Turtle Beach (HEAR) Plans Restructuring of HyperSound Unit

September 26, 2016 4:06 PM EDT
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Turtle Beach Corporation (NASDAQ: HEAR) has started the process of restructuring its HyperSound directed audio business in an effort to reduce costs and align spending with revenues.

Actions have been taken to significantly reduce HyperSound operating expenses going into October and monthly net cash burn is expected to be below $350,000 by January 2017. This excludes corporate allocations, which are expected to be phased out and redistributed to the headset business by year end. Turtle Beach is targeting to be net cash burn breakeven with respect to its HyperSound segment by the end of the second quarter of 2017.

The Company intends to continue pursuing multiple opportunities for its groundbreaking HyperSound technology, while evolving the business to a licensing model. This is expected to require less capital while still allowing for revenue generating opportunities, including:

  • Retail sales of HyperSound Clearâ„¢ 500P. The Company's test pilot at the major consumer electronics retailer in the Chicago area is off to a positive start, which is expected to help demonstrate sales potential to prospective licensees.
  • HyperSound's newly revealed potential to alleviate Tinnitus symptoms. FDA clearance was received in August and the Company is in discussions with multiple hearing healthcare providers.
  • HyperSound commercial retail display sales. This product area continues to generate consistent monthly sales with a solid pipeline of opportunities.
  • Licensing the technology for HyperSound Glass and other applications. The Company is in discussions with multiple potential licensees.

"As indicated in our most recent earnings call, we are committed to reducing the net cash burn at HyperSound, and we have taken steps to better align costs with our revenue," said Juergen Stark, CEO, Turtle Beach Corporation. "This is an important step toward achieving our goal of getting HyperSound to net cash burn breakeven by the end of Q2 2017. We will continue to seek revenue opportunities for this amazing technology, but in a way that preserves our capital and underscores the strong sales and profit growth of our headset business."

Stark continued: "The process of evaluating strategic alternatives for HyperSound will continue under the management of Piper Jaffray. We believe the streamlining of HyperSound offers more alternatives in the current process. In addition, a licensing model allows for a broader range of potential licensees to use HyperSound for a specific application without taking on markets that may be outside of their expertise."

"By reducing spending at HyperSound," concluded Stark, "we believe the strength of our core headset business will become even more apparent to the investment community."

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