Executive Summary

Net revenue was $56.8M, gross margin expanded to 32.2% (+200 bps YoY), and diluted EPS was $(0.14); Adjusted EBITDA was $(3.0)M, impacted by lower revenues and tariff headwinds, while full-year guidance was reiterated ($340–$360M revenue; $47–$53M Adj. EBITDA) .
Management emphasized swift tariff mitigation (cost optimization, price actions, and production shift to Vietnam), noting an ~150 bps negative GM impact in Q2; refinancing lowered term-loan cost by ~450 bps and added flexibility for share repurchases .
Capital allocation remained active with $5.0M repurchases in Q2 under the $75M authorization; company executed a $150M refinancing (SOFR + 325 bps), reducing cost of capital and extending maturities to August 2028 .
Narrative for H2 2025 is for revenue and profitability recovery as gaming accessories markets improve; management highlighted positioning for the upcoming gaming cycle into 2026 .

What Went Well and What Went Wrong

What Went Well

Gross margin expanded to 32.2%, +200 bps YoY, despite ~150 bps tariff drag, reflecting cost optimization and production shifts; CEO: “swift actions…significantly mitigated tariff impacts” .
Completed comprehensive refinancing: $150M facility (revolver $90M + term loan $60M) at SOFR + 325 bps, ~450 bps lower than prior term-loan, enhancing flexibility and reducing annual interest costs by >$2.0M .
Active capital return: $5.0M repurchased in Q2, supported by amended and refinanced debt agreements enabling opportunistic buybacks .

What Went Wrong

Revenues declined sequentially and YoY (Q2: $56.8M vs Q1: $63.9M and Q2’24: $76.5M), pressuring operating leverage; Adjusted EBITDA was $(3.0)M vs $4.1M in Q1 .
Diluted EPS fell to $(0.14), from $(0.03) in Q1 and $(0.35) in Q2’24, reflecting lower revenues and tariff impacts .
Accounts receivable and inventory management remained a working capital focus given market softness; inventory rose vs year-end (Q2 inventory $76.806M) while receivables stepped down from Q4 levels (Q2 AR $36.429M), requiring careful balance into H2 .

Financial Results

Metric	Q4 2024	Q1 2025	Q2 2025
Revenue ($USD Millions)	$146.1	$63.9	$56.8
Diluted EPS ($USD)	$0.95	$(0.03)	$(0.14)
Gross Margin (%)	37.0%	36.6%	32.2%
Adjusted EBITDA ($USD Millions)	$35.7	$4.1	$(3.0)
Net Income ($USD Millions)	$20.1	$(0.664)	$(2.931)

Vs prior year (Q2 2024):

Revenue: $76.5M vs $56.8M in Q2 2025 .
Diluted EPS: $(0.35) vs $(0.14) .
Gross Margin: 30.2% implied (32.2% less 200 bps) vs 32.2% .

Operating detail (Q2 2025):

Operating loss $(0.329)M; Interest expense $2.049M; Other expense $0.799M; Net loss $(2.931)M .
Insurance recovery of $(5.965)M in operating expenses related to Q4’24 inventory loss claim .

KPIs

KPI	Q4 2024	Q1 2025	Q2 2025
Net Cash from Operations ($USD Millions)	2024 FY: $5.761	$40.452	$37.303
Share Repurchases ($USD Millions)	$27.8 FY; $2.4 in Q4	$1.8	$5.0
Net Debt ($USD Millions)	Year-end net debt $85.4 (FY recap)	Net debt $43.6 at 3/31/25	~$48.3 calculated: debt $19.939 revolver + $40.051 term = $59.99 less cash $11.705 = $48.285
Tariff impact (GM bps)	N/A	Mitigation plans started	~150 bps GM headwind

Segment Breakdown (Company reports consolidated gaming accessories)

Segment	Q2 2025 Revenue ($USD Millions)
Total Company (Gaming accessories)	$56.8

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Revenue	FY 2025	$395–$405M (initiated Mar-13)	$340–$360M (revised May-8; reiterated Aug-7)	Lowered (Mar→May); Maintained (May→Aug)
Adjusted EBITDA	FY 2025	$68–$72M (initiated Mar-13)	$47–$53M (revised May-8; reiterated Aug-7)	Lowered (Mar→May); Maintained (May→Aug)

Management reiterated FY 2025 guidance in Q2 despite macro/tariff headwinds, citing expected H2 recovery and ongoing cost optimization .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024)	Previous Mentions (Q1 2025)	Current Period (Q2 2025)	Trend
Tariffs & Supply Chain	GM expanded; noted Q4 inventory-in-transit loss	Proactive production shift out of China; <10% US supply from China post-Q1; Vietnam focus	~150 bps GM headwind; cost optimization, pricing, and production shift to Vietnam	Improving mitigation
Capital Allocation (Buybacks)	$27.8M FY repurchases; continued capital return	New $75M authorization; $1.8M Q1 buyback	$5.0M Q2 buyback; opportunistic strategy	Active/ongoing
Debt Refinancing	Higher debt post-PDP; preparing for refinance	Waiver to enable buybacks; pursuing refinancing	Completed $150M refinance; ~450 bps rate cut; SOFR + 325 bps	Positive
Product Performance & Pipeline	Record Q4; PDP synergies; next-gen platform	Expanded portfolio benefits	Controllers/headsets top-sellers; racing sim expansion; headset launches; positioning for Switch 2/GTA VI cycle	Building momentum
Macro/Market	Large opportunity; GM expansion despite market factors	Market down YTD; adapting operations	Expect market improvements in H2 2025; positioned for 2026 cycle catalysts	Stabilizing to improving

Management Commentary

“Our second quarter results and confirmation of full year guidance reflects our organization’s agility… The swift actions…cost optimization…production strategy have significantly mitigated tariff impacts… gross margin… improved to over 32% despite an approximate 150 basis point negative impact from tariffs.” — CEO Cris Keirn .
“With improved pricing and extended tenure [of the new loans] significantly reduce our cost of capital and provide the financial foundation to continue investing in our future growth.” — CEO Cris Keirn on refinancing .
“Following the announcement in early April of new tariffs, we took immediate and decisive action… transitioning significant production out of China… our U.S. supply will primarily come from Vietnam” — Q1 commentary .
“Record quarterly net revenue and Adjusted EBITDA… PDP integration enhanced our scale and market reach” — Q4 commentary .

Q&A Highlights

Tariffs and margin: Management quantified ~150 bps GM headwind in Q2 and discussed pricing/mix and production shifts to Vietnam to mitigate impacts, expecting similar headwinds through the year .
Guidance drivers: Discussion anchored to US economy, tariffs, and title releases (e.g., Switch 2, GTA VI) as catalysts shaping H2 trajectory and 2026 setup .
Capital structure and buybacks: CFO/CEO highlighted rate reduction from refinancing and flexibility enabling continued opportunistic repurchases .
Market conditions: Headsets and third-party controllers expected to remain down for 2025, but share gains and product roadmap underpin confidence in H2 recovery .

Estimates Context

S&P Global consensus for Q2 2025 EPS and revenue was unavailable via our data pull; thus, we cannot quantify beats/misses versus Street for this quarter [GetEstimates: Q2 2025 returned no data].

Where estimates likely need to adjust:

With reiterated FY 2025 guidance ($340–$360M revenue; $47–$53M Adj. EBITDA) and Q2 tariff impacts quantified, Street models should reflect lower H1 run-rate, H2 recovery cadence, and ongoing GM mitigation .

Key Takeaways for Investors

Q2 execution amid tariffs: GM expanded to 32.2% despite ~150 bps headwind; tariff mitigation (cost/mix/pricing + Vietnam shift) is working and should continue into H2 .
Sequential softness but guided recovery: Q2 revenue fell to $56.8M vs $63.9M in Q1; management expects H2 revenue/profitability recovery consistent with reiterated FY guide .
Refinancing is a material positive: SOFR + 325 bps with ~450 bps rate reduction increases flexibility, lowers interest costs (> $2M annually), and supports buybacks .
Capital returns continue: $5.0M Q2 repurchases under $75M authorization; further opportunistic buybacks likely given new debt terms .
Working capital and net debt improving: Net cash from operations was $37.3M in Q2; calculated net debt at quarter-end ~ $48.3M underscores balance sheet progress .
Product portfolio and share gains: Top-selling headsets/controllers and expansion in racing simulation, plus upcoming platform cycle (Switch 2) and marquee titles (GTA VI), bolster 2026 setup .
Near-term trading: Watch H2 margin cadence vs tariff headwinds and evidence of market improvement; refinancing/buybacks are supportive, but revenue execution vs Q3/Q4 expectations is the key stock driver .

Turtle Beach Corp (TBCH)·Q2 2025 Earnings Summary