Turtle Beach Corporation · NASDAQ:TBCH
Turtle Beach — Investor Presentation (December 2015)
37 slides from Turtle Beach's investor presentation, Dec 18, 2015
Slide 1: Turtle Beach Corporation Corporate Presentation December 2015
JURTLE BEACH’ CORPORATION CORPORATE: PRESENTATION : 7. = DECEMBER 2015
Slide 2: Important Cautions Regarding Forward Looking Statements
N A S D A Q : H E A R Important Cautions Regarding Forward Looking Statements 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
Slide 3: Who We Are
N A S D A Q : H E A R Who We Are Turtle Beach is a premier audio innovation company We develop and commercialize audio technologies for large addressable markets with our Turtle Beach® and HyperSound® brands Turtle Beach: The dominant gaming headset brand in early stages of major industry grow
Slide 4: Strong Headset Business & Disruptive New Audio Technology
N A S D A Q : H E A R Headsets HyperSound Overview Market share leader with large, loyal customer base Breakthrough audio technology that allows directed placement of sound Markets Catalysts Early stages of gaming console transition Launched HyperSound Clear™ into the $5B hearing health market in Q4
Slide 5: Gaming Headsets
N A S D A Q : H E A R Gaming Headsets 4
Slide 6: Dominant Gaming Audio Provider with Leading Market Share
N A S D A Q : H E A R Turtle Beach Dominant Gaming Audio Provider with Leading Market Share #1 gaming headset in 2014 by market share 46% of U.S. market 52% of U.K. market Broad portfolio of headsets for Xbox and PlayStation, and growing offering of PC gaming headsets Headsets in over 25K
Slide 7: Console Transition Expected To Drive Growth
N A S D A Q : H E A R Console Transition Expected To Drive Growth During Holiday 2013, New Consoles Were Launched 6 $92 $166 $207 2010 2011 2012 Turtle Beach Revenue $ in Millions “Old Gen” Gaming Consoles “Console Transition” • Announced Q1 2013 • Launched Nov 2013 Xbox 360 PlayStation 3 (PS3) Xbox
Slide 8: Our Portfolio Transition is Nearly Complete
N A S D A Q : H E A R 7 Our Portfolio Transition is Nearly Complete Discontinued the Majority of our Old Gen Headsets & Launched New Portfolio in Just Two Years • Transition caused sales declines & higher expenses • Credit given to retailers to help old gen sell-through • Old gen inventory write-off
Slide 9: 2015 Marks the New Gen & Old Gen Crossover
N A S D A Q : H E A R 0M 20M 40M 60M 80M 100M 120M 2013 2014 2015 2016E 2017E 2018E Active Installed Base of Consoles 2015-2016 New gen ramp begins to offset old gen decline New gen headset portfolio largely complete New gen active installed base expected to cross over old gen in Q4-15 – almos
Slide 10: Console Transition Expected to Drive Growth
N A S D A Q : H E A R $8 $30 $58 $90 $123 $155 2013 2014 2015 2016E 2017E 2018E Cumulative Xbox One & PS4 Sales ($ in Millions) Console Transition Expected To Drive Growth Source: DFC Intelligence Forecasts: Worldwide Console Forecast, May 2015. 1) Percentage of total cumulative expected Xbox One an
Slide 11: Headset Product Highlights
N A S D A Q : H E A R PX24 Surround Headset Multi-platform compatibility Virtual Surround Sound Superhuman Hearing (1st & only innovation) SuperAmp powered amp (1st & only innovation) ELITE 800X Premium Wireless Headset 2nd 100% wireless on XB1 (1st & only innovation) Active noise cancel
Slide 12: We Cover All Key Price Points – More than Any Competitor
N A S D A Q : H E A R <$50 $50 - $99 $100 - $200 >$200 PS4 Xbox One PS4 Xbox One PS4 Xbox One PS4 Xbox One Recon 60P Recon 50P P4c Recon 50X Recon 30X Stealth 400 PX22 XO4 Stealth XO1 Stealth 500P Stealth 420X XO7 Pro Elite 800 Stealth 500X Elite 800X PX24 Sony Silver Wired Gold Wireless Microsoft X
Slide 13: We Have Differentiating Technology
N A S D A Q : H E A R We Have Differentiating Technology… Advanced Chat Chat technology like noise gate, chat boost, variable microphone monitor Bluetooth Dual-pairing Bluetooth in most wireless headsets for chat, mobile gaming, audio calls and music streaming DTS Headphone:X 1st gaming headsets wit
Slide 14: Strong Retail Presence and Strong Distribution
N A S D A Q : H E A R Strong Retail Presence Great Partnerships 12,000+ Interactive Displays Sample retailers …And Strong Distribution 13 Product sales in over 40 countries with over 280,000 points of distribution Partnerships with industry leading brands Market leader in deploying interactive gamin
Slide 15: PC Gaming International Headset Growth Opportunities
N A S D A Q : H E A R PC Gaming International Headset Growth Opportunities 14 Launched eight new SKUs in 2014 Launched PC gaming accessories in 2014 including: Keyboards Mice Mouse pads PC gaming more popular than console gaming in markets like Germany, China and other parts of Asia Sampl
Slide 16: International Headset Growth Opportunities
N A S D A Q : H E A R PC Gaming International Headset Growth Opportunities 15 New gen console sales even stronger internationally Strong growth in Europe led by U.K. and strong share gains in Germany and France China represents long-term growth opportunity for console and PC gaming headsets
Slide 17: 16
16
Slide 18: HyperSound – A New Sound Delivery Mechanism
N A S D A Q : H E A R HyperSound – A New Sound Delivery Mechanism How does HyperSound work? Thin panels generate an ultrasound beam Audio is injected into and carried by the beam Sound is contained to the air within the ultrasound beam Eliminates most background noise when in beam Q4-15
Slide 19: HyperSound Clear – A $5 Billion Hearing Health Opportunity
N A S D A Q : H E A R HyperSound Clear improves the listening experience and speech intelligibility for individuals with hearing loss HyperSound Clear – A $5 Billion Hearing Health Opportunity 18 1) Johns Hopkins School of Medicine, Nov 2011. World Health Organization, 2013. 2) The Hearing Review, T
Slide 20: U.S. Market Structure & Channel Approach
N A S D A Q : H E A R 1) Approximate units of hearing aids sold via this channel. Channel Landscape Market Size Retail Channel U.S. Market Structure & Channel Approach 19 Independent & Buying Groups Retail Store Front Veterans Admin. Direct to Consumer 8,000 Points of Sale (POS) 1.2M Units¹ 4,000 PO
Slide 21: HyperSound Clear For Hearing Market: Our Strategy
N A S D A Q : H E A R HyperSound Clear For Hearing Market: Our Strategy Hired Rodney Schutt in 2014 to run HyperSound team Former president/CEO of two large hearing aid companies, Widex and Unitron, and previously a senior executive at GE Healthcare Assembled a team of seasoned audiology indus
Slide 22: Partnered with ~45% of the Hearing Health Locations Across the U.S.
N A S D A Q : H E A R We’re Partnered with ~45% of the Hearing Health Locations Across the U.S. HyperSound Clear: Launch Cadence Secured channel relationships with 5,600+ hearing health offices and retail locations in the U.S. – representing ~45% of total distribution points First months of laun
Slide 23: 2015 Patient Preference Study
N A S D A Q : H E A R No Improvement 3% Some Improvement 3% Improvement 14% [CATEGORY NAME] [PERCENTAGE] Tremendous Improvement (Heard Every Word) 16% Does HyperSound improve your speech recognition ability? 2015 Patient Preference Study Study: Surveyed 58 adults exposed to two minute demonstratio
Slide 24: Commercial Potential Growth Opportunities
N A S D A Q : H E A R Consumer & Licensing Commercial Potential Growth Opportunities 23 1) BUNN Research, Jan. 2014. 2) Self-Service Markets: ATMs, Kiosks, Vending Machines, BCC Research, Mar. 2011. 3) POPAI | HyperSound In-Store Research Report, Jun. 2015. Pre-defined sound zones for in-store pro
Slide 25: Consumer & Licensing Growth Opportunities
N A S D A Q : H E A R Consumer & Licensing Commercial Potential Growth Opportunities 24 Immersive, directed 3D audio presents consumer opportunities for: Home theater systems Entertainment and gaming soundbars Computer speakers Evaluating consumer product opportunities in 2016 and beyond
Slide 26: Strong & Rapidly Growing Patent Portfolio
N A S D A Q : H E A R 26 28 35 48 20 68 86 109 Jan 2013 Jan 2014 Jan 2015 Nov 2015 Pending Issued Headset innovations: Audio processing Gaming specific features HyperSound innovations: Emitter construction Ultrasound and emitter electronics Digital signal processing techniques Market
Slide 27: Financial Summary
N A S D A Q : H E A R FINANCIAL SUMMARY 26
Slide 28: Key Financial Context
N A S D A Q : H E A R Key Financial Context Headset business was highly disrupted 2013-2015 by console transition, impacting revenue, margin, costs and profitability Turtle Beach new gen portfolio is now largely complete and old gen is under 25% of revenue, which should improve headset margins
Slide 29: Headset Revenue Growth Almost Completed Revenue Transition to New Gen
N A S D A Q : H E A R Headset Revenue Growth Almost Completed Revenue Transition to New Gen 28 Total Headset Revenues Transition Since 2013 New Gen Revenues Growing Quickly Old gen revenues less than 25% of business at year end New gen expected to continue to grow in 2016 New gen headsets prod
Slide 30: HyperSound Revenues Beginning to Ramp
N A S D A Q : H E A R Headset Revenue Growth HyperSound Revenues Beginning to Ramp 29 Almost two years of investment to commercialize hearing product Product launched late Oct 2015 Revenues expected to gradually increase for first months as supply and points of distribution increase Increasi
Slide 31: Balance Sheet Overview
N A S D A Q : H E A R Balance Sheet Overview Secured $15 million term loan July 2015 In Nov 2015, prepaid $2.5 million of term loan with proceeds of additional sub debt, which the lenders required come from Stripes (our largest shareholder) Peak borrowing season on asset-based loan occurs Sept
Slide 32: Business Outlook - Summary of 2015 Guidance
N A S D A Q : H E A R 1) As of the date hereof, the Company reaffirms the guidance originally issued on November 9, 2015. Business Outlook - Summary of 2015 Guidance¹ Headsets Q4-15 2015 Low High Low High Revenue $82 $92 $160 $170 Growth -11% Flat -14% -8% Gross Margin ~31% ~26% Growth ~280 bps ~(12
Slide 33: Key Takeaways
N A S D A Q : H E A R Key Takeaways Market leading console gaming headset brand in early stages of “once-in-a-decade” industry growth cycle Broad market share opportunities in PC gaming headsets and international markets HyperSound launch into $5B hearing health category represents strong grow
Slide 34: 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 35: Appendix
Appendix
Slide 36: 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 John Hanson CFO • EVP and CFO at Dialogic • CFO at One Communications Corp Rodney Shutt SVP, GM - HyperSound Richard Kuvalik CTO • 25+ years
Slide 37: Board of Directors
N A S D A Q : H E A R Board of Directors Laureen DeBuono Director Ken Fox Director William Keitel Director Dr. Andrew Wolfe, PhD Director Ron Doornink Chairman • Partner at leading CFO consulting services firm FLG Partners, LLC • Former President and CEO of Coapt Systems, Inc. • Former COO and CFO o