Turtle Beach Corporation Stock

Good day, ladies and gentlemen. Thank you for standing by. We welcome you to the Turtle Beach Corporation Second Quarter 2026 Conference Call. [Operator Instructions] As a reminder, the conference is being recorded.

I will now turn the call over to Jacques Cornet from Investor Relations team. Jacques, you may begin.

Thank you, operator. On today's call, we'll be referring to the press release filed this afternoon that details the company's second quarter 2026 results, which is available on the news page of the company's Investor Relations website, corp.turtlebeach.com, where you'll also find the latest earnings presentation that supplements the information discussed on today's call. Finally, a recording of the call will be available in the Events and Presentations section of the company's Investor Relations website later today.

Please be aware that some of the comments made during this call may include forward-looking statements within the meaning of the federal securities laws. Statements about the company's beliefs and expectations containing words such as may, will, could, believe, expect, anticipate and similar expressions constitute forward-looking statements. These statements involve risks and uncertainties regarding the company's operations and future results that could cause Turtle Beach Corporation's results to differ materially from management's current expectations. While the company believes that its expectations are based upon reasonable assumptions, numerous factors may affect actual results and may cause results to differ materially.

The company encourages you to review the safe harbor statements and risk factors contained in today's press release and in its filings with the Securities and Exchange Commission. Including, without limitation, the annual report on Form 10-K and other periodic reports, which identify specific risk factors that also may cause actual results or events to differ materially from those described in our forward-looking statements. The company does not undertake to publicly update or revise any forward-looking statements after this conference call.

The company also notes that on this call, it will be discussing non-GAAP financial information. The company is providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States or GAAP. You can find a reconciliation of these metrics to the company's reported GAAP results in the reconciliation tables provided in today's earnings release and presentation.

Hosting the call today are Cris Keirn, Chief Executive Officer; and Andrew Clipsham, Interim Chief Financial Officer. With that, I'll turn the call over to Chris.

Thanks, Jacques. Good afternoon, everyone, and welcome to our second quarter 2026 earnings call. During the second quarter, we continued executing against the strategic priorities we've outlined throughout the year. We expanded our product portfolio, advanced our brand transformation, returned significant capital to shareholders through share repurchases and prepared Turtle Beach for what we believe will be a stronger demand environment in the second half of 2026.

Revenue for the quarter was $56.4 million, essentially flat year-over-year. Continuing the trends we discussed on our last call, retail partners remain disciplined in managing inventory through much of the quarter with further reductions in channel inventory through the first half of Q2. As the quarter progressed, however, we began to see encouraging signs that retailers have now stabilized inventory ahead of what we expect will be a stronger second half of the year. We believe the combination of historically low channel inventory, improving early Q3 sell-through trends and the industry's upcoming content releases create a favorable setup for the second half of the year. Together, these factors prepare the business for a return to growth during the back half of 2026.

One of the defining characteristics of Turtle Beach in 2026 has been the pace of innovation across our portfolio. We are delivering a significant increase in new product introductions this year, and we're encouraged by the early performance of those models. The launch of Stealth Pro II, our new flagship headset, added share in the premium price tier for U.S. gaming headsets, supported by our new brand initiatives and building on the exceptional preorder demand we mentioned in our previous call.

We also recently announced the industry's first officially licensed wireless gaming headset for Nintendo Switch 2, further reinforcing Turtle Beach's leadership in gaming audio and our collaborative partnership with Nintendo. In addition to this latest audio innovation, our new Nintendo Switch 2 controllers and incremental retail placements drove year-over-year U.S. share growth in Nintendo controllers for the quarter, building momentum for Turtle Beach in this key growth segment.

More importantly, these launches with more to be announced, strengthen our leadership heading into what we believe will be one of the strongest gaming content calendars in years. Looking ahead, Grand Theft Auto VI remains on track for its confirmed November launch, while Call of Duty: Modern Warfare 4 has been confirmed to launch in October. Rather than simply benefiting from the increased demand these releases have historically generated, we've spent the past several quarters aligning our product road map, brand investments, retail distribution and operations to proactively set up Turtle Beach for the anticipated increase in gamer engagement. With GTA VI launching first on consoles, we believe Turtle Beach is particularly well positioned given our leadership across console gaming accessories and the timing of our newest product introductions as the market strengthens.

Capital allocation also remained an important area of execution throughout the quarter. Following the refinancing of our credit facilities in May, we repurchased approximately $25 million of our common stock during the second quarter. Those repurchases reflect our disciplined approach to capital allocation and our continued belief that the market does not fully recognize the long-term value of Turtle Beach. With approximately $31 million remaining under our current authorization, we will continue balancing opportunistic share repurchases with investments that support long-term value creation for the growth opportunities ahead. Given our confidence in our new product pipeline, the strength of the second half gaming release calendar and our expectation that channel inventories will rebuild toward more normalized levels, we are reaffirming our full year 2026 guidance.

Before turning to the financials, I'd like to introduce Andrew Clipsham, our recently appointed Interim Chief Financial Officer. Andrew has been with Turtle Beach for nearly 8 years and brings more than 20 years of global financial leadership experience. Throughout his time with the company, he has played an important role in strengthening our financial operations and supporting many of the strategic initiatives we've discussed over the past several years.

I'm pleased to welcome Andrew to his first earnings call as Interim CFO. With that, I'll turn it over to Andrew to provide additional details on our second quarter financials.

Thank you, Chris, and good afternoon, everyone. It's a pleasure to be joining you today as Interim Chief Financial Officer.

Second quarter revenue was $56.4 million, which is broadly unchanged from $56.8 million in the prior year period. While retail inventory levels remained below historical norms through much of the quarter, we began to see improving retail ordering patterns as we move through the period. Gross margin for the quarter was 38.8%, an increase of 660 basis points compared to 32.2% in the prior year quarter. Gross margins benefited from approximately $4.3 million of a total $8.2 million of tariff refunds received during the period. Excluding onetime items, our underlying gross margin profile continues to reflect the benefits of the structural improvements we've made over recent years through product mix optimization, supply chain initiatives and disciplined pricing actions.

For the balance of the year, we continue to expect gross margins to remain within our targeted mid- to high 30% range. As our newest products scale through the second half of the year and revenue increases seasonally, we expect those operating improvements and positive product mix to become increasingly evident. The recently announced tariff action increases the effective tariff rate on imports from China and Vietnam to approximately 12.5% from the prior 10% level. While we continue to monitor the trade environment closely, the actions we've taken over the past year to diversify our supply chain and optimize sourcing provide confidence that we can largely mitigate these changes without a material impact on profitability.

Operating expenses were $24.9 million or 44% of revenue compared to $18.6 million or 33% of revenue in the prior year quarter. The increase primarily reflects higher marketing investments supporting our expanded product launch schedule and brand initiatives, together with higher general and administrative expenses compared to the prior year quarter that included a onetime insurance recovery. The marketing investments are consistent with the strategy we've outlined throughout the year and are intended to support long-term growth rather than near-term revenue.

Net loss for the quarter was $7.3 million compared to $2.9 million in the prior year period. This quarter's loss reflects increased marketing investments during the period to support our brand and 2026 product road map, together with modestly higher interest expense. The prior year quarter included a onetime insurance recovery, which partially offset the net loss for that period. This recovery was adjusted out of prior year EBITDA. Adjusted EBITDA for the quarter was $1.3 million compared to negative $3.0 million in the prior year period. The year-over-year improvement reflects the stronger gross margins presented in these results.

Turning to the balance sheet. At June 30, net debt was $64.4 million, consisting of $83.9 million of outstanding debt and $19.6 million of cash. Operating cash inflow for the quarter was $6.5 million compared to an operating cash outflow of $3.1 million during the prior year period. Our revolving credit facility remained undrawn at quarter end. As we announced in May, we completed the refinancing of our credit facilities to increase financial flexibility and better align our capital structure with our long-term capital allocation priorities. The new structure provides up to $80 million in an asset-based revolving facility as well as an $85 million term loan, supporting both operational flexibility and our ongoing share repurchase strategy.

During the second quarter, we repurchased approximately $25 million of common stock, representing nearly 2 million shares at an average purchase price of $12.53. Following these repurchases, approximately 17.9 million shares remained outstanding with approximately $31 million remaining available under our current buyback authorization. As Chris mentioned, we continue to view share repurchases as an important component of our capital allocation framework. At the same time, we'll remain disciplined in balancing those repurchases with investments that support future growth.

Turning to guidance. We are reaffirming our full year 2026 outlook. Revenue is expected to remain in the range of $335 million to $355 million, while adjusted EBITDA is expected to be between $44 million and $48 million. As is typical for Turtle Beach, we expect the majority of our revenue to be generated in the second half of the year. This year's revenue cadence is expected to be more heavily weighted towards the back half than our historical seasonal pattern, reflecting the timing of our expanded new product introductions, improving channel inventory levels and the industry's major software releases, including Grand Theft Auto VI. While we currently expect the third quarter to contribute a percentage in the mid- to high 20s of full year revenue, the precise timing of retail holiday inventory load-ins can shift revenue between the third and fourth quarters. This is a normal feature of our business is reflected in our guidance and does not affect our expectations for the full year.

With that, I'll turn the call back to Chris.

Thanks, Andrew. As we look toward the second half of 2026, our priorities remain clear. We are focused on executing our product road map, supporting our retail partners through the holiday season, continuing to invest behind the Turtle Beach brand and allocating capital with discipline. The work we've completed over the past several years has created a stronger company with a broader product portfolio, improved operating leverage and greater financial flexibility. While the overall gaming accessories market has remained challenged over the past several quarters, we believe the industry is entering a more favorable period, supported by an improving content release calendar, momentum around Nintendo Switch 2 and the anticipated launch of Grand Theft Auto VI and other titles. As those industry catalysts develop, our focus remains on translating revenue growth into expanding profitability and long-term shareholder value through disciplined execution.

As always, I'd like to thank our employees for their strong delivery towards our goals, our retail and strategic partners for their collaboration and our shareholders for their continued support.

With that, operator, we can open the call for Q&A.

[Operator Instructions] Our first question is from Drew Crum from B. Riley Securities.

Andrew, welcome to the call. Appreciate the detail on the retail inventory dynamics you noted. One month into 3Q, can you talk about any observations what you've seen in terms of willingness on the part of retailers to replenish? Or is that something you're anticipating later in the quarter? And then I have a follow-up.

Yes. Thanks for your question. Good to hear from you. Yes, we are seeing positive signs here to start Q3. We're a month in here. And what we have seen is really since the preorders for GTA VI started, while we haven't received the market data yet, obviously, that won't come out until in a few weeks here in August from Circana. We do have the reported sell-through from retail that we get on a weekly basis. And we've seen since that preorder started weekly year-over-year growth in the business. And so that's been a very positive sign for us, and we're seeing that momentum continue here into August, the very early part of August. So we're pleased to see that development.

In addition, the channel inventory dynamics that we saw in the first quarter and that really continued until about midpoint in the second quarter appear to be behind us. We've seen a nice stabilization of those numbers. And knowing what's coming up in the back half with not only GTA 6, but some other really strong titles, we feel that will be a nice tailwind for the business moving forward.

Got it. Okay. Appreciate that. And then just a quick follow-up. I know that the business typically uses cash in 3Q. Can you talk about your ability to continue to buy shares given the cash flow dynamics of the business? Near term.

Absolutely. As you mentioned, we are getting to that period of time where we start to build inventory for holiday. You may see in the numbers, we've had a good reduction of inventory year-over-year up to this point in the year, we're about $20 million of inventory lower than we were at this time last year. If you remember, we had purchased ahead a good amount of inventory at that time in anticipation of the tariffs, which turned out to be a very good move for the company. But where we are now, we feel good about our inventory levels, but we are going to be committing more of that cash to the inventory build coming up, particularly with the growth that we expect to see in Q3 and Q4 due to the titles that are going to be releasing here in the back half.

Our next question is from Sean McGowan with ROTH Capital Partners.

Question about costs. You gave us an idea of what to expect in terms of third quarter revenue relative to the full year. But can you talk a little bit about the phasing of costs, particularly selling and marketing? I mean how is that going to be more skewed to the fourth quarter than typical?

Yes. Sean, thanks for your question. It's a great question, especially considering the dynamics we've got coming up. We have put more of the budget towards sales and marketing in the first half. There's two reasons for that. Number one, as we mentioned previously, we have a lot of new product launches this year. We've announced several of those. We've got more announcements coming here later this year.

And secondly, we've launched the new brand initiatives, which we've seen some really great early reception and results from on those initiatives. And so we have increased our spend so far this year. We do anticipate continuing some of that spend as we get into the back half, particularly with the opportunities that some of the new games are going to present and some of the lift that we've seen in the past, we talked a little on the last call about this, about the historical lift that we've seen from a game like GTA VI. So we will be continuing kind of the same level of spend that you've seen increase from us in the first half, but you'll see similar kind of numbers in the second half. And that's all included in our guide.

Okay. And another cost question. Was there anything in the G&A number in the second quarter that was kind of a benefit or an offset? Or is that kind of a real number that we can expect to see some -- maybe somewhat higher than that, but it was lower than I thought it would be. So good job, but was there something in there that was sort of an unusual benefit?

Yes. It's Andrew here. There's nothing there that's a significant benefit. In fact, we are lapping a benefit in G&A of the prior year where we received an insurance recovery from an incident that happened towards the end of 2024. But the levels of G&A that we see at the moment are consistent. There's nothing special in there, and we expect to see similar levels through the rest of the year.

That's helpful. And my last question is you are launching a lot more products than last year and more than normal. How has that gone as they kind of move through the system? Any glitches so far or have things been pretty smooth?

Yes. We've been pleased with the performance of those products so far, particularly Stealth Pro II, we talked about that. That's our new flagship headset. Really strong preorders on that. We've seen some nice share growth in that premium tier, which has been growing and continues to grow as a larger part of the market. In addition to that, we've had launches across multiple other categories. I would say that the largest benefit we've seen thus far has been a lot of our new Nintendo launches are doing quite well. On both the controller side and some of the other accessories that we've launched there.

We've also recently announced -- we've got the first wireless headset coming out for Nintendo Switch 2. So we're really excited about that. And we see a lot of potential for Nintendo Switch 2 sales continuing into the back half of the year. In that category, we've mentioned in the past that typically, you see a lot of first-party sales at the launch of the console. And then as you get further into the life cycle, you start to realize some of the shift into products like ours. And we're certainly seeing that in Q2 with some nice share gains in that space. So we're excited about what's moving forward with Switch 2 and the momentum that we see there.

[Operator Instructions] Our next question is from Jack Codera with Maxim Group LLC.

This is Jack Codera calling in for Jack Vander Aarde. A quick question on the gross margin. If you back out the tariff impact, it was closer to around, call it, 32%. How should we think about those 660-odd bps? Was that entirely accrued from like 2025? Like I guess the real question is, what would you say the real second quarter gross margin was?

Yes. So if we were to back out the effects of the tariff refunds received, you're correct. We're looking at about 31.2% gross margin for the quarter, which is still an increase on the previous quarter, which was running at 26.8%. So we're seeing a steady growth in our gross margin, and we do expect to keep gross margins in line with our guidance for the back half of this year.

Yes. And just to add to that, Jack, if you look at -- we thought we'd be ending up in roughly the low 30s. We had some comments on the last call about that. We weren't sure of the timing of the tariff refunds at that point. And so good to see those come in and provide that benefit here in Q2. As you look ahead for the full year, we still believe that we're going to end up in that target range that we have of mid- to high 30s. We think there's an opportunity to even improve slightly on last year's margins, which were quite strong for the full year. So we're encouraged with the progress we're seeing there, and we'll continue to work on that front.

Okay. That's super helpful. And then if you could kind of give an update on kind of all the segments. Obviously, we have the huge catalyst GTA, which seems like it's not going to be delayed, knock on wood. You mentioned the weekly year-over-year growth. Are you seeing that across your different segments? Is it kind of rising tide rises all boats. How are you seeing simulation controllers? Any color on those segments would be very helpful.

Sure. Yes, we're seeing it really -- all boats are rising here with increased engagement and I think also anticipation of upcoming engagement here in the back half of the year from gamers. Just giving you a quick breakdown on the different categories, headsets, in particular, when you look at lift that happened with GTA 5, it was a very, very strong lift across headsets. We're starting to see that come in. The headset market has been roughly flat year-to-date, but we do anticipate and the initial numbers we're seeing out of Q3 would indicate that, that is going to continue to increase now as we get further into Q3.

Controllers are also doing quite well with the overall shift to third-party controllers. as we get further into the life cycle for Switch 2 as an example. So we're seeing nice strong demand there in the controller space. Across the remainder of our business is about 10%. The remaining 10% or so of the business is where our hit devices, mice keyboards and SIEM products reside. We're seeing nice share gains in the SIEM space year-over-year. And those products continue to do well with some of the retail placements that we're able to get on those at the time of launch. So it's really more of a factor of all boats appear to be rising here across the categories.

We have reached the end of the question-and-answer session. I would like to turn the floor back over to Cris Keirn for closing remarks.

Thank you for your interest in Turtle Beach, everyone, and have a great day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Good afternoon, and welcome to the Turtle Beach Q1 2026 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded.

I will now hand the conference over to Jacques Cornet ICR. Please go ahead, sir.

Thank you, operator. On today's call, we will be referring to the press release filed this afternoon that details the company's first quarter 2026 results, which is available on the news page of the company's Investor Relations website corp.turtlebeach.com, where you'll also find the latest earnings presentation that supplements the information discussed on today's call. Finally, a recording of the call will be available in the Events and Presentations section of the company's Investor Relations website later today.

Please be aware that some of the comments made during this call may include forward-looking statements within the meaning of the federal securities laws. Statements about the company's beliefs and expectations containing words such as may, will, could, believe, expect, anticipate and similar expressions constitute forward-looking statements. These statements risks and uncertainties regarding the company's operations and future results that could cause Turtle Beach Corporation's results to differ materially from management's current expectations. While the company believes that its expectations are based upon reasonable assumptions, numerous factors may affect actual results and may cause results to differ materially.

The company encourages you to review the safe harbor statements and risk factors contained in today's press release and in its filings with the Securities and Exchange Commission, including, without limitation, its annual report on Form 10-K and other periodic reports which identify specific risk factors that also may cause actual results or events to differ materially from those described in our forward-looking statements.

The company does not undertake to publicly update or revise any forward-looking statements after this conference call. The company also notes that on this call, we'll be discussing non-GAAP financial information. company is providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States or GAAP. can find a reconciliation of these metrics to the company's reported GAAP results, the reconciliation tables provided in today's earnings release and presentation. Hosting the call today are Cris Keirn, Chief Executive Officer; Mark Weinswig, Chief Financial Officer.

With that, I'll turn the call over to Cris.

Thanks, Jacques. Good afternoon, everyone, and welcome to our first quarter 2026 earnings call. As we build momentum through our brand transformation and significant releases of new products in 2026, our first quarter results reflect a continuation of a challenging market environment that carried over from 2025. The quarter was impacted by a temporary dip in channel inventories as our retail partners manage stock levels in consideration of the short-term dynamic of multiyear market lows for Q1 in the headset and controller markets. This channel reduction included clearing retail inventories to support the load-in of our new product launches in Q2. We expect channel inventory to rebound in the coming quarters, which should act as a tailwind to year-over-year growth as we ramp new product placements at retail and prepare for improving market conditions leading up to holiday 2026.

At the same time, we executed in Q1 to lay the groundwork for a meaningful step-up in our new product introduction cycle. We are tracking with excellent progress on our plan to realize over 50% year-over-year growth in new product launches for 2026, including our recently announced Stealth Pro 2 flagship headset, our new Command series PC lineup and multiple accessories across categories that are officially licensed for the Nintendo Switch 2 ecosystem. Self Pro 2 represents the next evolution of our premium audio platform. Combining Japan Audio Society certified high-res audio, -- our patented 60-millimeter eclipse dual drivers for powerful base and crisp pies with exceptional precision, Dolby Atmos Spatial Audio for immersive 3D gaming and entertainment and active noise cancellation to reduce background distractions.

It also introduces our new cross-play 2.0 multi-platform wireless audio system, building on the cross-play wireless technology pioneered by Turtle Beach, and now supporting up to 4 audio sources. This industry-leading innovation gives gamers greater flexibility and seamless control across multiple audio sources without the need for cables running to a separate audio hub. All of this is paired with a refined premium build featuring anodized aluminum components, soft touch materials, a fabric suspension headband and memory foam ear cushions for long-lasting comfort. Together, these innovations reinforce our leadership in premium gaming audio and provide gamers with a pinnacle of gaming audio technology. To amplify this fantastic new addition to our headset lineup, we have also initiated our brand transformation to reinvent how Turtle Beach engages with gamers. A key example of this is our campaign for the Stealth Pro 2 launch, the last Ninja. The ultimate Stealth showdown highlighting Turtle Beach's legacy of gaming sound and industry-leading audio performance.

We believe this fun and more resident approach to storytelling will strengthen brand affinity and drive deeper engagement with gamers. The combined benefits of Stealth Pro 2's new standard for gaming audio experiences and the last Ninja campaign have resulted in very strong early momentum for Stealth Pro 2 with preorders on our site so far already more than double that of its predecessor, our original Stealth Pro. Looking ahead, we have strong conviction in our forward trajectory and are reaffirming our full year 2026 guidance, which considers several growth drivers for our business and the industry. Our outlook reflects our expanded innovation pipeline with accelerating momentum from confirmed new retail placements across multiple categories starting in Q2.

We are also advantageously positioned ahead of the anticipated November 2026 launch of Grand Theft Auto V -- as 1 of the biggest gaming releases in history, we expect it to serve as a meaningful catalyst for gamer engagement and accessory demand in the second half of the year and beyond. Importantly, with only PlayStation 5 and Xbox Series X and S currently confirmed as supported platforms at launch, we believe Turtle Beach is well positioned to see an outsized initial benefit given our strong presence in these console ecosystems, we are prepared to capture that demand as it materializes. Across the opportunities that our new product launches and brand engagement will provide upcoming market lift from GTA 6 and the next generation of console hardware platforms in the coming years, our focus remains consistent. Executing for success driving operational discipline and delivering meaningful value for our shareholders.

In addition, we announced earlier this week that we recently restructured our credit facilities to enhance our capital return flexibility. With $56 million remaining on our current $75 million share repurchase authorization, this new financing structure supports our active and systematic buyback strategy. We have both the capacity and the commitment to return capital to shareholders while investing in the strategic growth initiatives that will drive long-term value creation. Given our confidence in the business and the strength of our outlook, we believe there continues to be a meaningful disconnect between our current stock price and the intrinsic value of Turtle Beach, and we will remain disciplined and opportunistic in deploying capital under this program.

Overall, we remain focused on our strategic priorities as we move through 2026. We're executing against a clear strategy as we continue to optimize our cost structure, accelerate product innovations, and prepare the company to capitalize on significant upcoming industry catalysts. With our transformative work on the business over the last few years, we are exceptionally well positioned for the opportunities that lie ahead. Mark will now take us through the financials in more detail. Mark?

Thank you, Cris, and good afternoon, everyone. Our first quarter 2026 revenue was $42.2 million compared to $63.9 million in the prior year period. This decline reflects the continuation of challenging market conditions from 2025 as well as the channel inventory compression we saw in advance of our array of new products launching in 2026.

Our gross margin for the first quarter was 26.8% compared to 36.6% in the prior year period. This margin decline was primarily driven by lower revenue due to channel inventory compression. In addition, we utilized targeted promotional activity to reduce inventory in the channel, which pressured margins but positions us well as our new products launch and gain traction in the market. During the first quarter, we also realized a roughly 2 percentage point margin hit from the onetime costs associated with the transition of our U.S. warehouse. We view these items as a short-term headwind and expect to see significantly higher margins in future quarters.

Our total operating expenses of $25.4 million represents 6% of revenue in the quarter, higher than the prior year, primarily due to the $3.4 million benefit we realized in 2025 associated with the insurance recovery. Our first quarter 2026 adjusted EBITDA was a loss of $6.5 million compared to income of $4.1 million in the prior year period. This decline reflects the lower revenue base and the margin pressure from channel reduction as well as the continuation of our investment in product development and innovation that will drive growth throughout the remainder of 2026. At the bottom line, we reported a net loss of $15.2 million compared to a net loss of $0.7 million in the prior year period. The compression is reflective of our lower revenue levels, combined with higher operating expenses.

Turning to our balance sheet. As of March 31, net debt was $41.3 million, comprised of $53.6 million of outstanding debt and $12.3 million of cash. During the quarter, we generated $29.4 million in cash flow from operations, paying off our revolving line of credit, which had a 0 balance as of March 31. With respect to recent financing activities, on Monday, we announced a refinancing of our credit facilities that enhances our financial flexibility, particularly our commitment to returning capital to shareholders through share repurchases. Under the new structure, our ABL facility provides up to $80 million of revolving borrowing capacity, bearing interest at SOFR plus 150 to 200 basis points based on loan balance levels.

The term loan provides $85 million of committed term debt with borrowings bearing interest at SOFR plus 675 to 750 basis points and a maturity of 3 years. Importantly, the new facilities include a financial covenant structure specifically designed to accommodate the company's active share repurchase program.

And to that end, we started purchasing shares this week. With the new structure in place, We have both the capacity and the framework to consistently and systematically pursue our capital allocation priorities. We have $56 million remaining on our current share repurchase authorization. The new credit facility structure supports an active buyback strategy, and we intend to be opportunistic in returning capital to shareholders while maintaining the financial flexibility to invest in organic growth initiatives.

Now turning to guidance. Despite the soft first quarter results, we are reaffirming our full year 2026 revenue guidance of $335 million to $355 million and our adjusted EBITDA guidance of $44 million to $48 million. This guidance reflects our confidence in the strategic initiatives outlined by Cris and represents growth in both revenue and profitability compared to 2025. In terms of seasonality, it's important to note that we typically see the majority of our revenues in the second half of the year, coinciding with the holiday season. We had expected the first quarter to represent approximately 13% of our full year revenues. And while we came in slightly below that range, we remain confident in our ability to achieve our full year targets. We expect to see sequential improvement beginning this quarter as our new products launch and gain traction in the market, with Q2 representing approximately 17% to 18% of our full year revenue.

In the second half of the year, we anticipate significant acceleration driven by continued Nintendo Switch to momentum, our new products released, the anticipated November launch of Grand Theft Auto V and a strong holiday season.

With that, I will turn the call back to Cris. Cris?

Thanks, Mark. We remain confident in our full year 2026 guidance, and that confidence is grounded in several key factors. Our product innovation pipeline and comprehensive marketing plans are the strongest they have been in years, and we're strategically positioned for the anticipated November 2026 launch of Grand Theft Auto V which has the highest purchase intent for a new gaming release ever recorded by Sircana. Beyond these near-term catalysts, the gaming industry is entering into an exciting period with anticipated console refresh cycles from Xbox and PlayStation in the coming years. New console launches have historically driven increased hardware adoption and broader consumer engagement, which typically translates to elevated accessory demand. Combined with the expected replacement cycle for accessories purchased during the Covid era, we believe the industry is positioned for sustained growth over the next 24 months. As this growth materializes, our operational discipline remains a cornerstone of our strategy.

We've built a strong foundation through our cost optimization initiatives, and we're committed to expanding margins further as revenue scales -- the refinancing we announced this week enhances our financial flexibility and enables us to execute on our capital allocation priorities, including our commitment to returning capital to shareholders through share repurchases. As always, I would like to recognize and thank our amazing team at Turtle Beach for their dedication and contributions to our success. And with that, operator, we can open the call for Q&A.

[Operator Instructions] The first question we have comes from Ryan Bison of Craig Hallum.

It's Ryan on for Tony Stoss. It was nice to see that you were able to reiterate the full year guide. I guess could you talk a little bit about kind of your simulator products, how demand has been for those? And how that demand kind of compares to maybe your legacy headset business or any more resilience in the simulator space?

Ryan, thanks for the question. We've seen some nice progress on our SIM business. We did see some share gains year-over-year in Q1 between our race and our flight simulator products. it remains a small piece of our total business. It's a low single-digit contributor to our overall revenue. But we are pleased to see that progress in that space. We do think it's a great space for further expansion. And that's something we'll be pursuing with some of our launches that will be announced later this year. As far as it compares to the headset business, again, as I said, it's obviously much smaller for us headsets are north of 60% of our business, and this is a single-digit contributor.

So we view it as an opportunity for growth and something that we'll continue to invest in and bring new products to market.

Got it. And then just as my follow-up, given some of the I guess, consumer spend worries over the past couple of quarters. I'm curious, are you seeing any trade down behavior with premium products to the lower-level products or entry-level products? Or is demand in the higher-level products remain relatively steady?

We've seen strong demand on the high end of the price ranges. We've actually -- if you look at the year-over-year trends for Q1, we're seeing people trade up to the next price tier. So even entry-level products that typically might come in at a $30 price point, people are trading up to closer to a $40 or $50 price point. The mid of the market, we're seeing the same kind of behavior where -- we've seen growth in the $100 to $150 tier. And then at the premium space, we've also seen growth in the ultra premium tier products there above $200 on the headset side. That's why we're really excited about the Stealth Pro 2. We see continued growth in that premium space, and we're bringing amazing product to market that will take advantage of that.

The next question we have comes from Drew Crum of B. Riley.

So Mark, on the 2Q revenue commentary, taking the midpoint of the range as you provided would imply something below the double-digit revenue growth expectation you suggested back in March with 4Q earnings -- just curious if there's something specific that's driving the lower updated view.

Yes, we saw Q1 be just a little bit slower than expected. We have mentioned that we are going to be a little bit more promotional. We saw that in some of the margin hit that we took in Q1 that will flow over a little bit into Q2 in addition with some of the weakness that we saw, and we'll make the second quarter a little bit weaker than what we were expecting. However, we are seeing some very interesting momentum for the second half of the year, as we mentioned. We'll be much more back-end loaded than we've been in previous years. But with the launch of new products, with what we've seen in terms of channel inventory compression. And then finally, with GTA 6, we do think the second half of the year will be a very robust period.

Got it. Okay. And then maybe for Cris. The subsequent to your 4Q earnings release, there was a lot of press suggesting that Nintendo intends to cut production of the Switch 2 due to weaker-than-expected holiday sales. I guess we'll find out tomorrow, but how does this impact your planogram or sales expectation for your Switch 2 line in '26?

Drew. Great question. I think that Nintendo switch to sales have been very strong. I did see that they had indicated they were going to potentially bring that down. But remember, they'd also raised those expectations last year. So I think they're just adjusting to what they're seeing out in the market. What we've seen is sequential increasing comps each month here in Q1 for our Switch 2 products. As we get those rolled out to the market, we're seeing some nice growth there. It's still very first-party focused right now with a lot of the sales for accessories as we had talked about in previous calls. This is something that's normal for new console launches. You'll see a lot of very strong first-party accessory purchases for a period of time. And then as third parties like us have our products ready those will start to come into the market. That's exactly what you'll see from us as we get into Q2, we've got new placements coming up for our Switch 2 products.

We're really excited about everything the antenna is doing in that space, some really great work with their IP and the overall ecosystem there for Switch 2. So we feel good about Switch 2 for the year. We think it's going to drive growth for us, and we think that growth will accelerate as we go through the year.

[Operator Instructions] The next question we have comes from Sean McGowan of ROTH Capital Partners.

A couple of questions, if I can. Given that the first quarter seemed a little bit less than maybe you would have thought and you seeing similar industry residents in maybe so far in the second quarter. I would have thought that inventory would be higher. Have you started building enough for the increase in sales you're starting to see or open to see.

Sean, yes, we're keeping a close eye on inventory. If you look at the year-over-year, we're down about $10 million year-over-year. And if you recall last year, We were right in the middle of stocking ahead of all the tariffs. So we were heavy at this time last year intentionally. That was part of the reason we saw such a great lift in our gross margins last year as we did get ahead of the tariffs carried a bit more and then sold that inventory off through the year. We feel good about where we're positioned inventory-wise going into the second half. We anticipate that with the Q4, assuming everything stays on track with GTA 6, which all signs out in the market indicate that, that is happening, that we'll be building inventory to prepare for that lift which was significant.

If you look at GTA 5, it's kind of the 1 data point that we've got there to compare in 2014, we saw over a 50% lift for console gaming headsets in Q4 -- now we haven't modeled that into our guidance, that kind of lift. But it's a good comp for us to understand what we might see. And so we're keeping out on that data and also on how the launch is tracking as we look at what the ramp might look like as we get out of Q3 and into Q4, heading towards that November launch.

Okay. And can you comment on how much exposure you feel like you have to rising fuel costs, specifically freight and relating costs like that? What's your outlook there?

We're seeing some small increases. It hasn't been material really for us to this point. That's another item we're keeping a close eye on to make sure that we're optimizing our shipping containers and making sure that we're taking advantage of any improvements that we can drive there in our supply chain. But so far, nothing significant, and I wouldn't anticipate it to change anything that we've guided to for the full year.

Okay. If I could slide in 1 more. It's like the SCANA data for the month of March for the accessories category, I think it showed like the first increase in a long time. Do you take any comfort in that? Or is that driven by something that doesn't really affect you guys?

Yes. I think that's an indication of the ongoing demand for gaming. It was great to see that number. When you look at our category specifically, so if I take headsets and controllers through Q1, those categories are just slightly down, sort of low single digits. So they're not yet seeing growth across -- that's, call it, 90% of our business between headsets and controllers but that overall 5% increase, I think, is a good sign as you look into how the next few quarters are going to go, going into what we expect to be a really nice back half of the year that, that demand is out there and the gamers are out there buying.

The next question we have comes from Martin Yang from Oppenheimer.

First question is around the holiday season channel activities. Do you think the launch of GTA in November could change how particularly timing, maybe volume regarding the channel activities into the hot base season?

Martin, it's possible. Again, looking back at 2014 is a great reference point. We did see that demand started to ramp in September leading up to that launch. So if that were to occur again, we could see some benefit to Q3 as some earlier load-ins would happen maybe compared to recent years. Buying behavior in 2014 was also very different, though. With a lot of sales going digital, you don't have quite the same store traffic that you might have for a launch. I do think GTA 6 is going to be an exceptional launch and we may see some of that behavior return a bit with some sales leading up to the launch. So I do think that it could impact it. We're not really factoring in a large increase at this point for Q3 it's difficult to say when that lift would be seen necessarily in our revenue for the back half. But certainly, ahead of the launch, we would expect to see some lift as people start to refresh their accessories and get ready for some very long gaming sessions if I had to guess.

Cris. My next question is, given the newer challenges in the consumer hardware marketing, general -- are you actively managing the balance between console and PC new product launches because of the new reality?

Yes, it certainly factors into how we're thinking about future products, future technologies and innovations that we're putting into products, making sure that we've got multiplatform support across our products, whether it be headsets, controllers, or any other accessories because we are seeing gamers certainly playing across multiple platforms and really going to where their favorite games are. And we want to make sure that we're there to support them wherever they are and playing those games. And so I think that shift that we're seeing, I do think that we'll see a nice bump in console activity, starting with GTA 6 they've confirmed and some additional recent comments here just in the last couple of weeks that it will launch on PlayStation 5 and also on Xbox Series X and S.

And it sounds like the PC won't be coming for some period of time. And that's something that really positions Turtle Beach in a very favorable light because obviously, our heritage there is with console gaming and our strength when you look at our share is very focused on the console side. So I think that will give us a nice -- certainly early advantage potentially in some of those sales for those gamers that are going to be playing that particular title.

Got it. Last question from me. Can you maybe remind us your relationship with Xbox and whether that relationship has evolved since they're putting the new leadership team there.

Sure. We've got a great relationship with Xbox as we do with our other first-party partners. We really deeply appreciate the collaborative work that we do with each of those groups. We haven't seen any shifts there that the folks that we work with have all been remained engaged and looking ahead to the future, we're excited about Project Helix. That's been sort of teased out there. And what that's going to mean, when you look across all of our console partners with Switch 2 coming out last year and then Project Helix coming up and then a likely Place Station 6 in the future as well. We're just really excited to get this next console cycle underway. It's great to have started it with Switch 2, and we're already seeing the benefits there from the SWITCH 2 launch.

And it's a very cyclical business. So when you look every 7 years or so, 6 or 7 years in that new hardware comes out, we see a great benefit for our business. And so this is part of the reason we're so excited about the next few years is that we've got a really fun time and gaming coming up and will create some nice tailwinds for accessories.

The final question we have comes from Jack Codera of Maxim.

This is Jack Kodera calling in for Jeff Mandar. You kind of alluded to it before, but given recent comments from Take-Two, that it does seem that GTA is kind of really on track at this time for the fall. I'm wondering if you have any comments, when do you expect that impact to start? Is it when their marketing starts kind of on the game side or when the game launches? And then given that kind of phased release of the console game as well as the PC game, do you see that as a persisting tailwind? And what sort of window of a tailwind would that be?

Sure. Great question, Jack. It's something that there's obviously a lot of discussion about in the industry. There's a lot of excitement around GTA 6 for great reasons. Looking at when it might start, again, as we look back to GTA 5, we did see that lift start to really creep in Q3 it ramped up pretty sharply. And again, I'm looking at console headset markets. It ramped up pretty sharply in September and carried right through Q4. So it could be that early. And a lot of that is just the buildup, again, as people are trying to get their setup updated and get ready for some gaming sessions there.

We could see that come early, but we're not counting on it necessarily when we look at the back half, but we'll see how that rolls out. The second piece around the -- how long the tailwinds might be for console there. Last time, again, it was about a 6-month window between the console launch. And I believe the April of 2015 is when the PC version of GTA 5 came out. So it could be something similar. We don't really have any visibility into that. But what is encouraging is that we saw continued growth throughout 2015, following the 2014 launch on PlayStation 4 and Xbox One for GTA 5. We saw double-digit growth in 2015 for those core markets with console gaming headsets. So I would anticipate that this is going to be a hugely popular game. It's going to have engagement that continues literally for years, much as GTA 5 has done. And that will provide a multiyear benefit for the industry and likely for our business as well.

Okay. That's helpful. And then I had 1 more if that's possible. Kind of a clarification question. You mentioned the retail channel inventory, kind of some of this new product, you're clearing out some of the old product and then there's the new buy-in. I'm wondering if you view it on maybe like a net basis -- are you seeing overall channel inventory start to build again? Or is that something we should kind of expect closer to the holiday season?

What we've seen so far is that retailers have adjusted to the markets that we saw in Q1. If you look at our primary categories of headsets and controllers Q1 was the lowest market. It was the lowest Q1 since Q1 of 2020 for those 2 categories. And that's part of the impact that we're seeing, even though they were just down sort of low single digits from last year. If you recall, last year, Q1 was down pretty significantly. So the fact that we're at those multiyear lows at the moment for the markets, has retailers responding appropriately and reducing their stock. I think what you'll see is as we get through Q2 and into Q3 in anticipation of a holiday that could see pretty significant lift, that's when you'll see that buildup start to go.

Just to give you a feel for our guidance, our guidance presumes that the channel inventory stays relatively flat year-over-year between 25 and 26 to end the year. We think that, that's a fairly good and conservative look on it. We're not counting on any kind of channel inventory growth. We certainly could see that depending on how the holiday goes, but our guidance basically has a flat channel inventory year-over-year. So with the decrease that we saw in Q1, obviously, that's going to provide a benefit for us for the remaining quarters.

At this stage, there are no further questions in the queue. And I will now hand back to Cris for closing comments. Please go ahead, sir.

Thanks, everyone, for your interest in Turtle Beach, and have a great day.

Thank you. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.

Good afternoon, and welcome to the Turtle Beach Q4 '25 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to hand this conference over to Mr. Jacques Cornet, Investor Relations. Please go ahead.

Thank you, operator. On today's call, we'll be referring to the press release filed this afternoon that details the company's fourth quarter and full year 2025 results, which are available on the news page of the company's Investigations website, corp.turtlebeach.com, where you'll also find the latest earnings presentation that supplements the information discussed on today's call. Finally, a recording of the call will be available on the Events and Presentations section of the company's Investor Relations website later today.

Please be aware that some of the comments made during this call may include forward-looking statements within the meaning of the federal securities laws. Statements about the company's beliefs and expectations containing words such as may, will, could, believe, expect, anticipate and similar expressions constitute forward-looking statements. These statements involve risks and uncertainties regarding the company's operations and future results that could cause Turtle Beach Corporation's results to differ materially from management's current expectations.

While the company believes that its expectations are based upon reasonable assumptions, numerous factors may affect actual results and may cause results to differ materially. So the company encourages you to review the safe harbor statements and risk factors contained in today's press release and in its filings with the Securities and Exchange Commission, including without limitation, its annual report on 10-K and other periodic reports, which identify specific risk factors that also may cause actual results or events to differ materially from those described in our forward-looking statements. The company does not undertake to publicly update or revise any forward-looking statements after this conference call.

The company also notes that on this call, it will be discussing non-GAAP financial information. company is providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States or GAAP. You can find a reconciliation of these metrics to the company's reported GAAP results in the reconciliation tables provided in today's earnings release and presentation.

Hosting the call today are Cris Keirn, Chief Executive Officer; and Mark Weinswig, Chief Financial Officer. With that, I'll turn the call over to Cris. Cris?

Thanks, Jacques. Good afternoon, everyone, and welcome to our full year and fourth quarter 2025 earnings call. As we close out 2025, it's clear that this was a year that challenged the broader industry and tested our resilience while also highlighting the discipline of our execution. We navigated a number of external pressures, including global tariff impacts, unexpected softness in the North America gaming and accessories markets and a holiday season that fell short of expectations.

While our financial results came in below our guidance range, we made meaningful operational progress that strengthened our competitive position. We gained share in our core Turtle Beach headset brand and laid important groundwork to capitalize on the anticipated accessories, upgrade and replacement cycle, positioning the business for significant growth over the next 24 months.

Looking forward, we're encouraged by what we see on the horizon. Grand Theft Auto 6 is currently scheduled for a late 2026 release date and we expect it to be one of the largest and most anticipated video game launches in history. Releases of this magnitude have historically driven substantial increases in gaming engagement and accessory demand across the category. We believe the combination of our product innovation, brand strength and market position will enable us to capitalize on this catalyst as it materializes.

While we expect GTA to have a significant impact when launched, we also expect it to help produce a strong replacement cycle for a period beyond launch. Major franchise releases of this scale create extended periods of elevated gaming activity and accessory demand. We're well positioned with our product portfolio and go-to-market strategy to benefit from this dynamic as it unfolds. As we move through 2026 and lap the softer demand environment we've experienced, we're optimistic about the trajectory of our business.

Beyond game releases, the industry is also entering a console refresh cycle in the coming years with next-generation platforms expected from major console manufacturers, including Xbox and PlayStation. New console launches have historically driven increased hardware adoption and broader consumer engagement, which typically translates to elevated accessory demand. Supporting these industry catalysts. It is worth spotlighting that over the last year, we've strengthened our product innovation pipeline. We're launching over 50% more new products in 2026 compared to 2025.

And with our first significant releases beginning in Q2. Early retailer feedback has been positive, and we believe this accelerated product cadence positions us well to capitalize on the favorable industry dynamics ahead. Of course, capitalizing on these industry catalysts requires operational excellence and a strong foundation, both of which we have built throughout 2025. Despite the external pressures we faced, particularly in Q4, we delivered a number of important accomplishments that demonstrate both the resilience of our organization and the effectiveness of our strategy.

I'd like to highlight 3 key achievements from 2025 that underscore the strength of our execution and position Turtle Beach to capitalize on the opportunities ahead. as new games and next-generation hardware are introduced in the exciting upcoming gaming cycle. First, we implemented comprehensive cost optimization initiatives that drove gross margin expansion. For the full year, gross margins increased 270 basis points year-over-year to get to the highest annual level since 2018. This momentum was evident in the fourth quarter where gross margins reached 40.1%, up over 310 basis points year-over-year. These results demonstrate the effectiveness of our operational discipline and focused cost management strategy.

Through targeted savings initiatives and improved execution, we were able to protect and expand profitability despite a challenging top line environment. It's worth noting, we achieved these margin improvements while accelerating our pace for upcoming new product launches, as previously mentioned. Second, we effectively navigated a challenging tariff environment and mitigated what could have been significant financial headwinds.

Early in 2025, we took proactive steps in anticipation of potential tariff changes building strategic inventory and accelerating our manufacturing diversification efforts. By the end of the second quarter, we had transitioned the majority of our U.S.-bound production to Vietnam, while maintaining China-based operations for non-U.S. markets and select product lines. These actions demonstrate the strength of our strategic planning and supply chain agility and they were instrumental in preserving our margin expansion throughout the year. Third, we strengthened our balance sheet and enhanced shareholder value through a comprehensive refinancing and continued disciplined capital allocation.

In August, we refinanced our prior term loan and credit facilities, lowering the base interest rate on our term loan by approximately 450 basis points and generating annual interest savings of more than $2 million. This transaction reduced our cost of capital, improved our financial flexibility and remove previous restrictions on share repurchases, a key pillar of our capital allocation strategy. Taking advantage of that flexibility, we remain active with share repurchases, buying back nearly 1.35 million shares in 2025 for approximately $19 million. Over the past 2 years, we have returned nearly $47 million to shareholders through buybacks.

Additionally, we authorized a new 2-year $75 million share repurchase program the largest in company history with more than $58 million of capacity remaining. Before I pass the call over to Mark to walk through the financials in more detail, I wanted to comment on a few strategic and Board-related matters. First, on strategy and capital allocation. Since our highly successful acquisition of PDP in March of 2024, we have actively assessed opportunistic bolt-on acquisitions that could be complementary to our growing platform.

We have evaluated many potential acquisition opportunities over that period and have remained disciplined in how we allocate our shareholders' capital. While no new deals have been announced, we continue to assess acquisitions that could make strategic sense for the company over time. Our streamlined operations and strong cash flow characteristics have allowed us to significantly delever from the post PDP highs of early 2024. This financial strength, combined with the long-term outlook for our business, has led us to pivot our capital allocation priorities.

With a strong balance sheet, operations running at strong margins and an outlook as promising as the one that we currently have, we do not believe the equity markets are currently pricing our stock appropriately. Should this disconnect continue, we are evaluating opportunities to enhance our financial flexibility, specifically to support increased share repurchases. This includes exploring options to refinance our existing debt on more favorable terms and potentially expand our borrowing capacity. These actions would provide additional resources to increase the size of our share buyback program.

Should the current valuation disconnect persists, we expect to prioritize active and significant repurchasing of our shares in the open market until our stock price better reflects what we believe is fair value or unless a compelling acquisition opportunity presents itself. As we have demonstrated with our capital allocation decisions over the past 2 years, we remain exceptionally disciplined with shareholder capital and focused on maximizing long-term value creation.

Lastly, I'd like to comment on the recent updates to our Board of Directors. As you saw in our recent 8-K, [indiscernible] has stepped down. I want to thank Terry for his contributions during his tenure at Turtle Beach. Will Wyatt, who has served on our Board since 2023 has been appointed Chairman. Will brings deep expertise and has been a valuable contributor to our board. I congratulate Will and look forward to working with him in his expanded role. Our Board of Directors remains focused working with our executive leadership team on driving long-term value creation for our shareholders. With that, Mark will take us through the detailed financial results. Mark?

Thank you, Cris. Fourth quarter net revenue was $118 million, a decline of 19% year-over-year compared to $146.1 million in the prior year period. This decline reflects the recent softness in the gaming accessories markets. In the fourth quarter, we delivered strong gross margin performance. Fourth quarter gross margins reached 40.1%, a year-over-year improvement of nearly 310 basis points.

Net income for the fourth quarter was $17.6 million compared to $20.1 million in the prior year period. The structural changes we have made over the last few years have allowed us to mitigate the recent revenue decline through cost containment activities. Fourth quarter adjusted EBITDA was $28.1 million, a decline of 21% year-over-year compared to $35.7 million in the prior year period. We maintained an EBITDA margin of 24%.

Operating expenses of $26.7 million represented 22% of our total revenue compared to $30.6 million or 21% of revenue in the prior year period, demonstrating our disciplined expense management in the face of a tough market environment. For the full year 2025, net revenue was $319.9 million, a decline of 14% year-over-year compared to $372.8 million in 2024. This came in below our expectations due to the market headwinds that Cris noted in his prepared remarks.

Full year gross margins of 37.3% and represented an improvement of 270 basis points year-over-year and marks the highest annual level since 2018, reflecting our successful execution of cost optimization initiatives and tariff mitigation strategies throughout the year. Net income for the full year was $15.7 million, representing a 3% year-over-year decline compared to $16.2 million in 2024. Full year adjusted EBITDA of $40.1 million was 12.5% of total revenue compared to $56.4 million in 2024 due to the revenue decrease from unfavorable market conditions.

Operating expenses of $91.8 million represented 28.7% of total revenue compared to $109 million or 29% of total revenue in 2024. In 2025, the company realized a onetime credit of over $9 million from recoveries. Moving to the balance sheet. Our balance sheet remains solid with a cash position of $17 million on December 31, during the year, we generated $35 million in cash from operations.

Total revolver and term loan debt as of December 31 was $85 million, resulting in net debt of $68 million. During 2025, we continued returning capital to shareholders through our share repurchase program. In the fourth quarter, we repurchased approximately 140,000 shares for a total of approximately $2 million. For the full year, we repurchased 1.35 million shares for approximately $19 million. This brings our total repurchases over the past 2 years to nearly $47 million Share buybacks remain a key pillar of our capital allocation strategy. They demonstrate both our confidence in the business and our ongoing commitment to creating value for shareholders.

Looking ahead, we are optimistic for 2026. We expect growth in both revenue and EBITDA as we navigate through the current headwinds in the gaming accessories markets. We anticipate the market environment will remain challenging in the first half of 2026, with improvements in the second half driven by new products and game launches. We currently expect full year 2026 revenue to be in the range of $335 million to $355 million. This represents 8% growth at the midpoint compared to 2025.

We expect our full year 2026 adjusted EBITDA to be in the range of $44 million to $48 million. Due to volatility in the retail environment, we want to provide additional context on expected seasonality and revenue cadence throughout the year. It's important to reiterate that we typically see the majority of our revenues in the second half of the year, coinciding with the holiday season. In 2026, we expect to see this trend continue. For the first quarter, we anticipate approximately 13% to 14% of full year revenues to be realized. Looking to the second quarter, we expect to release a significant number of new product introductions.

With these new models and retail placements, we expect to see double-digit year-on-year revenue growth in the second quarter. Our guidance assumes continued market headwinds in the first half of the year, but reflects our confidence in our operational improvements and strategic positioning for when market conditions improve. We remain focused on maintaining our margins while positioning for growth when market catalysts emerge. With that, I'll turn the call back to Cris for closing remarks. Cris?

Thanks, Mark. As we look ahead, we are confident in both the long-term strength of the gaming accessories market and our ability to lead within it. While 2025 brought meaningful challenges, we believe those pressures were cyclical in nature and we used the year to sharpen our execution and reinforce our foundation. Through disciplined cost optimization, agile supply chain management, a strategic refinancing of our debt, continued product innovation and a focused capital allocation strategy, we have meaningfully strengthened our competitive position.

We enter 2026 with expanded margins, a stronger and more flexible balance sheet and a compelling product portfolio that positions us to capitalize on improving market conditions and drive sustainable growth. Building on the strong foundation we've established, our focus in 2026 is to fully leverage these operational gains while positioning the company to accelerate as demand strengthens. The global gaming audience continues to expand. And as market conditions improve, we expect to realize meaningful growth. At the same time, we will continue investing in our brand and deepening engagement with gamers worldwide capitalizing on the strength and leadership of the Turtle Beach franchise to drive long-term value creation.

As always, I want to recognize and thank the entire Turtle Beach team for their dedication, focus and relentless execution throughout the year. Their hard work and commitment were instrumental in delivering our 2025 accomplishments and have positioned us strongly for continued success in 2026 and the years ahead. With that, operator, we can open the call for Q&A.

[Operator Instructions] Our first question today comes from Anthony Stoss from Craig-Hallum.

Cris, I'd love to hear a little bit more about how the racing Sim products are doing. And then also your comment about 50% more products for 2026. Any way you could break that into the different buckets if it's more skewed towards one product line versus another?

[ Racing Sim ] is doing well for us. We're seeing share gains year-over-year in that category. We started with really 1 SKU in that category initially, and then we expanded that to a few more SKUs last year, and we'll continue building on that here in 2026. When you look across the different categories with a 50% more SKUs coming out, it's really across all of the categories that we operate in. There's some really great products coming in and for competitive reasons, I won't go into too many details, but the headset space is an area that we're going to continue to drive innovations. And we have some really exciting innovations coming in that space very soon. And then you look across the controller categories, particularly with the strength that we expect this year from Switch 2, we've got a lot of great accessories that have been launched and are gaining placements in Q2 and we'll continue to gain placements throughout the year in that space as we typically see in a new console cycle like Switch 2 is in. And then across the other categories of PC and some of the accessory categories that we expect to see grow, as Swtich 2 comes out and across Sim as well, we got new products coming in really every category. And so that's part of the excitement that we've got here. We did a lot of work last year as the market was a bit slower to really focus on our product pipeline, and I think the team has done an amazing job at that.

Got it. Your midpoint of your guide for the full year revs of $345 million and given the cadence for Q1 and the remainder of the year, it would presume a pretty lofty September, December. So I would assume you're assuming GTA 6 launches in November as planned. Maybe can you bracket a range of revenue that you've added to that $345 million guide that would be somewhat related to GTA 6 [indiscernible] we can figure out how much to back out.

Sure. Yes. You framed it up correctly. We do expect the second half of the year to be very strong. If you think about seasonality for 2026, for us, it's going to look very similar to 2024. If you look back at 2024, it was more heavily weighted towards Q4. Q1 was also more pressured as we're going to see here in this Q1. If you remember, Q1 had a very strong market, but Turtle Beach actually slightly underperformed that market in Q1 of '24 as we were preparing for new launches in Q2. It's very much the same dynamic in 2026. So we're currently running the channel down as we prep for a pretty significant amount of new placements in Q2, and we'll see a nice increase in our Q2 numbers to really help the first half here. But with GTA 6 launching in Q4, that's our expectation. That's what our guidance is built on. It's hard to put an exact range because there's a variety of factors that are going to drive growth for us this year. But certainly, double-digit growth -- double-digit portion of that growth that we would expect to see in Q4 is going to come from GTA 6.

[Operator Instructions] Your next question comes from Martin Yang from Oppenheimer.

My question is about the cost structure for '26. Can you give us more details around your expectations for gross margin versus OpEx and whether the proof of new products will impact either part of the cost.

Sure. Martin, we're really happy with the progress that we've made on gross margin so far, and we expect to see continued improvements in gross margin as we go into 2026. The drivers behind that, we're now comping a full year of all of those mitigations that we made for tariffs additional product changes that we made, focusing on the higher-margin products as we look at our retail placements. So all of those improvements that we made throughout the year in we're now comping a full year of that here in '26. So we'll see improved margins continue and continued margin growth in that space. Our OpEx structure is going to remain fairly similar to what we had in 2025. We are going to be making some additional structural investments on continued upgrades in technology. We're implementing new tools that are going to help with our efficiencies. We're also making investments in our brand, and you'll see more coming out about that from us in the coming weeks and months. We think there's a huge amount of equity in the Turtle Beach brand. And with all of the great things coming up in gaming, we're going to be repositioning the brand and really making a brand push this year.

One more question on the pace of new product introduction. Do you view 2026 as more of a unique year, you have more new products coming out to the market? Or do you believe this pace of new product instruction is a sustainable place for years?

I think it's sustainable. You look at -- there's always some ebb and flow in the timing of launches. And we had a very, very strong year in '24 with new launches we did a bit more preparation last year with our launch cadence. So there'll be a bit of ebb and flow, but we've made some real improvements and I really have to give credit to the team on this. We've made some great improvements in our development process. And as we look ahead to preparing for the next round of consoles that are coming up, we feel really good about where we're positioned and our capabilities our R&D team and our product team to deliver on those. So you'll see this pace continue from us moving forward as we look at preparing for the next console cycle here.

Your next question comes from Sean McGowan from ROTH Capital Partners.

I have a couple of questions. First, to follow up on Martin's question on the gross margin and your response. Normally, when your sales are soft or softer than expected, you see some deleveraging at the gross margin line. So would this suggest that from this level, if we were to look at a quarter that saw a lot more sales increase that we could expect significantly higher margins? Or are there some givebacks that we can expect to see?

Yes. Great question, Sean. So we did have a very good Q4. We do expect to continue to be in our range of our targeted gross margins of the mid- to high 30s. We are very, very happy that for the full year, we were able to make it to the 37% level. We do expect to have some additional expansion, as you mentioned, partially due to the higher revenue base and then also from some of the new products that we'll be introducing in '26.

Okay. And in terms of G&A and selling and marketing, there's good discipline there, but were you holding back? And should we expect to see maybe an increase in as a percentage of revenue in those categories?

Yes. When you look at Q4, we made the decision that we weren't going to go chase into a soft market on price. That's part of why you're seeing the better gross margin is we really don't think that's good for the brand long term and didn't see the need to do that. Obviously, that creates a little bit of pressure on the top line I do believe that we'll be making some additional investments this year, and our guide includes those investments. particularly around the brand. We've got -- we've made some real changes with some great new talent on our marketing team that have done some amazing work on some of the brand work you're going to see coming out from Turtle Beach here in the coming months. And so we're going to make some investments in that space, along with the investments that we've made in our products and on the development side. So you'll see a bit more there, but that's included in our guide.

Okay. Can you comment on where your read of retail inventories both at year-end and kind of where they sit right now as the trade is working through some of these issues?

Great question. As we saw the softer demand, we did see inventories, as you might expect, decline. We ended the year in a much lighter inventory position than we've seen because of where the markets were. -- retailers adjusted to those dynamics. And so that was some of the impact that we saw. The good news is for this year, we don't see the potential for a further decline in the channel inventories. So we'll see the benefit of that, I would say, of not having that risk in the numbers of potential additional shrinkage of channel inventory stocks. If anything for us, with some placements that we've been able to gain for Q2 and looking ahead, we would expect that to potentially even expand a bit. All that obviously included in the guide numbers.

Okay. And then my final question for now is probably related to the timing and phasing issues that you talked about earlier. Weird dynamic here, it seems where the first quarter, you're probably going to see some destocking, right, or cutbacks on some purchases that would have been made last year in preparation for these new products that are launching later, plus the overall softness in the market. And then fast forward toward the end of the year, we have a major, major software launch coming late in the year that I think we've talked before, it's probably going to have a positive impact on the months and quarters after it's released. So could be looking at a fairly dramatic swing Q1 '27 versus Q1 '26. So would you venture to say that sitting here in mid-March, toward the end of that first quarter that we're looking at a significantly better next 12 months compared to the prior 12-month period.

Yes. Certainly, I think you framed it up in the right way that we're thinking about it is when you look forward, it's been -- it was obviously a tough Q4 -- Q1 because of exactly what you referred to there, we are draining the channel, and so we're not replenishing at the moment. So it does put a lot of pressure on the Q1 numbers. Again, we saw the same dynamic. If you look back to 2024, exactly the same type of thing. It was a softer Q1 for us relative to the market because we were preparing for all these great new launches. And then Q2, we exceeded the markets, and we expect to see exactly that same dynamic repeat here in '26 because it's a very similar kind of launch cadence for us. The Q4 numbers will be outsized if GTA 6 launches as expected. And we do anticipate that it will launch as planned in November. We know what that does to markets. And when you look at the go-forward demand for accessories and the go-forward engagement from gamers after that game comes out, it's going to continue into Q1 and we would anticipate -- if you look at the last time when GTA 5 came out, it continued for quite some time after that launch and GTA 5 still one of the leading sellers after all these years. So Yes, I do think that when you think about the go-forward next 12 months versus trailing 12 months, it's a very different picture for us.

Your next question comes from Andrew Crum from B. Riley Securities.

You mentioned a willingness to expand the company's borrowing capacity for share repurchases. Is there a leverage threshold that you're comfortable with, you can share with us?

Well, when we look at those numbers, we've been able to deleverage pretty significantly since we did the PDP acquisition. And I think, a fair range for the company, certainly a 2% to 2.5% kind of range is something we feel comfortable with. It's something that is not out of the norm for the industry and I think that when we look at our capital allocation, again, as we start to see some of the benefits of the upcoming gaming cycle, we see opportunity there, which is why we're looking into potentially obtaining some new financing around that to allow us even more flexibility than the work that was done last year. So that's roughly the range that we're thinking about.

Okay. Got it. And then maybe just to kind of follow up on that last comment. I think you've the call, you've mentioned expectations for significant growth over the next, call it, 12 to 24 months. And I know there's been a lot of questions around GTA 6. Beyond that launch, is there anything else that's behind the optimism? I know there's been some concern in the market that the semiconductor shortages could push out the launch of the next Xbox and the PlayStation 6. So I just want to get a better understanding as to what those drivers are behind the optimism beyond this year.

Sure. Yes, absolutely. And it's -- the great thing for the business going forward is it's really not one thing, it's a combination of multiple factors here. And we've seen it before because we saw it during the last console cycle when we had GTA 5 come out and then we had the new consoles come out from Xbox and from PlayStation, we're about to hit that same kind of cycle over the next couple of years. So while it could be that the consoles push out because of memory issues, we're personally -- we're not seeing any impact to our business that's significant from the memory shortages. We've had a bit of lead time impact, nominal cost increases all again within the guide. So we're not seeing an impact on our business. But if it does push the console refresh cycle out, clearly, GTA 6 and the other games will run on the current generation of consoles, and we could see even towards the end of life of these consoles a nice lift on those sales even if the new comps do move out. We also have, for an accessories business such as ours, we've got an overdue accessories replacement cycle that we do anticipate will start to come in once we see that engagement, whether it's from GTA 6 or any other great games that are coming out or Switch 2, which we're seeing some nice momentum and starting to see people come over into third-party accessories on Switch 2 as expected. So all of those together, in addition to our own product innovations, that's another thing that drives gamers to go and get new gear is great new products come out. They've got new features that they can't enjoy on their current accessories and so they'll go out and they'll they'll replace those. So all those things together are really what's driving the optimism from our side.

Your next question comes from Jack Vander Aarde from Maxim Group.

Cris, so with the 50% more new product launches in 2026 and the focus kind of still being on this. It sounds like high gross margins are going to continue, which have been historically high. Can you speak to your overall just pricing and promotional strategy this extra layer of substantial new products in the market? Assuming these gross margins stay high, are you also -- what are you doing with the price points here across the portfolio and for this new lineup?

Sure. Jack, great question. It's something that we're looking at very closely. As you might imagine, the pricing dynamics, the promotional dynamics, they've changed pretty dramatically over the last year when you look at how we addressed some of those tariff challenges, some of the cost challenges and the overall market slowness and what we're seeing is we're still seeing good performance from some of the higher-end price points. We're seeing some pressure on some of the entry and mid-level price points. And we're -- as we look at our promotional strategy, we're really trying to find a way to address all of the needs that gamers have at every price point. And so our decision in Q4 and as we get ready for these new launches that are coming up has really been to not be as promotional as we have been in the past. That's part of what's driving our improvements in gross margin. Obviously, that can put some pressure on top line revenue. That's a little bit of what we saw in Q4. So we are evaluating how to go out and get the right mix, the optimized mix of promotions and price. And we want to make sure that we've got the gamer, first and foremost in mind on that. And so I think that we could probably start to be a bit more promotional. We've been very conservative on our promotions. So we may do some of that, but we would much rather invest in the brand, and we're also going to be putting some of those dollars to work to really talk about some of the great things that Turtle Beach brings to gamers and really building a community with the gamers out there.

Okay. Great. And then maybe for Mark on the 2026 outlook. EBITDA, it looks like it's -- that growth is supposed to outpace revenue. which is also going to be growing, it looks like, it sounds like gross margins are going to remain historically strong we don't guide for EPS, but is it safe to assume a similar kind of growth trend relative to EBITDA with EPS, I mean, a similar sub-7% or 10% tax rate. I'm assuming you're likely buying back more shares, so maybe a decline in share count. Is there a read-through there on the EPS line that it should outpace -- that growth should outpace revenue on assuming all things play out like that?

I think you mentioned a lot of the great points, and I would reiterate one of the items that you noted, which is our share buyback strategy. This year, we had a significant amount of buybacks over the past couple of years. more than $40 million of total buybacks. We are looking at opportunities to continue to drive additional buyback strategies in 2026 and what that could mean for us in terms of just the overall share count. As we noted here in terms of the guide, we're looking at adjusted EBITDA to be in the range of $44 million to $48 million. as a percentage basis, that's going to be up from where we were in '25, just showing the leverage that we get on the revenue and as you noted, the gross margin side, we are very excited about the fact that we are already in our targeted range, and yet we still see opportunities to slightly increase our margin levels going into the new year with new products. So we think '26 is going to be a very good year and looking forward to seeing the outcomes.

This concludes our question-and-answer session. I would now like to turn the conference back over to Mr. Cris Keirn for any closing remarks.

Thank you, everyone, for your interest in Turtle Beach, and have a great day.

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Turtle Beach Corporation Third Quarter 2025 Conference Call. [Operator Instructions] As a reminder, the conference call is being recorded.

I will now turn the conference over to Jacques Cornet from the Investor Relations team. Jacques, you may begin.

Thank you, operator. On today's call, we'll be referring to the press release filed this afternoon that details the company's third quarter 2025 results, which is available on the news page of the company's Investor Relations website, corp.turtlebeach.com, where you'll also find the latest earnings presentation that supplements the information discussed on today's call. Finally, a recording of the call will be available on the Events and Presentations section of the company's Investor Relations website later today.

Please be aware that some of the comments made during this call may include forward-looking statements within the meaning of the federal securities laws. Statements about the company's beliefs and expectations containing words such as may, will, could, believe, expect, anticipate and similar expressions constitute forward-looking statements. These statements involve risks and uncertainties regarding the company's operations and future results that could cause Turtle Beach Corporation's results to differ materially from management's current expectations. While the company believes that its expectations are based upon reasonable assumptions, numerous factors may affect actual results and may cause results to differ materially. So the company encourages you to review the safe harbor statements and risk factors contained in today's press release and in its filings with the Securities and Exchange Commission, including, without limitation, its annual report on Form 10-K and other periodic reports, which identify specific risk factors that also may cause actual results or events to differ materially from those described in our forward-looking statements. The company does not undertake to publicly update or revise any forward-looking statements after this conference call.

The company also notes that on this call, we will be discussing non-GAAP financial information. The company is providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States or GAAP. You can find a reconciliation of these metrics to the company's reported GAAP results in the reconciliation tables provided in today's earnings release and presentation.

Hosting the call today are Cris Keirn, Chief Executive Officer; and Mark Weinswig, Chief Financial Officer.

With that, I'll turn the call over to Cris. Cris?

Thanks, Jacques. Good afternoon, everyone, and thanks for joining us for Turtle Beach's third quarter 2025 earnings call. Turtle Beach delivered another quarter of solid execution against our strategic priorities with results that met our expectations in the face of the ongoing challenges in the gaming accessories market.

Today, I'd like to touch on 4 highlights from the quarter. First, we generated $80.5 million in revenue, and we continue to make progress on profitability with gross margins up nearly 120 basis points year-over-year, coming in at over 37%. That improvement reflects the team's continued focus on operational discipline and cost management. I'm especially proud that we were able to fully offset the margin impact of tariffs this quarter, thanks to strong execution across the board, including partner cost negotiations, selective price adjustments and selling inventory that we proactively brought in before the latest tariff increases.

Second, as we mentioned last quarter, we completed a refinancing of our term loan and credit facility. This was an important milestone for us. We strengthened our balance sheet, lowered our cost of capital and extended our maturity profile, giving us more flexibility going forward. The refinancing also cut our term loan interest rate by more than 450 basis points, which will provide meaningful savings and help us continue building long-term shareholder value.

Third, we continue to return capital to shareholders through our repurchase program. During the quarter, we bought back $10 million of stock from our existing shareholder, Diversis Capital, roughly 695,000 shares at an average price of $14.41. That brings our year-to-date repurchases to about $17 million. Share repurchases remain an important part of our strategy. They demonstrate both our confidence in the business and our ongoing commitment to creating value for our shareholders.

And finally, we maintained our focus on innovation, announcing and launching more than 40 new products since Q2. This momentum strengthens our position heading into the holiday season and sets us up for continued growth in 2026. Our accelerated launch cadence across headsets, controllers, simulation gear and PC peripherals, highlights our transformation into a comprehensive gaming accessories leader with the added advantage of official partnerships with all 3 major console platforms.

Let's take a look -- a closer look at the product side, where we've made some exciting additions across our entire Turtle Beach lineup. Starting with headsets. We've expanded our portfolio with several new wired models since Q2. Our Airlite Fit, one of our officially licensed headsets for Nintendo Switch and Switch 2 delivers great audio, a super lightweight fit and comes in a range of fun-color options for Nintendo fans everywhere. We also launched an officially licensed switch version of our Recon 70, which continues to hold its spot as the industry's best-selling wired gaming headset year after year. For PlayStation and other platforms, we rolled out the new Atlas 200 series, which includes our first ever officially licensed PlaySet -- PlayStation headset and features our premium 50-millimeter Nanoclear drivers for incredible sound clarity. The response has been fantastic, and it even received a perfect 10 out of 10 score and Editor's Choice Award from CGMAG online, which we're thrilled about. Through our ongoing partnership with Nintendo, we also announced a broad lineup of officially licensed accessories for both Switch and Switch 2. This includes new rematch, afterglow and afterglow wave wired and wireless controllers along with travel cases and other accessories that are rolling out now through the end of the year. Controls continue to be one of our strongest growth opportunities, and we're proud to now be one of the leading third-party controller brands in the market. We've grown, thanks in part to our premium Victrix brand, which is well known among competitive gamers. The new Victrex Pro BFG reloaded controllers for PlayStation, Xbox and PC raised the bar again with upgrades like hall effect triggers and mechanical buttons that give players a real performance edge. For Nintendo fans, we also launched 2 new wireless lenticular controllers, themed for Donkey Kong and Super Mario, featuring dynamic artwork that shifts with different viewing angles. On the Xbox side, we've added new Afterglow Wave and rematch core wired controllers in several exciting colors, plus the Afterglow Ignite RGB controller for Xbox and PC, which looks incredible. We even expanded further into music gaming with our new Riffmaster Wireless Guitar Controller for Nintendo Switch and Switch 2, building on the success that we've seen with our Xbox and PlayStation models.

On the simulation front, our VelocityOne series continues to push boundaries. We introduced the VelocityOne Race KD3 wheel and pedals, the VelocityOne F-RX formula style wheel and the racer wireless wheel for Xbox and Windows. Each of these amazing new products were engineered to bring even more realism in fun, whether you're a dedicated simracer or just want a great driving experience.

And in PC gaming, we're broadening our footprint with high-performance peripherals like the Vulcan 2 TKL hot swappable mechanical keyboard and a Burst II Pro wireless esports mouse, both earning top tier reviews for speed, accuracy and design.

Altogether, these new products show how Turtle Beach has evolved into a true gaming accessories powerhouse, while delivering innovation, quality and value across every major category and platform. We're pleased with how our team continues to execute by growing our portfolio, driving efficiency and laying down a strong financial foundation for the future. Even though the overall gaming accessories market remains down year-to-date, we've seen year-over-year improvements as expected through Q3. We're encouraged by the improvement trends we've seen and remain confident in the industry's growth trajectory.

Looking ahead to 2026, there's a lot to be excited about the upcoming release of GTA 6, other major AAA game launches, the continued momentum of the Switch 2 and an overdue replacement cycle for accessories [indiscernible] in COVID are all setting the stage for a new multiyear growth cycle in gaming.

Combining that with our expanded product lineup and a stronger balance sheet, and we're in a great position to capitalize on what's next Turtle Beach and the broader gaming market.

With that, I'll hand it over to Mark to walk through the quarterly financials. Mark?

Thank you, Chris, and good afternoon, everyone. As Chris mentioned, our third quarter results demonstrate our continued focus on operational performance and financial discipline in the current market environment. Revenue for the third quarter was $80.5 million, in line with expectations. Our gross margin of 37.4% is a year-over-year improvement of nearly 120 basis points reflecting the benefits of our ongoing cost optimization initiatives and tariff mitigation strategies. Operating expenses for the quarter were $24.7 million, representing 30.7% of revenue compared to $27.7 million or 29.4% in the prior year period. The expense reduction over the prior year was primarily driven by lower sales and integration-related activities partially offset by investments in internal systems, processes and infrastructure that will enable us to continue scaling the business and drive operational leverage.

Net income for the quarter was $1.7 million, which includes a onetime noncash write-off of $1.9 million for previously capitalized fees relating to our refinancing. Adjusted EBITDA for the third quarter was $11 million and reflects strong performance at our current revenue level.

Turning to the balance sheet. At September 30th, our cash position was $12 million and total debt was $90 million, resulting in net debt of $78 million. As Chris mentioned, our recently completed term loan and credit facility refinancing, have strengthened our capital structure, increased our operating flexibility and reduced our cost of capital. With the base interest rate on the term loan lowered by approximately 450 basis points we expect an annual interest savings of over $2 million.

Turtle Beach's business model is designed to generate strong free cash flow supported by our current operational structure and disciplined working capital management. We expect to see significant improvement in our operating cash flow over the next 2 quarters as we benefit from the seasonal dynamics of the holiday period.

With respect to our capital allocation strategy, Year-to-date, we have returned approximately $17 million to shareholders through share repurchases. During the third quarter, we repurchased $10 million of shares from our existing shareholder Diversis Capital under our previously authorized $75 million share buyback program. One of our key priorities is to deliver value to our shareholders through share buybacks, while maintaining a strong balance sheet. This will continue to be an integral part of our capital allocation activities moving forward. Based on our performance through the first 3 quarters and our outlook for the remainder of the year, we are reiterating our full year 2025 revenue and adjusted EBITDA guidance ranges. We continue to expect full year revenue to be in the range of $340 million to $360 million and full year adjusted EBITDA to be in the range of $47 million to $53 million.

In summary, our third quarter results reflect our continued focus on operational excellence and financial discipline in a complex market environment. We are pleased with our ability to maintain strong gross margins, refinance our prior debt facilities and returned significant capital to shareholders, all while continuing to innovate across our product platform. Our strengthened financial position and enhanced operational flexibility position us well to capitalize on the opportunities ahead.

With that, I will turn the call back to Chris for closing remarks.

Thanks, Mark. In closing, I'm really proud of the progress we've made this quarter, especially given the challenges in the broader gaming accessories market. Our strategy is clear. Our execution is strong. and our teams remain laser-focused on driving sustainable growth and long-term value for our shareholders. We've built great momentum across the business, and I'm confident that Turtle Beach is exceptionally well positioned to take advantage of the exciting opportunities ahead in the holiday season throughout 2026 and well beyond as the next major growth cycle in gaming unfolds.

I want to thank our incredible employees for their hard work and dedication, our partners for their collaboration and our shareholders for their continued support. Together, we're pushing Turtle Beach forward into its next phase of performance and growth.

With that, operator, we can open the call for Q&A.

[Operator Instructions] Our first question is from Ryan Bisson with Craig Hallum.

It's Ryan on for Tony Stoss. From a high level I'm just curious on mainly headset controllers, what you're seeing in terms of an accessory refresh just given the launch of Battlefield 6 upcoming launch of Call of Duty and then what you're seeing with kind of consumer spending trends for the December quarter?

Sure. Hi, Ryan, the refresh is, I would say, delayed. We've seen that since COVID, actually. When you look at the markets year-to-date, the markets continue to improve year-over-year, but they still remain down. And this was all accounted for in our guidance when we guided in Q1, if you recall, the accessories market at that point, and this is mainly talking headsets and third-party controllers the markets were down over 20% year-over-year in Q1. So what we have guided is we believe the markets would continue to improve through Q3 -- Q2 and Q3 and end down for the full year, about 10% to 12%. We have seen that play out. So when you look at Q2, the markets improved, they were down sort of in the high teens. And then when you look at Q3, they've improved again on a year-to-date basis, and they're down kind of low to mid-teens. So we are trending well to that 10% to 12% down. But that really implies that, that refresh cycle hasn't fully kicked in yet. So we do believe that's one of the catalysts as you look ahead into the holiday and also into 2026, along with many other positive factors for the gaming market, we do think that's something that's going to drive growth in 2026.

Okay. Great. And then as my follow-up, more on the simulator side of the business. I mean, it was nice to see some new wheel launches in that space. I'm curious again what what you guys are seeing in terms of maybe demand for the new wheels or just in general on that business? And then the same for kind of the flight simulator market, what you guys are seeing there?

Sure. Yes, starting with the races wheels, we've seen some nice growth there with the recent launches. We've got some good placements of those coming up at retail. So we're pleased to see the progress of the new race products. I thought our team did a really fantastic job with those products and the engineering folks that worked on those. So the race category in general is up year-over-year. Flight sim is very similar to the other categories, slighted, kind of low teens year-over-year. So very much in line with the rest of the accessories market.

Next question is from Drew Crum with B. Riley Securities.

So I wanted to start by asking about GTA 6. You mentioned it in your preamble, and in light of today's announcement, the game has been postponed again I know the first delay was a factor in your decision to adjust 2025 guidance earlier this year. I know you're not providing an outlook for next year at this point. But with the release date pushed out by 6 months from May to now November, curious as to how that could impact your 2026 financials? And then I have a follow-up.

Great question, Drew. We saw that as well. And I think that's just an indication of how focused that team over take to is on delivering an amazing game I think that's really what we're going to get when that game is launched. We'll factor that into our 2026 guide. It's one of the things that we like about 2026. There's many other things happening in the gaming industry that, in addition to GTA 6, which is going to be a fantastic launch, that really have us excited about what's going on in gaming. If you look at the trends over the last several months. [ Sarcone ] cited the last five months have had consecutive year-over-year growth for the overall gaming industry through September? And I think what you're starting to see is the momentum that's building not only for new hardware because Switch 2, obviously, has done very well. You might have seen Nintendo raise their outlook on units, I think, from $15 million to $19 million for the Switch 2. So that will continue to drive engagement with gamers, but we've seen really good traction on other AAA launches. Borderlands 4 has been terrific. Battlefield 6 has driven some great engagement, and we're seeing that in the sell-through. And looking ahead, Black Ops is always a great title for accessories. So there's a lot of other things happening in the industry. Certainly, we'll factor in the timing of GTA 6, but that's one of many things we're looking at.

Okay. Got it. And then you guys delivered some nice gross margin improvement in the quarter. As you look at 4Q, how sustainable is that with tariffs and the holidays where you tend to have more promotional activity can you hold those gains?

Yes. Well, we're really excited about the kind of what Q4 is going to look like. we have seen continuous improvement in our gross margins. One thing that we've talked about on previous calls was the potential impact for the tariffs. We worked very, very diligently both operations and sales working together in tandem to make sure that we can mitigate almost all of the impacts associated with that. And so far, with Q4 on like it's going to be a very, very good quarter. We're excited about what the gross margins could be.

The next question is from Sean McGowan with Roth Capital Partners.

I want to follow up on Drew's question there on gross margin. On that gross margin outlook regarding tariffs, have you exhausted do you think all that you can do to mitigate the impact or conversely, might there be some headwinds that you're not anticipating related specifically to tariffs that maybe cause some more pressure going forward?

Sean, thanks for the question. And yes, you hit it right on the head. It's been a very high focus area for us is to continue to work on tariff mitigation throughout the year. And there's really three fronts that we've been addressing. First, working with our manufacturing partners to drive costs out as well as we've talked about in the previous calls, transfer U.S. production into Vietnam. Secondly, negotiations with our retailers and the retail programs associated with our products, and third, selective cost or price increases. And the combination of those three effects. We are basically completely offsetting the tariff impact through 2025 with the combined impact of the benefits from those three activities. And so when we look ahead, I wouldn't say that we've exhausted everything we can do there. Certainly, if we see the environment change on tariffs I think that there's other mitigations that we could put in place, and I'm highly confident in our team's ability to do that. I really have to give the credit across our entire organization. It's been a real high area of focus for this year, and they've done a fantastic job. So I'm really pleased to see what has come out of that and the strong margin that we've been able to generate this quarter and continued strong margin in Q4 because of those actions.

Another question just on product, and you did a good job of summarizing some of the products you're excited about. But drilling down a little bit. Could you talk about some of the features that specifically like headsets and controllers, what are some of the features that the new products would have that would be powerful in inducing somebody to upgrade if they -- like if the headsets went fine, why would they upgrade, but what are the features that would really drive them to say, "Hey, I got to get that."

Sure. There's so many upgrades available with technology and the work that our engineering team has done to include a lot of those new technologies into these new products. As an example, for headsets, One of the big step-ups for [indiscernible] asked about the refresh cycle and and what that looks like or maybe Brian had asked about that. The latest headsets that we've got, our latest generation is built on newer chipsets that draw lower power consumption. So for a gamer, that means they're going to have much longer battery life than they've ever had in the past. And the connectivity on those headsets from a wireless standpoint, really flawless connectivity from a wireless audio standpoint. And we've made a lot of investments as well in upgrading the comfort of the headsets moving forward. So for those games out there that want a game on long gaming sessions, they're engaged with their friends. The latest headsets really help support them to do that. When you look at controllers, again, there's been technology upgrades upgrades on things like hall effect triggers and joysticks, including TMR technology that really eliminates drift for gamers, which has been a long-standing problem. So there's a lot in the products that are going to give gamers a benefit and when they go in to upgrade and to replace their older gear.

The next question is from Jack Kodera with Maxim Group.

This is Jack Kodera calling in for Jack Vander Aarde. I just had one more question, kind of a follow-up regarding consumer strength. Could you give any more color how you're seeing consumer strength shape up into the holiday season, particularly if you're seeing anything notable across different price points of your products?

Sure. That's a great question. It's something that especially with the tariff impacts across the industry this year that we've been watching very closely. Fortunately, for us, we've worked very hard to maintain a lot of the price points for a very long time. And in the last round of tariffs a few years ago, we didn't have to raise prices. With the selective price increases we've made. Now we've seen consumers come along with us. We really haven't seen any impact in a meaningful way on the sell-through rates even though the prices have gone up slightly. We're seeing a strong response from premium consumers. So at the higher end of the price points, we're still seeing strong demand there. And some of the lower price points and some of the mids are where we start to see a little bit of challenges just from an overall market perspective, so it's something that we'll continue to monitor as we go into holiday here. I do believe, as we've seen in the past two quarters that we'll see continued improvement in the overall markets here in Q4. And we've got the added benefit here in Q4 as well as we anticipate that the retailers may not load in early for holiday this year. That was part of what we talked about in the last call when we talked about what we expected to see for that turned out to be true. There was a much lower load in in September than we typically would see. And I think that's just a function of retailers taking a more conservative view going into holiday on where the markets are. And so the benefit that we get on that, obviously, is we'll get replenishments in Q4 here that may have in the past come in, in Q3 as retailers take that replenishment strategy. So we'll keep an eye on those price points and look for opportunities going into 2026.

This concludes the question-and-answer session. I'd like to turn the conference back over to Chris Keirn for any closing remarks.

Thank you, operator. Thank you, everyone, for your interest in Turtle Beach, and have a great day.

This brings to a close of today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.