Turtle Beach Corporation · NASDAQ:TBCH
Turtle Beach — Investor Presentation (March 2018)
36 slides from Turtle Beach's investor presentation, Mar 12, 2018
Slide 1: Corporate Presentation March 2018
Corporate Presentation March 2018
Slide 2: Safe Harbor Statement
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 state
Slide 3: Who We Are
WHO WE ARE • Key player in $100 billion gaming market • Critical accessory provider to esports fans and players • Dominant market leader in gaming headsets • Strong brand with high consumer loyalty • Global distribution & partnerships • Full line of differentiated products • Extensive & valuable pat
Slide 4: Key Player in $100B Global Gaming Market
KEY PLAYER IN $100B GLOBAL GAMING MARKET 4 PC Gaming: $33B 5.9% YOY Growth(1) Mobile Gaming: $38B 10.8% YOY Growth(1) Console Gaming: $35B 17.2% YOY Growth (1) $106B Global Gaming Opportunity(1) Esports: $0.7B 41.3% YOY Growth(2) Virtual Reality: $6.4B 73% YOY Growth(3) $7B Opportunity(2)(3) (1) DFC
Slide 5: Audio Headsets Are a Critical Accessory for Gamers
AUDIO HEADSETS ARE A CRITICAL ACCESSORY FOR GAMERS 5 Gaming Headsets Provide… • Good microphone for multi-player gaming • More immersive audio for a better gaming experience • Competitive advantage in picking up key audio cues • Privacy of game and chat audio Headsets, $1,088 [CATEGO RY NAME], [VALU
Slide 6: We Are the Dominant Leader in Gaming Headsets
WE ARE THE DOMINANT LEADER IN GAMING HEADSETS 6 #1 gaming headset provider for Xbox & PlayStation Longstanding position with higher share than next 3 players combined Source: The NPD Group, Inc., Video Games Console Headset Update 1.11.18 5 of the top 10 sellers overall (1st & 3rd party) are Turtle
Slide 7: Strong Brand with High Consumer Loyalty
STRONG BRAND WITH HIGH CONSUMER LOYALTY 7 (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. Consumers’ Favorite Gaming Headset Brand¹ Facebook “Like
Slide 8: Global Distribution & Partnerships
Strong Retail Presence Great partnerships 10,000+ Interactive Displays Sample retailers GLOBAL DISTRIBUTION & PARTNERSHIPS 8 Product sales in 42 countries with over 260,000 points of distribution Partnerships with industry-leading brands Market leader in deploying interactive gaming headset displays
Slide 9: Strong Presence in Esports
STRONG PRESENCE IN ESPORTS 9 Optic Gaming #1 Console esports organization in the world, top ranked teams across Halo, Gears of War and Call of Duty Astralis One of world’s best CS:GO teams, Major Champions; one of Europe’s top Call of Duty teams Key Partnerships Splyce Europe’s top Call of Duty team
Slide 10: Full Line of Products with Compelling New Launches
FULL LINE OF PRODUCTS…WITH COMPELLING NEW LAUNCHES ASP TB Key Features Sample Products • Wireless game & chat • Active noise-cancellation & Bluetooth® • DTS Headphone:X® 7.1 surround sound • Superhuman Hearing • Magnetic base station • Immersive surround sound • Xbox Wireless (connects directly to X
Slide 11: And Differentiated Technology
…AND DIFFERENTIATED TECHNOLOGY 11 Rechargeable Batteries Built-in rechargeable batteries provide for hours of continuous game play. 100% Wireless Interference-free game audio & chat. First Xbox direct-correct wireless DTS Headphone:X 7.1 Surround Superior surround sound that adds a height dimension,
Slide 12: Overview of Unique HyperSound Technology
OVERVIEW OF UNIQUE HYPERSOUND TECHNOLOGY 12 New Sound Delivery Mechanism Thin panels generate ultrasound beam Audio is injected into the ultrasound beam Sound is created in the air along the beam Fundamentally new and different approach to audio Fully functional from glass emitters enablin
Slide 13: HyperSound Applications
HYPERSOUND APPLICATIONS 13 Commercial Audio Enables retailers and retail display manufacturers to add focused zone of audio to retail displays / kiosks Healthcare Improves sound clarity and listening benefits for people with hearing loss. Early indications of benefits for sufferers of Tinnitus Marke
Slide 14: Extensive & Valuable Patent Portfolio
EXTENSIVE & VALUABLE PATENT PORTFOLIO 14 26 28 35 49 78 95 20 68 86 109 65 60 0 20 40 60 80 100 120 140 160 180 Jan 2013 Jan 2014 Jan 2015 Jan 2016 Jan 2017 Feb 2018 Issued Pending 121 96 46 158 143 155 •Headset innovations: • Audio processing • Gaming specific features •HyperSound innovations: • Em
Slide 15: Revenue Profile
REVENUE PROFILE 15 $163 $174 $149 $157 2015 2016 2017 2018E³ Company Revenues (1) Millions Channel Inventory Adjustments $211 $217 $215 $228 2015 2016 2017 TTM Jan 2018 Company Product Retail Sell-Through in Core Markets (2) Millions 1) Company net revenues=wholesale revenues. 2) NPD and GFK reporte
Slide 16: EBITDA Profile
EBITDA PROFILE 16 -$11.4 $4.0 $11.6 $12.0 2015 2016 2017 2018E² Adjusted EBITDA (1) Millions 2016: Returned headset business to profitability. Converted HyperSound to licensing model. Entered esports, VR, streaming mic categories. 2017: Focused on core headset business and continued profitability im
Slide 17: Strong Free Cash Flow Growth
STRONG FREE CASH FLOW GROWTH 17 -$19.8 -$1.3 $5.2 $6.0 -$25.0 -$20.0 -$15.0 -$10.0 -$5.0 $0.0 $5.0 $10.0 2015 2016 2017 2018E² Strong free cash flow generation… • Positioned the company to amend and improve debt agreements Mar 2018 • Allows important growth investments throughout 2018 Free Cash Flow
Slide 18: Growth Opportunities – PC Gaming
GROWTH OPPORTUNITIES – PC GAMING 18 Virtual Reality (VR) PC Gaming International • PC gaming headsets market ~$730M market globally1 • PC gaming more popular than console gaming in markets like Germany, China & other parts of Asia1 • Leveraging expanded portfolio as growth platform in Germany & Chin
Slide 19: Growth Opportunities – China
GROWTH OPPORTUNITIES – CHINA 19 Virtual Reality (VR) International PC Gaming China Opportunity • 573M Chinese gamers1 • 114M esports audience in China of which 53.8M are esports Enthusiasts1 • Turtle Beach has establish presence and making modest investments in 2018 with further activities planned f
Slide 20: Growth Opportunities – VR
GROWTH OPPORTUNITIES – VR 20 PC Gaming Virtual Reality (VR) International 1) https://www.statista.com/statistics/550461/virtual-reality-market-size-worldwide/ 2) NPD data from 2016, 2017, through January 2018 . • According to SuperData Research, VR hardware market expected to reach $17.8B by 2020 fr
Slide 21: Balance Sheet Highlights
Balance Sheet Highlights • Revolver typically peaks in Q4 and lowest in Q1 after holiday receipts. 2017 average Revolver balance was $12.4M. • $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 Mar 5,
Slide 22: Amended Lending Agreements
AMENDED LENDING AGREEMENTS •Amended lending agreements on Mar 6, 2018 •Improved terms include: –Reduction in the interest rate and greater availability on revolving credit line –Significant reduction in the interest rates on term loans (e.g., Crystal rate reduced by 3.5%) –Reduction in the interest
Slide 23: Q1 2018 Outlook
Q1 2018 OUTLOOK 23 Q1-18¹ YoY ∆ Year-Over-Year Commentary & Assumptions Revenue ~$29M 102% • Retailer restocking after holiday under-ordering, strong consumer demand, healthy console gaming market EPS ~$(0.12) 55% • Various revenue drivers noted above Adj. EBITDA ~$(1.5)M 76% • Various revenue drive
Slide 24: 2018 Outlook
2018 OUTLOOK 24 2017 2018¹ Year-Over-Year Commentary & Assumptions Total Revenue $149.1M ~$157M Quarterly revenue profile expected to shift revenue mix from Q4 to earlier quarters similar to 2016 Gross Margin 34.2% ~34.2% Upper end of 33-35% targeted range EPS $(0.07) ~$(0.03) Expecting continued im
Slide 25: Key Takeaways
KEY TAKEAWAYS #1 console gaming headset brand with dominant share $106B global gaming market Critical accessory for gaming and esports Disruptive, cutting-edge technologies & patents Significantly improved balance sheet and lower cost of debt Projecting revenue growth in 2018 Q1 off to
Slide 26: Contact Us
CONTACT US 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 26 COMPANY WEBSITES www.turtlebeachcorp.com www.turtlebeach.com www.hypersound.com
Slide 27: Investor Relations and Media Contact
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
Slide 28: Appendix
APPENDIX 287
Slide 29: Experienced Board of Directors
EXPERIENCED BOARD OF DIRECTORS 29 • Former Chairman & CEO of Activision Publishing (NASDAQ: ATVI) • Operating partner of Stripes Group, LLC • Founder & principal of Erasmus Equity Investments Ron Doornink Chairman Juergen Stark CEO & Director • COO of Motorola Mobility’s mobile business • 10 years a
Slide 30: Experienced Management Team
EXPERIENCED MANAGEMENT TEAM 30 Juergen Stark CEO John Hanson CFO Cris Keirn SVP, Global Sales Matt Seymour VP, Product Management Megan Wynne General Counsel • COO of Motorola Mobility’s mobile business • 10 years as principal at McKinsey & Company Joe Stachula CTO & VP Development Andrew Lilien VP
Slide 31: Reconciliation of GAAP & Non-GAAP Earnings
RECONCILIATION OF GAAP & NON-GAAP EARNINGS 31 Three Months Ended Year Ended December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 Net Income (Loss) GAAP Net Income (Loss) $ 14,231 $ 12,201 $ (3,248 ) $ (87,182 ) Goodwill and intangible asset impairment — — — 63,236 HyperSound inven
Slide 32: GAAP to Adjusted EBITDA Reconciliation – Three Months Ended Dec 31, 2017
GAAP TO ADJUSTED EBITDA RECONCILIATION – THREE MONTHS ENDED DEC 31, 2017 32 (1) Other includes business transition costs and restructuring charges. Three Months Ended December 31, 2017 As Reported Adj Depreciation Adj Amortization Adj Stock Compensation Other (1) Adj EBITDA Net Revenue $ 79,696 $ —
Slide 33: GAAP to Adjusted EBITDA Reconciliation – Year Ended Dec 31, 2017
GAAP TO ADJUSTED EBITDA RECONCILIATION – YEAR ENDED DEC 31, 2017 33 Year Ended December 31, 2017 As Reported Adj Depreciation Adj Amortization Adj Stock Compensation Other (1) Adj EBITDA Net Revenue $ 149,135 $ — $ — $ — $ — $ 149,135 Cost of Revenue 98,132 (578 ) — 66 79 97,699 Gross Profit 51,003
Slide 34: GAAP to Adjusted EBITDA Reconciliation – Three Months Ended Dec 31, 2016
GAAP TO ADJUSTED EBITDA RECONCILIATION – THREE MONTHS ENDED DEC 31, 2016 34 (2) Other includes goodwill and other intangible asset impairment, business transition and restructuring charges. Three Months Ended December 31, 2016 As Reported Adj Depreciation Adj Amortization Adj Stock Compensation Othe
Slide 35: GAAP to Adjusted EBITDA Reconciliation – Year Ended Dec 31, 2016
GAAP TO ADJUSTED EBITDA RECONCILIATION – YEAR ENDED DEC 31, 2016 35 Year Ended December 31, 2016 As Reported Adj Depreciation Adj Amortization Adj Stock Compensation Other (2) Adj EBITDA Net Revenue $ 173,978 $ — $ — $ — $ — $ 173,978 Cost of Revenue 131,368 (571 ) (3,660 ) (557 ) (7,079 ) 119,501 G
Slide 36: GAAP to Adjusted EBITDA Reconciliation
GAAP TO ADJUSTED EBITDA RECONCILIATION 36 December 31, 2017 December 31, 2016 December 31, 2015 Consolidated Net Income (Loss) (3,248) (87,182) (82,907) Depreciation 4,075 5,066 5,901 Amortization of intangibles 349 4,128 2,015 Interest 7,916 7,447 5,100 Taxes 592 (387) 2,392 Stock Compensation 1,42