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?