Turtle Beach Corporation

Greetings and welcome to the Turtle Beach fourth quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Jacques Cornet with ICR. Please go ahead.

Thank you, operator. On today's call, we'll be referring to the press release filed this afternoon that details the company's fourth quarter and year-end 2024 results. The release is available on the press releases page of the company's investor relations website, corp.turtlebeach.com. There, you'll also find the latest earnings presentation that supplements the information discussed on today's call. And 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 to publicly update or revise any forward-looking statements after this conference call. The company also notes that on this call, we'll 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 in the reconciliation tables provided in today's earnings press release and presentation. Hosting the call today are Chris Kern, Chief Executive Officer, and Mark Weinswig, Chief Financial Officer. With that, I'll turn the call over to Chris.

Thanks, Jacques. Good afternoon, everyone, and welcome to our fourth quarter and year-end 2024 earnings call. I'm thrilled to report that we ended a record-breaking 2024 with a record-breaking quarter. We achieved our highest ever quarterly results in both revenue and adjusted EBITDA, underscoring the strength and resilience of our strategy, execution, and business model. This strong performance was driven by several key factors. Our acquisition of PDP has been a game changer, significantly expanding our product portfolio and market reach, and infusing the company with more amazing talent and expertise. PDP delivered an immediate positive impact on our performance at the time of the acquisition, and the completion of our integration activities in Q4 continued to drive results. For the fourth quarter, revenue was $146.1 million, up 46.8% compared to the same quarter last year, driven primarily by incremental sales and retail distribution for PDP, as well as low single-digit percentage growth for Turtle Beach branded products. We were able to reduce our promotional spend as a percentage of revenue for the fourth quarter and full year on the strength of our next generation product launches in 2024, and we're pleased to see ASP increases as a result. This promotional approach also contributed to improved profitability that was achieved for the quarter and full year. Adjusted EBITDA for the fourth quarter was $35.7 million, a significant increase from $14 million in the same period last year. This substantial improvement, with our adjusted EBITDA growing at a faster pace than our revenue, reflects our ongoing focus to enhance efficiency and streamline our processes. As one example, we expect to realize more than $13 million in annual cost synergies from the PDP acquisitions. surpassing our initial expectations of $10 to $12 million. These results underscore our commitment to driving profitability and operational excellence as we continue to optimize our expanded portfolio and organization. To that point, our relentless focus on operational excellence has yielded substantial improvements across the company. From supply chain optimization to cost management, our efforts have enhanced efficiency and profitability while positioning us for sustained growth. These efforts include preparations and mitigations for the impact of any new tariffs. 2024 was truly a transformational year for Turtle Beach. We have built a solid foundation for future expansion, and I'm confident that we are well positioned to capitalize on the opportunities ahead. With that, let's dive into a few takeaways from 2024 and the fourth quarter. We're pleased to see that, as we expected, the full-year 2024 growth of 6% for U.S. gaming accessories outpaced the overall gaming market, which was slightly down per Circana data. Turtle Beach Branded Gaming Headset's revenue share in the U.S. increased 270 basis points in the fourth quarter compared to the previous quarter, supported by the launch of our new Stealth 700 Gen 3 Premium Wireless Headset built on our next-generation platform design. For the controllers and game pads category, Cercada data shows that our revenue growth in the U.S. significantly outpaced the market, with a 25% increase in retail sales for 2024, while the market grew about 2.5%. Notably, our premium Victrix Pro BFG and Turtle Beat Stealth Ultra controllers ranked as the second and third best-selling third-party game pads during the year. Additionally, our Riftmaster wireless guitar controllers perfect for Fortnite Festival, continued dominating the music controller category with the number one share in the U.S. Over the course of the year, our strong cash generation enabled us to continue to return value to our shareholders. For the full year, we executed nearly $28 million in share buybacks at an average price of $15.39 per share. These repurchases were the largest in our history, and underscore our confidence in Turtle Beach's long-term growth prospects and our dedication to enhancing shareholder value. As we move forward, we will maintain a sharp focus on capital allocation, ensuring that our financial strategies align with our goal of delivering sustained value and growth. Before turning the call over, I'd like to take a moment to acknowledge some important updates in our leadership team. First, I'm delighted to welcome Mark Weinswig as our new Chief Financial Officer. Mark brings a wealth of experience and a proven track record of financial leadership. We're confident that he will be instrumental in driving our financial strategy and supporting our growth initiatives. Welcome aboard, Mark. At the same time, I'd like to extend our gratitude to John Hanson as he embarks on retirement after 11 years of dedicated service to Turtle Beach. John's contributions have been invaluable in steering the company through many significant milestones and challenges. We want to thank John for his commitment and leadership and wish him all the best in his well-deserved retirement. Mark will now take us through the financials in more detail and 2025 guidance. Mark?