Turtle Beach (US:HEAR)2025-11-06 22:00Financial Performance - Net revenue for the three months ended September 30, 2025 was $80.5 million, a decrease of $13.9 million or 14.7% from $94.4 million in the same period of 2024, primarily due to reduced market demand for computer gaming accessories [115]. - For the nine months ended September 30, 2025, net revenue was $201.1 million, a decrease of $25.6 million or 11.3% from $226.7 million in the same period of 2024 [117]. - Adjusted EBITDA for the three months ended September 30, 2025, was $10.975 million, a decrease from $16.268 million in the same period of 2024 [133]. Gross Profit and Margin - Gross profit for the three months ended September 30, 2025 was $30.1 million, with a gross margin of 37.4%, an increase from 36.2% in the prior year period [116]. - Gross margin for the nine months ended September 30, 2025 improved to 35.6% from 33.1% in the comparable prior year period [118]. Operating Expenses - Operating expenses for the three months ended September 30, 2025 totaled $24.7 million, a decrease of $3.0 million or 10.8% from $27.7 million in the same period of 2024 [119]. - General and administrative expenses increased by $1.2 million or 18.7% for the three months ended September 30, 2025, primarily due to higher public company costs [123]. Cash Flow and Financing - Net cash provided by operating activities for the nine months ended September 30, 2025, was $22.121 million, an increase of $30.7 million compared to a cash outflow of $8.553 million for the same period in 2024 [137]. - Cash and cash equivalents at the end of the period on September 30, 2025, were $12.257 million, down from $13.803 million at the end of September 30, 2024 [136]. - Net cash used for financing activities was $24.476 million during the nine months ended September 30, 2025, compared to net cash provided of $82.665 million in the same period of 2024 [139]. - The Company recorded a loss on extinguishment of debt of $1.7 million related to the repayment of the Term Loan Facility on August 1, 2025 [149]. - As of September 30, 2025, the Company had excess borrowing availability of approximately $34.5 million under the Credit Agreement [155]. - The Revolving Credit Facility was amended to extend the maturity date to March 13, 2027, and incorporated PDP acquisition assets into the U.S. Borrowing Base [144]. - Cash provided by investing activities was $1.346 million for the nine months ended September 30, 2025, compared to a cash outflow of $80.686 million in the same period of 2024 [138]. - The Company believes current cash and cash equivalents, along with cash flows from operations, will be sufficient for anticipated funding needs [140]. Market Conditions and Risks - The global gaming accessories market is estimated to be an $11 billion business, driven by major game launches and franchises [110]. - The launch of the Nintendo Switch 2 in June 2025 marked the fastest-selling video game console launch of all time [113]. - The Company has exposure to market risk primarily due to fluctuations in interest rates, foreign currency exchange rates, and inflation [160]. - As of September 30, 2025, and December 31, 2024, the Company did not have any derivative financial instruments to manage foreign currency risks [161]. - A hypothetical 10% change in foreign currency exchange rates is not expected to have a material impact on the Company's earnings or cash flows due to immaterial monetary assets and liabilities [162]. - Inflationary pressures have negatively impacted consumer demand, leading to reduced sales [164]. - Trade policy actions in 2025 have increased import tariffs, adversely affecting the Company's operations [163]. - The Company continues to face higher costs due to a higher interest rate environment, impacting profit margins if selling prices do not increase accordingly [166]. - Global supply chain constraints and economic conditions have caused volatility in demand and pricing of the Company's products [165]. Acquisition - The company acquired Performance Designed Products LLC in March 2024, expanding its product portfolio to include gaming controllers and accessories [109].