UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: July 11, 2017
(Date of earliest event reported)
Turtle Beach Corporation
(Exact name of registrant as specified in its charter)
Nevada | 001-35465 | 27-2767540 |
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification Number) |
12220 Scripps Summit Drive, Suite 100
San Diego, California 92131
(Address of principal executive offices)
(888) 496-8001
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
¨ 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.
Item 7.01. Regulation FD Disclosure
Investor Presentation
Certain information concerning our business and financial results can be currently accessed on our website, http://corp.turtlebeach.com/investor-relations under the heading “Investor Presentations.” Representatives of the Company expect to use this presentation, in whole or in part, and possibly with modifications, periodically in connection with conferences and presentations to investors, analysts and others. Portions of the presentation are attached hereto as Exhibit 99.1.
The investor presentation includes financial information not prepared in accordance with generally accepted accounting principles (“Non-GAAP Financial Measures”). A reconciliation of the Non-GAAP Financial Measures included in the presentation to financial information prepared in accordance with generally accepted accounting principles (“GAAP”), as required by Regulation G, appears in Appendix A to the presentation. The information contained in the presentation is summary information that is intended to be considered in the context of the Company’s Securities and Exchange Commission (“SEC”) filings and other public announcements that it may make, by press release or otherwise, from time to time. The Company undertakes no duty or obligation to publicly update or revise the information contained in the presentation or this report, although it may do so from time to time as its management believes is warranted. Any such updating may be made through the filing of other reports or documents with the SEC, through press releases or through other public disclosure.
The information in this report is being furnished pursuant to Item 7.01 and shall not be deemed to be “filed” for purposes of Section 17 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.
Item 9.01 — Financial Statements and Exhibits
(d) Exhibits
Exhibit No. | Description |
99.1 | Turtle Beach Corporation Investor Presentation |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
TURTLE BEACH CORPORATION | |||
Date: | July 11, 2017 | By: | /S/ JOHN T. HANSON |
John T. Hanson Chief Financial Officer, Treasurer and Secretary | |||
N A S D A Q : H E A R
Safe Harbor Statement
Forward-Looking Information
This presentation includes “forward-looking statements” within the meaning of the federal securities laws. These forward-looking statements are statements that are not historical facts
including statements about our beliefs and expectations and statements, and may contain the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,”
“target,” “project,” “intend,” “foresee,” and similar expressions. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking
statements made herein, including but not limited to, the application of quarter-end and year-end accounting procedures and adjustments, risks related to the Company’s liquidity and
financial position, the substantial uncertainties inherent in the acceptance of existing and future products, the difficulty of commercializing and protecting new technology, the impact of
competitive products and pricing, general business and economic conditions, risks associated with the expansion of our business including the implementation of any businesses we
acquire, our indebtedness, the outcome of our HyperSound strategic review process, and the other factors discussed in our public filings, including the section entitled “Risk Factors” in our
most recent Quarterly Report on Form 10-Q, our Annual Report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission (the “SEC”) and available on the
SEC’s website, www.sec.gov. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. Except as
required by law, Turtle Beach Corporation (the “Company”) undertakes no obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances
after the date of this presentation. All of the forward-looking statements in this presentation are qualified by such cautionary statements, and subject to the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. This presentation also contains trademarks and trade names that are property of their
respective owners.
Non-GAAP Financial Measures
This presentation contains certain financial measures, including adjusted EBITDA and non-GAAP earnings per share (“EPS”), that are not calculated under the standards or rules of U.S.
GAAP, which are referred to as "non-GAAP financial measures." These non-GAAP financial measures, as calculated by the Company, are not necessarily comparable to similarly titled
measures reported by other companies. Additionally, these non-GAAP financial measures are not measurements of financial performance or liquidity under GAAP and should not be
considered an alternative to the Company’s other financial information determined under GAAP. Management believes that these non-GAAP financial measures, when read in conjunction
with the Company's reported results, can provide useful supplemental information for investors analyzing period to period comparisons of the Company's results. “Adjusted EBITDA” is
defined by the Company 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. Non-GAAP EPS is defined as EPS less $0.01 per diluted share in HyperSound business transition charges. The Adjusted EBITDA outlook for the second
quarter and full year 2017 has not been reconciled with the Company’s net loss outlook for the same periods because of the variability, complexity and lack of visibility with respect to
certain reconciling items between adjusted EBITDA and net loss, including other income (expense), provision for income taxes and stock-based compensation. These items cannot be
reasonably and accurately predicted without the investment of undue time, cost and other resources and, accordingly, a reconciliation of the Company’s adjusted EBITDA outlook to its net
loss outlook for such periods is not available without unreasonable effort. These reconciling items could be material to the Company’s actual results for such periods.
© 2017 Turtle Beach Corporation. All Rights Reserved.
1
N A S D A Q : H E A R
Who We Are
Dominant market leader in gaming headsets
Strong brand with high consumer loyalty
Global distribution and partnerships
Full line of differentiated products
Extensive and valuable patent portfolio
Key player in $96B gaming market
Well positioned for a strong 2017
Opportunities to drive double-digit growth
Strengthening balance sheet
Experienced board and management team
2
N A S D A Q : H E A R
Balance Sheet Highlights
Revolver typically peaks in Q4
and lowest in Q1 after holiday
receipts
$49.0M federal, $21.0M state
net operating losses @ Dec 31,
2016 offset taxable income (not
scheduled to expire until 2029)
$60M line of credit and
expectation to be significantly
more profitable on
consolidated basis is
anticipated to provide sufficient
capital to fund our plan
Key Stats
3
Sources: S&P Capital IQ, company filings.
1) As of March 31, 2017.
2) Due in October 2030 and has 8% per annum PIK interest.
Trading Data (@ Jul 6, 2017)
Stock Price $0.68
Market Cap. $33.5M
52 Wk. Low/High $0.65/$2.00
Avg. Daily Vol. (3 mos.) 120K
Public Float¹ 45%
Insider Ownership¹ 55%
Shares Outstanding¹ 49.3M
Capitalization
@ 3-31-16 @ 3-31-17
Cash & Equivalents $3.2M $3.6M
Debt
Revolver (asset-based loan) $0.5M $0M
Term Loans $17.2M $14.4M
Subordinated Notes $17.8M $20.0M
Total Debt $35.5M $34.4M
Series B - Preferred Stock² $16.5M $17.8M
Valuation Metrics (@ Jul 6, 2017)
Enterprise Value $64.3M
Revenue (trailing 12 mos.) $164.3M
EV/Revenue 0.4x
N A S D A Q : H E A R
Dominant Market Leader in Gaming Headsets
5 of the top 10 sellers
overall (1st & 3rd party)
are Turtle Beach
4 Source: The NPD Group, Inc., Video Games Update 01.12.17. Data measured for full year 2016.
#1 gaming headset
provider for Xbox and
PlayStation
All 5 of the top 5
selling 3rd party
headsets are Turtle
Beach
Longstanding position with
higher share than next 3
players combined
N A S D A Q : H E A R
Strong Brand with High Consumer Loyalty
(1) Source: Bowen Research (June 2015); (2) Source: Survey Sampling International Research (April 2017), showing main Console Gaming Headset competitors; (3) Source: Simply Measured Service, June 2017.
5
Consumers’ Favorite Gaming Headset Brand¹
Facebook “Likes”³
#1 rated
headset based
on audio
quality¹
36%
30%
12%
8%
5% 4% 3% 3%
654,090
251,349
201,407 200,719
129,948
61,981
23%
21%
6% 5%
2%
Unaided Brand Awareness²
#1 rated
headset based
comfort¹
+52 Net Promoter Score²
Thinking about brands of gaming
headsets, what brands come to
mind?
Comp #1 Comp #2 Comp #3 Comp #4 Comp #5 Comp #6 Comp #7
Comp #1 Comp #2 Comp #3 Comp #4
Comp #1 Comp #2 Comp #3 Comp #4 Comp #5
N A S D A Q : H E A R
Strong Retail Presence Great Partnerships 12,000+ Interactive Displays
Sample retailers
Global Distribution and Partnerships
6
Product sales in 42 countries
with over 270,000 points of
distribution
Partnerships with industry
leading brands
Market leader in deploying
interactive gaming headset
displays
N A S D A Q : H E A R
Full Line of Products…
7
Entry-Level Gamer
< 4 hours per week
Casual Gamer
4-6 hours per week
Enthusiast Gamer
7-15 hours per week
Core Gamer
16+ hours per week
ASP TB Key Features Sample Products
> $200
$100 - $200
$50 - $100
< $50
• 100% wireless and active noise cancelling
• DTS 7.1 Headphone:X
• Boomless Microphone
• Superhuman HearingTM
• Bluetooth integration
• DTS 7.1 Headphone:X
• Superhuman Hearing
• 100% wireless
• Noise cancelling
• EQ Presets
• Superhuman Hearing
• 50mm speaker drivers
• Mic monitoring
• Stereo sound, 40mm speaker drivers
• 3.5mm connection
• Removable mic
• Open earcup
• Glasses friendly design
eSports Varies
• Unique, adjustable tension
• Cooling gel ear pads
• Patented glasses relief system
Just Launched
Launching September
Launching July
N A S D A Q : H E A R
8
Active Noise Cancellation
Silence unwanted background sound for an
immersive listening experience.
Bolded and Italicized Text = Turtle Beach Headset First Mover Advantage
Rechargeable Batteries
Built-in rechargeable batteries provide for hours of
continuous game play.
Bluetooth
Bluetooth integration allows you to take phone
calls with your headset while playing.
100% Wireless
Interference free game audio and chat.
Bass Boost
Bass boost enhances deep rumbling sounds
in games.
DTS Headphone:X 7.1 Surround
Superior surround sound that adds a height
dimension, recreating the sound in your environment.
Audio Presets
Customize your settings to create the perfect,
personalized experience.
Dynamic Chat BoostTM
Chat volume increases as game volume increases.
Mic Monitoring
Allows gamers to hear their voice within the headset
so they know how loud they are speaking.
Superhuman HearingTM
Hear every single thing around you, from enemy
footsteps to distant vehicles to weapon reloads.
ProSpecs™ Glasses Relief System
Ear pads with pressure-release technology that
provides relief for gamers who wear glasses.
(Not on pictured headset.)
Boomless Mic
Hidden, high-quality noise-cancelling
microphones.
Magnetic Charging Stand
Easily charge and store your headset when
not in use without fussing with wires.
…with Differentiated Technology
N A S D A Q : H E A R
26 28
35
81
20
68
86
65
Jan 2013 Jan 2014 Jan 2015 Mar 2017¹
Pending Issued
Headset innovations:
Audio processing
Gaming specific features
HyperSound innovations:
Emitter construction
Ultrasound and emitter electronics
Digital signal processing techniques
121
96
46
146
Extensive & Valuable Patent Portfolio
9 1) As of Mar 10, 2017.
Patent Portfolio
Valued at $45+M in
June 2015
N A S D A Q : H E A R
Key Player in $96 Billion Global Gaming Market
PC Gaming: $33B Mobile Gaming: $31B
Console Gaming: $32B
$96B
Global Gaming
Opportunity
Source: DFC Intelligence Video Game Worldwide Market Forecast (October 2016).
10
N A S D A Q : H E A R
Strong New Product Additions New Titles Expected To Do Well ’17 Results Expected to Improve
Recon Chat headsets launched in
Q2 and propelled Turtle Beach to
#1 spot for Xbox One chat
communicator sales in May 2017
(U.S. market)¹.
Current sales trends indicate Recon
Chats will become #1 chat
communicators across both
platforms.
XO Three and Recon 150 launching
in July refresh a headset with
proven market leadership to a new,
lower price point of $69.95.
Stealth 600 and 700’s launch in
Sept, bringing unprecedented
features to $99 and $149 price
points.
Xbox One models expected to be
first-to-market with direct wireless
connection to Xbox consoles.
Strong ’17 holiday outlook for AAA game titles.
NPD predicting at least 4 titles will exceed $100M
in Q4 packaged consumer sales2.
NPD predicting top 5 selling titles this Q4 will
combine to generate at least 20% more packaged
consumer revenues than the top 5 one year ago2.
Consolidated Adj. EBITDA expected
to improve to $11M ($4M in ’16)³.
Consolidated Adj. EBITDA margin
expected to improve to 7% (2% in
’16)³.
Adjusted EBITDA expected to be
sufficient to support senior debt
repayment.
Average revolver balance (asset-
based loan) in 2017 expected to
decline.
Well Positioned For a Strong 2017
11 1. Source: The NPD Group, May 2017 and Turtle Beach projections. 2. Source: Industry Analysts, Video Games The NPD Group, Inc. 3. Guidance effective on May 9, 2017. Reflects midpoint of range.
N A S D A Q : H E A R
1) Guidance reiterated and effective on May 9, 2017.
2) Delta reflects midpoint of the outlook.
3) Excludes intangible asset amortization costs associated with HyperSound Clear™ 500P launch, $7.1M in inventory reserves associated with HyperSound restructuring and $0.6M for other restructuring charges in 2016.
2017 Outlook Reflects Q4-16 Channel Inventory Impact on
Revenues But Significantly Improved Profitability
12
($ in millions) 2017¹ % ∆² Management Commentary & Assumptions
Total Revenue $155-$160 (9)% Holiday ’16 inventory carryover impacts first half 2017 revenue
Headset Gross Margin ~30% Up from 24.5% in ‘16
Lower operations costs, continued COGS improvements, some loss of
operating leverage due to lower revenue
EPS³ $(0.08)-$(0.12) $(0.33) in ‘16³ Based upon 49.3M shares
Adjusted EBITDA:
Headsets ~$12 (17)% Higher channel inventory in early 2017 impacts full-year sales
HyperSound ~$(1) $(10.4)M ‘16 Significant cost reductions enable consolidated adj. EBITDA improvement
Consol. Adj. EBITDA $10-$12 162% $4M in 2016
N A S D A Q : H E A R
13
($ in millions) 2013 2014 2015 2016 2017E¹
Headset
Net Revenue $178.5 $185.5 $161.8 $173.3 $157.0
Adjusted EBITDA² $13.9 $12.0 $2.4 $14.4 $12.0
Gross Margin % 28.2% 27.5% 26.5% 31.9% ~ 30%
HyperSound
Net Revenue - $0.7 $0.9 $0.7 -
Adjusted EBITDA² - ($10.0) ($13.8) ($10.4) ($1.0)
Consolidated
Net Revenue $178.5 $186.2 $162.7 $174.0 $157.0
Adjusted EBITDA² $13.9 $2.0 ($11.4) $4.0 $11.0
Historical Segment Results Detail the Drivers of
Consolidated Performance
Following HyperSound Transition to a License Model, Gaming Business Driving Revenue and Adj. EBITDA Going Forward
1) Guidance reiterated and effective on May 9, 2017.
2) See appendix for a reconciliation of adjusted EBITDA.
Gaming business drives revenue
and cash flows going forward
HyperSound transitioned to a
license model in Q3/Q4 2016
N A S D A Q : H E A R
Highlights:
• Between 2013 and 2016, new gen net
revenue grew from zero to $173.3M
• Between 2013 and 2016, old gen net
revenue declined from $207.1M to
$6.9M
• From 2013-2016, wound down all old
gen products and built entire new gen
product line-up
• 2014 and 2015 had greatest negative
impact from console transition driven by
product portfolio changes, higher
promotional activity to clear inventory,
incremental costs to get new gen
products to market, and higher logistics
costs
14
($ in millions) 2013 2014 2015 2016 2017E¹
Net Revenue $178.5 $185.5 $161.8 $173.3 $157.0
Gross Margin $ $50.3 $51.0 $42.8 $55.2
Gross Margin % 28.2% 27.5% 26.5% 31.9% ~30%
Operating Expenses $48.7 $51.6 $51.5 $46.4
Operating Income $1.6 ($0.3) ($8.7) $8.6
Foreign Exchange Gain(Loss) - ($0.7) ($1.0) ($2.4)
Adjusted EBITDA $13.9 $12.0 $2.4 $14.4 ~$12.0
Historical Headset GAAP Financial Results Strengthening As
Console Transition Completes
1) Guidance reiterated and effective on May 9, 2017.
Headset Business Generates Sufficient Cash to Service Senior Debt
Consolidated Adjusted EBITDA Improves to $11M or 7% of Revenue in 2017
N A S D A Q : H E A R
15
($ millions) 2013 2014 2015 2016 2017E¹
New Gen Revenue¹ $15.9 $100.2 $124.2 $160.0 $151.0
YoY $ Change $15.9 $84.3 $24.0 $35.8 ($9.0)
YoY % Change 100% 530% 24% 29% (6%)
Old Gen Revenue¹ $153.4 $75.4 $30.4 $6.9 -
YoY $ Change ($53.7) ($78.0) ($45.0) ($23.5) ($6.9)
YoY % Change (26%) (51%) (60%) (77%) (100%)
Strong New Gen Compounded Annual Growth Now Driving
Headset Business
1. Xbox and PlayStation net revenue only
2. Midpoint of guidance reiterated and effective on May 9, 2017.
2014 new gen revenue
• Microsoft gaming audio for headsets not
available until March 2014, missing 2013
holiday and benefitting 2014
2015 was inflection point for new gen:
• More games for new gen platforms vs. 2014
• New gen consoles over 50% of active
installed base
• New gen console unit sales significantly
higher than original projections
2017 new gen revenue
• Negatively impacted by
~$12M due primarily to
first-person shooter game
titles being down 40%
year-over-year in 2016
holiday
N A S D A Q : H E A R
Headset Revenue Growth
Opportunities To Drive Double-Digit Revenue Growth
16
History
2013 - 2015:
Console platform change forces changeover to new portfolio (not
expected to happen again). Strong dollar impacted 2015.
2014 - 2016:
Significant investment in HyperSound. Gaming market has weak Q4-
16, leading to high channel inventory.
Focus/Priorities
2016:
Focus on returning headset business to strong profitability. Wind-
down HyperSound. Enter eSports, virtual reality (VR), Streaming Mic
categories.
2017:
Focus on core headset business and continued profitability
improvements. Expand eSports. Nurture new VR and mic business.
Lay groundwork for 2018+ growth initiatives in PC and international.
2018 - 2019:
Maintain leadership in core console segment. Expand into PC gaming
headsets including China market. Drive eSports, VR, mic businesses.
Evaluate additional new product categories for 2019+.
Note: Old-gen, new-gen revenue splits are approximations.
1) Guidance reiterated and effective on May 9, 2017.
2013 2014 2015 2016 2017E¹ 2018E 2019E
New Gen Old Gen Other HyperSound PC/VR/New Products
$178M
$186M
$163M
$174M
$155-160M
N A S D A Q : H E A R
17
Longer Term Console Market Expected to Grow at ~5% Rate
Sources: DFC Intelligence Forecasts: Worldwide Console Forecast, Preliminary February 2017 and Turtle Beach projections.
N A S D A Q : H E A R
Virtual Reality (VR)
PC Gaming International
PC Gaming Offers Growth Opportunity in Adjacent Market
18
PC gaming headsets market ~$400M market globally1
PC gaming more popular than console gaming in
markets including Germany, China, other parts of Asia2
Leveraging expanded portfolio as a growth platform in
Germany and China
Microsoft introduced Xbox on Window 10 gaming
PCs/laptops
Compatibility of Xbox accessories provides good path
from Xbox leadership into PC segment
1) The NPD Group, IDC and Company Estimates.
2) Newzoo 2015 Global Games Market Report Premium.
Sample PC Products
N A S D A Q : H E A R
Virtual Reality (VR)
PC Gaming International
China is a Large Gaming Market with PC Focus, Untapped for
Turtle Beach
19
China represents long-term growth opportunity for console and PC
gaming headsets
530M Chinese gamers2
Turtle Beach revenues from China well under $1M in 2016
Initiated modest growth investment in 2016, expected to ramp in 2018
73M Esports audience in China of which 42M are Esports Enthusiasts2
Turtle Beach investment in eSports underway
Growth Plans and expansion in Latin America
209M estimated gamers3
Turtle Beach in 12 countries and over 1600 stores in Latin America
$13.8B
$33.7B
2013 2020E
Chinese Games Market Forecast¹
1) Newzoo | Q2 2017 Update | Global Games Market Report.
2) Newzoo 2016 Global Esports Market Report.
3) Newzoo 2016 Global Games Market Report Premium.
N A S D A Q : H E A R
Virtual Reality (VR)
PC Gaming International
Virtual Reality Offers Additional Long-Term Growth Opportunity
20
According to SuperData Research, VR hardware market
expected to reach $17.8B by 2020 from $1.5B in 2016 (85%
CAGR)¹
Consoles likely to be key driver of non-mobile VR as
evidenced by Sony PSVR having 70%+ revenue share of
major non-mobile VR headsets since Oct ’16 launch²
STEALTH 350VR, our first gaming headset designed for
upcoming VR devices, launched in Oct 2016
STEALTH 350VR
1) https://www.superdataresearch.com/market-data/virtual-reality-industry-report/
2) February 2017 NPD report.
N A S D A Q : H E A R
Experienced Board of Directors
Ken Fox
Director
William Keitel
Director
Dr. Andrew Wolfe, PhD
Director
Ron Doornink
Chairman
• Managing partner of Stripes Group, LLC
• Former Managing Director and co-founder of Internet Capital Group (NASDAQ: ICGE)
• Co-founder of A-10 Capital and Sentinel Fund
• Former CFO of Qualcomm Incorporated (NASDAQ: QCOM)
• During his time at the company grew revenues from ~$800M to ~$25B
• Held senior financial roles at Nortel (OTC: NRTLQ) and Pepsico (NYSE: PEP)
• Founder and principal of Wolfe Consulting
• Former Chief Technology Officer for SONICblue, Inc.
• B.S.E.E. in Electrical Engineering and Computer Science, Johns Hopkins; Ph.D. in Computer
Engineering, Carnegie Mellon
• Former Chairman and CEO of Activision Publishing (NASDAQ: ATVI)
• Operating partner of Stripes Group, LLC
• Founder and principal of Erasmus Equity Investments
Juergen Stark
CEO and Director
• COO of Motorola Mobility’s mobile business
• 10 years as Principal at McKinsey & Company, Inc.
• MBA, Harvard Business School; B.S. Aerospace, University of Michigan
21
Gregory Ballard
Director
• General partner with Eleven Ventures
• Former senior VP for mobile & social games at Warner Bros., former CEO of Glu Mobile,
former board member with DTS
• JD, Harvard Law School
N A S D A Q : H E A R
Experienced Management Team
Juergen Stark
CEO
• COO of Motorola Mobility’s mobile business
• 10 years as principal at McKinsey & Company
Richard Kuvalik
CTO
• 15+ years in consumer audio
• Led peripheral products for PlayStation at
Sony
Cris Keirn
SVP, Global Sales
Andrew Lilien
VP of Marketing
Megan Wynne
General Counsel
• 20+ years of brand, consumer and retail
marketing experience
• Past experience at ESPN, Fleer Trading
Cards and National Media Group
• 5 years with I-Flow, a Kimberly-Clark Health
Care Company
• 13 years with Morris Polich & Purdy law firm
22
• Led headset transition as VP of business planning &
strategy
• 17 years with Motorola in product management,
operations, quality and customer relations
John Hanson
CFO
• EVP and CFO at Dialogic
• CFO at One Communications Corp
• 20+ years in the Consumer Electronics industry
• Previously with Sony leading television portfolio
planning & development, product marketing
Matt Seymour
VP, Product Management
• 20+ years of logistics, transportation and
operations experience
• 11+ years at Turtle Beach
Scott Rankin
VP Global Logistics
Jose Rosado
VP Global Operations
• Former Sr. Director, Global Supply Chain
Operations for HP
• 22 years of supply chain management with
Motorola, On Semiconductor, HP, Cisco
N A S D A Q : H E A R
Key Takeaways
#1 console gaming headset brand in the world -
~3x larger than next competitor by revenue
$92 billion global gaming opportunity
Disruptive, cutting-edge technologies and patents
New-gen headset transition expected to continue
to improve margins, profitability and cash flows
2017 is focused on improving profitability and
strengthening the balance sheet
VR, PC gaming and international expansion all
provide meaningful longer-term headset growth
opportunities
23
N A S D A Q : H E A R
Contact Information
Investor Relations: Media Contact:
Cody Slach Maclean Marshall
Liolios Turtle Beach Corporation
949.574.3860 858.914.5093
HEAR@Liolios.com Maclean.Marshall@turtlebeach.com
www.turtlebeach.com www.hypersound.com
C O M PA N Y W E B S I T E S
www.turtlebeachcorp.com
Contact Us
24
Appendix
N A S D A Q : H E A R
Q2 2017 Outlook
26
Q2-17¹ YoY ∆2 Management Commentary & Assumptions
Revenue $17-$18M (40)%
- Lingering impact of weak holiday ’16 sales
- Higher-than-normal post-holiday channel inventory
- New Q3 product launches expected to impact Q2 as company pulls
back sales to prep for launch of replacement models
Adj. EBITDA $(5.5)M 13%
- Reflects anticipated lower revenue but lower opex (better adj. EBITDA
margins)
EPS $(0.17)-$(0.19) 22%³
- Profit expected to increase despite weak operating environment
highlights strong expense management
1) Guidance effective on May 9, 2017.
2) Delta reflects midpoint of the outlook.
3) Assumes Q2-16 EPS of $(0.23), which excludes a $0.63 non-cash goodwill impairment charge.
N A S D A Q : H E A R
Financial Overview – Last Reported Quarter
27 1) See slides 28 and 29 for a reconciliation of non-GAAP measures.
2016 2017
YOY ∆
$ in millions (except per share data) Q1 Q1
Revenue $24.0 $14.4 -40%
Gross Profit $3.4 $2.2 -34%
Gross Margin 14.0% 15.4% +140bps
Headset Gross Margin 19.9% 19.5% -40bps
Operating Expenses $13.1 $10.3 Reduced 22%
Operating Income (Loss) ($9.8) ($8.1) +$1.7
Headset Operating Income ($5.3) ($7.1) -$1.8
GAAP Net Income (Loss) ($12.0) ($9.9) +$2.1
GAAP EPS Diluted ($0.26) ($0.20) +$0.06
Non-GAAP Net Income (Loss)1 ($11.8) ($9.3) +$2.5
Non-GAAP EPS Diluted¹ ($0.26) ($0.19) +$0.07
Adj. EBITDA¹ ($6.3) ($6.2) +$0.1
Headset Adj. EBITDA ($3.2) ($5.6) -$2.4
N A S D A Q : H E A R
Reconciliation of GAAP and Non-GAAP Measures
28
Three Months Ended
March 31, 2017 March 31, 2016
Net Income (Loss)
GAAP Net Income (Loss) $ (9,926 ) $ (12,011 )
Business transition charges 651 225
Non-GAAP Earnings (9,275 ) (11,786 )
Diluted Earnings Per Share
GAAP - Diluted $ (0.20 ) $ (0.26 )
Business transition charges $ 0.01 $ —
Non-GAAP - Diluted $ (0.19 ) $ (0.26 )
N A S D A Q : H E A R
GAAP to Adjusted EBITDA Reconciliation
29
(1) Other includes business transition costs and restructuring charges.
Three Months Ended
March 31, 2017
As Reported
Adj
Depreciation
Adj
Amortization
Adj
Stock
Compensation Other (1)
Adj
EBITDA
Net Revenue $ 14,352 $ — $ — $ — $ — $ 14,352
Cost of Revenue 12,136 (122 ) — 85 (353 ) 11,746
Gross Profit 2,216 122 — (85 ) 353 2,606
Operating Expense 10,308 (647 ) (84 ) (471 ) (298 ) 8,808
Operating loss (8,092 ) 769 84 386 651 (6,202 )
Interest expense 1,840
Other non-operating income, net (51 ) (51 )
Loss before income tax expense (9,881 )
Income tax expense 45
Net loss $ (9,926 ) Adjusted EBITDA $ (6,151 )
N A S D A Q : H E A R
GAAP to Adjusted EBITDA Reconciliation (continued)
30
December 31, 2016 December 31, 2015 December 31, 2014 December 31, 2013
Net Income (Loss) (87,182) (82,907) (15,485) (6,163)
Depreciation 5,066 5,901 5,800 4,422
Amortization of intangibles 4,128 2,015 1,066 923
Interest 7,447 5,100 7,209 6,626
Taxes (387) 2,392 (6,272) 1,090
Stock Compensation 3,960 5,897 5,194 2,563
Restructuring Expense 664 399 747 527
Goodwill 63,236 49,822 - -
Business Transaction Expense 7,079 - 3,744 3,864
EBITDA 4,011 (11,381) 2,003 13,852
N A S D A Q : H E A R
GAAP to Adjusted EBITDA Reconciliation (continued)
31
December 31, 2016 December 31, 2015 December 31, 2014 December 31, 2013
Headset
Net Income (Loss) (930) (17,201) (1,969) (6,163)
Depreciation 4,061 5,704 5,680 4,422
Amortization of intangibles 437 670 800 923
Interest 7,445 5,096 7,205 6,626
Taxes (392) 2,393 (6,272) 1,090
Stock Compensation 3,457 5,347 4,266 2,563
Restructuring Expense 289 399 747 527
Business Transaction Expense - - 1,556 3,864
EBITDA 14,367 2,408 12,013 13,852
N A S D A Q : H E A R
GAAP to Adjusted EBITDA Reconciliation (continued)
32
December 31, 2016 December 31, 2015 December 31, 2014 December 31, 2013
HyperSound
Net Income (Loss) (86,252) (65,706) (13,516) -
Depreciation 1,005 197 120 -
Amortization of intangibles 3,691 1,345 266 -
Interest 2 4 4 -
Taxes 5 (1) - -
Stock Compensation 503 550 928 -
Restructuring Expense 375 - - -
Goodwill 63,236 49,822 - -
Business Transaction Expense 7,079 - 2,188 -
EBITDA (10,356) (13,789) (10,010) -