|
|
|
|
|
|
||||||||
Basic
|
49,346
|
|
|
49,230
|
|
|
49,299
|
|
|
47,934
|
|
||||
Diluted
|
49,346
|
|
|
49,230
|
|
|
49,299
|
|
|
47,934
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
||||||||
|
(in thousands)
|
||||||||||||||
Net loss
|
$
|
(7,061
|
)
|
|
$
|
(42,573
|
)
|
|
$
|
(16,987
|
)
|
|
$
|
(54,584
|
)
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustment
|
118
|
|
|
(49
|
)
|
|
158
|
|
|
(70
|
)
|
||||
Other comprehensive income (loss)
|
118
|
|
|
(49
|
)
|
|
158
|
|
|
(70
|
)
|
||||
Comprehensive loss
|
$
|
(6,943
|
)
|
|
$
|
(42,622
|
)
|
|
$
|
(16,829
|
)
|
|
$
|
(54,654
|
)
|
|
Six Months Ended
|
||||||
|
June 30, 2017
|
|
June 30, 2016
|
||||
|
(in thousands)
|
||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
||
Net loss
|
$
|
(16,987
|
)
|
|
$
|
(54,584
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
2,213
|
|
|
2,471
|
|
||
Amortization of intangible assets
|
170
|
|
|
2,695
|
|
||
Amortization of debt financing costs
|
781
|
|
|
632
|
|
||
Stock-based compensation
|
817
|
|
|
2,205
|
|
||
Accrued interest on Series B redeemable preferred stock
|
702
|
|
|
651
|
|
||
Paid in kind interest
|
1,196
|
|
|
1,039
|
|
||
Deferred income taxes
|
(43
|
)
|
|
(510
|
)
|
||
Reversal of sales returns reserve
|
(2,438
|
)
|
|
(5,689
|
)
|
||
Provision for doubtful accounts
|
3
|
|
|
(27
|
)
|
||
Provision for obsolete inventory
|
1,689
|
|
|
1,596
|
|
||
Loss on impairment of assets
|
—
|
|
|
31,152
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
47,073
|
|
|
44,823
|
|
||
Inventories
|
(907
|
)
|
|
(3,348
|
)
|
||
Accounts payable
|
(601
|
)
|
|
1,798
|
|
||
Prepaid expenses and other assets
|
(505
|
)
|
|
(1,183
|
)
|
||
Income taxes payable
|
329
|
|
|
81
|
|
||
Other liabilities
|
(6,845
|
)
|
|
(5,565
|
)
|
||
Net cash provided by operating activities
|
26,647
|
|
|
18,237
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
||||
Purchase of property and equipment
|
(506
|
)
|
|
(1,645
|
)
|
||
Net cash used for investing activities
|
(506
|
)
|
|
(1,645
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
||||
Borrowings on revolving credit facilities
|
51,909
|
|
|
82,701
|
|
||
Repayment of revolving credit facilities
|
(82,638
|
)
|
|
(107,962
|
)
|
||
Repayment of capital leases
|
(4
|
)
|
|
(19
|
)
|
||
Repayment of term loan
|
(427
|
)
|
|
(2,407
|
)
|
||
Proceeds from sale of common stock, net of issuance costs
|
—
|
|
|
5,968
|
|
||
Debt financing costs
|
—
|
|
|
(761
|
)
|
||
Net cash used for financing activities
|
(31,160
|
)
|
|
(22,480
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
74
|
|
|
(64
|
)
|
||
Net decrease in cash and cash equivalents
|
(4,945
|
)
|
|
(5,952
|
)
|
||
Cash and cash equivalents - beginning of period
|
6,183
|
|
|
7,114
|
|
||
Cash and cash equivalents - end of period
|
$
|
1,238
|
|
|
$
|
1,162
|
|
|
|
|
|
||||
SUPPLEMENTAL DISCLOSURE OF INFORMATION
|
|
|
|
||||
Cash paid for interest
|
$
|
918
|
|
|
$
|
992
|
|
Cash paid for income taxes
|
$
|
—
|
|
|
$
|
—
|
|
|
Common Stock
|
|
Additional Paid-In Capital
|
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Total
|
||||||||||||
|
Shares
|
Amount
|
|
|
|
|
|||||||||||||||
|
(in thousands)
|
||||||||||||||||||||
Balance at December 31, 2016
|
49,251
|
|
$
|
49
|
|
|
$
|
146,615
|
|
|
$
|
(166,800
|
)
|
|
$
|
(560
|
)
|
|
$
|
(20,696
|
)
|
Net loss
|
—
|
|
—
|
|
|
—
|
|
|
(16,987
|
)
|
|
—
|
|
|
(16,987
|
)
|
|||||
Other comprehensive loss
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
158
|
|
|
158
|
|
|||||
Stock-based compensation
|
135
|
|
—
|
|
|
817
|
|
|
—
|
|
|
—
|
|
|
817
|
|
|||||
Balance at June 30, 2017
|
49,386
|
|
$
|
49
|
|
|
$
|
147,432
|
|
|
$
|
(183,787
|
)
|
|
$
|
(402
|
)
|
|
$
|
(36,708
|
)
|
•
|
Level 1 — Quoted prices in active markets for identical assets or liabilities.
|
•
|
Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
|
•
|
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
|
|
June 30, 2017
|
|
December 31, 2016
|
||||||||||||
|
Reported
|
|
Fair Value
|
|
Reported
|
|
Fair Value
|
||||||||
|
(in thousands)
|
||||||||||||||
Financial Assets and Liabilities:
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
1,238
|
|
|
$
|
1,238
|
|
|
$
|
6,183
|
|
|
$
|
6,183
|
|
Credit Facility
|
5,176
|
|
|
5,176
|
|
|
35,905
|
|
|
35,905
|
|
||||
Term Loans
|
13,940
|
|
|
13,613
|
|
|
14,367
|
|
|
14,281
|
|
||||
Subordinated Debt
|
20,600
|
|
|
20,272
|
|
|
19,403
|
|
|
18,569
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
||||||||||||||
Balance, beginning of period
|
$
|
3,033
|
|
|
$
|
3,527
|
|
|
$
|
4,591
|
|
|
$
|
6,268
|
|
Reserve accrual
|
951
|
|
|
2,401
|
|
|
2,082
|
|
|
4,534
|
|
||||
Recoveries and deductions, net
|
(1,831
|
)
|
|
(5,349
|
)
|
|
(4,520
|
)
|
|
(10,223
|
)
|
||||
Balance, end of period
|
$
|
2,153
|
|
|
$
|
579
|
|
|
$
|
2,153
|
|
|
$
|
579
|
|
|
June 30, 2017
|
|
December 31, 2016
|
||||
|
(in thousands)
|
||||||
Raw materials
|
$
|
1,732
|
|
|
$
|
1,680
|
|
Finished goods
|
19,184
|
|
|
20,018
|
|
||
Total inventories
|
$
|
20,916
|
|
|
$
|
21,698
|
|
|
June 30, 2017
|
|
December 31, 2016
|
||||
|
(in thousands)
|
||||||
Machinery and equipment
|
$
|
1,332
|
|
|
$
|
1,321
|
|
Software and software development
|
383
|
|
|
383
|
|
||
Furniture and fixtures
|
296
|
|
|
288
|
|
||
Tooling
|
1,964
|
|
|
1,581
|
|
||
Leasehold improvements
|
1,248
|
|
|
1,247
|
|
||
Demonstration units and convention booths
|
9,019
|
|
|
8,172
|
|
||
Total property and equipment, gross
|
14,242
|
|
|
12,992
|
|
||
Less: accumulated depreciation and amortization
|
(10,894
|
)
|
|
(8,681
|
)
|
||
Total property and equipment, net
|
$
|
3,348
|
|
|
$
|
4,311
|
|
|
June 30, 2017
|
|
December 31, 2016
|
||||
|
(in thousands)
|
||||||
Accrued vendor expenses
|
$
|
3,331
|
|
|
$
|
4,735
|
|
Accrued royalty
|
1,537
|
|
|
3,370
|
|
||
Accrued employee expenses
|
1,526
|
|
|
2,791
|
|
||
Accrued expenses
|
4,061
|
|
|
5,518
|
|
||
Total other current liabilities
|
$
|
10,455
|
|
|
$
|
16,414
|
|
|
June 30, 2017
|
||||||||||||||
|
Gross Carrying Value
|
|
Accumulated Amortization
|
|
Asset Impairment
|
|
Net Book Value
|
||||||||
|
(in thousands)
|
||||||||||||||
Customer relationships
|
$
|
5,796
|
|
|
$
|
3,955
|
|
|
$
|
—
|
|
|
$
|
1,841
|
|
Foreign Currency
|
(1,066
|
)
|
|
(754
|
)
|
|
—
|
|
|
(312
|
)
|
||||
Total Intangible Assets
|
$
|
4,730
|
|
|
$
|
3,201
|
|
|
$
|
—
|
|
|
$
|
1,529
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
December 31, 2016
|
||||||||||||||
|
Gross Carrying Value
|
|
Accumulated Amortization
|
|
Asset Impairment
|
|
Net Book Value
|
||||||||
|
(in thousands)
|
||||||||||||||
Customer relationships
|
$
|
5,796
|
|
|
$
|
3,737
|
|
|
$
|
—
|
|
|
$
|
2,059
|
|
Non-compete agreements
|
177
|
|
|
177
|
|
|
—
|
|
|
—
|
|
||||
In-process Research and Development
|
27,100
|
|
|
4,074
|
|
|
23,026
|
|
|
—
|
|
||||
Developed technology
|
8,880
|
|
|
802
|
|
|
8,078
|
|
|
—
|
|
||||
Trade names
|
170
|
|
|
92
|
|
|
78
|
|
|
—
|
|
||||
Patent and trademarks
|
967
|
|
|
65
|
|
|
902
|
|
|
—
|
|
||||
Foreign Currency
|
(1,294
|
)
|
|
(853
|
)
|
|
—
|
|
|
(441
|
)
|
||||
Total Intangible Assets
|
$
|
41,796
|
|
|
$
|
8,094
|
|
|
$
|
32,084
|
|
|
$
|
1,618
|
|
|
(in thousands)
|
||
2017
|
$
|
218
|
|
2018
|
366
|
|
|
2019
|
307
|
|
|
2020
|
258
|
|
|
2021
|
217
|
|
|
Thereafter
|
475
|
|
|
Total
|
$
|
1,841
|
|
|
June 30, 2017
|
|
December 31, 2016
|
||||
|
(in thousands)
|
||||||
Revolving credit facility, maturing March 2019
|
$
|
5,176
|
|
|
$
|
35,905
|
|
|
|
|
|
||||
Term Loan Due 2018
|
3,205
|
|
|
3,632
|
|
||
Term Loan Due 2019
|
10,735
|
|
|
10,735
|
|
||
Less unamortized deferred financing fees
|
1,008
|
|
|
1,278
|
|
||
Total Term Loans
|
12,932
|
|
|
13,089
|
|
||
|
|
|
|
||||
Subordinated notes - related party
|
20,600
|
|
|
19,403
|
|
||
Less unamortized debt discount
|
1,311
|
|
|
1,522
|
|
||
Total Subordinated notes
|
19,289
|
|
|
17,881
|
|
||
Total outstanding debt
|
37,397
|
|
|
66,875
|
|
||
Less: current portion of revolving line of credit
|
(5,176
|
)
|
|
(35,905
|
)
|
||
Less: current portion of term loans
|
(4,626
|
)
|
|
(2,647
|
)
|
||
Total noncurrent portion of long-term debt
|
$
|
27,595
|
|
|
$
|
28,323
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
||||||||||||||
Income tax expense (benefit)
|
$
|
475
|
|
|
$
|
(304
|
)
|
|
$
|
520
|
|
|
$
|
(207
|
)
|
Effective income tax rate
|
(7.2
|
)%
|
|
0.7
|
%
|
|
(3.2
|
)%
|
|
0.4
|
%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
||||||||||||||
Cost of revenue
|
$
|
(1
|
)
|
|
$
|
125
|
|
|
$
|
(86
|
)
|
|
$
|
246
|
|
Selling and marketing
|
20
|
|
|
(11
|
)
|
|
56
|
|
|
10
|
|
||||
Research and development
|
63
|
|
|
142
|
|
|
120
|
|
|
286
|
|
||||
General and administrative
|
349
|
|
|
822
|
|
|
727
|
|
|
1,663
|
|
||||
Total stock-based compensation
|
$
|
431
|
|
|
$
|
1,078
|
|
|
$
|
817
|
|
|
$
|
2,205
|
|
|
Options Outstanding
|
||||||||
|
Number of Shares Underlying Outstanding Options
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average Remaining Contractual Term
|
|
Aggregate Intrinsic Value
|
||
|
|
|
|
|
(In years)
|
|
|
||
Outstanding at December 31, 2016
|
6,381,447
|
|
|
1.90
|
|
7.37
|
|
20,033
|
|
Granted
|
693,865
|
|
|
0.93
|
|
|
|
|
|
Exercised
|
—
|
|
|
—
|
|
|
|
|
|
Forfeited
|
(817,195
|
)
|
|
2.11
|
|
|
|
|
|
Outstanding at June 30, 2017
|
6,258,117
|
|
|
1.77
|
|
6.78
|
|
—
|
|
Vested and expected to vest at June 30, 2017
|
6,248,116
|
|
|
1.78
|
|
6.78
|
|
—
|
|
Exercisable at June 30, 2017
|
3,757,536
|
|
|
1.80
|
|
6.70
|
|
—
|
|
Expected term (in years)
|
6.1
|
Risk-free interest rate
|
1.9% - 2.1%
|
Expected volatility
|
40.7% - 41.1%
|
Dividend rate
|
0%
|
|
Shares
|
|
Weighted Average Grant Date Fair Value Per Share
|
||
Nonvested restricted stock at December 31, 2016
|
135,705
|
|
|
1.84
|
|
Granted
|
166,665
|
|
|
0.90
|
|
Vested
|
(91,002
|
)
|
|
2.06
|
|
Forfeited
|
(43,903
|
)
|
|
1.16
|
|
Nonvested restricted stock at June 30, 2017
|
167,465
|
|
|
0.96
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands, except per-share data)
|
||||||||||||||
Net Loss
|
$
|
(7,061
|
)
|
|
$
|
(42,573
|
)
|
|
$
|
(16,987
|
)
|
|
$
|
(54,584
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding — Basic
|
49,346
|
|
|
49,230
|
|
|
49,299
|
|
|
47,934
|
|
||||
Plus incremental shares from assumed conversions:
|
|
|
|
|
|
|
|
||||||||
Dilutive effect of stock options
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Weighted average common shares outstanding — Diluted
|
49,346
|
|
|
49,230
|
|
|
49,299
|
|
|
47,934
|
|
||||
Net loss per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.14
|
)
|
|
$
|
(0.86
|
)
|
|
$
|
(0.34
|
)
|
|
$
|
(1.14
|
)
|
Diluted
|
$
|
(0.14
|
)
|
|
$
|
(0.86
|
)
|
|
$
|
(0.34
|
)
|
|
$
|
(1.14
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
June 30,
|
|
June 30,
|
||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
|
(in thousands)
|
||||||||||
Stock options
|
6,409
|
|
|
6,638
|
|
|
6,365
|
|
|
6,101
|
|
Warrants
|
3,059
|
|
|
3,068
|
|
|
3,063
|
|
|
3,074
|
|
Unvested restricted stock awards
|
137
|
|
|
137
|
|
|
121
|
|
|
105
|
|
Total
|
9,605
|
|
|
9,843
|
|
|
9,549
|
|
|
9,280
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net Revenues
|
(in thousands)
|
||||||||||||||
Headset
|
$
|
19,084
|
|
|
$
|
29,142
|
|
|
$
|
33,344
|
|
|
$
|
52,889
|
|
HyperSound
|
28
|
|
|
220
|
|
|
120
|
|
|
501
|
|
||||
Total
|
$
|
19,112
|
|
|
$
|
29,362
|
|
|
$
|
33,464
|
|
|
$
|
53,390
|
|
|
|
|
|
|
|
|
|
||||||||
Operating Loss
|
|
|
|
|
|
|
|
||||||||
Headset
|
$
|
(4,542
|
)
|
|
$
|
(4,401
|
)
|
|
$
|
(11,598
|
)
|
|
$
|
(9,681
|
)
|
HyperSound
|
(423
|
)
|
|
(36,086
|
)
|
|
(1,459
|
)
|
|
(40,576
|
)
|
||||
Total
|
$
|
(4,965
|
)
|
|
$
|
(40,487
|
)
|
|
$
|
(13,057
|
)
|
|
$
|
(50,257
|
)
|
Interest Expense
|
$
|
1,835
|
|
|
$
|
1,686
|
|
|
$
|
3,675
|
|
|
$
|
3,465
|
|
Other non-operating expense (income), net
|
$
|
(214
|
)
|
|
$
|
704
|
|
|
(265
|
)
|
|
1,069
|
|
||
Loss before income tax expense
|
$
|
(6,586
|
)
|
|
$
|
(42,877
|
)
|
|
$
|
(16,467
|
)
|
|
$
|
(54,791
|
)
|
|
June 30,
2017 |
|
December 31,
2016 |
||||
Total Assets
|
(in thousands)
|
||||||
Headset
|
$
|
43,596
|
|
|
$
|
94,081
|
|
HyperSound
(1)
|
29,106
|
|
|
31,233
|
|
||
Eliminations
|
(29,068
|
)
|
|
(30,514
|
)
|
||
Total
|
$
|
43,634
|
|
|
$
|
94,800
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
||||||||||||||
North America
|
$
|
12,996
|
|
|
$
|
22,853
|
|
|
$
|
24,051
|
|
|
$
|
41,616
|
|
United Kingdom
|
2,124
|
|
|
3,129
|
|
|
3,978
|
|
|
5,931
|
|
||||
Europe
|
2,769
|
|
|
2,376
|
|
|
3,937
|
|
|
3,849
|
|
||||
International
|
1,223
|
|
|
1,004
|
|
|
1,498
|
|
|
1,994
|
|
||||
Total net revenues
|
$
|
19,112
|
|
|
$
|
29,362
|
|
|
$
|
33,464
|
|
|
$
|
53,390
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
||||||||||||||
Warranty, beginning of period
|
$
|
589
|
|
|
$
|
687
|
|
|
$
|
639
|
|
|
$
|
580
|
|
Warranty costs accrued
|
54
|
|
|
207
|
|
|
114
|
|
|
477
|
|
||||
Settlements of warranty claims
|
(114
|
)
|
|
(177
|
)
|
|
(224
|
)
|
|
(340
|
)
|
||||
Warranty, end of period
|
$
|
529
|
|
|
$
|
717
|
|
|
$
|
529
|
|
|
$
|
717
|
|
•
|
Turtle Beach is a worldwide leading provider of feature-rich headset solutions for use across multiple platforms, including video game and entertainment consoles, handheld consoles, personal computers, tablets and mobile devices.
|
•
|
HyperSound technology is an innovative patent-protected sound technology that delivers immersive, directional audio with applications in digital signage and kiosks, consumer electronics and hearing healthcare.
|
•
|
Adjusted EBITDA
is defined as net income (loss) before interest, taxes, depreciation and amortization, stock-based compensation (non-cash) and, certain special items that we believe are not representative of core operations.
|
•
|
Cash Margins
is defined as gross margin excluding depreciation and amortization, and stock-based compensation.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
||||||||||||||
Net loss
|
$
|
(7,061
|
)
|
|
$
|
(42,573
|
)
|
|
$
|
(16,987
|
)
|
|
$
|
(54,584
|
)
|
Interest expense
|
1,835
|
|
|
1,686
|
|
|
3,675
|
|
|
3,465
|
|
||||
Depreciation and amortization
|
1,530
|
|
|
2,677
|
|
|
2,383
|
|
|
5,166
|
|
||||
Stock-based compensation
|
431
|
|
|
1,078
|
|
|
817
|
|
|
2,205
|
|
||||
Income tax expense (benefit)
|
475
|
|
|
(304
|
)
|
|
520
|
|
|
(207
|
)
|
||||
Restructuring charges
|
(30
|
)
|
|
—
|
|
|
268
|
|
|
225
|
|
||||
Business model transition charge
|
—
|
|
|
—
|
|
|
353
|
|
|
—
|
|
||||
Impairment charges
|
—
|
|
|
31,152
|
|
|
—
|
|
|
31,152
|
|
||||
Adjusted EBITDA
|
$
|
(2,820
|
)
|
|
$
|
(6,284
|
)
|
|
$
|
(8,971
|
)
|
|
$
|
(12,578
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
||||||||||||||
Net Revenue
|
$
|
19,112
|
|
|
$
|
29,362
|
|
|
$
|
33,464
|
|
|
$
|
53,390
|
|
Cost of Revenue
|
12,811
|
|
|
24,249
|
|
|
24,947
|
|
|
44,915
|
|
||||
Gross Profit
|
6,301
|
|
|
5,113
|
|
|
8,517
|
|
|
8,475
|
|
||||
Operating expenses
|
11,266
|
|
|
45,600
|
|
|
21,574
|
|
|
58,732
|
|
||||
Operating loss
|
(4,965
|
)
|
|
(40,487
|
)
|
|
(13,057
|
)
|
|
(50,257
|
)
|
||||
Interest expense
|
1,835
|
|
|
1,686
|
|
|
3,675
|
|
|
3,465
|
|
||||
Other non-operating expense (income), net
|
(214
|
)
|
|
704
|
|
|
(265
|
)
|
|
1,069
|
|
||||
Loss before income tax expense
|
(6,586
|
)
|
|
(42,877
|
)
|
|
(16,467
|
)
|
|
(54,791
|
)
|
||||
Income tax expense (benefit)
|
475
|
|
|
(304
|
)
|
|
520
|
|
|
(207
|
)
|
||||
Net loss
|
$
|
(7,061
|
)
|
|
$
|
(42,573
|
)
|
|
$
|
(16,987
|
)
|
|
$
|
(54,584
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
||||||||||||||
Net Revenue
|
$
|
19,084
|
|
|
$
|
29,142
|
|
|
$
|
33,344
|
|
|
$
|
52,889
|
|
Gross Profit
|
6,359
|
|
|
7,143
|
|
|
9,137
|
|
|
11,877
|
|
||||
Gross Margin
|
33.3
|
%
|
|
24.5
|
%
|
|
27.4
|
%
|
|
22.5
|
%
|
||||
Cash Margin
(1)
|
34.3
|
%
|
|
25.5
|
%
|
|
28.1
|
%
|
|
23.6
|
%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
||||||||||||||
Selling and marketing
|
$
|
5,529
|
|
|
$
|
7,121
|
|
|
$
|
9,978
|
|
|
$
|
12,721
|
|
Research and development
|
1,697
|
|
|
2,040
|
|
|
3,087
|
|
|
4,064
|
|
||||
General and administrative
|
4,070
|
|
|
5,287
|
|
|
8,241
|
|
|
10,570
|
|
||||
Asset impairment
|
—
|
|
|
31,152
|
|
|
—
|
|
|
31,152
|
|
||||
Restructuring charges
|
(30
|
)
|
|
—
|
|
|
268
|
|
|
225
|
|
||||
Total operating expenses
|
$
|
11,266
|
|
|
$
|
45,600
|
|
|
$
|
21,574
|
|
|
$
|
58,732
|
|
|
|
|
|
|
|
|
|
||||||||
By Segment:
|
|
|
|
|
|
|
|
||||||||
Headset
|
$
|
10,901
|
|
|
$
|
11,543
|
|
|
$
|
20,735
|
|
|
$
|
21,557
|
|
HyperSound
|
$
|
365
|
|
|
$
|
34,057
|
|
|
$
|
839
|
|
|
$
|
37,175
|
|
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
|
2017
|
|
2016
|
||||
|
(in thousands)
|
||||||
Cash and cash equivalents at beginning of period
|
$
|
6,183
|
|
|
$
|
7,114
|
|
Net cash provided by operating activities
|
26,647
|
|
|
18,237
|
|
||
Net cash used for investing activities
|
(506
|
)
|
|
(1,645
|
)
|
||
Net cash used for financing activities
|
(31,160
|
)
|
|
(22,480
|
)
|
||
Effect of foreign exchange on cash
|
74
|
|
|
(64
|
)
|
||
Cash and cash equivalents at end of period
|
$
|
1,238
|
|
|
$
|
1,162
|
|
•
|
If our forecasts of demand for products are too high, we may accumulate excess inventories of products, which could lead to markdown allowances or write-offs affecting some or all of such excess inventories. We may also have to adjust the prices of our existing products to reduce such excess inventories;
|
•
|
If demand for specific products increases beyond what we forecast, our suppliers and third-party manufacturers may not be able to increase production quickly enough to meet the demand. Our failure to meet market demand may lead to missed opportunities to increase our base of gamers, damage our relationships with retailers or harm our business;
|
•
|
The on-going console transition increases the likelihood that we could fail to accurately forecast demand for our new generation console headsets and our existing headsets; and
|
•
|
Rapid increases in production levels to meet unanticipated demand could result in increased manufacturing errors, as well as higher component, manufacturing and shipping costs, all of which could reduce our profit margins and harm our relationships with retailers and consumers.
|
•
|
trade restrictions, higher tariffs, currency fluctuations or the imposition of additional regulations relating to import or export of our products, especially in China, where all of our Turtle Beach products are manufactured, which could force us to seek alternate manufacturing sources or increase our expenses;
|
•
|
difficulties obtaining domestic and foreign export, import and other governmental approvals, permits and licenses, and compliance with foreign laws, which could halt, interrupt or delay our operations if we cannot obtain such approvals, permits and licenses;
|
•
|
difficulties encountered by our international distributors or us in staffing and managing foreign operations or international sales, including higher labor costs;
|
•
|
transportation delays and difficulties of managing international distribution channels;
|
•
|
longer payment cycles for, and greater difficulty collecting, accounts receivable;
|
•
|
political and economic instability, including wars, terrorism, political unrest, boycotts, curtailment of trade and other business restrictions, any of which could materially and adversely affect our net sales and results of operations; and
|
•
|
natural disasters.
|
•
|
cease selling, incorporating or using products or services that incorporate the challenged intellectual property;
|
•
|
obtain a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms, if at all; and/or
|
•
|
redesign products or services that incorporate the disputed technology.
|
31.1
|
Certification of Juergen Stark, Principal Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
|
|
31.2
|
Certification of John T. Hanson, Principal Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
|
|
32.1
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Juergen Stark, Principal Executive Officer and John Hanson, Principal Financial Officer (filed herewith).
|
|
|
|
Extensible Business Reporting Language (XBRL) Exhibits
|
101.INS
|
XBRL Instance Document
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
XBRL Taxonomy Extension Labels Linkbase Document
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
TURTLE BEACH CORPORATION
|
|
|
|
|
Date:
|
August 10, 2017
|
By:
|
/S/ JOHN T. HANSON
|
|
|
|
John T. Hanson
Chief Financial Officer, Treasurer and Secretary
|
|
|
|
(Principal Financial Officer)
|
1 Year Turtle Beach Chart |
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