| Parametric Sound Announces First Quarter 2014 Results |
-- First Quarter Net Revenue Increased 30% to $38.3 million -- First Quarter Gross Profit Increased 42% to $12.3 million
SAN DIEGO, May 12, 2014 /PRNewswire/ -- Parametric Sound Corporation (NASDAQ: HEAR) today announced financial results for the first quarter ended March 31, 2014.
First Quarter 2014 Financial Highlights
-- Net revenue of $38.3 million, a 30% increase from $29.5 million in the first quarter of 2013. -- Gross profit of $12.3 million, a 42% increase from $8.6 million in the first quarter of 2013. -- Gross margin of 32.1%, a 290 basis point increase from 29.2% in the first quarter of 2013. -- Adjusted EBITDA (as defined below) for the headset business totaled approximately $4.8 million, a 182% increase from $1.7 million in the first quarter of 2013. The Company invested approximately $2 million in HyperSound during the quarter, Adjusted EBITDA on a consolidated basis was $2.8 million. -- Headset Adjusted EBITDA margins of 12.5%, a 680 basis point increase from 5.7% in the first quarter of 2013.
Recent Developments
-- Signed a new $60 million global asset backed credit facility with Bank of America that better supports our domestic and international growth strategies. -- Completed equity offering that raised $35.6 million net of all commissions and fees that improved stock liquidity and increased institutional ownership. -- Used proceeds from the equity offering to significantly improve the balance sheet; as of April 29, 2014 cash and cash equivalents were approximately $20 million, an increase of $14.5 million from March 31, 2014, and net debt was approximately $24.8 million, a reduction of $35.9 million from March 31, 2014. -- Received U.S. Food and Drug Administration (FDA) clearance for the marketing of the HyperSound Audio System as a hearing improvement device. -- Changed ticker symbol to HEAR and moved closer to completing a corporate name change to Turtle Beach Corporation and related CUSIP change, which is expected to occur May 28th.
"It has been a busy and productive first quarter for Parametric Sound, and a formative period during which we laid the groundwork for what I believe will be a bright future for our company and our stockholders," commented Juergen Stark, chief executive officer of Parametric Sound. "In less than 90 days we completed the merger and strengthened our financial position by signing a new asset backed credit facility, paying down long-term debt, and raising capital through a common stock offering. In that same 90 day window, we successfully capitalized on the initial opportunities created by the gaming console transition through the well-executed launch of the first Xbox One headsets to market. We've also moved quickly to get the right people and pieces in place to successfully execute on the commercialization of our HyperSound technology, which will begin in earnest later this year. We are confident that our recent actions have put the Company in a stronger position to capitalize on the many global opportunities that lie ahead."
First Quarter 2014 Review
Net revenue increased 30% to $38.3 million, compared with $29.5 million in the same period in 2013. The increase in revenue was driven primarily by demand for the Company's new Xbox One headsets, which launched during the first quarter of 2014.
Gross profit increased 42% to $12.3 million, compared to $8.6 million in the same period in 2013. Gross margin increased 290 basis points to 32.1% from 29.2% in the same period in 2013 driven primarily by a favorable product and channel mix.
Operating expenses, excluding $4.2 million in one-time business transactions costs related to the VTBH and Parametric Sound merger that closed on January 15, 2014, increased 40% to $12.6 million, or 32.8% of net revenue, compared to $9.0 million, or 30.3% of net revenue in the same period in 2013. The increase in operating expenses was primarily attributable to investments in personnel and R&D to support future growth of HyperSound technology as well as additional general and administrative costs associated with being a larger public company, partially offset by lower marketing expenses.
Adjusted EBITDA (as defined below) for the headsets business totaled approximately $4.8 million, a 182% increase from $1.7 million in the first quarter of 2013. The Company invested approximately $2 million in HyperSound during the quarter, Adjusted EBITDA on a consolidated basis was $2.8 million.
"Our first quarter results represent a very good start to the new fiscal year," commented Mr. Stark. "Demand for our first Xbox One compatible headsets, including the popular Titanfall licensed series, has been strong, driving robust top-line growth and gross margin expansion versus a year ago. We expect the momentum across our Turtle Beach business to remain positive as household penetration of Xbox One and PlayStation 4 gaming consoles continues to increase in the U.S. and in international markets."
Balance Sheet Highlights
As of March 31, 2014, cash and cash equivalents totaled $5.5 million. As of April 29, 2014, immediately after the closing of our common stock offering, our cash and cash equivalents totaled approximately $20 million. As of March 31, 2014, the Company had outstanding net debt of $60.7 million. The debt at March 31, 2014 consisted of $34.5 million drawn down from our revolver, $17.7 million of subordinated notes and $14.0 million in Series B Preferred Stock. Following the closing of the offering, on April 29, 2014, the Company's net debt outstanding was $24.8 million, a decrease of $35.9 million. Total inventory as of March 31, 2014 was $41.6 million, a decrease of 16.2% as compared to the same period in 2013. There were approximately 37.7 total shares outstanding on March 31, 2014. Immediately after the closing of the offering on April 29, 2014, there were approximately 41.7 million.
Full Year 2014 Expectations
Based on first quarter results and current visibility, the Company is reiterating its outlook for the full year. The Company expects net revenues in the Turtle Beach headset business to be in the range of $210 to $230 million representing growth of approximately 24% over 2013 levels at the mid-point of the range. The anticipated revenue growth is primarily driven by the expected rebound in the core console gaming headset market, which the Company expects to be a multi-year trend. Net revenues from the HyperSound business are still expected to be in the range of $1 to $4 million consistent with our expectations for the early stages of commercializing the HyperSound technology. Total company gross margins are expected to be in the 30% range, a 180 basis point increase over 2013 with further improvement expected in 2015 as Turtle Beach's gaming headset product portfolio for new consoles expands and HyperSound becomes a more material part of the revenues.
Full year Adjusted EBITDA for the headset business is expected to be in the range of $30 to $35 million representing year-over-year growth of 134% at the midpoint of the range. Full year Adjusted EBITDA margin is expected to be approximately 15%, a 730 basis point increase over 2013 at the mid-point of the range. The Company remains committed to investing in HyperSound in order to capitalize on the broad array of expected future opportunities for this technology. Adjusted EBITDA for the businesses in 2014 is expected to be in the range of $20-$25 million, reflecting the impact of a $10 million anticipated investment during the year in HyperSound.
Conference Call Details
Juergen Stark, CEO, and John Hanson, CFO, will host a conference call and simultaneous webcast to discuss the financial results and outlook today, May 12, 2014, at 1:30 PM Pacific Time / 4:30 PM Eastern Time. To participate in the conference call, investors should dial (877) 303-9855 (domestic) or (408) 337-0154 (international) and provide the pass code 36801752, 10 minutes prior to the scheduled start of the call. A simultaneous audio-only webcast of the call may be accessed on the Internet at www.parametricsound.com. An archive of the webcast will be available on the Company's website for approximately one year, and a recorded replay of the call will be available for one week at (855) 859-2056 or (404) 537-3406 and entering conference ID number 36801752.
Non-GAAP Financial Measures
In addition to its reported results, the Company has included in this earnings release certain financial results that the Securities and Exchange Commission defines as "non-GAAP financial measures." Management believes that such non-GAAP financial measures, when read in conjunction with the Company's reported results, can provide useful supplemental information for investors analyzing period to period comparisons of the Company's results. These non-GAAP financial measures relate to presenting Adjusted EBITDA, as defined by the Company, for the years ended December 31, 2013, and 2012. Please see a reconciliation of GAAP results to Adjusted EBITDA, which is included below for the first quarters ended March 31, 2014, and 2013.
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Parametric Sound Corporation Condensed Consolidated Balance Sheet (in thousands, except share and per-share data) As of As of December 31, March 31, 2014 2013 ---------------- ---------------- ASSETS (unaudited) CURRENT ASSETS: Cash and cash equivalents $ 5,552 $ 6,509 Accounts receivable, net 28,904 48,542 Inventories, net 41,584 49,643 Deferred tax assets 9,745 2,214 Prepaid expenses and other current assets 4,131 3,561 Prepaid income taxes 2,925 2,925 ---------------- -------------- Total Current Assets 92,841 113,394 Property and equipment, net 6,229 7,369 Deferred financing costs, net 449 1,575 Deferred tax assets, long-term portion 6,322 827 Intangible assets, net 40,210 3,972 Goodwill 80,868 -- Other assets 119 170 TOTAL ASSETS $ 227,038 $ 127,307 ============ ========== LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Revolving credit facilities $ 34,490 $ 39,736 Term loan, current portion -- 14,500 Subordinated notes 17,737 -- Accounts payable 28,833 44,136 Accrued liabilities 10,341 8,615 Due to shareholders, current portion 3,125 3,125 Capital lease obligation, current portion 38 -- Other current liabilities 288 1,097 ---------------- -------------- Total Current Liabilities 94,852 111,209 Series B redeemable preferred stock 13,983 13,713 Income tax payable, long-term portion 1,986 1,986 Capital lease obligation, long-term portion 75 -- Deferred tax liabilities 14,325 850 Subordinated note -- 10,342 ---------------- -------------- TOTAL LIABILITIES 125,221 138,100 ---------------- -------------- Commitments and Contingencies Series A convertible stock, $0.01 par value - 50,000,000 shares authorized; 48,689,555 shares issued and outstanding as of December 31, 2013 -- 24,345 STOCKHOLDERS' EQUITY (DEFICIT) Common stock, $0.001 par value - 50,000,000 shares authorized; 37,651,247 shares issued and outstanding as of March 31, 2014 and 12,700,460 shares issued and outstanding as of December 31, 2013 38 13 Additional paid-in capital 85,678 (54,031) Retained earnings 15,868 18,775 Accumulated other comprehensive income 233 105 ---------------- -------------- TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 101,817 (35,138) ---------------- -------------- TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) $ 227,038 $ 127,307 ============ ========== Parametric Sound Corporation Condensed Consolidated Statements of Operations (unaudited) (in thousands) Quarter Ended Quarter Ended March 31, 2014 March 31, 2013 ---------------- ------------------ Net Revenue $ 38,288 $ 29,533 Cost of Revenue 26,012 20,908 Gross Profit 12,276 8,625 ---------------- ---------------- Operating expenses: Selling and marketing 7,000 5,706 Research and development 1,998 887 General and administrative 3,573 2,370 Business transaction costs 4,228 -- Total operating expenses 16,799 8,963 ---------------- ---------------- Operating loss (4,523) (338) Other (income) expense, net: Interest expense 4,240 1,314 Other (income) expense, net (25) 389 Total other expense, net 4,215 1,703 ---------------- ---------------- Loss before (benefit) provision for income taxes (8,738) (2,041) (Benefit) provision for income taxes (5,832) 263 Net loss $ (2,906) $ (2,304) ============ ============ Net loss per share: Basic $ (0.09) $ (0.18) ============ ============ Diluted $ (0.09) $ (0.18) ============ ============ Weighted-average shares used to compute net loss per share: Basic 33,715 12,700 ================ ================ Diluted 33,715 12,700 ================ ================ Parametric Sound Corporation GAAP to Adjusted EBITDA Reconciliation GAAP Adj Adj Adj Adj Adjusted Q1 2014 Reported Depr Stock Comp Amort Trans Exp EBITDA
Revenue, net $ 38,288 $ - $ - $ - $ - $ 38,288 Cost of Revenue $ 26,012 $ (54) $ (30) $ (6) $ - $ 25,922 ----------- ----------- ----------- ---------- ----------- ---------- Gross Profit $ 12,276 $ 54 $ 30 $ 6 $ - $ 12,366 Operating Expenses Selling & Marketing $ 7,000 $ (1,361) $ (120) $ (231) $ - $ 5,288 Product Development $ 1,998 $ (79) $ (206) $ - $ - $ 1,713 Gen & Admin $ 3,573 $ (320) $ (693) $ - $ - $ 2,560 Business Trans $ 4,228 $ - $ - $ - $ (4,228) $ - ----------- ----------- ----------- ---------- ----------- ---------- Total Operating Exp $ 16,799 $ (1,760) $ (1,019) $ (231) $ (4,228) $ 9,561 Operating Income (Loss) $ (4,523) $ 1,814 $ 1,049 $ 237 $ 4,228 $ 2,805 Other Income Interest Expense, net $ 4,240 Other Expense, net $ (25) $ (25) ----------- ---------- Total Other Expense, net $ 4,215 Loss Before Taxes $ (8,738) Tax Benefit $ (5,832) ----------- Net Income(Loss) $ (2,906) Adjusted EBITDA $ 2,830 GAAP Adj Adj Adj Adj Adjusted Q1 2013 Reported Depr Stock Comp Amort Trans Exp EBITDA Revenue, net $ 29,533 $ - $ - $ - $ - $ 29,533 Cost of Revenue $ 20,908 $ (34) $ (20) $ - $ - $ 20,854 ----------- ---------- ---------- ---------- ---------- --------- Gross Profit $ 8,625 $ 34 $ 20 $ - $ - $ 8,679 Operating Expenses Selling & Marketing $ 5,706 $ (852) $ (75) $ (231) $ - $ 4,548 Product Development $ 887 $ (13) $ (65) $ - $ - $ 809 Gen & Admin $ 2,370 $ (37) $ (548) $ - $ (527) $ 1,258 Business Trans $ - $ - $ - $ - $ - $ - ----------- ---------- ---------- ---------- ---------- --------- Total Operating Exp $ 8,963 $ (902) $ (688) $ (231) $ (527) $ 6,615 Operating Income (Loss) $ (338) $ 936 $ 708 $ 231 $ 527 $ 2,064 Other Income Interest Expense,net $ 1,314 Other Income, net $ 389 $ 389 ----------- --------- Total Other Expense, net $ 1,703 Loss Before Taxes $ (2,041) Tax Provision $ 263 ----------- Net Income(Loss) $ (2,304) Adjusted EBITDA $ 1,675 ---------------------- ---------
| Parametric Sound Announces Ken Potashner Leaving Board of Directors |
SAN DIEGO, May 12, 2014 /PRNewswire/ -- Parametric Sound Corporation (NASDAQ: HEAR) today announced Kenneth F. Potashner has stepped down from the company's board of directors.
"It has been a pleasure serving on the Parametric Sound board, and helping to guide Parametric Sound and Turtle Beach through a successful merger," Potashner said. "I am confident in the combined company's prospects for growth and long-term success, and I am proud to have played a role in those efforts."
Mr. Potashner joined the Board of Parametric Sound in December 2011 and was appointed executive chairman March 2012. After the merger with Turtle Beach, Mr. Potashner remained on the board and served on the compensation committee.
"Ken has made invaluable contributions to Parametric Sound and the development of our HyperSound business," said Juergen Stark, chief executive officer of Parametric Sound. "Ken has invested his valuable time and talent to help make our company successful and we will miss his passion for the business."
Mr. Potashner has served in leadership positions at a number of technology companies, including Chairman of the Board of Directors of Maxwell Technologies, Inc., a manufacturer of ultracapacitors, microelectronics and high voltage capacitors, President, Chief Executive Officer and Chairman of SONICblue Incorporated (formerly S3 Incorporated), a supplier of digital media appliances and services, and Executive Vice President and General Manager of Disk Drive Operations for Conner Peripherals, a manufacturer of storage systems.
Ken serves on the boards of directors of a number of private technology companies, and is Chairman of the Board of Newport Corporation.
About Parametric Sound
Parametric Sound Corporation is an audio technology company that markets innovative products under the Turtle Beach and HyperSound brands.
The Company designs and markets premium audio peripherals for video game consoles, personal computers and mobile devices under the brand Turtle Beach (TurtleBeach.com), including officially-licensed headsets for the next-generation Xbox One and PlayStation 4 consoles. Turtle Beach is the leading brand in video game audio and the official audio provider for Major League Gaming, the world's largest eSports league, and Twitch, the world's leading video platform and community for gamers. |
