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. 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, and was incorporated in the State of Nevada in 2010.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) 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 information and footnote disclosures, normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), have been condensed or omitted pursuant to those rules and regulations. The Company believes that the disclosures made are adequate to make the information presented not misleading. The results of operations for the interim periods are not necessarily indicative of the results of operations for the entire fiscal year.

The December 31, 2025 Condensed Consolidated Balance Sheet has been derived from the Company’s audited financial statements included in its Annual Report on Form 10-K filed with the SEC on March 12, 2026 (the “Annual Report”).

These financial statements should be read in conjunction with the annual financial statements and the notes thereto included in the Annual Report that contain information useful to understanding the Company’s businesses and financial statement presentations.

Use 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.

There have been no material changes to the significant accounting policies and estimates from the information provided in Note 2 of the notes to our consolidated financial statements in our Annual Report.

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 receivable. 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:

• Customer accounted for less than 10% of total accounts receivable in the period.

Customers that accounted for more than 10% of revenue during the three and nine months ended September 30, 2026 and 2025 were as follows:

Accounting Pronouncements Issued and Adopted

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 receivables. 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 is 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 adopted this standard on a prospective basis. In adopting the standard, the Company elected the permitted practical expedient, which assumes current conditions as of the balance sheet date remain unchanged over the remaining life of the assets. The adoption didnot have a significant impact on its condensed consolidated financial statements.

Accounting Pronouncements Issued but Not Yet Adopted

The Company considers the applicability and impact of all Accounting Standards Updates (“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 unaudited condensed consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement—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 this pronouncement on its condensed consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which modernizes and simplifies the accounting for 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, 2027, with early adoption permitted. The Company is currently evaluating the impact of this pronouncement on its condensed consolidated financial statements and related disclosures.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies the scope of Topic 270, the form and content of interim financial statements and the disclosures required for interim reporting periods. 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 timing and method of adoption of this pronouncement but does not expect it to materially affect its disclosures.

Other recently issued accounting pronouncements are not expected to have a material impact on the Company's consolidated financial statements.

Note 3. 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 September 30, 2026 and December 31, 2025, 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, which are classified as Level 1, as of September 30, 2026 and December 31, 2025 (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 2026 Revolving Credit Facility and 2026 Term Loan due in 2029 approximate fair value as their stated interest rates reflect current market rates.

Note 4. Balance Sheet Components

Inventories

Inventories consist of the following (in thousands):

During the nine months ended September 30, 2026, the Company received tariff refunds totaling$8.2 million from the U.S. Customs and Border Protection related to previously paid import duties, all of which were recorded as an increase to cash. Of the total amount received,$4.3 million related to tariffs recognized in cost of revenue. Because the Company's right to the refund was established and the refund was received during the second quarter, the amount was recognized as a reduction of cost of revenue during the nine months ended September 30, 2026. The Company had previously capitalized$3.6 million of tariffs as a component of inventory. Upon receipt of the refund, the Company recognized a corresponding$3.6 million reduction in the carrying value of inventory. The remaining amount, representing statutory interest on the refunded duties of$0.3 million, was recognized in Other expense (income), net in the accompanying condensed consolidated statements of operations during the nine months ended September 30, 2026.

Property and Equipment, net

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

Depreciation and amortization expense on property and equipment was$0.7 million and$1.1 million for the three months ended September 30, 2026 and 2025, respectively. Depreciation and amortization expense on property and equipment was$2.3 million and$3.3 million for the nine months ended September 30, 2026 and 2025, respectively.

Other Current Liabilities

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

Note 5. Goodwill and Other Intangible Assets

Goodwill

The Company conducts its goodwill impairment analysis annually or more frequently if changes in facts and circumstances indicate that it is more likely than not that the fair value of a reporting unit may be less than its carrying value. There wereno impairment indicators and the Company's market capitalization continues to exceed the net carrying value of the business. As such, the Company did not perform any further quantitative testing.

There was no change in the carrying amount of goodwill (in thousands):

Intangible Assets, net

Acquired identifiable intangible assets, and related accumulated amortization, as of September 30, 2026 and December 31, 2025 consist of (in thousands):

Amortization expense related to definite lived intangible assets of$1.9 million and$2.0 million was recognized for the three months ended September 30, 2026 and 2025, respectively. Amortization expense related to definite lived intangible assets of$5.9 million and$6.1 million was recognized for the nine months ended September 30, 2026 and 2025, respectively.

As of September 30, 2026, estimated annual amortization expense related to definite lived intangible assets in future periods was as follows (in thousands):

Note 6. Credit Facility and Long-Term Debt

The following table presents the outstanding principal amounts of the Company's revolving credit facility and term loan (in thousands):

The following table summarizes the interest expense recognized for all periods presented (in thousands):

2024 Revolving Credit Facility

In 2024, the Company maintained a Revolving Credit Facility (the “2024 Revolving Credit Facility”) with Bank of America, N.A. (“Bank of America”) that provided up to $50.0 million in borrowing capacity, including a $10.0 million sub-facility for Turtle Beach Europe Limited, and was secured by substantially all Company assets. On March 13, 2024, the Company entered into a Fourth Amendmentto the 2024 Revolving Credit Facility (the “Fourth Amendment”). The Company executed the Fourth Amendment to the facility for the purposes of extending the maturity to March 13, 2027, incorporating Performance Designed Products LLC (“PDP”) acquisition assets into the U.S. Borrowing Base and updating interest rate and fee terms. The facility included customary covenants, including 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 the 2025 Credit Facility, defined and discussed below, and repaid in full the amount then-outstanding under the 2024 Revolving Credit Facility. The Company treated the 2025 Credit Facility as a partial extinguishment of the 2024 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 in its condensed consolidated statements of operations.

2024 Term Loan Facility

In March 2024, the Company entered into a $50.0 million Term Loan Facility (the “2024 Term Loan Facility”) with Blue Torch Finance, LLC (“Blue Torch”) 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 2024 Term Loan Facility was scheduled to mature on March 13, 2027 and included interest rates tied to base rate or Secured Overnight Financing Rate(“SOFR”) benchmarks with leverage‑based pricing tiers, as well as customary affirmative, negative, and financial covenants, including minimum liquidity and quarterly total net leverage requirements.

On August 1, 2025, the Company entered into the 2025 Credit Facility and repaid in full the amount then-outstanding under the 2024 Term Loan Facility 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.

2025 Credit Facility

On August 1, 2025, the Company and certain of our subsidiaries entered into a Credit Agreement with Bank of America, as the administrative agent, the swingline lender and the line of credit issuer (the “2025 Credit Facility”). The 2025 Credit Facility was to matureon August 1, 2028 andincluded 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 was subject to a borrowing base limitation that was calculated based on a percentage of eligible trade accounts receivable and inventories, the balances of which fluctuate, and was subject to discretionary reserves and revaluation adjustments. The 2025 Credit Facility may have been used for borrowings as well as for the issuance of letters of credit, repaying existing indebtedness outstanding as of the effective date of the 2025 Credit Facility and ongoing working capital and general corporate purposes as defined by the Credit Agreement governing the 2025 Credit Facility. The 2025 Credit Facility replaced our previous debt arrangements at that time.

Prior to its repayment and termination, borrowings under the 2025 Credit Facility bore interest at a rate that varied depending on the type of loan and the borrower. The interest rate was calculated using a floating rate plus a margin. Depending on the type of loan, the floating rate was either the prime rate announced by Bank of America, Term SOFR, Daily Simple SOFR, EURIBOR or SONIA. The margin ranged 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 2025 Credit Facility also provided for an unused line fee, letter of credit fees, and agent fees. The borrowers were 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.

On April 30, 2026, the Company repaid in full the amount then-outstanding under the 2025 Credit Facility in connection with the 2026 Term Loan Facility, as defined and described below. As part of the repayment, the Company recognized a loss on extinguishment of debt of$1.8 million to write-off the unamortized deferred financing costs in interest expense in its condensed consolidated statements of operations.

2026 Term Loan Facility

On April 30, 2026, the Company entered into a new financing agreement (the “2026 Term Loan Financing Agreement”) by and among the Company, Voyetra Turtle Beach, Inc. (“VTB"), as borrower, each of the Company's subsidiaries listed as a guarantor on the signature pages thereto, the lenders from time to time party thereto, and Blue Torch, as administrative agent and collateral agent, pursuant to which Blue Torch made a loan to VTB in the aggregate amount of $85.0 million (the “2026 Term Loan Facility”), the proceeds of which were used to or will be used to (a) refinance existing indebtedness of the Company and its subsidiaries; (b) for general corporate purposes; and (c) to pay fees and expenses related to the loan transactions. The 2026 Term Loan Facility will amortize in a quarterly amount equal to 1.25% of the aggregate original principal amount of the 2026 Term Loan Facility. Any prepayment, or any acceleration or other repayment in connection with an insolvency proceeding, occurring during the first twelve months following the closing date will be subject to a prepayment premium equal to (i) the interest that would otherwise have accrued on the principal amount being repaid through the twelve-month anniversary of the closing date, plus (ii)3.00% of the principal amount being repaid, provided that no such premium applies to regularly scheduled quarterly amortization payments or to certain prepayments specified in the 2026 Term Loan Financing Agreement. The 2026 Term Loan Facility is secured by substantially all of the assets of the Company and its subsidiaries which are party to the 2026 Term Loan Facility.

The 2026 Term Loan Facility (a) will mature on April 30, 2029; (b) will bear interest at a rate equal to (i) a base rate plus 6.50% per annum for Reference Rate Loans and SOFR plus 7.50% per annum for SOFR Loans if the total leverage ratio is greater than or equal to 3.00 x, (ii) a base rate plus 6.25% per annum for Reference Rate Loans and SOFR plus 7.25% per annum for SOFR Loans if the total leverage ratio is greater than or equal to 2.25 x but less than 3.00 x, and (iii) a base rate plus 5.75% per annum for Reference Rate Loans and SOFR plus 6.75% per annum for SOFR Loans if the total leverage ratio is less than 2.25 x; 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 September 30, 2026, the interest rate for outstanding borrowings was 11.59%.

2026 Revolving Credit Facility

On April 30, 2026, the Company entered into a Loan, Guaranty and Security Agreement (the “2026 Revolving Credit Agreement”), by and among the Company, VTB, TBC Holding Company LLC, PDP, Turtle Beach Europe Limited, VTB Holdings, Inc., Tide Acquisition Sub II, LLC, the financial institutions party thereto and Bank of America, as agent, collateral agent and security trustee for the lenders to the credit facility (the “2026 Revolving Credit Facility”). The 2026 Revolving Credit Agreement provides for, among other things: (a) subject in each case to the applicable borrowing base, a US commitment in an amount equalto $50.0 million or $65.0 million based on the season and a UK commitment equal to $10.0 million or $15.0 million based on the season; (b) a maturity date of April 30, 2029; (c) interest rate and margin terms such that the loans will bear interest at a rate equal to (1) SOFR, (2) the US Base Rate, (3) SONIA for loans denominated in Sterling, and (4) EURIBOR for loans denominated in Euros, plus in each case, an applicable margin, which is between 0.50% and 1.00% for US Base Rate Loans and 1.50% and 2.00% for US Term SOFR Loans, UK SONIA Rate Loans and UK EURIBOR Loans; and (d) certain affirmative and negative covenants and a springing (subject to certain triggers) fixed charge coverage ratio. Theobligations under the 2026 Revolving Credit Agreement are secured by substantially all of the assets of the Company and its subsidiaries which are party to the 2026 Revolving Credit Agreement.

The respective priorities of the security interests securing the 2026 Term Loan Financing Agreement and the 2026 Revolving Credit Agreement are governed by an intercreditor agreement, dated as of April 30, 2026, between Blue Torch and Bank of America.

As of September 30, 2026, the Company was in compliance with all the financial covenants under the2026 Revolving Credit Facility, as amended, and excess borrowing availability was approximately$61.5 million.

As part of the 2026 Revolving Credit Facility, the Company recorded an aggregate amount of deferred debt financing costs of$1.2 million in its condensed consolidated balance sheet.

Maturities of Term Loan Debt

The following table summarizes the maturities of debt, assuming no prepayments or refinancing (in thousands):

Note 7. 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 (“TBC”) infringed the same four patents at issue in the declaratory judgment action filed by PDP. On July 8, 2025, PDP and TBC moved to dismiss Nyko’s complaint. On March 25, 2026, the Court partially granted that motion, dismissed TBC, and consolidated the two actions. On April 16, 2026, Nyko filed a First Amended Complaint that again alleged infringement by TBC and PDP. On May 21, 2026, PDP filed an answer to Nyko’s First Amended Complaint and TBC moved to dismiss Nyko’s First Amended Complaint. That motion is pending. On August 4, 2026, the Court issued its claim construction order that construed certain claim terms in Nyko’s patents. On August 6, 2026, the Court denied PDP’s motion for judgment on the pleadings.

Intellectual Property Dispute: On October 3, 2025, Robert Lyden, an individual, filed a patent infringement lawsuit against PDP, Voyetra Turtle Beach, Inc. (“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, PDP, VTB and TBC moved to dismiss the complaint for improper venue. On March 19, 2026, the Court granted that motion and transferred the case to the United States District Court for the Southern District of California. On May 13, 2026, PDP, VTB and TBC moved to dismiss the Complaint. 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 September 30, 2026 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.

Product Warranties

The Company warrants its 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):

Indemnifications

The Company indemnifies certain suppliers and customers for losses arising from matters such as intellectual property disputes and product safety defects, subject to certain restrictions. The scope of these indemnities varies, but in some instances includes indemnification for damages and expenses, including reasonable attorneys’ fees. As of September 30, 2026, no material amounts have been accrued for indemnification provisions. The Company does not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid under its indemnification arrangements.

The Company also indemnifies its current and former directors and certain current and former officers. Certain costs incurred for providing such indemnification may be recoverable under various insurance policies. The Company is unable to reasonably estimate the maximum amount that could be payable under these arrangements because these exposures are not capped, the obligations are conditional in nature, and the facts and circumstances involved in any situation that might arise are variable.

Note 8. Income Taxes

The following table presents the Company’s income tax (benefit) expense and effective income tax rate (in thousands, except percentages):

The Company recorded income tax benefits of$1.4 million and$1.0 million for the three and nine months ended September 30, 2026, respectively. The year-to-date benefit reflects the application of the estimated annual effective tax rate to the year-to-date pretax loss, partially offset by discrete tax expense related to uncertain tax positions and stock-based compensation. The third-quarter benefit includes the cumulative adjustment to the year-to-date provision based on the estimated annual effective tax rate. The Company’s income tax positions, including the assessment of valuation allowances and uncertain tax positions, remain largely consistent with those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. The Company continues to maintain a valuation allowance on its net U.S. deferred tax assets while periodically reassessing the need for it.

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. Interest and penalties associated with income tax matters are included in the provision for income taxes in the condensed consolidated statements of operations. As of September 30, 2026, the Company had uncertain tax positions of$2.2 million, inclusive of$0.4 million of interest and penalties.

As required by the authoritative guidance on accounting for income taxes, the Company evaluates the realizability of deferred tax assets on a jurisdictional basis at each reporting date. Accounting for income taxes requires that a valuation allowance be established when it is more likely than not that all or a portion of the deferred taxes will not be realized. The Company considers all positive and negative evidence in determining if, based on the weight of such evidence, a valuation allowance is required. In circumstances where there is sufficient negative evidence indicating that the deferred tax assets are not more likely than not realizable, the Company establishes a valuation allowance. Due to the significant 2022 pre-tax loss, coupled with cumulative book losses, the Company recorded a valuation allowance on its net U.S. deferred tax assets as of December 31, 2022. The Company continues to maintain this valuation allowance for the three and nine months ended September 30, 2026. The Company will continue to evaluate all available positive and negative evidence in future periods to assess the realizability of its deferred tax assets and the need for a valuation allowance. Should facts and circumstances change, the Company may adjust its valuation allowance and record income tax expense or benefit in future periods.

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 2022 through 2025, and the state tax years open under the statute of limitations are 2022 through 2024, and the foreign tax years open under the statute of limitations are 2022 through 2025.

Note 9. Equity and Stock-Based Compensation

Stock Repurchase Activity

On May 7, 2025, the Company's Board of Directors (the "Board") authorized a stock repurchase program to acquire up to $75 million of Company 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 expires on May 6, 2027.

The Company didnot repurchase any shares of its common stock during thethree months ended September 30, 2026 and incurred no associated costs. During the three months ended September 30, 2025, the Company repurchased 712,205 shares of its common stock for a total cost of$10.3 million. The Company repurchased 2,156,341 and 1,205,724 shares of its common stock in thenine months ended September 30, 2026 and 2025, respectively, for a total cost of$27.2 million and$17.0 million, respectively.

Stock-Based Compensation

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

The following table summarizes the total unrecognized stock-based compensation expense and remaining recognition period by Restricted Stock Units (“RSUs”) and Performance Stock Units (“PSUs”) (in thousands, except number of years):

The following table presents the stock activity and the total number of shares available for grant as of September 30, 2026:

Stock Option Activity

Stock options generally vested in accordance with the terms of the applicable award agreements and are exercisable for up to ten years once vested. Vested options must be exercised within 90 days following a participant’s termination of service or they are forfeited.

There have beenno options granted since the fiscal year 2021.

Restricted Stock Activity

Performance-Based Restricted Share Activity

The outstanding PSUs as of September 30, 2026 were comprised of 13,925,21,999 and 170,373 performance shares that were granted on April 1, 2024, 2025 and 2026, respectively. With respect to the PSUs that were granted on April 1, 2026, the vesting is conditional based on the achievement of certain key financial and corporate strategic targets for the year ended December 31, 2026, and continued service over athree-year period. The number of units that could be earned ranged from 0% to 150% of the target shares depending on the achievement of these targets. The number of PSUs to be earned is subject to approval by the Board after the completion of the performance period based on the Company’s 2026 performance over the performance period. Approximately 17,886,15,356, and 12,201 performance shares were released during thenine months ended September 30, 2026 relating to shares that were granted on April 1, 2023, 2024, and 2025, respectively. Earned PSUs typically vest with 33%,33% and 34% of the earned PSU shares over the first, second and third year of the requisite vesting period, respectively.

Warrants

In January 2026, the holders exercised 550,000 wholly-funded warrants for an equal number of shares of the Company's common stock, which related to a series of transactions pursuant to the retirement of Series B preferred stock in 2018. Upon exercise, no warrants remained outstanding.

Note 10. Net Income (Loss) Per Share

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

Incremental shares from stock options and restricted stock 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 and unrecognized compensation expense for outstanding awards.

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

Note 11. Segment Information

The Company operates in asingle reportable segment. The Company’s chief operating decision maker is its Chief Executive Officer. The Chief Executive Officer regularly reviews operating loss and net loss for the Company’s single reportable segment when assessing performance and making resource allocation decisions. Operating loss, which is the segment profit or loss measure most consistent with the measurement principles used in the Company’s consolidated financial statements, is used to evaluate the results of the Company’s core operations before the effects of interest expense, other income or expense, and income taxes. Net loss is also reviewed by the Chief Executive Officer to evaluate overall consolidated performance after these items. Because the Company hasone reportable segment, the segment measures reviewed by the Chief Executive Officer are consistent with the corresponding consolidated measures presented in the Company’s condensed consolidated statements of operations.

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):

(1) Other (recovery) costs in the three and nine months ended September 30, 2026 and 2025 include acquisition-related costs and an insurance recovery.