Nevada
|
27-2767540
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification Number)
|
|
|
11011 Via Frontera, Suite A/B
San Diego, California
|
92127
|
(Address of principal executive offices)
|
(Zip Code)
|
|
|
|
Page
|
PART I. FINANCIAL INFORMATION
|
|
|
|
|
|
Item 1.
|
Financial Statements (unaudited)
|
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 3.
|
||
|
|
|
Item 4.
|
||
|
|
|
PART II. OTHER INFORMATION
|
||
|
|
|
Item 1.
|
||
|
|
|
Item 1A.
|
||
|
|
|
Item 5.
|
|
|
|
|
|
Item 6.
|
||
|
|
|
SIGNATURES
|
|
June 30,
2018 |
|
December 31, 2017
|
||||
|
(unaudited)
|
|
|
||||
ASSETS
|
(in thousands, except par value and share amounts)
|
||||||
Current Assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
9,108
|
|
|
$
|
5,247
|
|
Accounts receivable, net
|
34,582
|
|
|
50,534
|
|
||
Inventories
|
28,043
|
|
|
27,518
|
|
||
Prepaid expenses and other current assets
|
5,190
|
|
|
3,467
|
|
||
Total Current Assets
|
76,923
|
|
|
86,766
|
|
||
Property and equipment, net
|
2,839
|
|
|
4,677
|
|
||
Intangible assets, net
|
1,196
|
|
|
1,404
|
|
||
Deferred income taxes
|
127
|
|
|
362
|
|
||
Other assets
|
1,095
|
|
|
1,042
|
|
||
Total Assets
|
$
|
82,180
|
|
|
$
|
94,251
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|||
Current Liabilities:
|
|
|
|
|
|||
Revolving credit facility
|
$
|
—
|
|
|
$
|
38,467
|
|
Term loans
|
375
|
|
|
4,173
|
|
||
Accounts payable
|
29,976
|
|
|
13,459
|
|
||
Other current liabilities
|
14,061
|
|
|
11,451
|
|
||
Total Current Liabilities
|
44,412
|
|
|
67,550
|
|
||
Term loans, long-term portion, net of unamortized debt issuance costs of $734 and $759
|
11,391
|
|
|
6,789
|
|
||
Series B redeemable preferred stock
|
—
|
|
|
18,921
|
|
||
Subordinated notes - related party, net of unamortized discount of $811 and $1,075
|
19,092
|
|
|
20,836
|
|
||
Other liabilities
|
2,311
|
|
|
2,312
|
|
||
Total Liabilities
|
77,206
|
|
|
116,408
|
|
||
Commitments and Contingencies
|
|
|
|
||||
Stockholders' Equity (Deficit)
|
|
|
|
|
|
||
Common stock, $0.001 par value - 25,000,000 shares authorized; 13,794,251 and 12,349,449 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively
|
14
|
|
|
12
|
|
||
Additional paid-in capital
|
167,668
|
|
|
148,082
|
|
||
Accumulated deficit
|
(162,390
|
)
|
|
(170,048
|
)
|
||
Accumulated other comprehensive loss
|
(318
|
)
|
|
(203
|
)
|
||
Total Stockholders' Equity (Deficit)
|
4,974
|
|
|
(22,157
|
)
|
||
Total Liabilities and Stockholders' Equity (Deficit)
|
$
|
82,180
|
|
|
$
|
94,251
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
2018 |
|
June 30,
2017 |
|
June 30,
2018 |
|
June 30,
2017 |
||||||||
|
(in thousands, except per-share data)
|
||||||||||||||
Net revenue
|
$
|
60,805
|
|
|
$
|
19,112
|
|
|
$
|
101,691
|
|
|
$
|
33,464
|
|
Cost of revenue
|
40,528
|
|
|
12,811
|
|
|
66,385
|
|
|
24,947
|
|
||||
Gross profit
|
20,277
|
|
|
6,301
|
|
|
35,306
|
|
|
8,517
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Selling and marketing
|
6,818
|
|
|
5,529
|
|
|
12,747
|
|
|
9,978
|
|
||||
Research and development
|
1,327
|
|
|
1,697
|
|
|
2,656
|
|
|
3,087
|
|
||||
General and administrative
|
3,863
|
|
|
4,070
|
|
|
7,848
|
|
|
8,241
|
|
||||
Restructuring charges
|
—
|
|
|
(30
|
)
|
|
—
|
|
|
268
|
|
||||
Total operating expenses
|
12,008
|
|
|
11,266
|
|
|
23,251
|
|
|
21,574
|
|
||||
Operating income (loss)
|
8,269
|
|
|
(4,965
|
)
|
|
12,055
|
|
|
(13,057
|
)
|
||||
Interest expense
|
1,258
|
|
|
1,835
|
|
|
3,263
|
|
|
3,675
|
|
||||
Other non-operating expense (income), net
|
410
|
|
|
(214
|
)
|
|
165
|
|
|
(265
|
)
|
||||
Income (loss) before income tax
|
6,601
|
|
|
(6,586
|
)
|
|
8,627
|
|
|
(16,467
|
)
|
||||
Income tax expense
|
300
|
|
|
475
|
|
|
364
|
|
|
520
|
|
||||
Net income (loss)
|
$
|
6,301
|
|
|
$
|
(7,061
|
)
|
|
$
|
8,263
|
|
|
$
|
(16,987
|
)
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.47
|
|
|
$
|
(0.57
|
)
|
|
$
|
0.64
|
|
|
$
|
(1.38
|
)
|
Diluted
|
$
|
0.40
|
|
|
$
|
(0.57
|
)
|
|
$
|
0.56
|
|
|
$
|
(1.38
|
)
|
Weighted average number of shares:
|
|
|
|
|
|
|
|
||||||||
Basic
|
13,401
|
|
|
12,337
|
|
|
12,877
|
|
|
12,325
|
|
||||
Diluted
|
15,644
|
|
|
12,337
|
|
|
14,816
|
|
|
12,325
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30, 2018
|
|
June 30, 2017
|
|
June 30, 2018
|
|
June 30, 2017
|
||||||||
|
(in thousands)
|
||||||||||||||
Net income (loss)
|
$
|
6,301
|
|
|
$
|
(7,061
|
)
|
|
$
|
8,263
|
|
|
$
|
(16,987
|
)
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustment
|
(270
|
)
|
|
118
|
|
|
(115
|
)
|
|
158
|
|
||||
Other comprehensive income (loss)
|
(270
|
)
|
|
118
|
|
|
(115
|
)
|
|
158
|
|
||||
Comprehensive income (loss)
|
$
|
6,031
|
|
|
$
|
(6,943
|
)
|
|
$
|
8,148
|
|
|
$
|
(16,829
|
)
|
|
Six Months Ended
|
||||||
|
June 30, 2018
|
|
June 30, 2017
|
||||
|
(in thousands)
|
||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
||
Net income (loss)
|
$
|
8,263
|
|
|
$
|
(16,987
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
2,204
|
|
|
2,213
|
|
||
Amortization of intangible assets
|
156
|
|
|
170
|
|
||
Amortization of debt financing costs
|
642
|
|
|
781
|
|
||
Stock-based compensation
|
822
|
|
|
817
|
|
||
Accrued interest on Series B redeemable preferred stock
|
501
|
|
|
702
|
|
||
Paid-in-kind interest
|
1,256
|
|
|
1,196
|
|
||
Deferred income taxes
|
235
|
|
|
(43
|
)
|
||
Reversal of sales returns reserve
|
(489
|
)
|
|
(2,438
|
)
|
||
Provision for doubtful accounts
|
144
|
|
|
3
|
|
||
Provision for obsolete inventory
|
1,766
|
|
|
1,689
|
|
||
Loss on disposal of property and equipment
|
93
|
|
|
—
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
15,692
|
|
|
47,073
|
|
||
Inventories
|
(2,291
|
)
|
|
(907
|
)
|
||
Accounts payable
|
16,461
|
|
|
(601
|
)
|
||
Prepaid expenses and other assets
|
(1,723
|
)
|
|
(505
|
)
|
||
Income taxes payable
|
293
|
|
|
329
|
|
||
Other liabilities
|
2,316
|
|
|
(6,845
|
)
|
||
Net cash provided by operating activities
|
46,341
|
|
|
26,647
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
||||
Purchase of property and equipment
|
(402
|
)
|
|
(506
|
)
|
||
Net cash used for investing activities
|
(402
|
)
|
|
(506
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
||||
Borrowings on revolving credit facilities
|
81,991
|
|
|
51,909
|
|
||
Repayment of revolving credit facilities
|
(120,458
|
)
|
|
(82,638
|
)
|
||
Repayment of capital leases
|
—
|
|
|
(4
|
)
|
||
Proceeds from term loan
|
3,265
|
|
|
—
|
|
||
Repayment of term loan
|
(2,485
|
)
|
|
(427
|
)
|
||
Repayment of subordinated notes - related party
|
(3,265
|
)
|
|
—
|
|
||
Settlement of Series B Preferred Stock
|
(1,390
|
)
|
|
—
|
|
||
Proceeds from exercise of stock options
|
734
|
|
|
—
|
|
||
Debt financing costs
|
(405
|
)
|
|
—
|
|
||
Net cash used for financing activities
|
(42,013
|
)
|
|
(31,160
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(65
|
)
|
|
74
|
|
||
Net decrease in cash and cash equivalents
|
3,861
|
|
|
(4,945
|
)
|
||
Cash and cash equivalents - beginning of period
|
5,247
|
|
|
6,183
|
|
||
Cash and cash equivalents - end of period
|
$
|
9,108
|
|
|
$
|
1,238
|
|
|
|
|
|
||||
SUPPLEMENTAL DISCLOSURE OF INFORMATION
|
|
|
|
||||
Cash paid for interest
|
$
|
763
|
|
|
$
|
918
|
|
Cash paid for income taxes
|
$
|
—
|
|
|
$
|
—
|
|
Exchange of Series B Preferred Stock
|
$
|
18,032
|
|
|
$
|
—
|
|
|
Common Stock
|
|
Additional Paid-In Capital
|
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Total
|
||||||||||||
|
Shares
|
Amount
|
|
|
|
|
|||||||||||||||
|
(in thousands)
|
||||||||||||||||||||
Balance at December 31, 2017
|
12,349
|
|
$
|
12
|
|
|
$
|
148,082
|
|
|
$
|
(170,048
|
)
|
|
$
|
(203
|
)
|
|
$
|
(22,157
|
)
|
Cumulative effect of the adoption of ASC 606
|
—
|
|
—
|
|
|
—
|
|
|
(605
|
)
|
|
—
|
|
|
(605
|
)
|
|||||
Issuance of common stock in exchange for Series B preferred stock, net of issuance costs
|
1,307
|
|
1
|
|
|
18,031
|
|
|
|
|
|
|
18,032
|
|
|||||||
Issuance of restricted stock
|
28
|
|
—
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|||||||
Net income
|
—
|
|
—
|
|
|
—
|
|
|
8,263
|
|
|
—
|
|
|
8,263
|
|
|||||
Other comprehensive income
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(115
|
)
|
|
(115
|
)
|
|||||
Stock options exercised
|
110
|
|
1
|
|
|
733
|
|
|
—
|
|
|
—
|
|
|
734
|
|
|||||
Stock-based compensation
|
|
—
|
|
|
822
|
|
|
—
|
|
|
—
|
|
|
822
|
|
||||||
Balance at June 30, 2018
|
13,794
|
|
$
|
14
|
|
|
$
|
167,668
|
|
|
$
|
(162,390
|
)
|
|
$
|
(318
|
)
|
|
$
|
4,974
|
|
•
|
Level 1 — Quoted prices in active markets for identical assets or liabilities.
|
•
|
Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
|
•
|
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
|
|
June 30, 2018
|
|
December 31, 2017
|
||||||||||||
|
Reported
|
|
Fair Value
|
|
Reported
|
|
Fair Value
|
||||||||
|
(in thousands)
|
||||||||||||||
Financial Assets and Liabilities:
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
9,108
|
|
|
$
|
9,108
|
|
|
$
|
5,247
|
|
|
$
|
5,247
|
|
Revolving credit facility
|
—
|
|
|
—
|
|
|
38,467
|
|
|
38,467
|
|
||||
Term loans
|
12,500
|
|
|
13,020
|
|
|
11,721
|
|
|
11,329
|
|
||||
Subordinated notes
|
19,903
|
|
|
22,394
|
|
|
21,911
|
|
|
22,442
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(in thousands)
|
||||||||||||||
Balance, beginning of period
|
$
|
4,260
|
|
|
$
|
3,033
|
|
|
$
|
5,533
|
|
|
$
|
4,591
|
|
Reserve accrual
|
5,184
|
|
|
951
|
|
|
8,441
|
|
|
2,082
|
|
||||
Recoveries and deductions, net
|
(4,400
|
)
|
|
(1,831
|
)
|
|
(8,930
|
)
|
|
(4,520
|
)
|
||||
Balance, end of period
|
$
|
5,044
|
|
|
$
|
2,153
|
|
|
$
|
5,044
|
|
|
$
|
2,153
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
|
(in thousands)
|
||||||
Raw materials
|
$
|
1,581
|
|
|
$
|
837
|
|
Finished goods
|
26,462
|
|
|
26,681
|
|
||
Total inventories
|
$
|
28,043
|
|
|
$
|
27,518
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
|
(in thousands)
|
||||||
Machinery and equipment
|
$
|
1,506
|
|
|
$
|
1,396
|
|
Software and software development
|
300
|
|
|
383
|
|
||
Furniture and fixtures
|
530
|
|
|
525
|
|
||
Tooling
|
1,997
|
|
|
1,968
|
|
||
Leasehold improvements
|
1,327
|
|
|
1,318
|
|
||
Demonstration units and convention booths
|
9,308
|
|
|
11,719
|
|
||
Total property and equipment, gross
|
14,968
|
|
|
17,309
|
|
||
Less: accumulated depreciation and amortization
|
(12,129
|
)
|
|
(12,632
|
)
|
||
Total property and equipment, net
|
$
|
2,839
|
|
|
$
|
4,677
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
|
(in thousands)
|
||||||
Accrued vendor expenses
|
$
|
242
|
|
|
$
|
652
|
|
Accrued royalties
|
4,361
|
|
|
2,848
|
|
||
Accrued employee expenses
|
2,302
|
|
|
2,510
|
|
||
Accrued freight
|
2,242
|
|
|
130
|
|
||
Accrued expenses
|
4,914
|
|
|
5,311
|
|
||
Total other current liabilities
|
$
|
14,061
|
|
|
$
|
11,451
|
|
|
June 30, 2018
|
||||||||||
|
Gross Carrying Value
|
|
Accumulated Amortization
|
|
Net Book Value
|
||||||
|
(in thousands)
|
||||||||||
Customer relationships
|
$
|
5,796
|
|
|
$
|
4,356
|
|
|
$
|
1,440
|
|
Foreign currency
|
(997
|
)
|
|
(753
|
)
|
|
(244
|
)
|
|||
Total Intangible Assets
|
$
|
4,799
|
|
|
$
|
3,603
|
|
|
$
|
1,196
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
|
December 31, 2017
|
||||||||||
|
Gross Carrying Value
|
|
Accumulated Amortization
|
|
Net Book Value
|
||||||
|
(in thousands)
|
||||||||||
Customer relationships
|
$
|
5,796
|
|
|
$
|
4,173
|
|
|
$
|
1,623
|
|
Foreign currency
|
(899
|
)
|
|
(680
|
)
|
|
(219
|
)
|
|||
Total Intangible Assets
|
$
|
4,897
|
|
|
$
|
3,493
|
|
|
$
|
1,404
|
|
|
(in thousands)
|
||
2018
|
$
|
183
|
|
2019
|
307
|
|
|
2020
|
258
|
|
|
2021
|
217
|
|
|
2022
|
182
|
|
|
Thereafter
|
293
|
|
|
Total
|
$
|
1,440
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
|
(in thousands)
|
||||||
Revolving credit facility, maturing March 2023
|
$
|
—
|
|
|
$
|
38,467
|
|
|
|
|
|
||||
Term Loan Due 2018
|
—
|
|
|
1,923
|
|
||
Term Loan Due 2019
|
—
|
|
|
9,798
|
|
||
Term Loan Due 2023
|
12,500
|
|
|
—
|
|
||
Less: unamortized deferred financing fees
|
734
|
|
|
759
|
|
||
Total Term Loans
|
11,766
|
|
|
10,962
|
|
||
|
|
|
|
||||
Subordinated notes - related party
|
19,903
|
|
|
21,911
|
|
||
Less: unamortized debt discount
|
811
|
|
|
1,075
|
|
||
Total Subordinated notes
|
19,092
|
|
|
20,836
|
|
||
Total outstanding debt
|
30,858
|
|
|
70,265
|
|
||
Less: current portion of revolving credit facility
|
—
|
|
|
(38,467
|
)
|
||
Less: current portion of term loans
|
(375
|
)
|
|
(4,173
|
)
|
||
Total noncurrent portion of long-term debt
|
$
|
30,483
|
|
|
$
|
27,625
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(in thousands)
|
||||||||||||||
Income tax expense
|
$
|
300
|
|
|
$
|
475
|
|
|
$
|
364
|
|
|
$
|
520
|
|
Effective income tax rate
|
4.5
|
%
|
|
(7.2
|
)%
|
|
4.2
|
%
|
|
(3.2
|
)%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(in thousands)
|
||||||||||||||
Cost of revenue
|
$
|
313
|
|
|
$
|
(1
|
)
|
|
$
|
331
|
|
|
$
|
(86
|
)
|
Selling and marketing
|
30
|
|
|
20
|
|
|
55
|
|
|
56
|
|
||||
Research and development
|
33
|
|
|
63
|
|
|
63
|
|
|
120
|
|
||||
General and administrative
|
223
|
|
|
349
|
|
|
373
|
|
|
727
|
|
||||
Total stock-based compensation
|
$
|
599
|
|
|
$
|
431
|
|
|
$
|
822
|
|
|
$
|
817
|
|
|
Options Outstanding
|
|||||||||||
|
Number of Shares Underlying Outstanding Options
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average Remaining Contractual Term
|
|
Aggregate Intrinsic Value
|
|||||
|
|
|
|
|
(In years)
|
|
|
|||||
Outstanding at December 31, 2017
|
1,740,103
|
|
|
$
|
6.20
|
|
|
6.64
|
|
$
|
6
|
|
Granted
|
445,195
|
|
|
3.55
|
|
|
|
|
|
|||
Exercised
|
(109,681
|
)
|
|
6.69
|
|
|
|
|
|
|||
Forfeited
|
(142,297
|
)
|
|
7.83
|
|
|
|
|
|
|||
Outstanding at June 30, 2018
|
1,933,320
|
|
|
$
|
5.44
|
|
|
7.40
|
|
$
|
28,762,929
|
|
Vested and expected to vest at June 30, 2018
|
1,875,294
|
|
|
$
|
5.56
|
|
|
7.34
|
|
$
|
27,788,808
|
|
Exercisable at June 30, 2018
|
949,598
|
|
|
$
|
7.42
|
|
|
5.69
|
|
$
|
12,348,636
|
|
Expected term (in years)
|
6.1
|
Risk-free interest rate
|
2.3% - 3.0%
|
Expected volatility
|
38.2% - 39.5%
|
Dividend rate
|
0%
|
|
Shares
|
|
Weighted Average Grant Date Fair Value Per Share
|
||
Nonvested restricted stock at December 31, 2017
|
41,867
|
|
|
3.84
|
|
Granted
|
198,247
|
|
|
17.60
|
|
Vested
|
(27,978
|
)
|
|
4.02
|
|
Nonvested restricted stock at June 30, 2018
|
212,136
|
|
|
16.68
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(in thousands, except per-share data)
|
||||||||||||||
Net income (loss)
|
$
|
6,301
|
|
|
$
|
(7,061
|
)
|
|
$
|
8,263
|
|
|
$
|
(16,987
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding — Basic
|
13,401
|
|
|
12,337
|
|
|
12,877
|
|
|
12,325
|
|
||||
Plus incremental shares from assumed conversions:
|
|
|
|
|
|
|
|
||||||||
Dilutive effect of restricted stock
|
57
|
|
|
—
|
|
|
49
|
|
|
—
|
|
||||
Dilutive effect of stock options
|
1,369
|
|
|
—
|
|
|
1,271
|
|
|
—
|
|
||||
Dilutive effect of warrants
|
817
|
|
|
—
|
|
|
619
|
|
|
—
|
|
||||
Weighted average common shares outstanding — Diluted
|
15,644
|
|
|
12,337
|
|
|
14,816
|
|
|
12,325
|
|
||||
Net income (loss) per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.47
|
|
|
$
|
(0.57
|
)
|
|
$
|
0.64
|
|
|
$
|
(1.38
|
)
|
Diluted
|
$
|
0.40
|
|
|
$
|
(0.57
|
)
|
|
$
|
0.56
|
|
|
$
|
(1.38
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
June 30,
|
|
June 30,
|
||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||||||
Stock options
|
19
|
|
|
1,602
|
|
|
19
|
|
|
1,591
|
|
Warrants
|
—
|
|
|
765
|
|
|
—
|
|
|
766
|
|
Unvested restricted stock awards
|
1
|
|
|
34
|
|
|
1
|
|
|
30
|
|
Total
|
20
|
|
|
2,401
|
|
|
20
|
|
|
2,387
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net Revenues
|
(in thousands)
|
||||||||||||||
Headset
|
$
|
60,805
|
|
|
$
|
19,084
|
|
|
$
|
101,673
|
|
|
$
|
33,344
|
|
HyperSound
|
—
|
|
|
28
|
|
|
18
|
|
|
120
|
|
||||
Total
|
$
|
60,805
|
|
|
$
|
19,112
|
|
|
$
|
101,691
|
|
|
$
|
33,464
|
|
|
|
|
|
|
|
|
|
||||||||
Operating Income (Loss)
|
|
|
|
|
|
|
|
||||||||
Headset
|
$
|
8,369
|
|
|
$
|
(4,542
|
)
|
|
$
|
12,166
|
|
|
$
|
(11,598
|
)
|
HyperSound
|
(100
|
)
|
|
(423
|
)
|
|
(111
|
)
|
|
(1,459
|
)
|
||||
Total
|
8,269
|
|
|
(4,965
|
)
|
|
12,055
|
|
|
(13,057
|
)
|
||||
Interest Expense
|
1,258
|
|
|
1,835
|
|
|
3,263
|
|
|
3,675
|
|
||||
Other non-operating expense (income), net
|
410
|
|
|
(214
|
)
|
|
165
|
|
|
(265
|
)
|
||||
Income (loss) before income tax
|
$
|
6,601
|
|
|
$
|
(6,586
|
)
|
|
$
|
8,627
|
|
|
$
|
(16,467
|
)
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
Total Assets
|
(in thousands)
|
||||||
Headset
|
$
|
82,194
|
|
|
$
|
94,114
|
|
HyperSound
(1)
|
36,402
|
|
|
26,787
|
|
||
Eliminations
|
(36,416
|
)
|
|
(26,650
|
)
|
||
Total
|
$
|
82,180
|
|
|
$
|
94,251
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(in thousands)
|
||||||||||||||
North America
|
$
|
45,967
|
|
|
$
|
12,996
|
|
|
$
|
78,951
|
|
|
$
|
24,051
|
|
United Kingdom
|
7,628
|
|
|
2,124
|
|
|
11,657
|
|
|
3,978
|
|
||||
Europe
|
5,858
|
|
|
2,769
|
|
|
9,105
|
|
|
3,937
|
|
||||
Other
|
1,352
|
|
|
1,223
|
|
|
1,978
|
|
|
1,498
|
|
||||
Total net revenues
|
$
|
60,805
|
|
|
$
|
19,112
|
|
|
$
|
101,691
|
|
|
$
|
33,464
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(in thousands)
|
||||||||||||||
Warranty, beginning of period
|
$
|
534
|
|
|
$
|
589
|
|
|
$
|
472
|
|
|
$
|
639
|
|
Warranty costs accrued
|
210
|
|
|
54
|
|
|
444
|
|
|
114
|
|
||||
Settlements of warranty claims
|
(162
|
)
|
|
(113
|
)
|
|
(334
|
)
|
|
(223
|
)
|
||||
Warranty, end of period
|
$
|
582
|
|
|
$
|
530
|
|
|
$
|
582
|
|
|
$
|
530
|
|
•
|
Turtle Beach is a worldwide leading provider of feature-rich headset solutions for use across multiple platforms, including video game and entertainment consoles, handheld consoles, personal computers, tablets and mobile devices.
|
•
|
HyperSound technology is an innovative patent-protected sound technology that delivers immersive, directional audio with applications in digital signage and kiosks, consumer electronics and hearing healthcare.
|
•
|
Adjusted EBITDA
is defined as net income (loss) before interest, taxes, depreciation and amortization, stock-based compensation (non-cash) and certain special items that we believe are not representative of core operations.
|
•
|
Cash Margin
is defined as gross margin excluding depreciation and amortization, and stock-based compensation.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(in thousands)
|
||||||||||||||
Net income (loss)
|
$
|
6,301
|
|
|
$
|
(7,061
|
)
|
|
$
|
8,263
|
|
|
$
|
(16,987
|
)
|
Interest expense
|
1,258
|
|
|
1,835
|
|
|
3,263
|
|
|
3,675
|
|
||||
Depreciation and amortization
|
1,333
|
|
|
1,530
|
|
|
2,360
|
|
|
2,383
|
|
||||
Stock-based compensation
|
599
|
|
|
431
|
|
|
822
|
|
|
817
|
|
||||
Income tax expense
|
300
|
|
|
475
|
|
|
364
|
|
|
520
|
|
||||
Restructuring charges
|
—
|
|
|
(30
|
)
|
|
—
|
|
|
268
|
|
||||
Business model transition charge
|
—
|
|
|
—
|
|
|
—
|
|
|
353
|
|
||||
Adjusted EBITDA
|
$
|
9,791
|
|
|
$
|
(2,820
|
)
|
|
$
|
15,072
|
|
|
$
|
(8,971
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(in thousands)
|
||||||||||||||
Net revenue
|
$
|
60,805
|
|
|
$
|
19,112
|
|
|
$
|
101,691
|
|
|
$
|
33,464
|
|
Cost of revenue
|
40,528
|
|
|
12,811
|
|
|
66,385
|
|
|
24,947
|
|
||||
Gross profit
|
20,277
|
|
|
6,301
|
|
|
35,306
|
|
|
8,517
|
|
||||
Operating expenses
|
12,008
|
|
|
11,266
|
|
|
23,251
|
|
|
21,574
|
|
||||
Operating income (loss)
|
8,269
|
|
|
(4,965
|
)
|
|
12,055
|
|
|
(13,057
|
)
|
||||
Interest expense
|
1,258
|
|
|
1,835
|
|
|
3,263
|
|
|
3,675
|
|
||||
Other non-operating expense (income), net
|
410
|
|
|
(214
|
)
|
|
165
|
|
|
(265
|
)
|
||||
Income (loss) before income tax
|
6,601
|
|
|
(6,586
|
)
|
|
8,627
|
|
|
(16,467
|
)
|
||||
Income tax expense
|
300
|
|
|
475
|
|
|
364
|
|
|
520
|
|
||||
Net income (loss)
|
$
|
6,301
|
|
|
$
|
(7,061
|
)
|
|
$
|
8,263
|
|
|
$
|
(16,987
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(in thousands)
|
||||||||||||||
Net Revenue
|
$
|
60,805
|
|
|
$
|
19,112
|
|
|
$
|
101,691
|
|
|
$
|
33,464
|
|
Gross Profit
|
$
|
20,277
|
|
|
$
|
6,301
|
|
|
$
|
35,306
|
|
|
$
|
8,517
|
|
Gross Margin
|
33.3
|
%
|
|
33.0
|
%
|
|
34.7
|
%
|
|
25.5
|
%
|
||||
Cash Margin
(1)
|
34.0
|
%
|
|
34.0
|
%
|
|
35.3
|
%
|
|
26.1
|
%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(in thousands)
|
||||||||||||||
Selling and marketing
|
$
|
6,818
|
|
|
$
|
5,529
|
|
|
$
|
12,747
|
|
|
$
|
9,978
|
|
Research and development
|
1,327
|
|
|
1,697
|
|
|
2,656
|
|
|
3,087
|
|
||||
General and administrative
|
3,863
|
|
|
4,070
|
|
|
7,848
|
|
|
8,241
|
|
||||
Restructuring charges
|
—
|
|
|
(30
|
)
|
|
—
|
|
|
268
|
|
||||
Total operating expenses
|
$
|
12,008
|
|
|
$
|
11,266
|
|
|
$
|
23,251
|
|
|
$
|
21,574
|
|
|
|
|
|
|
|
|
|
||||||||
By Segment:
|
|
|
|
|
|
|
|
||||||||
Headset
|
$
|
12,008
|
|
|
$
|
10,901
|
|
|
$
|
23,251
|
|
|
$
|
20,735
|
|
HyperSound
|
$
|
—
|
|
|
$
|
365
|
|
|
$
|
—
|
|
|
$
|
839
|
|
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Cash and cash equivalents at beginning of period
|
$
|
5,247
|
|
|
$
|
6,183
|
|
Net cash provided by operating activities
|
46,341
|
|
|
26,647
|
|
||
Net cash used for investing activities
|
(402
|
)
|
|
(506
|
)
|
||
Net cash used for financing activities
|
(42,013
|
)
|
|
(31,160
|
)
|
||
Effect of foreign exchange on cash
|
(65
|
)
|
|
74
|
|
||
Cash and cash equivalents at end of period
|
$
|
9,108
|
|
|
$
|
1,238
|
|