Turtle Beach Corporation · NASDAQ:TBCH
Turtle Beach — Investor Presentation (July 2017)
33 slides from Turtle Beach's investor presentation, Jul 11, 2017
Slide 1: Turtle Beach Corporation Corporate Presentation
JURTLE BEACH CORPORATION CORPORATE PRESENTATION NASDAQ: HEAR July 2017
Slide 2: Safe Harbor Statement
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
Slide 3: Who We Are
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 st
Slide 4: Balance Sheet Highlights
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 significan
Slide 5: Dominant Market Leader in Gaming Headsets
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 sell
Slide 6: Strong Brand with High Consumer Loyalty
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
Slide 7: Strong Retail Presence, Great Partnerships
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
Slide 8: Full Line of Products
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 •
Slide 9: Active Noise Cancellation and Features
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. Bluetoo
Slide 10: Extensive & Valuable Patent Portfolio
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 4
Slide 11: Key Player in $96 Billion Global Gaming Market
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
Slide 12: Strong New Product Additions
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 b
Slide 13: 2017 Outlook
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 $0.6M for othe
Slide 14: Historical Segment Results
N A S D A Q : H E A R 13 ($ 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) (
Slide 15: Historical Headset GAAP Financial Results
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 $6.9M • From 2013-2016, wound down all old gen products and built entire new gen product line-up • 2014 and 2015 had greatest
Slide 16: Strong New Gen Compounded Annual Growth
N A S D A Q : H E A R 15 ($ 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 % Cha
Slide 17: Headset Revenue Growth Opportunities
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 ma
Slide 18: Longer Term Console Market Expected to Grow
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.
Slide 19: PC Gaming Offers Growth Opportunity in Adjacent Market
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 expande
Slide 20: China is a Large Gaming Market
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
Slide 21: Virtual Reality Offers Long-Term Growth Opportunity
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
Slide 22: Experienced Board of Directors
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
Slide 23: Experienced Management Team
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 Lilie
Slide 24: Key Takeaways
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, profitabil
Slide 25: Contact Information
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.turtlebeachcor
Slide 26: Appendix
Appendix
Slide 27: Q2 2017 Outlook
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 l
Slide 28: Financial Overview – Last Reported Quarter
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 Margi
Slide 29: Reconciliation of GAAP and Non-GAAP Measures
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 $
Slide 30: GAAP to Adjusted EBITDA Reconciliation
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 $ — $ — $ — $ — $ 1
Slide 31: GAAP to Adjusted EBITDA Reconciliation (continued)
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 7,4
Slide 32: GAAP to Adjusted EBITDA Reconciliation (continued)
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
Slide 33: GAAP to Adjusted EBITDA Reconciliation (continued)
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 - Ta