Turtle Beach Corporation

Good afternoon, ladies and gentlemen, and welcome to the Turtle Beach Third Quarter 2020 Conference Call. Delivering today's prepared remarks are Chairman and Chief Executive Officer Juergen Stark and Chief Financial Officer John Hanson. Following their prepared remarks, the management team will open up the call for any questions. Before we go further, I would like to turn the call over to Sean McGowan of Gateway Investor Relations. Turtle Beach's IR Advisor. As he reads the company's safe harbor, that provides important cautions regarding forward-looking statements. Sean, please go ahead.

Thank you, Joelle. On today's call, we will be referring to the press release filed this afternoon that details the company's third quarter 2020 results, which can be downloaded from the investor relations page at corp.turtlebeach.com. Thank you very much. will, could, believe, expect, anticipate, and similar expressions constitute forward-looking statements. These statements involve risks and uncertainties regarding the company's operations and future results that could cause Turtle Beach Corporation's results to differ materially from management's current expectations. While the company believes that its expectations are based on reasonable assumptions, numerous factors may affect actual results and may cause results to differ materially, So the company encourages you to review the safe harbor statements and risk factors contained in today's press release and in its filings with the Securities and Exchange Commission, including, without limitation, its annual report on Form 10-K, most recent quarterly report on Form 10-Q, and other periodic reports which identify specific risk factors that may also cause actual results or events to differ materially from those described in our forward-looking statements. The company does not undertake to publicly update or revise any forward-looking statements after this conference call. The company also notes that on this call it will be discussing non-GAAP financial information. The company is providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States, or GAAP, and you can find a reconciliation of these metrics to the company's reported GAAP results in the reconciliation tables provided in today's earnings release and presentation. and now I'll turn the call over to Juergen Stark, the company's chairman and chief executive officer. Juergen?

Good afternoon, everyone, and thank you for joining us. We are extremely pleased to deliver another record quarter and again raise our guidance for the year. Our third quarter sales of $112.5 million, up 140% year over year, reflect the continued strength of our brand and product portfolio, including our expanding line of PC gaming accessories as well as another quarter of phenomenal execution in all areas of our business. In the past months, we've again exceeded on all fronts the goals we articulated to maintain our lead in council gaming headsets, drive growth in PC accessories, maintain a healthy balance sheet, and execute well in this unusual and dynamic environment. This has us tremendously excited about our future. I couldn't be more proud of our team who in many cases has accomplished this from their kitchen tables, makeshift home offices, and amidst the many other constraints the COVID situation has put on all of us. The Q3 results speak for themselves. We've set records for revenues, margins, and EBITDA, which John will cover in more detail. Here are the three key drivers of our strong top line results. 1. The market for console gaming headsets continues to be very strong. Using NPD data for North America, sell-through is up 46% year-over-year in dollars for Q3. We believe the factors we laid out last quarter continue to drive strong demand. Higher gaming engagement, the continued influx of new and lapsed gamers, as well as consumers buying gaming headsets for working, schooling, and socializing at home. 2. We didn't just ride the coattails of a strong market. Once again, we significantly outperformed the market, which was a major factor in our quarterly results. With the North American market up 46%, sell-through of our council gaming headsets was up 76% in dollars. Our revenue share was over 50%, and our share of the units of headsets shipped was over 60%. In fact, excluding the increase in units we've supplied and sold through in Q3 from the North American market numbers, the rest of the market was only up 2% on a unit basis. Our ability to continue to execute on supply, logistics, and retail operations played a key role in our exceptional market share performance. As one example, Q3 factory headset production in units was almost 90% of our total 2019 headset unit production. Of course, our market share continues to be a testament to the strength of our brand and product portfolio. As an example, we recently launched successors to our top-selling Stealth 600 and 700 line of wireless headsets for Xbox and PlayStation. These are phenomenal headsets, the best we've ever produced at these compelling price points. Both new 600 models, Xbox and PlayStation, are already in the top four revenue products in the U.S. per NPD for September. And one of the models achieved this with only a partial month of sales because the model launched partway into September. In September, all eight of the top eight selling Council headsets in the U.S. were Turtle Beach. Three, we continue to make exciting progress with our PC gaming accessories. During Q3, we launched the first of our new line of PC headsets, three Rocket ELO models that have received rave reviews. One professional reviewer couldn't seem to get past the fact that our entry-level $49 model sounded better than his far more expensive headsets. These headsets all apply the same strengths and capabilities that have made our Council Gaming headsets bestsellers for years. The $99 Elo Air wireless model, for example, leverages all of the capabilities in our industry-leading Stealth 600s I just mentioned. I'll cover our other PC gaming product launches later. of course everything I've said so far pertains almost entirely to the top line but our excellent performance goes well beyond just record sales as John will review in a moment our gross margin levels and our operating expense leverage were excellent strong execution across the board as a result of the strong third quarter and our view that many of the underlying positive trends over the past quarters will continue into holiday and next year We are increasing our sales outlook for the full year to $330 million, which would exceed our prior high revenue mark by over $40 million. With that, I will turn the call over to John to review our financial performance, after which I will come back with some additional comments about what we see for the balance of the year and into 2021. John?