Turtle Beach Corp
For the period ended Dec 31, 2023. Filed Mar 13, 2024.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2023 · Filed Mar 13, 2024
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Item 8. Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Turtle Beach Corporation (the Company) as of December 31, 2023, the related consolidated statement of operations, comprehensive income (loss), stockholders’ equity and cash flows for the period ended December 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023, and the results of its operations and its cash flows for the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 13, 2024 expressed an unqualified opinion thereon.
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| Revenue Recognition: Cash-Based Incentive Programs | |
| Description of the Matter | As described in Note 1 of the consolidated financial statements, the Company provides cash-based incentive programs, including cash discounts, quantity rebates and price concessions, which results in variable consideration. As of December 31, 2023, the Company has recognized an allowance for cash-based incentives of $28.6 million in accounts receivable on the consolidated balance sheet. Auditing the Company’s measurement of variable consideration related to cash-based incentives is complex because the calculation is determined based on significant management estimates. These estimates are based on historical and expected performance of the customer, types and levels of promotions, claims received from the customers and forecasted economic trends in comparison to historical trends, when applicable. Changes in these assumptions can have a significant impact on the amount of the revenue recognized. |
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| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s process to estimate variable consideration related to its cash-based incentive programs. For example, we tested controls over management’s review of significant assumptions, such as forecasted sales and claims activity, management’s validation of the completeness and accuracy of the data used in making their estimates, and controls over retrospective review analysis. Among other audit procedures, we tested the Company's retrospective review of cash-based incentives reserves, evaluated the assumptions by comparing them to historical trends and third-party information, and performed transactional testing of customer claim activity. |
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| Revenue Recognition: Sales Return Reserve | |
| Description of the Matter | As described in Note 1 and Note 3 of the consolidated financial statements, the Company provides certain customers product return rights, which results in variable consideration. As of December 31, 2023, the Company has recognized an allowance for sales returns of $8.4 million in accounts receivable on the consolidated balance sheet. Auditing the measurement of variable consideration related to sales returns is complex because the calculation is determined based on significant management estimates. These estimates are based on historical and current return activity trends and forecasted economic trends in comparison to historical trends, when applicable. Changes in these assumptions can have a significant impact on the amount of the revenue recognized. |
| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s process to estimate variable consideration related to its allowance for sales returns. For example, we tested controls over management’s review of significant assumptions, such as historical return rates, management’s validation of the completeness and accuracy of the data used in making their estimates, and other controls over retrospective review analysis. Among other audit procedures, we tested the Company's retrospective review of the allowance for sales returns, evaluated the assumptions by comparing them to historical trends, and performed transactional testing of sales returns. Additionally, we tested whether the introduction of new products or new customer contracts could have a material impact on the allowance for sales returns at period end. |
/s/ ERNST & YOUNG LLP
We have served as the Company’s auditor since 2023.
New York, New York
March 13, 2024
REPORT OF INDEPENDENT REGIS TERED PUBLIC ACCOUNTING FIRM
Shareholders and Board of Directors
White Plains, New York
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Turtle Beach Corporation (the “Company”) as of December 31, 2022, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2022, and the related notes and schedule (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ BDO USA, LLP
We served as the Company’s auditor from 2014 to 2023
New York, New York
March 29, 2023
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