INVESTOR PRESENTATION NASDAQ: TBCH | MARCH 2025 SAFE HARBOR STATEMENT & IMPORTANT INFORMATION Forward-Looking Information and Statements This presentation, including the appendix, includes forward-looking information and statements within the meaning of the federal securities laws. Except for historical information contained in this release, statements in this release may constitute forward-looking statements regarding assumptions, projections, expectations, targets, intentions or beliefs about future event ...

Turtle Beach (HEAR) FY Conference Summary Industry and Company Overview - The conference focused on Turtle Beach, a leading company in the gaming accessory industry, particularly known for its headsets and controllers [1][2] - The discussion highlighted the upcoming gaming cycle, including new hardware launches and significant game releases that are expected to impact accessory sales positively [3][4] Key Points and Arguments Upcoming Gaming Cycle - Anticipation for the Nintendo Switch 2 and its impact on accessory sales, with historical trends indicating strong initial sales for accessories following new console launches [4][5] - Excitement surrounding the release of GTA VI in May, which is expected to drive significant engagement and accessory purchases [6][14] Accessory Categories and Growth - Turtle Beach aims to differentiate its products by collaborating with console manufacturers to create complementary accessories that enhance the gaming experience [8][11] - The company is focusing on innovative audio features and new technologies across all platforms, including PC [10][12] Engagement-Driven Sales - High engagement games, such as GTA VI and Fortnite, are identified as key drivers for accessory purchases, with the expectation that increased playtime leads to higher accessory demand [13][15] - The company has successfully launched licensed products for popular games like Minecraft, indicating a strategy to tap into high-engagement titles [16][17] Market Dynamics and Replacement Cycles - Historically, the replacement cycle for gaming accessories has been around 2-3 years, driven by gamer engagement and technological advancements [21][22] - The pandemic created a surge in demand for gaming accessories, but a full replacement cycle has not yet been realized, presenting an opportunity for future growth as new hardware and games are released [23][25] Financial Performance and M&A Strategy - The acquisition of PDP has been transformative, broadening Turtle Beach's product portfolio and contributing to a more balanced revenue split between headsets and other categories [30][31] - The company has exceeded synergy expectations from the PDP acquisition, achieving over $13 million in synergies compared to the anticipated $10-12 million [32] - Future M&A activities will be informed by the success of the PDP acquisition, with a focus on accretive deals that enhance growth [34][35] Capital Allocation and Cash Flow - Turtle Beach anticipates $50 million in EBITDA for the year, with cash flow expected to be in the mid-$30 million range, supported by low capital requirements [37][38] - The company has a strong buyback program, having repurchased nearly $30 million in stock last year and approving an additional $75 million buyback program [36][39] Long-Term Strategy - The focus for the next 3-5 years includes consistent execution, adapting to market changes, and maintaining a leadership position in the gaming accessory space [47][50] - The company aims to balance investments in core business growth, M&A opportunities, and share buybacks to enhance shareholder value [49][51] Additional Important Insights - The company is preparing for a shift in revenue seasonality due to the upcoming releases, particularly GTA VI, which may create patterns similar to console launches [44][45] - The management emphasizes agility and quick adaptation to market changes, which has been a competitive advantage for Turtle Beach [48][49] This summary encapsulates the key insights from the Turtle Beach FY Conference, highlighting the company's strategic direction, market opportunities, and financial outlook.

Turtle Beach (HEAR) Q1 2025 Earnings Call May 08, 2025 05:00 PM ET Company Participants Jacques Cornet - PartnerCris Keirn - CEOMark Weinswig - CFO Conference Call Participants Anthony Stoss - AnalystSean McGowan - MD & Senior Research AnalystMartin Yang - Senior AnalystNone - Analyst Operator and welcome to Turtle Beach Q1 twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a remin ...

Turtle Beach (HEAR) Q1 2025 Earnings Call May 08, 2025 05:00 PM ET Company Participants Jacques Cornet - PartnerCris Keirn - CEOMark Weinswig - CFO Conference Call Participants Anthony Stoss - AnalystSean McGowan - MD & Senior Research AnalystMartin Yang - Senior AnalystNone - Analyst Operator and welcome to Turtle Beach Q1 twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a remin ...

Financial Data and Key Metrics Changes - First quarter revenue increased by 14% year over year to $63.9 million, driven by the full quarter contribution from the PDP acquisition [4][14] - Adjusted EBITDA rose to $4.1 million, up 180% from $1.4 million a year ago, indicating strong operating leverage [4][16] - Gross margins improved by 470 basis points year over year to 36.6% [5][14] - Operating expenses were $21.8 million, representing 34% of revenue compared to 42% in the prior year [15] Business Line Data and Key Metrics Changes - The U.S. gaming accessories market experienced a 16% year over year decline in Q1, impacting overall market performance [5][27] - Despite the market decline, the company achieved revenue growth due to the PDP acquisition and improved product offerings [4][5] Market Data and Key Metrics Changes - The broader gaming accessories market is projected to decline by 10% to 12% for the full year 2025, influenced by factors such as the delayed release of Grand Theft Auto VI and tariff impacts [28][41] - The company anticipates a gradual improvement in market conditions throughout 2025, particularly with the upcoming launch of the Nintendo Switch 2 [11][19] Company Strategy and Development Direction - The company is focusing on expanding its gaming accessories portfolio and capitalizing on industry growth drivers, including new product launches [12][22] - A new share repurchase program of up to $75 million over the next two years has been authorized, reflecting confidence in the company's future [13][18] - The company is actively managing supply chain diversification to mitigate tariff impacts, with less than 10% of U.S. supply produced in China after Q1 [9][60] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by tariffs and the evolving economic landscape but expressed confidence in navigating these issues with minimal long-term effects [8][22] - The company remains optimistic about returning to robust growth in 2026 and beyond, driven by a growing gamer base and new game releases [11][19] Other Important Information - The company generated over $40 million in cash flow from operations during Q1, marking one of the highest cash flow-generating quarters in its history [17] - The company is implementing pricing adjustments to mitigate tariff impacts, which have already been factored into the revised guidance [54][56] Q&A Session Summary Question: Impact of GTA VI delay on revenue reduction - Management indicated that the revenue reduction is a combination of factors, including the GTA VI delay and broader market challenges, with the accessories market down 16% in Q1 [25][26] Question: Expectations for gross margins in upcoming quarters - Gross margins are expected to be in the low 30s for Q2, with potential recovery in Q3 and Q4 as the company adjusts to market conditions [31][33] Question: Further cost controls in light of revised guidance - The company is actively pursuing cost synergies from the PDP acquisition and is identifying additional opportunities for cost reductions [34][35] Question: Flexibility to rebound if market conditions improve - Management stated that they are well-prepared to respond to any positive changes in market conditions, with a strong inventory position [41][42] Question: Tariff assumptions for Vietnam in projections - Current guidance reflects existing tariff conditions, and the company is ready to adjust its plans based on any changes in the tariff landscape [46][48] Question: Pricing adjustments due to tariffs - Pricing adjustments have been communicated to partners and are included in the revised guidance, with some products absorbing the tariff impact entirely [54][56] Question: Transition to Vietnam and competitive advantage - The company has been diversifying its supply chain for years and was able to quickly shift production to mitigate tariff impacts, which may provide a competitive advantage [58][60]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides a comprehensive overview of the company's financial performance, position, and cash flows for the quarter ended March 31, 2025 [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Q1 2025 financial statements show increased revenue and operating income, a net loss, reduced debt, and improved operating cash flow, driven by the PDP acquisition [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net revenue increased 14.4% to **$63,901 thousand**, achieving operating income, but a net loss due to higher interest and lower tax benefit Consolidated Statements of Operations (Q1 2025 vs Q1 2024) | Financial Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Net revenue | $63,901 | $55,848 | +14.4% | | Gross profit | $23,367 | $17,786 | +31.4% | | Operating income (loss) | $1,536 | $(5,713) | Improvement | | Net (loss) income | $(664) | $155 | Decline | | Diluted (loss) income per share | $(0.03) | $0.01 | Decline | - Total operating expenses decreased to **$21,800 thousand** from **$23,500 thousand** year-over-year, mainly due to **$4,900 thousand** in Q1 2024 acquisition-related costs and a **$3,400 thousand** insurance recovery in Q1 2025[10](index=10&type=chunk) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$247,024 thousand** due to reduced accounts receivable, while total liabilities decreased to **$126,150 thousand** from credit facility paydown Balance Sheet Comparison (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $11,684 | $12,995 | | Inventories | $73,664 | $71,251 | | Total Assets | $247,024 | $298,861 | | Revolving credit facility | $6,592 | $49,412 | | Total Liabilities | $126,150 | $178,257 | | Total Stockholders' Equity | $120,874 | $120,604 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased to **$40,452 thousand**, investing activities provided **$2,349 thousand** from a PDP adjustment, and financing activities used **$44,877 thousand** for debt and repurchases Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $40,452 | $27,257 | | Net cash provided by (used for) investing activities | $2,349 | $(76,225) | | Net cash (used for) provided by financing activities | $(44,877) | $47,983 | | Net decrease in cash and cash equivalents | $(1,311) | $(910) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the PDP acquisition's post-closing adjustment, current debt facilities and compliance, and the expanded stock repurchase program - The acquisition of Performance Designed Products, LLC (PDP) on March 13, 2024, was for a total final purchase consideration of **$114,400 thousand**, consisting of cash and common stock[34](index=34&type=chunk)[35](index=35&type=chunk) - In January 2025, the company finalized post-closing adjustments for the PDP acquisition, resulting in a **$2,500 thousand** payment from the sellers to the company, treated as a reduction of purchase consideration[36](index=36&type=chunk) - As of March 31, 2025, the company had **$6,592 thousand** outstanding on its Revolving Credit Facility and **$48,600 thousand** on its Term Loan, with excess borrowing availability of approximately **$51,200 thousand**[54](index=54&type=chunk)[63](index=63&type=chunk) - The company's stock repurchase program was expanded to **$55,000 thousand**, with **0.1 million shares** repurchased for **$1,800 thousand** during Q1 2025[84](index=84&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses 14.4% revenue growth from PDP acquisition, improved gross margin, lower operating expenses due to an insurance recovery, and doubled Adjusted EBITDA [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Net revenue increased to **$63,901 thousand** due to PDP, gross margin expanded to **36.6%**, operating expenses decreased, and Adjusted EBITDA rose to **$4,050 thousand** Net Revenue and Gross Profit (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Revenue | $63,901 | $55,848 | | Gross Profit | $23,367 | $17,786 | | Gross Margin | 36.6% | 31.8% | - The increase in gross margin was primarily due to operating leverage from higher revenue from the PDP acquisition, lower promotional spend, and reduced freight costs[105](index=105&type=chunk) Adjusted EBITDA Reconciliation (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net (loss) income | $(664) | $155 | | Interest expense | 2,006 | 150 | | Depreciation and amortization | 3,126 | 1,476 | | Stock-based compensation | 1,912 | 1,105 | | Income tax provision | (109) | (6,388) | | Acquisition-related cost | 608 | 4,910 | | Insurance recovery | (3,439) | — | | **Adjusted EBITDA** | **$4,050** | **$1,449** | [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is supported by **$40,452 thousand** in operating cash flow and the Revolving Credit Facility, with **$44,877 thousand** used in financing activities for debt repayments - Cash provided by operating activities increased by **$13,200 thousand** year-over-year to **$40,452 thousand** in Q1 2025, primarily due to higher gross receipts from incremental PDP revenue[117](index=117&type=chunk) - Net cash used for financing activities was **$44,877 thousand** in Q1 2025, consisting primarily of **$42,800 thousand** in revolving credit facility net repayments and **$1,800 thousand** of share repurchases[119](index=119&type=chunk) - As of March 31, 2025, the company was in compliance with all financial covenants and had excess borrowing availability of approximately **$51,200 thousand**[130](index=130&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign currency fluctuations and inflation, impacting costs and consumer demand, with no derivative instruments held as of March 31, 2025 - The company's primary market risk exposures are from foreign currency exchange rates (British Pound and Euro) and inflation[138](index=138&type=chunk) - Inflationary pressures have negatively impacted consumer demand for the company's products and increased costs, and the company may not be able to fully offset increased costs by raising selling prices[141](index=141&type=chunk)[142](index=142&type=chunk) - As of March 31, 2025, the company did not have any derivative financial instruments to hedge foreign currency risk[139](index=139&type=chunk) [Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of March 31, 2025, and the company is remediating identified material weaknesses - Based on an evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were ineffective as of March 31, 2025[144](index=144&type=chunk) - The company is in the process of remediating material weaknesses identified in its 2024 Annual Report on Form 10-K[145](index=145&type=chunk) [PART II. OTHER INFORMATION](index=41&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section details legal proceedings, key risk factors, and information regarding the company's stock repurchase program [Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in legal matters including a resolved shareholder lawsuit, an appealed unfavorable German insolvency ruling, and an intellectual property claim against its PDP subsidiary - A shareholder lawsuit (PAMTP LLC) was fully resolved in the company's favor, with the Nevada Supreme Court affirming the judgment for the defendants in June 2024[72](index=72&type=chunk) - In a German insolvency dispute, a court ruled against the company's subsidiary for **EUR 1.4 million** plus interest, which the company has appealed but accrued for the potential loss contingency[73](index=73&type=chunk) - Subsidiary PDP received a letter from Nyko Technologies claiming patent infringement on a product no longer sold in the U.S., and PDP is investigating the claims[74](index=74&type=chunk) [Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) Key risks include dependency on third-party gaming platforms and game releases, alongside potential adverse impacts from changes in U.S. or foreign trade policies and tariffs - The company's business is highly dependent on the success of third-party gaming platforms (Microsoft Xbox, Sony PlayStation, Nintendo Switch) and the timely release of popular game titles[151](index=151&type=chunk)[152](index=152&type=chunk) - Changes in U.S. or foreign trade policies, especially tariffs on goods manufactured in China, pose a significant risk, potentially increasing costs and decreasing demand for the company's products[153](index=153&type=chunk)[154](index=154&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Board authorized a **$55,000 thousand** stock repurchase program, with **121,321 shares** repurchased for **$14.43** per share in Q1 2025 - The Board of Directors has authorized a stock repurchase program for up to **$55,000 thousand** of the company's common stock[157](index=157&type=chunk) Issuer Purchases of Equity Securities (March 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares that May Yet Be Purchased | | :--- | :--- | :--- | :--- | | March 1-31, 2025 | 121,321 | $14.43 | $17,088,682 |

Financial Performance - Q1 2025 revenue reached $64 million, a 14% increase compared to the previous year, primarily driven by PDP sales[4,8] - Gross margins improved by 470 basis points year-over-year in Q1 2025[4,8] - Adjusted EBITDA grew by 180% to $4.1 million in Q1 2025, reflecting higher revenue and improved cost structure[4,8] - The company repurchased $1.8 million in common shares during Q1 2025 and authorized a new stock repurchase program of up to $75 million over the next two years[5] Market Position - Turtle Beach gained 40 basis points in revenue share in the gaming headset market during Q1 2025, despite an overall market decline[7] - In March 2025, Turtle Beach gained 160 basis points in revenue share while the gaming headset market was down approximately 19%[7] - Turtle Beach's PS5 Victrix BFG is the second bestselling controller in the 3rd party market and the top selling wireless controller[7] - The Riffmaster wireless guitar on XBO and PS4 continues to be the dominant seller in the music controller's category with 95% share of music controller market[7,41,43] - Turtle Beach is the second largest third-party controllers brand with nearly 30% share[39,43] Future Outlook - The company's 2025 guidance projects net revenue between $340 million and $360 million, and adjusted EBITDA between $47 million and $53 million[9] - Long-term financial targets include revenue growth of 10%+ CAGR and Adjusted EBITDA margins in the mid-to-high teens[10]

[Q1 2025 Performance Summary](index=1&type=section&id=Q1%202025%20Performance%20Summary) [Financial Highlights](index=1&type=section&id=First%20Quarter%20Highlights) Turtle Beach reported strong Q1 2025 results with a 14% increase in net revenue to $63.9 million and a 470 basis point improvement in gross margin to 36.6% Q1 2025 Key Financial Metrics vs. Q1 2024 | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $63.9 million | $55.8 million | +14% | | Gross Margin | 36.6% | 31.8% | +470 bps | | Net Income (Loss) | $(0.7) million | $0.2 million | - | | Adjusted EBITDA | $4.1 million | $1.4 million | +193% | | Cash Flow from Operations | $40.5 million | $27.3 million | +48% | - The company authorized a new **$75 million** stock repurchase program, signaling confidence in its future prospects[1](index=1&type=chunk)[5](index=5&type=chunk)[6](index=6&type=chunk) [Management Commentary & Strategy](index=1&type=section&id=Management%20Commentary) The CEO attributed the strong Q1 growth, despite market headwinds, to the accretive acquisition of PDP and strong execution - Q1 growth was driven by incremental revenue and margin from the March 2024 acquisition of PDP, which helped offset a decline in the broader gaming accessories market[3](index=3&type=chunk) - In response to potential tariffs, the company has transitioned significant production out of China, with post-Q1 U.S. supply from China being **less than 10%**, and Vietnam becoming the primary source[4](index=4&type=chunk) - The company remains confident in its initiatives and ability to drive shareholder value, focusing on profitability, operational efficiency, and growth to adapt to evolving economic conditions[7](index=7&type=chunk) [Capital Management](index=2&type=section&id=Capital%20Management) [Share Repurchase Program](index=2&type=section&id=Share%20Repurchase%20Update) The company has authorized a new $75 million stock repurchase program set to expire on May 6, 2027, with $1.8 million repurchased in Q1 2025 - A new stock repurchase program of up to **$75 million** has been authorized, scheduled to expire on May 6, 2027[8](index=8&type=chunk)[6](index=6&type=chunk) Share Repurchase Activity | Period | Amount Repurchased | | :--- | :--- | | Q1 2025 | $1.8 million | | Since Q2 2024 (Total) | $29.5 million (1.9M shares) | [Balance Sheet and Cash Flow](index=2&type=section&id=Balance%20Sheet%20and%20Cash%20Flow%20Summary) As of March 31, 2025, the company had net debt of $43.6 million and generated $40.5 million in cash flow from operations - As of March 31, 2025, **net debt** stood at **$43.6 million**[9](index=9&type=chunk) - Generated **$40.5 million** in cash flow from operations in Q1 2025, marking the highest level since 2019[9](index=9&type=chunk)[5](index=5&type=chunk) [Full Year 2025 Outlook](index=2&type=section&id=Financial%20Outlook) [Revised Financial Guidance](index=2&type=section&id=Revised%20Financial%20Guidance) Turtle Beach has revised its full-year 2025 financial outlook due to macroeconomic uncertainty and recent industry announcements regarding new game releases - The 2025 financial outlook was revised due to macroeconomic uncertainty and changes in new game release schedules[10](index=10&type=chunk) Full Year 2025 Financial Outlook | Metric | Guidance Range | | :--- | :--- | | Net Revenues | $340 million - $360 million | | Adjusted EBITDA | $47 million - $53 million | [Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Consolidated%20Financial%20Statements%20(Unaudited)) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Table%201.%20Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended March 31, 2025, the company reported net revenue of $63.9 million and a net loss of $(0.7) million Q1 2025 vs Q1 2024 Statement of Operations (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net revenue | $63,901 | $55,848 | | Gross profit | $23,367 | $17,786 | | Operating income (loss) | $1,536 | $(5,713) | | Net income (loss) | $(664) | $155 | | Diluted net loss per share | $(0.03) | $0.01 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Table%202.%20Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets were $247.0 million, total liabilities were $126.2 million, and total stockholders' equity was $120.9 million Balance Sheet Summary (in thousands) | Line Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $11,684 | $12,995 | | Inventories | $73,664 | $71,251 | | Total Assets | $247,024 | $298,861 | | Total Liabilities | $126,150 | $178,257 | | Total Stockholders' Equity | $120,874 | $120,604 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Table%203.%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first three months of 2025, net cash provided by operating activities was $40.5 million, with net cash used for financing activities of $(44.9) million Cash Flow Summary for Three Months Ended March 31 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $40,452 | $27,257 | | Net cash provided by (used for) investing activities | $2,349 | $(76,225) | | Net cash (used for) provided by financing activities | $(44,877) | $47,983 | | Net decrease in cash and cash equivalents | $(1,311) | $(910) | [GAAP to Adjusted EBITDA Reconciliation](index=8&type=section&id=Table%204.%20GAAP%20to%20Adjusted%20EBITDA%20Reconciliation) The company reconciled its Q1 2025 net loss of $(0.7) million to an Adjusted EBITDA of $4.1 million, compared to $1.4 million in Q1 2024 Adjusted EBITDA Reconciliation for Q1 (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net (loss) income | $(664) | $155 | | Adjustments | $4,714 | $1,294 | | **Adjusted EBITDA** | **$4,050** | **$1,449** | - Major adjustments in Q1 2025 included **$3.1 million** for depreciation & amortization, **$1.9 million** for stock-based compensation, and a **$(3.4) million** insurance recovery related to a prior inventory loss[29](index=29&type=chunk) [Supplementary Information](index=2&type=section&id=Supplementary%20Information) [Conference Call Information](index=2&type=section&id=Earnings%20Conference%20Call%20and%20Webcast%20Details) Turtle Beach hosted a conference call and webcast on May 8, 2025, to discuss its first-quarter results and provide commentary on its 2025 outlook - A conference call was held on May 8, 2025, to discuss Q1 results and the 2025 outlook[11](index=11&type=chunk) - A webcast replay is available on the investor relations website at corp.turtlebeach.com[12](index=12&type=chunk) [Non-GAAP Financial Measures](index=3&type=section&id=Non-GAAP%20Financial%20Measures) The company utilizes non-GAAP financial measures, such as Adjusted EBITDA, to offer investors supplemental information for period-to-period comparisons - The company uses non-GAAP measures like Adjusted EBITDA to evaluate operating performance and for financial planning[14](index=14&type=chunk) - A reconciliation of the full-year 2025 Adjusted EBITDA guidance to its GAAP equivalent, net income (loss), is not provided due to the variability and unpredictability of certain reconciling items[15](index=15&type=chunk)

Part I [Business](index=7&type=section&id=Item%201.%20Business) Turtle Beach, a leading gaming accessories company, expanded its product portfolio in 2024 with the acquisition of Performance Designed Products (PDP), maintaining market leadership in console gaming headsets for 15 consecutive years - The company has been a market share leader in console gaming headsets for **15 consecutive years**[16](index=16&type=chunk)[17](index=17&type=chunk) - In **2024**, Turtle Beach acquired Performance Designed Products (PDP) to expand its product portfolio, particularly in gaming controllers[17](index=17&type=chunk)[37](index=37&type=chunk) Gaming Peripherals Market Size Estimates | Market Segment | Estimated Global Size | | :--- | :--- | | Total Gaming Peripherals | $11 billion | | Console and PC Gaming Headsets | $2.9 billion | | Gamepad/Controllers | $3.0 billion | | PC Gaming Mice, Keyboards, Microphones | $3.9 billion | | Gaming Simulation Accessories | $1.2 billion | - The business is seasonal, with over **45% of revenues** historically generated between September and December[47](index=47&type=chunk) - Significant customer concentration exists, with the five largest customers accounting for approximately **69% of gross sales in 2024**, including Walmart, Amazon, and Best Buy[46](index=46&type=chunk) [Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) The company faces substantial risks from inflation, intense competition, supply chain disruptions, customer concentration, and identified material weaknesses in internal controls over financial reporting - Inflationary pressures adversely impact business costs and consumer discretionary spending[60](index=60&type=chunk)[61](index=61&type=chunk) - Reliance on limited third-party manufacturers and logistics providers exposes the company to supply chain risks, including a **$3.4 million inventory loss** due to misappropriation in **2024**[64](index=64&type=chunk)[69](index=69&type=chunk)[92](index=92&type=chunk) - **69% of gross sales in 2024** derived from five large customers, posing a material risk if any are lost[79](index=79&type=chunk) - Material weaknesses in internal controls over revenue recognition and supply chain monitoring led to a **$3.4 million misappropriation of in-transit inventory**[92](index=92&type=chunk) - Dependence on third-party licenses, such as from Microsoft for Xbox-compatible products requiring proprietary chips, is a key risk[104](index=104&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk) [Unresolved Staff Comments](index=39&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None [Cybersecurity](index=39&type=section&id=Item%201C.%20Cybersecurity) Turtle Beach employs a risk-based cybersecurity strategy overseen by the Board's Audit Committee, with no material breaches in the last five years - The company integrates processes for assessing and managing material cybersecurity risks into its overall risk management framework[147](index=147&type=chunk) - Cybersecurity oversight is managed by the Board's Audit Committee, with daily operations handled by the CFO and Senior Director of Information Technology[154](index=154&type=chunk)[155](index=155&type=chunk) - No material information security breaches have occurred in the last **five years**[153](index=153&type=chunk) [Properties](index=41&type=section&id=Item%202.%20Properties) The company leases all principal facilities, including its corporate headquarters in San Diego, CA, and administrative offices globally, which are deemed adequate for current needs Principal Leased Facilities as of December 31, 2024 | Location | Principal Business Activity | Approx. Square Feet | | :--- | :--- | :--- | | White Plains, NY | Administration | 15,800 | | San Diego, CA | Corporate Headquarters | 16,150 | | New Taipei City, TW | Administration | 14,800 | | Basingstoke, U.K. | Administration | 7,030 | [Legal Proceedings](index=41&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in legal proceedings, including an appealed EUR **1.4 million** insolvency ruling in Germany and a resolved 2013 shareholder class action in its favor - A shareholder class action lawsuit related to the **2013 merger** was fully resolved in the defendants' favor on **June 6, 2024**[163](index=163&type=chunk)[412](index=412&type=chunk) - A German court ruled on **February 28, 2025**, that a subsidiary is liable for **EUR 1.4 million** plus interest and costs in an insolvency dispute, which the company intends to appeal[164](index=164&type=chunk)[413](index=413&type=chunk) [Mine Safety Disclosures](index=43&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable Part II [Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=44&type=section&id=Item%205.%20Market%20for%20the%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq under "TBCH"; it does not pay dividends but has an active stock repurchase program, expanded to **$55.0 million** in **April 2024**, with **162,278 shares** repurchased for **$2.4 million** in Q4 2024 - The company does not pay cash dividends and does not anticipate doing so in the foreseeable future[174](index=174&type=chunk) - On **April 9, 2024**, the Board expanded the stock repurchase program to up to **$55.0 million** of common shares[175](index=175&type=chunk) Issuer Purchases of Equity Securities (Q4 2024) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares that May Yet Be Purchased | | :--- | :--- | :--- | :--- | | October 1 - 31, 2024 | 162,278 | $15.01 | — | | November 1 - 30, 2024 | 0 | $— | — | | December 1 - 31, 2024 | 0 | $— | — | | **Total** | **162,278** | **$15.01** | **$18,841,094** | [Reserved](index=46&type=section&id=Item%206.%20Reserved) This item is reserved [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=47&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In **2024**, the PDP acquisition drove **44.5%** net revenue growth to **$372.8 million**, improving gross margin to **34.6%** and achieving **$16.2 million** net income, with Adjusted EBITDA surging to **$56.4 million** despite **$3.4 million** inventory loss and **$10.8 million** integration costs Consolidated Statements of Operations Summary | (in thousands) | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Net revenue | $372,766 | $258,122 | $240,166 | | Gross profit | $128,982 | $75,504 | $49,187 | | Gross margin | 34.6% | 29.3% | 20.5% | | Operating income (loss) | $20,029 | $(16,443) | $(51,480) | | Net income (loss) | $16,183 | $(17,679) | $(59,546) | - Net revenue increased by **$114.8 million (44.5%)** in **2024**, primarily due to the PDP acquisition[198](index=198&type=chunk) - A **$3.4 million** loss of in-transit inventory was recorded in 'Cost of revenue' for Q4 **2024**[200](index=200&type=chunk)[352](index=352&type=chunk) - Acquisition integration costs for the PDP acquisition totaled **$10.8 million** in **2024**[201](index=201&type=chunk)[205](index=205&type=chunk) Adjusted EBITDA Reconciliation | (in thousands) | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Net income (loss) | $16,183 | $(17,679) | $(59,546) | | Adjustments | $40,234 | $24,173 | $29,657 | | **Adjusted EBITDA** | **$56,417** | **$6,494** | **$(29,889)** | [Quantitative and Qualitative Disclosures About Market Risk](index=62&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rate fluctuations on variable-rate debt, foreign currency exchange rates (British Pound and Euro), and inflation, which impacts costs and consumer demand - Primary market risks include interest rates, foreign currency exchange rates, and inflation[243](index=243&type=chunk) - Exposure to British Pound and Euro fluctuations is considered immaterial as of **December 31, 2024**[245](index=245&type=chunk) - Inflation has increased costs and may negatively impact profit margins if selling prices cannot be adjusted[246](index=246&type=chunk)[248](index=248&type=chunk) [Financial Statements and Supplementary Data](index=63&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for **2022-2024**, including an adverse opinion from Ernst & Young LLP on internal controls as of **December 31, 2024**, due to material weaknesses, and details on the PDP acquisition and debt facilities - Ernst & Young LLP issued an adverse opinion on internal control over financial reporting as of **December 31, 2024**, due to material weaknesses in revenue recognition[254](index=254&type=chunk)[434](index=434&type=chunk)[435](index=435&type=chunk) - On **March 13, 2024**, the company acquired PDP for **$116.9 million**, comprising **$78.9 million** cash and **3.45 million shares**, adding **$42.3 million** in goodwill[341](index=341&type=chunk)[342](index=342&type=chunk)[345](index=345&type=chunk) - A new **$50 million** Term Loan Facility with Blue Torch Finance was entered into on **March 13, 2024**, to partially fund the PDP acquisition[226](index=226&type=chunk)[375](index=375&type=chunk) - The Revolving Credit Facility was amended, extending maturity to **March 13, 2027**, and increasing the line of credit to **$50 million**[218](index=218&type=chunk)[365](index=365&type=chunk) - In **2022**, impairment charges of **$0.8 million** for the ROCCAT tradename and **$1.1 million** for Neat intangible assets were recorded due to brand transition strategies[357](index=357&type=chunk)[358](index=358&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=105&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None [Controls and Procedures](index=105&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of **December 31, 2024**, due to material weaknesses in customer purchase order initiation and monitoring of third-party logistics, leading to a **$3.4 million** inventory misappropriation - Management concluded that disclosure controls and procedures were not effective as of **December 31, 2024**[420](index=420&type=chunk) - A material weakness was identified in the customer purchase order initiation process, specifically regarding controls over product quantity and type[424](index=424&type=chunk) - Ineffective monitoring of third-party logistics providers led to a second material weakness, resulting in the **$3.4 million** misappropriation of in-transit inventory[425](index=425&type=chunk) [Other Information](index=107&type=section&id=Item%209B.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 trading arrangement in the fourth quarter of **2024** - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement in Q4 **2024**[431](index=431&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=107&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable Part III [Directors, Executive Officers, Corporate Governance, Compensation, Security Ownership, and Accountant Fees](index=110&type=section&id=Items%2010%2C%2011%2C%2012%2C%2013%2C%20and%2014) Information for Items 10-14, covering directors, executive officers, corporate governance, compensation, and security ownership, is incorporated by reference from the forthcoming **2025** Proxy Statement - All information required by Part III (Items 10-14) is incorporated by reference from the forthcoming **2025** Proxy Statement[444](index=444&type=chunk)[446](index=446&type=chunk)[447](index=447&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=111&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements, valuation and qualifying accounts schedules, and all exhibits filed with the Form 10-K, including credit agreements and the PDP merger agreement - This section provides a comprehensive list of all documents filed with the report, including financial statements, schedules, and exhibits[450](index=450&type=chunk)[453](index=453&type=chunk) - Schedule II - Valuation and Qualifying Accounts details allowances for sales returns, cash discounts, and deferred tax asset valuation allowances for **2022, 2023, and 2024**[470](index=470&type=chunk) [Form 10-K Summary](index=111&type=section&id=Item%2016.%20Form%2010-K%20Summary) No summary is provided in this section of the report - None

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