Executive Summary

Q2 delivered strong top-line and margin momentum: revenue rose 59% YoY to $76.5M, with organic (ex-PDP) growth of 15%, and gross margin expanded 540 bps to 30.2% as platforming and lower freight/promos flowed through .
Profitability inflected: Adjusted EBITDA was $3.0M (vs. $(5.7)M YoY), aided by cost actions and integration progress; underlying gross margin was ~34% excluding a $1.25M PDP inventory step-up and a $1.6M ROCCAT rebranding reserve .
Full-year guide: revenue maintained at $370–$380M; Adjusted EBITDA raised to $53–$56M (from $51–$54M) as PDP synergies arrive ahead of plan and cost discipline persists .
Capital returns accelerated: bought back ~952K shares for $15.2M (avg $15.97) and enabled a 10b5-1 plan via credit amendments; ~$31.4M remains on the authorization through Apr-9-2025 .
Note: S&P Global consensus estimates for Q2 2024 were unavailable via our data connection; estimate comparisons are therefore not presented (see Estimates Context).

What Went Well and What Went Wrong

What Went Well

Material growth and share gains: revenue +59% YoY to $76.5M with 15% organic growth ex-PDP; management cited leadership in headsets and “meaningful share gains in gaming controllers” .
Margin expansion and cost control: GAAP gross margin rose to 30.2% (+540 bps YoY) driven by product platforming/optimization, lower freight, and more efficient promotions; OpEx ex-acquisition costs fell ~7% YoY .
Integration ahead of schedule: PDP integration progressing faster than planned with realized synergies and expanded opportunities; management lifted FY Adjusted EBITDA guidance on execution strength .

Selected quotes:

“Significant gross margin expansion… and the integration of PDP that is ahead of schedule.” — CEO Cris Keirn
“We are raising our full year 2024 adjusted EBITDA guidance to a range of $53 million to $56 million.” — CFO John Hanson

What Went Wrong

GAAP loss persisted: Q2 net loss of $(7.5)M, or $(0.35) per share, though improved vs $(15.9)M/$(0.93) YoY .
Non-recurring charges: $1.251M acquired inventory step-up (PDP) and ~$1.6M ROCCAT inventory reserve depressed reported gross margin; integration-related expenses to continue in 2024 .
Leadership transition: CFO John Hanson announced intent to retire; while orderly, leadership changes can introduce execution risk .

Financial Results

Quarterly comparables (oldest → newest)

Metric	Q4 2023	Q1 2024	Q2 2024
Revenue ($M)	$99.54	$55.85	$76.48
Net Income (Loss) ($M)	$8.55	$0.16	$(7.52)
Diluted EPS ($)	$0.47	$0.01	$(0.35)
Gross Margin %	32.0%	31.9% (calc from rev/gp)	30.2%
Adjusted EBITDA ($M)	$13.95	$1.45	$3.04

Note: Q1 2024 gross margin % computed from reported revenue and gross profit .

Q2 YoY bridge

Metric	Q2 2023	Q2 2024	YoY
Revenue ($M)	$47.98	$76.48	+59%
Net Income (Loss) ($M)	$(15.92)	$(7.52)	Improved (loss narrows)
Diluted EPS ($)	$(0.93)	$(0.35)	Improved
Gross Margin %	24.7%	30.2%	+540 bps
Adjusted EBITDA ($M)	$(5.66)	$3.04	+$8.7M

KPIs and operating/context metrics

KPI	Q2 2024	Context
Share Repurchases	~$15.2M; ~952K shares (avg ~$15.97)	~$31.4M remaining through 4/9/2025
Net Debt (6/30/24)	$61.2M (debt $73.6M; cash $12.5M)	Revolver $24.0M; term loan ~$49.6M
Gross Margin (underlying)	~34% ex-step up and ROCCAT reserve	Step-up $1.251M; reserve ~$1.6M
Market growth (U.S., H1’24)	Accessories +~5%; Headsets +~12%; Third-party controllers +~15%	HEAR gaining controller share (+300+ bps H1)
Channel inventory	“Really balanced” post wireless/PC launches	Expect some Q3↔Q4 holiday timing shift

No segment revenue disclosure was provided in the 8-K; management discussed category trends qualitatively (headsets, controllers, PC peripherals, simulation) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Revenue	FY 2024	$370–$380M (3/13 & 5/7)	$370–$380M	Maintained
Adjusted EBITDA	FY 2024	$51–$54M (3/13 & 5/7)	$53–$56M	Raised

Notes: Guidance includes PDP operations beginning March 13, 2024 .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’23, Q1’24)	Current Period (Q2’24)	Trend
PDP acquisition & integration	Announced PDP acquisition; “transformational” with diversification and scale . Integration ramp and cost actions continuing .	Integration ahead of schedule; synergies realized; contributing to EBITDA raise .	Improving
Gross margin/cost actions	GM uplift on freight/promo normalization; platforming/SKU rationalization rolling into 2024 . Q1 GM +430 bps YoY; cost discipline .	GM 30.2%; ex step-up and ROCCAT reserve ~34%; OpEx ex-acq down ~7% YoY .	Improving
Capital allocation	Net cash improved; no revolver borrowings YE’23; set 2024 plan .	Maintaining FY guide; PDP term loan added .	~$15.2M buyback; 10b5-1 enabled; ~$31.4M remaining authorization .
Market/category dynamics	Anticipated category outperformance; >40% revenue outside headsets in 2024 .	Solid demand; new launches planned .	U.S. accessories +5%; headsets +12%; 3P controllers +15%; HEAR controller share +300+ bps H1 .
Channel/inventory	Clean-up post-pandemic; improving .	Proactive channel resets ahead of launches .	Channel “balanced”; ready for back half; some Q3→Q4 revenue timing sensitivity .
Platform cadence (Nintendo)	n/a	n/a	Nintendo cycle softness likely near term, but diversified platform mix; embedded in guide .
Leadership	n/a	n/a	CFO announced intent to retire .

Management Commentary

“Revenue… reached $76.5 million, a significant 59% increase year-over-year… Even excluding PDP, we saw healthy organic growth of 15%.” — CEO Cris Keirn
“Gross margin in the second quarter was 30.2% compared to 24.7% last year… driven by lower product cost… lower freight costs and more efficient promotional spend.” — CFO John Hanson
“We repurchased approximately $15 million of our stock… the largest repurchase in our history… [and] negotiated amendments to our credit agreements [to] implement a rule 10b5-1 plan.” — CFO John Hanson
“We are raising our full year adjusted EBITDA guidance… to between $53 million and $56 million.” — CFO John Hanson
“The integration of PDP is already yielding synergies and expanding our market opportunities.” — CEO Cris Keirn

Q&A Highlights

Channel/seasonality: Retail inventory “really healthy… balanced,” with potential Q3↔Q4 holiday timing shifts as retailers and consumers buy later; company “ready… for the back half” .
Non-GAAP/one-time effects: PDP inventory step-up was $1.251M in Q2 with ~$0.9–$1.0M remaining for 2H; ROCCAT rebranding reserve ~$1.6M; underlying Q2 GM ~34% excluding both .
PDP margin profile/integration costs: PDP gross margin impact “relatively neutral”; integration work continues with additional expenses through 2024 .
Capital return: repurchased ~952K shares at ~$15.97; 10b5-1 plan provides formulaic repurchase flexibility .
Platform cycle risk: Anticipated Nintendo-end-cycle softness is reflected in guidance; diversification across platforms and strong controller portfolio mitigate .

Estimates Context

S&P Global consensus for Q2 2024 (EPS, revenue, EBITDA) was unavailable via our data connection for HEAR; as a result, we cannot provide definitive actual vs. consensus comparisons. We searched for S&P Global estimates but were unable to retrieve them through our system at this time. Where relevant, management’s narrative indicates execution above internal plans (e.g., EBITDA raise), but we do not substitute that for Street consensus .

Key Takeaways for Investors

Execution momentum with quality of earnings improving: broad-based growth, structural gross margin drivers, and OpEx discipline are lifting profitability; EBITDA guidance raised on integration and cost traction .
Integration de-risking faster than expected: ahead-of-schedule PDP integration and realized synergies are improving visibility into FY EBITDA delivery .
Controller-led mix tailwind: U.S. 3P controllers +15% YTD and HEAR share +300+ bps in H1 support above-market growth vectors into holiday .
Capital returns as a catalyst: significant Q2 buyback and 10b5-1 plan signal confidence; ~$31.4M remains authorized through April 2025 .
Watch non-recurring items: PDP step-up and ROCCAT reserve depressed GAAP GM; underlying GM trajectory mid-30s as mix shifts to platformed next-gen launches .
Near-term sensitivities: holiday timing (Q3↔Q4), Nintendo cycle pause, and integration expenses persisting through 2024; CFO transition introduces modest leadership risk, though handoff appears orderly .
Medium-term thesis: diversified category mix, platformed product cost curve, and category-leading brands position HEAR to compound revenue and expand margins as synergies and scale accrue .

Turtle Beach Corp (HEAR)·Q2 2024 Earnings Summary