Turtle Beach Q1 2026 Earnings Report

Turtle Beach EPS Results

• Actual EPS: -$0.78
• Consensus EPS: -$0.43
• Beat/Miss: Missed by -$0.35
• One Year Ago EPS: N/A

Turtle Beach Revenue Results

• Actual Revenue: $42.17 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Turtle Beach Announcement Details

• Quarter: Q1 2026
• Date: 5/7/2026
• Time: After Market Closes
• Conference Call Date: Thursday, May 7, 2026
• Conference Call Time: 4:30PM ET

Turtle Beach (NASDAQ:TBCH) (NASDAQ:TBCH) is a global developer, manufacturer and distributor of gaming audio peripherals, specializing in headsets, microphones and audio accessories for PC, console and mobile platforms. The company’s product lineup spans wired and wireless gaming headsets, mixing stations, sound cards and accessories designed to enhance the immersive experience for casual and professional gamers alike.

Founded in 1975 and headquartered in San Diego, California, Turtle Beach has built a longstanding reputation in audio innovation. In 2019, the company expanded its portfolio with the acquisition of ROCCAT, a German gaming peripheral brand, broadening its reach into high-performance keyboards, mice and mouse pads. These strategic moves have enabled Turtle Beach to strengthen its position across multiple hardware categories within the competitive gaming market.

Turtle Beach operates through a network of regional distributors and retail partners across North America, Europe and Asia-Pacific, leveraging both brick-and-mortar channels and direct-to-consumer e-commerce platforms. Under the leadership of CEO Juergen Stark, the company focuses on continual product development and new market opportunities in e-sports and live streaming segments. Turtle Beach’s commitment to audio quality and innovation positions it as a key player in the global interactive entertainment industry.

Turtle Beach Q1 2026 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: Q1 revenue fell to $42.2M from $63.9M a year ago, gross margin dropped to 26.8% (from 36.6%), adjusted EBITDA was a $6.5M loss and net loss was $15.2M, driven by channel inventory compression and promotional activity.
• Positive Sentiment: Management reaffirmed full‑year 2026 guidance of $335M–$355M revenue and $44M–$48M adjusted EBITDA, calling for a back‑loaded year with sequential improvement starting in Q2 and a strong second half tied to new product placements and holiday demand.
• Positive Sentiment: Company is accelerating its product pipeline (targeting >50% YoY growth in new launches), highlighted by the premium Stealth Pro II (CrossPlay 2.0, Hi‑Res, Dolby Atmos, ANC) which has pre‑orders more than double its predecessor, signaling early demand momentum.
• Positive Sentiment: Turtle Beach refinanced credit facilities (up to $80M ABL and an $85M term loan) to enhance capital flexibility, has started share repurchases and has $56M remaining on its buyback authorization while carrying net debt of $41.3M.

Presentation

[Operator]

Good afternoon, welcome to the Turtle Beach Q1 2026 earnings conference call. All participants will be in a listen-only mode. There will be an opportunity to ask questions after the presentation. If you should need assistance during the call, please signal an operator by pressing star then zero. Please note that this event is being recorded. I will now hand the conference over to Jacques Cornet, ICR. Please go ahead, sir.

[Jacques Cornet, Partner at ICR]

Thank you, operator. On today's call, we'll be referring to the press release filed this afternoon that details the company's first quarter 2026 results, which is available on the news page of the company's investor relations website, corp.turtlebeach.com, where you'll also find the latest earnings presentation that supplements the information discussed on today's call. Finally, a recording of the call will be available in the Events and Presentation section of the company's investor relations website later today. Please be aware that some of the comments made during this call may include forward-looking statements within the meaning of the federal securities laws. Statements about the company's beliefs and expectations containing words such as may, will, could, believe, expect, anticipate, and similar expressions constitute forward-looking statements.

[Jacques Cornet, Partner at ICR]

These statements involve risks and uncertainties regarding the company's operations and future results that could cause Turtle Beach Corporation's results to differ materially from management's current expectations. While the company believes that its expectations are based upon reasonable assumptions, numerous factors may affect actual results and may cause results to differ materially. The company encourages you to review the safe harbor statements and risk factors contained in today's press release and in its filings with the Securities and Exchange Commission, including, without limitation, its annual report on Form 10-K and other periodic reports, which identify specific risk factors that also may cause actual results or events to differ materially from those described in our forward-looking statement. The company does not undertake to publicly update or revise any forward-looking statements after this conference call. The company also notes that on this call, it will be discussing non-GAAP financial information.

[Jacques Cornet, Partner at ICR]

The company is providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States or GAAP. You can find a reconciliation of these metrics to the company's reported GAAP results in the reconciliation tables provided in today's earnings release and presentation. Hosting the call today are Cris Keirn, Chief Executive Officer, and Mark Weinswig, Chief Financial Officer. With that, I'll turn the call over to Cris.

[Cris Keirn, CEO at Turtle Beach]

Thanks, Jacques. Good afternoon, everyone, and welcome to our first quarter 2026 earnings call. As we build momentum through our brand transformation and significant releases of new products in 2026, our first quarter results reflect a continuation of a challenging market environment that carried over from 2025. The quarter was impacted by a temporary dip in channel inventories as our retail partners managed stock levels in consideration of the short-term dynamic of multi-year market lows for Q1 in the headset and controller markets. This channel reduction included clearing retail inventories to support the load-in of our new product launches in Q2. We expect channel inventory to rebound in the coming quarters, which should act as a tailwind to year-over-year growth as we ramp new product placements at retail and prepare for improving market conditions leading up to holiday 2026.

[Cris Keirn, CEO at Turtle Beach]

At the same time, we executed in Q1 to lay the groundwork for a meaningful step-up in our new product introduction cycle. We are tracking with excellent progress on our plan to realize over 50% year-over-year growth in new product launches for 2026, including our recently announced Stealth Pro II flagship headset, our new Command Series PC lineup, and multiple accessories across categories that are officially licensed for the Nintendo Switch 2 ecosystem. Stealth Pro II represents the next evolution of our premium audio platform, combining Japan Audio Society certified Hi-Res Audio, our patented 60-millimeter Eclipse dual drivers for powerful bass and crisp highs with exceptional precision, Dolby Atmos spatial audio for immersive 3D gaming and entertainment, and active noise cancellation to reduce background distractions.

[Cris Keirn, CEO at Turtle Beach]

It also introduces our new CrossPlay 2.0 multi-platform wireless audio system, building on the CrossPlay wireless technology pioneered by Turtle Beach and now supporting up to four audio sources. This industry-leading innovation gives gamers greater flexibility and seamless control across multiple audio sources without the need for cables running to a separate audio hub. All of this is paired with a refined premium build featuring anodized aluminum components, soft-touch materials, a fabric suspension headband, and memory foam ear cushions for long-lasting comfort. Together, these innovations reinforce our leadership in premium gaming audio and provide gamers with the pinnacle of gaming audio technology. To amplify this fantastic new addition to our headset lineup, we have also initiated our brand transformation to reinvent how Turtle Beach engages with gamers.

[Cris Keirn, CEO at Turtle Beach]

A key example of this is our campaign for the Stealth Pro II launch, The Last Ninja: The Ultimate Stealth Showdown, highlighting Turtle Beach's legacy of gaming sound and industry-leading audio performance.

[Cris Keirn, CEO at Turtle Beach]

We believe this fun and more resonant approach to storytelling will strengthen brand affinity and drive deeper engagement with gamers. The combined benefits of Stealth Pro II's new standard for gaming audio experiences and The Last Ninja campaign have resulted in very strong early momentum for Stealth Pro II, with pre-orders on our site so far already more than double that of its predecessor, our original Stealth Pro. Looking ahead, we have strong conviction in our forward trajectory and are reaffirming our full year 2026 guidance, which considers several growth drivers for our business and the industry. Our outlook reflects our expanded innovation pipeline with accelerating momentum from confirmed new retail placements across multiple categories starting in Q2. We are also advantageously positioned ahead of the anticipated November 2026 launch of Grand Theft Auto six.

[Cris Keirn, CEO at Turtle Beach]

As one of the biggest gaming releases in history, we expect it to serve as a meaningful catalyst for gamer engagement and accessory demand in the second half of the year and beyond. Importantly, with only PlayStation five and Xbox Series X and S currently confirmed as supported platforms at launch, we believe Turtle Beach is well-positioned to see an outsized initial benefit given our strong presence in these console ecosystems. We are prepared to capture that demand as it materializes. Across the opportunities that our new product launches and brand engagement will provide, upcoming market lift from GTA six and the next generation of console hardware platforms in the coming years, our focus remains consistent, executing for success, driving operational discipline, and delivering meaningful value for our shareholders. In addition, we announced earlier this week that we recently restructured our credit facilities to enhance our capital return flexibility.

[Cris Keirn, CEO at Turtle Beach]

With $56 million remaining on our current $75 million share repurchase authorization, this new financing structure supports our active and systematic buyback strategy. We have both the capacity and the commitment to return capital shareholders while investing in the strategic growth initiatives that will drive long-term value creation. Given our confidence in the business and the strength of our outlook, we believe there continues to be a meaningful disconnect between our current stock price and the intrinsic value of Turtle Beach, and we will remain disciplined and opportunistic in deploying capital under this program. Overall, we remain focused on our strategic priorities as we move through 2026. We're executing against a clear strategy as we continue to optimize our cost structure, accelerate product innovations, and prepare the company to capitalize on significant upcoming industry catalysts.

[Cris Keirn, CEO at Turtle Beach]

With our transformative work on the business over the last few years, we are exceptionally well-positioned for the opportunities that lie ahead. Mark will now take us through the financials in more detail. Mark?

[Mark Weinswig, CFO at Turtle Beach]

Thank you, Cris, and good afternoon, everyone. Our first quarter 2026 revenue was $42.2 million, compared to $63.9 million in the prior year period. This decline reflects the continuation of challenging market conditions from 2025, as well as the channel inventory compression we saw in advance of our array of new products launching in 2026. Our gross margin for the first quarter was 26.8%, compared to 36.6% in the prior year period. This margin decline was primarily driven by lower revenue due to channel inventory compression.

[Mark Weinswig, CFO at Turtle Beach]

In addition, we utilized targeted promotional activity to reduce inventory in the channel, which pressured margins, but positions us well as our new products launch and gain traction in the market. During the first quarter, we also realized a roughly 2 percentage point margin hit from the one-time costs associated with the transition of our U.S. warehouse. We view these items as a short-term headwind and expect to see significantly higher margins in future quarters. Our total operating expenses of $25.4 million represent 60% of revenue in the quarter, higher than the prior year, primarily due to the $3.4 million benefit we realized in 2025 associated with the insurance recovery. Our first quarter 2026 adjusted EBITDA was a loss of $6.5 million, compared to income of $4.1 million in the prior year period.

[Mark Weinswig, CFO at Turtle Beach]

This decline reflects the lower revenue base and the margin pressure from channel reduction, as well as the continuation of our investment in product development and innovation that will drive growth throughout the remainder of 2026. At the bottom line, we reported a net loss of $15.2 million, compared to a net loss of $0.7 million in the prior year period. The compression is reflective of our lower revenue levels combined with higher operating expenses. Turning to our balance sheet, as of March 31st, net debt was $41.3 million, comprised of $53.6 million of outstanding debt and $12.3 million of cash. During the quarter, we generated $29.4 million in cash flow from operations, paying off our revolving line of credit, which had a zero balance as of March 31st.

[Mark Weinswig, CFO at Turtle Beach]

With respect to recent financing activities, on Monday, we announced a refinancing of our credit facilities that enhances our financial flexibility, particularly our commitment to returning capital to shareholders through share repurchases. Under the new structure, our ABL facility provides up to $80 million of revolving borrowing capacity, bearing interest at SOFR plus 150-200 basis points based on loan balance levels. The term loan provides $85 million of committed term debt with borrowings bearing interest at SOFR plus 675-750 basis points and a maturity of three years. Importantly, the new facilities include a financial covenant structure specifically designed to accommodate the company's active share repurchase program. To that end, we started purchasing shares this week.

[Mark Weinswig, CFO at Turtle Beach]

With the new structure in place, we have both the capacity and the framework to consistently and systematically pursue our capital allocation priorities. We have $56 million remaining on our current share repurchase authorization. The new credit facility structure supports an active buyback strategy, and we intend to be opportunistic in returning capital to shareholders while maintaining the financial flexibility to invest in organic growth initiatives. Now turning to guidance. Despite the soft first quarter results, we are reaffirming our full year 2026 revenue guidance of $335 million-$355 million and our adjusted EBITDA guidance of $44 million-$48 million. This guidance reflects our confidence in the strategic initiatives outlined by Cris and represents growth in both revenue and profitability compared to 2025.

[Mark Weinswig, CFO at Turtle Beach]

In terms of seasonality, it's important to note that we typically see the majority of our revenues in the second half of the year coinciding with the holiday season. We had expected the first quarter to represent approximately 13% of our full year revenues, and while we came in slightly below that range, we remain confident in our ability to achieve our full year targets. We expect to see sequential improvement beginning this quarter as our new products launch and gain traction in the market, with Q2 representing approximately 17%-18% of our full year revenue. In the second half of the year, we anticipate significant acceleration driven by continued Nintendo Switch 2 momentum, our new products released, the anticipated November launch of Grand Theft Auto six, and a strong holiday season. With that, I will turn the call back to Cris. Cris?

[Cris Keirn, CEO at Turtle Beach]

Thanks, Mark. We remain confident in our full year 2026 guidance, and that confidence is grounded in several key factors. Our product innovation pipeline and comprehensive marketing plans are the strongest they have been in years, and we're strategically positioned for the anticipated November 2026 launch of Grand Theft Auto six, which has the highest purchase intent for a new gaming release ever recorded by Circana. Beyond these near-term catalysts, the gaming industry is entering into an exciting period with anticipated console refresh cycles from Xbox and PlayStation in the coming years. New console launches have historically driven increased hardware adoption and broader consumer engagement, which typically translates to elevated accessory demand. Combined with the expected replacement cycle for accessories purchased during the COVID era, we believe the industry is positioned for sustained growth over the next 24 months.

[Cris Keirn, CEO at Turtle Beach]

As this growth materializes, our operational discipline remains a cornerstone of our strategy. We've built a strong foundation through our cost optimization initiatives, and we're committed to expanding margin further as revenue scales. The refinancing we announced this week enhances our financial flexibility and enables us to execute on our capital allocation priorities, including our commitment to returning capital to shareholders through share repurchases. As always, I would like to recognize and thank our amazing team at Turtle Beach for their dedication and contributions to our success. With that, operator, we can open the call for Q&A.

[Operator]

Thank you, sir. The first question we have comes from Rian Bisson of Craig-Hallum. Please go ahead.

[Rian Bisson, Analyst at Craig-Hallum Capital Group]

Hey, guys, it's Rian on for Anthony Stoss. Thanks for taking my questions. You know, it's nice to see that you were able to reiterate the full year guide. Could you talk a little bit about kind of your simulator products, how demand's been for those, and how that demand kind of compares to maybe your legacy headset business or, you know, any more resilience in the simulator space? Thanks.

[Cris Keirn, CEO at Turtle Beach]

Hi, Rian. Thanks for the question. We've seen some nice progress on our sim business. We did see some share gains year-over-year in Q1 between our race and our flight simulator products. It remains a small piece of our total business. You know, it's a low single-digit contributor to our overall revenue. We are pleased to see that progress in that space. We do think it's a great space for further expansion, and that's something we'll be pursuing with some of our launches that'll be announced later this year. As far as it compares to the headset business, again, as I said, it's obviously much smaller for us. Our headsets are north of 60% of our business, and this is a single-digit contributor.

[Cris Keirn, CEO at Turtle Beach]

We view it as an opportunity for growth and something that we'll continue to invest in and bring new products to market.

[Rian Bisson, Analyst at Craig-Hallum Capital Group]

Got it. Thanks. Just as my follow-up, you know, given some of the consumer spend worries over the past couple of quarters, I'm curious, are you seeing any trade-down behavior with premium products to the lower-level products or entry-level products, or is demand in the higher-level products remain relatively steady? Thanks.

[Cris Keirn, CEO at Turtle Beach]

We've seen strong demand on the high end of the price ranges. We've actually, if you look at the year-over-year trends for Q1, we're seeing people trade up to the next price tier. Even entry-level products that typically might come in at a $30 price point, people are trading up to closer to a $40 or $50 price point. The mid of the market, we're seeing the same kind of behavior where we've seen growth in the $100-$150 tier. At the premium space, we've also seen growth in the ultra-premium tier products that are above $200 on the headset side. That's why we're really excited about the Stealth Pro II.

[Cris Keirn, CEO at Turtle Beach]

We see continued growth in that premium space, and we're bringing amazing product to market that'll take advantage of that.

[Rian Bisson, Analyst at Craig-Hallum Capital Group]

Got it. Good to hear. Thanks.

[Cris Keirn, CEO at Turtle Beach]

Thanks, Rian.

[Operator]

Thank you. The next question we have comes from Drew Crum of B. Riley. Please go ahead.

[Drew Crum, Analyst at B. Riley Securities]

Okay, thanks. Hey, guys. Good afternoon. Mark, on the 2Q revenue commentary, you know, taking the midpoint of the ranges you provided would imply something below the double-digit revenue growth expectation you suggested back in March with fourth year earnings. Just curious if there's something specific that's driving the lower updated view.

[Mark Weinswig, CFO at Turtle Beach]

Yeah. We saw Q1 be just a little bit slower than expected. You know, we have mentioned that we are going to be a little bit more promotional.

[Mark Weinswig, CFO at Turtle Beach]

in some of the margin hit that we took in Q1. That will flow over a little bit into Q2. In addition, with some of the weakness that we saw, it will make the second quarter a little bit weaker than what we were expecting.

[Mark Weinswig, CFO at Turtle Beach]

seeing some very interesting momentum for the second half of the year, as we mentioned. We'll be much more back-end loaded than we've been in previous years. You know, with the launch of new products, with what we've seen in terms of channel inventory compression, finally with GTA 6, we do think the second half of the year will be a very robust period.

[Drew Crum, Analyst at B. Riley Securities]

Got it. Okay. Thanks, Mark. Maybe for Cris. You know, subsequent to your 4Q earnings release, there was a lot of press suggesting that Nintendo intends to cut production of the Switch 2 due to weaker than expected holiday sales. I guess we'll find out tomorrow, but, you know, how does this impact your planogram or sales expectation for your Switch 2 line in 2026? Thanks, guys.

[Cris Keirn, CEO at Turtle Beach]

Hi, Drew. Great question. I think the Nintendo Switch two sales have been very strong. I did see that they had indicated they were going to potentially bring that down, but remember, they'd also raised those expectations last year. I think they're just adjusting to what they're seeing out in the market. What we've seen is sequential increase in comps each month here in Q1 for our Switch two products. You know, as we get those rolled out to the market, we're seeing some nice growth there. It's still very first-party focused right now with a lot of the sales for accessories, as we had talked about in previous calls. This is something that's normal for new console launches.

[Cris Keirn, CEO at Turtle Beach]

You'll see a lot of very strong first-party accessory purchases for a period of time, and then as third parties like us have our products ready, those will start to come into the market. That's exactly what you'll see from us as we get into Q2. We've got new placements coming up for our Switch two products. We're really excited about everything Nintendo's doing in that space. Some really great work with their IP and the overall ecosystem there for Switch two. We feel good about Switch two for the year. We think it's gonna drive growth for us, and we think that growth will accelerate as we go through the year.

[Drew Crum, Analyst at B. Riley Securities]

Got it. Thanks, guys.

[Cris Keirn, CEO at Turtle Beach]

Thanks, Drew.

[Operator]

Thank you. Ladies and gentlemen, just a reminder, if you would like to ask a question, please press star and then one now. The next question we have comes from Sean McGowan of Roth Capital Partners. Please go ahead.

[Sean McGowan, Analyst at Roth Capital Partners]

Hi, guys. Thanks for taking the questions. A couple of questions if I can. Given that the first quarter seemed a little bit less than maybe you would have thought and you're seeing similar industry resonance maybe so far in the second quarter, I would have thought that inventory would be higher. Have you started building enough for the increase in sales you're starting to see or hoping to see?

[Cris Keirn, CEO at Turtle Beach]

Hi, Sean. Yes, we're keeping a close eye on inventory. If you look at the year-over-year, we're down about $10 million year-over-year. If you recall, last year, we were right in the middle of stocking ahead of all the tariffs. We were heavy at this time last year intentionally. That was part of the reason we saw such a great lift in our gross margins last year is we did get ahead of the tariffs, carried a bit more, sold that inventory off through the year. We feel good about where we're positioned inventory-wise going into the second half.

[Cris Keirn, CEO at Turtle Beach]

We anticipate that, you know, with the Q4, assuming everything stays on track with GTA six, which all signs out in the market indicate that that is happening, that, you know, we'll be building inventory to prepare for that lift, which was significant. You know, if you look at GTA five, it's kind of the one data point that we've got there to compare in 2014. We saw over 50% lift for console gaming headsets in Q4. Now we haven't modeled that into our guidance, that kind of lift, but, you know, it's a good comp for us to understand what we might see.

[Cris Keirn, CEO at Turtle Beach]

We're keeping an eye on that data and also on how the launch is tracking as we look as what the ramp might look like as we get out of Q3 and into Q4, heading towards that November launch.

[Sean McGowan, Analyst at Roth Capital Partners]

Okay. Thank you. Can you comment on how much exposure you feel like you have to rising fuel costs, specifically freight and related costs like that? What's your outlook there?

[Cris Keirn, CEO at Turtle Beach]

We're seeing some small increases. It hasn't been material really for us to this point. That's another item we're keeping a close eye on to make sure that we're optimizing our shipping containers and, you know, making sure that we're taking advantage of any improvements that we can drive there in our supply chain. So far, nothing significant and, I wouldn't anticipate it to change, you know, anything that we've guided to for the full year.

[Sean McGowan, Analyst at Roth Capital Partners]

Okay. If I can slide in one more. It's like the Circana data for the month of March for the accessories category. I think it showed like the first increase in a long time. Do you take any comfort in that, or is that driven by something that doesn't really affect you guys?

[Cris Keirn, CEO at Turtle Beach]

I think that's an indication of the ongoing demand for gaming. It was great to see that number. When you look at our categories specifically, so if I take headsets and controllers, you know, through Q1, those categories are just slightly down, sort of low single digits. They're not yet seeing growth, across the, you know, that's, call it 90% of our business between headsets and controllers. That overall 5% increase, I think is a good sign, as you look into, how the next few quarters are going to go, going into a, what we expect to be a really nice back half of the year. That demand is out there and the gamers are out there buying.

[Sean McGowan, Analyst at Roth Capital Partners]

Okay. Thank you very much.

[Cris Keirn, CEO at Turtle Beach]

Thanks, Sean.

[Operator]

The next question we have comes from Martin Yang from Oppenheimer. Please go ahead.

[Martin Yang, Analyst at Oppenheimer]

Hi. Thank you for taking my question. First question is around the holiday season channel activities. Do you think the launch of GTA in November could change how, particularly timing, maybe volume, regarding the channel activities into the holiday season?

[Cris Keirn, CEO at Turtle Beach]

Hi, Martin. It's possible. Well, again, looking back at 2014 is a great reference point. We did see that demand started to ramp in September, leading up to that launch. If that were to occur again, we could see some benefit to Q3 as some earlier load-ins would happen, maybe, compared to recent years. Buying behavior in 2014 was also very different though. You know, with a lot of sales going digital, you know, you don't have quite the same store traffic that you might have for a launch. I do think GTA six is going to be an exceptional launch. We may see, you know, some of that behavior return a bit with some sales leading up to the launch. I do think that it could impact it.

[Cris Keirn, CEO at Turtle Beach]

We're not really factoring in a large increase at this point for Q3. It's difficult to say when that lift would be seen necessarily in our revenue for the back half. Certainly ahead of the launch, we would expect to see some lift as, you know, people start to refresh their accessories and get ready for some very long gaming sessions, if I had to guess.

[Martin Yang, Analyst at Oppenheimer]

Thanks, Cris. My next question is, given the newer challenges in the consumer hardware marketing general, are you actively managing the balance between console and PC new product launches because of the new reality?

[Cris Keirn, CEO at Turtle Beach]

Yes. It certainly factors into how we're thinking about future products, future technologies and innovations that we're putting into products. Making sure that we've got multi-platform support across our products, whether it be headsets, controllers, or any other accessories. Because we are seeing gamers certainly playing across multiple platforms and really going to where their favorite games are. We wanna make sure that we're there to support them wherever they are in playing those games. I think that shift that we're seeing, I do think that we'll see a nice bump in console activity starting with GTA six. You know, they've confirmed and in some additional recent comments here just in the last couple of weeks, that it will launch on PlayStation five and also on Xbox Series X and S.

[Cris Keirn, CEO at Turtle Beach]

It sounds like PC won't be coming for some period of time. You know, that's something that really positions Turtle Beach in a very favorable light because, you know, obviously our heritage there is with console gaming and our strength when you look at our share is very focused on the console side. I think that'll give us a nice, certainly early advantage, potentially in some of those sales for those gamers that are gonna be playing that particular title.

[Martin Yang, Analyst at Oppenheimer]

Got it. Thanks, Cris. Last question from me. Can you maybe gently remind us your relationship with Xbox and whether that relationship has evolved since they putting the new leadership team there?

[Cris Keirn, CEO at Turtle Beach]

Sure. We've got a great relationship with Xbox, as we do with our other first party partners. We, we really deeply appreciate the collaborative work, that we do with each of those groups. We haven't seen any shifts there that the folks that we work with have all been remained engaged. Looking ahead to the future, we're excited about Project Helix. That, that's been sort of teased out there and what that's gonna mean. You know, when you look across all of our console partners with Switch two coming out last year and then Project Helix coming up, and then a likely PlayStation six in the future as well, we're just really excited to get this next console cycle underway.

[Cris Keirn, CEO at Turtle Beach]

It's great to have started it with Switch two, and we're already seeing the benefits there from the Switch two launch. You know, it's a very cyclical business. When you look every seven years or so, six or seven years, and that new hardware comes out, you know, we see a great benefit for our business. This is part of the reason we're so excited about the next few years, is that we've got a really fun time of gaming coming up, and we'll create some nice tailwinds for accessories.

[Martin Yang, Analyst at Oppenheimer]

Got it. Thank you very much. That's it for me.

[Cris Keirn, CEO at Turtle Beach]

Thanks, Martin.

[Operator]

Thank you. The final question we have comes from Jack Codera of Maxim. Please go ahead.

[Jack Codera, Analyst at Maxim Group]

Hi, this is Jack Codera calling in for Jack Vander Aarde. Thanks for taking my questions. You know, you kind of alluded to it before, but, you know, given recent comments from Take-Two Interactive Software, it does seem that GTA is really on track this time for the fall. You know, I'm wondering if you have any comments. You know, when do you expect that impact to start? You know, is it when their marketing starts kind of for on the game side, or when the game launches? You know, given that kind of phased release of the console game as well as the PC game, you know, do you see that as a persisting tailwind? You know, what sort of window of a tailwind would that be?

[Cris Keirn, CEO at Turtle Beach]

Sure. Great question, Jack. It's something that there's obviously a lot of discussion about in the industry. There's a lot of excitement around GTA six for great reasons. You know, looking at it when it might start, you know, again, as we look back to GTA V, we did see that lift start to really creep in in Q3. It ramped up pretty sharply. Again, I'm looking at console headset markets. It ramped up pretty sharply in September and carried right through Q4. It could be that early and, you know, a lot of that is just the buildup as, again, as people are trying to get their setups updated and get ready for some gaming sessions there.

[Cris Keirn, CEO at Turtle Beach]

We could see that come early, but we're not counting on it necessarily when we look at the back half. We'll see how that rolls out. The second piece around how long the tailwinds might be for console there. You know, last time, again, it was about a 6-month window between the console launch and, I believe the April of 2015 is when the PC version of GTA five came out. It could be something similar. We don't really have any visibility into that. You know, what is encouraging is that, you know, we saw continued growth throughout 2015, you know, following the 2014 launch on PlayStation four and Xbox One for GTA five.

[Cris Keirn, CEO at Turtle Beach]

We saw double-digit growth in 2015 for those core markets with console gaming headsets. I would anticipate, you know, that this is gonna be a hugely popular game. It's gonna have engagement that continues literally for years, much as GTA five has done. That'll provide a multi-year benefit for the industry and likely for our business as well.

[Jack Codera, Analyst at Maxim Group]

Okay, that's helpful. Then I have one more, if that's possible. You know, kind of a clarification question. You mentioned the retail channel inventory, kind of some of this new product. You're clearing out some of the old product, and then there's the new buy-in. I'm wondering, you know, if you view it on maybe like a net basis, are you seeing overall channel inventory start to build again, or is that something we should kind of expect closer to the holiday season? Thank you.

[Cris Keirn, CEO at Turtle Beach]

Sure. What we've seen so far is that retailers have adjusted to the markets that we saw in Q1. If you look at our primary, you know, categories of headsets and controllers, Q1 was the lowest market. It was the lowest Q1 since Q1 of 2020 for those two categories. You know, that's part of the impact that we're seeing. You know, even though they were just down sort of low single digits from last year, if you recall, last year Q1 was down pretty significantly. The fact that we're at those multi-year lows at the moment for the markets has retailers, you know, responding appropriately and reducing their stock.

[Cris Keirn, CEO at Turtle Beach]

I think what you'll see is as we get through Q2 and into Q3 in anticipation of a holiday that could see pretty significant lift, that's when you'll see that buildup start to go. Just to give you a feel for our guidance, our guidance presumes that the channel inventory stays relatively flat year over year, between 25 and 26 to end the year. We think that that's a fairly good and conservative look on it. We're not counting on any kind of channel inventory growth. We certainly could see that, depending on how the holiday goes. Our guidance basically has a flat channel inventory year over year.

[Cris Keirn, CEO at Turtle Beach]

With the decrease that we saw in Q1, obviously that's gonna provide a benefit for us for the remaining quarters.

[Jack Codera, Analyst at Maxim Group]

Okay. Thank you. That's helpful.

[Cris Keirn, CEO at Turtle Beach]

Thanks, Jack.

[Operator]

Thank you. Thank you. At this stage, there are no further questions in the queue, and I will now hand back to Cris for closing comments. Please go ahead, sir.

[Cris Keirn, CEO at Turtle Beach]

Thanks everyone for your interest in Turtle Beach, and have a great day.

[Operator]

Thank you. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.

Participants

Executives

• Cris Keirn, CEO
• Mark Weinswig, CFO

Analysts

• Drew Crum, Analyst at B. Riley Securities
• Jack Codera, Analyst at Maxim Group
• Jacques Cornet, Partner at ICR
• Martin Yang, Analyst at Oppenheimer
• Rian Bisson, Analyst at Craig-Hallum Capital Group
• Sean McGowan, Analyst at Roth Capital Partners