Turtle Beach drops due to EPS miss, Q1/2015 guidance

|About: Turtle Beach Corporation (HEAR)|By:, SA News Editor

In addition to missing Q4 EPS estimates (while beating on revenue), Turtle Beach (HEAR -3.7%) guided on its CC (transcript) for Q1 revenue of $18M-$20M (well below a $31.8M consensus), and for full-year headset revenue to be roughly flat Y/Y; the 2015 total revenue growth consensus is at 17.1%. 2015 HyperSound (directional audio product) revenue is expected to be in the "single-digit millions."

The company reports having seen "steep discounting" from gaming headset rivals in Q4 (previous), and says it chose not to return fire. Its U.S. gaming headset share (on a dollar basis) is estimated to be at 46% at the end of 2014.

Declining 2015 headset sales for prior-gen consoles are expected to offset growing sales for current-gen consoles. CFO John Hanson states that while Turtle Beach wants to grow, its "top priority is is to improve profitability." The company forecasts gross margin will rise to the low-30s in 2015, up from 2014's 27.2% and 2013's 28.2%. Its HyperSound GM target remains above 50%.

Hurting EPS: GM fell 300 bps Y/Y in Q4 to 28%, thanks largely to higher shipping costs and a legacy contract write-off. Also, excluding one-time costs, operating expenses rose 26.1% to $17.9M (compares with 7% revenue growth). Turtle Beach ended 2014 with $7.9M in cash and $44.6M in debt.

Shares aren't far removed from a 52-week low of $2.10.

Q4 results, PR