Turtle Beach NASDAQ: TBCH reaffirmed its full-year 2026 outlook despite a weaker first quarter, as management pointed to channel inventory reductions, a challenging gaming accessories market and the timing of new product launches as key factors weighing on near-term results.
Chief Executive Officer Cris Keirn said the company’s first-quarter performance reflected “a continuation of a challenging market environment that carried over from 2025.” He said the quarter was affected by a temporary reduction in channel inventories as retail partners managed stock levels amid what he described as multi-year market lows for the first quarter in the headset and controller markets.
Keirn said retailers also cleared inventory to support the load-in of Turtle Beach’s new products in the second quarter. He said the company expects channel inventory to rebound in coming quarters, which management believes should support year-over-year growth as new products reach retail shelves.
Revenue Falls as Margins Compress
Chief Financial Officer Mark Weinswig said first-quarter 2026 revenue was $42.2 million, down from $63.9 million in the prior-year period. He attributed the decline to challenging market conditions and channel inventory compression ahead of the company’s 2026 product launches.
Gross margin fell to 26.8% from 36.6% a year earlier. Weinswig said the decline was primarily driven by lower revenue tied to channel inventory compression, as well as targeted promotional activity used to reduce inventory in the channel. He also said the quarter included an approximately 2 percentage point margin impact from one-time costs related to the transition of the company’s U.S. warehouse.
Total operating expenses were $25.4 million, or 60% of revenue. Weinswig said expenses were higher than the prior-year period primarily because 2025 benefited from a $3.4 million insurance recovery.
Adjusted EBITDA was a loss of $6.5 million, compared with adjusted EBITDA income of $4.1 million a year earlier. Turtle Beach reported a net loss of $15.2 million, compared with a net loss of $0.7 million in the prior-year quarter.
Company Reaffirms 2026 Guidance
Despite the soft quarter, Turtle Beach reaffirmed full-year 2026 revenue guidance of $335 million to $355 million and adjusted EBITDA guidance of $44 million to $48 million.
Weinswig said the company had expected the first quarter to represent about 13% of full-year revenue and came in slightly below that range. He said Turtle Beach expects sequential improvement beginning in the second quarter, with Q2 representing about 17% to 18% of full-year revenue.
Management said the second half of the year is expected to accelerate, driven by new product releases, Nintendo Switch 2 momentum, the anticipated November 2026 launch of Grand Theft Auto VI and the holiday season.
In response to an analyst question, Weinswig said the second quarter would be “a little bit weaker” than previously expected because of first-quarter softness and some promotional activity carrying over into Q2. However, he said the company expects the second half to be “a very robust period.”
Product Pipeline and Brand Campaigns Take Focus
Keirn said Turtle Beach is on track for more than 50% year-over-year growth in new product launches in 2026. He highlighted the recently announced Stealth Pro II flagship headset, the Command Series PC lineup and accessories licensed for the Nintendo Switch 2 ecosystem.
Keirn described Stealth Pro II as the next evolution of the company’s premium audio platform, citing features including Japan Audio Society certified Hi-Res Audio, 60-millimeter Eclipse dual drivers, Dolby Atmos spatial audio, active noise cancellation and a new CrossPlay 2.0 multi-platform wireless audio system.
He also said Turtle Beach has begun a brand transformation effort, including a campaign for Stealth Pro II called “The Last Ninja: The Ultimate Stealth Showdown.” Keirn said pre-orders on the company’s site for Stealth Pro II were already more than double those of the original Stealth Pro.
During the question-and-answer session, Keirn said Turtle Beach is seeing strong demand at higher price points. He said consumers have been trading up across several headset tiers, including entry-level buyers moving toward $40 or $50 products and growth in the $100 to $150 tier as well as the ultra-premium tier above $200.
Capital Return and Balance Sheet
As of March 31, Turtle Beach had net debt of $41.3 million, consisting of $53.6 million of outstanding debt and $12.3 million in cash. Weinswig said the company generated $29.4 million in cash flow from operations during the quarter and paid off its revolving line of credit, which had a zero balance at quarter-end.
The company also discussed a refinancing of its credit facilities announced earlier in the week. Weinswig said the new structure includes an asset-based lending facility with up to $80 million of revolving borrowing capacity and an $85 million term loan with a three-year maturity.
Both Keirn and Weinswig said the refinancing provides flexibility for share repurchases. Turtle Beach has $56 million remaining under its current $75 million share repurchase authorization, and Weinswig said the company began purchasing shares during the week of the call.
Management Points to Industry Catalysts
Keirn repeatedly cited the anticipated launch of Grand Theft Auto VI as a potential catalyst for gaming engagement and accessory demand. He said the company is well positioned because the game is currently confirmed for PlayStation 5 and Xbox Series X and S at launch, where Turtle Beach has a strong console presence.
Keirn said management has not modeled a lift comparable to the one seen around Grand Theft Auto V into its guidance, but noted that the prior release provided a useful reference point. He said Turtle Beach saw a more than 50% lift for console gaming headsets in the fourth quarter of 2014 around that launch, followed by double-digit growth in 2015 for core console headset markets.
Management also discussed Nintendo Switch 2, with Keirn saying Turtle Beach has seen sequential increases in comparable sales each month in the first quarter for its Switch 2 products. He said third-party accessory sales typically follow an initial period of stronger first-party accessory purchases after a new console launch, and Turtle Beach expects growth to accelerate as the year progresses.
Keirn said the company remains focused on cost discipline, product innovation and positioning for future console cycles, including anticipated refreshes from Xbox and PlayStation in coming years.
About Turtle Beach NASDAQ: TBCH
Turtle Beach Corporation 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.
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