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Item 1. Financial Statements

2025-11-06 compared with 2025-08-07 · 215 added, 140 removed, 387 unchanged (48% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cost of revenue

6 unchanged sentences

Total operating expenses

Operating (loss) income

Operating income (loss)

Interest expense

Other expense, net

Loss before income tax

Income tax (benefit) expense

Net loss per share

Other (income) expense, net

Income (loss) before income tax

Income tax expense (benefit)

Net income (loss)

Net income (loss) per share

Weighted average number of shares:

1 unchanged sentence

Turtle Beach Corporation

Condensed Consolidated Statements of Comprehensive Loss

Condensed Consolidated Statements of Comprehensive Income (Loss)

(unaudited, in thousands)

Three Months Ended

Six Months Ended

Other comprehensive income (loss)

Nine Months Ended

September 30,

Net income (loss)

Other comprehensive (loss) income

Foreign currency translation adjustment

Other comprehensive income (loss)

Comprehensive loss

Other comprehensive (loss) income

Comprehensive income (loss)

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(in thousands, except par value and share amounts)

September 30,

Current Assets:

9 unchanged sentences

Accounts payable

Term Loan, current

Other current liabilities

Total Current Liabilities

Debt, non-current

Term Loan, non-current

Income tax payable

4 unchanged sentences

Common stock, $ 0.001 par value - 25,000,000 shares authorized;

19,823,915 and 19,961,696 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively

19,307,514 and 19,961,696 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively

Additional paid-in capital

7 unchanged sentences

(unaudited, in thousands)

Six Months Ended

June 30, 2025

June 30, 2024

Nine Months Ended

September 30, 2025

September 30, 2024

CASH FLOWS FROM OPERATING ACTIVITIES

4 unchanged sentences

Amortization of debt financing costs

Loss on extinguishment of debt

Stock-based compensation

2 unchanged sentences

Provision for obsolete inventory

Loss on impairment of assets

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

Accounts payable

Prepaid expenses and other assets

Accounts payable

Income taxes payable

Other liabilities

Net cash provided by operating activities

Net cash provided by (used for) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

13 unchanged sentences

Net decrease in cash and cash equivalents

Cash and cash equivalents - beginning of period

Cash and cash equivalents - end of period

Cash and cash equivalents at the beginning of period

Cash and cash equivalents at the end of period

SUPPLEMENTAL DISCLOSURE OF INFORMATION

Property and equipment purchases included in accounts payable and accrued liabilities

Unpaid debt financing costs

The accompanying notes are an integral part of these condensed consolidated financial statements.

3 unchanged sentences

Comprehensive

(Loss) Income

Income (Loss)

Balance at December 31, 2024

11 unchanged sentences

Balance at June 30, 2025

Other comprehensive loss, net of tax

Issuance of restricted stock

Stock options exercised

Stock-based compensation

Repurchase of common stock

Balance at September 30, 2025

Comprehensive

Income (Loss)

Balance at December 31, 2023

11 unchanged sentences

Balance at June 30, 2024

Other comprehensive income, net of tax

Issuance of restricted stock

Stock options exercised

Stock-based compensation

Repurchase of common stock

Balance at September 30, 2024

The accompanying notes are an integral part of these condensed consolidated financial statements.

22 unchanged sentences

There have been no material changes to the significant accounting policies and estimates from the information provided in Note 1 of the notes to our consolidated financial statements in our Annual Report.

Recently Issued Accounting Pronouncements Not Yet Adopted

Accounting Pronouncements Issued but Not Yet Adopted

The Company considers the applicability and impact of all Accounting Standards Update (“ASUs").

ASUs not referenced below were assessed and determined to be either not applicable or are not expected to have a material impact on the Company's unaudited condensed consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction.

5 unchanged sentences

The Company is currently evaluating the impact of the adoption of this standard to determine its impact on the Company's disclosures.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient and accounting policy election which will result in reduced complexity for the measurement of credit losses arising from transactions accounted for under ASC 606—Revenue from Contracts with Customers, which include current contract assets and current contract receivable.

Specifically, the practical expedient permits entities to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset, and the accounting policy election permits an entity other than a public business entity to consider collection activity after the balance sheet date when estimating expected credit losses.

Entities electing to apply the practical expedient and the accounting policy election, if applicable, should apply the amendments prospectively.

This ASU will be effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted.

The Company is currently evaluating the impact of the adoption of this standard to determine its impact on the Company's disclosures.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), which modernizes and simplifies the accounting costs incurred to develop or acquire internal use software costs.

The update eliminates the legacy three-stage waterfall model - preliminary, application development, and post-implementation.

Under the new standard, capitalization begins when management authorizes and commits funding for the project and completion is probable, aligning better with agile and iterative development practices.

The types of costs eligible remain unchanged, and the update does not affect accounting for software developed for sale or licensing.

This ASU will be effective for fiscal years beginning after December 15, 2025, with early adoption permitted.

The Company is currently evaluating the impact of the adoption of this standard and does not expect that it will have a material impact on its disclosures.

Business Combinations

7 unchanged sentences

As a result, the total final purchase consideration was $ 114.4 million , partially funded by borrowing on the new term loan facility (see Note 7).

Additionally, the Company recognized $ 6.3 million of acquisition-related costs that were expensed during the six months ended June 30, 2024, and are included as “Acquisition-related costs” in the unaudited Condensed Consolidated Statement of Operations.

Additionally, the Company recognized $ 9.8 million of

acquisition-related costs that were expensed during the nine months ended September 30, 2024, and are included as “Acquisition-related costs” in the unaudited Condensed Consolidated Statement of Operations.

The following table summarizes the allocation of the consideration transferred to the assets acquired and liabilities assumed at the acquisition date:

13 unchanged sentences

The goodwill from the acquisition, which is fully deductible for tax purposes, consists largely of synergies and economies of scale expected from adding the operations of PDP's and the Company’s existing business and supply channels.

PDP's net revenue has been integrated in the Company's unaudited condensed consolidated financial statements in the six months ended June 30, 2025 .

PDP's net revenue included in the Company’s consolidated results was $ 21.8 million and $ 27.7 million for the three and six months ended June 30, 2024 , respectively.

PDP's net revenue has been integrated in the Company's unaudited condensed consolidated financial statements in the nine months ended September 30, 2025.

PDP's net revenue included in the Company’s consolidated results wa s $ 26.7 million and $ 54.4 million f or the three and nine months ended September 30, 2024 , respectively.

Fair Value Measurement

7 unchanged sentences

Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and the revolving line of credit.

As of June 30, 2025 and December 31, 2024, the Company has not elected the fair value option for any financial assets and liabilities for which such an election would have been permitted.

The following is a summary of the carrying amounts and estimated fair values of the Company's financial instruments as of June 30, 2025 and December 31, 2024:

June 30, 2025

As of September 30, 2025 and December 31, 2024, the Company has not elected the fair value option for any financial assets and liabilities for which such an election would have been permitted.

The following is a summary of the carrying amounts and estimated fair values of the Company's financial instruments as of September 30, 2025 and December 31, 2024:

September 30, 2025

December 31, 2024

6 unchanged sentences

The carrying value of the Credit Facility and Term Loan due 2028 equals fair value as the stated interest rate approximates market rates currently available to the Company.

The carrying value of the Credit Facility approximates fair value, due to the variable rate nature of the debt, as of June 30, 2025 and December 31, 2024 .

The carrying value of the Credit Facility approximates fair value, due to the variable rate nature of the debt, as of September 30, 2025 and December 31, 2024 .

Balance Sheet Components

Inventories consist of the following (in thousands):

September 30,

Finished goods

3 unchanged sentences

Property and equipment, net, consists of the following (in thousands):

September 30,

Machinery and equipment

6 unchanged sentences

Total property and equipment, net

(1) In March 2025, the Company wrote off certain fully depreciated demonstration units and tooling totaling $ 14.9 million .

As of September 2025, the Company completed a review of its fixed assets ledger and removed certain fully depreciated demonstration and tooling with an aggregate carrying amount of $ 24.4 million .

There were no proceeds recognized upon disposal.

Depreciation and amortization expense on property and equipment was $ 1.1 million and $ 1.2 million for the three months ended June 30, 2025 and 2024, respectively.

Depreciation and amortization expense on property and equipment was $ 2.2 million and $ 2.1 million for the six months ended June 30, 2025 and 2024.

Depreciation and amortization expense on property and equipment was $ 1.1 million and $ 1.2 million for the three months ended September 30, 2025 and 2024, respectively.

Depreciation and amortization expense on property and equipment was $ 3.3 million for both the nine months ended September 30, 2025 and 2024.

Other Current Liabilities

Other current liabilities consist of the following (in thousands):

Accrued employee expenses

September 30,

Accrued royalty

Accrued employee expenses

Accrued tax-related payables

2 unchanged sentences

Accrued expenses

Term loan, short term

Total other current liabilities

1 unchanged sentence

The Company conducts its goodwill impairment analysis annually or more frequently if changes in facts and circumstances indicate that it is more likely than not that the fair value of a reporting unit may be less than its carrying value.

There were no impairment indicators and the

Company's market capitalization continues to exceed the net carrying value of the business.

There were no impairment indicators and the Company's market capitalization continues to exceed the net carrying value of the business.

As such, the Company did not perform any further qualitative or quantitative testing.

2 unchanged sentences

Purchase price adjustment

Balance as of June 30, 2025

Balance as of September 30, 2025

Intangible Assets, net

Acquired identifiable intangible assets, and related accumulated amortization, as of June 30, 2025 and December 31, 2024 consisted of (in thousands):

June 30, 2025

Acquired identifiable intangible assets, and related accumulated amortization, as of September 30, 2025 and December 31, 2024 consisted of (in thousands):

September 30, 2025

Customer relationships

7 unchanged sentences

Total Intangible Assets

Amortization expense related to definite lived intangible assets of $ 2.0 million and $ 2.1 million was recognized for the three months ended June 30, 2025 and 2024, respectively.

Amortization expense related to definite lived intangible assets of $ 4.0 million and $ 2.7 million for the six months ended June 30, 2025 and 2024, respectively.

As of June 30, 2025, estimated annual amortization expense related to definite lived intangible assets in future periods was as follows (in thousands):

Amortization expense related to definite lived intangible assets of $ 2.0 million and $ 2.1 million was recognized for the three months ended September 30, 2025 and 2024, respectively.

Amortization expense related to definite lived intangible assets of $ 6.1 million and $ 4.8 million was recognized for the nine months ended September 30, 2025 and 2024, respectively.

As of September 30, 2025, estimated annual amortization expense related to definite lived intangible assets in future periods was as follows (in thousands):

Credit Facility and Long-Term Debt

The following table presents the carrying value of the Revolving Credit Facility and Term Loan (in thousands):

Revolving credit facility, maturing March 2027

Term loan due March 2027

Total interest expense, inclusive of amortization of deferred financing costs, on long-term debt obligations was $ 2.0 million and $ 2.2 million for the three months ended June 30, 2025 and 2024, respectively.

Total interest expense, inclusive of amortization of deferred financing costs, on long-term debt obligations was $ 4.1 million and $ 2.7 million for the six months ended June 30, 2025 and 2024, respectively.

Amortization of deferred financing costs were $ 0.3 million in each of the three months ended June 30, 2025 and 2024, respectively.

Amortization of deferred financing costs were $ 0.6 million and $ 0.3 million for the six months ended June 30, 2025 and 2024, respectively.

The following table presents the amounts of the Revolving Credit Facility and Term Loan (in thousands):

September 30,

Revolving credit facility

On March 5, 2018, Turtle Beach and certain of its subsidiaries entered into an amended and restated loan, guaranty and security agreement (the “Credit Facility”) with Bank of America, N.A.

(“Bank of America”), as administrative agent, collateral agent and security trustee for Lenders (as defined therein), which replaced the then existing asset-based revolving loan agreement.

The Credit Facility, as amended, expires on March 13, 2027 and provides for a line of credit of up to $ 50 million inclusive of a sub-facility limit of $ 10 million for TB Europe, a wholly owned subsidiary of Turtle Beach.

On March 13, 2024, the Company entered into a Fourth Amendment, dated as of March 13, 2024 (the “Fourth Amendment”), by and among the Company, Voyetra Turtle Beach, Inc., TBC Holding Company LLC, Turtle Beach Europe Limited, VTB Holdings, Inc., the financial institutions party thereto from time to time and Bank of America, as administrative agent, collateral agent and security trustee for the lenders.

Among other things, the Fourth Amendment provided for:

(i) the acquisition of PDP;

(ii) the revision of the calculation of the U.S.

Borrowing Base to include certain acquired assets of PDP equal to the lesser of (a) the sum of the accounts formula amount and the inventory formula amount (each as defined in the Fourth Amendment), (b) $ 15,000,000 , and (c) 30 % of the aggregate Revolver Commitments;

(iii) the extension of the maturity date of the Credit Facility from April 1, 2025 to March 13, 2027 ;

and (iv) updates to the interest rate and margin terms such that the loans will bear interest at a rate equal to (1) SOFR, (2) the U.S.

Base Rate, (3) the Sterling Overnight Index Average Reference Rate (“SONIA”) for loans denominated in Sterling, and (4) the Euro Interbank Offered Rate (“EUIBOR”) for loans denominated in Euros, plus in each case, an applicable margin, which is between 0.50 % and 2.50 % for Base Rate Loans and 1.75 % and 3.50 % for Term SOFR Loans, SONIA Rate Loans and EUIBOR Loans.

The maximum credit availability for loans and letters of credit under the Credit Facility is governed by a borrowing base determined by the application of specified percentages to certain eligible assets, primarily eligible trade accounts receivable and inventories, and is subject to discretionary reserves and revaluation adjustments.

The Credit Facility may be used for working capital, the issuance of bank guarantees, letters of credit and other corporate purposes.

Amounts outstanding under the Credit Facility bear interest at a rate equal to (i) a rate published by Bank of America or the U.S.

Bloomberg Short-Term Bank Yield Index (“BSBY”) rate for loans denominated in U.S.

Dollars, (ii) the Sterling Overnight Index Average Reference Rate (“SONIA”) for loans denominated in Sterling, and (iii) the EUIBOR for loans denominated in Euros, plus in each case, an applicable margin, which is between 0.50 % to 2.50 % for base rate loans and UK base rate loans, and 1.75 % to 3.50 % for U.S.

Total interest expense, inclusive of amortization of deferred financing costs, on long-term debt obligations was $ 1.8 million and $ 2.7 million for the three months ended September 30, 2025 and 2024, respectively.

Total interest expense, inclusive of amortization of deferred financing costs, on long-term debt obligations was $ 5.9 million and $ 5.4 million for the nine months ended September 30, 2025 and 2024, respectively.

Amortization of deferred financing costs were $ 0.2 million and $ 0.3 million for the three months ended September 30, 2025 and 2024, respectively.

Amortization of deferred financing costs were $ 0.8 million and $ 0.6 million for the nine months ended September 30, 2025 and 2024, respectively.

Revolving Credit Facility

On March 5, 2018, Turtle Beach and certain of its subsidiaries entered into an amended and restated loan, guaranty and security agreement (the “Revolving Credit Facility”) with Bank of America, N.A.

(“Bank of America”), as administrative agent, collateral agent and security trustee for the lenders.

The Revolving Credit Facility provided for a line of credit of up to $ 50 million inclusive of a sub-facility limit of $ 10 million for TB Europe, and was secured by substantially all of the Company's assets.

The Revolving Credit Facility was intended for working capital, letters of credit and other corporate purposes.

On March 13, 2024, the Company entered into a Fourth Amendment, dated as of March 13, 2024 (the “Fourth Amendment”), to the Revolving Credit Facility.

The Fourth Amendment extended the maturity date to March 13, 2027 , incorporated PDP acquisition assets into the U.S.

Borrowing Base (up to $ 15,000,000 or 30 % of the aggregate Revolver Commitments), and updated interest terms.

Loans bore interest at SOFR, U.S.

Base Rate, SONIA or EUIBOR, plus applicable margins, which was between 0.50 % to 2.50 % for base rate loans and UK base rate loans, and 1.75 % to 3.50 % for U.S.

BSBY rate loans, U.S.

BSBY daily floating rate loans and UK alternative currency loans.

In addition, Turtle Beach is required to pay a commitment fee on the unused revolving loan commitment at a rate ranging from 0.375 % to 0.50 % , and letter of credit fees and agent fees.

As of June 30, 2025, interest rates for outstanding borrowings were 8.10 % for base rate loans and 4.32 % for Term SOFR loans.

The Company is subject to quarterly financial covenant testing if certain availability thresholds are not met or certain other events occur (as defined in the Credit Facility).

The Credit Facility requires the Company and its restricted subsidiaries to maintain a fixed charge coverage ratio of at least 1.00 as of the last day of each fiscal quarter.

The Credit Facility also contains affirmative and negative covenants that, subject to certain exceptions, limit our ability to take certain actions, including the Company’s ability to incur debt, pay dividends and repurchase stock, make certain investments and other payments, enter into certain mergers and consolidations, engage in sale leaseback transactions and transactions with affiliates, and encumber and dispose of assets.

Obligations under the Credit Facility are secured by a security interest and lien upon substantially all of the Company’s assets.

As of June 30, 2025, the Company was in compliance with all the financial covenants under the Credit Facility, as amended, and excess borrowing availability was approximately $ 36.2 million .

On March 13, 2024, Turtle Beach and certain of its subsidiaries entered into a new financing agreement with Blue Torch Finance, LLC, (“Blue Torch”), pursuant to which Blue Torch for an aggregate amount of $ 50 million (the “Term Loan Facility”), the proceeds of which were used to (i) fund a portion of the PDP acquisition purchase price;

(ii) repay certain existing indebtedness of the acquired business;

In addition, Turtle Beach was required to pay a commitment fee on the unused revolving loan commitment at a rate ranging from 0.375 % to 0.50 % , and letter of credit fees and agent fees.

The Revolving Credit Facility included customary affirmative and negative covenants and required a minimum fixed charge coverage ratio of at least 1.00 when availability thresholds were not met.

These covenants restricted the Company’s ability to incur additional debt, pay dividends, repurchase stock, make certain investments, enter into mergers, and dispose of assets.

On August 1, 2025, the Company entered into a Credit Agreement (the “Credit Agreement”), discussed below, and made a payment of $ 16.0 million from the Bank of America term loan facility, including $ 15.9 million and $ 0.1 million of principal and accrued interest, respectively.

The Company treated the Credit Agreement as a partial extinguishment to the Revolving Credit Facility and recognized a loss on extinguishment of debt of $ 0.3 million to write-off the unamortized deferred financing costs in interest expense in its condensed consolidated statements of operations.

On March 13, 2024, Turtle Beach and certain of its subsidiaries entered into a new financing agreement with Blue Torch Finance, LLC, (“Blue Torch”), pursuant to which Blue Torch provided for an aggregate amount of $ 50 million (the “Term Loan Facility”), the proceeds of which were used to (i) fund a portion of the PDP acquisition purchase price;

(ii) repay certain indebtedness of the acquired business;

(iii) to pay fees and expenses related to such transactions and (iv) for general corporate purposes.

The Term Loan Facility will amortize in a monthly amount equal to 0.21 % during the first two years and 0.42 % during the third year.

As the prepayment period concluded on March 13, 2025, the Term Loan Facility is no longer subject to the prepayment premium applied during the first year.

The Term Loan Facility is secured by substantially all of the assets of the Company and its subsidiaries which are party to the Term Loan Facility.

The Term Loan Facility (a) matures on March 13, 2027 ;

(b) bears interest at a rate equal to (i) a base rate plus 7.25 % per annum for Reference Rate Loans and Secured Overnight Financing Rate (“SOFR”) plus 8.25 % per annum for SOFR Loans if the total net leverage ratio is greater than or equal to 2.25 x and (ii) a base rate plus 6.75 % per annum for Reference Rate Loans and SOFR plus 7.75 % per annum for SOFR Loans if the total net leverage ratio is less than 2.25 x;

and (c) is subject to certain affirmative, negative and financial covenants, including a minimum liquidity covenant and a quarterly total net leverage ratio covenant.

As of June 30, 2025, the interest rate for outstanding borrowings was 12.19 % .

As of June 30, 2025, the Company was in compliance with all the financial covenants under the Term Loan Facility.

Maturities of Term Loan Debt

As of June 30, 2025, maturities of debt, assuming no prepayments, are as follows (in thousands):

The Term Loan Facility amortized in a monthly amount equal to 0.21 % during the first two years and 0.42 % during the third year.

As the prepayment period concluded on March 13, 2025, the Term Loan Facility was no longer subject to the prepayment premium applied during the first year.

The Term Loan Facility was secured by substantially all of the assets of the Company and its subsidiaries which were party to the Term Loan Facility.

The Term Loan Facility (a) had a maturity date of March 13, 2027 ;

(b) bore interest at a rate equal to (i) a base rate plus 7.25 % per annum for Reference Rate Loans and Secured Overnight Financing Rate (“SOFR”) plus 8.25 % per annum for SOFR Loans if the total net leverage ratio was greater than or equal to 2.25 x and (ii) a base rate plus 6.75 % per annum for Reference Rate Loans and SOFR plus 7.75 % per annum for SOFR Loans if the total net leverage ratio is less than 2.25 x;

and (c) was subject to certain affirmative, negative and financial covenants, including a minimum liquidity covenant and a quarterly total net leverage ratio covenant.

On August 1, 2025, the Term Loan Facility was repaid in full from the proceeds of the Bank of America credit agreement, discussed below, for the amount of $ 43.2 million .

The Company treated the repayment as a debt extinguishment and recognized a loss on extinguishment of debt of $ 1.7 million to write-off the unamortized deferred financing costs in interest expense in the condensed consolidated statements of operations.

Credit Agreement

On August 1, 2025, the Company entered into the Credit Agreement (the “Credit Agreement”) with Bank of America, as the administrative agent, the swingline lender and the line of credit issuer, replacing the Company’s previous debt arrangements.

On August 1, 2025, the Company and certain of its subsidiaries (the “Borrowers”) entered into the Credit Agreement (the “Credit Agreement”) with Bank of America, as the administrative agent, the swingline lender and the line of credit issuer.

The Credit Agreement, matures on August 1, 2028 and includes a $ 60 million term loan facility and a $ 90 million revolving credit facility with designated sub-facility limits of (i) $ 15 million for the U.K.

Borrower, (ii) $ 10 million or a swingline facility and (iii) $ 5 million for letters of credit.

Borrower, (ii) $ 10 million for a swingline facility and (iii) $ 5 million for letters of credit.

Actual credit availability under the revolving facility is subject to a borrowing base limitation that is calculated based on a percentage of eligible trade accounts receivable and inventories, the balances of which fluctuate, and is subject to discretionary reserves and revaluation adjustments.

The Company may utilize the facilities for borrowings as well as for the issuance of letters of credit, repaying existing indebtedness outstanding as of the effective date of the Credit Agreement and ongoing working capital and general corporate purposes as defined by the Credit Agreement.

The Borrowers may utilize the facilities for borrowings as well as for the issuance of letters of credit, repaying existing indebtedness outstanding as of the effective date of the Credit Agreement and ongoing working capital and general corporate purposes as defined by the Credit Agreement.

The facilities under the Credit Agreement replaced the Company’s previous debt arrangements.

Borrowings will bear interest at a rate that varies depending on the type of loan calculated using a floating rate plus a margin.

Borrowings will bear interest at a rate that varies depending on the type of loan and the Borrower.

The interest rate will be calculated using a floating rate plus a margin.

Depending on the type of loan, the floating rate will either be the prime rate announced by Bank of America, Term SOFR, Daily Simple SOFR, EURIBOR or SONIA.

1 unchanged sentence

The Credit Agreement also provides for an unused line fee, letter of credit fees, and agent fees.

The Credit Agreement requires the Company and its subsidiaries to (i) maintain a fixed charge coverage ratio, defined as the ratio, determined on a consolidated basis for the Company and its subsidiaries for the applicable measurement period, of (a) EBITDA minus unfinanced capital expenditures and cash taxes paid for such period to (b) consolidated interest charges for such period plus principal payments or redemptions of outstanding debt plus certain restricted payments and (ii) maintain a consolidated leverage ratio, defined as the ratio, determined on a consolidated basis for the Company and its subsidiaries for the applicable measurement period, of (a) certain funded indebtedness minus unrestricted cash up to a maximum of $ 12 million to (b) EBITDA.

The Borrowers will be able to voluntarily prepay the principal of any advance, without penalty or premium, at any time in whole or in part, subject to certain breakage costs.

As of September 30, 2025, interest rates for the term loan and revolving credit facilities were 7.66 % and 7.53 % , respectively.

expenditures and cash taxes paid for such period to (b) consolidated interest charges for such period plus principal payments or redemptions of outstanding debt plus certain restricted payments and (ii) maintain a consolidated leverage ratio, defined as the ratio, determined on a consolidated basis for the Company and its subsidiaries for the applicable measurement period, of (a) certain funded indebtedness minus unrestricted cash up to a maximum of $ 12 million to (b) EBITDA.

The Credit Agreement also contains affirmative and negative covenants that, subject to certain exceptions, limit our ability to take certain actions, including our ability to incur debt, pay dividends and repurchase stock, make certain investments and other payments, enter into certain mergers and consolidations, engage in sale leaseback transactions and transactions with affiliates, and encumber and dispose of assets.

The Credit Agreement contains customary events of default, including defaults triggered by the failure to make payments when due, breaches of covenants and representations, material impairment in the perfection of the lenders’ security interest in the collateral, and events related to bankruptcy and insolvency of the Company and its subsidiaries.

If an event of default occurs and is continuing, the lenders may terminate and/or suspend their obligations to make loans and issue letters of credit and/or accelerate amounts due under the Credit Agreement and exercise other rights and remedies.

To secure their obligations under the Credit Agreement, the Company and each of the other loan parties granted an all-assets lien with a first priority security interest in substantially all of their assets to the administrative agent.

As of September 30, 2025, the Company was in compliance with all the financial covenants under the Credit Agreement and excess borrowing availability was approximately $ 34.5 million .

As part of the Credit Agreement, the Company recorded an aggregate amount of deferred debt financing costs of $ 2.3 million .

Maturities of Term Loan Debt

As of September 30, 2025, maturities of debt are as follows (in thousands):

Current portion

Unamortized debt discount

Total Term Loan, non-current

Commitments and Contingencies

13 unchanged sentences

On June 20, 2014, VTBH and the Company moved to dismiss the action, but that motion was denied on August 28, 2014.

On September 14, 2017, a unanimous en banc panel of the Nevada Supreme Court granted defendants’ petition for writ of mandamus and ordered the trial court to dismiss the complaint but provided a limited basis upon which plaintiffs could seek to amend their complaint.

basis upon which plaintiffs could seek to amend their complaint.

Plaintiffs amended their complaint on December 1, 2017 to assert the same claims in a derivative capacity on behalf of the Company, as well as in a direct capacity, against VTBH, Stripes Group, LLC, SG VTB Holdings, LLC, and the former members of the Company’s Board of Directors.

16 unchanged sentences

On February 15, 2024, TBC Holding Company LLC (“TBCH”), a wholly owned subsidiary of Turtle Beach Corporation, was served with a lawsuit that was brought to the German Higher Regional Court in Stade by the insolvency administrator of KJE Europe GmbH (“KJE”) , a company registered and existing under the laws of Germany.

In his complaint, the insolvency administrator claims that TBCH is liable to reimburse any payments received by the TBCH under a certain settlement agreement with KJE dated June 30, 2020.

In his complaint, the insolvency administrator claimed that TBCH was liable to reimburse any payments received by the TBCH under a certain settlement agreement with KJE dated June 30, 2020.

On February 28, 2025, the Court ruled in favor of the insolvency administrator holding that TBCH was liable for EUR 1.4 million plus interest and costs.

TBCH appealed the judgment and the parties subsequently negotiated a settlement agreement that became effective following the approval of the creditors' assembly of KJE on August 5, 2025.

Under the settlement agreement, TBCH agreed to make a payment of EUR 722,989.00 to KJE's insolvency estate and to withdraw its appeal in exchange for a full and final release of all claims the insolvency administrator may have against TBCH, with a portion of the payment amount being allowed as a claim in KJE's insolvency proceedings .

As of June 30, 2025, the Company had accrued for the potential impact of loss contingency.

Pursuant to the settlement agreement, TBCH made a payment of EUR 0.7 million to KJE's insolvency estate and withdrew its appeal in exchange for a full and final release of all claims the insolvency administrator may have against TBCH, with a portion of the payment amount being allowed as a claim in KJE's insolvency proceedings .

Intellectual Property Dispute :

2 unchanged sentences

Nyko has responded to PDP’s complaint and filed counterclaims for patent infringement by the Ultra Slim.

On June 12, 2025, Nyko filed a lawsuit in the Southern District of California asserting that PDP and Turtle Beach Corporation infringed the same four

patents at issue in the declaratory judgment action filed by PDP.

On June 12, 2025, Nyko filed a lawsuit in the Southern District of California asserting that PDP and Turtle Beach Corporation infringed the same four patents at issue in the declaratory judgment action filed by PDP.

On July 8, 2025, PDP and Turtle Beach moved to dismiss Nyko’s complaint and that motion is pending.

On September 30, 2025, PDP moved for judgment on the pleadings on multiple aspects of Nyko’s counterclaims and that motion is pending.

Intellectual Property Dispute :

On July 18, 2025, Gametronics LLC filed a patent infringement lawsuit against Voyetra Turtle Beach, Inc., (“VTB”) a wholly owned subsidiary of Turtle Beach Corporation, in the United States District Court for the District of Delaware, asserting infringement of three patents by the Victrix Pro BFG Wireless Controller.

VTB is investigating Gametronics’ allegations.

VTB and Gametronics have agreed to resolve the dispute.

Intellectual Property Dispute:

On October 3, 2025, Robert Lyden, an individual, filed a patent infringement lawsuit against PDP, VTB, and Turtle Beach Corporation ("TBC”) in the United States District Court for the District of Minnesota, asserting infringement of one patent by the Victrix Pro BFG Wireless Controller and Victrix Gambit Wireless Controller.

PDP, VTB, and TBC are investigating Mr.

Lyden’s allegations.

The Company will continue to vigorously defend itself in the foregoing unresolved matters.

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Accordingly, the Company cannot predict the outcome of these matters.

The Company has not recorded any accrual at June 30, 2025 for contingent losses associated with these matters unless otherwise disclosed above based on its belief that losses, while possible, are not probable.

The Company has not recorded any accrual at September 30, 2025 for contingent losses associated with these matters unless otherwise disclosed above based on its belief that losses, while possible, are not probable.

Further, any possible range of loss cannot be reasonably estimated at this time.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Warranty, beginning of period

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damages and expenses, including reasonable attorneys’ fees.

As of June 30, 2025, no material amounts have been accrued for indemnification

The Company does not believe, based on historical experience and information currently available, that it is probable that any

material amounts will be required to be paid under its indemnification arrangements.

As of September 30, 2025, no material amounts have been accrued for indemnification provisions.

The Company does not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid under its indemnification arrangements.

The Company also indemnifies its current and former directors and certain current and former officers.

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Three Months Ended

Six Months Ended

Income tax benefit

Nine Months Ended

September 30,

Income tax expense (benefit)

Effective income tax rate

The effective tax rate for the three and six months ended June 30, 2025 was primarily impacted by the change in U.S.

The effective tax rate for the three and nine months ended September 30, 2025 was primarily impacted by the change in U.S.

valuation allowance, foreign taxes, and Federal and State current tax.

The effective tax rate for the three and six months ended June 30, 2024 was primarily impacted by the release of U.S.

The effective tax rate for the three and nine months ended September 30, 2024 was primarily impacted by the release of U.S.

valuation allowance for PDP acquired net deferred tax liabilities.

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Interest and penalties associated with income tax matters are included in the provision for income taxes in the condensed consolidated statements of operations.

As of June 30, 2025, the Company had uncertain tax positions of $ 2.5 million , inclusive of $ 0.6 million of interest and penalties.

As of September 30, 2025, the Company had uncertain tax positions of $ 2.5 million , inclusive of $ 0.6 million of interest and penalties.

As required by the authoritative guidance on accounting for income taxes, the Company evaluates the realizability of deferred tax assets on a jurisdictional basis at each reporting date.

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deferred tax assets as of December 31, 2022.

The Company continues to maintain this valuation allowance for the three and six months ended June 30, 2025.

For the six months ended June 30, 2024 , the Company recorded a $ 6.2 million of tax benefit related to the PDP acquisition, including a reversal of $ 6.4 million of valuation allowance for PDP acquired net deferred tax liabilities.

The Company continues to maintain this valuation allowance for the three and nine months ended September 30, 2025.

For the nine months ended September 30, 2024 , the Company recorded a $ 6.2 million tax benefit related to the PDP acquisition, including a reversal of $ 6.9 million of valuation allowance for PDP acquired net deferred tax liabilities.

The Company is subject to income taxes domestically and in various foreign jurisdictions.

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ASC 740, “Income Taxes”, requires the tax effects of changes in tax rates and tax law be recognized in the period in which the legislation is enacted.

The Company is currently evaluating the impact of the OBBBA and the results of such evaluation will be reflected in the Company’s Form 10-Q for the quarter ended September 30, 2025, the period of enactment.

The Company completed its initial assessment of OBBBA for the quarter ended September 30, 2025.

For the provisions effective in 2025, there was no material impact to the Company’s effective tax rate for the quarter ended September 30, 2025.

The Company will continue to evaluate the impact of the new legislation on its condensed consolidated financial statements as additional guidance is issued .

Equity Incentive Plans and Stock-Based Compensation

Stock Repurchase Activity

On May 7, 2025, The Company' Board of Directors authorized a stock repurchase program to acquire up to $ 75 million of Company common stock.

On May 7, 2025, The Company's Board of Directors (the "Board") authorized a stock repurchase program to acquire up to $ 75 million of Company common stock.

The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements, restrictions in the Company’s debt agreements and other factors.

The Company intends to fund the share repurchases using cash from operations or short-term borrowings and may suspend or discontinue repurchases at any time.

The Company intends to fund the share repurchases using cash from operations or borrowings and may suspend or discontinue repurchases at any time.

The share repurchase program is scheduled to expire on May 6, 2027 .

The Company repurchased 0.4 million and 1.0 million shares of its common stock during the three months ended June 30, 2025 and 2024, respectively, for a total cost of $ 5.0 million and $ 15.2 million , respectively.

The Company repurchased 0.5 million and 1.0 million shares of its common stock during the six months ended June 30, 2025 and 2024, respectively for a total cost of $ 6.8 million and $ 15.2 million , respectively.

The Company repurchased 0.7 million shares of its common stock both in the three months ended September 30, 2025 and 2024, respectively, for a total cost of $ 10.3 million and $ 10.1 million , respectively.

The Company repurchased 1.2 million and 1.6 million shares of its common stock during the nine months ended September 30, 2025 and 2024, respectively, for a total cost of $ 17.0 million and $ 25.3 million , respectively.

On August 14, 2025, the Company entered into a stock purchase agreement regarding the purchase and sale of shares of its common stock beneficially owned by DC VGA LLC (“Diversis”), in a private transaction.

The Company agreed to purchase 694,926 shares at a price of $ 14.41 per share of common stock for a total of $ 10.0 million .

In addition, Diversis agreed to sell 693,962 shares to TDG CP LLC, a Delaware limited liability company (“Donerail”) at a price of $ 14.41 per share of common stock for a total of $ 10.0 million .

The purchase price per share of common stock for each transaction represents the average of the volume weighted average price of the common stock of the thirty days prior to and including August 14, 2025.

Donerail is an entity affiliated with William Wyatt, a member of the Company's Board and Dave Muscatel, who was a member of the Board at the time of the transaction, is affiliated with Diversis.

The Audit Committee of the Board, comprised solely of independent directors not affiliated with Diversis and Donerail, approved the transactions.

The agreement contains customary representations, warranties and covenants of the parties.

Stock-Based Compensation

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cost of revenue

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Total stock-based compensation

The following table presents the stock activity and the total number of shares available for grant as of June 30, 2025:

The following table presents the stock activity and the total number of shares available for grant as of September 30, 2025:

Balance at December 31, 2024

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Performance Shares Issued

Balance at June 30, 2025

Balance as of September 30, 2025

Stock Option Activity

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Options Forfeited

Outstanding at June 30, 2025

Vested and expected to vest at June 30, 2025

Exercisable at June 30, 2025

Outstanding at September 30, 2025

Vested and expected to vest at September 30, 2025

Exercisable at September 30, 2025

Stock options are time-based and the majority are exercisable within 10 years of the date of grant, but only to the extent they have vested.

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In the event participants in the plan cease to be employed or engaged by the Company, all vested options would be forfeited if they are not exercised within 90 days.

Forfeitures on option grants are estimated at 10 % for non-executives and 0 % for executives based on evaluation of historical and expected future turnover.

Forfeitures on equity grants are estimated at 10 % for non-executives and 0 % for senior management based on evaluation of historical and expected future turnover.

Stock-based compensation expense was recorded net of estimated forfeitures, such that expense was recorded only for those stock-based awards expected to vest.

The Company reviews this assumption periodically and will adjust it if it is not representative of future forfeiture data and trends within employee types (executive vs.

The Company reviews this assumption periodically and will adjust it if it is not representative of future forfeiture data and trends within employee types (senior management vs.

non-executive).

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Shares forfeited

Nonvested restricted stock at June 30, 2025

As of June 30, 2025, total unrecognized compensation cost related to the nonvested restricted stock granted was $ 9.7 million , which is expected to be recognized over a remaining weighted average vesting period of 2.5 years.

As of June 30, 2025 , the Company had 550,000 wholly funded warrants related to a series of transactions pursuant to which the previously outstanding Series B Preferred Stock were retired.

Nonvested restricted stock at September 30, 2025

As of September 30, 2025, total unrecognized compensation cost related to the nonvested restricted stock granted was $ 7.9 million , which is expected to be recognized over a remaining weighted average vesting period of 2.5 years.

As of September 30, 2025 , the Company had 550,000 wholly funded warrants related to a series of transactions pursuant to which the previously outstanding Series B Preferred Stock were retired.

The warrants do not expire.

Net Loss Per Share

The following table sets forth the computation of basic and diluted net loss per share of common stock attributable to common stockholders (in thousands, except per-share data):

Net Income (Loss) Per Share

The following table sets forth the computation of basic and diluted net income (loss) per share of common stock attributable to common stockholders (in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net income (loss)

Weighted average common shares outstanding — Basic

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Weighted average common shares outstanding — Diluted

Net loss per share:

Net income (loss) per share:

Incremental shares from stock options and restricted stock are computed by the treasury stock method.

The treasury stock method calculates dilution assuming the exercise of all in-the-money options and vesting of restricted stock, reduced by the repurchase of shares with the proceeds from the assumed exercises and unrecognized compensation expense for outstanding awards and the estimated tax benefit of the assumed exercises.

The weighted average shares listed below were not included in the computation of diluted earnings per common share because to do so would have been anti-dilutive for the periods presented or were otherwise excluded under the treasury stock method.

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Stock options

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Three Months Ended

Six Months Ended

North America

Nine Months Ended

September 30,

Europe and Middle East

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Significant segment expenses:

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General and administrative

Other (recovery) costs (1)

Operating (loss) income

Other costs (recovery) (1)

Operating income (loss)

Interest expense, net

Other expense, net

Income tax benefit

(1) Other costs in the three and six months ended June 30, 2025 include acquisition-related costs and an insurance recovery.

Other costs in the three and six months ended June 30, 2024 include acquisition-related costs.

Other (income) expense, net

Income tax expense (benefit)

Net income (loss)

(1) Other costs (recovery) in the three and nine months ended September 30, 2025 relates to insurance recovery and acquisition-related costs.

Other costs (recovery) in the three and nine months ended September 30, 2024 include acquisition-related costs.

Acquisition-related costs include costs incurred in connection with the PDP acquisition, warehouse lease impairment, including professional fees such as legal and accounting along with other certain integration-related costs.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements