Turtle Beach Corporation · NASDAQ:TBCH
Turtle Beach — Investor Presentation (March 2017)
36 slides from Turtle Beach's investor presentation, Mar 14, 2017
Slide 1: Turtle Beach Corporation Corporate Presentation
JURTLE BEAGH CORPORATION CORPORATE PRESENTATION NASDAQ: HEAR MARCH 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 Turtle Beach is a premier audio innovation company with a 40-year legacy of creating new audio categories Longstanding, #1 brand for gaming headsets with 42% share of the U.S. market – 3x larger than next competitor¹ Disruptive, cutting-edge technologies and pa
Slide 4: $96 Billion Global Gaming Opportunity in 2017
N A S D A Q : H E A R $96 Billion Global Gaming Opportunity in 2017 PC Gaming: $33B Mobile Gaming: $31B Console Gaming: $32B $96B Global Gaming Opportunity Source: DFC Intelligence Video Game Worldwide Market Forecast (October 2016). 3
Slide 5: Dominant Gaming Audio Provider with Continued Leading Market Share
N A S D A Q : H E A R Dominant Gaming Audio Provider with Continued Leading Market Share 2016 Data #1 gaming headset provider for Xbox and PlayStation—by far All 5 of the top 5 selling 3rd party headsets are Turtle Beach Our Recon 50X is the highest-selling 3rd party headset followed by XO1
Slide 6: Competitive Positioning & Brand Differentiators
N A S D A Q : H E A R Competitive Positioning & Brand Differentiators Best-in-class product offering catering to every level of gamer Technology-driven, robust innovation capabilities, impressive speed-to-market Products continually evolve with gamer’s needs at forefront Strong patent portfo
Slide 7: We Cover All Key Price Points – More Than Any Competitor
N A S D A Q : H E A R Retail ASP <$50 $50 - $99 $100 - $200 >$200 Console PS4 Xbox One PS4 Xbox One PS4 Xbox One PS4 Xbox One TOTAL¹ Recon 60P Recon 50P P4c Recon 50X Recon 30X Stealth 400 S350VR XO4 Stealth XO1 Stealth 520 Stealth 420X+ XO7 Pro Elite 800 Elite 800X 16 Sony Gold Wireless Platinum Wi
Slide 8: Product Features and First Mover Advantages
N A S D A Q : H E A R 7 Active Noise Cancellation Silence unwanted background sound for an immersive listening experience. Bolded and Italicized Text = Turtle Beach First Mover Advantage Rechargeable Batteries Built-in rechargeable batteries provide for hours of continuous game play. Bluetooth Bluet
Slide 9: Strong Retail Presence, Great Partnerships 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 8 Product sales in 42 countries with over 270,000 points of distribution Partnerships with industry leading brands Market leader in deploying interactive gaming head
Slide 10: Strong Expected New-Gen Console Growth Still to Come
N A S D A Q : H E A R 3.0 10.9 20.0 29.0 37.7 45.6 52.5 58.9 4.6 18.0 34.6 51.0 66.7 80.8 93.7 105.4 0M 20M 40M 60M 80M 100M 120M 2013 2014 2015 2016 2017E 2018E 2019E 2020E Xbox One PS4 Strong Expected New-Gen Console Growth Still to Come 51M 105M 29M 59M Sources: DFC Intelligence Forecasts: Wo
Slide 11: Growth Opportunities: Virtual Reality
N A S D A Q : H E A R International Virtual Reality (VR) PC Gaming Headset Growth Opportunities 10 According to SuperData Research, VR hardware market expected to reach $17.8B by 2020 from $1.5B in 2016 (85% CAGR) STEALTH 350VR, our first gaming headset designed for upcoming VR devices, launched
Slide 12: Growth Opportunities: PC Gaming Headset
N A S D A Q : H E A R International Virtual Reality (VR) PC Gaming Headset Growth Opportunities 11 PC gaming headsets market ~$400M market globally1 Launched eight new SKUs in 2014 and 2015 Launched PC gaming accessories via a partner in 2014 including: Keyboards Mice Mouse pads PC gam
Slide 13: Growth Opportunities: China and Latin America
N A S D A Q : H E A R International Virtual Reality (VR) PC Gaming Headset Growth Opportunities 12 China represents long-term growth opportunity for console and PC gaming headsets 530M Chinese gamers2 China well under $1 million in revenues in 2016 Initiated modest growth investment in 2016,
Slide 14: Strong & Growing 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 15: HyperSound Technology
N A S D A Q : H E A R 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 enabling glass “speakers” Mul
Slide 16: Example HyperSound Applications
N A S D A Q : H E A R Example HyperSound Applications Commercial Audio Enables retailers and retail display manufacturers to add focused zone of audio to retail displays/kiosks. Healthcare Shown to improve sound clarity and listening benefits for people with hearing loss. Market Application Enterpri
Slide 17: Financial Summary
Financial Summary
Slide 18: Balance Sheet Highlights
N A S D A Q : H E A R Balance Sheet Highlights Revolver peaks in Q4, lowest in Q1 after holiday receipts In Feb 2016, raised $6.2M in net proceeds (over 50% purchased by insiders), stabilizing liquidity $49.0M federal, $21.0M state net operating losses @ Dec 31, 2016 offset taxable income (not
Slide 19: Headset Revenue Growth
N A S D A Q : H E A R Headset Revenue Growth Revenue Growth Profile 18 New-gen revenue up 29% from 2015 Total revenue up 7% (9% constant currency)² Strong revenue growth supporting further gains in our #1 market share Old-gen revenue declines to roughly zero in 2017 Note: Old-gen, new-gen re
Slide 20: Strong Improvement in Headset Business
N A S D A Q : H E A R Headset Net Revenue¹ Headset Gross Margin¹ Headset Adj. EBITDA¹ ² 19 $162M $166M $173M $175M $173M TTM @ Q4-15 TTM @ Q1-16 TTM @ Q2-16 TTM @ Q3-16 TTM @ Q4-16 26.5% 26.6% 27.7% 28.9% 31.9% TTM @ Q4-15 TTM @ Q1-16 TTM @ Q2-16 TTM @ Q3-16 TTM @ Q4-16 $2M $6M $8M $11M $14M TTM @ Q
Slide 21: Holiday '16 U.S. Market Dynamic Commentary
N A S D A Q : H E A R Holiday ’16 U.S. Market Dynamic Commentary 20 Sources: The NPD Group / Retail Tracking Service. -12% -21% -15% -41% 0% 20% 40% 60% 80% 100% Console Gaming Headsets ($) Console Software Spend ($) Physical New Software, All Platforms ($) Top 3 FPS/Action Titles, All Platforms (Un
Slide 22: Longer Term Console, Attach and Headset Outlook
N A S D A Q : H E A R 21 Longer Term Console, Attach and Headset Outlook Sources: DFC Intelligence Forecasts: Worldwide Console Forecast, Preliminary February 2017 and Turtle Beach projections
Slide 23: Q1 2017 Outlook
N A S D A Q : H E A R Q1 2017 Outlook 22 Q1-17¹ YoY ∆2 Management Commentary & Assumptions Revenue $12-$13M (48)% Reflects higher-than-normal channel inventory due to weak holiday ’16 sales as well as the final drop of old-gen revenues to roughly zero Adj. EBITDA $(8.5)M (35)% Reflects lower revenue
Slide 24: 2017 Outlook
N A S D A Q : H E A R 1) Guidance effective on Mar 8, 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
Slide 25: 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 $92 billion global gaming opportunity Disruptive, cutting-edge technologies and patents New-gen headset transition expected to continue to improve margins, profitability and cas
Slide 26: 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 [email protected] [email protected] www.turtlebeach.com www.hypersound.com C O M PA N Y W E B S I T E S www.turtlebeachcor
Slide 27: Appendix
Appendix
Slide 28: 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 29: 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 30: Financial Overview
N A S D A Q : H E A R Financial Overview 29 1) Pages 30-34 contain a reconciliation of all non-GAAP measures. 2015 2016 YOY ∆% Full Year YOY ∆% $ millions Q4 Q4 2015 2016 Revenue $84.6 $82.2 -3% $162.7 $174.0 7% Gross Profit $24.6 $30.2 23% $40.7 $42.6 5% Gross Margin 29.1% 36.7% 760bps 25.0% 24.5%
Slide 31: Financial Overview (excluding extraordinary or one-time charges)
N A S D A Q : H E A R Financial Overview (excluding extraordinary or one-time charges)¹ 30 2015 2016 YOY ∆% Full Year YOY ∆% $ millions Q4 Q4 2015 2016 Revenue $84.6 $82.2 -3% $162.7 $174.0 7% Gross Profit $24.6 $30.2 23% $40.7 $42.6 5% Gross Margin 29.1% 36.7% 760bps 25.0% 24.5% (50)bps Operating E
Slide 32: Headset Adjusted EBITDA Reconciliation
N A S D A Q : H E A R Headset Adjusted EBITDA Reconciliation (Trailing 12 months) 31 $ thousands Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Net Loss $ (17,201) $ (17,440) $ (17,341) $ (5,630) $ (930) Interest 5,096 6,091 6,943 7,270 7,445 Depreciation & Amortization 6,374 5,865 5,443 4,959 4,498 Stock Compensati
Slide 33: Reconciliation of GAAP and Non-GAAP Measures
N A S D A Q : H E A R Reconciliation of GAAP and Non-GAAP Measures 32 Three Months Ended Year Ended December 31, 2016 December 31, 2015 December 31, 2016 December 31, 2015 Net Income (Loss) GAAP Net Income (Loss) $ 12,201 $ (46,536 ) $ (87,182 ) $ (82,907 ) Goodwill and intangible asset impairment —
Slide 34: GAAP to Adjusted EBITDA Reconciliation (three months ended)
N A S D A Q : H E A R GAAP to Adjusted EBITDA Reconciliation (three months ended) 33 1) Other includes goodwill and other intangible assets impairment, business transition costs and restructuring charges. Three Months Ended December 31, 2016 As Reported Adj Depreciation Adj Amortization Adj Stock Co
Slide 35: GAAP to Adjusted EBITDA Reconciliation (twelve months ended)
N A S D A Q : H E A R GAAP to Adjusted EBITDA Reconciliation (twelve months ended) 34 (1) Other includes goodwill and other intangible assets impairment, business transition costs and restructuring charges. Year Ended December 31, 2016 As Reported Adj Depreciation Adj Amortization Adj Stock Compensa
Slide 36: Constant Currency Reconciliation
N A S D A Q : H E A R Constant Currency Reconciliation 35 December 31, Three Months Ended Year Ended Constant Currency Reconciliation 2015 Revenue (GAAP) $ 84,559 $ 162,747 2016 Revenue (GAAP) $ 82,204 $ 173,978 Percentage Change Y/Y (GAAP) (3 )% 7 % Constant Currency Impact $ 2,717 $ 3,506 Percenta