Turtle Beach Corp
For the period ended Dec 31, 2024. Filed Mar 17, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 17, 2025
TBCH$15.19-8.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-13.
0000950170-24-030883
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-17.
0000950170-25-040292
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 109 previous paragraphs and 105 current paragraphs.
50 unchanged; 29 reworded; 23 added; 26 removed; 4 previous and 3 current paragraphs rearranged.
Tables are not compared: 5 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (23)
Current report
rItem 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
Current report
Turtle Beach’s PC-specific gaming headsets, keyboards, and mice span price tiers ranging from low-to-high for entry-level to professional gamers, with each successive price tiers adding features and build quality. We seek to infuse differentiation and innovation into our PC products, including our own design for keyboard and mouse switches, innovative RGB LED lighting, and extensive ergonomic design testing and modeling.
Current report
The Results of Operations and Sources and Uses of Cash, for the years ended December 31, 2023 and 2022 and as compared to the years ended December 31, 2022 and 2021, respectively, has been previously disclosed in Item 7 of our 2023 Annual Report on Form 10-K and in Item 7 of our 2022 Annual Report on Form 10-K, and are incorporated herein by reference.
Current report
In 2024, we acquired Performance Designed Products (“PDP”), another leading gaming accessory brand with a robust slate of products, including gaming controllers/gamepads for all platforms and licensing deals with popular gaming and entertainment properties. As a result of the advantages of increased scale and diversification, Turtle Beach experienced robust revenue growth, driven by increased demand for our leading gaming accessories and the benefits of our expanded portfolio.
Current report
During 2024, primarily due to the PDP acquisition, revenues grew to $372.8 million, with strong revenue growth in headsets and controllers. This level of growth continues to be driven by the ongoing success of our portfolio and strong sales of groundbreaking products like the Stealth 700 Gen 3 wireless headset, a premium multi-platform headset using our unique cross-play technology
Current report
Net revenue for the year ended December 31, 2024 was $372.8 million, an $114.8 million, or 44.5%, increase from $258.1 million in the prior year period primarily driven by incremental revenue from the PDP acquisition.
Current report
For the year ended December 31, 2024, gross profit as a percentage of net revenue increased to 34.6%, inclusive of a $2.1 million purchase accounting driven charge to step-up the value of PDP inventory at the time of acquisition, compared to 29.3% in the comparable prior year period, as a result of higher revenue and improved operating leverage from the PDP acquisition.
Current report
In-Transit Inventory Loss
Current report
One of the Company’s third-party logistics providers experienced a loss of Turtle Beach inventory during the fourth quarter of 2024 while in transit to one of the Company’s customers which impacted the result of operations for the twelve months ended December 31, 2024. The Company recorded the loss of inventory in the amount of $3.4 million within “Cost of revenue” on the consolidated statement of operations. The Company is pursuing recovery of the value of this inventory, as well as other consequential damages, and has filed claims with its insurance carriers, although there can be no assurance as to what amount ultimately will be recovered, if any. While investigations are ongoing with law enforcement, Turtle Beach and the logistics provider have taken actions to mitigate the risk of future similar inventory losses.
Current report
Research and development expense for the year ended December 31, 2024, was $17.3 million compared to $17.1 million for the year ended December 31, 2023.
Current report
Acquisition Integration Costs
Current report
An income tax benefit of $7.6 million was recorded as a result of the reversal of a portion of the Company’s deferred tax asset valuation allowance.
Current report
Costs relate to the step up of acquired finished goods inventory to fair market value as required under purchase accounting. This step up in value over original cost is recorded as a charge to cost of revenue as such inventory is sold.
Current report
Reflects a loss of Turtle Beach inventory while in transit that occurred in the fourth quarter of 2024.
Current report
Cash provided by operating activities for the year ended December 31, 2024 was $5.8 million, a decrease of $21.3 million as compared to $27.0 million for the year ended December 31, 2023. The decrease is primarily the result of certain acquisition related business costs, including integration costs and related severance, and higher inventory procurements reflective of the larger business and additional product offerings.
Current report
Among other things, the Fourth Amendment provided for, among other things: (i) the acquisition of PDP; (ii) the revision of the calculation of the U.S. Borrowing Base to include certain acquired assets of PDP equal to the lesser of (a) the sum of the accounts formula amount and the inventory formula amount (each as defined in the Fourth Amendment), (b) $15,000,000, and (c) 30% of the aggregate Revolver Commitments; (iii) the extension of the maturity date of the Credit Facility from April 1, 2025 to March 13, 2027; and (iv) updates to the interest rate and margin terms such that the loans will bear interest at a rate equal to (1) SOFR, (2) the U.S. Base Rate, (3) the Sterling Overnight Index Average Reference Rate (“SONIA”) for loans denominated in Sterling, and (4) the Euro Interbank Offered Rate (“EUIBOR”) for loans denominated in Euros, plus in each case, an applicable margin, which is between 0.50% and 2.50% for Base Rate Loans and 1.75% and 3.50% for Term SOFR Loans, SONIA Rate Loans and EUIBOR Loans.
Current report
Term Loan
Current report
On March 13, 2024, Turtle Beach and certain of its subsidiaries entered into a new financing agreement with Blue Torch Finance, LLC, (“Blue Torch”), for an aggregate amount of $50 million (the “Term Loan Facility”), the proceeds of which were used to (i) fund a portion of the PDP acquisition purchase price; (ii) repay certain existing indebtedness of the acquired business; (iii) to pay fees and expenses related to such transactions and (iv) for general corporate purposes. The Term Loan Facility amortizes in a monthly amount equal to 0.208333% during the first two years and 0.416667% during the third year and may be prepaid at any time subject to a prepayment premium during the first year of the interest payments payable during the first year plus 3.00%. The Term Loan Facility is secured by substantially all of the assets of the Company and its subsidiaries which are party to the Term Loan Facility.
Current report
The Term Loan Facility (a) matures on March 13, 2027; (b) bears interest at a rate equal to (i) a base rate plus 7.25% per annum for Reference Rate Loans and Secured Overnight Financing Rate (“SOFR”) plus 8.25% per annum for SOFR Loans if the total net leverage ratio is greater than or equal to 2.25x and (ii) a base rate plus 6.75% per annum for Reference Rate Loans and SOFR plus 7.75% per annum for SOFR Loans if the total net leverage ratio is less than 2.25x; and (c) is subject to certain affirmative, negative and financial covenants, including a minimum liquidity covenant and a quarterly total net leverage ratio covenant. As of December 31, 2024, interest rates for outstanding borrowings were 12.44%.
Current report
On August 7, 2024, the Company and Blue Torch amended the Term Loan Facility to, among other things, permit the Company to repurchase Company common stock in an aggregate amount not to exceed $30 million prior to March 31, 2025, subject to the satisfaction of certain conditions. The other material terms of the Term Loan Facility were unchanged.
Current report
Business Combinations
Current report
During the year ended December 31, 2024, the Company completed the acquisition of PDP for total consideration of $116.9 million. The transaction was accounted for under the acquisition method of accounting whereby the total purchase price was allocated to assets acquired and liabilities assumed based on the estimated fair value of such assets and liabilities.
Current report
Accounting for the acquisition of PDP required estimation in determining the fair value of identified intangible assets for tradenames, customer relationships and developed technology. Estimation was utilized as it relates to inputs to the valuation techniques used to measure the fair value of these intangible assets as well as the sensitivity of the respective fair values to the underlying assumptions. The significant assumptions used to estimate the fair value of the acquired intangible assets included revenue assumptions, earnings assumptions, royalty rates and discount rates. These assumptions are forward-looking and could be affected by future economic and market conditions.
Removed paragraphs (26)
Previous report
We have experienced and may continue to experience increased freight costs and component availability challenges. Further, market conditions have significantly increased the lead time on many product components, causing us to purchase components earlier than normal to meet forecasted demand, which, in some cases, led to excess inventories of certain components ordered with long lead times ahead of shifting demand. We expect to continue to experience challenges impacting our supply chain and logistics operations. As a result, we continue to take proactive steps to limit the impact of these challenges and are working closely with our manufacturing and freight providers to reduce costs.
Previous report
In 2023, we continued our position as the number one console gaming headset provider and, showcased strong operational and financial execution with increased revenues, earnings and adjusted EBITDA compared to a year ago.
Previous report
Despite the console gaming market being down slightly, we delivered net revenue of $258.1 million as our industry-leading console headsets, including the launch of the Stealth Pro multi-platform headset into the top price tier, continued to drive both revenue growth and market share gains. Additionally, our simulation product related revenue increased due to product expansion, led by our Velocity One flight simulator, which became the market share leader in 2023.
Previous report
Looking forward, demand for gaming accessories is normalizing higher than pre-pandemic levels and we believe the replacement cycle for pandemic accessory purchases will drive ongoing demand into 2024. We expect our brand to continue leading the headset category with new, innovative console gaming headsets as demonstrated by the nearly $1 billion in U.S. retail sales that three of our top sellers, Stealth 600, Stealth 700 and Recon 70, have collectively delivered since their respective launches. In addition, we exceeded 20% of our revenues in categories outside the console gaming headset category and, as we continue to launch exciting new products across these categories, we believe there are further opportunities to extend our growth in PC gaming, simulation, and controllers.
Previous report
Financial Results
Previous report
Net revenue for the year ended December 31, 2023 was $258.1 million, an $18.0 million, or 7.5%, increase from $240.2 million in the prior year period driven by revenue and share gains for both the console headset gaming and simulation products.
Previous report
For the year ended December 31, 2023, as a result of lower freight and promotional spending, gross profit as a percentage of net revenue increased to 29.3% compared to 20.5% in the comparable prior year period, which included $9.8 million of pandemic-related excess components and product inventory impairment charges.
Previous report
Net revenue for the year ended December 31, 2022 was $240.2 million, a $126.2 million, or 34.4% decrease from $366.4 million in the record prior year period reflecting lower customer demand as a result of a challenging macroeconomic environment, channel inventory compression and increased promotional spend.
Previous report
For the year ended December 31, 2022, gross profit as a percentage of net revenue decreased to 20.5% from 35.0% in the prior year. The decrease was primarily due to a $9.8 million charge for potential excess components and product inventory relating to pandemic driven supply chain and logistic impacts, higher freight and warehouse costs to ensure product supply, higher promotional spend driven by more aggressive competitive pricing actions to reduce channel inventory levels and volume-driven fixed cost deleveraging.
Previous report
Selling and marketing expense for the year ended December 31, 2022 totaled $47.1 million, or 19.6% as a percentage of net revenue, compared to $58.9 million, or 16.1% as a percentage of net revenue, for the year ended December 31, 2021. This decrease was primarily due to lower revenue-based expenses, reduction of marketing initiatives to align with lower consumer demand and strategic priorities.
Previous report
For the year ended December 31, 2023, we invested $17.1 million in research and development, compared to $19.1 million for the year ended December 31, 2022, which reflects certain expense management, including lower headcount and costs associated with our product portfolio plans.
Previous report
For the years ended December 31, 2022 and 2021, we invested $19.1 million and $17.5 million, respectively, as we continued to invest in new product categories and portfolio expansion to support strategic growth initiatives.
Previous report
General and administrative expenses for the year ended December 31, 2022 increased $1.1 million to $32.6 million compared to $31.5 million for the year ended December 31, 2021. Excluding certain non-recurring fees related to the proxy contest in both years with respect to the 2022 annual meeting of stockholders ($2.2 million) and other litigation costs, expenses decreased $1.1 million primarily due to lower personnel costs and professional fees.
Previous report
Income tax expense for the year ended December 31, 2023 was $0.3 million at an effective tax rate of (1.9)% compared to income tax expense of $5.1 million for the year ended December 31, 2022 at an effective tax rate of (9.4%). The effective tax rate was primarily impacted by foreign taxes, state taxes and interest on uncertain tax positions. In 2022 the Company recorded a valuation allowance on its deferred tax assets.
Previous report
Other Non-Operating Expense (Income)
Previous report
Other non-operating expense totaled $0.4 million and $1.8 million for the years ended December 31, 2023 and 2022, respectively, due to negative effect of exchange rates as it relates to our European operations, compared to other non-operating income of $0.1 million for the year ended December 31, 2021, which included a $1.9 million fair value of contingent consideration reversal.
Previous report
Cash provided by operating activities for the year ended December 31, 2023 was $27.0 million, an increase of $68.9 million as compared to cash used for operating activities totaling $41.8 million for the year ended December 31, 2022. The increase is primarily the result of lower working capital driven by reductions in inventory levels, higher gross receipts and expense management initiatives.
Previous report
Cash used for operating activities for the year ended December 31, 2022 was $41.8 million, a decrease of $41.5 million as compared to cash provided by operating activities of $0.3 million for the year ended December 31, 2021. The increase in the cash used for operations is primarily the result of lower gross receipts due to lower demand and retailers compressing channel inventories.
Previous report
Cash used for investing activities was $3.5 million for the year ended December 31, 2022, which was related to certain capital investments, compared to $8.1 million in 2021, which consisted of capital expenditures related to in-store advertising displays and new product manufacturing tooling, as well as $2.5 million related to the Neat Microphones acquisition.
Previous report
Financing activities in 2022 consisted primarily of revolving credit facility borrowings. Financing activities in 2021 included stock option exercise proceeds of $5.3 million and repurchases of common stock of $4.9 million.
Previous report
The Third Amendment provided for, among other things: (i) extending the maturity date of the Credit Facility from March 5, 2024 to April 1, 2025; (ii) updating the interest rate and margin terms; (iii) removing the FILO Loan facility; (iv) updating the sub-facility limit for TB Europe to $15 million; (v) increasing our undrawn commitment fee by 0.125%; and (vi) transitioning the reference interest rates from LIBOR to BSBY, SONIA and EUIBOR, as applicable.
Previous report
In 2017, the United Kingdom’s Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates. LIBOR’s administrator ceased publishing one-week and two-month U.S. Dollar LIBOR immediately after the LIBOR publication on December 31, 2021, and is scheduled to cease publication of the remaining U.S. Dollar LIBOR tenors immediately after the publication on June 30, 2023. In January 2023, the Company and Bank of America entered into LIBOR Transition Amendments with respect to the Credit Facility, including the sub-facility for TB Europe. These amendments replaced applicable LIBOR rates for interest, fees, commissions and other amounts based on LIBOR with successor rates based on BSBY, SONIA and EURIBOR, as applicable.
Previous report
Contractual Obligations
Previous report
Our principal commitments primarily consist of obligations for minimum payment commitments to lessors for office space and the revolving credit facility. As of December 31, 2023, we had operating lease obligations totaling $9.8 million which represents our obligations to make payments under non-cancelable lease agreements for our facilities. See Part II, Item 7,“Management’s Discussion and Analysis of Financial Condition and Results of Operations –Liquidity and Capital Resources–Revolving Credit Facility” above for more information regarding obligations under our revolving credit facility.
Previous report
Contractual obligations exclude tax liabilities of $2.3 million related to uncertain tax positions because we are unable to make a reasonably reliable estimate of the timing of settlement, if any, of these future payments.
Previous report
Operating lease agreements represent obligations to make payments under non-cancelable lease agreements for its facilities.
Reworded paragraphs (29)
Previous wording
Turtle Beach Corporation (herein referred to as the “Company,” “we,” “us,” or “our”), headquartered in White Plains, New York, and incorporated in the state of Nevada in 2010, is a premier audio technology company with expertise and experience in developing, commercializing, and marketing innovative products across a range of large addressable markets under the Turtle Beach® and ROCCAT® brands. Turtle Beach is a worldwide leader of feature-rich gaming solutions for use across multiple platforms, including video game and entertainment consoles, handheld consoles, personal computers (“PC”), tablets and mobile devices. ROCCAT is a gaming headsets, keyboards, mice, and other accessories brand focused on the personal computer peripherals market.
Current wording
Turtle Beach Corporation (herein referred to as the “Company,” “we,” “us,” or “our”), headquartered in San Diego, California, and incorporated in the state of Nevada in 2010, is a premier audio technology company with expertise and experience in developing, commercializing, and marketing innovative products across a range of large addressable markets under the Turtle Beach® brand. In 2021, Turtle Beach expanded its brand beyond gaming headsets and launched its gaming controller product line, as well as gaming flight simulation and racing simulation accessories. In 2024, Turtle Beach acquired Performance Designed Products (“PDP”), another leading gaming accessory brand with a robust slate of products, including gaming controllers/gamepads for all platforms and licensing deals with popular gaming and entertainment properties, including Call of Duty and Fortnite among others. The Company has started the process of transitioning all gaming accessories under its best-selling Turtle Beach brand, with products for consoles and PC, including multiplatform gaming headsets, controllers, mice, keyboards, microphones, and flight/racing simulation accessories under one of the industry’s most recognized and trusted brand names.
Previous wording
Turtle Beach is the leading console gaming headset manufacturer in the U.S. and other major console markets. Turtle Beach has achieved these global market shares by delivering high-quality products that often include first-to-market innovations, robust features, superior sound, unmatched comfort, and top customer support – all key factors that consumers seek when shopping for a gaming headset.
Current wording
Turtle Beach is a leading gaming headset manufacturer in the U.S. and globally. Turtle Beach delivers high-quality products that often include first-to-market innovations, robust features, superior sound, unmatched comfort, and top customer support – all key factors that consumers seek when shopping for a gaming headset.
Previous wording
The global market for console gaming headsets, in which Turtle Beach has been the market leader for the past 14 years, is estimated to be approximately $1.4 billion. PlayStation and Xbox consoles continue to be dominant gaming platforms in North America and Europe for games that drive headset usage. Consistent with a historical pattern of major new console launches every 7-8 years, Microsoft and Sony launched their latest consoles, Xbox Series X|S and PlayStation 5, ahead of the 2020 holiday season, and in 2021/2022 demand for the latest Xbox and PlayStation consoles exceeded the available supply for consumers to purchase. In 2023, the demand for gaming consoles increased as additional supplies became available, which resulted in our improved market share.
Current wording
The global market for console and PC gaming headsets including for consoles and PC is estimated to be approximately $2.9 billion. PlayStation and Xbox consoles continue to be dominant gaming platforms in North America and Europe for games that drive headset usage. Consistent with a historical pattern of major new console launches every 7-8 years, Microsoft and Sony launched their latest consoles, Xbox Series X|S and PlayStation 5, ahead of the 2020 holiday season, and in 2021/2022 demand for the latest Xbox and PlayStation consoles exceeded the available supply for consumers to purchase. In late 2024, Sony introduced the PS5 Pro system. The next Microsoft and Sony consoles are anticipated to launch within the next 2-3 years.
Previous wording
Nintendo has sold over 132.5 million units of its highly popular Nintendo Switch since the platform's release in early 2017. Nintendo continues adding and expanding its library of games, including an increased number of multiplayer chat-enabled games. Nintendo also sells the Nintendo Switch Lite, a follow-on product that offers gamers the hand-held only version of their popular gaming console.
Current wording
According to Nintendo, as of December 2024, they have sold over 150 million units of its highly popular Nintendo Switch systems since the platform's original release in early 2017. Nintendo continues adding and expanding its library of games, including an increased number of multiplayer chat-enabled games. Nintendo also sells the Nintendo Switch Lite – a follow-on product that offers gamers the hand-held only version of the console, as well as the higher resolution Nintendo Switch OLED Model system. A new Nintendo Switch 2 system is expected in 2025.
Previous wording
The market for gamepad controllers is estimated to be approximately $0.5 billion, and shares the same retail footprint and consumer base that Turtle Beach gaming headsets compete in. Controllers now come in various ergonomic shapes, sizes, and colors. Gamers can even further customize their controllers with unique thumbsticks and better grips/textures, weights, and more. Game controllers also range in price from ~$40 to $300+ for ultra premium options, with premium controllers featuring improved materials, cooling, swappable parts and more. Turtle Beach entered the controllers market in 2021 with the introduction of its wired Recon™ Controller for Xbox and PC. Turtle Beach then launched the lower-cost wired REACT-R™ Controller in 2022, as well as introduced the mobile focused Recon™ Cloud and Atom™ controllers. In 2023, Turtle Beach launched its first wireless controller for Xbox and PC, the premium Stealth™ Ultra controller. Turtle Beach’s controllers not only provide the same responsive, quality controls as first party, but also offer Turtle Beach’s signature gaming audio experience when gamers connect a wired headset to the controller.
Current wording
The market for gamepad controllers is estimated to be approximately $3 billion, and shares the same retail footprint and consumer base that Turtle Beach gaming headsets compete in. Controllers now come in various ergonomic shapes, sizes, and colors, as well as for specific types of games, for example, like fighting games like Mortal Kombat and TEKKEN. Gamers can even further customize their controllers with unique thumbsticks and better grips/textures, weights, and more. Game controllers also range in price from ~$40 to $300+ for ultra-premium options, with premium controllers featuring improved materials, cooling, swappable parts, and more. Turtle Beach entered the controllers market in 2021 with the introduction of its wired Recon™ Controller for Xbox and PC. Turtle Beach then launched the lower-cost wired REACT-R™ Controller in 2022, as well as introduced the mobile focused Recon™ Cloud and Atom™ controllers. In 2023, Turtle Beach launched its first wireless controller for Xbox and PC, the premium Stealth™ Ultra, and in 2024, the brand launched the innovative Stealth™ Pivot controller with a groundbreaking rotating button/stick modules design making it attractive for all game types. Turtle Beach’s controllers not only provide the same responsive, high-quality controls as first party controllers, but also offer the brand’s signature gaming audio experience when gamers connect a wired headset to the controller. In 2024, following Turtle Beach’s transformational acquisition of PDP – a leading gaming accessories business with a vast controllers portfolio, Turtle Beach launched the new Riffmaster Wireless Guitar Controller, which gamers can use to play in Fortnite Festival, as well as with Rock Band 4, making Turtle Beach the current leader in the music controllers category, per Circana. Turtle Beach also launched a variety of new controllers, including various Mario and Minecraft-themed wired and wireless controllers for Nintendo Switch systems, Minecraft-themed controllers for Xbox, and Call of Duty and TEKKEN-themed controllers for PlayStation. Turtle Beach’s modular Victrix Pro BFG gamepad controller and Victrix Pro FS Arcade Fight Stick and Victrix Pro KO Leverless Fight Stick are highly rated and well-respected products.
Previous wording
The market for PC gaming headsets, mice, and keyboards is estimated to be approximately $3.2 billion. PC gaming continues to be a main gaming platform in the U.S. and internationally, driven by big AAA game launches, PC-specific esports leagues, popular teams and players, content creators and influencers and cross-platform play. While most games are available on multiple platforms, gaming on PC offers advantages including improved graphics, increased speed and precision of mouse/keyboard controls, and the ability for deeper customization. Gaming mice and keyboards are engineered to provide gamers with high-end performance and a superior gaming experience through features such as faster response times, improved materials and build quality, programmable buttons and keys, and software suites to customize and control devices and settings.
Current wording
The market for PC gaming mice, keyboards, and microphones is estimated to be approximately $3.9 billion. PC gaming continues to be a main gaming platform in the U.S. and internationally, similarly driven by popular AAA game launches, PC-specific esports leagues, teams, and players, content creators, and influencers, and with the introduction of cross-platform play – where PC gamers can play online against other gamers playing the same game on an Xbox, PlayStation, or Nintendo Switch. While most games are available on multiple platforms, gaming on PC offers advantages including improved graphics, increased speed and precision of mouse/keyboard controls, and the ability for deeper customization. Gaming mice and keyboards are engineered to provide gamers with high-end performance and a superior gaming experience through features such as fast key and button response times, improved materials and build quality, comfortable ergonomic designs, programmable keys and buttons, and software suites to customize and control devices and settings.
Previous wording
PC gaming mice come in a variety of different ergonomic shapes and sizes, are available in both wired and wireless models, offer options for different sensors (optical and laser) and responsiveness, and often feature integrated RGB LED lighting and software to unify the lighting with other devices for a visually consistent PC gaming appearance. Similarly, PC gaming keyboards often deliver a competitive advantage by offering options for mechanical and optical key switches that feel and sound different and offer customizable lighting.
Current wording
PC gaming mice come in a variety of different ergonomic and symmetrical shapes and sizes, are available in both wired and wireless models, offer different optical or laser sensor options and responsiveness, and often feature integrated RGB LED lighting and software to unify the lighting with other devices for a visually consistent PC gaming appearance. Similarly, PC gaming keyboards often deliver a competitive advantage by offering options for ultra-responsive mechanical and optical key switches that feel and sound different, as well as customizable lighting.
Previous wording
The market for gaming simulation accessories is estimated to be approximately $1.2 billion. Flight and racing simulation gaming are more dominant on higher-end PCs able to deliver the most realistic visuals. However, jumps in visual quality made possible in the latest consoles/games have made flight simulation gaming on Xbox more accessible. In 2020, Microsoft redefined the graphics flight sim gamers can expect while playing with the launch of the latest generation of its Flight Sim games and, in subsequent years, Microsoft expanded the game to Xbox Series X|S1, Xbox One, lower-end gaming PCs, and mobile via Xbox Cloud.
Current wording
The market for gaming simulation accessories is estimated to be approximately $1.2 billion. Flight and racing simulation gaming are more dominant on higher-end PCs able to deliver the most realistic visuals. However, jumps in visual quality made possible in the latest consoles/games have made flight simulation gaming on Xbox and PlayStation more accessible. For example, in 2020 Microsoft redefined the graphics flight sim gamers can expect while playing with the launch of the latest generation of its Flight Sim games and, in subsequent years, Microsoft expanded the game to Xbox Series X|S, Xbox One, and for lower-end gaming PCs, and mobile gaming via Xbox Cloud.
Previous wording
Long-running popular flight sim games like Flight Simulator 2024, X-Plane, and others allow pilots to learn to fly and pilot various aircraft through picture-perfect skies and scenery, with typical flight sim accessories including yokes and pedals, combat flightsticks, and HOTAS (Hands-On Throttle And Stick) controllers. The flight sim market is niche, but with a dedicated, older fanbase willing to spend more on accessories to create the ultimate flight simulation setups, with a variety of expert pilots and creators showcasing their latest content on YouTube and other mediums. Turtle Beach launched the original VelocityOne Flight universal control system in 2021, followed by the VelocityOne™ Rudder and VelocityOne™ Stand in 2022, the VelocityOne™ Flightstick in 2023, and the VelocityOne™ Flightdeck HOTAS controller in 2024
Current wording
Long-running popular flight sim games like Flight Simulator 2024, X-Plane, and others allow pilots to learn to fly and pilot various aircraft through picture-perfect skies and scenery, with typical flight sim accessories including yokes and pedals, combat flightsticks, and HOTAS (Hands-On Throttle And Stick) controllers. The flight sim market is niche, but with a dedicated, older fanbase willing to spend more on accessories to create the ultimate flight simulation setups, with a variety of expert pilots and
Previous wording
Racing simulation gaming follows a similar trajectory as flightl simulation gaming. The audience of racing sim gamers is also niche, dedicated, slightly older and willing to spend more on creating high-end racing simulation setups predominantly on PC, but also on consoles. There are also a variety of long-running, successful racing game franchises including Forza, Assetto Corsa, and more that allow drivers to get behind the wheel and experience the rush of racing. Typical racing simulation accessories include wheel and pedal setups, swappable steering wheels, shifters, handbrakes and more, ranging in price from a few hundred dollars to thousands of dollars for the most involved simulators. Racing simulation fans also regularly create content and share with the community. Turtle Beach introduced its first VelocityOne™ Race racing simulation wheel and pedals setup in 2024, with additional racing sim accessory launches planned for the future.
Current wording
Racing simulation gaming follows a similar trajectory as flight simulation gaming. The audience of racing simulation gamers is also niche, dedicated, slightly older and willing to spend more on creating high-end racing simulation setups predominantly on PC, but also on consoles. There’s also a variety of long-running, successful racing game franchises including Forza, Assetto Corsa, and more that allow drivers to get behind the wheel and experience the rush of racing. Typical racing simulation accessories include wheel and pedal setups, swappable steering wheels, shifters, handbrakes and more, ranging in price from lower cost entry-level gear available for a few hundred dollars (~$200), to ultra-premium, high-end custom-built sim racing setups that cost thousands of dollars (~$3k-$15k). Racing simulation fans also regularly create their own content to share with the racing sim community. Turtle Beach introduced its first VelocityOne™ Race racing simulation wheel and pedals setup in 2024, as well as the follow-up add-on VelocityOne Multi-Shift shifter/handbrake in early 2025, with additional racing simulation products in development and heading for future 2025 launches.
Previous wording
Our gaming accessories business is seasonal with a significant portion of sales and profits typically occurring around the holiday period. Historically, more than 45% of revenues are generated during the period between September and December as new products are introduced and consumers engage in holiday shopping. In addition, launches of major new online multiplayer games, and specific retailer purchasing behavior, can drive significant revenue shifts between months and quarters in a given year. In the past few years, normal seasonal patterns have been significantly changed due to pandemic-driven shifts in consumer demand.
Current wording
Our gaming accessories business is seasonal with a significant portion of sales and profits typically occurring around the holiday period. Historically, more than 45% of revenues are generated during the period between September and December as new products are introduced and consumers engage in holiday shopping. In addition, launches of major new online multiplayer games, and specific retailer purchasing behavior, can drive significant revenue shifts between months and quarters in a given year. In connection with the seasonality of the business, historically the Company’s borrowings on the revolving credit facility increase as a result of the holiday inventory build leading up to year-end and decline on gross receipts during the first quarter of the following year.
Previous wording
As a result of the execution against our strategic pillars and ongoing cost management initiatives, the overall operating environment improved throughout the year, demonstrated by improved margins due to lower freight and more normalized promotional spend.
Current wording
As a result of the execution against our strategic pillars and ongoing cost management initiatives, the overall operating environment improved throughout the year, demonstrated by improved gross profits and net income due to higher operating leverage on higher revenue levels. Looking forward, in addition to the acquisition cost synergies, we anticipate that there are long-term revenue synergies due to our enhanced product lineups and strong customer relationships that will drive our brands to continue leading gaming accessories categories with new, innovative console gaming headsets and controllers.
Previous wording
Selling and marketing expense for the year ended December 31, 2023 totaled $43.5 million, or 16.8% as a percentage of net revenue, compared to $47.1 million, or 19.6% as a percentage of net revenue, for the prior year. This decrease was primarily due to lower headcount and the alignment of marketing to support demand and product launches.
Current wording
Selling and marketing expense for the year ended December 31, 2024 totaled $52.4 million, or 14.1% as a percentage of net revenue, compared to $43.5 million, or 16.8% as a percentage of net revenue, for the prior year. This increase in expense was primarily due to incremental intangible assets amortization and operating expenses related to the PDP acquisition, and certain integration related severance costs.
Previous wording
General and administrative expenses for the year ended December 31, 2023 decreased $1.2 million to $31.3 million compared to $32.6 million for the year ended December 31, 2022. Excluding certain non-recurring executive compensation, proxy contest and shareholders' litigation costs, expenses decreased $2.7 million primarily due lower non-cash stock-based compensation, employee expenses and certain corporate legal costs.
Current wording
General and administrative expenses for the year ended December 31, 2024 decreased $2.9 million to $28.4 million compared to $31.3 million for the year ended December 31, 2023 primarily due to lower stock-based compensation and employee expenses partially offset by increased professional service costs.
Previous wording
Income tax expense for the year ended December 31, 2022 was $5.1 million at an effective tax rate of (9.4%) compared to income tax expense of $2.4 million for the year ended December 31, 2021 at an effective tax rate of 12.1%. The effective tax rate was primarily impacted by the establishment of a valuation allowance on our net U.S. deferred tax assets as well as state income tax.
Current wording
Income tax benefit for the year ended December 31, 2024 was $5.5 million at an effective tax rate of (51.6)% compared to income tax expense of $0.3 million for the year ended December 31, 2023 at an effective tax rate of (1.9%). The effective tax rate was primarily impacted by the reversal of a portion of the Company’s deferred tax asset valuation allowance associated with the deferred tax liabilities established on PDP’s intangible assets.
Previous wording
Increase in stock-based compensation in the year-ended December 31, 2023 over the comparable prior year period primarily driven by $4.0 million charge related to the accelerated vesting of equities of the Company's former Chief Executive Officer.
Current wording
Increase in stock-based compensation in the year-ended December 31, 2023 primarily driven by $4.0 million charge related to the accelerated vesting of equities of the Company's former Chief Executive Officer.
Previous wording
Impairment charge includes costs related to impairment of intangible assets. See Note 5 to our condensed consolidated financial statements included elsewhere in this Annual Report.
Current wording
Impairment charge includes costs related to impairment of intangible assets. See Note 5 to our consolidated financial statements included elsewhere in this Annual Report.
Previous wording
Chief Executive Officer transition related expense includes one-time costs associated with the separation of its former executive. Such costs included severance, bonus, medical benefits and the tax impact of vesting of stock-based compensation.
Current wording
CEO transition related expense includes one-time costs associated with the separation of its former CEO. Such costs included severance, bonus, medical benefits and the tax impact of accelerated vesting of stock-based compensation.
Previous wording
Business transaction expense includes one-time costs in connection with acquisition-related activities including professional fees such as legal and accounting along with other certain integration related costs of the acquisitions.
Current wording
Acquisition related costs include one-time costs we incurred in connection with acquisitions including warehouse lease impairment, professional fees such as legal and accounting along with other certain integration related costs.
Previous wording
Proxy contest and other primarily includes (a) one-time legal and other professional fee associated with proxy challenges presented by certain shareholder activists and (b) the settlement of an intellectual property lawsuit in 2022.
Current wording
Proxy contest and other primarily includes (a) a $1.7 million judgment in an insolvency dispute in Germany and (b) one-time legal and other professional fee associated with proxy challenges presented by certain shareholder activists in 2023 and 2022. See Item 3 – Legal Proceedings above.
Previous wording
Cash used for investing activities was $2.2 million for the year ended December 31, 2023, which was related to certain capital investments, compared to $3.5 million in 2022.
Current wording
Cash used for investing activities was $82.2 million for the year ended December 31, 2024, which was primarily related to the acquisition of the Performance Designed Products business, compared to $2.2 million in 2023.
Previous wording
Net cash used for financing activities was $17.8 million during the year ended December 31, 2023 compared to net cash provided by financing activities of $19.7 million and net cash used for financing activities of $0.1 million during the years ended December 31, 2022 and 2021, respectively. Financing activities during the year ended December 31, 2023 consisted primarily of $19.1 million revolving credit facility net repayments and $1.0 million of common stock repurchases, partially offset by $2.3 million of stock option exercise proceeds.
Current wording
Net cash used for financing activities was $71.1 million during the year ended December 31, 2024 compared to net cash provided by financing activities of $17.8 million during the year ended December 31, 2023. Financing activities during the year ended December 31, 2024 consisted primarily of $49.4 million net borrowings, the $50 million term loan and $3.4 million of stock option exercise proceeds, partially offset by $27.8 million of share repurchases, $2.9 million of debt issuance costs and $1.0 million of term loan repayments.
Previous wording
Foreign cash balances at December 31, 2023 and December 31, 2022 were $8.0 million and $6.5 million, respectively.
Current wording
Foreign cash balances at December 31, 2024 and December 31, 2023 were $4.5 million and $8.0 million, respectively.
Previous wording
On March 5, 2018, Turtle Beach and certain of its subsidiaries entered into an amended and restated loan, guaranty and security agreement (the “Credit Facility”) with Bank of America, N.A. (“Bank of America”), as administrative agent, collateral agent and security trustee for Lenders (as defined therein), which replaced the then existing asset-based revolving loan agreement. The Credit Facility was amended on each of December 17, 2018, May 31, 2019, and March 10, 2023. The Credit Facility, as amended, expires on April 1, 2025 and provides for a line of credit of up to $80 million inclusive of a sub-facility limit of $15 million for TB Europe, a wholly-owned subsidiary of Turtle Beach. In addition, the Credit Facility provides for a $40 million accordion feature.
Current wording
On March 5, 2018, Turtle Beach and certain of its subsidiaries entered into an amended and restated loan, guaranty and security agreement (the “Credit Facility”) with Bank of America, N.A. (“Bank of America”), as administrative agent, collateral agent and security trustee for Lenders (as defined therein), which replaced the then existing asset-based revolving loan agreement. The Credit Facility was amended on each of December 17, 2018, May 31, 2019, and March 10, 2023. The Credit Facility, as amended, expires on March 13, 2027 and provides for a line of credit of up to $50 million inclusive of a sub-facility limit of $10 million for TB Europe, a wholly-owned subsidiary of Turtle Beach.
Previous wording
On March 10, 2023, the Company entered into a Third Amendment to Amended and Restated Loan, Guaranty and Security Agreement (the “Third Amendment”), by and among the Company, VTB, TBC Holding Company LLC, TB Europe, VTBH, the financial institutions party thereto from time to time and Bank of America, as administrative agent, collateral agent and security trustee for the lenders.
Current wording
On March 13, 2024, the Company entered into a Fourth Amendment, dated as of March 13, 2024 (the “Fourth Amendment”), by and among the Company, VTB, TBC Holding Company LLC, TB Europe, VTBH, the financial institutions party thereto from time to time and Bank of America, as administrative agent, collateral agent and security trustee for the lenders.
Previous wording
Amounts outstanding under the Credit Facility bear interest at a rate equal to (i) a rate published by Bank of America or the U.S. Bloomberg Short-Term Bank Yield Index (“BSBY”) rate for loans denominated in U.S. Dollars, (ii) the Sterling Overnight Index Average Reference Rate (“SONIA”) for loans denominated in Sterling, and (iii) the Euro Interbank Offered Rate (“EUIBOR”) for loans denominated in Euros, plus in each case, an applicable margin, which is between 0.50% to 2.50% for base rate loans and UK base rate loans, and 1.50% and 3.50% for BSBY rate loans, BSBY daily floating rate loans and UK alternative currency loans. In addition, Turtle Beach is required to pay a commitment fee on the unused revolving loan commitment at a rate ranging from 0.375% to 0.50%, and letter of credit fees and agent fees. As of December 31, 2023, interest rates for outstanding borrowings were 11.00% for base rate loans and 8.90% for SONIA rate loans.
Current wording
Amounts outstanding under the Credit Facility bear interest at a rate equal to (i) a rate published by Bank of America or the U.S. Bloomberg Short-Term Bank Yield Index (“BSBY”) rate for loans denominated in U.S. Dollars, (ii) the Sterling Overnight Index Average Reference Rate (“SONIA”) for loans denominated in Sterling, (iii) and the Euro Interbank Offered Rate (“EUIBOR”) for loans denominated in Euros, plus in each case, an applicable margin, which is between 0.50% to 2.50% for base rate loans and UK base rate loans, and 1.75% and 3.50% for U.S. BSBY rate loans, U.S. BSBY daily floating rate loans and UK alternative currency loans. In addition, Turtle Beach is required to pay a commitment fee on the unused revolving loan commitment at a rate ranging from 0.375% to 0.50%, and letter of credit fees and agent fees. As of December 31, 2024, interest rates for outstanding borrowings were 8.10% for base rate loans and 6.19% for Term SOFR loans.
Previous wording
As of December 31, 2023, the Company was in compliance with all the financial covenants under the Credit Facility, as amended, and excess borrowing availability was approximately $60.6 million.
Current wording
As of December 31, 2024, the Company was in compliance with all the financial covenants under the Credit Facility, as amended, and excess borrowing availability was approximately $30.3 million.
Previous wording
Each contract at inception is evaluated to determine whether the contract should be accounted for as having one or more performance obligations. The Company's business activities were determined to be a single performance obligation with revenue recognized when obligations under the terms of a contract with its customer are satisfied; generally, this occurs at a point in time when the risk and title to the product transfers to the customer. The Company's standard terms of delivery are included in its contracts of sale, order confirmation documents, and invoices. The Company excludes sales taxes collected from customers from “Net Revenue” on the consolidated statements of operations.
Current wording
Each contract at inception is evaluated to determine whether the contract should be accounted for as having one or more performance obligations. The Company's business activities were determined to be a single performance obligation with revenue recognized when obligations under the terms of a contract with its customer are satisfied; generally, this occurs at a point in time when the risk and title to the product transfers to the customer which can be at the time of shipment or the product reaches its customer at the point of destination. The Company's standard terms of delivery are included in its contracts of sale, order confirmation documents, and invoices. The Company excludes sales taxes collected from customers from “Net revenue” on the consolidated statements of operations.
Previous wording
Certain customers may receive cash-based incentives (including cash discounts, quantity rebates, and price concessions), which are accounted for as variable consideration based upon the expected value method. Provisions for sales returns are recognized in the period the sale are based upon the expected value method and is recorded based upon the Company's prior experience and current trends. Cash-based incentive allowances are based on historical and expected performance of the customers, types and levels of promotions including any contractual commitments, claims received and forecasted economic trends in comparison to historical trends. Sales return reserves are based on historical and current return activity and forecasted economic trends in comparison to historical trends. As of December 31, 2023 and 2022, the Company had an allowance for cash-based incentives of $28.6 million and $29.5 million, respectively, and an allowance for sales returns of $8.4 million and $7.8 million, respectively. These amounts are recorded as a reduction of accounts receivable on the consolidated balance sheets.
Current wording
Certain customers may receive cash-based incentives (including cash discounts, quantity rebates, and price concessions), which are accounted for as variable consideration. Cash-based incentive allowances are based on historical and expected performance of the customers, types and levels of promotions including any contractual commitments, claims received and forecasted economic trends in comparison to historical trends. The Company also has provisions for sales returns that are recognized in the period of the sale and are recorded based upon the Company's prior experience and current trends and forecasted economic trends in comparison to historical trends. As of December 31, 2024 and 2023, the Company had an allowance for cash-based incentives of $32.6 million and $28.6 million, respectively, and an allowance for sales returns of $7.7 million and $8.4 million, respectively. These amounts are recorded as a reduction of accounts receivable on the consolidated balance sheets.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
creators showcasing their latest content on YouTube and other mediums. Turtle Beach launched the original VelocityOne Flight universal control system in 2021, followed by the VelocityOne™ Rudder and VelocityOne™ Stand in 2022, the VelocityOne™ Flightstick in 2023, and the VelocityOne™ Flightdeck HOTAS controller in 2024.
Current report — wording carried from elsewhere
Acquisition related costs include one-time costs incurred in connection with the PDP acquisition including warehouse lease impairment, professional fees, such as legal and accounting, along with other certain integration related costs.
Current report — wording carried from elsewhere
As of December 31, 2024, the Company was in compliance with all the financial covenants under the Term Loan Facility.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
Previous report — wording carried elsewhere
In connection with the seasonality of the business, historically the Company’s borrowings on the revolving credit facility increase as a result of the holiday inventory build leading up to year-end and decline on gross receipts during the first quarter of the following year.
Previous report — wording carried elsewhere
Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021
Previous report — wording carried elsewhere
The Credit Facility, as amended, expires on April 1, 2025 and provides for a line of credit of up to $80 million inclusive of a sub-facility limit of $15 million for TB Europe, a wholly-owned subsidiary of Turtle Beach. Interest payments are not reflected under the Credit Facility because the amount that will be borrowed in future years is uncertain.