Turtle Beach Corporation

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

Thanks, Operator. On today's call, we'll be referring to the press release file this afternoon that details the company's third quarter 2024 results. This press release is available on the press releases page of the company's investor relations website at 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 investor relations 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. 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 or publicly update or revise any forward-looking statements after this conference call. The company also notes that on its 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 GAAP results and 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. And with that, I'll turn the call over to Chris.

Thanks, Jacques. Good afternoon, everyone, and welcome to our third quarter 2024 earnings call. We're delighted to report another strong quarter highlighted the continued popularity of the Turtle Beach brand. sustained momentum in gaming accessories and the tremendous progress towards the integration of PDP which is running ahead of schedule. Our strategic acquisition of PDP has significantly broadened our reach and further elevated our presence across several categories especially in controllers which I'll speak about more shortly. Further, Turtle Beach's brand reach and strong reputation for quality gaming accessories continues to gain fans And just last month was named in Times World's Best Brands of 2024 feature as a top five consumer electronics brand in the gaming hardware and peripherals category. This quarter, we experienced robust revenue growth driven by increased demand for our leading gaming accessories and the benefits of our expanded portfolio. We're in the early stages of realizing the advantages of our increased scale and diversification which are strengthening our leadership across categories. Our unwavering commitment to innovation, top tier execution, and continuous growth continues to set Turtle Beach apart as a leader in the gaming accessories market. For the third quarter, Turtle Beach revenue was 94.4 million, up 60% compared to the same quarter last year. Excluding PDP contributions, Revenues were up 15% compared to last year. Our growth continues to be driven by the ongoing success of our portfolio and strong sales of our latest groundbreaking products, like the Stealth 700 Gen 3 wireless headset, a premium multi-platform headset using our unique cross-play technology. Games industry site Game Rant noted in their review that the Stealth 700, quote, is definitely one of the best gaming headsets on the market right now, and a multi-platform gamer's dream. Thanks to our recent launches, we achieved sales this quarter with lower promotional spend, significantly boosting our profitability. Additionally, our strong revenue results reflect earlier than anticipated retail load-ins ahead of the holidays, as we saw activity during the quarter which was designed to mitigate the potential impact from the port strike. Considering these accelerated load-ins, our full year revenue guidance remains unchanged. Our adjusted EBITDA for the quarter was $16.3 million, a substantial improvement compared to the $1 million in the same period last year. We are pleased to see that the year-to-date growth of 7% for U.S. gaming accessories continues to outpace the overall gaming market, which has been roughly flat. Our gaming headsets revenue share increased 108 basis points in Q3 compared to the previous quarter following the launch of our new wireless headsets. Additional share gains are anticipated during the upcoming holidays following the mid Q3 launch of our new Stealth 700-3 premium wireless headset. In the controllers and game pads category, Turtle Beach revenue growth continued to significantly outpace the market with a 37.9% retail sales increase year-to-date compared to the U.S. controller market's growth of nearly 3%. Notably, our Victrix Pro BFG controller and Turtle Beach Stealth Ultra were the second and third best-selling third-party gamepads year-to-date. Our Riffmaster wireless guitar controllers, perfect for Fortnite Festival, continue dominating the music controller category with 97% share in the U.S. On the expense side, we continue to enhance our operational efficiencies, resulting in substantial profitability gains. Our gross margin of 36.2% for the third quarter expanded by 630 basis points year-over-year as a result of our focused cost optimization initiatives and the ongoing successful integration of PDP. We've seen reduced promotional spending following our recent new product launches which we expect to increase somewhat to normal holiday levels in Q4. It's worth noting that gross margin for the quarter would have been 38.3%, excluding Rocket brand transition reserves and PDP purchase accounting charges, neither of which are expected to continue moving forward. Our integration of PDP is progressing very well ahead of schedule and continues to drive value. We now anticipate achieving total annual synergies exceeding 13 million, surpassing our original estimate of 10 to 12 million. The expanded market opportunities from our newly combined product portfolio are exciting, and we foresee a long-term runway for growth. Beyond the acquisition cost synergies, we anticipate that there are long-term revenue synergies due to our enhanced product lineups and strong customer relationships. Furthermore, we continue to drive margin expansion through our previously communicated initiatives, including SKU rationalization, portfolio optimization, and the launch of our platform next generation products. The result of all of this is that we're raising our full year adjusted EBITDA guidance to a range of 55 million to 58 million, up from our prior range of 53 million to 56 million. With our strong underlying fundamentals driving increased cash generation, coupled with our positive outlook and view that our share price represents great value, we continue to buy back our stock during the third quarter. In the quarter, we repurchased a value of approximately 10.1 million of our stock, bringing our year-to-date repurchases to about 25.3 million. This underscores both our continued 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. Looking ahead, we are excited about the many opportunities in front of us. We'll continue to focus on innovation and operational excellence, which we are successfully leveraging to expand our market leadership. Our upcoming product launches and the ongoing integration of PDP will further strengthen our position in the broader gaming accessories market. we remain committed to delivering value to our shareholders and providing best-in-class products for gamers worldwide. John will now take us through the financials in more detail. John?