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Turtle Seashore (HEAR -9.06%)
Q3 2022 Earnings Name
Nov 03, 2022, 5:00 p.m. ET
Contents:
- Ready Remarks
- Questions and Solutions
- Name Individuals
Ready Remarks:
Operator
Welcome to the Turtle Seashore third quarter 2022 convention name. My title is Daniel and I will likely be your operator for in the present day’s name. Presently, all individuals are in a listen-only mode. Later we are going to conduct a question-and-answer session.
[Operator instructions] Delivering in the present day’s ready remarks are chairman and chief govt officer, Juergen Stark; and chief monetary officer, John Hanson. Following their ready remarks, the administration staff will open up the decision for any questions. As a reminder, the convention name is being recorded. I’ll now flip the decision over to Alex Thompson.
Alex, you could start.
Alex Thompson — Investor Relations
Thanks, Daniel. On in the present day’s name, we will likely be referring to the press launch filed this afternoon that particulars the corporate’s third quarter 2022 outcomes, which will be downloaded from the investor relations web page at corp.turtlebeach.com, the place you will additionally discover the newest earnings presentation that dietary supplements data mentioned on in the present day’s name. Lastly, a recording of the decision will likely be out there on the buyers part of the corporate’s web site later in the present day. Please remember that among the feedback made throughout this name could embody forward-looking statements inside the which means of the federal securities legal guidelines.
Statements in regards to the firm’s beliefs and expectations containing phrases equivalent to could, will, may, imagine, anticipate, anticipate, and comparable expressions represent forward-looking statements. These statements contain dangers and uncertainties concerning the corporate’s operations and future outcomes that might trigger Turtle Seashore Company’s outcomes to vary materially from administration’s present expectations. Whereas the corporate believes that its expectations are primarily based upon affordable assumptions, quite a few components could have an effect on precise outcomes and should trigger outcomes to vary materially. So, the corporate encourages you to assessment the protected harbor statements and danger components contained in in the present day’s press launch and in its filings with Securities and Change Fee, together with, with out limitation, its annual report on Kind 10-Okay and different periodic studies, which determine particular danger components that additionally could trigger precise outcomes or occasions to vary materially from these described in our forward-looking statements.
The corporate doesn’t undertake to publicly replace or revise any forward-looking statements after this convention name. The corporate additionally notes that on this name, they are going to be discussing non-GAAP monetary data. The corporate is offering that data as a complement to data ready in accordance with the accounting rules usually accepted in the US, or GAAP. You will discover a reconciliation of those metrics to the corporate’s reported GAAP leads to the reconciliation tables supplied in in the present day’s earnings launch and presentation.
And now, I am going to flip the decision over to Juergen Stark, the corporate’s chairman and chief govt officer. Juergen?
Juergen Stark — Chairman and Chief Government Officer
Thanks Alex. Good afternoon, everybody and thanks for becoming a member of us. Within the third quarter, we introduced a number of new gaming and simulation merchandise, made progress on our key strategic priorities and executed to ship monetary and operational outcomes that had been in step with our expectations in opposition to very difficult market and working circumstances. We proceed to imagine that the gaming market is a good market to be a pacesetter in, regardless of the tough yr, pushed by a slowdown in client demand, retail channel stock reductions, heavy aggressive discounting, a powerful greenback and continued international logistics and provide chain challenges, together with excessive freight charges.
Whereas these challenges persist, we’re seeing indicators of sequential enchancment within the gaming market. Per MPD, the third quarter council gaming headset market within the US was down 17% yr over yr, evaluating that to the second quarter of 2022, which was down 27% yr over yr. The third quarter confirmed some restoration. Moreover, the improved provide of latest technology councils supplied a number of months of double-digit development in council {hardware}.
Towards this backdrop for our third quarter 2022, we delivered internet income of $51.3 million, up 24% sequentially from Q2 and an adjusted EBITDA lack of $6.9 million versus a lack of $12.1 million in Q2. As you could recall, we confronted a tough comp from a yr in the past as our third quarter 2021 was on the second highest third quarter revenues within the firm’s historical past. As we mentioned final quarter, in mild of the poor macroeconomic circumstances, we proactively and shortly took steps to cut back our working bills, which had been down 16% on a recurring foundation in Q3. Within the third quarter of 2022, we continued our place because the primary council gaming headset supplier once more main the class by far.
Our new wi-fi fashions have carried out very properly as 5 of the six fashions in our newest Stealth collection of merchandise made the highest 10 checklist of best-selling wi-fi headsets. We additionally introduced the supply of the multi-platform Stealth 600 and Stealth 700 Gen 2 MAX collection, and the Stealth 600 Gen 2 USB gaming headset for PlayStation. The PlayStation fashions comply with the profitable launch of our Gen 2 MAX and USB fashions for Xbox earlier this yr the place each avid gamers and reviewers raved in regards to the merchandise. In reality, since our new Stealth wi-fi collection launched, IGN one of many world’s main gaming and leisure publications, reviewed the Stealth 700 Gen 2 MAX and gave it IGN’s Editor’s Alternative Award.
IGN additionally named the 700 Gen 2 MAX, one of the best Xbox collection XNS gaming headset, in addition to one of the best wi-fi Xbox headset. In our Rocket PC gaming portfolio, we have continued to broaden our line of award-winning PC gaming mice, keyboards, and headsets with new merchandise that ship the efficiency PC gamer’s want and leverage RGB lighting to create essentially the most stunning desktop for avid gamers out there. In August, we introduced the supply of the brand new Kone XP Air wi-fi customizable RGB gaming mouse. The Kone’s expertly crafted ergonomics ship supreme consolation with nice textual content specs, and showcase our IMO know-how to create a singular 3D RGB lighting impact on the mouse.
For PC gaming and keyboards, we expanded ROCCAT’s iconic Vulcan line with two new fashions, the Vulcan 2 Mini and the Vulcan 2 Max. Each fashions launched floor bear breaking first-to-market options, together with the world’s first twin LED sensible keys plus new Titan II optical switches. Past their ridiculously quick responsiveness, the brand new Titan II switches showcase ROCCAT’s IMO RGB lighting higher than ever. The Vulcan II MAX additionally comes with an progressive translucent danger relaxation, which mixed with the twin LED switches is beautiful.
In reality, the Vulcan II MAX has been named essentially the most stunning gaming keyboard by a number of main gaming publications. The Vulcan II MINI is the compact model with a footprint 65% the dimensions of a regular keyboard. Many keyboards are a quickly rising section, so we now have a terrific possibility for avid gamers wanting a keyboard in a smaller footprint. We additionally unveiled our flagship ROCCAT PC headset, the Syn Max Air, which delivers a premium wi-fi 3D audio expertise excellent for avid gamers and streamers in want of top of the range audio with distinctive RGB infused lighting.
The Syn Max Air mixed many years of Turtle Seashore’s audio experience and unique gaming audio options with ROCCAT’s stunning design. Nice specs, significant improvements and beautiful design are the pillars of our ROCCAT portfolio, and I am satisfied that our expanded portfolio allows PC avid gamers to create gaming desktops which are as stunningly stunning as they’re useful. We have been taking all the things we learn about operating the world’s best-selling council headset enterprise, and placing that experience into controllers. We proceed to broaden our controller household with further merchandise that provide recreation profitable controls and options at a wide range of value factors and for extra programs.
We added a brand new Arctic Camo colorway to the recon controller line and in addition launched the Recon React-R Gaming controller, which presents avid gamers most of the identical options, however at a extra reasonably priced value. The response to our first wave of Xbox and PC controllers continues to be very constructive. And from this, we have now launched our first cloud and cellular gaming controllers. The Recon Cloud hybrid controller, which takes the recon controller’s wonderful ergonomic form, and provides a singular cellphone clip and lagged free Bluetooth, so avid gamers on suitable Android gadgets can expertise the identical recreation profitable controls whereas gaming on the go.
The Recon Cloud additionally works as a wired controller with Xbox and Home windows PCs and presents, presents avid gamers, Turtle Seashore unique audio options like superhuman listening to. Our second cellular product is the not too long ago introduced Adam Controller. The Adam is an ultraportable cellular gaming controller with a singular versatile two piece design that matches any Android cellphone, the 2 items magnetically clipped collectively for compact journey. For the gaming simulation class, we launched the VelocityOne Rudder, which completely enhances the award-winning VelocityOne flight yoke and throttle quadrant, and offers followers and fanatics the final word trendy simulation management arrange for giant and small planes of each kind.
For avid gamers that need to fly fighter jets and area simulation, we announce the VelocityOne Flight Stick, which mixes the newest applied sciences with an unimaginable array of buttons and controls and customizable lighting to take flight sticks into the long run. Leveraging our international enterprise as a number one gaming {hardware} supplier, the profitable growth and diversification of our portfolio over the previous years from council gaming headsets right into a broad array of council and PC gaming equipment is enabling us to proceed to broaden revenues outdoors of our market-leading council headset enterprise to what we anticipate will likely be over 30% of revenues in This autumn. I am going to return with extra commentary on the rest of the yr and ideas on 2023 after John takes us by means of the financials. John?
John Hanson — Chief Monetary Officer
Hey, thanks Juergen, and good afternoon, everybody. For the third quarter, income was $51.3 million down as anticipated from the second highest third quarter in our historical past. The year-over-year decline displays decrease demand as customers in the reduction of on their discretionary spend and retailers proceed to cut back channel inventories. As we acknowledged on the Q2 earnings name, we enhance promotional program spend in Q3 on account of these market circumstances.
Within the third quarter, gross margins had been 14.1%, together with an incremental stock provision for potential extra part and product stock referring to pandemic pushed provide chain and logistics impacts. Excluding this provision, gross margins had been 24.5% in comparison with 34.3% within the yr in the past quarter. The lower was primarily because of the extremely promotional retail setting, excessive freight price and discount on this fastened price leverage. Excessive freight charges relative to free pandemic ranges diminished gross margins by roughly 5%.
Freight charges have been declining not too long ago, which can cut back that affect as merchandise arriving on the decrease freight charges transfer by means of stock. Working bills within the third quarter had been $21 million, in comparison with $27.8 million within the yr in the past interval, a lower of 24%. Third quarter recurring working bills declined 16% yr over yr. A results of the proactive expense administration packages that we initiated earlier within the yr, in addition to alignment of bills to decrease market demand.
Our third quarter adjusted EBITDA loss was $6.9 million, in comparison with an adjusted EBITDA of 6.7 million within the yr in the past interval. The year-over-year variance is primarily pushed by the objects I’ve coated above, plus a $2.3 million opposed affect from overseas change. Adjusted internet loss for the third quarter 2022 was $7.7 million or 47 cents per diluted share, in comparison with adjusted internet earnings of $4.8 million or 26 cents per diluted share within the yr in the past interval. We anticipate our efficient tax charge for the complete yr to be roughly 25% and a This autumn share rely of roughly $18.5 million and full yr common share rely of roughly $17 million.
Turning to the steadiness sheet at September 30, 2022, we had $10.5 million of money and $44.6 million of borrowings excellent on our revolving credit score line. Inventories at September 30, 2022 had been $118.4 million, in comparison with $113.3 million at September 30, 2021. The elevated stock ranges replicate decrease than anticipated client demand later than regular vacation load in and decrease retail stock ranges, in addition to our aim of sustaining product availability amid persevering with international provide chain and logistics challenges. We proceed to anticipate a big discount in our stock by the tip of the yr as our stock ranges transition again to extra normalized ranges.
As we famous within the earnings launch, the corporate intends to file its Kind 10 Q pending completion of a goodwill evaluation that will affect goodwill valuation on the steadiness sheet and have a non-cash affect on GAAP internet earnings and GAAP EPS accordingly. Now, I am going to flip the decision again over to Juergen for some further feedback. Juergen?
Juergen Stark — Chairman and Chief Government Officer
Thanks, John. We anticipate the confluence of things together with client spending warning, channel stock compression, abnormally excessive aggressive discounting and exorbitant freight charges, which have impacted our enterprise and lots of others this yr to subside throughout 2023. That mixed with robust new product launches and our proactive reductions in spend ought to allow us to return to income development and constructive EBITDA in 2023, even when client demand stays subdued. In mild of the market and operational circumstances we have mentioned, we anticipate full yr 2022 revenues to be roughly $250 million inside, however on the low finish of our beforehand communicated steering vary of $250 to $275 million.
This displays an expectation that retailers will maintain their stock ranges properly under regular by means of vacation. We anticipated adjusted EBITDA to be roughly destructive $15 million with gross margins within the mid-twenties vary. I discussed that the gaming accent market is displaying enhancements within the yr over yr promote by means of comps over the previous few months, and we imagine these will proceed into the fourth quarter, notably given how weak the fourth quarter of 2021 was for gaming, We anticipate larger high quality AAA recreation releases this yr in opposition to poor high quality launches final yr. Certainly, the not too long ago launched Name of Responsibility has significantly better opinions and simply set a franchise document for opening weekend gross sales.
The provision of Xbox and PlayStation Councils can also be displaying enchancment with double digit yr over yr development the previous few months, and as a very good indication of continued gamer engagement. Steam simply broke its document for concurrent customers at over 30 million, which is up 12% from a yr in the past and has resumed steadily climbing since late July. After all, we have additionally continued to broaden and diversify our product portfolio, together with a number of merchandise added since This autumn final yr. As I’ve outlined, we’ve been and proceed to be very diligent on spending.
As mentioned, we have produced opex earlier this yr, regardless of operating with an already lean construction for the complete yr, we anticipate to ship roughly 13% in recurring opex discount yr over yr with movement ahead profit into 2023. We have now taken prudent and cautious actions to cut back bills the place attainable whereas persevering with to develop, launch and market nice merchandise to place our enterprise properly for the long run. Considering ahead to 2023, along with decrease opex, freight charges have come down considerably, however these decrease prices actually begin flowing by means of the p and l subsequent yr. Whereas we do not anticipate freight charges to return to pre pandemic ranges, we’d anticipate the 5 plus % gross margin affect to return down considerably with the ensuing profit to EBITDA.
Promotional exercise has been a lot larger than traditional this yr as the complete class has labored to cut back stock ranges. We anticipate that to enhance in 2023 as inventories proceed to return down, and we imagine that the retail stock reductions made in 2022 have reset retailer inventories to a really low degree in order that even flat promote by means of in 2023 would end in income development. In reality, if client demand for gaming equipment begins to choose up, which we imagine is feasible subsequent yr, retailers could enhance their stock ranges and thereby present an incremental profit to income. Simply as retail stock reductions this yr are having an incremental destructive affect on income, whereas it is tough to foretell macroeconomic circumstances for 2023, we imagine that gaming is a class can carry out properly even in a recession because it has prior to now.
And the business analysts are forecasting development in avid gamers and gaming markets, together with DFC anticipate PlayStation 5 gross sales to set a document subsequent yr. These components mixed with our continued robust product launches are why we anticipate income development and return to constructive EBITDA in 2023, even when client demand stays subdued. Our priorities proper now are easy, ship the absolute best monetary leads to a really tough and difficult setting whereas persevering with to execute on our long run technique to place us even higher when the gaming market rebounds. The important thing pillar of that technique stay the identical.
First, proceed to guide the council gaming headset market the place we’ve maintained management by far for 12 consecutive years. Second, proceed to broaden our PC gaming portfolio of headsets, keyboards, and mice, and develop our share within the 3.6 billion PC equipment market. Third, drive continued development in gamepad controller and gaming simulation classes that we entered in 2021 and fourth, proceed to determine and selectively consider different development alternatives, together with new product classes and increasing in goal geographies as we’ve with Korea and Japan. The general goal is to drive development in step with our 10 to twenty% annual long run development goal and accomplish that at 10 plus % EBIT margins.
Lastly, I need to thank the good staff at Turtle Seashore for his or her continued laborious work and dedication. With that, let’s flip to our Q and A.
Questions & Solutions:
Operator
Thanks. [Operator instructions] And our first query comes from Jack Vander Aarde with Maxim Group. Your line is now open.
Jack Vander Aarde — Maxim Group — Analyst
Nice. Thanks. Hello, Juergen. Hello, John.
I respect the replace. Thanks for taking my questions. So Juergen, I respect the useful colour on 2023. Simply, questioning, perhaps if I may dig into somewhat bit extra simply by way of the way you see it taking part in it out, how the yr performs out, assuming client demand simply steadily begins to enhance and retail inventories are barely rising all year long.
Is any specific seasonality modifications by way of income combine, the way you’d anticipate that to steadiness out? After which I am going to have a comply with up.
Juergen Stark — Chairman and Chief Government Officer
Positive, Jack. Hello. Initially, on seasonality, it is at all times laborious to evaluate as you go into the yr. This yr’s been considerably uncommon with a really, you already know, gradual Q1 pushed by every week This autumn for the entire class in vacation 2021.
So I feel one of the best modeling assumption proper now’s that the seasonality will likely be regular subsequent yr, however I do imagine that the general market will proceed to enhance subsequent yr in gaming. A key barometer, by the best way, for Q1 by means of Q3 subsequent yr is This autumn this yr. Recall that that This autumn can — has a — is impacted by how properly the video games do and {that a} robust vacation sometimes foreshadows a powerful Q1 by means of q3, and, and the alternative occurs as properly. If This autumn is weak, then the next yr till the brand new video games launch are also impacted by that.
So I discussed that the brand new Name of Responsibility launch has significantly better opinions and, you already know, we had been very happy to see that that it is set a gap weekend document and in addition broke the document, I imagine, on the PlayStation 5 retailer, in order that that is a very good first signal. There’s extra good video games coming however I feel that’ll have a constructive impact on 2023. One different essential dynamic by way of the highest line that I discussed you’ve gotten this double destructive impact when demand goes down as a result of not solely do you must promote much less merchandise to retailers to fulfil the demand, however in addition they take their stock ranges down even when they preserve the identical weeks of provide. Retailers have not maintained the identical weeks of provide on prime of all of that this yr.
They’ve diminished, you already know, wherever from two to eight weeks of provide from their regular targets that has a big incremental impact on revenues as a result of on prime of the decline in promote by means of and discount in regular stock, you are additionally not promoting as they, as they wind their stock ranges, which are actually properly under regular. So we anticipate that they may retailers will run by means of vacation, conservatively and lean, not lean to the purpose of stocking out by the best way, however slightly below, what we anticipate will likely be many weeks under their regular goal ranges. So if subsequent yr, I discussed, even when promote by means of is flat subsequent yr, the truth that there’s not that destructive affect from further channel — retail channel stock compression since you attain limits, the retailers cannot maintain taking weeks of provide out of their targets. And I — we expect we’re at these limits now.
And we may have a double constructive impact as properly. If promote by means of begins going up and so they turn out to be a much less conservative on the stock, then you definately’re promoting in not solely the upper client demand, but in addition a rise within the weeks of provide for retailers. So, sorry for the lengthy reply, however that that is sort of an outline on the highest of what we anticipate subsequent yr.
Jack Vander Aarde — Maxim Group — Analyst
No, I respect the added colour and if assuming a type of is constructive and even in the event you get the double constructive impact, is there an opportunity we see 2023 income look much like 2020 and 2021? Or we — I suppose I do not need to get forward of my skis right here, nevertheless it looks as if that is attainable if demand returns and these double positives play out.
Juergen Stark — Chairman and Chief Government Officer
That is going to rely loads on how the general financial system does. That is why we had been — even citing that at flat promote by means of subsequent yr. So comparable client demand, we would nonetheless see a income enhance. It is method too early earlier than vacation to make a name on how the general business within the video games setting goes to be subsequent yr.
Jack Vander Aarde — Maxim Group — Analyst
Gotcha. And only one extra for me. You talked about, as a part of your long run plan and what you are targeted on, you are exploring getting into new product traces or classes, which you’ve got carried out fairly efficiently not too long ago. Simply any concept of what you may be or what, what can we perhaps anticipate of a pure or one thing that is sensible that you do not at the moment have in the present day?
Juergen Stark — Chairman and Chief Government Officer
Positive. So, this yr late final yr, we entered flight simulation as a brand new class and the primary council controllers, and we clearly expanded our PC equipment line up and in addition launched a set of mics. So these are, some new classes subsequent yr or final yr at an growth within the PC class. This yr we have continued to broaden in PC and we have launched cellular controllers.
So these are what we only recently introduced, that is a sort of a separate further tam for cellular avid gamers. And one pure extension, which we totally have within the works for subsequent yr is racing simulation. Similar varieties of merchandise and abilities and engineering that we have demonstrated the flexibility to do extraordinarily properly inside the flight simulation class, actually sort of elevating the bar and redefining simulation merchandise for flight simmers. And we’re engaged on doing that with racing simulation with a goal of someday late subsequent yr.
There are different {hardware} classes, together with controllers for different platforms that we’ll have a look at. And, we have got sort of a strategic map of the place else we are able to go that is complimentary to our present companies, and like the remainder of our expansions can totally leverage the worldwide management place we have had for a few years in council gaming headsets with all these retail relationships and all of the followers we have generated from that.
Jack Vander Aarde — Maxim Group — Analyst
Wonderful. Nicely, I respect it, Juergen. Thanks. I am going to hop again into queue.
Juergen Stark — Chairman and Chief Government Officer
Thanks, Jack.
Operator
Thanks. Our subsequent query comes from Andrew Northcutt with Oppenheimer. Your line is now open.
Andrew Rogers — Oppenheimer and Firm — Analyst
Hello, that is Andrew on for Martin. Thanks for taking the questions. I simply have two. First, how ought to we take into consideration the places and takes for gross margins in 2023? After which second one, may you please touch upon the selection of a brand new board member Terry Jimenez, and why have not we seen a principal from [Inaudible] but?
Juergen Stark — Chairman and Chief Government Officer
Positive. So on the gross margins, so this yr’s gross margins had been closely impacted by two components. One is a really aggressive promotional setting to cut back inventories. We anticipate that that can get higher subsequent yr, so that ought to have some constructive affect on gross margins.
The opposite massive issue we mentioned was excessive freight charges, and freight charges have come down fairly a bit. Freight charges this yr we anticipate can have an over 5% destructive affect on gross margins. So we do not anticipate freight charges to return to pre-pandemic ranges, however they’ve been coming down fairly a bit prior to now few months, and you do not — you will not see that within the P&L but in This autumn as a result of these merchandise should arrive, undergo the stock and get bought out to retail. So we would anticipate gross margin affect from freight charges to begin coming down subsequent yr.
And each of these objects have vital affect on gross margins. After which the brand new board member, Terry, he is joined now that’s instead of a [Inaudible] individual at their suggestion. So we have introduced him on because the fourth new board member and he is joined our first board assembly final week.
Jack Vander Aarde — Maxim Group — Analyst
Nice. Thanks.
Operator
Thanks. [Operator instructions] Our subsequent query comes from Franco Granda with D.A. Davidson. Your line is now open.
Franco Granda — D.A. Davidson — Analyst
Hello. Good afternoon everybody. Thanks for letting me ask a pair questions right here. For Juergen, earlier within the name you talked about among the new releases being helpful to fourth quarter given into subsequent yr, in the event that they do properly ultimately.
Though there is a lengthy strategy to go to have the ability to gauge how properly the sport will do, as you talked about, Name of Responsibility simply has the document first weekend. Have you ever seen any information on what that did in your personal gross sales for the weekend?
Juergen Stark — Chairman and Chief Government Officer
I will not touch upon current gross sales as a result of we’re overlaying the numbers by means of the tip of Q3, however I’ll let you know that previously after we’ve seen extremely profitable recreation launches or not profitable recreation launches, it has a movement by means of affect on how the entire market does. It is not a direct affect. So we have had — I bear in mind some years in the past, I imagine it was 2016 nevertheless it may need been 2015, the place Name of Responsibility gross sales had been down one thing like 40% and the affect on the general marketplace for council giving me headsets was about 10% in This autumn. So it isn’t an ideal comp, however there’s, perhaps a few quarter movement by means of into council headsets.
The rationale for that, by the best way, is that council had plenty of the gross sales are current avid gamers who improve fashions all year long, and a few new avid gamers and a extremely profitable recreation launch will are likely to both immediate people who find themselves avid gamers and you actually need to have a headset for Name of Responsibility, as a result of it is multiplayer and in addition entice some new avid gamers in. So for us, having Name of Responsibility have significantly better opinions and set some information proper out of the gate is a constructive indicator.
Franco Granda — D.A. Davidson — Analyst
I respect all that colour. It is actually useful. So in that case, I suppose it is your steering for $2.50 for the yr, does that ponder what occurred this previous weekend with Name Responsibility or is that also to be a [Inaudible]
John Hanson — Chief Monetary Officer
No, we’re — we take clearly our steering displays the newest out there data, promote by means of channel stock, all of that. We attempt to present essentially the most correct learn that we are able to with all the newest data.
Franco Granda — D.A. Davidson — Analyst
Obtained it. OK, excellent. After which only one extra from me. You lately introduced plenty of merchandise for cellular and clearly are you continue to rising your PC line-up fairly a bit? Are you able to, I suppose — are you on the level the place you might parse out the income composition throughout cellular console and PC?
Juergen Stark — Chairman and Chief Government Officer
So we simply introduced and launched one, and I feel the opposite product continues to be, we have introduced it nevertheless it’s nonetheless coming, two cellular controllers. So method too early to report something on cellular individually. And word that whereas cellular, it is acquired a set of shoppers which are our cellular avid gamers, each — or the recon cloud controller, which is de facto cloud and cellular additionally works on Xbox. It is sort of very, very distinctive in that — you may get an Xbox a participant who needs to make use of in an Xbox, however then has excellent functionality to take it with and play the identical video games on cellular that they play on the Xbox.
So it is also not clear you can sort of clearly draw a line between these two. The growth within the cellular is de facto simply good addition to the controller portfolio that permits avid gamers for use utilizing controllers for cloud and cellular gaming.
Franco Granda — D.A. Davidson — Analyst
Obtained it. And I suppose I used to be referring primarily to the truth that you had already introduced some cellular headphones earlier this yr, however that is all proper. That solutions my query. Thanks a lot.
Juergen Stark — Chairman and Chief Government Officer
Yeah, I get it. And identical factor with cellular headphones, by the best way. I imply, you should utilize them for non-mobile gaming, proper? So it is simply a further product set to provide our followers and our prospects a strategy to additionally use merchandise once they’re solely cellular.
Franco Granda — D.A. Davidson — Analyst
Useful. Thanks.
Operator
Thanks. [Operator instructions] I might now like to show the convention again over to Juergen Stark for any closing remarks.
Juergen Stark — Chairman and Chief Government Officer
Thanks. We stay up for talking with our buyers and analysts once more subsequent yr on our fourth quarter earnings name, and we hope you all have a terrific vacation season. Thanks.
Operator
[Operator signoff]
Period: 0 minutes
Name individuals:
Alex Thompson — Investor Relations
Juergen Stark — Chairman and Chief Government Officer
John Hanson — Chief Monetary Officer
Jack Vander Aarde — Maxim Group — Analyst
Andrew Rogers — Oppenheimer and Firm — Analyst
Franco Granda — D.A. Davidson — Analyst
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