Anne Rakunas – Investor Relations Juergen Stark – Chief Executive Officer, President and Director John T. Hanson – Chief Financial Officer, Treasurer and Secretary.

Sean McGowan – Needham & Company Robert Stone – Cowen and Company Ryan McDonald – Northland Securities Mark Argento – Lake Street Capital Markets.

Good day, ladies and gentlemen. And welcome to the Turtle Beach Third Quarter 2014 Conference Call. At this time, all participants are in a listen only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions) As a reminder this conference is being recorded.

I would now turn the call over to your host, Anne Rakunas. Please go ahead..

Thank you. Good afternoon everyone and welcome to Turtle Beach Corporation’s third quarter fiscal 2014 earnings call to discuss the financial results.

Before we get started, we will be referring to the press release filed today with details of the results which can be downloaded from the Investor Relations page of our website at www.corp.turtlebeach.com. In addition, we posted a supplemental slide presentation to company remarks, which is also available on our IR website.

Shortly after we end this call, a recording of the call will be available as a replay in the Investor Relations section of the Company’s website.

Please be aware that some of the comments made during our call may include forward-looking statements, they involve risks and uncertainties regarding our operation and future results that could cause Turtle Beach Corporation’s results to differ materially from management’s current expectations.

We encourage you to review the Safe Harbor statement contained in today’s press release and on our filings with the Securities and Exchange Commission including without limitations our annual report on Form 10-K, our most recent Form 10-Q and other periodic reports as well as proxy statement on schedule 14-A filed with the SEC on April 24, 2014, which identifies specific risk factors that also may cause actual results or events to differ materially from those described in forward-looking statements.

We also note that this call contains non-GAAP financial information.

We’re providing that information as a supplement the information prepared in accordance with accounting principles generally accepted in the United States or GAAP, you can find a reconciliation of these metrics to our reported GAAP results in the reconciliation table provided in today’s earnings release.

And now, I’ll turn the call over to Juergen Stark, the company’s Chief Executive Officer..

Master Chief edition to name a couple all of which we expect to drive retail traffic in gaming headset purchases not just in Q4, but next year as well.

Third, we believe that our new next-gen console headsets have differentiated features with compelling value propositions that will help drive headset sales, including over the standalone Microsoft adapters and increase attach rates as consumers head into the stores over the holidays.

To the extent that the standalone adapter has provided a bridge for some consumers to use old headsets, we do believe they will ultimately buy a new headset for their new consoles. It’s just a matter of time.

So we continue to expect attach rates to rise over time with Xbox One reaching the mid-20s or higher and PlayStation 4 eventually reaching at least the low-20s if not ultimately catching up to the Xbox One as that platform attracts more multi-player gaming. As I mentioned, we are encouraged to see this PlayStation 4 attach rate uptick begin.

We are still very early on in a multi-year console cycle with significant opportunity ahead of us to grow our gaming headset business. Given that somewhat slow start, we again asked IDG to give us an independent view for next year and they’ve indicated they expect year-over-year growth in console gaming headset sales for 2015.

I’m very confident that we are well-positioned to take advantage of that opportunity. I’ll now turn the call over to John for a review of the financials.

John?.

Great. Thanks, Juergen. In my presentation, I will be discussing the combined results for the third quarter as well of the first nine months of 2014, which we believe is the better parameter of our overall recent performance due to the timing of the Xbox One roll-out in Q1 of 2014.

Q3 also tends to have a high velocity of shipments at the end of September, which can easily move millions of dollars between Q3 and Q4 based on a few days difference in retail ordering or timing of specific product launches.

So, it’s important to understand Q3 in the context of Q4, and for this reason, I will provide guidance for Q4 later in this presentation. It is important to note that results for the year-ago period represent Turtle Beach headset business on a standalone basis. Net revenue totaled $33.3 million, compared to $38.3 million in the third quarter of 2013.

The decrease in revenue was driven by a decline in sales to our Canadian distributor this year that was expected as we were stocking this new distributor in Q3 2013 and realized incremental revenues in Q3 2013 as a result.

In addition, our two new high end products were delayed a few weeks moving sales out of Q3 across all of our channels and into Q4. For the first nine months of 2014, revenue increased 1.7% to $93.9 million compared with $92.4 million for the same period a year ago.

The increase in revenue was driven by strong consumer response to the company’s Xbox One and Playstation 4 compatible headsets, partially offset by the revenue declining delays mentioned above for the quarter. Gross profit for the third quarter was $7.7 million, compared to $8.6 million in the same period in 2013.

The gross margin percentage however increased 70 basis points to 23.3% in the third quarter compared with the same period a year ago due to sales of higher margin headsets and mix of customers compared to the prior year period.

For the first nine months of 2014, the gross margin percentage improved by 100 basis points to 26.5% compared with the same period a year ago.

Excluding the onetime cost of $2.8 million earlier this year associated with packing and shipping the Microsoft adaptor in time for the Xbox One headset audio and Titanfall game (indiscernible) launches, gross margin would have been up 390 basis points to 29.4% for the nine months of 2014 over the same period last year.

Operating expenses in Q3 totaled $15.1 million which was a 26.1 increase year-over-year due primarily to $2.5 million of investment in HyperSound, $1 million associated with higher headcount in headset R&D, non-cash expenses for depreciation, amortization and stock compensation of $0.8 million and Public Company cost of $0.7 million partially offset by lower business transaction expenses of $1.6 million.

For the first nine months of 2014, operating expenses excluding $3.7 million and $2.3 million in business transaction costs in 2014 and 2013 respectively increased to $42.1 million compared to $30.7 million in the same period a year ago.

The increase was driven by $6.7 million of investment in HyperSound, non-cash expense for depreciation, amortization and stock compensation of $3 million, $1.5 million associated with the headcount increase and headset R&D and Public Company expenses of $1.5 million, partially offset by $2.2 million of lower marketing expenses.

Adjusted EBITDA in Q3, 2014 was a negative $4.5 million for the combined business as compared to $0.6 million in 2013. The adjusted EBITDA decrease was due to lower revenue, our HyperSound investment, public company cost, and higher headset operating expenses.

The headset business delivered negatively adjusted EBITDA of $1.7 million for the quarter, which compares to adjusted EBITDA of $0.6 million in 2013. Headset adjusted EBITDA decline due to lower revenue level, higher operating expenses partially offset by higher gross margins.

For the first nine months of 2014, adjusted EBITDA on a consolidated basis totalled a negative $8.4 million compared to a negative $1.2 million in 2013. The year-over-year adjusted EBITDA decline was driven by the planned $6.7 million investment in HyperSound and lower adjusted EBITDA in the headset business.

Year-to-date, the headset business has delivered a negatively adjusted EBITDA of $1.5 million as compared to a negative adjusted EBITDA of $1.2 million in 2013.

The headset adjusted EBITDA decrease for the nine month ended September 30, 2014 was driven largely by the one-time Microsoft adapter packing and shipping cost incurred in the first half of 2014.

Excluding the non-recurring Microsoft adapter expenses of approximately $2.8 million, the headset business substantially improved adjusted EBITDA year-over-year. The company has invested approximately $6.7 million in HyperSound on a year-to-date basis and is consistent with our plan.

There were approximately 42 million total shares issued an outstanding as of September 30, 2014. Please note that we provided a reconciliation of GAAP reported results to adjusted EBITDA in the accompanying tables at the end of the press release we issued today.

Now turning to the balance sheet as of September 30, 2014, cash and availability under the revolving credit facility totaled $18.1 million compared to $6.5 million as of December 31, 2013.

Outstanding debt, defined as the revolving credit facility, term loan and subordinated notes has decreased 44% or $28.4 million since December 31, 2013 and is approximately 43% below this time last year. The reduction in debt is driven by lower inventory levels, consistent with our plans to improve asset utilization.

Total inventory as of September 30, 2014 was $46.6 million, a decrease of 25.2% as compared to the same period in 2013 and approximately 6% below year-end 2013. We remain focused on our initiatives to reduce our inventory investments and have made significant progress this year.

Moving on, accounts receivable decreased $6.1 million to $26.7 million at September 30, 2014, compared to the same period in 2013. Our customers typically pay within terms and our days sales outstanding was approximately 60 days at September 30, 2014 and consistent with our payment terms.

The company has made significant progress this year improving its capital structure and as a final step it’s looking to pay-off the reaming subordinated notes with the long-term debt facility. Now turning to our outlook.

For the fourth quarter of 2014, we expect net revenue for our headset business to be in the range of $91 million to $101 million, representing an increase of approximately 12% at the mid-point of the range over the same period a year ago.

Adjusted EBITDA for the headset business is expected to be in the range of $19 million to $21 million representing an increase of approximately 29% at the mid-point of the range over last year.

Total company fourth quarter adjusted EBITDA is expected to be in the range of $16 million to $18 million reflecting the impact of a roughly $3 million investment anticipated for HyperSound. For the full year, we are revising our outlook to reflect the current view of attach rates and headset industry projections.

As we have discussed, we expect the attach rate projected for the year to be lower due to higher standalone adapter sales and the delay in a number of multi-player games in 2015. These two conditions are projected the cost of console gaming headset industry to be roughly flat to possibly down slightly for the year.

We expect our strong portfolio of products in positioning with retailers to deliver growth ahead of the industry are below our initial full year guidance. Again with roughly 40% of annual sales happening in November and December, these attach in market projections could change significantly.

As result of the lower revenue outlook, we now expect full year adjusted EBITDA to be lower, and as Juergen, mentioned earlier, we have incurred some incremental costs in Q3 and will incur further incremental cost in Q4 to expedite shipments to customers for our two high-tier products that require air-freight to arrive on time and other products that require expedited shipping due to the port congestion on the West Coast.

In total, we expect to incur approximately $2.4 million of incremental logistics costs in Q4. Based on these factors, we now expect full-year net revenues for the Turtle Beach headset business to be in the range of $185 million to $195 million, representing an increase of approximately 7% at the mid-point of the range over 2013.

For the full-year, adjusted EBITDA for the headset business is now expected to be in the range of $18 million to $20 million representing an increase of approximately 32% at the mid-point of the range over 2013. This translates into an approximately 10% EBITDA margin for our headset business in 2014.

Total company 2014 adjusted EBITDA is expected to be in the range of $8 million to $10 million reflecting the impact of $10 million anticipated HyperSound investment. I’ll now turn it back to Juergen for closing comments..

Thanks, John. I am really pleased with how our team continues to execute on the operational and strategic initiatives that form the foundation for sustained, long-term growth.

Our leadership in the gaming headset industry is illustrated by the largest assortment of next-generation compatible headsets available for the holiday season, providing our retail partners with a wide variety of first-to-market products at compelling price points, and consumers with innovation and advanced technologies that allows for a richer and more engaging gaming experience.

We’ve also executed on the key objectives for commercializing HyperSound and, as I’ve stated, continue to see that as a very promising opportunity. Both HyperSound and our Gaming Headset business highlight our focus on Best, First, Only innovations in audio.

This goal of differentiating products with innovation and quality will continue to be the hallmark of how we think about and run our business. And of course we will protect our innovations as reflected with a patent portfolio of now well over 100 issued and pending U.S. and international patents.

Given the importance of the next two months on our industry, industry growth forecasts for 2015 could certainly change and we will learn a lot over the next few months. That said, I do want to share some insight into how we are thinking about our headset business next year.

Particularly in light of the somewhat slower start industry-wide on console headsets than expected.

Based on where we sit today, we expect to grow headset revenue at least 10% in 2015 driven by an uptick in attach rates from the growing installed base of next-generation consoles, more multiplayer game launches and demand for our product portfolio of leading headsets.

With respect to gross margin, we expect to be in the low 30% range consistent with our past communications, finally we expect adjusted EBITDA margins for the headset business to improve from this year’s projected level of approximately 10% including some investments we will make in 2015 to reconfigure our supply chain.

We expect those investments to reduce our long-term product cost and help us track towards our goal of 15% adjusted EBITDA margin over time. Turning to HyperSound, momentum continues to build in our commercial business and we are on schedule and very excited for the launch of our healthcare product in 2015.

We will provide specific targets for HyperSound on our next call once we have completed our healthcare launch plan. To close, I want to say thanks again to our great team of dedicated colleagues around the world, who delivered these multiple best first and only capabilities and are helping to make our vision become a reality every day.

With that we will now take your questions..

(Operator Instructions) Our first question comes from Sean McGowan with Needham. .

Hi guys thank you.

Couple of questions, first just a clarification on something you just said that you are into that – outlook for gross margins in 2015 in the low 30%, is that just the headset side?.

Yes, that’s just the headset side..

Okay.

We are targeting much higher gross margins on HyperSound. .

That’s what is thought.

Okay, now what can you say given the MPD data through whatever – latest period as I guess that end of September, about your margins particularly on headset business for consoles?.

Our market – MPD data is just for the U.S., right and so we are roughly in line where we expected to be, if you take out the adapter, which we do because we don’t consider that to be a headset, our market share by the way tends to be at its low point for the year in Q3 and then going into Q4 tends to bounce back and we hope to close the year in roughly of the 50% market share range.

I will tell you though also that we have said is that we have stated a goal that we would roughly hold share in the markets where we have very high share like 50% in the U.S. and in the UK and grow share in the markets where we have a lower market share and that continues to be our priority.

So roughly holding share could be plus or minus some points there and – but I also say though that, as much as we talk about market share, we measure it and it’s important to us as we launch new headsets, to see those headsets takes some share. We are not running the business to chase share, especially, into the more developed segments like the U.S.

and the UK. So, as we noticed, prize competition in some of those segments, we will be optimizing for profits and not for market share..

Okay, thanks.

So what exactly are you seeing so far in attach rates, like how far off of the – of your expectations is it?.

It is a few points on both platforms..

A few points below you mean – a few points below your expectations?.

Yeah, below our expectation, so – and I’m not going to give specific speakers.

We have, what I would consider to be kind of a proprietary model of how we calculate these things but it’s a few, call it two to three percentage points on each platform, but remember that I stated last time that like a 1% change in attach rate is $5 million to $7 million revenue for us given our market share. .

Okay, and then I had a quick question for John. So John, was anything going on in the gross margin or cost of sales level last year in the September quarter that would have driven that margin lower than normal..

Well, so certainly in 2013, it was mix of customer. It was a bit of mix of customer as well as the company did have more sales of refurbish products as we’ve been working the refurbish products down. But for the most part, it’s the older products at the lower pricing tiers ahead of the console training..

Yeah plus – really with, Sean with Q3, you got to be kind of careful with the numbers because there is a high velocity of shipments that happen at the end of September as retailers will start to stack up for holiday, especially our international distribution orders tend to go before our domestic retail orders.

And since those orders go through distribution, they’re also at a lower margin than our, call it, direct retail sales here in the U.S. But a few days of difference on either timing of product launches, when retailers decide to place orders can easily move millions of dollars between Q3 and Q4.

That’s frankly why we’ve taken the time now to explain Q3 in the context of Q4 and the full year..

Right, I just remembered part of the story of last year being that refurb business depressed margins than I would have thought. Without that there is a drag – you would have higher than a 70 point increase.

Yes, so we’ll continue to – I will tell you Sean, we continue to work the refurb product sale and we’re still working through the refurb product inventories, right. And so, this year’s volume is pretty similar to last year on the refurb front..

Okay, all right. So that’s still having that effect. All right, I’ll jump back in the queue then. Thank you..

Exactly, no – thank you, Sean. .

Our next question comes from Rob Stone with Cowen and Company. Your line is open. .

Hey guys, first question is on HyperSound, I wonder if you could comment on how much that contributed in Q3 and what you’re thinking about HyperSound for the full year 2014?.

Hi, Rob. This is Juergen here. We figured we get that question. Let’s talk about the full year because quarter-to-quarter is not that relevant. Q3 was – so for full year, we said $1 to $4 million was – when we went into the year was the target, and but I’ll tell you that the financials of the HyperSound are not that material.

So we focused a lot more on achieving the key objectives we said we wanted to achieve. But just to give you a straight answer, HyperSound in this year will be close to the $1 revenue range, so the low end of that target. If we count in the Activision called the duty kiosk sale.

That sale had a significant real value to us, so they actually – they paid for it, but they paid for it with a set of marketing credits that were part of a broader deal, but it’s real value to us.

And so – but from an external perceptive, I’m not sure if we will be able to account that on the top-line of revenues and frankly it doesn’t really matter, it’s not material.

The key thing is for us focusing on getting a large retail showcase deployment done, we got that with the Best Buy deployment and there were more good deployments to showcase HyperSound in different types of retail environments.

Into that right now more or so than whether it’s generating a $1 million or $2 million of revenue is the key priority for us.

For next year, I would expect that commercial business will start to actually scale nicely and – but the healthcare product could quickly overtaken from a revenue standpoint, but – until we have our launch plan set – as I stated, we’re not going to give revenue estimates.

We do plan to do that at the next call because I know that’s going to be important to people, but give us a little bit more time to flesh out the first year’s plan for that product..

Is it too soon to provide feedback in terms of reaction from Best Buy where this has been deployed or from other potential commercial customers who might have had a chance to go check out those displays? Juergen Stark It is. They’ve just been deployed. The reaction we’re getting is quite favorable.

And it is – the momentum is definitely starting to build, where people will now see that and realize it’s real and we are seeing an increase in interest from other retailers now..

Okay..

.

:.

With respect to the two high-tier products that were delayed a little bit, can you size the impact of that on your Q3 sales versus if they had launched within the – with your plans for launch within the quarter originally yet?.

Yes, technically, yes, it’s on the order of single-digit millions. It’s a little – it’s almost a little bit ridiculous that call it a delay, we didn’t announce product target dates, we didn’t’ set Q3 quarterly guidance, but we were trying to be transparent with people.

And in our internal schedules had them shipping a few weeks earlier than we actually were able to ship them. This is part of the challenge of evaluating Q3 because these product launch timing can be different from year-to-year whether they are late or not late frankly.

So really the only impact was that we air-freighted them in and incurred some additional cost. I will tell you though also very important is, those are the two high-tier products that are really in the industry. The only significant innovations, new technologies, new products being launched in a year of – apart from transition.

Where if you look at the competitive marketplace, what people have done – other people have done is essentially put a paint job on last year’s models.

And so we – as much as I’m disappointed by a few weeks of delay, it clearly makes sense to air-freight the minute we spend the money to do it and that was an accomplishment that we alone in the industry were able to produce..

That’s actually a perfect segue into my last question, which is related to gross margin kind of in two parts. One, if you said, I apologize, that you can catch it, what you’re thinking about gross margin for Q4? And then if you could seize the impact in Q3 of the usual expediting charges, and so forth, how much that affects your gross margin? Thanks.

.

Sure, so gross margins for Q4, we would expect them to be with the majority of the $2.4 million of freight cost incurred. We mentioned that the incremental freight cost are up $2.4 million, the majority of that will be in the fourth quarter, we’re looking at margins that would be around 30%, right.

In 30%, 31% so that – those freight cost obviously pull that margin percentage down, which is why we said to Sean’s earlier question, we said we think that for the headset business, we think the margins are in low 30’s. .

So, that’s for both Q4 and next year’s, low 30’s, on the?.

Yes for the full year it would in low 30’s obviously as we’ve discussed before, in order to get to low 30’s, because of the heavy volume and leverage fixed cost, our margins will below that, the first, two, three quarters of the year and that will be higher obviously in the fourth quarter..

Let me just throw away in one other thing, as you guys think about next year, in modeling next year. So we’ve given the first kind of view of what we expect the revenues to look like. It’s also important to note, that this year was just the strange year on many regards, right.

On the revenue side, the timing of revenues, the console transitions, the product portfolio and the effort required to get a portfolio launch.

Next year, it should be much more normal, and so if you think about the quarters, first half and second half probably will look somewhat like this year, but Q1 won’t be as heavily loaded, because in Q1 – Q2 won’t be a slight, as it was this year, because this year’s Q1 had the Xbox One product launches and games in it.

And then the second half Q4 won’t be quite as heavy, it will still be the update picture of our revenues and Q3 won’t be a slight because, the timing of the product launches will be a bit more normal, where we’re now, we know the specs of the platforms, we’ve been working on our portfolio for next year already, we are not dealing with six months compressed elements cycles like we were this year.

.

Okay. That’s all I had, thanks. .

Okay, thank you Rob. .

Our next question comes from Ryan McDonald with Northland Securities. Your line is open..

Hi guys, let’s just start within the headset business, I mean obviously you’re a seeing a large impact already from the adaptors which is separate out.

But within the headset business specifically, do you see any competitors continuing to gain share against doing that market perhaps, Microsoft and Sony obviously have come out with a higher functionality headsets this year. .

Yes, so its again, it’s a little bit, we don’t do a lot of judging in Q3 because Q4 has won a new product set, but the first parties are Microsoft and Sony, they do have headsets, they compete typically in the below $100 segment and those headsets have done well particularly on the Sony side and so that’s one of the areas where we’re not going to chase market share.

Those headsets are one platform only, we have headsets that are multi-platform and we tend to just try to innovate around those launches and around those specific headsets. On the high end, we have as I mentioned in my prepared remarks we’ve essentially been absent from the above 200 tier.

We launched our couple of last headsets there at beginning of 2013 it doesn’t make sense then, (indiscernible) is right at the time by the way when new consoles got analyzed a few months after that, you then don’t go launch new high-end models for old consoles and so we waited until the specs became clear and have now launched the Elite 800 on the PlayStation side and the Stealth 500X as our new entries into that 200 plus premium tier in the market and we would expect to go get a fair amount of share in that tier back overtime.

.

Okay.

And then as you talked about your expectations for 2015, I think you mentioned it was at least 10% growth next year was kind of a general way you think about top line revenue growth, is that with the market or the headset market as a whole remaining flat or is that kind of growing with the market expectation?.

So that’s we are assuming the headset market will grow next year and we will grow along with it.

The growth will do some more detailed modeling once we get through Q4 and it is actually very important for us to see how the headsets do relative to the market and the competitors, but our goal is to outgrow the market going forward that’s why we said at least 10%.

Again with the only caveat being that if we find segments that are becoming highly commoditized, we won’t chase revenue or share, we will optimize profits.

The other one to keep in mind is, we’ve now, we’re in China, we’ve grown shares significantly in the international markets on the console side where we don’t have 50% share and we would expect to continue to grow share there that’s the key initiative for us and we’ve now very successfully kind of started in the PC segment, and all three of those would provide longer term above market growth rates for us overtime.

.

Okay, and then just lastly, I think you’d mentioned earlier in the year on one of the previous earnings calls about expectations over the life of the console or headset sale of attachment rates I think in the low 20s.

I mean is that basically assumed that the attach rates have been trending rather in the high teens? Is it just simply lower attachment rates in that sense so far?.

So let me – that’s realty important and then given how much pain we’re taking to explain, how the whole industry works here because we’re such a key part of it. So let me go back through that. So historically, the attach rate has been like 22%. This is 2013 numbers and all of this by way is based on the U.S.

retail data where we have the most information. So that’s made up of a – historically 2013 has been made up of mix of PlayStation, three in this case, which tended to be in the mid teens and Xbox which tended to be in the mid-20s, okay..

Okay..

So our expectation coming into the year was that Xbox would be – it now starts to trend into the high-20s on new generation. And PlayStation would actually start to quickly catch up and enter the 20s from an attach rate standpoint because Sony is putting a lot of effort in the multiplayer gaming on PlayStation 4.

The reason why the two platforms have been historically different is because of Xbox live and multiplayer gaming. So if you will especially with more and more multiplayer games launching and more games launching that are multiplayer only, Titanfall was the first one. We expect attach rates really to be in the mid-20s and go up from there over time.

And so on the Sony front, we’re actually now starting to see the uptick that we expected in the last few months but it just didn’t climb as fast as we thought it would. This year, it’s very hard thing to estimate and guess by the way. But we do expect over time to be in the mid-20s and above for the industry.

And that one other point there is the adapter is peaking a fair amount of heads of attach out of the Xbox one segment because people are essentially not buying a new headset – there some people are using the adapters to bring an old headset along.

That’s a significant, significant amount of volume if you count the adapters into the Xbox one headset – into that segment. That in our opinion is a temporary phenomenon.

Over time those users will actually go out and upgrade their headsets like they always have – like they always do, it’s just that we didn’t expect that level of standalone adapter sales to essentially take some of the attach out of the Xbox one without that the attach on Xbox one is actually tracking closer to our expectations.

Does that help?.

Yes, yes, it does.

Okay and then just start one quick last one, when you talk for your commentary about how the year is broken down for 2015, would you say that you expect Q1 to be up year-over-year or above flat year-over-year with 2014?.

Yes, now very important. So, it is kind of not, we are not that we have done the detailed quarterly numbers but Q1 is here was much, much higher than that normal as the share of the year because the Xbox One launch, tighten fall launch, it was lot of pent-up demand for headsets and games and everything.

So if I has to see in the next year, my sense is that Q1 would actually be down some from this year, but Q2 would end of being higher and it would be a little bit more even down, based on when games launch and all that.

And then the back half of the year, Q3 was lower than it normally would have been and Q4 is higher than it normally would have been just because of the product schedules and launch timing..

All right, thank you very much..

Sure. I think are we out of time? One more. Okay. (Indiscernible)..

Our next question comes from Mark Argento with Lake Street Capital. Your line is open..

Hi, guys. Good afternoon.

Just the quick question from me, all focused on HyperSound here? In terms of the hearing health product, is that product finished and ready to go and now just looking for distribution channels or where are you in terms of those products?.

Yes, I’m glad to give some insight on that. So the product is not completely done, the system and the technologies all done working, in fact we’ll demo it next week at New York Investor event.

So that means that the new emitters are functioning and now we’re working through getting mass production setup in all of the refinements that have to happen to get for the first time ever that kind of product that’s produced.

Those new emitters as I mentioned have doubled the emitter efficiency, which is a phenomenal, technological achievement and reduce the cost per side, two emitters by $40 – over $40. The consumer module, the amp and everything that drives the system is also done in beta form.

And so, where we are right now is actually starting to rollout in the next two to three months. The first beta units which will go to do a handful of kind of call them internal friend lease and in preparation for the launch next year.

That schedule now will move into all of the supply chains set up in mass production, the product testing, all of that which will put it well into 2015 for the actual product launch. Very important that along side of that, we’re also a parallel path is to essentially establish HyperSound in the scientific and medical community.

That will actually start in January where an audiologist will start presenting, how it works and what we found and the efficacy all these things of the FDA certification was based on earlier this year. And so that will also come together with the channel strategy, the pricing strategy, product strategy all of that for a launch in mid-year.

And I will give more detailed timing and all that on our next call, but I want – I do want to get that whole plan figured out before we start estimating the revenues and get more specific on the product.

The last thing I’ll say just to reiterate from the remarks I made earlier is Rodney who has been phenomenal knows the industry inside now is a really, really good hire for us and a real [coo] (ph) frankly to get him to come in and run this business, has been in a two week road show meeting with senior executives and in major hearing-aid companies, channels, people who own ear doctor stores all of that and the feedback has been very positive.

So he is off to a quite good start, starting to assemble what’s the right distribution and channel strategy for the product for next year..

That’s it from me. Thanks..

Okay..

Thank you. That concludes the Q&A session. I will now turn the call back over to Juergen Stark for closing remarks..

Okay. Again I just want to say thank you to everybody for your participation on the call and once again special shout to all the Turtle Beach employees, who have delivered an incredible set of innovations in the midst of a pretty complicated platform transition.

So I know all the gamers out there appreciate what we’ve done and we look forward to catching up with everybody in the coming months here. Thank you..

Thank you, ladies and gentlemen. That does conclude today’s conference. You may all disconnect and everyone have a great day..