Turtle Beach Corp Q4 FY2024 earnings call

• 2024 was a transformational year with the company achieving record quarterly results in Q4, driven by PDP acquisition, next-generation product launches, and improved profitability.
• The full year 2024 saw U.S. gaming accessories growth of 6% outpacing the overall market. Turtle-Beach-branded gaming headsets and controllers/game pads categories performed well.
• The company executed nearly $28 million in share buybacks in 2024. Welcomed Mark Weinswig as new CFO and thanked John Hanson for retirement.
• Fourth quarter gross margin improved to 37%, operating expenses were 21% of revenue, and adjusted EBITDA was a record quarterly amount.

For the fourth quarter, revenue was $146.1 million, up 46.8% compared to the same quarter last year. Adjusted EBITDA for the fourth quarter was $35.7 million, a significant increase from $14 million in the same period last year. For the full year, adjusted EBITDA was $56.4 million compared to $6.5 million in the prior year. The acquisition of PDP has expanded the product portfolio and market reach. The company expects to realize more than $13 million in annual cost synergies from the PDP acquisition. Turtle-Beach-branded gaming headsets revenue share in the U.S. increased 270 basis points in the fourth quarter. In the controllers and game pads category, U.S. revenue growth significantly outpaced the market with a 25% increase in retail sales for 2024.

• Full year 2025 revenue expected in the range of $395 million to $405 million, representing 7% growth at midpoint compared to 2024.
• Full year 2025 adjusted EBITDA expected in the range of $68 million to $72 million, with midpoint showing greater than 200 basis point improvement in adjusted EBITDA margin.
• First quarter expected to account for approximately 15% to 16% of full year revenues.
• Full year 2025 guidance includes expected net impact of current tariffs.

• The company is actively monitoring the changing tariff environment, which is a dynamic situation that could impact results.

Q: Could you put a number on the impact of tariffs?

A: It would be in the range of several million of EBITDA, with mitigations in place but dynamic environment making exact estimation challenging.

Q: On margin, with the inventory charge added back, what about future gross margin?

A: The company is focusing on mid- to high 30s in gross margin going forward.

Q: Impact of currency changes and if factored into guidance?

A: Currently seeing benefits from FX, but no hedging, and natural hedge from different currency revenues considered in guidance.

Q: Seasonality and adjusted EBITDA guidance, operating expenses?

A: Expect to continue getting leverage on operating expenses due to acquisition synergies and streamlining processes, with seasonality similar to a run rate year but with lower run rate level than past.