Turtle Beach Corporation

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Turtle Beach Second Quarter 2024 Conference Call. At this time, all participants are in listen-only mode. A question and answer session will follow the prepared remarks presentation. As a reminder, the conference is being recorded. I'll now turn the call over to Josh Cornett from Investor Relations Team. Josh, you may begin.

Thank you, Operator. On today's call, You'll be referring to the press release filed this afternoon that details the company's second quarter 2024 results, which is available on the investor relations page at www.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 events and presentation 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, 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 upon 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 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 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. You can find a reconciliation of these metrics to the company's reported gap results in the reconciliation tables provided in today's earnings release and presentation. Hosting the call today are Chris Kern, Chief Executive Officer, and John Hanson, Chief Financial Officer. With that, I'll turn the call over to Chris. Chris?

Thanks, Jacques. Good afternoon, everyone, and welcome to our second quarter 2024 earnings call. Before we get into the financial results, I'd like to take a moment to acknowledge an important milestone. You've all seen the announcement today that our esteemed Chief Financial Officer, John Hanson, has informed us of his intent to retire. John has been an integral part of our leadership team, and his contributions have been invaluable to our success. I personally have enjoyed a tremendous partnership with John, and we wish him all the best in retirement. Turning to results. I'm pleased to share that the continued momentum in our business drove very strong second quarter results that reflect the ongoing success of our portfolio and cost optimization initiatives combined with our transformational acquisition of PDP. As a newly combined company, we are in the early stages of gaining scale and diversification advantages that enable us to expand our leadership position across categories. Our unwavering commitment to innovation, world-class execution, and sustained growth sets us apart in a highly competitive gaming accessories market. Our Q2 results reflect this commitment. Robust revenue growth for the quarter was driven by higher demand for our leading products, even as we reduced promotional spending as planned. To that end, second quarter revenue was $76.5 million, up roughly 59% year over year, which included our first full quarter of PDP contribution. Even excluding PDP contributions, revenues were up 15% compared to last year. Turning to the performance of the gaming markets driving the revenue growth, we see that gaming accessory markets have outperformed the low single-digit growth for the overall US gaming industry so far in 2024. According to Sukana, the overall US gaming accessories market value is up approximately 5% for the first half of 2024, compared to the first half of 2023. U.S. gaming headsets and third-party controller markets are exceeding overall accessory growth year-to-date, up approximately 12% and 15% respectively. We believe this growth is due to the start of pandemic-era replacements along with upgrade purchases for new models and features. We expect both factors to drive continued gaming accessories growth in the foreseeable future. As a leader in these categories, we continue to contribute to driving market growth with our newly launched wireless headsets, premium controllers, and PC peripherals across Turtle Beach and PDP. For example, in their first full month of sales after launch, the Turtle Beach Stealth 500 for Xbox and the Stealth 600 Gen 3 for Xbox were the number two and number four best-selling headsets in the U.S. for June. Both new models have received an abundance of praise from fans and reviewers alike, with each named as Best Wireless Gaming Headsets by IGN and other notable games industry and tech review publications. We also debuted the highly lauded Atlas Air as the industry's first wireless open-back gaming headset, which IGN gave a 9 out of 10 review score and added to their Best Gaming Headsets for PC list, calling it one of the most unique headsets out there. Additionally, PDP's Riffmaster wireless guitar controller launched in April coinciding with Epic's Fortnite Festival Season 3 instrument compatibility update, and has quickly become the industry's best-selling music controller in the U.S., as reported by Circana. In May, we also introduced a full line of Turtle Beach-branded PC gaming gear, furthering our reach into the massive $3.9 billion PC peripherals market. Our latest PC products introduced groundbreaking features in their respective categories, and are headlined by the highly responsive and customizable Vulcan II TKL Pro Keyboard, the incredibly lightweight Burst II Air Mouse, and our ergonomic masterpiece, Cone II MICE. We continue to make excellent progress in operational efficiencies across all aspects of our business, as we delivered substantially improved profitability in the quarter, including a significant 540 basis point gross margin expansion compared to the same quarter in 2023, Adjusted EBITDA was 3 million during the quarter, an improvement of 8.7 million compared to the same quarter last year. With our enhanced profitability in the first half of the year, we are raising our full year 2024 adjusted EBITDA guidance to a range of 53 to 56 million. John will provide additional details on our financial results. Since acquiring PDP in March, we've made rapid progress on integration. which we are continuing to execute ahead of schedule. Feedback from retail customers and other industry partners of the high potential for our combined company has been overwhelmingly positive, and we're already realizing synergies and expanding market opportunities. In addition to the clear benefits from our PDP acquisition, we are continuing to drive margin expansion from our previously communicated initiatives of skew rationalization, portfolio optimization, and our platformed next generation product launches. These improvements have all accelerated our ability to generate strong cash flow from operations. Given the strength of the balance sheet, our outlook, and our view that our share price offers a compelling value, we repurchased approximately $15 million of our stock during the second quarter. This is the largest repurchase in our history. and underscores both our confidence in Turtle Beach's trajectory and our commitment to enhancing shareholder value. We believe in our vision, and we are putting our resources behind it. John will now take us through the financials in more detail. John?