What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-05 compared with 2021-05-05 · 84 added, 59 removed, 420 unchanged (25% of the section changed)

3 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands, except per-share data)

5 unchanged sentences

Total operating expenses

Operating income (loss)

Operating income

Interest expense

Other non-operating expense, net

Income (loss) before income tax

Other non-operating expense (income), net

Income before income tax

Income tax expense (benefit)

Net income (loss)

Net income (loss) per share

Net income 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;

15,653,644 and 15,475,504 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

16,065,231 and 15,475,504 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

6 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

(in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

Adjustments to reconcile net income to net cash provided by operating activities:

44 unchanged sentences

Balance at March 31, 2021

Other comprehensive income, net of tax

Issuance of restricted stock

Repurchase of common stock and retirement of related treasury shares

Stock options exercised

Stock-based compensation

Balance at June 30, 2021

Comprehensive

8 unchanged sentences

Balance at March 31, 2020

Other comprehensive income, net of tax

Issuance of restricted stock

Repurchase of common stock and retirement of related treasury shares

Stock options exercised

Stock-based compensation

Balance at June 30, 2020

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

2 unchanged sentences

Background and Basis of Presentation

Turtle Beach Corporation (“Turtle Beach” or the “Company”), headquartered in White Plains, New York and incorporated in the state of Nevada in 2010, is a premier audio and gaming technology company with expertise and experience in developing, commercializing and marketing innovative products across a range of large addressable markets under the Turtle Beach® and ROCCAT®.

Turtle Beach is a worldwide leader of feature-rich headset solutions for use across multiple platforms, including video game and entertainment consoles, handheld consoles, personal computers (“PC”), tablets and mobile devices.

Under the ROCCAT brand, the Company creates award-winning keyboards, mice, headsets, mousepads, and other computer accessories.

The recently acquired, Neat Microphones® brand creates high-quality USB and analog microphones for gamers, streamers, and professionals that embrace cutting-edge technology and design.

The recently acquired, Neat brand creates high-quality USB and analog microphones for gamers, streamers, and professionals that embrace cutting-edge technology and design.

VTB Holdings, Inc.

27 unchanged sentences

The closing payment was funded from cash on the Company’s balance sheet.

In addition, business transaction costs incurred in connection with the acquisition of $ 0.2 million for the three months ended March 31, 2021, were recorded as a component of “General and administrative” expenses in the Condensed Consolidated Statements of Operations.

In addition, business transaction costs incurred in connection with the acquisition of $ 0.1 million and $ 0.3 million for the three and six months ended June 30, 2021, respectively, were recorded as a component of “General and administrative” expenses in the Company’s Condensed Consolidated Statements of Operations.

Neat Microphones creates, manufactures, and sells high-quality digital USB and analog microphones that embrace cutting-edge technology and design.

21 unchanged sentences

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

As of March 31, 2021 and December 31, 2020 , 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 at March 31, 2021 and December 31, 2020 .

March 31, 2021

As of June 30, 2021 and December 31, 2020 , 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 at June 30, 2021 and December 31, 2020 .

June 30, 2021

December 31, 2020

9 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands)

23 unchanged sentences

(in thousands)

Accrued tax-related payables

Accrued royalty

Accrued employee expenses

Accrued freight

Accrued marketing

Accrued freight

Accrued employee expenses

Contingent consideration

Accrued customer fees

Accrued expenses

2 unchanged sentences

Acquired Intangible Assets

Acquired identifiable intangible assets, and related accumulated amortization, as of March 31, 2021 and December 31, 2020 consist of:

March 31, 2021

Acquired identifiable intangible assets, and related accumulated amortization, as of June 30, 2021 and December 31, 2020 consist of:

June 30, 2021

(in thousands)

15 unchanged sentences

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

Amortization expense related to definite lived intangible assets of $ 0.3 million was recognized for the three months ended March 31, 2021, and $ 0.2 million for the three months ended March 31, 2020.

As of March 31, 2021, estimated annual amortization expense related to definite lived intangible assets in future periods is as follows:

Amortization expense related to definite lived intangible assets of $ 0.3 million and $ 0.6 million was recognized for the three and six months ended June 30, 2021, and $ 0.2 million and $ 0.4 million for the three and six months ended June 30, 2020.

As of June 30, 2021, estimated annual amortization expense related to definite lived intangible assets in future periods is as follows:

(in thousands)

Changes in the carrying values of goodwill for the three months ended March 31, 2021 are as follows:

Changes in the carrying values of goodwill for the six months ended June 30, 2021 are as follows:

(in thousands)

1 unchanged sentence

Neat Microphones acquisition

Balance as of March 31, 2021

Balance as of June 30, 2021

Revolving Credit Facility and Long-Term Debt

The Company had no outstanding balance related to its revolving credit facility as of March 31, 2021 and December 31, 2020.

Total interest expense, inclusive of amortization of deferred financing costs, on long-term debt obligations was $ 0.1 million for the three months ended March 31, 2021, and $ 0.2 million for the three months ended March 31, 2020.

Amortization of deferred financing costs was $ 47,000 for the three months ended March 31, 2021 and 2020.

The Company had no outstanding balance related to its revolving credit facility as of June 30, 2021 and December 31, 2020.

Total interest expense, inclusive of amortization of deferred financing costs, on long-term debt obligations was $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2021, and $ 0.1 million and $ 0.3 million for the three and six months ended June 30, 2020.

Amortization of deferred financing costs was $ 47,000 and $ 0.1 million for the three and six months ended June 30, 2021 and 2020.

Revolving Credit Facility

10 unchanged sentences

In addition, Turtle Beach is required to pay a commitment fee on the unused revolving loan commitment at a rate ranging from 0.25 % to 0.50 % and letter of credit fees and agent fees.

As of March 31, 2021, interest rates for outstanding borrowings were 3.75 % for base rate loans and 3.00 % for LIBOR rate loans.

As of March 31, 2021, there were no outstanding borrowings under the Credit Facility.

As of June 30, 2021, interest rates for outstanding borrowings were 3.75 % for base rate loans and 3.00 % for LIBOR rate loans.

As of June 30, 2021, there were no outstanding borrowings under the Credit Facility.

The Company is subject to quarterly financial covenant testing if certain availability thresholds are not met or certain other events occur (as defined 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, 2021, the Company was in compliance with all financial covenants under the Credit Facility, as amended, and excess borrowing availability was approximately $ 49.7 million.

As of June 30, 2021, the Company was in compliance with all financial covenants under the Credit Facility, as amended, and excess borrowing availability was approximately $ 49.7 million.

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

3 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands)

1 unchanged sentence

Effective income tax rate

Income tax expense for the three months ended March 31, 2021 was $ 2.8 million at an effective tax rate of 23.8 %.

Income tax benefit for the three months ended March 31, 2020 was $ 1.8 million at an effective tax rate of 33.9 %.

The effective tax rate for the three months ended March 31, 2021 was primarily impacted by the tax effect of disallowed compensation and state income tax expense, offset by benefits on stock option exercises.

Income tax benefit for the three months ended June 30, 2021 was $ 1.3 million at an effective tax rate of ( 295.6 %) and income tax expense for the six months ended June 30, 2021was $ 1.5 million at an effective tax rate of 12.3 %.

Income tax expense for the three and six months ended June 30, 2020 was $ 3.3 million at an effective tax rate of 28.6 % and $ 1.5 million at an effective tax rate of 23.9 %, respectively.

The effective tax rate for the three and six months ended June 30, 2021 was primarily impacted by discrete windfall tax benefits of $( 1.8 ) million attributable to stock option exercises and restricted stock vestings, partially offset by the impact of disallowed compensation and state income tax expense on the estimated annual effective tax rate.

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

2 unchanged sentences

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, 2021, the Company had uncertain tax positions of $ 3.9 million, inclusive of $ 0.8 million of interest and penalties.

As of June 30, 2021, the Company had uncertain tax positions of $ 3.3 million, inclusive of $ 0.8 million of interest and penalties.

The Company files U.S., state and foreign income tax returns in jurisdictions with various statutes of limitations.

7 unchanged sentences

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, 2021:

The following table presents the stock activity and the total number of shares available for grant as of June 30, 2021:

(in thousands)

Balance at December 31, 2020

Plan Amendment

Options granted

2 unchanged sentences

Forfeited/Expired restricted stock added back

Balance at March 31, 2021

Performance-Based restricted stock granted

Balance at June 30, 2021

Stock Option Activity

1 unchanged sentence

Outstanding at December 31, 2020

Outstanding at March 31, 2021

Vested and expected to vest at March 31, 2021

Exercisable at March 31, 2021

Options Granted

Options Exercised

Options Forfeited

Outstanding at June 30, 2021

Vested and expected to vest at June 30, 2021

Exercisable at June 30, 2021

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 $ 4.2 million for the three months ended March 31, 2021.

The aggregate intrinsic value of options exercised was $ 8.6 million for the six months ended June 30, 2021.

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

The following are the assumptions for options granted during the three months ended March 31, 2021 :

The following are the assumptions for options granted during the six months ended June 30, 2021 :

Expected term (in years)

3 unchanged sentences

Each of these inputs is subjective and generally requires significant judgment to determine.

The weighted average grant date fair value of options granted during the three months ended March 31, 2021 was $ 14.89 .

The total estimated fair value of employee options vested during the three months ended March 31, 2021 was $ 0.3 million.

As of March 31, 2021, there was no unrecognized compensation cost related to nonvested stock options granted to employees.

The weighted average grant date fair value of options granted during the six months ended June 30, 2021 was $ 14.89 .

The total estimated fair value of employee options vested during the six months ended June 30, 2021 was $ 1.6 million.

As of June 30, 2021, total unrecognized compensation cost related to non-vested stock options granted to employees was $ 3.9 million, which is expected to be recognized over a remaining weight average vesting period of 2.3 years.

Restricted Stock Activity

1 unchanged sentence

Shares forfeited

Nonvested restricted stock at March 31, 2021

As of March 31, 2021, total unrecognized compensation costs related to the nonvested restricted stock awards was $ 6.3 million, which will be recognized over a remaining weighted average vesting period of 2.5 years.

Nonvested restricted stock at June 30, 2021

As of June 30, 2021, total unrecognized compensation costs related to the nonvested restricted stock awards was $ 12.4 million, which will be recognized over a remaining weighted average vesting period of 2.8 years.

Performance-Based Restricted Share Units

As of June 30, 2021, the Company had 134,000 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 %.

Stockholder’s Equity

5 unchanged sentences

During the year ended December 31, 2020, the Company sold a total of 237,813 shares of its common stock under the Sales Agreement in the open market at an average gross selling price of $ 18.39 per share for net proceeds of $ 4.4 million.

During the three months ended March 31, 2021, the Company had no sales of its common stock under the Sales Agreement.

Net Income (Loss) Per Share

The following table sets forth the computation of basic and diluted net income (loss) per share of common stock attributable to common stockholders:

During the six months ended June 30, 2021, the Company had no sales of its common stock under the Sales Agreement.

Net Income Per Share

The following table sets forth the computation of basic and diluted net income per share of common stock attributable to common stockholders:

Three Months Ended

Six Months Ended

(in thousands, except per-share data)

Net income (loss)

Weighted average common shares outstanding — Basic

4 unchanged sentences

Weighted average common shares outstanding — Diluted

Net income (loss) per share:

Net income per share:

Incremental shares from stock options and restricted stock awards are computed using the treasury stock method.

2 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands)

4 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands)

42 unchanged sentences

The Company filed a cross-complaint against the former employee on May 25, 2017 for certain activities related to his employment with the Company.

Discovery is closed and the case was set for trial on April 6, 2020 in San Diego County Superior Court.

Due to the continued closure of the Court, the April 6, 2020 trial date was vacated and the current trial date is July 9, 2021.

Discovery is closed and the case was set for trial on July 9, 2021 in San Diego County Superior Court.

Due to continued Court delays with civil jury trials, the trial date was vacated and the current trial date is September 24, 2021.

Settlement of Disputes :

13 unchanged sentences

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

The Company has not recorded any accrual at March 31, 2021 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, 2021 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)

9 unchanged sentences

Balance Sheet Classification

March 31, 2021

June 30, 2021

(in thousands)

7 unchanged sentences

Weighted-average discount rate

During the three months ended March 31, 2021, the Company recognized approximately $ 0.3 million of lease costs in operating expenses and approximately $ 0.2 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, 2021, are as follows:

During the six months ended June 30, 2021, the Company recognized approximately $ 0.7 million of lease costs in operating expenses and approximately $ 0.6 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, 2021, 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