Q2 2026 Turtle Beach Corp Earnings Call

August 6, 2026

Operator 2: Good day, ladies and gentlemen. Thank you for standing by. We welcome you to the Turtle Beach Corporation Q2 2026 Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the prepared remarks presentation. As a reminder, the conference is being recorded. I will now turn the call over to Jacques Cornet from investor relations team. Jacques, you may begin.

Operator: Good day, ladies and gentlemen. Thank you for standing by. We welcome you to the Turtle Beach Corporation Q2 2026 Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the prepared remarks presentation. As a reminder, the conference is being recorded. I will now turn the call over to Jacques Cornet from investor relations team. Jacques, you may begin.

Speaker #1: reminder , the conference is being recorded . I will now turn the call over to Jacques Cornet from Investor Relations Team Shock . You may begin

Speaker #2: Thank you . . On today's call , we'll be referring to the press filed this Operator afternoon that details the company's second quarter 2026 results , which is available on the news page of the company's investor relations website , Corp dot Turtle Beach Corp dot com , where you'll also find the latest earnings presentation that supplements the information discussed on today's call Finally , a recording of the call will be available in the events and Presentations section of the company's Investor Relations website .

Jacques Cornet: Thank you, operator. On today's call, we'll be referring to the press release filed this afternoon that details the company's Q2 2026 results, which is available on the news page of the company's investor relations website, corp.turtlebeach.com, where you'll also find the latest earnings presentation that supplements the information discussed on today's call. Finally, a recording of the call will be available in the Events and Presentation section of the company's investor relations website later today. Please be aware that some of the comments made during this call may include forward-looking statements within the meaning of the federal securities laws. Statements about the company's beliefs and expectations containing words such as may, will, could, believe, expect, anticipate, and similar expressions constitute forward-looking statements.

Speaker #2: Later today . Please be aware that some of the comments made during this call may include forward looking statements within the meaning of the Federal laws Statements about the company's beliefs and expectations containing words such as May , will , could , believe , expect , anticipate , and similar expressions constitute forward looking statements .

Speaker #2: These statements involve risks and uncertainties regarding the company's operations and future results that could cause Turtle Beach results to differ materially from management's current expectations .

Jacques Cornet: These statements involve risks and uncertainties regarding the company's operations and future results that could cause Turtle Beach Corporation's results to differ materially from management's current expectations. While the company believes that its expectations are based upon reasonable assumptions, numerous factors may affect actual results and may cause results to differ materially. The company encourages you to review the safe harbor statements and risk factors contained in today's press release and in its filings with the Securities and Exchange Commission, including, without limitation, the annual report on Form 10-K and other periodic reports, which identify specific risk factors that also may cause actual results or events to differ materially from those described in our forward-looking statements. The company does not undertake to publicly update or revise any forward-looking statements after this conference call. The company also notes that on this call, it will be discussing non-GAAP financial information.

Speaker #2: While the company believes that its expectations are based upon reasonable assumptions , numerous factors may affect actual results and may cause results to differ materially Company encourages you to review the safe Harbor statements and risk factors contained in today's press release and in its filings with the Securities and Exchange Commission , including , without limitation , annual Report on Form 10-K and other periodic reports which identify specific risk factors that also may cause actual results or events to differ materially from those described in our forward looking statements Company does not undertake to publicly update or revise any forward looking statements After this conference call .

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

Speaker #2: Company also notes that on this call , it will be discussing non-GAAP financial information . Company is providing that information as a supplement to information prepared in accordance with the counting principles generally accepted in the United States or GAAP .

Jacques Cornet: The company is providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States or GAAP. You can find a reconciliation of these metrics to the company's reported GAAP results in the reconciliation tables provided in today's earnings release and the presentation. Hosting the call today are Cris Keirn, Chief Executive Officer, and Andrew Clipsham, Interim Chief Financial Officer. With that, I'll turn the call over to Cris.

Speaker #2: You can find a reconciliation of these metrics to the reported GAAP results in the reconciliation tables provided in today's earnings release and presentation.

Speaker #2: Hosting the call today are Chris Kern , chief Executive Officer and Andrew Clipsham , interim chief financial officer With that , I'll turn the call over to Chris

Speaker #3: Thanks, Jack. Good afternoon, and welcome to our second quarter 2026 earnings call. During the second quarter, we continued executing against the strategic priorities we've outlined throughout the year.

Cris Keirn: Thanks, Jacques. Good afternoon, everyone, and welcome to our Q2 2026 earnings call. During the Q2, we continued executing against the strategic priorities we've outlined throughout the year. We expanded our product portfolio, advanced our brand transformation, returned significant capital to shareholders through share repurchases, and prepared Turtle Beach for what we believe will be a stronger demand environment in H2 2026. Revenue for the quarter was $56.4 million, essentially flat year-over-year. Continuing the trends we discussed on our last call, retail partners remained disciplined in managing inventory through much of the quarter, with further reductions in channel inventory through the first half of Q2. As the quarter progressed, however, we began to see encouraging signs that retailers have now stabilized inventory ahead of what we expect will be a stronger H2 of the year.

Speaker #3: We expanded our product portfolio , advanced our brand transformation , returned significant capital to shareholders through share repurchases and prepared Turtle Beach for what we believe will be a stronger demand environment in the second half of 2026 .

Speaker #3: Revenue for the quarter was $56.4 million . Essentially flat year over year . Continuing the trends we discussed on our last call , retail partners remain disciplined in managing inventory through much of the quarter , with further reductions in channel inventory through the first half of Q2 as a quarter progressed , however , we began to see signs that retailers have now stabilized inventory ahead of what we expect will be stronger second half of the year .

Speaker #3: We believe the combination of historically low channel inventory, improving early Q3 sell-through trends, and the industry’s upcoming content releases create a favorable setup for the second half of the year. Together, these factors prepare the business for a return to growth during the back half of 2026.

Cris Keirn: We believe the combination of historically low channel inventory, improving early Q3 sell-through trends, and the industry's upcoming content releases create a favorable setup for the H2 of the year. Together, these factors prepare the business for a return to growth during the H2 of 2026. One of the defining characteristics of Turtle Beach in 2026 has been the pace of innovation across our portfolio. We are delivering a significant increase in new product introductions this year, and we're encouraged by the early performance of those models. The launch of Stealth Pro II, our new flagship headset, added share in the premium price tier for US gaming headsets, supported by our new brand initiatives and building on the exceptional pre-order demand we mentioned in our previous call.

Speaker #3: One of the defining characteristics of Turtle Beach in 2026 has been the pace of innovation across our portfolio . We are delivering a significant increase in new product introductions this year , and we're encouraged by the early performance of those models .

Speaker #3: The launch of Stealth Pro 2, our new flagship headset, added share in the premium price tier for U.S. gaming headsets, supported by our new brand initiatives and building on the exceptional pre-order demand we mentioned in our previous call.

Speaker #3: We also recently announced the industry's first officially licensed wireless gaming headset for Nintendo Switch two . Further reinforcing Turtle Beach's leadership in gaming , audio and our collaborative partnership with Nintendo In addition to this latest audio innovation , our new Nintendo Switch two controllers and incremental retail placements drove year year U.S.

Cris Keirn: We also recently announced the industry's first officially licensed wireless gaming headset for Nintendo Switch 2, further reinforcing Turtle Beach's leadership in gaming audio and our collaborative partnership with Nintendo. In addition to this latest audio innovation, our new Nintendo Switch 2 controllers and incremental retail placements drove year-over-year US share growth in Nintendo controllers for the quarter, building momentum for Turtle Beach in this key growth segment. More importantly, these launches, with more to be announced, strengthen our leadership heading into what we believe will be one of the strongest gaming content calendars in years. Looking ahead, Grand Theft Auto VI remains on track for its confirmed November launch, while Call of Duty: Modern Warfare 4 has been confirmed to launch in October.

Speaker #3: share growth in Nintendo controllers for the quarter . Building momentum for Turtle Beach in this key growth segment . More importantly , these launches with more to be announced strengthen our leadership heading into what we believe will be one of the strongest gaming content calendars in years Looking ahead , Grand Theft Auto six remains on track for its confirmed November launch .

Speaker #3: While Call of Duty Modern Warfare four has been confirmed to launch in October . Rather than simply benefiting from the increased demand , these releases have historically generated , we've spent the past several quarters aligning our product roadmap , brand investments , retail distribution and operations to proactively set up Turtle Beach for the anticipated increase in gamer engagement with GTA six , launching first on consoles , we believe Turtle Beach is particularly well positioned given our leadership across console gaming , accessories and the timing of our newest product introductions .

Cris Keirn: Rather than simply benefiting from the increased demand these releases have historically generated, we've spent the past several quarters aligning our product roadmap, brand investments, retail distribution, and operations to proactively set up Turtle Beach for the anticipated increase in gamer engagement. With GTA 6 launching first on consoles, we believe Turtle Beach is particularly well-positioned given our leadership across console gaming accessories and the timing of our newest product introductions as the market strengthens. Capital allocation also remained an important area of execution throughout the quarter. Following the refinancing of our credit facilities in May, we repurchased approximately $25 million of our common stock during the Q2. Those repurchases reflect our disciplined approach to capital allocation and our continued belief that the market does not fully recognize the long-term value of Turtle Beach.

Speaker #3: As the market strengthens capital allocation . Also remained an important area of execution throughout the quarter Following the refinancing of our credit facilities in May , we repurchased approximately $25 million of our common stock during the second quarter .

Speaker #3: Those repurchases reflect our disciplined approach to capital allocation and our continued belief that the market does not fully recognize the long-term value of Turtle Beach.

Cris Keirn: Those repurchases reflect our disciplined approach to capital allocation and our continued belief that the market does not fully recognize the long-term value of Turtle Beach. With approximately $31 million remaining under our current authorization, we will continue balancing opportunistic share repurchases with investments that support long-term value creation for the growth opportunities ahead. Given our confidence in our new product pipeline, the strength of the H2 gaming release calendar, and our expectation that channel inventories will rebuild toward more normalized levels, we are reaffirming our full-year 2026 guidance.

Speaker #3: With approximately $31 million remaining under our current authorization . We will continue balancing opportunistic share repurchases with investments that support long term value creation for the growth opportunities ahead .

Cris Keirn: With approximately $31 million remaining under our current authorization, we will continue balancing opportunistic share repurchases with investments that support long-term value creation for the growth opportunities ahead. Given our confidence in our new product pipeline, the strength of the H2 gaming release calendar, and our expectation that channel inventories will rebuild toward more normalized levels, we are reaffirming our full-year 2026 guidance. Before turning to the financials, I'd like to introduce Andrew Clipsham, our recently appointed Interim Chief Financial Officer. Andrew has been with Turtle Beach for nearly 8 years and brings more than 20 years of global financial leadership experience. Throughout his time with the company, he has played an important role in strengthening our financial operations and supporting many of the strategic initiatives we've discussed over the past several years. I'm pleased to welcome Andrew to his first earnings call as Interim CFO.

Speaker #3: Given our confidence in our new product pipeline . The strength of the second half gaming release calendar and our expectation that channel inventories will rebuild toward more normalized levels .

Speaker #3: We are reaffirming our full year 2026 guidance before turning to the financials , I'd like to introduce Andrew Clipsham , our recently appointed interim chief financial officer .

Cris Keirn: Before turning to the financials, I'd like to introduce Andrew Clipsham, our recently appointed Interim Chief Financial Officer. Andrew has been with Turtle Beach for nearly 8 years and brings more than 20 years of global financial leadership experience. Throughout his time with the company, he has played an important role in strengthening our financial operations and supporting many of the strategic initiatives we've discussed over the past several years. I'm pleased to welcome Andrew to his first earnings call as Interim CFO. With that, I'll turn it over to Andrew to provide additional details on our Q2 financials.

Speaker #3: Andrew has been with Turtle Beach for nearly eight years and brings more than 20 years of global financial leadership experience Throughout his time with the company , he has played an important role in strengthening our financial operations and supporting many of the strategic initiatives we discussed over the past several years .

Speaker #3: I'm pleased to welcome Andrew to his first earnings call as interim CFO With that , I'll turn it over to Andrew to provide additional details on our second quarter financials .

Cris Keirn: With that, I'll turn it over to Andrew to provide additional details on our Q2 financials.

Speaker #3: Thank you , Chris , and good afternoon , everyone . It's a pleasure to be joining you today as interim chief Financial Officer Second quarter revenue was $56.4 million , which is broadly unchanged from $56.8 million in the prior year period .

Andrew Clipsham: Thank you, Cris, and good afternoon, everyone. It's a pleasure to be joining you today as Interim Chief Financial Officer. Q2 revenue was $56.4 million, which is broadly unchanged from $56.8 million in the prior year period. While retail inventory levels remained below historical norms through much of Q2, we began to see improving retail ordering patterns as we moved through the period. Gross margin for Q2 was 38.8%, an increase of 660 basis points compared to 32.2% in the prior year Q2. Gross margins benefited from approximately $4.3 million of a total $8.2 million of tariff refunds received during the period. Excluding one-time items, our underlying gross margin profile continues to reflect the benefits of the structural improvements we've made over recent years through product mix optimization, supply chain initiatives, and disciplined pricing actions.

Speaker #3: While retail inventory levels remained below historical norms through much of the quarter , we began to see improving retail ordering patterns as we move through the period .

Speaker #3: Gross margin for the quarter was 38.8% , an increase of 660 basis points compared to 32.2% in the prior year quarter Gross margins benefited from approximately $4.3 million of a total $8.2 million of tariff refunds received during the period .

Speaker #3: Excluding one time items . Our underlying gross margin profile continues to reflect the benefits of the structural improvements we've made over recent years through product mix optimization , supply chain initiatives , and disciplined pricing actions For the balance of the year , we continue to expect gross margins to remain within our targeted mid to high 30% range .

Andrew Clipsham: For the balance of the year, we continue to expect gross margins to remain within our targeted mid to high 30% range. As our newest products scale through H2 of the year and revenue increases seasonally, we expect those operating improvements and positive product mix to become increasingly evident. The recently announced tariff action increases the effective tariff rate on imports from China and Vietnam to approximately 12.5% from the prior 10% level. While we continue to monitor the trade environment closely, the actions we've taken over the past year to diversify our supply chain and optimize sourcing provide confidence that we can largely mitigate these changes without a material impact on profitability. Operating expenses were $24.9 million, or 44% of revenue, compared to $18.6 million, or 33% of revenue in the prior year Q2.

Speaker #3: As our newest products scale through the second half of the year and revenue increases seasonally . We expect those operating improvements and positive product mix to become increasingly evident .

Speaker #3: The recently announced tariff action increases the effective tariff rate on imports from China and Vietnam to approximately 12.5% from the prior 10% level .

Speaker #3: While we continue to monitor the trade environment closely , the actions we've taken over the past year to diversify our supply chain and optimize sourcing provide confidence that we can largely mitigate these changes without a material impact on profitability Operating expenses were $24.9 million , or 44% of revenue , compared to $18.6 million , or 33% of revenue , in the prior year quarter The increase primarily reflects higher marketing investments supporting our expanded product launch schedule and brand initiatives , together with higher general and administrative expenses compared to the prior year quarter .

Andrew Clipsham: The increase primarily reflects higher marketing investments supporting our expanded product launch schedule and brand initiatives, together with higher general and administrative expenses compared to the prior year Q2 that included a one-time insurance recovery. The marketing investments are consistent with the strategy we've outlined throughout the year and are intended to support long-term growth rather than near-term revenue. Net loss for Q2 was $7.3 million, compared to $2.9 million in the prior year period. This Q2's loss reflects increased marketing investments during the period to support our brand and 2026 product roadmap, together with modestly higher interest expense. The prior year Q2 included a one-time insurance recovery, which partially offset the net loss for that period. This recovery was adjusted out of prior year EBITDA. Adjusted EBITDA for Q2 was $1.3 million compared to -$3.0 million in the prior year period.

Speaker #3: That included a one time insurance recovery . The marketing investments are consistent with the strategy we've outlined throughout the year and are intended to support long term growth rather than near-term revenue Net loss for the quarter was $7.3 million , compared to $2.9 million in the prior year This quarter's loss reflects increased marketing investments during the period to support our brand in 2026 , product roadmap together with modestly higher interest expense , the prior year quarter included a one time insurance recovery , which partially offset the net loss for that period .

Speaker #3: This recovery was adjusted out of prior year EBITDA . Adjusted EBITDA for the quarter was $1.3 million , compared to negative 3.0 million in the prior year period .

Andrew Clipsham: This recovery was adjusted out of prior year EBITDA. Adjusted EBITDA for Q2 was $1.3 million compared to -$3.0 million in the prior year period. The year-over-year improvement reflects the stronger gross margins presented in these results. Turning to the balance sheet, at 30 June, net debt was $64.4 million, consisting of $83.9 million of outstanding debt and $19.6 million of cash. Operating cash inflow for the quarter was $6.5 million, compared to an operating cash outflow of $3.1 million during the prior year period. Our revolving credit facility remained undrawn at quarter end. As we announced in May, we completed the refinancing of our credit facilities to increase financial flexibility and better align our capital structure with our long-term capital allocation priorities.

Speaker #3: The year over year improvement reflects the stronger gross margins presented in these results . Turning to the balance sheet at June 30th . Net debt was $64.4 million , consisting of $83.9 million of outstanding debt and $19.6 million of cash .

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

Speaker #3: Operating cash inflow for the quarter was $6.5 million , compared to an operating cash outflow of $3.1 million during the prior year period .

Speaker #3: Our revolving credit facility remained undrawn at quarter end , as we announced in May , we completed the refinancing of our credit facilities to increase financial flexibility and better align our capital structure with our long term capital allocation priorities .

Speaker #3: The new structure provides up to $80 million in an asset based revolving facility , as well as an $85 million term loan supporting both operational flexibility and our ongoing share repurchase strategy During the second quarter , we repurchased approximately $25 million of common stock , representing nearly 2 million shares at an average purchase price of $12.53 .

Andrew Clipsham: The new structure provides up to $80 million in an asset-based revolving facility, as well as an $85 million term loan, supporting both operational flexibility and our ongoing share repurchase strategy. During Q2, we repurchased approximately $25 million of common stock, representing nearly 2 million shares at an average purchase price of $12.53. Following these repurchases, approximately 17.9 million shares remained outstanding, with approximately $31 million remaining available under our current buyback authorization. As Cris mentioned, we continue to view share repurchases as an important component of our capital allocation framework. At the same time, we will remain disciplined in balancing those repurchases with investments that support future growth.

Andrew Clipsham: During Q2, we repurchased approximately $25 million of common stock, representing nearly 2 million shares at an average purchase price of $12.53. Following these repurchases, approximately 17.9 million shares remained outstanding, with approximately $31 million remaining available under our current buyback authorization. As Cris mentioned, we continue to view share repurchases as an important component of our capital allocation framework. At the same time, we will remain disciplined in balancing those repurchases with investments that support future growth. Turning to guidance, we are reaffirming our full-year 2026 outlook. Revenue is expected to remain in the range of $335 to $355 million, while adjusted EBITDA is expected to be between $44 million and $48 million. As is typical for Turtle Beach, we expect the majority of our revenue to be generated in H2.

Speaker #3: Following these repurchases , approximately 17.9 million shares remained outstanding , with approximately $31 million remaining available under our current buyback authorization . As Chris mentioned , we continue to view share repurchases as an important component of our capital allocation framework .

Speaker #3: At the same time , we'll remain disciplined in balancing those repurchases with investments that support future growth . Turning to guidance . We are reaffirming our full year 2026 outlook , revenue is expected to remain in the range of 335 to $355 million , while adjusted EBITDA is expected to be between $44,000,048 million .

Andrew Clipsham: Turning to guidance, we are reaffirming our full-year 2026 outlook. Revenue is expected to remain in the range of $335 to $355 million, while adjusted EBITDA is expected to be between $44 million and $48 million. As is typical for Turtle Beach, we expect the majority of our revenue to be generated in H2. This year's revenue cadence is expected to be more heavily weighted towards H2 than our historical seasonal pattern, reflecting the timing of our expanded new product introductions, improving channel inventory levels, and the industry's major software releases, including Grand Theft Auto VI.

Speaker #3: As is typical for Turtle Beach Corp , we expect the majority of our revenue to be generated in the second half of the year .

Speaker #3: This year's revenue cadence is expected to be more heavily weighted towards the back half than our historical seasonal pattern , reflecting the timing of our expanded new product introductions , improving channel inventory levels , and the industry's major software releases , including Grand Theft Auto six .

Andrew Clipsham: This year's revenue cadence is expected to be more heavily weighted towards H2 than our historical seasonal pattern, reflecting the timing of our expanded new product introductions, improving channel inventory levels, and the industry's major software releases, including Grand Theft Auto VI. While we currently expect Q3 to contribute a percentage in the mid-to-high 20s of full-year revenue, the precise timing of retail holiday inventory loadings can shift revenue between Q3 and Q4. This is a normal feature of our business, is reflected in our guidance, and does not affect our expectations for the full year. With that, I will turn the call back to Cris.

Speaker #3: While we currently expect the third quarter to contribute a percentage in the mid to high 20s of full year revenue , the precise timing of retail holiday inventory loadings can shift revenue between the third and fourth quarters .

Andrew Clipsham: While we currently expect Q3 to contribute a percentage in the mid-to-high 20s of full-year revenue, the precise timing of retail holiday inventory loadings can shift revenue between Q3 and Q4. This is a normal feature of our business, is reflected in our guidance, and does not affect our expectations for the full year. With that, I will turn the call back to Cris.

Speaker #3: This is a normal feature of our business , is reflected in our guidance and does not affect our expectations for the full year With that , I'll turn the call back to Chris Thanks , Andrew

Cris Keirn: Thanks, Andrew. As we look toward H2 2026, our priorities remain clear. We are focused on executing our product roadmap, supporting our retail partners through the holiday season, continuing to invest behind the Turtle Beach brand, and allocating capital with discipline. The work we have completed over the past several years has created a stronger company with a broader product portfolio, improved operating leverage, and greater financial flexibility. While the overall gaming accessories market has remained challenged over the past several quarters, we believe the industry is entering a more favorable period, supported by an improving content release calendar, momentum around Nintendo Switch 2, and the anticipated launch of Grand Theft Auto VI and other titles. As those industry catalysts develop, our focus remains on translating revenue growth into expanding profitability and long-term shareholder value through disciplined execution.

Speaker #4: As we look toward the second half of 2026 , our priorities remain clear . We are focused on executing our product roadmap , supporting our retail partners through the holiday season , continuing to invest behind the Turtle Beach brand , and allocating capital with discipline .

Speaker #4: The work we've completed over the past several years has created a stronger company with a broader product portfolio , improved operating leverage and greater financial flexibility While the overall Gaming accessories market has remained challenged over the past several quarters , we believe the industry is entering a more favorable period , supported by an improving content release calendar momentum around Nintendo Switch two and the anticipated launch of Grand Theft Auto six and other titles .

Speaker #4: As those industry catalysts develop . Our focus remains on translating revenue growth into expanding profitability and long term shareholder value through disciplined execution .

Cris Keirn: As those industry catalysts develop, our focus remains on translating revenue growth into expanding profitability and long-term shareholder value through disciplined execution. As always, I'd like to thank our employees for their strong delivery towards our goals, our retail and strategic partners for their collaboration, and our shareholders for their continued support. With that, operator, we can open the call for Q&A.

Speaker #4: As always , I'd like to thank our employees for their strong delivery towards our goals . Our retail and strategic partners for their collaboration and our shareholders for their continued support With that operator , we can open the call for Q&A

Cris Keirn: As always, I'd like to thank our employees for their strong delivery towards our goals, our retail and strategic partners for their collaboration, and our shareholders for their continued support. With that, operator, we can open the call for Q&A.

Speaker #1: Thank you . We will now be conducting a question and answer session . If you would like to ask a question , please press star one on your telephone keypad .

Operator 2: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Our first question is from Drew Crum from B. Riley Securities. Please proceed with your question.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Our first question is from Drew Crum from B. Riley Securities. Please proceed with your question. Perhaps you are on mute and would need to unmute your device to ask your question.

Speaker #1: A confirmation tone will indicate your line is in the question queue . You may press star two if you would like to remove your question from the queue for participants using speaker equipment , it may be necessary to pick up your handset before pressing the star keys .

Speaker #1: One moment please , while we pull for questions Our first question is from Drew Crum from B Riley Securities . Please proceed with your question Perhaps you are on mute and would need to unmute your device to ask your question .

Operator 2: Perhaps you are on mute and would need to unmute your device to ask your question.

Speaker #5: Okay , let me try that again . Thanks , everyone . Good afternoon . Andrew . Welcome to the call . Appreciate the detail on the retail inventory dynamics .

Drew Crum: Okay. Let me try that again. Thanks, everyone. Good afternoon. Andrew, welcome to the call. Appreciate the detail on the retail inventory dynamics you noted. One month into Q3, can you talk about any observations, what you've seen in terms of willingness on the part of retailers to replenish or is that something you're anticipating later in the quarter? I have a follow-up.

Speaker #5: You noted . One month into three Q . Can you talk about any observations , what you've seen in terms of willingness on the part of retailers to replenish , or is that something you're anticipating later in the quarter ?

Speaker #5: And then I have a follow-up.

Speaker #4: Yeah . Thanks for your question . Good to hear you . Yes , we are seeing positive signs here to start Q3 . You know , we're a month in here .

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

Speaker #4: And what we have seen is , is really since the pre-orders for GTA six started . While we haven't received the market data yet , obviously that won't come out until , you know , in a few weeks here in August from zarkana .

Speaker #4: We do have the reported sell through from from retail that we get on a weekly basis . And we've seen since that preorder started weekly year over year growth in the business .

Speaker #4: And so that's been a very positive sign for us . And we're seeing that momentum continue here into August . The very early part of August .

Speaker #4: So we're pleased to see that development . In addition , the channel inventory dynamics that we saw in the first quarter and that really continued until about midpoint in the second quarter , appear to be behind us .

Cris Keirn: In addition, the channel inventory dynamics that we saw in Q1 and that really continued until about midpoint in Q2 appear to be behind us, where we've seen a nice stabilization of those numbers. Knowing what's coming up in H2, with not only Grand Theft Auto VI but some other really strong titles, we feel that'll be a nice tailwind for the business moving forward.

Speaker #4: We're we've seen a nice stabilization of those numbers . And knowing what's coming up in the back half with not only GTA six , but some other really strong titles , we feel that be a nice tailwind for the business .

Speaker #4: Moving forward

Speaker #5: Got it . Okay . Appreciate that . And then just a quick follow up . I know that the business typically uses cash in can you talk about your ability to continue to buy shares , given the cash flow dynamics of the business near term ?

Drew Crum: Got it. Okay. Appreciate that. Just a quick follow-up. I know that the business typically uses cash in Q3. Can you talk about your ability to continue to buy shares, given the cash flow dynamics of the business near term?

Speaker #5: Yeah .

Cris Keirn: Sure. Absolutely. As you mentioned, we are getting to that period of time where we start to build inventory for holiday. You may see in the numbers, we've had a good reduction of inventory year-over-year. Up to this point in the year, we're about $20 million of inventory lower than we were at this time last year. If you remember, we had purchased ahead a good amount of inventory at that time in anticipation of the tariffs, which turned out to be a very good move for the company. Where we are now, we feel good about our inventory levels, but we are going to be committing more of that cash to the inventory build coming up, particularly with the growth that we expect to see in Q3 and Q4 due to the titles that are going to be releasing here in H2.

Speaker #4: Absolutely . As you mentioned , you know , we are getting into that period of time where we start to build inventory for holiday .

Speaker #4: You may see in the numbers , you know , we've had a good reduction of inventory year over year up to this point in the year .

Speaker #4: We're about $20 million of inventory lower than we were at this time last year. If you remember, we had purchased ahead a good amount of inventory at that time.

Speaker #4: You know , in anticipation of the tariffs , which which turned out to be a very good move for the company . But , you know , where we are now .

Speaker #4: We feel good about our inventory levels , but we are going to be committing more of that cash to the inventory build coming up , particularly with the growth that we expect to see in Q3 and Q4 due to the titles that are going to be releasing here in the back half

Speaker #5: Got it . Okay . Thanks , guys .

Drew Crum: Got it. Okay. Thanks, guys.

Speaker #4: Thanks so much , drew

Cris Keirn: Thanks so much, Drew.

Speaker #1: Our next question is from Sean McGowan with Roth Capital Partners . Please proceed with your question

Operator 2: Our next question is from Sean McGowan with Roth Capital Partners. Please proceed with your question.

Operator: Our next question is from Sean McGowan with Roth Capital Partners. Please proceed with your question.

Speaker #6: Thank you . Hi , Chris . Andrew . Question about costs . You gave us an idea of what to expect in terms of third quarter revenue relative to the full year .

Sean McGowan: Thank you. Hi, Cris and Andrew. Question about costs. You gave us an idea of what to expect in terms of Q3 revenue relative to the full year. Can you talk a little bit about the phasing of costs, particularly selling and marketing? Is that going to be more skewed to the Q4 than typical?

Speaker #6: But can you talk a little bit about the phasing of costs , particularly selling and marketing ? I mean , how much is that going to be more skewed to the fourth quarter than typical ?

Speaker #4: Yeah . Hi , Sean . Thanks for your question . It's a great question , especially considering the dynamics we've got coming up You know , we have put more of the budget towards sales and marketing in the first half .

Cris Keirn: Yeah. Hi, Sean. Thanks for your question. It's a great question, especially considering the dynamics we've got coming up. We have put more of the budget towards sales and marketing in H1. There's two reasons for that. Number one, as we mentioned previously, we have a lot of new product launches this year. We've announced several of those. We've got more announcements coming here later this year. Secondly, we've launched the new brand initiatives, which we've seen some really great early reception and results from on those initiatives. So we have increased our spend so far this year. We do anticipate continuing some of that spend as we get into H2, particularly with the opportunities that some of the new games are going to present.

Speaker #4: There's two reasons for that . Number one is we mentioned previously we have a lot of new product launches this year . We've announced several of those .

Speaker #4: We've got more announcements coming here later this year . And secondly , we've launched the new brand initiatives . You know , which we've seen some really great early reception and results from on those initiatives .

Speaker #4: And so we have we have increased our our spend so far this year . We do anticipate continuing some of that spend as we get into the back half , particularly with the opportunities that some of the new games are going to present .

Speaker #4: And some of the list lift that we've seen in the past , we talked a little about on the last call about this , about the historical lift that we've seen from a game like GTA six .

Cris Keirn: Some of the lift that we've seen in the past, we talked a little about on the last call about this, about the historical lift that we've seen from a game like GTA6. We will be continuing kind of the same level of spend that you've seen increase from us in H1. You'll see similar kind of numbers in H2. That's all included in our guide.

Speaker #4: So we will be we continuing , you know , kind of the same same level of spend that you've seen increase from us in the first half .

Speaker #4: You'll see similar kind of numbers in the second half . And that's all included in our guide

Speaker #6: Okay . And another question , was there anything in the G&A number in the second quarter that was kind of a benefit or an offset , or is that kind of a real number that we can expect to see some , you know , maybe somewhat higher than that , but it was lower than I thought it would be .

Sean McGowan: Okay. Another cost question. Was there anything in the G&A number in Q2 that was kind of a benefit or an offset, or is that kind of a real number that we can expect to see maybe somewhat higher than that, but it was lower than I thought it would be. Good job. It was just something in there that was sort of an unusual benefit?

Speaker #6: So good job . But it was something in there that of an unusual benefit .

Speaker #3: Yeah . Hi , sir . Andrew here . There's nothing there that's a significant benefit . In fact , we are lapping a benefit in a of the prior year where we received an insurance recovery from an incident that happened towards the end of 2024 .

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

Speaker #3: But the levels of DNA that we see at the moment are consistent . There's nothing special in there . And we expect to see similar levels through the rest of the year .

Speaker #6: Thanks . That's helpful . My last question is you are launching a lot more products than last year . And more than normal .

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

Speaker #6: How has that gone as a as a kind of move through the system ? Any glitches so far or things been pretty smooth ?

Speaker #4: Yeah , we've been pleased with the performance of those products so far , particularly Stealth Pro two . You know , we talked about that .

Cris Keirn: Yeah. We've been pleased with the performance of those products so far. Particularly Stealth Pro II, we talked about that. That's our new flagship headset. Really strong pre-orders on that. We've seen some nice share growth in that premium tier, which has been growing and continues to grow as a larger part of the market. In addition to that, we've had launches across multiple other categories. I would say that the largest benefit we've seen thus far has been a lot of our new Nintendo launches are doing quite well on both the controller side and some of the other accessories that we've launched there. We've also recently announced we've got the first wireless headset coming out for Nintendo Switch 2, so we're really excited about that. We see a lot of potential for Nintendo Switch 2 sales continuing into H2.

Speaker #4: That's our new flagship headset. We have really strong pre-orders on that. We've seen some nice share growth in that premium tier, which has been growing.

Speaker #4: And continues to grow as a larger part of the market. In addition to that, we've had launches across multiple other categories.

Speaker #4: I would say the largest benefit we've seen thus far has been a lot of our new Nintendo launches are doing quite well on both the controller side and some of the other accessories that we've launched there .

Speaker #4: We've also recently announced we've got the first wireless headset coming out for Nintendo Switch two , so we're really excited about that . And we see a lot of potential for Nintendo Switch to sales continuing into the back half of the year in that category , we've mentioned in the past that typically , you know , you see a lot of first party sales at the launch of the console .

Cris Keirn: In that category, we've mentioned in the past that typically, you see a lot of first-party sales at the launch of the console, and then as you get further into the life cycle, you start to realize some of the shift into products like ours. We're certainly seeing that in Q2 with some nice share gains in that space. We're excited about what's moving forward with Switch 2 and the momentum that we see there.

Speaker #4: And then, as you get further into the life cycle, you start to realize, you know, some of the shift into products like ours.

Speaker #4: And we're certainly seeing that in Q2 with some nice share gains in that space . So we're excited about what's moving forward with switch two and , and the momentum that we see there .

Speaker #6: Okay . Thank you very much .

Sean McGowan: Okay. Thank you very much.

Speaker #4: Thanks , John

Cris Keirn: John Hanson.

Speaker #1: Once again, if you would like to ask a question, please press star one on your telephone keypad. The next question is from Jack Kodera with Maxim Group LLC.

Operator 2: Once again, if you would like to ask a question, please press star one on your telephone keypad. Our next question is from Jack Vander Aarde with Maxim Group LLC. Please proceed with your question.

Operator: Once again, if you would like to ask a question, please press star one on your telephone keypad. Our next question is from Jack Vander Aarde with Maxim Group LLC. Please proceed with your question.

Speaker #1: Please proceed with your question .

Speaker #7: Hi . Thanks . This is Jack Kodera calling in for Jack . Thanks for taking my questions . A quick question on the gross margin .

Jack Vander Aarde: Hi, thanks. This is Jack Vander Aarde calling in for Jack Vander Aarde. Thanks for taking my questions. A quick question on the gross margin. If you back out the tariff impact, it was closer to around, call it 32%. How should we think about those 660 odd basis points? Was that entirely accrued from 2025? I guess the real question is, what would you say the real Q2 gross margin was?

Jack Codera: Hi, thanks. This is Jack Vander Aarde calling in for Jack Vander Aarde. Thanks for taking my questions. A quick question on the gross margin. If you back out the tariff impact, it was closer to around, call it 32%. How should we think about those 660 odd basis points? Was that entirely accrued from 2025? I guess the real question is, what would you say the real Q2 gross margin was?

Speaker #7: If you back out the tariff impact , it was closer to around . Call it 32% . How should we think about those 660 odd Bips was that entirely accrued from 2025 ?

Speaker #7: I guess the real question is , what would you say the real second quarter gross margin was

Speaker #3: Yeah . So if we were to back out the effects of the tariff refunds received , you're correct . We're looking at about 31.2% gross margin for the quarter , which is still an increase on the on the previous quarter , which was running at 26.8% .

David Brown: If we were to back out the effects of the tariff refunds received, you're correct. We're looking at about 31.2% gross margin for Q2, which is still an increase on the previous Q1, which was running at 26.8%. We're seeing steady growth in our gross margin, and we do expect to keep gross margins in line with our guidance for the back H2 of this year.

Andrew Clipsham: If we were to back out the effects of the tariff refunds received, you're correct. We're looking at about 31.2% gross margin for Q2, which is still an increase on the previous Q1, which was running at 26.8%. We're seeing steady growth in our gross margin, and we do expect to keep gross margins in line with our guidance for the back H2 of this year.

Speaker #3: So we're seeing we're seeing steady growth in our gross margin . And we do expect to , you know , keep gross margins in line with our guidance for the back half of this year .

Speaker #4: Yeah . And just to add to that , Jack , if you look at , you know , we thought we'd be ending up in roughly the low 30s .

Cris Keirn: Yeah, just to add to that, Jack, we thought we would be ending up in roughly the low 30s. We had some comments on the last call about that. We were not sure of the timing of the tariff refunds at that point. Good to see those come in and provide that benefit here in Q2. As you look ahead for the full year, we still believe that we are going to end up in that target range that we have of mid to high 30s. We think there is an opportunity to even improve slightly on last year's margins, which were quite strong for the full year. We are encouraged with the progress we are seeing there, and we will continue to work on that front.

Speaker #4: We had some comments on the last call about that. You know, we weren't sure of the timing of the tariff refunds at that point.

Speaker #4: And so good to see those come in and provide that benefit here in Q2 . As you look ahead , you know , for the full year , we still believe that we're going to end up in that that target range that we have of mid to high 30s .

Speaker #4: We think there's an opportunity to to even improve slightly . On last year's margins , which were quite strong for the full year .

Speaker #4: So we're encouraged with the progress we're seeing there, and we'll continue to work on that front.

Speaker #7: Okay . That's super helpful . And then , you know , if you could kind of give an update on kind of all the segments , obviously we have the huge catalyst GTA , which seems like it's not going to be delayed .

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

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

Speaker #7: Knock on wood . You mentioned the weekly year over year growth . You are you seeing that across your different segments ? Is it kind of you know , rising tide ?

Speaker #7: Raises all boats. How are you seeing simulation controllers? Any color on those segments would be very helpful.

Speaker #4: Sure . Yeah , we're seeing it really . All boats are rising here with with increased engagement . And I think also anticipation of upcoming engagement here in the back half of the year from gamers , just giving you a quick breakdown on , on , on the different categories , you know , headsets in particular , when you look at lift that happened with GTA five , it was very , very strong lift across headsets .

Cris Keirn: Sure. Yeah, we are seeing it really, all boats are rising here with increased engagement and then I think also anticipation of upcoming engagement here in the back half of the year from gamers. Just giving you a quick breakdown on the different categories. Headsets in particular, when you look at lift that happened with GTA V, it was very strong lift across headsets. We are starting to see that come in. The headset market has been roughly flat year to date. We do anticipate, and the initial numbers we are seeing out of Q3 would indicate that that is going to continue to increase now as we get further into Q3. Controllers are also doing quite well with the overall shift to third-party controllers as we get further into the life cycle for Switch 2, as an example. We are seeing nice, strong demand there in the controller space.

Speaker #4: We're starting to see that come in the headset market's been roughly flat year to date , but we do anticipate and the initial numbers we're seeing out of Q3 would indicate that that that is going to continue to to increase .

Speaker #4: Now as we get further into Q3 , controllers are also doing quite well with with the overall shift to third party controllers . As we get further into the life cycle for switch two , as an example .

Speaker #4: So we're seeing nice strong demand there in the controller space across the remainder of our business is about 10% . The remaining 10% or so of the business is where our head devices , mice , keyboards , and SIM products reside .

Cris Keirn: Across the remainder of our business is about 10%. The remaining 10% or so of the business is where our head devices, mice, keyboards, and sim products reside. We are seeing nice share gains in the sim space year-over-year, and those products continue to do well with some of the retail placements that we were able to get on those at the time of launch. It is really more of a factor of all boats appear to be rising here across the categories.

Speaker #4: We're seeing nice share gains , you know , in the SIM space year over year . And those products continue to do well with some of the retail placements that we're able to get on those , you know , at the time of launch .

Speaker #4: So it's really more of a factor of all boats appear to be rising here across the categories

Speaker #7: Okay. Thank you for taking my questions. Take care.

Jack Vander Aarde: Okay. Thank you for taking my questions. Take care.

Jack Codera: Okay. Thank you for taking my questions. Take care.

Speaker #4: Thanks , Jack

Cris Keirn: Thanks, Jack.

Speaker #1: We have reached the end of the question and answer session . I would like to turn the floor back over to Chris Kern for closing remarks .

Operator 2: We have reached the end of the question and answer session. I would like to turn the floor back over to Cris Keirn for closing remarks.

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

Speaker #4: Thank you for your interest in Turtle Beach , everyone , and have a great day

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

Operator 2: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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

Q2 2026 Turtle Beach Corp Earnings Call

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