What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-08 compared with 2024-05-07 · 95 added, 61 removed, 448 unchanged (26% of the section changed)

3 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands, except per-share data)

7 unchanged sentences

Operating loss

Interest expense

Interest expense (income)

Other non-operating expense, net

Loss before income tax

Income tax benefit

Net income (loss)

Net income (loss) per share

Income tax expense (benefit)

Net loss per share

Weighted average number of shares:

3 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands)

Net income (loss)

Other comprehensive income (loss):

26 unchanged sentences

Common stock, $ 0.001 par value - 25,000,000 shares authorized;

21,167,504 and 17,531,702 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

20,753,358 and 17,531,702 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

6 unchanged sentences

Condensed Consolidated S tatements of Cash Flows

Three Months Ended

March 31, 2024

March 31, 2023

Six Months Ended

June 30, 2024

June 30, 2023

(in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:

Depreciation and amortization

Costs recognized on sale of acquired inventory

Amortization of intangible assets

21 unchanged sentences

Proceeds from exercise of stock options and warrants

Repurchase of common stock

Debt issuance costs

20 unchanged sentences

Balance at March 31, 2024

Other comprehensive loss, net of tax

Issuance of restricted stock

Stock options exercised

Stock-based compensation

Repurchase of common stock

Balance at June 30, 2024

Comprehensive

7 unchanged sentences

Balance at March 31, 2023

Other comprehensive income, net of tax

Issuance of restricted stock

Stock options exercised

Stock-based compensation

Repurchase of common stock

Balance at June 30, 2023

See accompanying Notes to the Condensed Consolidated Financial Statements (unaudited)

36 unchanged sentences

As a result, the total preliminary purchase consideration was $ 116.9 million, partially funded by borrowing on the new term loan facility (see Note 8).

Additionally, the Company recognized $ 4.9 million of acquisition-related costs that were expensed during the three months ended March 31, 2024, and are included as a component of general & administrative expenses in the Condensed Consolidated Statement of Operations.

Additionally, the Company recognized $ 6.3 million of acquisition-related costs that were expensed during the six months ended June 30, 2024, and are included as a component of general & administrative expenses in the Condensed Consolidated Statement of Operations.

The following table summarizes preliminary allocation of the consideration transferred to the assets acquired and liabilities assumed at the acquisition date:

13 unchanged sentences

The final determination of the fair value of certain assets and liabilities will be completed as soon as the necessary information is available, but no later than one year from the acquisition date.

During the three months ended June 30, 2024, we recognized measurement period adjustments primarily to establish preliminary values for the opening balance sheet of the net assets acquired including intangibles assets, which also resulted in a reduction in goodwill from the previously reported preliminary amount.

The goodwill from the acquisition, which is fully deductible for tax purposes, consists largely of synergies and economies of scale expected from adding the operations of PDP's and the Company’s existing business and supply channels.

2 unchanged sentences

Some of the more significant assumptions inherent in the development of intangible asset values include:

the amount and timing of projected future cash flows, the discount rate selected to measure the risks inherent in the future cash flows, the

assessment of the intangible asset’s life cycle, as well as other factors.

the amount and timing of projected future cash flows, the discount rate selected to measure the risks inherent in the future cash flows, the assessment of the intangible asset’s life cycle, as well as other factors.

The following table summarizes the preliminary allocation of purchase consideration to identifiable intangible assets:

2 unchanged sentences

Developed technology

PDP's net revenue included in the Company’s consolidated results was $ 5.9 million for the three months ended March 31, 2024.

PDP's net revenue included in the Company’s consolidated results was $ 21.8 million and $ 27.7 million for the three and six months ended June 30, 2024, respectively.

PDP’s net income included in the Company’s consolidated results for the same period was not material.

Pro Forma Financial Information (Unaudited)

The following table reflects the unaudited pro forma operating results of the Company for the three months ended March 31, 2024 and 2023, which give effect to the acquisition of PDP as if it had occurred on January 1, 2023.

The following table reflects the unaudited pro forma operating results of the Company for the three and six months ended June 30, 2024 and 2023, which give effect to the acquisition of PDP as if it had occurred on January 1, 2023.

Three Months Ended

Six Months Ended

(in thousands)

Net income (loss)

The pro forma results are based on assumptions that the Company believes are reasonable under the circumstances.

9 unchanged sentences

Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, debt instruments and certain warrants.

As of March 31, 2024 and December 31, 2023 , the Company had not elected the fair value option for any financial assets and liabilities for which such an election would have been permitted.

The following is a summary of the carrying amounts and estimated fair values of our financial instruments as of March 31, 2024 and December 31, 2023:

March 31, 2024

As of June 30, 2024 and December 31, 2023 , the Company had not elected the fair value option for any financial assets and liabilities for which such an election would have been permitted.

The following is a summary of the carrying amounts and estimated fair values of our financial instruments as of June 30, 2024 and December 31, 2023:

June 30, 2024

December 31, 2023

4 unchanged sentences

Cash equivalents are stated at amortized cost, which approximates fair value as of the consolidated balance sheet dates, due to the short period of time to maturity;

and accounts receivable and accounts payable are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment.

and accounts receivable and accounts payable are stated at their carrying value, which approximates fair value due to the

short time to the expected receipt or payment.

The carrying value of the Credit Facility and Term Loan due 2027 equals fair value as the stated interest rate approximates market rates currently available to the Company.

The carrying value of the Credit Facility approximates fair value, due to the variable rate nature of the debt, as of March 31, 2024 and December 31, 2023 .

The carrying value of the Credit Facility approximates fair value, due to the variable rate nature of the debt, as of June 30, 2024 and December 31, 2023 .

Allowance for Sales Returns

1 unchanged sentence

Three Months Ended

Six Months Ended

(in thousands)

32 unchanged sentences

Acquired Intangible Assets

Acquired identifiable intangible assets, and related accumulated amortization, as of March 31, 2024 and December 31, 2023 consisted of:

March 31, 2024

Acquired identifiable intangible assets, and related accumulated amortization, as of June 30, 2024 and December 31, 2023 consisted of:

June 30, 2024

(in thousands)

9 unchanged sentences

Total Intangible Assets (1)

(1) The accumulated amortization includes $ 1.9 million of accumulated impairment charges as of March 31, 2024 and December 31, 2023.

(1) The accumulated amortization includes $ 1.9 million of accumulated impairment charges as of June 30, 2024 and December 31, 2023.

In May 2019, the Company completed its acquisition of the business and assets of ROCCAT.

5 unchanged sentences

Refer to Note 3, “Acquisitions” for additional information related to PDP’s identifiable intangible assets.

Amortization expense related to definite lived intangible assets of $ 0.6 million was recognized for the three months ended March 31, 2024, respectively, and $ 0.3 million was recognized for the three months ended March 31, 2023.

As of March 31, 2024, estimated annual amortization expense related to definite lived intangible assets in future periods was as follows:

Amortization expense related to definite lived intangible assets of $ 2.1 million and $ 2.7 million was recognized for the three and six months ended June 30, 2024, respectively, and $ 0.2 million and $ 0.5 million was recognized for the three and six months ended June 30, 2023, respectively.

As of June 30, 2024, estimated annual amortization expense related to definite lived intangible assets in future periods was as follows:

(in thousands)

Changes in the carrying values of goodwill for the three months ended March 31, 2024 from the balance as of December 31, 2023.

Changes in the carrying values of goodwill for the six months ended June 30, 2024 from the balance as of December 31, 2023.

(in thousands)

1 unchanged sentence

PDP acquisition

Balance as of March 31, 2024

Balance as of June 30, 2024

Revolving Credit Facility and Long-Term Debt

2 unchanged sentences

Term loan Due 2027

Total interest expense, inclusive of amortization of deferred financing costs, on long-term debt obligations was $ 0.4 million for the three months ended March 31, 2024 and $ 0.2 million for the three months ended March 31, 2023.

Amortization of deferred financing costs was $ 0.1 million for the three months ended March 31, 2024 and $ 42 thousand for the three months ended March 31, 2023.

Total interest expense, inclusive of amortization of deferred financing costs, on long-term debt obligations was $ 2.2 million and $ 2.7 million for the three and six months ended June 30, 2024, respectively, and $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2023, respectively.

Amortization of deferred financing costs was $ 0.3 million for the three and six months ended June 30, 2024 and $ 33 thousand and $ 75 thousand for the three and six months ended June 30, 2023, respectively.

Revolving Credit Facility

7 unchanged sentences

(ii) revised the calculation of the U.S.

Borrowing Base to include certain acquired assets of PDP equal to the lesser of (a) the sum of the Project Tide Accounts Formula Amount and the Project Tide Inventory Formula Amount (each as defined in the Fourth Amendment), (b) $ 15,000,000 , and (c) 30 % of the aggregate Revolver Commitments;

Borrowing Base to include certain acquired assets of PDP equal to the lesser of (a) the sum of the accounts formula amount and the inventory formula amount (each as defined in the Fourth Amendment), (b) $ 15,000,000 , and (c) 30 % of the aggregate Revolver Commitments;

(iii) extending the maturity date of the Credit Facility from April 1, 2025 to March 13, 2027 ;

9 unchanged sentences

In addition, Turtle Beach is required to pay a commitment fee on the unused revolving loan commitment at a rate ranging from 0.375 % to 0.50 % and letter of credit fees and agent fees.

As of March 31, 2024, interest rates for outstanding borrowings were 9.00 % for base rate loans and 8.90 % for LIBOR rate loans, which reference interest rates were still in effect prior to the Libor Transition Amendments.

As of June 30, 2024, interest rates for outstanding borrowings were 9.10 % for base rate loans and 7.19 % for Term SOFR loans.

The Company is subject to quarterly financial covenant testing if certain availability thresholds are not met or certain other events occur (as set forth in the Credit Facility).

2 unchanged sentences

Obligations under the Credit Facility are secured by a security interest and lien upon substantially all of the Company’s assets.

As of March 31, 2024, the Company was in compliance with all financial covenants under the Credit Facility, as amended, and excess borrowing availability was approximately $ 43.8 million.

As of June 30, 2024, the Company was in compliance with all financial covenants under the Credit Facility, as amended, and excess borrowing availability was approximately $ 34.6 million.

On March 13, 2024, Turtle Beach and certain of its subsidiaries entered into a new financing agreement with Blue Torch Finance, LLC, (“Blue Torch”), pursuant to which Blue Torch for an aggregate amount of $ 50 million (the “Term Loan Facility”), the proceeds of which were used to (i) fund a portion of the PDP acquisition purchase price;

6 unchanged sentences

and (c) is subject to certain affirmative, negative and financial covenants, including a minimum liquidity covenant and a quarterly total net leverage ratio covenant.

As of March 31, 2024 , the Company was in compliance with all financial covenants under the Term Loan.

As of June 30, 2024 , interest rates for outstanding borrowings was 13.69 %.

As of June 30, 2024 , the Company was in compliance with all financial covenants under the Term Loan.

Generally, in order to determine the quarterly provision for income taxes, the Company uses an estimated annual effective tax rate, which is based on expected annual income and statutory tax rates in the various jurisdictions.

However, to the extent that application of the estimated annual effective tax rate is not representative of the quarterly portion of actual tax expense expected to be recorded for the year in a jurisdiction, the Company determines the provision for income taxes based on actual year-to-date income (loss) which it has done for certain jurisdictions for the quarter ended March 31, 2024.

Certain significant or unusual items are separately recognized as discrete items in the period during which they occur and can be a source of variability in the effective tax rates from quarter to quarter.

1 unchanged sentence

Three Months Ended

Six Months Ended

(in thousands)

Income tax benefit

Income tax expense (benefit)

Effective income tax rate

The effective tax rate for the three months ended March 31, 2024 was primarily impacted by the change in U.S.

The effective tax rate for the three and six months ended June 30, 2024 was primarily impacted by the change in U.S.

valuation allowance related to the acquisition of PDP, foreign taxes, state tax and interest on uncertain tax positions.

1 unchanged sentence

Interest and penalties associated with income tax matters are included in the provision for income taxes in the condensed consolidated statements of operations.

As of March 31, 2024, the Company had uncertain tax positions of $ 2.8 million , inclusive of $ 0.6 million of interest and penalties.

As of June 30, 2024, the Company had uncertain tax positions of $ 2.8 million , inclusive of $ 0.6 million of interest and penalties.

As required by the authoritative guidance on accounting for income taxes, the Company evaluates the realizability of deferred tax assets on a jurisdictional basis at each reporting date.

4 unchanged sentences

deferred tax assets as of December 31, 2022.

While the Company continues to maintain this valuation allowance for the three months ended March 31, 2024 , it did release $ 6.7 million of valuation allowance for PDP acquired net deferred tax liabilities.

While the Company continues to maintain this valuation allowance for the three and six months ended June 30, 2024 , it did release $ 6.4 million of valuation allowance for PDP acquired net deferred tax liabilities.

The Company is subject to income taxes domestically and in various foreign jurisdictions.

1 unchanged sentence

The federal tax years open under the statute of limitations are 2019 through 2021, and the state tax years open under the statute of limitations are 2019 through 2022.

Equity and Stock-Based Compensation

Stock Repurchase Activity

On April 9, 2019, the Company’s Board of Directors authorized a stock repurchase program to acquire up to $ 15.0 million of its common stock.

Any repurchases under the program will be made from time to time on the open market at prevailing market prices.

On April 1, 2021, the Board of Directors approved an extension and expansion of this stock repurchase program up to $ 25.0 million of its common shares, expiring April 9, 2023 .

On March 3, 2023, the Company’s Board of Directors approved a two-year extension of this stock repurchase plan.

On April 9, 2024, the Board of Directors approved an additional expansion of this stock repurchase program to up to $ 55 million of the Company’s common shares.

During the three and six months ended June 30, 2024 , the Company has repurchased 1.0 million shares of its common stock for a total cost of $ 15.2 million.

Stock-Based Compensation

1 unchanged sentence

Three Months Ended

Six Months Ended

(in thousands)

4 unchanged sentences

Total stock-based compensation

The following table presents the stock activity and the total number of shares available for grant as of March 31, 2024:

The following table presents the stock activity and the total number of shares available for grant as of June 30, 2024:

(in thousands)

Balance at December 31, 2023

Options Cancelled

Restricted Stock Granted

Restricted Stock Forfeited

Balance at March 31, 2024

Performance Shares Granted

Balance at June 30, 2024

Stock Option Activity

4 unchanged sentences

Options Forfeited

Outstanding at March 31, 2024

Vested and expected to vest at March 31, 2024

Exercisable at March 31, 2024

Outstanding at June 30, 2024

Vested and expected to vest at June 30, 2024

Exercisable at June 30, 2024

Stock options are time-based and the majority are exercisable within 10 years of the date of grant, but only to the extent they have vested.

6 unchanged sentences

Aggregate intrinsic value represents the difference between the estimated fair value of the underlying common stock and the exercise price of outstanding, in-the-money options.

The aggregate intrinsic value of options exercised was $ 1.2 million for the three months ended March 31, 2024.

The aggregate intrinsic value of options exercised was $ 2.3 million for the six months ended June 30, 2024.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of options granted as of the grant date.

There were no new options granted during the three months ended March 31, 2024.

The total estimated fair value of employee options vested during the three months ended March 31, 2024 was $ 1.1 million .

As of March 31, 2024, total unrecognized compensation cost related to non-vested stock options granted to employees was $ 0.1 million , which is expected to be recognized over a remaining weighted average vesting period of 0.3 years.

There were no new options granted during the six months ended June 30, 2024.

The total estimated fair value of employee options vested during the six months ended June 30, 2024 was $ 1.2 million .

As of June 30, 2024 , total unrecognized compensation cost related to non-vested stock options granted to employees was less than $ 0.1 million, which is expected to be recognized over a remaining weighted average vesting period of 0.5 years.

Restricted Stock Activity

1 unchanged sentence

Shares forfeited

Nonvested restricted stock at March 31, 2024

As of March 31, 2024, total unrecognized compensation costs related to the nonvested restricted stock awards was $ 7.0 million , which will be recognized over a remaining weighted average vesting period of 3.4 years.

Nonvested restricted stock at June 30, 2024

As of June 30, 2024, total unrecognized compensation costs related to the nonvested restricted stock awards was $ 9.1 million , which will be recognized over a remaining weighted average vesting period of 1.5 years.

Performance-Based Restricted Share Units

As of March 31, 2024 , the Company had 162,672 performance-based restricted share units outstanding.

The vesting of performance-based restricted share units is determined over a three-year period based on (i) the amount by which revenue growth exceeds a defined baseline market growth each year and (ii) the achievement of specified tiers of adjusted EBITDA as a percentage of net revenue each year, with the ability to earn and vest into such units ranging from 0 % to 200 %.

As of March 31, 2024 , achievement of the performance conditions associated with the 2023, 2022 and 2021 performance shares was deemed not probable.

As of June 30, 2024 , the Company had 253,395 performance-based restricted share units outstanding.

On April 1, 2024, the Company granted 171,393 PSUs to certain executives, of which 50 % vest based on achievement of defined Company stock price appreciation over the period of April 1, 2024 through May 9, 2025, and 50 % vest based on defined Adjusted EBITDA targets for the period commencing on the second fiscal quarter in 2024 through the first fiscal quarter of 2025.

The awards granted on April 1, 2024 are also subject to three year service-based vesting periods with the ability to earn and vest into such units ranging from 0 % to 200 % of the granted PSUs.

The remaining 82,002 PSUs outstanding were granted to executives on April 1, 2023 and 2022, and will vest over a three-year period from the respective grant dates based on (i) the amount by which revenue growth exceeds a defined baseline market growth each year and (ii) the achievement of specified tiers of Adjusted EBITDA as a percentage of net revenue each year, with the ability to earn and vest into such units ranging from 0 % to 200 % of the granted PSUs.

As of June 30, 2024 , achievement of the performance conditions associated with the outstanding 2024, 2023 and 2022 performance shares was deemed not probable.

Net Income (Loss) Per Share

1 unchanged sentence

Three Months Ended

Six Months Ended

(in thousands, except per-share data)

11 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands)

4 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands)

24 unchanged sentences

On January 18, 2019, the district court certified a class of shareholders of the Company as of January 15, 2014.

On October 11, 2019, the parties notified the district court that they had reached a

settlement that would resolve the pending action if ultimately approved by the Court.

On October 11, 2019, the parties notified the district court that they had reached a settlement that would resolve the pending action if ultimately approved by the Court.

On January 13, 2020, the district court preliminarily approved the settlement between the plaintiffs and all defendants.

5 unchanged sentences

The case was tried in August 2021 and all remaining defendants, including the Company, prevailed on all counts with final judgment entered in their favor on September 3, 2021.

Plaintiff is appealing that judgment.

Plaintiff appealed that judgment.

On June 6, 2024, the Nevada Supreme Court affirmed the judgment in Defendants’ favor and subsequently denied Plaintiff’s petition for rehearing on July 22, 2024.

Employment Litigation:

14 unchanged sentences

In his complaint, the insolvency administrator claims that TBCH is liable to reimburse any payments received by the TBCH under a certain settlement agreement with KJE Europe GmbH dated June 30, 2020.

TBCH will file its statement of defense to the complaint on April 30, 2024.

TBCH filed its statement of defense to the complaint on April 30, 2024 and the insolvency administrator filed his response in a brief on June 11, 2024.

TBCH does not believe the claims have merit and intends to defend itself in this proceeding.

2 unchanged sentences

Accordingly, the Company cannot predict the outcome of these matters.

The Company has not recorded any accrual at March 31, 2024 for contingent losses associated with these matters based on its belief that losses, while possible, are not probable.

The Company has not recorded any accrual at June 30, 2024 for contingent losses associated with these matters based on its belief that losses, while possible, are not probable.

Further, any possible range of loss cannot be reasonably estimated at this time.

6 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands)

8 unchanged sentences

Balance Sheet Classification

March 31, 2024

June 30, 2024

(in thousands)

7 unchanged sentences

Weighted-average discount rate

During the three months ended March 31, 2024, the Company recognized approximately $ 0.4 million of lease costs in operating expenses and approximately $ 0.3 million of operating cash flows from operating leases.

Approximate future minimum lease payments for the Company’s right of use assets over the remaining lease periods as of March 31, 2024, are as follows:

During the six months ended June 30, 2024, the Company recognized approximately $ 0.8 million of lease costs in operating expenses and approximately $ 0.9 million of operating cash flows from operating leases.

Approximate future minimum lease payments for the Company’s right of use assets over the remaining lease periods as of June 30, 2024, are as follows:

(in thousands)

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements