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Summary of Changes
Remaining $12.5 million term loan balance has been repaid;
Remaining $10.7 million subordinated debt balance has been repaid;
Long-term obligations, excluding our revolver, have been reduced from $52.6 million at the beginning of the year to zero;
BofA Revolver has been extended to March 5, 2024;
Increased advance rates on inventory and accounts receivable will drive greater availability on the revolver;
Covenants on the revolver have been simplified, and now only require a fixed charge ratio of 1:0x or greater (measured quarterly); and
Funds from the revolver can be used to repurchase up to $10.0 million of common stock over the term of the agreement without prior lender approval.
"Our sales, profits and cash flow generation have continued to exceed our expectations," said Juergen Stark, CEO, Turtle Beach Corporation. "Continued outstanding sales and profit momentum, as underscored by our 51% revenue share of the U.S. console headset market in November as per NPD1, has allowed us once again to negotiate better debt terms and to further strengthen our balance sheet. We have eliminated all debt except for the revolver, reduced our annual interest costs by well over $1 million, and secured a revolving facility that gives us greater flexibility to grow our business and drive shareholder value."
The amended BofA Revolver now has a remaining term of longer than five years, and provides up to $80 million in borrowings. The only covenant on the BofA Revolver is the maintenance of a quarterly fixed charge coverage ratio of 1:0x or higher upon a triggering event.
In addition, the BofA Revolver has higher advance rates on both inventory and accounts receivable, which has the effect of increasing the funds availability, allowing the company to rely solely on the BofA Revolver to support its business. Finally, the new terms allow the company to use the revolver to repurchase up to $10.0 million of its common stock over the term of the BofA Revolver without first securing approval from the lenders, and to repurchase higher amounts with approval, should the company decide to do so in the future.
Upon closing the BofA Revolver, the company repaid in full the remaining $12.5 million on its term loan, and the remaining $10.7 million on its subordinated debt. As a result of these repayments, the company's only outstanding debt is its asset-backed revolver. "We were delighted to work with Bank of America on these latest moves to strengthen our balance sheet," said John Hanson, Turtle Beach's CFO. "Excluding our revolver, our combined long-term obligations at the beginning of 2018 were over $52 million, including term loans, subordinated debt and the Series B preferred stock. We have been able to completely eliminate these obligations through internally generated cash flow, additional borrowings under the BofA Revolver, and the issuance of less than $9.0 million in common stock earlier this year."
