And it’s the opportunity at hand to Turtle beach, the manufacturer of gaming accessories from San Diego, California, such as headsets, mice, keyboards and other peripherals.
Turtle beach CEO Juergen Stark said in an interview with GamesBeat that revenge players make sure they have good equipment. Add to that the popularity of Battle Royale games like Call of Duty: Warzone, which require quality headsets with good microphones, as well as the need to talk to people on professional video calls, and you have some sort of perfect storm, said Stark.
The NPD market research said that March sales increased 12% on an historic level compared to the previous year for game accessories, and they found that Turtle Beach had the Helmet # 1 again in March, with the Xbox One Ear Force Stealth 600 wireless headset.
I told Stark about this trend after the company reported on results for the first quarter ended March 31. Revenues for the quarter were $ 35 million, with a net loss of $ 3.6 million. Stark said Turtle Beach recently acquired Roccat to boost its accessories business, and the company has invested heavily in R&D to develop new trades.
Nonetheless, Stark said that growth related to the coronavirus had prompted the company to increase its estimates of second quarter results for a sales range of $ 42 million to $ 47 million. The company also increased its annual revenues from $ 224 million to $ 234 million. This means that Stark expects a real boost due to the trends we mentioned, and it expects to continue to be the number one market share for gaming headsets in the U.S. market.
Here is a revised transcript of our interview.
Juergen Stark: The months of January and February are down from year to year for the entire market. In March, the market jumped 39% year-over-year. This uses sales data from console headsets in the United States. We jumped more than 50% as we also gained more than 500 basis points in March. The demand, in a way we have never seen in the past, even during the Fortnite year, has just come through the roof.
GamesBeat: For this quarter, was it only the last two weeks of March that were affected by higher demand, or was it more like the whole quarter?
Rigid: No, it started around mid-March. Perhaps it was when the residence orders came into effect, essentially. It may have been part of the second week of March versus exactly March 15, but it wasn’t even all of March.
GamesBeat: For the whole year, you also expect better sales, right?
Rigid: Yes, largely due to a significant increase in T2. We increased Q2 because the demand we started in March has continued in Q2 here, until today. This does not mean that it ends today. It continues.
GamesBeat: Does this turn almost entirely into digital sales for you, as opposed to brick and mortar?
Rigid: No, it’s still a lot of retail sales. Walmart and Target have remained wide open and they are big customers for us. Best Buy and GameStop, although it took a little longer at GameStop, they both switched to contactless pickup. And then, obviously, everyone increased, including our own website, online sales.
We are surprised at how quickly and how retail has adapted, in some cases, to closed doors and all these measures of social distancing. March of this year was the highest level of March sales of console gaming headphones in the United States in history, even higher than March of the Fortnite year, despite all constraints from retail.
GamesBeat: It seems like there is a challenge here because you still have a net loss over the quarter. You also expect a net loss for the whole year. It’s a bit inconsistent. Do you have this big demand, but still a forecast of money loss?
Rigid: We are investing approximately $ 9 million this year to accelerate our entry into PC gaming accessories. Expand the portfolio and energize the Roccat brand. We are investing for future growth. I’m very good. If we didn’t have one, the bottom line would be positive this year. That’s the reason. Even now, with the increase, the upper end of our guidance range has us in positive profitability. It is not inconsistent. It’s like other companies investing to grow in the future.
GamesBeat: Is the company still competitive enough?
Rigid: It has always been competitive. We have been leading our category for over 10 years. We have a higher market share than the next three players combined in console headsets. Despite that, we even increased our share in March, as I mentioned.
GamesBeat: Did it refer to the US retail business?
Rigid: Yes, it’s the American retail business.
GamesBeat: Do you expect more changes in market share in the second quarter or for the year?
Rigid: Generally, we have held more than 40% market share for many years. Last year our market share was good in the 1940s. We gained market share in March here. I expect our stock performance to be fairly good in April. This will likely translate into what will once again be a good equity performance for the year. Whether our share is up or down a few percent for the year, I think the most important thing is that we are in the 1940s, and the next closest competitor is that of teens. We are so far ahead of everyone that we go up and down by a few percentage points, it affects our income, but it does not affect the fact that we are by far the main player and that we have been for over 10 years.
GamesBeat: Do you feel like people are replacing helmets that were not working, or are they just getting them for the first time? Do they use them for work? What are the comments from the users you hear?
Rigid: It’s a bit difficult to judge, but I would say that in view of the surge in demand, it comes from all of the above. It’s usually less helmets that don’t work or break. What is happening is that people are improving their helmets, getting the best next. Change headphones or passive headphones to amplified headphones, or from amplified headphones to wireless headphones. One thing that we have always done well is that, almost in $ 20 increments, you can get a lot more functionality. Upgrading headsets among the active user base installed has always been the main driver of market sales each year. They are not new players.
Now, in this environment, there could be new players or new helmet users. Nintendo’s Animal Crossing, for example, offers voice chat. This could attract headset users. The other thing is that we have seen advice on not sharing headsets. Children in a house where they shared a helmet may also want to get their own helmets. This could be one of the drivers. And then the last thing is, we certainly heard anecdotally that people are actively using our gaming headsets for home learning, videoconferencing with teachers and working from home.
GamesBeat: In terms of the type of equipment they get, are microphones also a priority over headphones?
Rigid: We sell headsets, as opposed to headphones. All our helmets are delivered with microphones. They’re used for two-way communication, which is why they work well with Zoom and that sort of thing, which has also taken off in the past month and a half here.