HEAR - Turtle Beach stock sinks aftermarket as guidance slashed on macro headwinds

Turtle Beach ( NASDAQ: HEAR ) stock sank ~34% postmarket on Monday after the firm slashed its 2022 guidance , citing macro headwinds including lower consumer spending amid high inflation, channel inventory reductions, supply chain issues and a strong dollar.

The gaming accessory maker expects 2022 adj. loss per share of $1.35-$0.90 vs. consensus EPS estimate of $0.82. Its previous forecast was GAAP EPS of $0.70-$1.20.

HEAR expects 2022 revenue of $250M-$275M, widely missing consensus estimate of $362.32M. Its prior outlook was for revenue to be approx. flat, plus or minus 5%, from its 2021 revenue of $366.4M.

Revenue growth is expected to return in Q4 and 2023.

2022 gross margins are expected to improve in H2 2022, but finish the year in the mid 20s percent range, reflecting increased promotional activity, higher freight costs and lower operating leverage.

Freight costs are trending down and HEAR expects to start realizing this benefit later in the year and into 2023.

HEAR projects adj. EBITDA loss of ~$5M-$15M.

The company also said it will conclude its proactive outreach to potential buyers after conducting a strategic review.

HEAR reported Q2 GAAP EPS of -$1.08 vs. $0.09 in Q2 2021.

Revenue declined 47.5% Y/Y to $41.3M, reflecting macro headwinds vs. a near record Q2 2021, when stay-at-home orders, govt. stimulus payments and a strong gaming accessories market drove demand.

Gross margin was 19.1% vs. 36.5% in Q2 2021 due to higher promotional credits driven by aggressive pricing actions to reduce inventory levels, business mix, higher freight costs, volume-driven fixed cost deleveraging and higher warehouse costs.

Operating expenses increased 3.5% to $29.3M, including $6.8M of non-recurring costs (proxy contest and related costs). Excluding these costs, operating expenses fell 17% as HEAR cut down on spending and revenue-driven costs fell.

"... we expect to roll out new gaming products in H2 2022 that will position us to capture more share as the gaming market improves," said CEO Juergen Stark.

Shares of HEAR declined 40.1% YTD.

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