What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-08-06 compared with 2026-05-07 · 102 added, 95 removed, 132 unchanged (60% of the section changed)

28 unchanged sentences

In February 2026, the U.S.

Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers

Act (“IEEPA”) were unconstitutional.

Following this decision, the U.S.

Court of International Trade ordered U.S.

Customs and Border Protection (“CBP”) to establish a process for issuing refunds related to these tariffs.

On April 20, 2026, CBP launched an online portal for the submission of IEEPA-related tariff refund requests.

Submitted claims will be reviewed by CBP to determine eligibility prior to the issuance of any refunds.

In response to the Supreme Court’s ruling, the U.S.

implemented a new 10% tariff on all imports under Section 122 of the Trade Act of 1974.

These tariffs became effective on February 24, 2026, and are scheduled to remain in effect for up to 150 days, which is the maximum duration permitted under Section 122 without congressional authorization.

Existing exclusions, including those related to the United States-Mexico-Canada Agreement (“USMCA”), remain in effect.

As of March 31, 2026, our condensed consolidated financial statements do not reflect any impacts attributable to such refunds.

Supreme Court held that the International Emergency Economic Powers Act (“IEEPA”) did

not authorize the President to impose the challenged tariffs.

Following the Supreme Court’s decision and related proceedings, the U.S.

Court of International Trade issued orders establishing processes and procedures affecting potential refunds of IEEPA-related duties.

During the three months ended June 30, 2026, we received tariff refunds totaling $8.2 million from the CBP related to previously paid import duties, all of which were recorded as an increase to cash.

Of the total amount received, $4.3 million related to tariffs recognized in cost of revenue during the prior fiscal year.

Because our right to the refund was established and the refund was received during the current quarter, the amount was recognized as a reduction of cost of goods revenue during the three months ended June 30, 2026.

An additional $3.6 million related to tariffs previously capitalized as a component of inventory and was recognized as a reduction to inventory.

The remaining amount, representing statutory interest on the refunded duties of $0.3 million, was recognized in Other expense (income), net in the accompanying condensed consolidated statements of operations.

Various modifications to U.S.

tariff policy have been announced since the Supreme Court’s decision, and newly imposed tariffs may affect the Company’s future cost of inventory and operating results.

Although the impact to the Company of ongoing changes in U.S.

and international tariff policy remains uncertain, the Company continues to evaluate the extent of its exposure and actions available to mitigate any impacts.

Results of Operations

1 unchanged sentence

Three Months Ended

Six Months Ended

Cost of revenue

2 unchanged sentences

Interest expense, net

Other (income) expense, net

Other expense (income), net

Loss before income tax

Income tax benefit

Income tax expense (benefit)

Net Revenue and Gross Profit

1 unchanged sentence

Three Months Ended

Comparison of the Three Months Ended March 31, 2026 to the Three Months Ended March 31, 2025

Net revenue for the three months ended March 31, 2026 was $42.2 million, a $21.7 million decrease from $63.9 million for the three months ended March 31, 2025, reflecting softer market demand for gaming accessories driven primarily by macroeconomic challenges affecting consumer spending.

For the three months ended March 31, 2026, gross margin decreased to 26.8% from 36.6% in the comparable prior year period primarily due to decline in net revenues relative to cost of goods sold.

During the three months ended March 31, 2026, gross margin was adversely affected compared with the prior year quarter, driven in part by transition-related costs associated with the relocation of the Company's principal third-party logistics provider.

Six Months Ended

Comparison of the Three Months Ended June 30, 2026 to the Three Months Ended June 30, 2025

Net revenue for the three months ended June 30, 2026 was $56.4 million, a $0.4 million or 0.7% decrease from $56.8 million for the three months ended June 30, 2025.

The decrease was primarily attributable to softer market demand for gaming accessories, which was driven in part by macroeconomic challenges affecting consumer spending.

For the three months ended June 30, 2026, gross margin increased to 38.8% from 32.2% in the comparable prior year period.

The increase was primarily due to a $4.3 million reduction to cost of revenue related to a tariff refund recognized during the three months ended June 30, 2026, of which $3.1 million related to cost of revenue recognized in 2025.

This benefit was partially offset by higher product costs and the effect of product mix compared with the prior three-month period.

Comparison of the Six Months Ended June 30, 2026 to the Six Months Ended June 30, 2025

Net revenue for the six months ended June 30, 2026 was $98.5 million, a decrease of $22.2 million, or 18.4%, from $120.7 million.

The decrease was primarily attributable to softer market demand for gaming accessories, which was driven in part by macroeconomic challenges affecting consumer spending.

For the six months ended June 30, 2026, gross margin slightly decreased to 33.6% from 34.5% in the comparable prior year period.

Gross profit for the six months ended June 30, 2026 included a $4.3 million reduction to cost of revenue related to the tariff refund received during the period, of which $3.1 million related to cost of revenue recognized in 2025.

The year-over-year decrease in gross margin was primarily due to higher costs from certain product mix and transition-related costs associated with the relocation of the Company’s principal third-party logistics provider, partially offset by the tariff refund benefit.

Operating Expenses

Three Months Ended

Six Months Ended

(in thousands)

7 unchanged sentences

Selling and Marketing

Selling and marketing expenses decreased by $0.2 million, or 1.5% for the three months ended March 31, 2026 as compared to the same period in the prior year primarily due to lower employee compensation cost.

Selling and marketing expenses increased by $2.0 million, or 15.5% for the three months ended June 30, 2026 as compared to the same period in the prior year primarily due to higher marketing initiatives and strategic brand positioning.

Selling and marketing expenses increased by $1.8 million, or 7.1% for the six months ended June 30, 2026 as compared to the same period in the prior year primarily due to higher marketing initiatives and strategic brand positioning.

Research and Development

Research and development costs increased by $0.6 million or 14.6% for the three months ended March 31, 2026 as compared to the same period in the prior year due to engineering costs related to new products.

Research and development costs increased by $0.3 million or 7.6% for the three months ended June 30, 2026 as compared to the same period in the prior year due to engineering costs related to new products.

Research and development costs increased by $0.9 million or 10.9% for the six months ended June 30, 2026 as compared to the same period in the prior year due to engineering costs related to new products.

General and Administrative

General and administrative expenses increased by $0.3 million or 3.7% for the three months ended March 31, 2026 as compared to the same period in the prior year primarily due to professional services and fees.

General and administrative expenses decreased by $2.0 million or 26.6% for the three months ended June 30, 2026 as compared to the same period in the prior year primarily due to the reduction in employee-related expense.

General and administrative expenses decreased by $1.6 million or 10.6% for the six months ended June 30, 2026 as compared to the same period in the prior year primarily due to the reduction in employee-related expense.

Insurance recovery

Insurance recovery relates to the recognition of certain initial insurance claim receivables from the previously disclosed loss of inventory while in transit that occurred in the fourth quarter of 2024.

Insurance recovery for the three and six months ended June 30, 2025 totaled $6.0 million and $9.4 million, respectively, and relates to the receipt of certain insurance claims from the previously disclosed loss of inventory while in transit that occurred in the fourth quarter of 2024.

Acquisition-related cost

1 unchanged sentence

Interest expense

Interest expense decreased by $0.6 million or 31.8% for the three months ended March 31, 2026, as compared to the same period in the prior year primarily due to lower interest costs associated with our refinancing in August 2025.

Income tax benefit for the three months ended March 31, 2026 was $0.1 million at an effective tax rate of 0.8% compared to income tax benefit of $0.1 million for the three months ended March 31, 2025 at an effective tax rate of 14.1%.

The effective tax rate for the three months ended March 31, 2026 was primarily impacted by the change in U.S.

Interest expense increased by $1.7 million, or 85.0% to $3.7 million for three months ended June 30, 2026, from $2.0 million or for the three months ended June 30, 2025, and increased by $0.9 million, or 22.0%, to $5.0 million for the six months ended June 30, 2026 from $4.1 million for the six months ended June 30, 2025.

The increases were primarily attributable to a $1.8 million loss on extinguishment of debt recognized in connection with the April 2026 refinancing.

This increase was partially offset by lower recurring interest expense, primarily reflecting lower average outstanding borrowings following repayments of the Company’s prior credit facilities, partially offset by interest incurred on the 2026 Term Loan Facility, which had an interest rate of 11.17% as of June 30, 2026, and amortization of debt discount and financing costs.

Income tax expense for the three months ended June 30, 2026 was $0.5 million at an effective tax rate of (7.7%) compared to income tax benefit of $0.2 million for the three months ended June 30, 2025 at an effective tax rate of 7.7%.

The effective tax rate for the three months ended June 30, 2026 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 months ended March 31, 2025 was primarily impacted by the change in U.S.

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

valuation allowance and foreign taxes.

Income tax expense for the six months ended June 30, 2026 was $0.4 million at an effective tax rate of (1.8%) compared to income tax benefit of $0.4 million for the six months ended June 30, 2025 at an effective tax rate of 9.0%.

The effective tax rate for the six months ended June 30, 2026 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 six months ended June 30, 2025 was primarily impacted by the change in U.S.

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

Key Performance Indicators and Non-GAAP Measures

1 unchanged sentence

In addition, we believe certain other measures provide useful information to management and investors about us and our financial condition and results of operations for the following reasons:

(i) they are measures used by our Board and management team to evaluate our

operating performance;

(i) they are measures used by our Board and management team to evaluate our operating performance;

(ii) they are measures used by our management team to make day-to-day operating decisions;

5 unchanged sentences

However, Adjusted EBITDA is not a measure of financial performance under GAAP and, given the limitations of these metrics as analytical tools, should not be considered a substitute for gross profit, gross margin, net income (loss) or other consolidated income statement data as determined in accordance with GAAP.

Adjusted EBITDA (and a reconciliation to Net loss, the nearest GAAP financial measure) for the three months ended March 31, 2026 and March 31, 2025, are as follows (in thousands):

Adjusted EBITDA (and a reconciliation to Net loss, the nearest GAAP financial measure) for the three and six months ended June 30, 2026 and June 30, 2025, are as follows (in thousands):

Three Months Ended

Six Months Ended

Interest expense, net

1 unchanged sentence

Stock-based compensation

Income tax benefit

Income tax expense (benefit)

Restructuring expense (1)

14 unchanged sentences

The following table summarizes our sources and uses of cash (in thousands):

Three Months Ended

Six Months Ended

Cash and cash equivalents at beginning of period

Net cash provided by operating activities

Net cash (used for) provided by investing activities

Net cash used for financing activities

Net cash (used in) provided by investing activities

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

1 unchanged sentence

Cash Flows from Operating activities

Cash provided by operating activities for the three months ended March 31, 2026 was $29.4 million, decrease of $11.1 million as compared to $40.5 million used for the three months ended March 31, 2025.

The decrease is primarily due to higher net loss of $14.5 million, paydown of accounts payable of $8.9 million and lower accounts receivable of $5.6 million.

This was partially offset by $7.4 million of inventory sold, lower paydown of $5.4 million in other liabilities and lower prepaid expenses and other assets of $4.0 million.

Cash provided by operating activities for the three months ended March 31, 2025 was $40.5 million, an increase of $13.2 million as compared to $27.3 million for the three months ended March 31, 2024.

The increase is primarily due to higher gross receipts as a result of incremental PDP revenue.

Cash provided by operating activities was $35.9 million for the six months ended June 30, 2026, a decrease of $1.4 million from $37.3 million of cash provided by operating activities for the six months ended June 30, 2025.

The decrease was primarily attributable to an $18.9 million increase in net loss, partially offset by favorable working capital changes of $17.2 million.

Working capital changes provided $44.0 million of cash during the six months ended June 30, 2026, compared with $26.8 million during the prior six-month period, an improvement of $17.2 million.

The year-over-year improvement in working capital was primarily driven by an $18.7 million favorable change in inventories, a $9.3 million favorable change in other liabilities, a $3.5 million favorable change in accounts payable, a $2.6 million favorable change in income taxes payable, and a $1.3 million favorable change in prepaid expenses and other assets, partially offset by an $18.2 million unfavorable change in accounts receivable.

The current six-month period operating cash flows also reflected a $3.4 million non-cash adjustment for the change in sales returns reserve and the receipt of $8.2 million of tariff refunds, of which $4.3 million reduced cost of revenue, $3.6 million reduced inventory, and $0.3 million was recognized in other expense (income), net.

Cash provided by operating activities for the six months ended June 30, 2025 was $37.3 million, primarily due to higher gross receipts, insurance proceeds from claims related to a loss of inventory, lower acquisition-related costs and reduced spending levels.

Cash Flows from Investing activities

Cash used for investing activities was $0.3 million for the three months ended March 31, 2026, which was primarily related to purchase of property and equipment of $0.3 million, compared to $2.3 million used for the three months ended March 31, 2025 primarily related to the acquisition of the PDP business.

Cash provided by investing activities was $2.3 million for the three months ended March 31, 2025, which was primarily related to a $2.5 million working capital adjustment payment, compared to $76.2 million used for the three months ended March 31, 2024 primarily related to the acquisition of the PDP business.

Cash used in investing activities was $0.8 million for the six months ended June 30, 2026, which was primarily related to purchase of property and equipment of $0.8 million.

Cash provided by investing activities was $2.0 million for the six months ended June 30, 2025 primarily driven by $2.5 million of cash acquired in relation to the acquisition of the PDP business.

Cash provided by investing activities was $2.0 million for the six months ended June 30, 2025, which was primarily related to purchase price working capital adjustments of $2.5 million.

Cash Flows from Financing activities

Net cash used for financing activities was $33.7 million during the three months ended March 31, 2026 compared to net cash provided by financing activities of $44.9 million during the three months ended March 31, 2025.

Financing activities during the three months ended March 31, 2026 consisted primarily of $29.4 million repayment of revolving credit facility, $2.1 million term loan principal payment and $2.2 million repurchase of our common stock.

Net cash used for financing activities was $44.9 million during the three months ended March 31, 2025 compared to net cash provided by financing activities of $48.0 million during the three months ended March 31, 2024.

Financing activities during the three months ended March 31, 2025 consisted primarily of $42.8 million revolving credit facility net repayments, $1.8 million of share repurchases, and $0.3 million of term loan repayments.

Net cash used in financing activities was $32.4 million during the six months ended June 30, 2026 compared to net cash used by financing activities of $41.7 million during the six months ended June 30, 2025.

Financing activities during the six months ended June 30, 2026 consisted primarily of $29.4 million repayments of revolving credit facility, $56.8 million repayments of term loan, and $27.2 million repurchases of common stock.

These repayments and repurchases were partially offset by $82.5 million of proceeds from term loan related to the 2026 Credit Agreement.

Net cash used for financing activities was $41.7 million during the six months ended June 30, 2025, which consisted primarily of $29.5 million revolving credit facility net repayments, $6.7 million of share repurchases and $5.6 million of term loan repayments.

Management assessment of liquidity

Management believes that our current cash and cash equivalents, the amounts available under our Revolving Credit Facility and cash flows derived from operations will be sufficient to meet anticipated short-term and long-term funding for working capital and capital expenditures including amounts to develop new products, fund future stock repurchases and to pursue strategic opportunities.

including amounts to develop new products, fund future stock repurchases and to pursue strategic opportunities.

Significant assumptions underlie this belief, including, among other things, that there will be no material adverse developments in our business, liquidity or capital requirements, or strategic opportunities that require additional capital.

In addition, the Company monitors the capital markets on an ongoing basis and may consider raising capital if favorable market conditions develop.

Foreign cash balances at March 31, 2026 and December 31, 2025 were $6.6 million and $8.7 million, respectively.

Foreign cash balances at June 30, 2026 and December 31, 2025 were $5.6 million and $8.7 million, respectively.

2024 Revolving Credit Facility

In 2024, we maintained a Revolving Credit Facility (the “2024 Revolving Credit Facility”) with Bank of America, N.A.

(“Bank of America”) that provided up to $50.0 million in borrowing capacity, including a $10.0 million sub-facility for Turtle Beach Europe Limited, and was secured by substantially all Company assets.

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

We executed a Fourth Amendment to the facility, extending the maturity to March 13, 2027, incorporating Performance Designed Products LLC (“PDP”) acquisition assets into the U.S.

Borrowing Base and updating interest rate and fee terms.

The facility included customary covenants, including a minimum fixed-charge coverage ratio when availability thresholds were not met, and restrictions on additional indebtedness, dividends share repurchases, certain investments, mergers, and asset sales.

On August 1, 2025, we entered into the 2025 Credit Facility, defined and discussed below, and repaid in full the amount then-outstanding under the 2024 Revolving Credit Facility.

We treated the 2025 Credit Facility as a partial extinguishment of the 2024 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.

2024 Term Loan Facility

In March 2024, we entered into a $50.0 million Term Loan Facility (the “2024 Term Loan Facility”) with Blue Torch Finance, LLC (“Blue Torch”) to support the PDP acquisition, repay certain indebtedness of the acquired business, cover transaction‑related fees, and provide general corporate liquidity.

The facility was being amortized over its term, was secured by substantially all Company assets, and carried a prepayment premium that expired in March 2025.

The 2024 Term Loan Facility was scheduled to mature on March 13, 2027 and included interest rates tied to base rate or Secured Overnight Financing Rate (“SOFR”) benchmarks with leverage‑based pricing tiers, as well as customary affirmative, negative, and financial covenants, including minimum liquidity and quarterly total net leverage requirements.

On August 1, 2025, we entered into the 2025 Credit Facility and repaid in full the amount then-outstanding under the 2024 Term Loan Facility for the amount of $43.2 million.

We 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.

2025 Credit Facility

On August 1, 2025, we and certain of our subsidiaries entered into the 2025 Credit Facility.

On August 1, 2025, we and certain of our subsidiaries entered into a Credit Agreement with Bank of America, as the administrative agent, the swingline lender and the line of credit issuer ("the 2025 Credit Facility").

The 2025 Credit Facility was to mature on August 1, 2028 and included 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.

3 unchanged sentences

The 2025 Credit Facility replaced our previous debt arrangements at that time.

Borrowings under the 2025 Credit Facility bore interest at a rate that varied depending on the type of loan and the borrower.

Prior to its repayment and termination, borrowings under the 2025 Credit Facility bore interest at a rate that varied depending on the type of loan and the borrower.

The interest rate was calculated using a floating rate plus a margin.

Depending on the type of loan, the floating rate was either 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 margin ranged 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 2025 Credit Facility also provided for an unused line fee, letter of credit fees, and agent fees.

The borrowers were 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 March 31, 2026, there were no outstanding borrowings under the revolving credit facility provided by the 2025 Credit Facility.

As of March 31, 2026, interest rates for the term loan and revolving credit facilities under the 2025 Credit Facility were 7.02% and 0.00%, respectively.

The 2025 Credit Facility required us and our subsidiaries to (i) maintain a fixed charge coverage ratio, defined as the ratio, determined on a consolidated basis for us and our 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 us and our subsidiaries for the applicable measurement period, of (a) certain funded indebtedness minus unrestricted cash up to a maximum of $12.0 million to (b) EBITDA.

The 2025 Credit Facility also contained affirmative and negative covenants that, subject to certain exceptions, limited 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 2025 Credit Facility contained 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 us and our subsidiaries.

To secure their obligations under the 2025 Credit Facility, 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 part of the Credit Agreement, we recorded deferred debt financing costs of $2.3 million.

On April 30, 2026, the Company repaid in full the amount then-outstanding under the 2025 Credit Facility in connection with the 2026 Credit Facility.

On April 30, 2026, we repaid in full the amount then-outstanding under the 2025 Credit Facility in connection with the 2026 Term Loan Facility, as defined and described below.

Accordingly, the 2025 Credit Facility was no longer available to us as of June 30, 2026.

As part of the

repayment, we recognized a loss on extinguishment of debt of $1.8 million to write-off the unamortized deferred financing costs in interest expense in our condensed consolidated statements of operations.

2026 Term Loan Facility

On April 30, 2026, we entered into the 2026 Term Loan Facility governed by the 2026 Term Loan Financing Agreement by and among us, VTB, as borrower, each of our subsidiaries listed as a guarantor on the signature pages thereto, the lenders from time to time party thereto, and Blue Torch, as administrative agent and collateral agent, pursuant to which Blue Torch made a loan to VTB in the aggregate amount of $85.0 million, the proceeds of which were used to or will be used to (a) refinance existing indebtedness of ours and our subsidiaries;

On April 30, 2026, we entered into a new financing agreement (the "2026 Term Loan Financing Agreement") by and among us, Voyetra Turtle Beach, Inc.

(“VTB"), as borrower, each of our subsidiary listed as a guarantor on the signature pages thereto, the lenders from time to time party thereto, and Blue Torch, as administrative agent and collateral agent, pursuant to which Blue Torch made a loan to VTB in the aggregate amount of $85.0 million (the "2026 Term Loan Facility"), the proceeds of which were used to or will be used to (a) refinance existing indebtedness of ours and our subsidiaries;

(b) for general corporate purposes;

and (c) to pay fees and expenses related to the loan transactions.

The 2026 Term Loan Facility will amortize in a quarterly amount equal to 1.25% of the aggregate original principal amount of the 2026 Term Loan Facility and may be prepaid at any time subject to a prepayment premium during the first year of the interest payments payable during the first year plus 3.00%.

The 2026 Term Loan Facility will amortize in a quarterly amount equal to 1.25% of the aggregate original principal amount of the 2026 Term Loan Facility.

Any prepayment, or any acceleration or other repayment in connection with an insolvency proceeding, occurring during the first twelve months following the closing date will be subject to a prepayment premium equal to (i) the interest that would otherwise have accrued on the principal amount being repaid through the twelve-month anniversary of the closing date, plus (ii) 3.00% of the principal amount being repaid, provided that no such premium applies to regularly scheduled quarterly amortization payments or to certain prepayments specified in the 2026 Term Loan Financing Agreement.

The 2026 Term Loan Facility is secured by substantially all of our assets and those of our subsidiaries which are party to the 2026 Term Loan Facility.

The 2026 Term Loan Facility (a) will mature on April 30, 2029;

or equal to 2.25x but less than 3.00x, and (iii) a base rate plus 5.75% per annum for Reference Rate Loans and SOFR plus 6.75% per annum for SOFR Loans if the total leverage ratio is less than 2.25x;

(b) will bear interest at a rate equal to (i) a base rate plus 6.50% per annum for Reference Rate Loans and SOFR plus 7.50% per annum for SOFR Loans if the total leverage ratio is greater than or equal to 3.00x, (ii) a base rate plus 6.25% per annum for Reference Rate Loans and SOFR plus 7.25% per annum for SOFR Loans if the total leverage ratio is greater than or equal to 2.25x but less than 3.00x, and (iii) a base rate plus 5.75% per annum for Reference Rate Loans and SOFR plus 6.75% per annum for SOFR Loans if the total leverage ratio is less than 2.25x;

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, 2026, the interest rate for outstanding borrowings was 11.17%.

2026 Revolving Credit Facility

On April 30, 2026, we entered into the 2026 Revolving Credit Facility governed by the 2026 Revolving Credit Agreement, by and among us, Voyetra Turtle Beach, Inc., TBC Holding Company LLC, Performance Designed Products LLC, Turtle Beach Europe Limited, VTB Holdings, Inc., Tide Acquisition Sub II, LLC, the financial institutions party thereto and Bank of America, as agent, collateral agent and security trustee for the lenders to the credit facility.

On April 30, 2026, we entered into a Loan, Guaranty and Security Agreement (the “2026 Revolving Credit Agreement"), by and among us, VTB, TBC Holding Company LLC, PDP, Turtle Beach Europe Limited, VTB Holdings, Inc., Tide Acquisition Sub II, LLC, the financial institutions party thereto and Bank of America, as agent, collateral agent and security trustee for the lenders to the credit facility (the "2026 Revolving Credit Facility").

The 2026 Revolving Credit Agreement provides for, among other things:

5 unchanged sentences

The respective priorities of the security interests securing the 2026 Term Loan Financing Agreement and the 2026 Revolving Credit Agreement are governed by an intercreditor agreement, dated as of April 30, 2026, between Blue Torch and Bank of America.

As of June 30, 2026, we were in compliance with all the financial covenants under the Credit Facility, as amended, and excess borrowing availability was approximately $31.0 million.

As part of the 2026 Credit Facility, we recorded an aggregate amount of deferred debt financing costs of $1.2 million in our condensed consolidated balance sheet.

Critical Accounting Estimates

7 unchanged sentences

We are currently evaluating the impact of certain recently issued guidance on our financial condition and results of operations in future periods.

Item 3 - Qualitative and Quantitative Disclosures About Market Risk

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.

Our market risk exposure is primarily a result of fluctuations in interest rates, foreign currency exchange rates and inflation.

We have used derivative financial instruments, specifically foreign currency forward and option contracts, to manage exposure to foreign currency risks, by hedging a portion of its forecasted expenses denominated in British Pounds expected to occur within a year.

The effect of exchange rate changes on foreign currency forward and option contracts is expected to offset the effect of exchange rate changes on the underlying hedged item.

We do not use derivative financial instruments for speculative or trading purposes.

As of March 31, 2026 and December 31, 2025, we did not have any derivative financial instruments.

Interest Rate Risk

As of March 31, 2026, we had cash of $12.3 million, which consisted primarily of bank deposits.

Our cash is held for working capital purposes.

We are exposed to interest rate risk primarily through borrowings under our amended Credit Agreement, which bears interest at variable rates.

The applicable interest rate varies based on the type of loan and the borrower and is calculated using a floating benchmark rate plus an applicable margin.

Depending on the loan type and currency, the floating benchmark may be the prime rate announced by Bank of America, Term SOFR, Daily Simple SOFR, EURIBOR, or SONIA.

Because these benchmark rates fluctuate with market conditions, our interest expense will increase or decrease as the underlying reference rates change.

As of December 31, 2025, under the amended Credit Agreement,

we had $85.1 million of outstanding balance at face value.

A 100 basis-point change in applicable benchmark interest rates would increase or decrease our annual interest expense by approximately $0.5 million based on $53.6 million of variable-rate borrowings outstanding.

Foreign Currency Exchange Risk

We have exchange rate exposure primarily with respect to the British Pound and Euro.

As of March 31, 2026 and December 31, 2025, our monetary assets and liabilities that are subject to this exposure are immaterial, therefore the potential immediate loss to us that would result from a hypothetical 10% change in foreign currency exchange rates would not be expected to have a material impact on our earnings or cash flows.

This sensitivity analysis assumes an unfavorable 10% fluctuation in the exchange rates affecting the foreign currencies in which monetary assets and liabilities are denominated and does not take into account the offsetting effect of such a change on our foreign currency denominated revenues.

Inflation Risk

We remain exposed to market risk driven by inflationary pressures affecting our costs and demand for the products we sell.

Such inflationary pressures have been and could continue to be exacerbated by continued high tariffs, higher oil prices, geopolitical turmoil, and economic policy actions and could lead to a recessionary environment.

In recent years, our business has been affected by volatile global supply chain constraints and unfavorable changes in economic or political conditions in the countries and markets where we operate.

Our financial performance continues to be influenced by shifting economic and political landscapes, most notably regarding evolving U.S.

trade policies.

The incremental tariffs have had and may continue to have an adverse impact on our result of operations.

Inflationary pressures can also have a negative impact on demand for the products we sell.

Reduced or delayed discretionary spending by consumers in response to inflationary pressures has reduced consumer demand for our products, and may result in reduced sales.

The global and regional economic and political conditions, as well as changes in trade policies, have caused and may continue to cause volatility in demand for our products as well as the cost of tariffs, materials and logistics, and transportation delays, and as a result have impacted and may continue to impact the pricing of our products, product availability and our results of operations.

We continue to experience the on-going impacts of a higher interest rate environment, which resulted in higher cost of goods, selling expenses, and general and administrative expenses.

Such increases have had and may continue to have a negative impact on our profit margins if selling prices of products do not increase with the increased 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 2. Management’s Discussion and Analysis