Turtle Beach Corp 10-Q

Item 1. Financial Statements. Turtle Beach Corporation Condensed Consolidated Statements of Operations ( unaudited, in thousands, except per-share data) Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2025 2024 2025 2024 Net revenue $ 80,457 $ 94,363 $ 201,135 $ 226,689 Cost of revenue 50,399 60,232 129,448 151,696 Gross profit 30,058 34,131 71,687 74,993 Operating expenses: Selling and marketing 12,513 13,535 37,697 36,289 Research and development 4,161 4,311 12,625 12,802 General and administrative 7,541 6,352 23,111 19,489 Insurance recovery, net — — ( 9,404 ) — Acquisition-related cost 476 3,510 1,084 9,814 Total operating expenses 24,691 27,708 65,113 78,394 Operating income (loss) 5,367 6,423 6,574 ( 3,401 ) Interest expense 3,718 2,712 7,773 5,082 Other (income) expense, net ( 322 ) 252 780 974 Income (loss) before income tax 1,971 3,459 ( 1,979 ) ( 9,457 ) Income tax expense (benefit) 254 46 ( 101 ) ( 5,501 ) Net income (loss) $ 1,717 $ 3,413 ( 1,878 ) $ ( 3,956 ) Net income (loss) per share Basic $ 0.09 $ 0.17 $ ( 0.09 ) $ ( 0.20 ) Diluted $ 0.08 $ 0.16 $ ( 0.09 ) $ ( 0.20 ) Weighted average number of shares: Basic 20,073 20,553 20,413 20,050 Diluted 20,406 21,501 20,413 20,050 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 Turtle Beach Corporation Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited, in thousands) Three Months Ended Nine Months Ended September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 Net income (loss) $ 1,717 $ 3,413 $ ( 1,878 ) $ ( 3,956 ) Other comprehensive (loss) income Foreign currency translation adjustment ( 819 ) 1,718 2,735 1,536 Other comprehensive (loss) income ( 819 ) 1,718 2,735 1,536 Comprehensive income (loss) $ 898 $ 5,131 $ 857 $ ( 2,420 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Turtle Beach Corporation Condensed Consolida ted Balance Sheets (in thousands, except par value and share amounts) September 30, December 31, 2025 2024 (unaudited) ASSETS Current Assets: Cash and cash equivalents $ 12,257 $ 12,995 Accounts receivable, net 56,754 93,118 Inventories 94,964 71,251 Prepaid expenses and other current assets 14,381 11,007 Total Current Assets 178,356 188,371 Property and equipment, net 3,841 5,844 Goodwill 50,428 52,942 Intangible assets, net 36,350 42,398 Other assets 9,232 9,306 Total Assets $ 278,207 $ 298,861 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Revolving credit facility $ 33,486 $ 49,412 Accounts payable 46,917 34,839 Term Loan, current 8,571 1,250 Other current liabilities 22,580 38,171 Total Current Liabilities 111,554 123,672 Term Loan, non-current 48,404 45,620 Income tax payable 1,377 1,362 Other liabilities 6,221 7,603 Total Liabilities 167,556 178,257 Commitments and Contingencies Stockholders’ Equity Common stock, $ 0.001 par value - 25,000,000 shares authorized; 19,307,514 and 19,961,696 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively 19 20 Additional paid-in capital 229,174 239,983 Accumulated deficit ( 119,972 ) ( 118,094 ) Accumulated other comprehensive income (loss) 1,430 ( 1,305 ) Total Stockholders’ Equity 110,651 120,604 Total Liabilities and Stockholders’ Equity $ 278,207 $ 298,861 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Turtle Beach Corporation Condensed Consolidated S tatements of Cash Flows (unaudited, in thousands) Nine Months Ended September 30, 2025 September 30, 2024 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 1,878 ) $ ( 3,956 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 3,259 3,261 Fair value step-up adjustment to acquired inventory — 2,085 Amortization of intangible assets 6,051 4,843 Amortization of debt financing costs 776 625 Loss on extinguishment of debt 1,923 — Stock-based compensation 4,306 3,447 Deferred income taxes 165 ( 6,739 ) Change in sales returns reserve 1,777 1,369 Provision for obsolete inventory 2,162 4,690 Loss on impairment of assets — 753 Other ( 54 ) — Changes in operating assets and liabilities, net of acquisitions: Accounts receivable 34,586 4,344 Inventories ( 25,875 ) ( 43,597 ) Prepaid expenses and other assets ( 1,495 ) 127 Accounts payable 12,045 30,050 Income taxes payable ( 3,471 ) 485 Other liabilities ( 12,156 ) ( 10,340 ) Net cash provided by (used for) operating activities 22,121 ( 8,553 ) CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment ( 1,169 ) ( 3,392 ) Acquisition of a business, net of cash acquired 2,515 ( 77,294 ) Net cash provided by (used for) investing activities 1,346 ( 80,686 ) CASH FLOWS FROM FINANCING ACTIVITIES Borrowings on revolving credit facilities 186,249 242,609 Repayment of revolving credit facilities ( 202,175 ) ( 183,983 ) Proceeds from term loan 60,000 50,000 Repayment of term loan ( 51,101 ) ( 729 ) Proceeds from exercise of stock options 1,900 3,004 Repurchase of common stock ( 17,015 ) ( 25,339 ) Debt financing costs ( 2,334 ) ( 2,897 ) Net cash (used for) provided by financing activities ( 24,476 ) 82,665 Effect of exchange rate changes on cash and cash equivalents 271 1,651 Net decrease in cash and cash equivalents ( 738 ) ( 4,923 ) Cash and cash equivalents at the beginning of period 12,995 18,726 Cash and cash equivalents at the end of period $ 12,257 $ 13,803 SUPPLEMENTAL DISCLOSURE OF INFORMATION Property and equipment purchases included in accounts payable and accrued liabilities $ 154 $ 356 Unpaid debt financing costs $ 513 $ — The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Turtle Beach Corporation Condensed Consolidated Statement o f Stockholders ’ Equity (unaudited, in thousands) Common Stock Additional Paid-In Accumulated Accumulated Other Comprehensive Shares Amount Capital Deficit Income (Loss) Total Balance at December 31, 2024 19,962 $ 20 $ 239,983 $ ( 118,094 ) $ ( 1,305 ) $ 120,604 Net loss — — — ( 664 ) — ( 664 ) Other comprehensive income, net of tax — — — — 767 767 Issuance of restricted stock 9 — — — — — Stock options exercised — — 5 — — 5 Stock-based compensation — — 1,912 — — 1,912 Repurchase of common stock ( 121 ) — ( 1,750 ) — — ( 1,750 ) Balance at March 31, 2025 19,850 $ 20 $ 240,150 $ ( 118,758 ) $ ( 538 ) $ 120,874 Net loss — — — ( 2,931 ) — ( 2,931 ) Other comprehensive income, net of tax — — — — 2,787 2,787 Issuance of restricted stock 314 — — — — — Stock options exercised 32 — 107 — — 107 Stock-based compensation — — 1,008 — — 1,008 Repurchase of common stock ( 373 ) — ( 5,010 ) — — ( 5,010 ) Balance at June 30, 2025 19,823 $ 20 $ 236,255 $ ( 121,689 ) $ 2,249 $ 116,835 Net income — — — 1,717 — 1,717 Other comprehensive loss, net of tax — — — — ( 819 ) ( 819 ) Issuance of restricted stock 6 — — — — — Stock options exercised 191 — 1,788 — — 1,788 Stock-based compensation — — 1,386 — — 1,386 Repurchase of common stock ( 712 ) ( 1 ) ( 10,255 ) — — ( 10,256 ) Balance at September 30, 2025 19,308 $ 19 $ 229,174 $ ( 119,972 ) $ 1,430 110,651 6 Common Stock Additional Paid-In Accumulated Accumulated Other Comprehensive Shares Amount Capital Deficit Income (Loss) Total Balance at December 31, 2023 17,532 $ 18 $ 220,185 $ ( 134,277 ) $ ( 849 ) $ 85,077 Net income — — — 155 — 155 Other comprehensive loss, net of tax — — — — ( 418 ) ( 418 ) Issuance of acquisition-related stock 3,450 3 38,047 — — 38,050 Issuance of restricted stock 12 — — — — — Stock options exercised 171 — 1,257 — — 1,257 Stock-based compensation — — 1,105 — — 1,105 Balance at March 31, 2024 21,165 $ 21 $ 260,594 $ ( 134,122 ) $ ( 1,267 ) $ 125,226 Net loss — — — ( 7,524 ) — ( 7,524 ) Other comprehensive income, net of tax — — — — 236 236 Issuance of restricted stock 365 — — — — — Stock options exercised 176 1 1,683 — — 1,684 Stock-based compensation — — 846 — — 846 Repurchase of common stock ( 952 ) ( 1 ) ( 15,206 ) — — ( 15,207 ) Balance at June 30, 2024 20,754 $ 21 $ 247,917 $ ( 141,646 ) $ ( 1,031 ) $ 105,261 Net income — — — 3,413 — 3,413 Other comprehensive income, net of tax — — — — 1,718 1,718 Issuance of restricted stock 6 — — — — — Stock options exercised 8 — 63 — — 63 Stock-based compensation — — 1,496 — — 1,496 Repurchase of common stock ( 689 ) ( 1 ) ( 10,131 ) — — ( 10,132 ) Balance at September 30, 2024 20,079 $ 20 $ 239,345 $ ( 138,233 ) $ 687 $ 101,819 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Turtle Beach Corporation Notes to Condensed Consolidated Financial Statements (unaudited) Note 1. Description of Business Organization Turtle Beach Corporation (“Turtle Beach” or the “Company”), headquartered in San Diego, California and incorporated in the state of Nevada in 2010, is a premier audio and gaming technology company with expertise and experience in developing, commercializing, and marketing innovative products across a range of large addressable markets under the Turtle Beach® brand. Turtle Beach, a worldwide leader of feature-rich headset solutions for use across multiple platforms, including video game and entertainment consoles, handheld consoles, personal computers (“PC”), tablets and mobile devices, expanded its brand beyond gaming headsets and launched its gaming controller product line, as well as gaming flight simulation and racing simulation accessories, and strengthened its gaming PC keyboards and mice product lines. In March 2024, Turtle Beach acquired Performance Designed Products LLC (“PDP”), another leading gaming accessory brand with a robust slate of products, including gaming controllers, gamepads for all platforms and licensing deals with popular gaming and entertainment properties. Note 2. Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, reflect all adjustments (which include normal recurring adjustments) considered necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. All intercompany accounts and transactions have been eliminated in consolidation. Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), have been condensed or omitted pursuant to those rules and regulations. The Company believes that the disclosures made are adequate to make the information presented not misleading. The results of operations for the interim periods are not necessarily indicative of the results of operations for the entire fiscal year. The December 31, 2024 Condensed Consolidated Balance Sheet has been derived from the Company’s audited financial statements included in its Annual Report on Form 10-K filed with the SEC on March 17, 2025 (“Annual Report”). These financial statements should be read in conjunction with the annual financial statements and the notes thereto included in the Annual Report that contains information useful to understanding the Company’s businesses and financial statement presentations. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to use estimates and assumptions that affect the reported amount of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. The significant estimates and assumptions used by management affect: sales return reserve, allowances for cash-based incentive programs, warranty reserve, valuation of inventory, valuation of long-lived assets, goodwill and other intangible assets, depreciation and amortization of long-lived assets, valuation of deferred tax assets, probability of performance shares vesting and forfeiture rates utilized in issuing stock-based compensation awards. The Company evaluates estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates, and those differences could be material to the consolidated financial statements. 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. Accounting Pronouncements Issued but Not Yet Adopted 8 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 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. This ASU is effective for fiscal years beginning after December 15, 2024 and allows for adoption on a prospective basis, with early adoption is permitted. The Company is currently evaluating the impact of the adoption of this standard to determine its impact on the Company's disclosures. In November 2024, the FASB issued ASU 2024-03, Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which is intended to improve disclosures related to certain income statement expenses of the Company. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, 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 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. Note 3. Business Combinations Performance Designed Products LLC Acquisition On March 13, 2024, the Company acquired all the issued and outstanding equity of PDP for consideration that included cash and common stock. PDP was a privately held gaming accessories leader that designs and distributes video game accessories, including controllers, headsets, power supplies, cases, and other accessories. As a result of the acquisition, the Company strengthened its leadership position in hardware gaming accessories and expanded its product portfolio. Consideration for the transaction consisted of the issuance of 3.45 million shares of Company common stock and approximately $ 78.9 million in cash, subject to customary post-closing adjustments for working capital, closing cash, closing debt and closing third party expenses. On a fully-diluted basis, issued stock represented approximately 16.4 % of the total issued and outstanding shares of the Company as of the closing date. The fair value of the 3.45 million common shares issued as part of the consideration was determined on the basis of the closing market price of the Company’s common shares on the acquisition date, or $ 11.03 per share. 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 $ 9.8 million of 9 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: (In thousands) Amount Cash $ 1,562 Accounts Receivable 23,888 Inventory 22,721 Prepaid and Other Current Assets 3,195 Property, Plant & Equipment 1,161 Other Assets 3,478 Intangible Assets 47,769 Accounts Payable ( 12,535 ) Accrued Liabilities ( 6,268 ) Lease Payable ( 2,726 ) Deferred Tax Liability ( 7,592 ) Total identifiable net assets 74,653 Goodwill 39,741 Total consideration $ 114,394 On January 28, 2025, the Company finalized the post-closing adjustments related to the acquisition of PDP, resulting in a $ 2.5 million payment from the sellers to the Company. The payment was received by the Company in January 2025 and accounted for as a reduction of purchase consideration in the first quarter of 2025. 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 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. Note 4. Fair Value Measurement The Company follows a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: • Level 1 — Quoted prices in active markets for identical assets or liabilities. • Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for markets that are not active, or other inputs that are observable or can be corroborated by observable market data. • Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. 10 Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and the revolving line of credit. 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 Reported Fair Value Reported Fair Value (in thousands) Financial Assets and Liabilities: Cash and cash equivalents $ 12,257 $ 12,257 $ 12,995 $ 12,995 Term Loan $ 57,857 $ 57,857 $ 48,958 $ 48,958 Revolving credit facility $ 33,486 $ 33,486 $ 49,412 $ 49,412 Cash equivalents are stated at amortized cost, which approximates fair value as of the consolidated balance sheet dates, due to the short period of time to maturity; and accounts receivable and accounts payable are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment. 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 September 30, 2025 and December 31, 2024 . Note 5. Balance Sheet Components Inventories Inventories consist of the following (in thousands): September 30, 2025 December 31, 2024 Finished goods $ 89,982 $ 67,145 Raw materials 4,982 4,106 Total inventories $ 94,964 $ 71,251 Property and Equipment, net Property and equipment, net, consists of the following (in thousands): September 30, 2025 December 31, 2024 Machinery and equipment $ 1,148 $ 2,761 Software and software development 2,176 2,858 Furniture and fixtures 1,266 1,679 Tooling 10,190 14,062 Leasehold improvements 1,177 2,323 Demonstration units and convention booths 2,385 17,818 Total property and equipment, gross 18,342 41,501 Less: accumulated depreciation and amortization ( 14,501 ) ( 35,657 ) Total property and equipment, net $ 3,841 $ 5,844 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. 11 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): September 30, 2025 December 31, 2024 Accrued royalty $ 5,939 $ 11,326 Accrued employee expenses 2,893 3,714 Accrued tax-related payables 2,667 7,123 Accrued freight 2,012 1,635 Accrued marketing 1,670 3,045 Accrued expenses 7,399 11,328 Total other current liabilities $ 22,580 $ 38,171 Note 6. Goodwill and Intangible Assets Goodwill 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. As such, the Company did not perform any further qualitative or quantitative testing. The following table summarizes the changes in the carrying amount of goodwill (in thousands): Balance as of January 1, 2025 $ 52,942 Purchase price adjustment ( 2,514 ) Balance as of September 30, 2025 $ 50,428 Intangible Assets, net Acquired identifiable intangible assets, and related accumulated amortization, as of September 30, 2025 and December 31, 2024 consisted of (in thousands): September 30, 2025 Gross Carrying Value Accumulated Amortization Net Book Value Customer relationships $ 11,186 $ 7,668 $ 3,518 Tradenames 18,293 6,123 12,170 Developed technology 27,706 7,119 20,587 Patent and trademarks 784 709 75 Total Intangible Assets $ 57,969 $ 21,619 $ 36,350 12 December 31, 2024 Gross Carrying Value Accumulated Amortization Net Book Value Customer relationships $ 10,880 $ 6,533 $ 4,347 Tradenames 18,293 4,451 13,842 Developed technology 27,706 3,656 24,050 Patent and trademarks 784 625 159 Total Intangible Assets $ 57,663 $ 15,265 $ 42,398 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): 2025 $ 2,006 2026 7,763 2027 7,590 2028 7,590 2029 7,590 Thereafter 3,811 Total $ 36,350 Note 7. Credit Facility and Long-Term Debt The following table presents the amounts of the Revolving Credit Facility and Term Loan (in thousands): September 30, 2025 December 31, 2024 Revolving credit facility $ 33,486 $ 49,412 Term loan $ 57,857 $ 48,958 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. 13 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 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. Term Loan 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 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 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 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 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 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. The margin will range from 2.00 % to 2.75 % for base rate loans and SONIA based loans and from 3.00 % to 3.75 % for Term SOFR, Daily Simple SOFR and EURIBOR loans. The Credit Agreement also provides for an unused line fee, letter of credit fees, and agent fees. 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. 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 14 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): 2025 $ 2,143 2026 8,571 2027 8,571 2028 38,572 57,857 Less: Current portion ( 8,571 ) Unamortized debt discount ( 882 ) Total Term Loan, non-current $ 48,404 Note 8. Commitments and Contingencies Litigation The Company is subject to various legal proceedings and claims that arise in the ordinary course of its business. Although the amount of any liability that could arise with respect to these actions cannot be determined with certainty, in the Company’s opinion, any such liability will not have a material adverse effect on its consolidated financial position, consolidated results of operations or liquidity. Shareholders Class Action : On August 5, 2013, VTB Holdings, Inc. (“VTBH”) and the Company (f/k/a Parametric Sound Corporation) announced that they had entered into the Merger Agreement pursuant to which VTBH would acquire an approximately 80 % ownership interest and existing shareholders would maintain an approximately 20 % ownership interest in the combined company (the “Merger”). Following the announcement, several shareholders filed class action lawsuits in California and Nevada seeking to enjoin the Merger. The plaintiffs in each case alleged that members of the Company’s Board of Directors breached their fiduciary duties to the shareholders by agreeing to a merger that allegedly undervalued the Company. VTBH and the Company were named as defendants in these lawsuits under the theory that they had aided and abetted the Company’s Board of Directors in allegedly violating their fiduciary duties. The plaintiffs in both cases sought a preliminary injunction seeking to enjoin closing of the Merger, which, by agreement, was heard by the Nevada court with the California plaintiffs invited to participate. On December 26, 2013, the court in the Nevada case denied the plaintiffs’ motion for a preliminary injunction. Following the closing of the Merger, the Nevada plaintiffs filed a second amended complaint, which made essentially the same allegations and sought monetary damages as well as an order rescinding the Merger. The California plaintiffs dismissed their action without prejudice, and sought to intervene in the Nevada action, which was granted. Subsequent to the intervention, the plaintiffs filed a third amended complaint, which made essentially the same allegations as prior complaints and sought monetary damages. 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 15 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. All defendants moved to dismiss this amended complaint on January 2, 2018, and those motions were denied on March 13, 2018. Defendants petitioned the Nevada Supreme Court to reverse this ruling on April 18, 2018. On June 15, 2018, the Nevada Supreme Court denied defendants’ writ petition without prejudice. The district court subsequently entered a pretrial schedule and set trial for November 2019. On January 18, 2019, the district court certified a class of shareholders of the Company as of January 15, 2014. On October 11, 2019, the parties notified the district court that they had reached a settlement that would resolve the pending action if ultimately approved by the Court. On January 13, 2020, the district court preliminarily approved the settlement between the plaintiffs and all defendants. A final hearing was held on May 18, 2020, wherein the Court approved the settlement and entered final judgment. On May 22, 2020, PAMTP LLC, which purports to hold the claims of eight shareholders who opted out of the class settlement described above, brought suit against the Company, the Company’s former Chief Executive Officer, Juergen Stark, Stripes Group, LLC, SG VTB Holdings, LLC, Kenneth Fox, and former members of the Company’s Board of Directors in Nevada state court. This opt-out action asserts the same direct claims that were asserted by the class of shareholders described above. The defendants filed two motions to dismiss this complaint, which were heard on August 10, 2020. The Court denied those motions by order of August 20, 2020. The case was tried in August 2021 and all remaining defendants, including the Company, prevailed on all counts with final judgment entered in their favor on September 3, 2021. Plaintiff appealed that judgment. On June 6, 2024, the Nevada Supreme Court affirmed the judgment in Defendants’ favor and subsequently denied Plaintiff’s petition for rehearing on July 22, 2024. Insolvency Dispute in Germany: 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 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. 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 : On May 28, 2025, PDP filed an action for declaratory judgment of non-infringement of four patents purportedly owned by OKYN Holdings, Inc., d/b/a Nyko Technologies (“Nyko”) in the United States District Court for the Southern District of California. Nyko had written to PDP on October 31, 2024 asserting that PDP’s Ultra Slim Charge System for PlayStation 4 (“Ultra Slim”) infringed those patents. 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 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 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. However, litigation and investigations are inherently uncertain. Accordingly, the Company cannot predict the outcome of these matters. 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. The unfavorable resolution of these matters could have a material adverse effect on the Company’s business, results of operations, financial condition, or cash flows. The Company is engaged in other legal actions, not described above, arising in the ordinary course of its business and, while there can be no assurance, believes that the ultimate outcome of these other legal actions will not have a material adverse effect on its business, results of operations, financial condition, or cash flows. 16 Product Warranties The Company warrants its products against certain manufacturing and other defects. These product warranties are provided for specific periods of time depending on the nature of the product. Warranties are generally fulfilled by replacing defective products with new products. The following table provides the changes in our product warranties, which are included in other current liabilities (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2025 2024 2025 2024 Warranty, beginning of period $ 736 $ 735 $ 815 $ 670 Warranty costs accrued 56 244 317 727 Settlements of warranty claims ( 131 ) ( 206 ) ( 471 ) ( 624 ) Warranty, end of period $ 661 $ 773 $ 661 $ 773 Indemnifications The Company indemnifies certain suppliers and customers for losses arising from matters such as intellectual property disputes and product safety defects, subject to certain restrictions. The scope of these indemnities varies, but in some instances includes indemnification for damages and expenses, including reasonable attorneys’ fees. 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. Certain costs incurred for providing such indemnification may be recoverable under various insurance policies. The Company is unable to reasonably estimate the maximum amount that could be payable under these arrangements because these exposures are not capped, the obligations are conditional in nature, and the facts and circumstances involved in any situation that might arise are variable. Note 9. Income Taxes The following table presents the Company’s income tax expense (in thousands) and effective income tax rate: Three Months Ended Nine Months Ended September 30, September 30, 2025 2024 2025 2024 Income tax expense (benefit) $ 254 $ 46 $ ( 101 ) $ ( 5,501 ) Effective income tax rate 12.9 % 1.3 % 5.1 % 58.2 % 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 nine months ended September 30, 2024 was primarily impacted by the release of U.S. valuation allowance for PDP acquired net deferred tax liabilities. The Company recognizes only those tax positions that meet the more-likely-than-not recognition threshold and establishes tax reserves for uncertain tax positions that do not meet this threshold. 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 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. Accounting for income taxes requires that a valuation allowance be established when it is more likely than not that all or a portion of the deferred taxes will not be realized. The Company considers all positive and negative evidence in determining if, based on the weight of such evidence, a valuation allowance is required. In circumstances where there is sufficient negative evidence indicating that the deferred tax assets are not more likely than not realizable, the Company establishes a valuation allowance. Due to the significant 2022 pre-tax loss, coupled with cumulative book losses projected in early future years, the Company recorded a valuation allowance on its net U.S. deferred tax assets as of December 31, 2022. 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. 17 The Company is subject to income taxes domestically and in various foreign jurisdictions. The Company files U.S., state and foreign income tax returns in jurisdictions with various statutes of limitations. The federal tax years open under the statute of limitations are 2021 through 2023, and the state tax years open under the statute of limitations are 2020 through 2023, and the foreign tax years open under the statute of limitations are 2021 through 2023. On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OBBBA”). The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including 100 % bonus depreciation, domestic research cost expensing, and the business interest expense limitation. 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 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 . Note 10. Equity Incentive Plans and Stock-Based Compensation Stock Repurchase Activity 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 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 0.7 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 Total estimated stock-based compensation expense for employees and non-employees, related to all of the Company’s stock-based awards, was as follows (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2025 2024 2025 2024 Cost of revenue $ 110 $ 131 $ 416 $ 421 Selling and marketing 253 399 1,377 1,261 Research and development 196 298 987 795 General and administrative 827 668 1,526 970 Total stock-based compensation $ 1,386 $ 1,496 $ 4,306 $ 3,447 18 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 718,674 Plan Amendment 1,510,000 Options Cancelled 7,845 Restricted Stock Cancelled 105,758 Restricted Stock Granted ( 428,706 ) Performance Shares Issued ( 205,185 ) Balance as of September 30, 2025 1,708,386 Stock Option Activity Options Outstanding Number of Shares Underlying Outstanding Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value (in years) Outstanding at December 31, 2024 637,916 $ 9.38 5.00 $ 5,483,767 Options Granted — — Options Exercised ( 222,925 ) 8.53 Options Forfeited ( 7,845 ) 10.19 Outstanding at September 30, 2025 407,146 $ 9.83 3.65 $ 2,963,241 Vested and expected to vest at September 30, 2025 407,146 $ 9.96 3.65 $ 2,963,241 Exercisable at September 30, 2025 407,146 $ 9.96 3.65 $ 2,963,241 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. The options generally vest as specified in the option agreements subject to acceleration in certain circumstances. 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 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 (senior management vs. non-executive). There have been no options granted since the fiscal year 2021. Restricted Stock Activity Shares Weighted Average Grant Date Fair Value Per Share Nonvested restricted stock at December 31, 2024 605,356 $ 15.92 Granted 428,706 15.27 Vested ( 269,595 ) 17.68 Shares forfeited ( 105,758 ) 14.37 Nonvested restricted stock at September 30, 2025 658,709 $ 15.03 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. Warrants 19 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. Note 11. 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 Nine Months Ended September 30, September 30, 2025 2024 2025 2024 Net income (loss) $ 1,717 $ 3,413 $ ( 1,878 ) $ ( 3,956 ) Weighted average common shares outstanding — Basic 20,073 20,553 20,413 20,050 Plus incremental shares from assumed conversions: Effect of dilutive securities 333 948 — — Weighted average common shares outstanding — Diluted 20,406 21,501 20,413 20,050 Net income (loss) per share: Basic $ 0.09 $ 0.17 $ ( 0.09 ) $ ( 0.20 ) Diluted $ 0.08 $ 0.16 $ ( 0.09 ) $ ( 0.20 ) 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 (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2025 2024 2025 2024 Stock options 57 66 589 818 Restricted stock 255 316 701 674 Warrants — — — 550 Total 312 382 1,290 2,042 Note 12. Segment Information The Company operates in a single reportable segment. The entire business is managed by a single management team whose chief operating decision maker is the Chief Executive Officer , who evaluates segment performance based on net income (loss) and operating income (loss) for purposes of allocating resources and evaluating financial performance. The following table represents total net revenue based on where customers are physically located (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2025 2024 2025 2024 Americas $ 61,673 $ 73,404 $ 151,546 $ 177,556 Europe and Middle East 16,478 16,913 40,938 39,857 Asia Pacific 2,306 4,046 8,651 9,276 Total net revenue $ 80,457 $ 94,363 $ 201,135 $ 226,689 20 The following table reflects the significant expenses of the Company's reportable segment for the following periods (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2025 2024 2025 2024 Net revenue $ 80,457 $ 94,363 $ 201,135 $ 226,689 Significant segment expenses: Cost of revenue 50,399 60,232 129,448 151,696 Sales 5,843 6,243 17,998 10,526 Marketing 6,670 7,292 19,699 25,763 Research and development 4,161 4,311 12,625 12,802 General and administrative 7,541 6,352 23,111 19,489 Other costs (recovery) (1) 476 3,510 ( 8,320 ) 9,814 Operating income (loss) 5,367 6,423 6,574 ( 3,401 ) Interest expense, net 3,718 2,712 7,773 5,082 Other (income) expense, net ( 322 ) 252 780 974 Income tax expense (benefit) 254 46 ( 101 ) ( 5,501 ) Net income (loss) $ 1,717 $ 3,413 $ ( 1,878 ) $ ( 3,956 ) (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. 21