Executive Summary

Q3 delivered 60% year-over-year revenue growth to $94.4M, gross margin expanded 630 bps to 36.2%, and Adjusted EBITDA surged to $16.3M; diluted EPS was $0.16 versus $(0.21) last year .
Management raised FY2024 Adjusted EBITDA guidance to $55–$58M (from $53–$56M) on stronger margin execution and PDP integration synergies; revenue guidance was maintained at $370–$380M, implying 43–47% YoY growth .
The PDP acquisition is tracking ahead of schedule with anticipated annual synergies now “exceeding $13M” and continued share gains across headsets and controllers; organic revenue grew ~15% YoY excluding PDP .
The company repurchased $10.1M of stock in Q3 (688k shares at $14.70 average) after $15.2M in Q2, with $21.3M remaining under the program; capital allocation and guidance raise are catalysts into holiday season and early 2025 .

What Went Well and What Went Wrong

What Went Well

Gross margin expanded 630 bps YoY to 36.2% on lower promotions, product/freight costs; excluding ROCCAT transition reserves and PDP purchase accounting, gross margin would have been 38.3% (“upper 30s” run-rate) .
Integration of PDP is ahead of schedule; management now anticipates total annual synergies “exceeding $13 million,” above initial estimates, contributing to raised EBITDA guidance .
Product momentum: headset share rose ~108 bps QoQ post new wireless launches; controllers revenue growth is outpacing the market, with Victrix Pro BFG and Stealth Ultra among top-selling third-party gamepads YTD and Riffmaster holding ~97% U.S. music controller share .

Quotes:

“We now anticipate achieving total annual synergies exceeding $13 million, surpassing our initial estimates.” — CEO Cris Keirn
“Our gross margin expansion of 630 basis points year-over-year to 36.2% demonstrates the success of our cost optimization initiatives…” — CEO Cris Keirn
“Our gaming headsets revenue share increased 108 basis points in Q3… additional share gains are anticipated during the upcoming holidays.” — CEO Cris Keirn

What Went Wrong

Seasonal working capital build: net debt rose to $94.1M at Q3-end (inventory increased to $102.3M) ahead of holiday, partly from accelerated load-ins amid potential port strike risk .
Non-recurring costs in the quarter: $3.5M acquisition-related expense; PDP inventory step-up impacted Q2 and Q3 (completed by Q3); ROCCAT brand transition reserves also weighed on reported margin .
Higher promotional and marketing spend expected in Q4 (seasonality around Black Friday/Cyber Monday), tempering Q4 gross margin versus Q3 despite “upper 30s” run-rate .

Financial Results

Quarterly Performance (oldest → newest)

Metric	Q1 2024	Q2 2024	Q3 2024
Revenue ($USD Millions)	$55.848	$76.478	$94.363
Gross Margin (%)	31.8%	30.2%	36.2%
Operating Income ($USD Millions)	$(5.713)	$(4.111)	$6.423
Net Income ($USD Millions)	$0.155	$(7.524)	$3.413
Diluted EPS ($USD)	$0.01	$(0.35)	$0.16
Adjusted EBITDA ($USD Millions)	$1.449	$3.044	$16.268

Q3 Year-over-Year

Metric	Q3 2023	Q3 2024
Revenue ($USD Millions)	$59.158	$94.363
Gross Margin (%)	29.9%	36.2%
Net Income ($USD Millions)	$(3.606)	$3.413
Diluted EPS ($USD)	$(0.21)	$0.16
Adjusted EBITDA ($USD Millions)	$1.037	$16.268

KPIs and Balance Sheet

KPI	Q2 2024	Q3 2024
Share Repurchases ($USD Millions)	$15.2	$10.1
Shares Repurchased (000s)	~952	~688
Average Repurchase Price ($)	$15.97	$14.70
Net Debt ($USD Millions)	$61.2	$94.1
Inventory ($USD Millions)	$73.347	$102.263
Gross Margin ex. non-recurring (%)	34.0% (ex. PDP step-up and ROCCAT reserve)	38.3% (ex. items)
FY Adjusted EBITDA Guidance ($USD Millions)	$53–$56	$55–$58
FY Revenue Guidance ($USD Millions)	$370–$380	$370–$380

Segment breakdown: The company does not disclose revenue by segment; management commentary indicates diversified mix with headsets ~50–55% and “nearly half” from other categories post-PDP, but no audited segment table provided .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($USD Millions)	FY 2024	$370–$380 (maintained across Q1–Q3)	$370–$380	Maintained
Adjusted EBITDA ($USD Millions)	FY 2024	$51–$54 (Q1)	$53–$56 (Q2)	Raised (Q2)
Adjusted EBITDA ($USD Millions)	FY 2024	$53–$56 (Q2)	$55–$58 (Q3)	Raised (Q3)
Gross Margin Run-rate (%)	Q4 onward	n/a	“Upper 30s” run-rate (promo seasonal pressure in Q4)	Tone improved
Marketing/Promo Spend	Q4 2024	n/a	Higher YoY promo/marketing due to holidays	Increased

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
PDP integration & synergies	Early integration; pro forma EBITDA guide $51–$54; synergies expected; ahead of schedule by Q2	“Ahead of schedule”; annual synergies now “exceeding $13M”	Improving
Gross margin trajectory	Q1 31.8%; Q2 30.2%; ex-items Q2 ~34%; mix shifting to new products	Q3 36.2%; ex-items 38.3%; run-rate “upper 30s”; Q4 promo to temper	Upward, near-term seasonal moderation
Channel inventory & supply chain	Q1 drained channels ahead of launches; Q2 reload; retail healthy	Q3 accelerated load-ins to mitigate port strike; now “normal” heading into holiday	Normalized after precaution
Controllers momentum	Third-party controllers up ~15% YTD (Q2); premium gamepads gaining share	Company controllers rev +37.9% YTD; U.S. market growth ~3% YTD; top-selling BFG/Stealth Ultra	Company outgrowing market
Headset refresh & share	Q1 channel drain; Q2 launch of Stealth 500/600/Atlas Air; regained share	Q3 new Stealth 700 Gen 3; +108 bps QoQ share; PC headsets +150 bps YoY in U.S.	Positive momentum
Capital allocation	Authorized buybacks; $15.2M repurchased in Q2; 10b5-1 flexibility	$10.1M repurchased in Q3; $21.3M remaining authorization	Ongoing
Regional mix	Americas ~70–75%, EMEA ~25%; limited Asia exposure	Consistent; holiday demand tailwinds (CoD: Black Ops 6)	Stable mix

Management Commentary

“Excluding PDP's contributions, our organic revenue grew approximately 15% compared to last year… Our gross margin expansion of 630 basis points year-over-year to 36.2%…” — CEO Cris Keirn .
“We now anticipate achieving total annual synergies exceeding $13 million… Excluding ROCCAT transition reserves and PDP purchase accounting charges, gross margins would have been 38.3%.” — CEO/CFO .
“Our gaming headsets revenue share increased 108 basis points in Q3… Additional share gains are anticipated during the upcoming holidays.” — CEO Cris Keirn .
“We repurchased approximately $10.1 million of our stock… $21.3 million in potential buybacks remaining.” — CFO John Hanson .
“We continue to expect full year revenue to be between $370 million and $380 million… raising our full year adjusted EBITDA guidance to $55 million to $58 million.” — CFO John Hanson .

Q&A Highlights

Gross margin outlook: inventory step-up charges completed by Q3; ROCCAT reserves not expected to continue; Q4 gross margin “upper 30s” but seasonal promotions will weigh near-term .
Channel inventory: accelerated Q3 load-ins to hedge port strike risk left inventories briefly elevated, but normalized in November heading into holidays .
Marketing/promo cadence: marketing spend to rise sequentially and YoY in Q4 given holiday dynamics; promo spend impacts gross margin, separate from OpEx .
Capital uses: focus on paying down ABL with holiday collections while remaining opportunistic on buybacks; $21.3M authorization remaining .
Seasonality/PDP: combined portfolio seasonality similar to historic headset business; PDP expected to contribute normally in Q4 .

Estimates Context

S&P Global consensus for HEAR was unavailable due to missing mapping, so we cannot formally assess beats/misses versus Street estimates this quarter. Based on company disclosures, management’s raised FY2024 Adjusted EBITDA guidance and Q3 profitability inflection are likely to drive upward estimate revisions for EBITDA and margins; revenue guidance was maintained, suggesting Q3’s accelerated retail load-ins were timing-related rather than upside to FY revenue .
Note: We attempted to fetch S&P Global consensus, but HEAR mapping was unavailable in SPGI system at query time (tool error).

Key Takeaways for Investors

Margin inflection is real: Q3 gross margin at 36.2% (38.3% ex. items) with run-rate “upper 30s” supports a structurally higher profitability profile into 2025, even with Q4 seasonal promotions .
Guidance momentum: FY Adjusted EBITDA guidance raised to $55–$58M; revenue guide maintained at $370–$380M, implying continued execution with PDP synergies ahead of schedule .
Product-led share gains: refreshed wireless headsets and premium controllers are driving share and mix benefits; headset share +108 bps QoQ and controllers revenue growth +37.9% YTD vs market ~3% .
Capital returns and balance sheet: $25.3M repurchased YTD; expect near-term focus on ABL paydown post-holiday collections while retaining buyback flexibility ($21.3M remaining) .
Seasonal working capital: inventory build and net debt spike in Q3 are typical pre-holiday; expect normalization as collections come in during Q4/Q1 .
Execution catalysts: continued PDP integration (>$13M synergies), holiday demand tailwinds (e.g., CoD: Black Ops 6), and sustained accessories outperformance vs broader gaming market .
Watch Q4 dynamics: higher promo/marketing spend will temper near-term margins; monitor gross margin sustainability and sell-through to validate run-rate trajectory .

Turtle Beach Corp (HEAR)·Q3 2024 Earnings Summary