Turtle Beach Corporation

Good afternoon, ladies and gentlemen, and welcome to the Turtle Beach fourth quarter and full year 2021 conference call. Delivering today's prepared remarks are Chairman and Chief Executive Officer Juergen Stark and Chief Financial Officer John Hansen. Following their prepared remarks, the management team will open the call for questions. Before we go further, I would like to turn the call over to Alex Thompson of Gateway Investor Relations, Turtle Beach Eye Advisor, as he reads the company's Safe Harbor Statement that provides important questions regarding forward-looking statements. Alex, please go ahead.

Thank you. On today's call, we'll be referring to the press release filed this afternoon that details the company's full year and fourth quarter of 2021 results, which can be downloaded from the investor relations page at corp.turtlebeach.com, where you'll also find the latest earnings presentation that supplements the information discussed on today's call. Finally, a recording of the call will be available on the investor section of the company's website later today. Please be aware that some of the comments made during this call may include forward-looking statements within the meaning of the federal securities laws. Statements about the company's beliefs and expectations containing words such as may, 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 and any forward-looking statements made during this call. While the company believes that its expectations are based upon reasonable assumptions, there can be no assurances that its goals and strategy will be realized, and 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 and other periodic reports which identify specific risk factors that also may cause actual results or events to differ materially from those described in our forward-looking statements. The company is under no obligation 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 the accounting principles generally accepted in the United States for GAAP. 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 the 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. I'm pleased to discuss our strong full year and fourth quarter 2021 results, and I'm especially proud to announce that in 2021, we delivered the highest total revenues in the company's history following our record year in 2020. We also delivered $36.6 million in adjusted EBITDA in line with our previously provided guidance range. While we delivered another year of growth, 2021 certainly had industry-wide challenges. Semiconductor constraints limited our sales, shipping times were much longer and more unreliable than normal, and air freight costs hit over four times normal levels. The holiday period suffered from lower retail foot traffic, disappointing AAA game, video game releases, and Xbox and PlayStation console availability constraints that impacted the council accessory market. Our success despite the challenging operating environment is a testament to our team's hard work, operational excellence, and commitment to our brands and customers. Our 2021 performance reinforces our belief that our diverse portfolio, expert operational management, and strong consumer demand for our products have us well positioned for future success. We continue to believe that the gaming market remains the market to be in, and we expect pent-up consumer demand for the latest Xbox and PlayStation consoles to result in strong hardware and peripheral sales over the next several years as supply constraints ease, new games emerge, and gamers level up their gaming accessories. Last year, our Turtle Beach console headset brand maintained our market share of 40% or more in the US for the 12th consecutive year. And per New Zoo's US Consumer Insights report, Turtle Beach has the highest brand loyalty among active console gamers. We're dedicated to ensuring our fans are happy not only with their products, but with their entire experience with us. Per US NPD retail data, Turtle Beach continued with many market-leading headsets throughout 2021. In fact, Turtle Beach headsets represented five of the top 10 bestsellers and 11 of the top 20 bestsellers in 2021 in terms of dollar sales. Our wireless Stealth 600 Gen 2 and Stealth 700 Gen 2 headsets were Xbox's most popular headsets throughout the year. as the first and second best-selling Xbox headsets on the list. For PlayStation, our Stealth 600 Gen 2 and Stealth 700 Gen 2 products were the second and third best-selling headsets. It's important to highlight that this was despite semiconductor constraints that limited our ability to sell these ultra-popular Xbox and PlayStation wireless headsets. I'll cover more about our wireless Xbox and PlayStation headsets in a moment. In addition to best-selling console headsets, our first-ever gaming controller, the Recon Controller for Xbox, performed well and proved to be a strong entry into this new category for us. Since being revealed, the Recon Controller has gained multiple new placements at major retailers and has been met with great reviews. Of note, the Recon Controller for Xbox was recently named a Best Xbox Controller by IGN with a 9 out of 10 review score and Editor's Choice accolade. In our new gaming simulation accessories category, we launched our Velocity One Flight Simulation Control System in November. Since its debut, the Velocity One flight has generated significant consumer demand and critical acclaim. In fact, in November, our pre-orders sold out in less than an hour globally and in under 15 minutes in key markets, clearly indicating that we have delivered a great first product into the flight simulation category. Given the strong start and positive community chatter, we expect this product to continue to sell well in 2022 and onward. We also continued significant progress across our Rocket PC gaming accessories business. In the fourth quarter, we unveiled the Arctic White version of Rocket's fan-favorite Vulcan TKL Pro keyboard, adding yet another option to our award-winning PC gaming keyboard series. We launched a new family of Sense mouse pads with various sizes, shapes, and textures, Additionally, we expanded our mobile gaming lineup by launching new wired gaming earbuds in Asia with plans to bring them into additional markets and add a wireless option in the future. We also announced a new partnership with the popular online personality, gamer, entrepreneur, and businesswoman for the world-renowned Team Ninja brand, Jessica Blevins. In 2021, we launched 23 new Rocket PC gaming accessories and announced 12 new partnerships as we continue to broaden our PC portfolio and the Rocket brand. As a good metric of our progress, we gained share in all core PC markets, accessories markets, outperforming the competition, and again, growing our PC business at a rapid rate. The PC gaming accessories market for headsets, keyboards, and mice has now grown to $3.8 billion, and we will continue our investments to capture an increasing share of that market. We acquired Neat Microphones in January of 2021, which brought us a highly skilled team, the team that built Blue Microphones before creating Neat, and gave us a great advantage in creating cutting edge microphones. In 2021, we launched four new products under the Neats brand. In the fourth quarter, we launched Neats Sleek Skyline USB conferencing microphone, which is great for working from home or in the office. We also launched Neats flagship product, the eagerly anticipated King B2 XLR microphone. At the end of Q4, we added the Bumble B2 USB microphone, and Worker B2 XLR microphone to NEET's 2021 lineup. These new products enable us to pursue the market for streamer and creator microphones that totals over $2 billion. As I noted last quarter, across all our product categories, we have also made targeted investments in geographic expansion, particularly in Japan and Korea, where we have developed new distribution and retail relationships. The investments in sales and marketing paid early dividends with year-over-year revenue growth in Asia of well over 100%. Asia holds tremendous potential, and I'm encouraged by the excellent progress we've made there in 2021. Next, I'll turn it over to John to cover the financials in further detail, after which I'll provide commentary on our outlook and the continued progress we're making in the new year. John?