Turtle Beach (HEAR) - 2025 Q2 - Quarterly Results

Q2 2025 Financial Performance and Corporate Updates This section details Turtle Beach's second-quarter financial results, corporate strategic actions, and full-year guidance Q2 2025 Financial Highlights Turtle Beach reported Q2 2025 net revenue of $56.8 million, improved gross margin to 32.2%, and significantly narrowed its net loss Q2 2025 Financial Performance (in millions) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $56.8M | $76.5M | (25.8%) | | Gross Margin | 32.2% | 30.2% | +200 bps | | Net Loss | ($2.9M) | ($7.5M) | Improved by $4.6M | | Adjusted EBITDA | ($3.0M) | $3.0M | ($6.0M) | - CEO Cris Keirn highlighted the company's agility in navigating macro challenges, noting that swift actions on cost optimization and production strategy significantly mitigated tariff impacts[3] - Year-over-year gross margin improved to over 32% despite an approximate 150 basis point negative impact from tariffs[3] Corporate Developments The company executed strategic debt refinancing to lower capital costs and initiated a $5.0 million share repurchase program Debt Refinancing Turtle Beach secured a new $150 million facility, lowering the term loan interest rate by 450 basis points for over $2.0 million in annual savings - The new $150 million facility consists of a $90 million revolving credit facility and a $60 million term loan[5] - The refinancing lowered the cost of capital on the term loan by approximately 450 basis points, leading to annual savings of over $2.0 million[5] - The new agreement revises prior operational limitations, enhancing the company's ability to repurchase shares[5] Share Repurchase Program The company repurchased $5.0 million of common stock in Q2 2025 under its $75 million program, planning continued opportunistic buybacks - In Q2 2025, the company repurchased $5.0 million of common stock[6] - This is part of a recently announced $75 million share repurchase agreement[6] - The company intends to remain opportunistic in share buybacks, supported by the flexibility of its new debt agreements[6] Full Year 2025 Outlook Turtle Beach reiterated its full-year 2025 financial guidance, signaling confidence in its performance for the remainder of the year Full Year 2025 Guidance | Metric | Full Year 2025 Guidance Range | | :--- | :--- | | Net Revenues | $340 million - $360 million | | Adjusted EBITDA | $47 million - $53 million | Financial Statements The detailed financial statements show a Q2 revenue decline but narrowed operating and net loss, with positive cash flow from operations Condensed Consolidated Statements of Operations Q2 2025 net revenue decreased to $56.8 million, but net loss improved to $2.9 million, aided by a $6.0 million insurance recovery Condensed Consolidated Statements of Operations (in thousands) | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net revenue | $56,777 | $76,478 | | Gross profit | $18,262 | $23,076 | | Operating loss | ($329) | ($4,111) | | Net loss | ($2,931) | ($7,524) | | Diluted net loss per share | ($0.14) | ($0.35) | - A notable item was a $5.965 million insurance recovery, which significantly reduced total operating expenses from $27.2 million in Q2 2024 to $18.6 million in Q2 2025[19] Condensed Consolidated Balance Sheets As of June 30, 2025, total assets were $240.2 million, down from $298.9 million, primarily due to decreases in accounts receivable and cash Condensed Consolidated Balance Sheets (in thousands) | (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $11,705 | $12,995 | | Total Current Assets | $138,032 | $188,371 | | Total Assets | $240,181 | $298,861 | | Total Current Liabilities | $75,255 | $123,672 | | Total Liabilities | $123,346 | $178,257 | | Total Stockholders' Equity | $116,835 | $120,604 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, cash from operating activities significantly improved to $37.3 million, while financing activities used $41.7 million Condensed Consolidated Statements of Cash Flows (in thousands) | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $37,303 | $14,613 | | Net cash provided by (used for) investing activities | $2,019 | ($79,261) | | Net cash (used for) provided by financing activities | ($41,746) | $58,176 | | Net decrease in cash and cash equivalents | ($1,290) | ($6,264) | GAAP to Adjusted EBITDA Reconciliation The company reported a Q2 2025 Adjusted EBITDA of ($3.0) million, with a significant ($6.0) million insurance recovery adjustment from net loss GAAP to Adjusted EBITDA Reconciliation (in thousands) | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net loss | ($2,931) | ($7,524) | | Adjustments | $1,113 | $10,568 | | Insurance recovery | ($5,965) | $0 | | Adjusted EBITDA | ($3,044) | $3,044 | - The largest reconciling item in Q2 2025 was the ($5.965 million) insurance recovery, which is excluded from Adjusted EBITDA; other key add-backs include depreciation & amortization ($3.1 million) and interest expense ($2.0 million)[26] Disclosures and Definitions This section outlines the company's use of non-GAAP financial measures and provides cautionary notes regarding forward-looking statements Non-GAAP Financial Measures The company uses Adjusted EBITDA, a non-GAAP measure, to evaluate operating performance, with a reconciliation provided for historical data - Adjusted EBITDA is defined as net income (loss) before interest, taxes, depreciation and amortization, stock-based compensation, and certain non-recurring special items[12] - The company does not provide a reconciliation for its forward-looking Adjusted EBITDA guidance to net income (loss) due to the variability and complexity of reconciling items[13] Forward-Looking Statements This section contains a standard safe harbor statement, warning that future events are subject to risks and uncertainties - The press release includes forward-looking statements that are predictions and not guarantees of future performance, subject to known and unknown risks[14] - Key risk factors mentioned include trade policies (tariffs), release of successful game titles, macroeconomic conditions, and supply chain challenges[14]