January 18, 2024 - 8:21pm EST by
2024 2025
Price: 10.34 EPS N/A N/A
Shares Out. (in M): 19 P/E N/A N/A
Market Cap (in $M): 191 P/FCF 13.0 10.3
Net Debt (in $M): 1 EBIT 0 0
TEV (in $M): 192 TEV/EBIT N/A N/A

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  • Turtle Beach is the leading manufacturer of gaming headphones for console gamers. The company is reaching an inflection point with strong activist involvement from multiple parties. The Donerail Group, an investment firm founded by former Starboard Value PM William Wyatt, previously made two offers in 2021 to acquire the entirety of the company, one for $36.50 and one for $32.86, both rejected by the board. Following these events, Donerail initiated a proxy battle and presently has 5/7 board seats and 2/3 seats on the value enhancement committee. Since taking control of the board, Donerail has made progress on several operational improvement initiatives, leading to significant cost reductions and margin expansion. 

  • Going forward, it appears likely that the company gets sold at an attractive premium to a strategic acquirer or private equity firm, as precedent transactions for similar companies have been completed at higher multiples than the company currently trades for. The downside is protected by a cheap valuation, clean balance sheet, strong cash flow generation and significant brand value with a loyal customer base. 

Company Overview: 

Turtle Beach Corporation sells gaming headsets through their Turtle Beach product lineup as well as keyboards, mice and other computer accessories through their ROCCAT brand. The company also has a small presence in the flight simulation gaming market, selling flight sticks and rudders for flight simulation and air combat games. 

~80% of the company’s revenue comes from console gaming headset sales and the remaining ~20% comes from the computer peripherals and flight simulation gaming products. The majority of revenue comes from U.S. sales – YTD in 2023, 73% of revenue has come from North America, 22% from Europe and the Middle East and 5% from Asia Pacific. 

Notably, the company has strong brand value and market presence amongst gamers. Turtle Beach is the definitive market leader for console gaming headsets, which comprise the majority of its revenues at 80%. The company estimates that as of Q3 2023 they have 37% market share in the console gaming headset market. 9 of the top 20 best-selling gaming headsets are sold by Turtle Beach. The company offers a product lineup going from lower-priced headsets for casual gamers all the way up to $200+ ultra-premium headsets for serious gamers. The company has positive reviews for its products on several premier technology media publications such as IGN and PC Magazine. 

Financial Overview:

  • Summary Capitalization and Valuation Multiples:

Note: Fully detailed projections and assumptions included below in the Valuation section.