Turtle Beach Corp

Note 1. Description of Business

Organization

Turtle Beach Corporation (“Turtle Beach” or the “Company”), develops and markets audio and gaming accessory products under the Turtle Beach® brand for use with video game and entertainment consoles, handheld consoles, personal computers (“PCs”), tablets, and mobile devices. The Company’s product offerings have expanded over time beyond gaming headsets to include gaming controllers, flight and racing simulation accessories, and PC keyboards and mice. In March 2024, the Company acquired Performance Designed Products LLC (“PDP”), a gaming accessory provider with a broad portfolio of products, including multi‑platform controllers and offerings developed under various licensed gaming and entertainment properties. The Company operates within the gaming accessories market and sells its products through a variety of retail, distribution, and ecommerce channels in the U.S. and international markets. The Company is headquartered in San Diego, California, was incorporated in the State of Nevada in 2010.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and, in the opinion of management, reflect all adjustments (which include normal recurring adjustments) considered necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. All intercompany accounts and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassifed to conform to the current period presentation. Certain reclassifications have been made in the prior year to conform with the current year presentation.. The reclassifications did not affect previously reported net income, total assets, total liabilities, stockholders' equity or cash flows.

Uses of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to use estimates and assumptions that affect the reported amount of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. The significant estimates and assumptions used by management affect: sales return reserve, allowances for cash-based incentive programs, warranty reserve, valuation of inventory, valuation of long-lived assets, goodwill and other intangible assets, depreciation and amortization of long-lived assets, valuation of deferred tax assets, probability of performance shares vesting and forfeiture rates utilized in issuing stock-based compensation awards. The Company evaluates estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates, and those differences could be material to the consolidated financial statements.

Revenue Recognition and Variable Consideration

Net revenue consists primarily of revenue from the sale of gaming accessories to wholesalers, retailers and to a lesser extent, on-line customers. These products function on a standalone basis (in connection with a readily available gaming console, personal computer, or stereo) and are not sold with additional services or rights to future goods or services. Revenue is recorded for a contract through the following steps: (i) identifying the contract with the customer; (ii) identifying the performance obligations in the contract; (iii) determining the transaction price; (iv) allocating the transaction price to the performance obligations; and (v) recognizing revenue when or as each performance obligation is satisfied.

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 the 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.

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 which are another form of variable consideration 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, 2025 and 2024, the Company had allowances for cash-based incentives of$29.6 million and $32.6 million, respectively, and allowances for sales returns of$8.4 million and $7.7 million, respectively. These amounts are recorded as a reduction of "accounts receivable, net" on the consolidated balance sheets.

During the years ended December 31, 2025, 2024 and 2023, the Company revised its estimates for trade promotion expense incurred in the applicable prior year period as a result of actual experience and new information that was not available at the time the accruals were established. These changes in estimate resulted in an increase in net sales of 1.8%,0.3% and 0.8% during the years ended December 31, 2025, 2024 and 2023, respectively.

Cost of Revenue and Operating Expenses

The following table illustrates the primary costs classified in each major expense category:

Product Warranty Obligations

The Company provides for product warranties in accordance with the contract terms given to various customers by accruing estimated warranty costs at the time of revenue recognition. Warranties are generally fulfilled by replacing defective products with new products.

Marketing Costs

Costs associated with the production of advertising, such as print and other costs, as well as costs associated with communicating advertising that has been produced are expensed when the advertising first appears in public. Advertising costs were approximately$3.2 million,$3.8 million and$3.9 million for the years ended December 31, 2025, 2024 and 2023, respectively.

The Company also incurs co-operative advertising costs that represent reimbursements to customers for shared marketing expenses for sale of its products. These reimbursements are recorded as reductions of revenue based on a percentage of sales. Co-operative advertising costs were approximately$7.4 million, $9.4 million and$5.6 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Deferred Financing Costs

Deferred financing costs represent costs incurred in conjunction with the Company’s debt financing activities and are capitalized and amortized over the life of the related financing arrangements utilizing the effective interest method. If the debt is retired early, the related unamortized deferred financing costs are written off in the period the debt is retired as part of the net carrying value of the debt, and any gains or losses are recorded on the consolidated statements of operations within Interest expense, net.

Stock-Based Compensation

Compensation costs related to stock options, restricted stock grants and performance-based or market-based restricted share units are calculated based on the fair value of the stock-based awards on the date of grant, net of estimated forfeitures. The grant date fair value of stock options is determined using the Black-Scholes option-pricing model and the related stock-based compensation is recognized on a straight-line basis over the period in which an employee is required to provide service in exchange for the award, which is generally four years.

The Company estimates its forfeiture rate based on an analysis of actual forfeitures and will continue to evaluate the adequacy of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover behavior, and other factors. The impact from any forfeiture rate adjustment would be recognized in the period of adjustment and if the actual number of future forfeitures differs from estimates, the Company might be required to record adjustments to stock-based compensation expense. The grant date fair value of restricted stock grants is determined based on the grant date value of the Company’s common stock and is recognized on a straight-line basis over the period in which an employee is required to provide service in exchange for the award. The grant date fair value of performance-based restricted share units is calculated in the same manner as restricted stock grants with the exception that the Company recognizes compensation expense when it is probable that the performance condition will be achieved. The grant date fair value of market-based awards is determined using a Monte Carlo simulation, incorporating various option pricing inputs and recognized over the vesting period.

Exit and Disposal Costs

Management-approved restructuring activities are periodically initiated to achieve cost savings through reduced operational redundancies and to position the Company strategically in the market in response to prevailing economic conditions and associated customer demand. Costs associated with restructuring actions can include severance, infrastructure charges to vacate facilities or consolidate operations, contract termination costs and other related charges. For involuntary separation plans, a liability is recognized when it is probable and reasonably estimable. For one-time termination benefits, such as additional severance pay or benefit payouts, and other exit costs, such as lease termination costs, the liability is measured and recognized initially at fair value in the period in which the liability is incurred, with subsequent changes to the liability recognized as adjustments in the period of change.

Net Income (Loss) per Common Share

Basic income (loss) per share is calculated by dividing net income (loss) associated with common stockholders by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share assumes the issuance of additional shares of common stock by the Company upon exercise of all outstanding stock options, stock warrants and contingently issuable securities if the effect is dilutive, in accordance with the treasury stock method.

Cash and Cash Equivalents

The Company classifies cash and short-term highly liquid investments with original maturity dates of three months or less at time of purchase, and without redemption restrictions.

Inventories

Inventories consist primarily of finished goods and related component parts and are stated at the lower of cost or net realizable value using the first in, first out (“FIFO”) method. The Company maintains an inventory allowance for returned goods, slow-moving and unused inventories based on the historical trend and estimates. Inventory write-downs, once established, are not reversed as they establish a new cost basis for the inventory. Inventory write-downs are included as a component of “cost of revenue” on the consolidated statements of operations.

Property and Equipment, net

Property and equipment are presented at cost less accumulated depreciation and amortization. Repairs and maintenance expenditures are expensed as incurred. Depreciation and amortization are computed on a straight-line basis over the following estimated useful lives:

Valuation of Long-Lived and Intangible Assets and Goodwill

At acquisition, the Company estimates and records the fair value of purchased intangible assets, which primarily consists of developed technology, customer relationships, and trademarks and trade names. Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. Goodwill and certain other intangible assets having indefinite lives are not amortized to earnings, but instead are subject to periodic testing for impairment. Intangible assets determined to have definite lives are amortized over their remaining useful lives.

Long-lived and definite-lived intangible assets are assessed for potential impairment whenever events or changes in circumstances indicate that full recoverability of the asset group through future cash flows is in question. When impairment indicators are present, assessment for possible impairment is based on the Company’s ability to recover the carrying value of the long-lived asset’s asset group from expected future pre-tax cash flows. The expected future pre-tax cash flows are estimated based on historical experience, internal knowledge, and market data. Estimates of future cash flows require the Company to make assumptions and to apply judgment, including forecasting future sales and expenses and estimating the useful lives of assets. If the expected future cash flows of the asset group related to the long-lived assets are less than the asset group’s carrying value, an impairment charge is recognized for the difference between estimated fair value and carrying value. In 2024, the Company recorded a right-of-use asset impairment charge of $0.8 million related to the unused leased warehouse facility. There wereno additional impairment indicators on the Company’s long-lived and definite-lived intangible assets in 2025.

Goodwill and indefinite-lived intangible assets are assessed at least annually, but also whenever events or changes in circumstances indicate the carrying values may not be recoverable. Factors that could trigger an impairment review include (a) significant underperformance relative to historical or projected future operating results; (b) significant changes in the manner of use of the acquired assets or the strategy for the Company’s overall business; (c) significant negative industry or economic trends; (d) significant decline in the Company’s stock price for a sustained period; and (e) a decline in the Company’s market capitalization below net book value. When performing the Company’s evaluation of goodwill for impairment, if it concludes qualitatively that it is more likely that the fair value of the reporting unit is less than its carrying amount, the Company performs its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. If the carrying amount exceeds the fair value a goodwill impairment charge would be recorded for the amount by which the reporting unit’s carrying amount exceeds its fair value. In addition, identifiable intangible assets having indefinite lives are reviewed for impairment on an annual basis using a methodology consistent with that used to evaluate goodwill.

The Company conducted its annual impairment assessment on November 1, 2025, and compared the fair value of the reporting unit to the carrying value. No goodwill impairment charges have been recorded during the years ended December 31, 2025, 2024 or 2023.

The Company accounts for income taxes in accordance with the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying value of existing assets and liabilities and their respective tax bases based on enacted tax laws and statutory tax rates applicable to the periods in which the Company expects the temporary differences to reverse.

A valuation allowance is established for deferred tax assets when management anticipates that it is more likely than not that all, or a portion, of these assets would not be realized. In determining whether a valuation allowance is warranted, all positive and negative evidence and all sources of taxable income such as prior earnings history, expected future earnings, carryback and carryforward periods and tax strategies are considered to estimate if sufficient future taxable income will be generated to realize the deferred tax asset. The assessment of the adequacy of a valuation allowance is based on estimates of taxable income by jurisdiction and the period over which deferred tax assets will be recoverable. In the event that actual results differ from these estimates, or these estimates are adjusted in future periods for current trends or expected changes in assumptions, the Company may need to modify the level of valuation allowance which could materially impact the Company's business, financial condition, and results of operations.

The tax effects of uncertain tax positions taken or expected to be taken in income tax returns are recognized only if they are “more likely-than-not” to be sustained on examination by the taxing authorities based on the technical merits as of the reporting date. The tax benefits recognized in the financial statements from such positions are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. The Company recognizes estimated accrued interest and penalties related to uncertain tax positions in “income tax expense” on the consolidated statement of operations.

The Company and its domestic subsidiaries file a consolidated federal income tax return, while the Company’s foreign subsidiary files in its respective local jurisdictions.

Leases

The Company determines if an arrangement is a lease at inception. The Company leases office spaces that provide for future minimum rental lease payments under non-cancelable operating leases that have remaining lease terms ofone year toeight years, and do not contain any material residual value guarantees or material restrictive covenants. For operating leases, the Company includes and reports operating lease right-of-use (“ROU”) assets, sundry payables and accrued expenses, and noncurrent operating lease liabilities on the consolidated balance sheet for leases with a term longer than twelve months. Finance leases are reported on the consolidated balance sheets in property, plant and equipment, current portion of other debt, and long-term debt.

Operating lease ROU assets and operating lease liabilities are recognized at the lease commencement date based on the present value of the total lease payments over the lease term. The ROU assets represent the right to use an underlying leased asset over the existing lease term, and the corresponding lease liabilities represent the obligation to make lease payments arising from the lease agreement. As most of the Company’s leases do not provide for an implicit rate, the Company utilizes the secured incremental borrowing rate based on the information available when determining the present value of our lease payments. The lease terms may include options to terminate, or extend, our lease whenit is reasonably certain that the Company will execute the option. Lease agreements may contain lease and non-lease components, which are generally accounted for separately. Operating lease expense is recognized on a straight-line basis over the lease term.

Business Combinations

The Company allocates the purchase price of acquisitions to the tangible and intangible assets acquired, liabilities assumed, and non-controlling interests in the acquiree based on their estimated fair value at the acquisition date. The excess of the acquisition price over those estimated fair values is recorded as goodwill. Changes to the acquisition date provisional fair values prior to the expiration of the measurement period, a period not to exceed 12 months from date of acquisition, are recorded as an adjustment to the associated goodwill. Acquisition related expenses and restructuring costs, if any, are recognized separately from the business combination and are expensed as incurred.

Fair Value of Financial Instruments

The Company determines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses a hierarchical structure to prioritize the inputs used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1), then to quoted market prices for similar assets or liabilities in active or inactive markets (Level 2) and gives the lowest priority to unobservable inputs (Level 3).

Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and debt instruments. Cash equivalents are stated at amortized cost, which approximates fair value as of the consolidated balance sheet dates, due to the short period of time to maturity; and accounts receivable and accounts payable are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment. The carrying value of the Revolving Credit Facility and Term Loan equals fair value as the stated interest rate approximates market rates currently available to the Company.

The Company didnot have any non-financial assets or non-financial liabilities recognized at fair value on a recurring basis at December 31, 2025.

Foreign Currency Translation

Balance sheet accounts of the Company’s foreign subsidiaries are translated at the exchange rate in effect at the end of each period. Statement of operations accounts are translated using the weighted average of the prevailing exchange rates during each period. Gains or losses resulting from foreign currency transactions are included on the Company’s consolidated statements of operations within Other non-operating expense, net, whereas translation adjustments are reflected on the consolidated statements of comprehensive income (loss) within Foreign currency translation adjustment.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of investments in cash, cash equivalents and accounts receivables. The Company is exposed to credit risk and liquidity risk in the event of default by the financial institutions or issuers of investments in excess of FDIC insured limits. The Company performs periodic evaluations of the relative credit standing of these financial institutions and limits the amount of credit exposure with any institution.

Accounts receivable are unsecured and represent amounts due based on contractual obligations of customers. Accounts receivable from the Company's major customers representing 10% or more of total accounts receivable were as follows:

Customers that accounted for more than 10% of revenue during the years ended December 31, 2025, 2024 and 2023 were as follows:

Concentrations of credit risk with respect to accounts receivable are mitigated by performing ongoing credit evaluations of customers to assess the probability of collection based on a number of factors, including past transaction experience with the customer, evaluation of their credit history, limiting the credit extended, and review of the invoicing terms of the contract. In addition, the Company has credit insurance in place through a third-party insurer against defaults by certain other domestic and international customers, subject to policy limits. The Company generally does not require customers to provide collateral to support accounts receivable. The Company has recorded an allowance for credit losses for those receivables that were determined not to be collectible, which is not material.

Foreign cash balances at December 31, 2025 and 2024 were$8.7 million and$4.5 million, respectively.

Segment Information

The company operates in asingle reportable segment, referred to as gaming accessories. The entire business is managed by a single management team whose chief operating decision maker is the Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance.

Accounting Pronouncements Issued and Adopted

In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. This ASU is effective for fiscal years beginning after December 15, 2024 and allows for adoption on a prospective basis, with early adoption is permitted. The Company adopted this standard and has appropriately made the disclosures required by this authoritative guidance (see Note 8).

Accounting Pronouncements Issued but Not Yet Adopted

The Company considers the applicability and impact of all Accounting Standards Update (“ASUs"). ASUs not referenced below were assessed and determined to be either not applicable or are not expected to have a material impact on the Company's consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which is intended to improve disclosures related to certain income statement expenses of the Company. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard to determine its impact on the Company's disclosures.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient and accounting policy election which will result in reduced complexity for the measurement of credit losses arising from transactions accounted for under ASC 606—Revenue from Contracts with Customers, which include current contract assets and current contract receivable. Specifically, the practical expedient permits entities to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset, and the accounting policy election permits an entity other than a public business entity to consider collection activity after the balance sheet date when estimating expected credit losses. Entities electing to apply the practical expedient and the accounting policy election, if applicable, should apply the amendments prospectively. This ASU will be effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard to determine its impact on the Company's disclosures.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), which modernizes and simplifies the accounting costs incurred to develop or acquire internal use software costs. The update eliminates the legacy three-stage waterfall model - preliminary, application development, and post-implementation. Under the new standard, capitalization begins when management authorizes and commits funding for the project and completion is probable, aligning better with agile and iterative development practices. The types of costs eligible remain unchanged, and the update does not affect accounting for software developed for sale or licensing. This ASU will be effective for fiscal years beginning after December 15, 2025, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard and does not expect that it will have a material impact on its disclosures.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies that all entities issuing interim financial statements under U.S. GAAP must follow ASC 270. The update requires interim financial statements to include a full set of financial information (or condensed versions with clarified format), mandates disclosure of material events since year-end, and provides a consolidated list of required interim disclosures. This ASU will be effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The amendments in this update can be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact of the adoption of this standard and does not expect that it will have a material impact on its disclosures.

Note 3. Business Combinations

On March 13, 2024, the Company acquired all the issued and outstanding equity of PDP for consideration that included cash and common stock. PDP was a privately held gaming accessories leader that designs and distributes video game accessories, including controllers, headsets, power supplies, cases, and other accessories. As a result of the acquisition, the Company strengthened its leadership position in hardware and gaming accessories and expanded its product portfolio.

Consideration for the transaction consisted of the issuance of 3.45 million shares of Company common stock and approximately $78.9 million in cash, subject to customary post-closing adjustments for working capital, closing cash, closing debt and closing third party expenses. On a fully-diluted basis, issued stock represented approximately 16.4% of the total issued and outstanding shares of the Company as of the closing date. The fair value of the 3.45 million common shares issued as part of the consideration was determined on the basis of the closing market price of the Company’s common shares on the acquisition date, or $11.03 per share. As a result, the total final purchase consideration was$114.4 million, partially funded by borrowing on the term loan facility (see Note 7). For the year ended December 31, 2024, the Company recognized $9.8 million of acquisition related costs.

The following table summarizes preliminary allocation of the consideration transferred to the assets acquired and liabilities assumed at the acquisition date:

On January 28, 2025, the Company finalized the post-closing adjustments related to the acquisition of PDP, resulting in a $2.5 million payment from the sellers to the Company. The payment was received by the Company in January 2025 and was accounted for as a reduction of purchase consideration during the year ended December 31, 2025.

The goodwill from the acquisition, which is not deductible for tax purposes, consists largely of synergies and economies of scale expected from adding the operations of PDP's and the Company’s existing business and supply channels.

Note 4. Fair Value Measurement

The Company follows a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

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Level 1 — Quoted prices in active markets for identical assets or liabilities.

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Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

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Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and the revolving line of credit. As of December 31, 2025 and 2024, the Company has not elected the fair value option for any financial assets and liabilities for which such an election would have been permitted.

The following is a summary of the carrying amounts and estimated fair values of the Company’s financial instruments at December 31, 2025 and 2024 (in thousands):

Cash equivalents are stated at amortized cost, which approximates fair value as of the consolidated balance sheet dates, due to the short period of time to maturity; and accounts receivable and accounts payable are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment. The carrying values of the Revolving Credit Facility and Term Loan due 2028 approximate fair value as their stated interest rates reflect current market rates.

Note 5. Balance Sheet Components

Inventories

Inventories consist of the following (in thousands):

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.

Duringthe year ended December 31, 2025, the Company received insurance proceeds of $9.4 million from the loss of inventory and recorded the amount within operating income.

Property and Equipment, net

Property and equipment, net consists of the following (in thousands):

During the year ended December 31, 2025, the Company completed a review of its fixed assets ledger and wrote-off certain fully depreciated demonstration units and tooling with an aggregate carrying amount of$24.4 million. There wereno proceeds recognized upon disposaland no gain or loss recorded on the write-off of these assets.

Depreciation and amortization expense on property and equipment for the years ended December 31, 2025, 2024 and 2023 was$4.4 million,$4.4 million and$3.8 million, respectively.

Other Current Liabilities

Other current liabilities consist of the following (in thousands):

Note 6. Goodwill and Other Intangible Assets

Intangible Assets

Identifiable intangible assets, and related accumulated amortization, as of December 31, 2025 and 2024 consist of (in thousands):

Amortization expense related to definite lived intangible assets was$8.1 million,$7.0 million and$1.0 million for the years ended December 31, 2025, 2024 and 2023, respectively.

As of December 31, 2025, estimated annual amortization expense related to definite lived intangible assets in future periods is as follows (in thousands):

All goodwill is attributable to the gaming accessories reporting unit. Changes in the carrying values of goodwill fortwelve months ended December 31, 2025 are as follows (in thousands):

Note 7. Credit Facilities and Long-Term Debt

Total interest expense, inclusive of amortization of deferred financing costs, on long-term debt obligations was$7.9 million,$8.3 million and$0.6 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Amortization of deferred financing costs was$1.0 million,$0.9 million and$0.1 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Revolving Credit Facility

In 2024, the Company maintained a Revolving Credit Facility with Bank of America that provided up to $50.0 million in borrowing capacity, including a $10.0 million sub-facility for TB Europe, and was secured by substantially all Company assets. 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 Company executed a Fourth Amendment to the facility, extending the maturity to March 13, 2027, incorporating PDP acquisition assets into the U.S. Borrowing Base and updating interest rate and fee terms. The facility included customary covenants, included a minimum fixed-charge coverage ratio when availability thresholds were not met, and restrictions on additional indebtedness, dividends share repurchases, certain investments, mergers, and asset sales.

On August 1, 2025, the Company entered into a Credit Agreement (the “Credit Agreement”), discussed below, and made a payment of$16.0 million from the Bank of America term loan facility, including$15.9 million and$0.1 million of principal and accrued interest, respectively, to pay off the outstanding Revolving Credit Facility on this date. The Company treated the Credit Agreement as a partial extinguishment to the Revolving Credit Facility and recognized a loss on extinguishment of debt of$0.3 million to write-off the unamortized deferred financing costs in interest expense on the consolidated statements of operations.

Term Loan

In March 2024, the Company entered into a $50.0 million Term Loan Facility with Blue Torch Finance, LLC to support the PDP acquisition, repay certain indebtedness of the acquired business, cover transaction‑related fees, and provide general corporate liquidity. The facility was being amortized over its term, was secured by substantially all Company assets, and carried a prepayment premium that expired in March 2025.

The Term Loan Facility was scheduled to mature on March 13, 2027 and included interest rates tied to base rate or Secured Overnight Financing Rate benchmarks with leverage‑based pricing tiers, as well as customary affirmative, negative, and financial covenants, including minimum liquidity and quarterly total net leverage requirements. As discussed below, the facility was refinanced in 2025 in connection with the Company’s new Credit Agreement.

On August 1, 2025, the Term Loan Facility was repaid in full from the proceeds of the Bank of America credit agreement, discussed below, for the amount of$43.2 million. The Company treated the repayment as a debt extinguishment and recognized a loss on extinguishment of debt of$1.7 million to write-off the unamortized deferred financing costs in interest expense in the condensed consolidated statements of operations.

Credit Agreement

On August 1, 2025, the Company and certain of its subsidiaries (the “Borrowers”) entered into 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 andincludes a $60.0 million term loan facility and a $90.0 million revolving credit facility with designated sub-facility limits of (i) $15.0 million for the U.K. Borrower, (ii) $10.0 million for a swingline facility and (iii) $5.0 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.

Borrowings bear interest at a rate that varies depending on the type of loan and the Borrower. The interest rate is 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 ranges 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 December 31, 2025, interest rates for the term loan and revolving credit facilities were 7.27% and 7.11%, respectively.

The Credit Agreement requires the Company and its subsidiaries to (i) maintain a fixed charge coverage ratio, defined as the ratio, determined on a consolidated basis for the Company and its subsidiaries for the applicable measurement period, of (a) EBITDA minus unfinanced capital expenditures and cash taxes paid for such period to (b) consolidated interest charges for such period plus principal payments or redemptions of outstanding debt plus certain restricted payments and (ii) maintain a consolidated leverage ratio, defined as the ratio, determined on a consolidated basis for the Company and its subsidiaries for the applicable measurement period, of (a) certain funded indebtedness minus unrestricted cash up to a maximum of $12.0 million to (b) EBITDA.

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.

As of December 31, 2025, the Company was in compliance with all the financial covenants under the Credit Agreement and excess borrowing availability was approximately$41.1 million.

As part of the Credit Agreement, the Company recorded an aggregate amount of deferred debt financing costs of$2.3 million.

On December 29, 2025, the Company entered into a First Amendment to its Credit Agreement (the "First Amendment"). The First Amendment revised clause (b)(iii) of the definition of “Consolidated Fixed Charge Coverage Ratio” to permit the Company to exclude from the denominator of such ratio up to $10.0 million of restricted payments for the trailing twelve‑month period ended March 31, 2026, and an additional $10.0 million of restricted payments for the trailing twelve‑month period ended June 30, 2026. Aside from this modification, all other material terms, covenants, and conditions of the Credit Agreement remained unchanged.

Maturities of Term Loan Debt

As of December 31, 2025, maturities of debt, assuming no prepayments, are as follows (in thousands):

Note 8. Income Taxes

Income (loss) before income taxes consisted of the following (in thousands):

The provision for income taxes consists of the following (in thousands):

The Company's actual provision for tax differed from the amounts computed by applying the U.S. federal income tax rate of 21% to pretax income as a result of the following: (in thousands, except percentages):

The Company determines the amount of state tax liability based on current year operations. In accordance with the guidance under ASU 2023-09, Texas and California contributed to a majority of the effect of the state income taxes.

The reconciliation between the provision (benefit) for income taxes and the provision (benefit) for income taxes at the U.S. federal statutory rate before the adoption of ASU 2023-09 is as follows (in thousands, except percentages):

The tax effects of significant items comprising the Company’s deferred tax assets (liabilities) are as follows (in thousands):

As required by the authoritative guidance on accounting for income taxes, the Company assesses the realizability of its net deferred tax assets by evaluating all available evidence, both positive and negative, including (1) cumulative results of operations in recent years, (2) sources of recent losses, (3) estimates of future taxable income and (4) the length of net operating loss carryforward periods. The Company believes that based on the history of its U.S. losses and other factors, the weight of available evidence indicates that it is more likely than not that it will not be able to realize its U.S. net deferred tax assets. Accordingly, the U.S. net deferred tax assets have been offset by a full valuation allowance. The valuation allowance changed by $(2.4) million for the tax year ended December 31, 2025 and changed by $(9.0) million for the tax year ended December 31, 2024. As of December 31, 2025, the Company had domestic federal net operating loss carryforwards of $25.6 million. As of December 31, 2025, the Company had state federal net operating loss carryforwards of $42.7 million that can reduce future taxable income. The domestic federal net operating losses have indefinite carryforward lives. Certain domestic states have indefinite carryforward lives while others will begin to expire in 2029. As of December 31, 2025, the Company had credit carryforwards of $1.0 million that can reduce future taxable income. The credits will begin to expire in 2026 and 2027, respectively.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):

The Company recognizes only those tax positions that meet the more-likely-than-not recognition threshold and establishes tax reserves for uncertain tax positions that do not meet this threshold. To the extent these unrecognized tax benefits are ultimately recognized, approximately $1.8 million will impact the Company's effective tax rate and $0.1 million will be offset by a valuation allowance in future periods. The Company is filing for relief provisions in certain jurisdictions and based on such anticipated filings, it is reasonably possible that amounts of unrecognized tax benefits could decrease by $0.1 million within the next twelve months. Interest and penalties associated with income tax matters are included in the provision for income taxes. As of December 31, 2025, the Company had uncertain tax positions of $1.8 million, inclusive of$0.4 million of interest and penalties.

The amounts of cash income taxes paid, net of refunds, for the year ended December 31, 2025 were as follows:

The amount of cash income taxes paid, net of refunds, during the years ended December 31, 2024 and 2023 was $0.2 million and $0.1 million, respectively.

The Company is not currently under examination by federal, state or foreign taxing jurisdictions. Further, at any given time, multiple tax years may be subject to examination by various taxing authorities. The recorded amounts of income tax are subject to adjustment upon examination, changes in interpretation and changes in judgment utilized in determining estimates.

The Company considers the earnings of its foreign entities to be permanently reinvested outside the United States based on estimates that future cash generation will be sufficient to meet future domestic cash needs. Accordingly, deferred taxes have not been recorded for the undistributed earnings of the Company's foreign subsidiaries. As a result of the Tax Cuts and Jobs Act ("TCJA") and the current U.S. taxation of deemed repatriated earnings, the additional taxes that might be payable upon repatriation of foreign earnings are not significant.

The TCJA introduced a provision to tax global intangible low-taxed income (“GILTI”) of foreign subsidiaries and a measure to tax certain intercompany payments under the base erosion anti-abuse tax “BEAT” regime. For the years ended December 31, 2024 and 2023, the Company did not generate intercompany transactions that met the BEAT threshold but does have to include GILTI relating to the Company's foreign subsidiaries. The Company elected to account for GILTI as a current period cost.

The Company is subject to income taxes domestically and in various foreign jurisdictions. The Company files U.S., state and foreign income tax returns in jurisdictions with various statutes of limitations. The federal tax years open under the statute of limitations are 2021 through 2023, the state tax years open under the statute of limitations are 2021 through 2023, and the foreign tax years open under the statute of limitations are 2021-2023.

On August 16, 2022, the Inflation Reduction Act was signed into law. The Inflation Reduction Act includes various tax provisions, which are effective for tax years beginning on or after January 1, 2023. For tax years beginning after December 31, 2021, the Tax Cuts & Jobs Act of 2017 eliminated the option to deduct research and development expenditures as incurred and instead required taxpayers to capitalize and amortize them over five or 15 years beginning in 2022. The Company included the impact of the research and development expenditures in its December 31, 2024 and 2023 tax expense. The Inflation Reduction Act includes a 1% excise tax on publicly traded US corporations for the value of its stock repurchased after December 31, 2022. The Company didnot incur excise tax on stock repurchased for the year ended December 31, 2024 and 2023. The Company will continue to monitor possible future impact of changes in tax legislation.

In July 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, restoring immediate expensing for domestic research and development (“R&D”) expenditures and providing transition rules for amounts previously capitalized under Internal Revenue Code Section 174. For the year ended December 31, 2025, the Company has elected, as permitted under OBBBA, to deduct in the current year all remaining unamortized domestic R&D costs that were capitalized in prior years, as well as to immediately expense all qualifying current‑year domestic R&D expenditures. This election resulted in a significant increase in deductible expenses for income tax purposes in 2025, reducing the Company’s current federal taxable income and impacting the measurement of related deferred tax assets and liabilities. Foreign R&D expenditures continue to be capitalized and amortized over 15 years in accordance with applicable tax law. The Company will continue to monitor the impact of OBBBA on its effective tax rate and cash tax position in future periods.

Note 9. Net Income (Loss) Per Share

The following table sets forth the computation of basic and dilutednet income (loss) per share of common stock attributable to common stockholders (in thousands, except per-share data):

The weighted average common shares outstanding for basic and diluted includes the Company's wholly-funded warrants.

Incremental shares from stock options and restricted stock awards are computed by the treasury stock method. The treasury stock method calculates dilution assuming the exercise of all in-the-money options and vesting of restricted stock, reduced by the repurchase of shares with the proceeds from the assumed exercises, unrecognized compensation expense for outstanding awards and the estimated tax benefit of the assumed exercises.

The weighted average shares listed below were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive for the periods presented or were otherwise excluded under the treasury stock method (in thousands):

Note 10. Equity and Stock-Based Compensation

Stock Repurchase Activity

On May 7, 2025, The Company's Board of Directors authorized a stock repurchase program to acquire up to $75.0 million of its common stock. The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements, restrictions in the Company’s debt agreements and other factors. The Company intends to fund the share repurchases using cash from operations or borrowings and may suspend or discontinue repurchases at any time. The share repurchase program is scheduled to expire on May 6, 2027.

On August 14, 2025, the Company entered into a stock purchase agreement regarding the purchase and sale of shares of its common stock beneficially owned by DC VGA LLC (“Diversis”), in a private transaction. The Company agreed to purchase 694,926 shares at a price of $14.41 per share of common stock for a total of $10.0 million. In addition, Diversis agreed to sell 693,962 shares to TDG CP LLC, a Delaware limited liability company (“Donerail”) at a price of $14.41 per share of common stock for a total of $10.0 million. The purchase price per share of common stock for each transaction represents the average of the volume weighted average price of the common stock of the thirty days prior to and including August 14, 2025. Donerail is an entity affiliated with William Wyatt, a member of the Company's Board of Directors and Dave Muscatel, who was a member of the Board of Directors at the time of the transaction, is affiliated with Diversis. The Audit Committee of the Board of Directors, comprised solely of independent directors not affiliated with Diversis and Donerail, approved the transactions. The agreement contains customary representations, warranties and covenants of the parties.

During the year ended December 31, 2025, the Company has repurchased 1.3 million shares of its common stock. The total cost of the repurchase as of December 31, 2025 was$19.0 million.

On April 9, 2019, the Board of Directors authorized a stock purchase program for up to $15.0 million of the Company's common stock. The Board expanded the authorization to $25.0 million on April 1, 2021, and extended the program for an additionaltwo years on March 3, 2023. On April 9, 2024, the Board further increased the authorization to $55.0 million. This stock purchase program was utilized prior to the commencement of the May 7, 2025 stock repurchase program.

Stock-Based Compensation

On October 30, 2013, the Board of Directors adopted, and on December 27, 2013, the stockholders approved, the 2013 Stock-Based Incentive Compensation Plan, which was subsequently renamed the 2023 Stock-Based Incentive Compensation Plan (the “2023 Plan”), which was subsequently amended at the 2019, 2021, 2023 and 2025 annual meetings of stockholders to increase the total number of shares of common stock authorized for grant. The Company’s stock-based compensation program is a broad-based program designed to attract and retain employees while also aligning employees’ interests with the interests of the Company's stockholders. In addition, members of the Board of Directors participate in the stock-based compensation program in connection with their service on the Board of Directors.

Stock options awards outstanding under the 2023 Plan are time-based and granted at exercise prices which are equal to the market value of the Company’s common stock on the grant date. These options expire no later thanten years from the date of grant and may be exercised only to the extent they have vested. The options generally vest as specified in the option agreements subject to continued employment and in some instances, to acceleration in certain circumstances. In the event a participant terminates employment with the Company, any vested stock options are generally forfeited if they are not exercised within 90 days.

Stock awards, primarily restricted stock, under the 2023 Plan are time-based and granted at market value of the Company's common stock on the date of grant. The awards generally vest as specified in the award agreements subject to continued employment and in some instances, to acceleration in certain circumstances. In the event a participant terminates employment with the Company, any unvested stock awards are generally forfeited upon termination.

The following table presents the stock award activity and the total number of shares available for grant as of December 31, 2025:

Total estimated stock-based compensation expense for employees and non-employees, related to all of the Company's stock-based units, was comprised as follows (in thousands):

Forfeitures on stock awards are estimated at 10% based on evaluation of historical and expected future turnover for non-executives and 0% for executives. Stock-based compensation expense was recorded net of estimated forfeitures, such that expense was recorded only for those stock-based awards that are expected to vest. The Company reviews this assumption periodically and will adjust it if it is not representative of future forfeiture data and trends within employee types (senior management vs. non-executive).

On May 1, 2023, the Company announced that the Company and Juergen Stark, Chairman, Chief Executive Officer and President of the Company, agreed that Mr. Stark would not continue as Chairman, Chief Executive Officer and President of the Company, with his employment to terminate effective as of the close of business on June 30, 2023. On May 2, 2023, the Company entered into a separation agreement with Mr. Stark, resulting in an acceleration of the total stock-based compensation associated with equity awards granted to him. During the year ended December 31, 2023, the Company recorded a total of $4.0 million in stock-based compensation expenses and related payroll that would not have been recognized if Mr. Stark had not announced his retirement.

The associated tax benefit recognized on the consolidated statements of operations for the fiscal years ended December 31, 2024 and 2023 was approximately $0.4 million and $0.3 million, respectively.

Stock Option Activity

Aggregate intrinsic value represents the difference between the estimated fair value of the underlying common stock and the exercise price of outstanding, in-the-money options. The aggregate intrinsic value of option exercises was$1.6 million, $2.7 million and $3.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.

As of December 31, 2025, there was no unrecognized compensation cost related to non-vested stock options granted to employees.

No options were granted during the years ended December 31,2025 and 2024. Employee stock options vested during 2025; however, the total estimated fair value vested during the year was immaterial. The total estimated fair value of employee options that vested during years ended December 31, 2024 and 2023 was $1.2 million and $1.0 million, respectively.

Restricted Stock Activity

As of December 31, 2025, total unrecognized compensation cost related to the nonvested restricted stock units granted was$7.3 million, which is expected to be recognized over a remaining weighted average vesting period of 2.4 years.

Performance-Based Restricted Share Activity

As of December 31, 2025, the Company had 160,127 performance-based restricted share units (“PSUs”) outstanding. On April 1, 2025, the Company granted 205,884 PSUs to certain members of our management team under the 2023 Plan. The vesting of PSUs is conditional upon the achievement of certain stock price appreciation targets between May 1, 2025 and May 1, 2026, internal financial targets for the year ended December 31, 2025, and continued service over a three-year service period. The number of units that could be earned ranged from 0% to 200% of the target shares depending on the achievement of these targets. Based on the Company’s 2025 financial performance and stock price performance, the number of PSU expected to be earned is subject to approval by the Board in early 2026. One-third of the earned PSUs will vest in the second quarter of 2026, with the remaining two-thirds vesting quarterly over the subsequent two years, subject to continued service.

Included in the Company’s share-based compensation was expense recognized for the Company’s performance-based restricted share unit awards of$1.8 million in 2025, $1.4 million in 2024 and $1.7 million in 2023.

Warrants

As of December 31, 2025, the Company had 550,000 wholly-funded warrants related to a series of transactions pursuant to which the previously outstanding Series B Preferred Stock were retired. The warrants did not expire.

In January 2026, the holders exercised 550,000 wholly-funded warrants to purchase an equal number of shares of the Company's common stock. Upon exercise, no wholly-funded warrants remained outstanding.

Note 11. Segment Information

The Company operates in asingle reportable segment. The entire business is managed by a single management team whose chief operating decision maker isthe Chief Executive Officer, who evaluates segment performance based on operating income (loss) for purposes of allocating resources and evaluating financial performance.

The following table represents total net revenue based on where customers are physically located (in thousands):

The following table reflects the significant expenses of the Company's reportable segment for the following periods (in thousands):

The following table represents property and equipment, net based on physical location (in thousands):

Note 12. Commitments and Contingencies

Litigation

The Company is subject to various legal proceedings and claims that arise in the ordinary course of its business. Although the amount of any liability that could arise with respect to these actions cannot be determined with certainty, in the Company’s opinion, any such liability will not have a material adverse effect on its consolidated financial position, consolidated results of operations or liquidity.

Intellectual Property Dispute: On May 28, 2025, PDP filed an action for declaratory judgment of non-infringement of four patents purportedly owned by OKYN Holdings, Inc., d/b/a Nyko Technologies (“Nyko”) in the United States District Court for the Southern District of California. Nyko had written to PDP on October 31, 2024 asserting that PDP’s Ultra Slim Charge System for PlayStation 4 (“Ultra Slim”) infringed those patents. Nyko has responded to PDP’s complaint and filed counterclaims for patent infringement by the Ultra Slim. On June 12, 2025, Nyko filed a lawsuit in the Southern District of California asserting that PDP and Turtle Beach Corporation infringed the same four patents at issue in the declaratory judgment action filed by PDP. On July 8, 2025, PDP and Turtle Beach moved to dismiss Nyko’s complaint and that motion is pending. On September 30, 2025, PDP moved for judgment on the pleadings on multiple aspects of Nyko’s counterclaims and that motion is pending.

Intellectual Property Dispute: On October 3, 2025, Robert Lyden, an individual, filed a patent infringement lawsuit against PDP, VTB, and Turtle Beach Corporation ("TBC”) in the United States District Court for the District of Minnesota, asserting infringement of one patent by the Victrix™ Pro BFG™ Wireless Controller and Victrix™ Gambit Wireless Controller. On December 16, 2025, VTB and TBC moved to dismiss the complaint for improper venue and that motion is pending.

The Company will continue to vigorously defend itself in the foregoing unresolved matters. However, litigation and investigations are inherently uncertain. Accordingly, the Company cannot predict the outcome of these matters. The Company has not recorded any accrual at December 31, 2025 for contingent losses associated with these matters unless otherwise disclosed above based on its belief that losses, while possible, are not probable. Further, any possible range of loss cannot be reasonably estimated at this time. The unfavorable resolution of these matters could have a material adverse effect on the Company’s business, results of operations, financial condition, or cash flows. The Company is engaged in other legal actions, not described above, arising in the ordinary course of its business and, while there can be no assurance, believes that the ultimate outcome of these other legal actions will not have a material adverse effect on its business, results of operations, financial condition, or cash flows.

Warranties

The Company warrants products against certain manufacturing and other defects. These product warranties are provided for specific periods of time depending on the nature of the product. Warranties are generally fulfilled by replacing defective products with new products. The following table provides the changes in our product warranties, which are included in other current liabilities (in thousands):

Operating Leases – Right of Use Assets

The components of the right-of-use assets and lease liabilities were as follows (in thousands):

Weighted average lease terms and discount rates were as follows:

During the year ended December 31, 2025, the Company recognized approximately$2.8 million of lease costs in operating expenses and approximately$2.4 million of operating outflows from operating leases. During the year ended December 31, 2024 and 2023, the Company recognized approximately $1.6 million and $1.5 million of lease costs in operating expenses, respectively. The total operating outflows from operating leases was approximately $2.1 million and $1.3 million for years ended December 31, 2024 and 2023, respectively.

The following table summarizes the maturity of operating lease liabilities as of December 31, 2025 (in thousands):

Note 13. Subsequent Event

On February 20, 2026, the U.S. Supreme Court held that tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were not authorized. The decision did not resolve the availability of refunds or other remedies and remanded those issues to the U.S. Court of International Trade for further proceedings. On the same date, the President issued an executive order rescinding the IEEPA-based tariffs and directing federal agencies to discontinue their collection. In addition, the President issued a separate proclamation imposing a tariff surcharge of at least 10% under the balance-of-payments authority in 19 U.S.C. § 2132, applicable to all imports except certain specified commodities (including electronics and critical minerals) and products qualifying under the United States-Mexico-Canada Agreement. These surcharges took effect on February 24, 2026, and will remain in place for 150 days, the maximum period permitted under the statute. Tariffs have not previously been imposed under this statutory authority. We are currently assessing the potential effects of these developments on our operations, and the impact remains uncertain.