Turtle Beach Corporation

Good afternoon, and welcome to the Turtle Beach Q425 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your request, please press star, then two. Please note, this event is being recorded. I would now like to hand this conference over to Mr. Jacques Cornett, Investor Relations. Please go ahead.

Thank you, Operator. On today's call, we'll be referring to the press release filed this afternoon that details the company's fourth quarter and full year 2025 results, which are available on the news page of the company's Investor Relations website, corp.turtlebeach.com. where you'll also find the latest earnings presentation that supplements the information discussed on today's call. Finally, a recording of the call will be available on the events and 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. These statements involve risks and uncertainties regarding the company's operations and future results that could cause Turtle Beach Corporation's results to differ materially from management's current expectations. While the company believes that its expectations are based upon reasonable assumptions, Numerous factors may affect actual results and may cause results to differ materially. So the company encourages you to review the safe harbor statements and risk factors contained in today's press release and in its filings with the Securities and Exchange Commission, including without limitation its annual report on 10K and other periodic reports which identify specific risk factors That also may cause actual results or events to differ materially from those described in our forward-looking statements. The company does not undertake to publicly update or revise any forward-looking statements after this conference call. The company also notes that on this call, it will be discussing non-GAAP financial information. The company is providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States, or GAAP. You can find a reconciliation of these metrics to the company's reported GAAP results in the reconciliation tables provided in today's earnings release and presentation. Hosting the call today are Chris Kern, Chief Executive Officer, and Mark Weinswig, Chief Financial Officer. With that, I'll turn the call over to Chris.

Chris? Thanks, Jacques. Good afternoon, everyone, and welcome to our full year and fourth quarter 2025 earnings call. As we close out 2025, it's clear that this was a year that challenged the broader industry and tested our resilience while also highlighting the discipline of our execution. We navigated a number of external pressures, including global tariff impacts, unexpected softness in the North American gaming and accessories markets, and a holiday season that fell short of expectations. While our financial results came in below our guidance range, we made meaningful operational progress that strengthened our competitive position. We gained share in our core Turtle Beach headset brand and laid important groundwork to capitalize on the anticipated accessories upgrade and replacement cycle, positioning the business for significant growth over the next 24 months. Looking forward, we're encouraged by what we see on the horizon. Grand Theft Auto 6 is currently scheduled for a late 2026 release date, and we expect it to be one of the largest and most anticipated video game launches in history. Releases of this magnitude have historically driven substantial increases in gaming engagement and accessory demand across the category. We believe the combination of our product innovation, brand strength, and market position will enable us to capitalize on this catalyst as it materializes. While we expect GTA to have a significant impact when launched, we also expect it to help produce a strong replacement cycle for a period beyond launch. Major franchise releases of this scale create extended periods of elevated gaming activity and accessory demand. We're well positioned with our product portfolio and go-to-market strategy to benefit from this dynamic as it unfolds. As we move through 2026 and lap the softer demand environment we've experienced, we're optimistic about the trajectory of our business. Beyond game releases, the industry is also entering a console refresh cycle in the coming years, with next-generation platforms expected from major console manufacturers, including Xbox and PlayStation. New console launches have historically driven increased hardware adoption and broader consumer engagement, which typically translates to elevated accessory demand. Supporting these industry catalysts it is worth spotlighting that over the last year, we've strengthened our product innovation pipeline. We're launching over 50% more new products in 2026 compared to 2025, with our first significant releases beginning in Q2. Early retailer feedback has been positive, and we believe this accelerated product cadence positions us well to capitalize on the favorable industry dynamics ahead. Of course, capitalizing on these industry catalysts requires operational excellence and a strong foundation, both of which we have built throughout 2025. Despite the external pressures we faced, particularly in Q4, we delivered a number of important accomplishments that demonstrate both the resilience of our organization and the effectiveness of our strategy. I'd like to highlight three key achievements from 2025 that underscore the strength of our execution and positioned Turtle Beach to capitalize on the opportunities ahead as new games and next generation hardware are introduced in the exciting upcoming gaming cycle. First, we implemented comprehensive cost optimization initiatives that drove gross margin expansion. For the full year, gross margins increased 270 basis points year over year to get to the highest annual level since 2018. This momentum was evident in the fourth quarter where gross margins reached 40.1%, up over 310 basis points year-over-year. These results demonstrate the effectiveness of our operational discipline and focused cost management strategy. Through targeted savings initiatives and improved execution, we were able to protect and expand profitability despite a challenging top-line environment. It's worth noting we achieved these margin improvements while accelerating our pace for upcoming new product launches, as previously mentioned. Second, we effectively navigated a challenging tariff environment and mitigated what could have been significant financial headwinds. Early in 2025, we took proactive steps in anticipation of potential tariff changes, building strategic inventory, and accelerating our manufacturing diversification efforts. By the end of the second quarter, we had transitioned the majority of our U.S.-bound production to Vietnam while maintaining China-based operations for non-U.S. markets and select product lines. These actions demonstrate the strength of our strategic planning and supply chain agility, and they were instrumental in preserving our margin expansion throughout the year. Third, we strengthened our balance sheet and enhanced shareholder value through a comprehensive refinancing, and continued disciplined capital allocation. In August, we refinanced our prior term loan and credit facilities, lowering the base interest rate on our term loan by approximately 450 basis points and generating annual interest savings of more than $2 million. This transaction reduced our cost of capital, improved our financial flexibility, and removed previous restrictions on share repurchases, a key pillar of our capital allocation strategy. Taking advantage of that flexibility, we remain active with share repurchases, buying back nearly 1.35 million shares in 2025 for approximately $19 million. Over the past two years, we have returned nearly $47 million to shareholders through buybacks. Additionally, we authorized a new two-year $75 million share repurchase program, the largest in company history, with more than $58 million of capacity remaining. Before I pass the call over to Mark to walk through the financials in more detail, I wanted to comment on a few strategic and board-related matters. First, on strategy and capital allocation. Since our highly successful acquisition of PDP in March of 2024, we have actively assessed opportunistic bolt-on acquisitions that could be complementary to our growing platform. We have evaluated many potential acquisition opportunities over that period and have remained disciplined in how we allocate our shareholders' capital. While no new deals have been announced, we continue to assess acquisitions that could make strategic sense for the company over time. Our streamlined operations and strong cash flow characteristics have allowed us to significantly de-lever from the post-PDP highs of early 2024. This financial strength combined with the long-term outlook for our business, has led us to pivot our capital allocation priorities. With a strong balance sheet, operations running at strong margins, and an outlook as promising as the one that we currently have, we do not believe the equity markets are currently pricing our stock appropriately. Should this disconnect continue, we are evaluating opportunities to enhance our financial flexibility, specifically to support increased share repurchases. This includes exploring options to refinance our existing debt on more favorable terms and potentially expand our borrowing capacity. These actions would provide additional resources to increase the size of our share buyback program. If the current valuation disconnect persists, We expect to prioritize active and significant repurchasing of our shares in the open market until our stock price better reflects what we believe is fair value or unless a compelling acquisition opportunity presents itself. As we have demonstrated with our capital allocation decisions over the past two years, we remain exceptionally disciplined with shareholder capital and focused on maximizing long-term value creation. Lastly, I'd like to comment on the recent updates to our board of directors. As you saw in our recent 8K, Terry Jimenez stepped down. I want to thank Terry for his contributions during his tenure at Turtle Beach. Will Wyatt, who has served on our board since 2023, has been appointed chairman. Will brings deep expertise and has been a valuable contributor to our board. I congratulate Will and look forward to working with him in his expanded role. Our board of directors remains focused, working with our executive leadership team, on driving long-term value creation for our shareholders. With that, Mark will take us through the detailed financial results. Mark?

Thank you, Chris. Fourth quarter net revenue was $118 million, a decline of 19% year-over-year compared to $146.1 million in the prior year period. This decline reflects the recent softness in the gaming accessories markets. In the fourth quarter, we delivered strong gross margin performance, Fourth quarter gross margins reached 40.1%, a year-over-year improvement of nearly 310 basis points. Net income for the fourth quarter was $17.6 million, compared to $20.1 million in the prior year period. The structural changes we have made over the last few years have allowed us to mitigate the recent revenue decline through cost containment activities. Fourth quarter adjusted EBITDA was $28.1 million, a decline of 21% year-over-year compared to $35.7 million in the prior year period. We maintained an EBITDA margin of 24%. Operating expenses of $26.7 million represented 22% of total revenue compared to $30.6 million or 21% of revenue in the prior year period, demonstrating our disciplined expense management in the face of a tough market environment. For the full year 2025, Net revenue was 319.9 million, a decline of 14% year-over-year, compared to 372.8 million in 2024. This came in below our expectations due to the market headwinds that Chris noted in his prepared remarks. Full-year gross margins of 37.3% represented an improvement of 270 basis points year-over-year and marks the highest annual level since 2018. reflecting our successful execution of cost optimization initiatives and tariff mitigation strategies throughout the year. Net income for the full year was $15.7 million, representing a 3% year-over-year decline compared to $16.2 million in 2024. Full-year adjusted EBITDA of $40.1 million was 12.5% of total revenue compared to $56.4 million in 2024 due to the revenue decrease from unfavorable market conditions. Operating expenses of $91.8 million represented 28.7% of total revenue compared to $109 million, or 29% of total revenue, in 2024. In 2025, the company realized a one-time credit of over $9 million from recoveries. Moving to the balance sheet, our balance sheet remains solid with a cash position of $17 million on December 31st, During the year, we generated $35 million in cash from operations. Total revolver and term loan debt as of December 31st was $85 million, resulting in net debt of $68 million. During 2025, we continued returning capital to shareholders through our share repurchase program. In the fourth quarter, we repurchased approximately 140,000 shares for a total of approximately $2 million. For the full year, we repurchased 1.35 million shares for approximately $19 million. This brings our total repurchases over the past two years to nearly $47 million. Shared buybacks remain a key pillar of our capital allocation strategy. They demonstrate both our confidence in the business and our ongoing commitment to creating value for shareholders. Looking ahead, we are optimistic for 2026. We expect growth in both revenue and EBITDA as we navigate through the current headwinds in the gaming accessories markets. We anticipate the market environment will remain challenging in the first half of 2026 with improvements in the second half driven by new products and game launches. We currently expect full-year 2026 revenue to be in the range of $335 million to $355 million. This represents 8% growth at the midpoint compared to 2025. We expect our full year 2026 adjusted EBITDA to be in the range of $44 million to $48 million. Due to volatility in the retail environment, we want to provide additional context on expected seasonality and revenue cadence throughout the year. It's important to reiterate that we typically see the majority of our revenues in the second half of the year coinciding with the holiday season. In 2026, we expect to see this trend continue. For the first quarter, we anticipate approximately 13 to 14% of full-year revenues to be realized. Looking to the second quarter, we expect to release a significant number of new product introductions. With these new models and retail placements, we expect to see double-digit year-on-year revenue growth in the second quarter. Our guidance assumes continued market headwinds in the first half of the year, but reflects our confidence in our operational improvements and strategic positioning for when market conditions improve. We remain focused on maintaining our margins while positioning for growth when market catalysts emerge. With that, I'll turn the call back to Chris for closing remarks. Chris?

Thanks, Mark. As we look ahead, we are confident in both the long-term strength of the gaming accessories market and our ability to lead within it. While 2025 brought meaningful challenges, we believe those pressures were cyclical in nature, and we used the year to sharpen our execution and reinforce our foundation. Through disciplined cost optimization, agile supply chain management, a strategic refinancing of our debt, continued product innovation, and a focused capital allocation strategy, we have meaningfully strengthened our competitive position. We enter 2026 with expanded margins, a stronger and more flexible balance sheet, and a compelling product portfolio that positions us to capitalize on improving market conditions and drive sustainable growth. Building on the strong foundation we've established, our focus in 2026 is to fully leverage these operational gains while positioning the company to accelerate as demand strengthens. The global gaming audience continues to expand and as market conditions improve, we expect to realize meaningful growth. At the same time, we will continue investing in our brand and deepening engagement with gamers worldwide, capitalizing on the strength and leadership of the Turtle Beach franchise to drive long-term value creation. As always, I want to recognize and thank the entire Turtle Beach team for their dedication, focus, and relentless execution throughout the year. Their hard work and commitment were instrumental in delivering our 2025 accomplishments and have positioned us strongly for continued success in 2026 and the years ahead. With that, operator, we can open the call for Q&A.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up the handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Thank you. Our first question today comes from Anthony Stoss from Craig Hallam. Please go ahead.

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

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

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

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

Thanks, Tony.

Thank you. Once again, if you would like to ask a question, please press star, then one. Your next question comes from Martin Yang from Oppenheimer. Please go ahead.

Hi, thank you for taking my question. My question is about the cost structure for 26. Can you give us more details around your expectations for gross margin versus OPEX and whether the move of new products will impact either part of the cost? Thank you.

Sure. Hi, Martin. We're really happy with the progress that we've made on gross margin so far, and we expect to see continued improvements in gross margin as we go into 2026. The drivers behind that, we're now comping a full year of all of those mitigations that we made for tariffs, additional product changes that we made focusing on the higher margin products, as we look at our retail placements. So all of those improvements that we made throughout the year in 25, we're now comping a full year of that here in 26. So we'll see improved margins continue and continued margin growth in that space. Our OPEX structure is going to remain fairly similar to what we had in 2025. We are going to be making some additional structural investments on continued upgrades in technology. We're implementing new tools that are going to help with our efficiencies. We're also making investments in our brand. And you'll see more coming out about that from us in the coming weeks and months. We think there's a huge amount of equity in the Turtle Beach brand. And with all of the great things coming up in gaming, we're going to be repositioning the brand and really making the brand push this year.

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

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

uh continue from us moving forward as we we look at preparing for the next console cycle here thank you very much thank you martin thank you your next question comes from sean mcgowan from roth capital partners please go ahead thank you hi guys um i have a couple questions um first um to follow up on martin's question on on a gross margin and your response, normally when your sales are soft, are softer than expected, you see some deleveraging at the gross margin line. So would this suggest that, you know, from this level, if we were to look at a quarter, you know, that saw a lot more sales increase, that we could expect significantly higher margins, or are there some givebacks that we can expect to see?

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

Okay. Thank you. In terms of GNA and selling and marketing, there's good discipline there, but were you holding back and should we expect to see, you know, maybe an increase in spending as a percentage of revenue in those categories?

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

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

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

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

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

Okay. Thank you very much. Thanks, Sean.

Thank you. Your next question comes from Drew Crum from B. Reilly Securities. Please go ahead.

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

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

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

Yes.

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

Thank you. Your next question comes from Jacques Vanderaad from Maxim Group. Please go ahead.

Okay, great. Hi, guys. Thanks for taking my questions. Hey, Chris, so with the 50%, you know, more new product launches in 2026, and the focus kind of still being on this, it sounds like high gross margins are going to continue, which have been historically high. you can you speak to your overall just pricing and promotional strategies with these this extra layer of you know substantial new products in the market um assuming these gross margins stay high are you are you also what are you doing with the price points here across the portfolio and for this new lineup sure hi jack great question it's something that we're looking at very closely as you might imagine

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

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

I think you mentioned a lot of the great points, and I would reiterate one of the items that you noted, which is our share buyback strategy. This year, we had a significant amount of buybacks over the past couple years, more than $47 million of total buybacks. We are looking at opportunities to continue to drive additional buyback strategies in 2026 and what that could mean for us in terms of just the overall share count. As we noted here in terms of the guide, You know, we're looking at adjusted EBITDA to be in the range of 44 to 48 million. You know, as a percentage basis, that's going to be up from where we were in 25, just showing the leverage that we get on the revenue. And as you noted, you know, the gross margin side, we are very excited about the fact that we are already in our targeted range, and yet we still see opportunities to slightly increase our margin levels going into the new year with new products. So, you know, we think 26 is going to be a very good year and looking forward to seeing the outcomes.

Okay, great. Well, I appreciate the time, guys. Thank you.

Thank you. This concludes our question and answer session. I would now like to turn the conference back over to Mr. Chris Kern for any closing remarks.

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

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