Turtle Beach Corp

Previous wording

The following discussion and analysis of our operations should be read together with our unaudited condensed consolidated financial statements and the related notes included in Part I of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 17, 2025 (the“Annual Report.”)

Current wording

The following discussion and analysis of our operations and financial condition of Turtle Beach Corporation ("we," "us," "our," the "Company," "Turtle Beach") should be read together with our unaudited condensed consolidated financial statements and the related notes included in Part I of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 17, 2025 (the“Annual Report.”)

Previous wording

Turtle Beach Corporation (“Turtle Beach” or the “Company”), headquartered in San Diego, California, and incorporated in the state of Nevada in 2010, is a premier audio and gaming 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. The Turtle Beach® brand is a market share leader in console gaming headsets with a vast portfolio of headsets designed to be compatible with the latest Xbox, PlayStation, and Nintendo consoles, as well as for personal computers (“PCs”) and mobile/tablet devices. Turtle Beach Corporation’s PC product portfolio includes headsets, gaming keyboards, mice and other gaming accessories focused on the PC gaming platform and it has recently expanded its brand beyond gaming headsets and launched its gaming controller product line, as well as, gaming flight simulation and racing simulation accessories. In March 2024, Turtle Beach acquired Performance Designed Products LLC (“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. The Company has transitioned 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.

Current wording

Turtle Beach Corporation, headquartered in San Diego, California, and incorporated in the state of Nevada in 2010, is a premier audio and gaming 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. The Turtle Beach® brand is a market share leader in console gaming headsets with a vast portfolio of headsets designed to be compatible with the latest Xbox, PlayStation, and Nintendo consoles, as well as for personal computers (“PCs”) and mobile/tablet devices. Turtle Beach Corporation’s PC product portfolio includes headsets, gaming keyboards, mice and other gaming accessories focused on the PC gaming platform and it has recently expanded its brand beyond gaming headsets and launched its gaming controller product line, as well as, gaming flight simulation and racing simulation accessories. In March 2024, Turtle Beach acquired Performance Designed Products LLC (“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. The Company has transitioned 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 operates in the approximately $200 billion global games and accessories market. The global gaming audience now exceeds global cinema and music markets with over 3.4 billion active gamers worldwide. Gaming peripherals, such as headsets, controllers, keyboards, mice, microphones, and flight and racing simulation controls are estimated to be an $11 billion business globally.

Current wording

Turtle Beach operates in the approximately $200 billion global games and accessories market. The global gaming audience now exceeds global cinema and music markets with over 3.6 billion active gamers worldwide. Gaming peripherals, such as headsets, controllers, keyboards, mice, microphones, and flight and racing simulation controls are estimated to be an $11 billion business globally.

Previous wording

The console and PC gaming accessory markets are driven by major game launches and long-running franchises that encourage players to continually buy equipment and accessories. On Xbox, PlayStation, Nintendo Switch and PC, flagship games like Call of Duty, Destiny, Star Wars: Battlefront, Grand Theft Auto, Battlefield, and battle royale games like Fortnite, Call of Duty Warzone, Apex Legends, and PlayerUnknown’s Battlegrounds, are examples of major franchises that prominently feature online multiplayer modes that encourage player-to-player communication and drive increased demand for gaming headsets, controllers, and more. Many of these established franchises launch new titles annually, leading into the holidays and beyond, and as a result can cause an additional boost to the normally strong holiday sales for gaming accessories.

Current wording

The console and PC gaming accessories markets are driven by major game launches and long-running franchises that encourage players to continually buy equipment and accessories. On Xbox, PlayStation, Nintendo Switch and PC, flagship games like Call of Duty, Destiny, Star Wars: Battlefront, Grand Theft Auto, Battlefield, and battle royale games like Fortnite, Call of Duty Warzone, Apex Legends, and PlayerUnknown’s Battlegrounds, are examples of major franchises that prominently feature online multiplayer modes that encourage player-to-player communication and drive increased demand for gaming headsets, controllers, and more. Many of these established franchises launch new titles annually, leading into the holidays and beyond, and as a result can cause an additional boost to the normally strong holiday sales for gaming accessories.

Previous wording

Net revenue for the three months ended June 30, 2025 was $56.8 million, a $19.7 million decrease from $76.5 million driven by a significant reduction in market demand for computer gaming accessories.

Current wording

Net revenue for the three months ended September 30, 2025 was $80.5 million, a $13.9 million decrease from $94.4 million driven by a significant reduction in market demand for computer gaming accessories.

Previous wording

For the three months ended June 30, 2025, gross margin increased to 32.2% from 30.2% in the comparable prior year period primarily due to unfavorable impact of fair value step-up adjustment in prior period, partially offset by higher tariffs in 2025.

Current wording

For the three months ended September 30, 2025, gross margin increased to 37.4% from 36.2% in the comparable prior year period primarily due to the unfavorable impact of fair value step-up adjustment in the prior period relating to the PDP acquisition, partially offset by higher tariffs in 2025.

Previous wording

Comparison of the Six Months Ended June 30, 2025 to the Six Months Ended June 30, 2024

Current wording

Comparison of the Nine Months Ended September 30, 2025 to the Nine Months Ended September 30, 2024

Previous wording

For the six months ended June 30, 2025, gross margin increased to 34.5% from 30.9% in the comparable prior year period primarily due to unfavorable impact of fair value step-up adjustment and incremental warehouse costs in the prior period from the PDP acquisition.

Current wording

For the nine months ended September 30, 2025, gross margin increased to 35.6% from 33.1% in the comparable prior year period primarily due to the unfavorable impact of fair value step-up adjustment in the prior period relating to the PDP acquisition, partially offset by higher tariffs in 2025.

Previous wording

Selling and marketing expenses decreased by approximately $1.0 million, or 7.4% for the three months ended June 30, 2025 as compared to the same period in the prior year due to lower market demand driven direct media marketing.

Current wording

Selling and marketing expenses decreased by $1.0 million, or 7.6% for the three months ended September 30, 2025 as compared to the same period in the prior year primarily due to lower market demand-driven direct media marketing.

Previous wording

Selling and marketing expenses increased by $2.4 million, or 10.7% for the six months ended June 30, 2025 due to certain employee-related expenses, professional fees, certain marketing initiatives and incremental intangible assets amortization expenses related to the PDP acquisition.

Current wording

Selling and marketing expenses increased by $1.4 million, or 3.9% for the nine months ended September 30, 2025 primarily due to certain employee-related expenses, professional fees, certain marketing initiatives and incremental intangible assets amortization expenses related to the PDP acquisition.

Previous wording

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

Current wording

Insurance recovery for the nine months ended September 30, 2025 was $9.4 million, and relates to the receipt of certain insurance claims from the previously disclosed loss of inventory while in transit that occurred in the fourth quarter of 2024. There was no insurance recovery for the three months ended September 30, 2025.

Previous wording

Acquisition-related costs include one-time costs incurred in connection with the PDP acquisition including professional fees such as legal and accounting along with other certain integration related costs.

Current wording

Acquisition-related costs include costs incurred in connection with the PDP acquisition, including professional fees such as legal and accounting along with other certain integration related costs.

Previous wording

Income tax expense for the three months ended June 30, 2025 was $(0.2) million at an effective tax rate of 7.7% compared to income tax expense of $0.8 million for the three months ended June 30, 2024 at an effective tax rate of (12.6%). The effective tax rate for the three months ended June 30, 2025 was primarily impacted by the change in U.S. valuation allowance, foreign taxes and Federal and State current tax.

Current wording

Income tax expense for the three months ended September 30, 2025 was $0.3 million at an effective tax rate of 12.9% compared to income tax expense of $0.05 million for the three months ended September 30, 2024 at an effective tax rate of 1.3%. The effective tax rate for the three months ended September 30, 2025 was primarily impacted by the change in U.S. valuation allowance, foreign taxes and Federal and State current tax. The effective tax rate for the three months ended September 30, 2024 was primarily impacted by the change in U.S. valuation allowance and foreign taxes.

Previous wording

Income tax expense for the six months ended June 30, 2025 was $(0.4) million at an effective tax rate of 9.0% compared to income tax benefit for the six months ended June 30, 2024 of $5.5 million at an effective tax rate of 42.9%. The effective tax rate for the six months ended June 30, 2024 was primarily impacted by the reversal of a portion of the Company’s deferred tax asset valuation allowance.

Current wording

Income tax benefit for the nine months ended September 30, 2025 was $0.1 million at an effective tax rate of 5.1% compared to income tax benefit for the nine months ended September 30, 2024 of $5.5 million at an effective tax rate of 58.2%. The effective tax rate for the nine months ended September 30, 2025 was primarily impacted by the change in U.S. valuation allowance, foreign taxes and Federal and State current tax. The effective tax rate for the nine months ended September 30, 2024 was primarily impacted by the reversal of a portion of the Company’s deferred tax asset valuation allowance.

Previous wording

We believe that the presentation of Adjusted EBITDA, defined as net income (loss) before interest, taxes, depreciation and amortization, stock-based compensation (non-cash) and certain non-recurring special items that we believe are not representative of core operations, is appropriate to provide additional information to investors about our operating profitability adjusted for certain non-cash items, non-routine items that we do not expect to continue at the same level in the future, as well as other items that are not core to our operations. Further, we believe Adjusted EBITDA provides a meaningful measure of operating profitability because we use it for evaluating our business performance, making budgeting decisions, and comparing our performance against that of other peer companies using similar measures. However, Adjusted EBITDA is not a measure of financial performance under GAAP and, given the limitations of these metrics as analytical tools, should not be considered a substitute for gross profit, gross margins, net income (loss) or other consolidated income statement data as determined in accordance with GAAP.

Current wording

We believe that the presentation of Adjusted EBITDA, defined as net income (loss) before interest, taxes, depreciation and amortization, stock-based compensation (non-cash) and certain non-recurring special items that we believe are not representative of core operations, is appropriate to provide additional information to investors about our operating profitability adjusted for certain non-cash items or non-routine items that we do not expect to continue at the same level in the future, as well as other items that are not core to our operations. Further, we believe Adjusted EBITDA provides a meaningful measure of operating profitability because we use it for evaluating our business performance, making budgeting decisions, and comparing our performance against that of other peer companies using similar measures. However, Adjusted EBITDA is not a measure of financial performance under GAAP and, given the limitations of these metrics as analytical tools, should not be considered a substitute for gross profit, gross margin, net income (loss) or other consolidated income statement data as determined in accordance with GAAP.

Previous wording

Adjusted EBITDA (and a reconciliation to Net loss, the nearest GAAP financial measure) for the three and six months ended June 30, 2025 and June 30, 2024, are as follows (in thousands):

Current wording

Adjusted EBITDA (and a reconciliation to Net loss, the nearest GAAP financial measure) for the three and nine months ended September 30, 2025 and September 30, 2024, are as follows (in thousands):

Previous wording

Acquisition-related cost includes one-time costs we incurred in connection with acquisitions including warehouse lease impairment, professional fees such as legal and accounting along with other integration related costs.

Current wording

Acquisition-related costs include costs we incurred in connection with the PDP acquisition, including warehouse lease impairment, professional fees such as legal and accounting along with other integration-related costs.

Previous wording

Our primary sources of working capital are cash flow from operations and availability of capital under our Revolving Credit Facility. We have funded operations and acquisitions in recent periods with operating cash flows and proceeds from debt and equity financings.

Current wording

Our primary sources of working capital are cash flow from operations and availability of capital under our Credit Agreement. We have funded operations and acquisitions in recent periods with operating cash flows and proceeds from debt and equity financings.

Previous wording

Cash provided by operating activities for the six months ended June 30, 2025 was $37.3 million, an increase of $22.7 million as compared to $14.6 million for the six months ended June 30, 2024. The increase is primarily due to higher gross receipts, insurance proceeds from claims related to a loss of inventory, lower acquisition-related costs and reduced spending levels.

Current wording

Cash provided by operating activities for the nine months ended September 30, 2025 was $22.1 million, an increase of $30.7 million as compared to $8.6 million used for the nine months ended September 30, 2024. The increase is primarily due to higher gross receipts, insurance proceeds from claims related to a loss of inventory, lower acquisition-related costs and reduced spending levels.

Previous wording

Cash provided by investing activities was $2.0 million for the six months ended June 30, 2025, which was primarily related to purchase price working capital adjustments of $2.5 million, compared to $79.3 million used for the six months ended June 30, 2024 primarily related to the acquisition of the PDP business.

Current wording

Cash provided by investing activities was $1.3 million for the nine months ended September 30, 2025, which was primarily related to purchase price working capital adjustments of $2.5 million, compared to $80.7 million used for the nine months ended September 30, 2024 primarily related to the acquisition of the PDP business.

Previous wording

Net cash used for financing activities was $41.7 million during the six months ended June 30, 2025 compared to net cash provided by financing activities of $58.2 million during the six months ended June 30, 2024. Financing activities during the six months ended June 30, 2025 consisted primarily of $29.5 million revolving credit facility net repayments, $6.7 million of share repurchases and $5.6 million of term loan repayments. Financing activities during the six months ended June 30, 2024 consisted primarily of the $50 million term loan and $2.9 million of stock option exercise proceeds, partially offset by $3.2 million of debt issuance costs.

Current wording

Net cash used for financing activities was $24.5 million during the nine months ended September 30, 2025 compared to net cash provided by financing activities of $82.7 million during the nine months ended September 30, 2024. Financing activities during the nine months ended September 30, 2025 consisted primarily of $15.9 million revolving credit facility net repayments, $17.0 million of share repurchases, $2.3 million of debt financing costs and $8.9 million of term loan net proceeds.

Previous wording

Foreign cash balances at June 30, 2025 and December 31, 2024 were $4.7 million and $4.5 million, respectively.

Current wording

Foreign cash balances at September 30, 2025 and December 31, 2024 were $4.6 million and $4.5 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, 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.

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 “Revolving Credit Facility”) with Bank of America, N.A. (“Bank of America”), as administrative agent, collateral agent and security trustee for the lenders. The Revolving Credit Facility provided for a line of credit of up to $50 million inclusive of a sub-facility limit of $10 million for TB Europe, and was secured by substantially all of the Company's assets. The was intended for working capital, letters of credit and other corporate purposes.

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, (iii) and the 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% to 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 June 30, 2025, interest rates for outstanding borrowings were 8.10% for base rate loans and 4.32% for Term SOFR loans.

Current wording

On March 13, 2024, the Company entered into a Fourth Amendment, dated as of March 13, 2024 (the “Fourth Amendment”), to the Revolving Credit Facility. The Fourth Amendment extended the maturity date to March 13, 2027, incorporated PDP acquisition assets into the U.S. Borrowing Base ( up to $15,000,000 or 30% of the aggregate Revolver Commitments), and updated interest terms. Loans bore interest at SOFR, U.S. Base Rate, SONIA or EUIBOR, plus applicable margins, which was between 0.50% to 2.50% for base rate loans and UK base rate loans, and 1.75% to 3.50% for U.S. BSBY rate loans, U.S. BSBY daily floating rate loans and UK alternative currency loans. In addition, Turtle Beach was 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.

Previous wording

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. As the prepayment period concluded on March 13, 2025, the Term Loan Facility is no longer subject to the prepayment premium applied during the first year. 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 wording

On March 13, 2024, Turtle Beach and certain of its subsidiaries entered into a new financing agreement with Blue Torch Finance, LLC, (“Blue Torch”), pursuant to which Blue Torch provided 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 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 amortized in a monthly amount equal to 0.21% during the first two years and 0.42% during the third year. As the prepayment period concluded on March 13, 2025, the Term Loan Facility was no longer subject to the prepayment premium applied during the first year. The Term Loan Facility was secured by substantially all of the assets of the Company and its subsidiaries which were party to the Term Loan Facility.

Previous wording

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 June 30, 2025, the interest rate for outstanding borrowings was 12.19%.

Current wording

The Term Loan Facility (a) had a maturity date of March 13, 2027; (b) bore 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) was subject to certain affirmative, negative and financial covenants, including a minimum liquidity covenant and a quarterly total net leverage ratio covenant.

Previous wording

On August 1, 2025, the Company entered into the Credit Agreement (the “Credit Agreement”) with Bank of America, as the administrative agent, the swingline lender and the line of credit issuer, replacing the Company’s previous debt arrangements. The Credit Agreement, matures on August 1, 2028 and includes a $60 million term loan facility and a $90 million revolving credit facility with designated sub-facility limits of (i) $15 million for the U.K. Borrower, (ii) $10 million or a swingline facility and (iii) $5 million for letters of credit. Actual credit availability under the revolving facility is subject to a borrowing base limitation that is calculated based on a percentage of eligible trade accounts receivable and inventories, the balances of which fluctuate, and is subject to discretionary reserves and revaluation adjustments. The Company may utilize the facilities for borrowings as well as for the issuance of letters of credit, repaying existing indebtedness outstanding as of the effective date of the Credit Agreement and ongoing working capital and general corporate purposes as defined by the Credit Agreement. The facilities under the Credit Agreement replaced the Company’s previous debt arrangements.

Current wording

On August 1, 2025, the Company and certain of its subsidiaries (the "Borrowers") entered into the Credit Agreement (the “Credit Agreement”) with Bank of America, as the administrative agent, the swingline lender and the line of credit issuer. The Credit Agreement, matures on August 1, 2028 and includes a $60 million term loan facility and a $90 million revolving credit facility with designated sub-facility limits of (i) $15 million for the U.K. Borrower, (ii) $10 million for a swingline facility and (iii) $5 million for letters of credit. Actual credit availability under the revolving facility is subject to a borrowing base limitation that is calculated based on a percentage of eligible trade accounts receivable and inventories, the balances of which fluctuate, and is subject to discretionary reserves and revaluation adjustments. The Borrowers may utilize the facilities for borrowings as well as for the issuance of letters of credit, repaying existing indebtedness outstanding as of the effective date of the Credit Agreement and ongoing working capital and general corporate purposes as defined by the Credit Agreement. The facilities under the Credit Agreement replaced the Company’s previous debt arrangements.

Previous wording

Borrowings will bear interest at a rate that varies depending on the type of loan calculated using a floating rate plus a margin. Depending on the type of loan, the floating rate will either be the prime rate announced by Bank of America, Term SOFR, Daily Simple SOFR, EURIBOR or SONIA. The margin will range from 2.00% to 2.75% for base rate loans and SONIA based loans and from 3.00% to 3.75% for Term SOFR, Daily Simple SOFR and EURIBOR loans. The Credit Agreement also provides for an unused line fee, letter of credit fees, and agent fees.

Current wording

Borrowings will bear interest at a rate that varies depending on the type of loan and the Borrower. The interest rate will be calculated using a floating rate plus a margin. Depending on the type of loan, the floating rate will either be the prime rate announced by Bank of America, Term SOFR, Daily Simple SOFR, EURIBOR or SONIA. The margin will range from 2.00% to 2.75% for base rate loans and SONIA based loans and from 3.00% to 3.75% for Term SOFR, Daily Simple SOFR and EURIBOR loans. The Credit Agreement also provides for an unused line fee, letter of credit fees, and agent fees. The Borrowers will be able to voluntarily prepay the principal of any advance, without penalty or premium, at any time in whole or in part, subject to certain breakage costs. As of September 30, 2025, interest rates for the term loan and revolving credit facilities were 7.66% and 7.53%, respectively.

Previous wording

The Credit Facility also contains affirmative and negative covenants that, subject to certain exceptions, limit our ability to take certain actions, including the Company’s ability to incur debt, pay dividends and repurchase stock, make certain investments and other payments, enter into certain mergers and consolidations, engage in sale leaseback transactions and transactions with affiliates, and encumber and dispose of assets. Obligations under the Credit Facility are secured by a security interest and lien upon substantially all of the Company’s assets.

Current wording

The Credit Agreement also contains affirmative and negative covenants that, subject to certain exceptions, limit our ability to take certain actions, including our ability to incur debt, pay dividends and repurchase stock, make certain investments and other payments, enter into certain mergers and consolidations, engage in sale leaseback transactions and transactions with affiliates, and encumber and dispose of assets. The Credit Agreement contains customary events of default, including defaults triggered by the failure to make payments when due, breaches of covenants and representations, material impairment in the perfection of the lenders’ security interest in the collateral, and events related to bankruptcy and insolvency of the Company and its subsidiaries. If an event of default occurs and is continuing, the lenders may terminate and/or suspend their obligations to make loans and issue letters of credit and/or accelerate amounts due under the Credit Agreement and exercise other rights and remedies. To secure their obligations under the Credit Agreement, the Company and each of the other loan parties granted an all-assets lien with a first priority security interest in substantially all of their assets to the administrative agent.

Previous wording

As of June 30, 2025, the Company was in compliance with all the financial covenants under the Credit Facility, as amended, and excess borrowing availability was approximately $36.2 million.

Current wording

As of September 30, 2025, the Company was in compliance with all the financial covenants under the Credit Agreement and excess borrowing availability was approximately $34.5 million.