Hello, everyone. Welcome to our virtual fireside chat with Turtle Beach at Oppenheimer's 28th Annual Technology, Internet, and Communications Conference. Today, we have the pleasure to host Cris Keirn, the CEO of Turtle Beach. Thank you and welcome to our conference. Thank you, Martin. Appreciate you having us here today. For starters, Cris, I would like to, you have been with Turtle Beach for over 12 years now and in the CEO seat for over two years. If you reflect on the past two years, it's been quite eventful. What are your biggest takeaways and what are you most excited about? It has been very eventful for the last two years. I have to really give the Turtle Beach team here a ton of credit for being adaptable in a very dynamic environment and really resilient in the face of the changes that we've made in the company, which have been significant. We started a couple of years ago. We really wanted to fundamentally improve the performance of the business. We had several opportunities that we were taking around rationalizing our SKUs, focusing on higher productivity SKUs, higher margin SKUs, and really optimizing our channels to reflect those changes in our portfolio. In addition, we had a great amount of effort going into newly platformed products on the latest chipsets that bring the latest technology to gamers, really improve the cost basis of the products from where they were historically in the pandemic, and just bring a ton of new functionality to the space with new products. We were successfully able to execute on all those initiatives on the core business. Concurrently, we also acquired PDP, which is really a leader in the controller space and very complementary to our business, with a lot of great people that have really brought a lot of new expertise to our business as well. As a combined company, the benefits of the improvements to the core business, plus the synergies and everything we were able to realize from the PDP acquisition, have really put us in a very different place than we've been historically. Historically, we've been a headset company, primarily focused on audio. Probably 95% of the business when I joined the company was headsets. Now it's much more of a sort of 2/3 of the business is headsets, and it's trending toward more of a 60/40 split between headsets and the rest of our business, which is really exciting for us. As you look to the future and you look at the benefits that we've realized, not only from the initiatives we were driving before PDP, but also from PDP, there's a lot of things to be very excited about in gaming over the next really 18 - 24 months with this brand new gaming cycle that's coming into our business. A few of those recently were Switch 2. We saw all the excitement around that launch. What a great launch month for Nintendo in June, with new records being set for hardware sales. We know that that's driving accessory purchases in this new hardware cycle. We're very excited about what that's going to mean for us with our partnership with Nintendo going forward. We've started to announce some of those new products you may have even seen here in the last few days. You'll see additional announcements from us as we go into Q3 here. We're excited about the Nintendo growth that's going to drive. We're also very excited about the highly anticipated launch of Grand Theft Auto VI. It was great to see that that was confirmed from Take-Two as May of next year. We're going to see some really great engagement with gamers with that game coming in. When you look longer term, we know there's an upcoming cycle with Microsoft and with Sony and new hardware coming from them at some point. It's hard to say when that's going to be. It could be 2027. There are rumors out there for earlier or later. If you look at those, just those three factors really driving nice growth in the industry, it's something that is going to help everyone. Particularly for Turtle Beach, we're really well positioned to drive growth with those catalysts coming in. Yeah, that's certainly very exciting looking forward. In the near term, there are supply chain and tariff challenges. They're always tough to navigate, even for much larger companies. I think you have gone through those, you know, quite a few of those, arguably in better shape. What key decisions did you make that helped the company to stay healthy and competitive throughout those more turbulent times? Yeah, it's been a very dynamic environment there. We really started these actions in the first Trump administration where we saw some tariffs come in for China production. Fortunately, at that time, five or six years ago, we really started to develop our capabilities in Vietnam and established some very robust capabilities there from a manufacturing standpoint with our partners. When we saw the potential for additional tariffs, even leading up to Liberation Day tariffs that came in, we had proactively decided that if we needed to, we could pivot and do that very quickly here in 2025 to Vietnam production for the U.S. As a result of that, and again, the team here, I have to give them all the credit. They've done a fantastic job of really mapping out how that transition is happening, all the different timing and implications there. We anticipate we'll be roughly 15% of our production after Q2 for the U.S. will be in China, but the rest of it will be in Vietnam. That quick decision that we made collectively there to really focus on leveraging the expertise that we had there with our Vietnam partners, I think has turned out to be a very good decision for us and has put us in a strong position here for this year and looking ahead to next year. We also bulked up on inventory. That was another proactive measure that we took, along with many others, to really buy ahead of a lot of the tariffs to help mitigate the impact to our customers and to our business here for this year. There will be some ongoing impact. We are taking some of that impact in the business, and that's all included in our guidance. It has been a very dynamic environment that I'm really pleased with how the team has executed. In terms of our look for next year, you highlighted a few exciting industry-level topics that could drive accessory sales. If you look inward, when you look across your product categories like controller, flight sim, and others, where do you see the biggest revenue growth opportunity along those secular trends? Sure. When you look at this year and you look at how things have rolled out with some of the macro pressures, we saw a really slow Q1, with the comps year over year being down in our main category. So headsets and third-party controllers, the comps were down over 20% in Q1. We've seen improvement in Q2. Year to date, those two categories are down anywhere 15% - 17% here in the U.S. We've seen improving markets with that momentum in June helping out considerably there with Nintendo Switch 2 launching. For those reasons, we see that momentum continuing into the back half of the year with continued improvement. Our guidance still allows for the market to be down in the U.S. here roughly about 10% in our key categories. That expansion that we've had in categories over the last several years through both investments in our own team's development and through M&A, we're really in four major categories. We're in headsets, both console and PC. It's really a multi-platform story there now in the headset space. We've got a significant portfolio in controllers, so your typical gamepads, but also specialty controllers, things like fight sticks, musical controllers, really exciting new categories that are driving growth. We've got our PC lineup, including many of those legacy Roccat model lines for mice and keyboards in that space. Also in the sim category, we've been growing there. We entered the flight sim category in 2021. We've got over 20% share in that category. We've seen some nice organic growth in flight sim. We entered the race sim market last year with really just one SKU. We just had an announcement last week. We're expanding that portfolio and we see really nice growth in that market. When you look across those categories, I think there's opportunities in each to see growth. We're seeing that with the improving markets. When you look ahead to the catalysts that I talked about for the next couple of years here, I think with new hardware coming along, really from all of the three major first parties in the console side of the house, and then some really exciting new growth in the PC side, some nice content coming out. Grand Theft Auto VI is one I know that we've talked about. Hopefully, there's some gamers out there that didn't spend their whole weekend on the beta, but that's going to be a really great game. There's not just those big pillar games. There's also a lot of other exciting content coming that's really going to drive growth across all those categories. Yeah, makes sense. Going into, you know, arguably more opportunity, more growth opportunity comes with more competition. Do you see any risk you would want to highlight, any potential source of risk going into 2026? Really, with the competitive set, there's a lot of great products out there from not only first party and third party. We've been fortunate that the investments we've made in our R&D team, the investments we've made across the business, have really allowed us to maintain that leadership position that we've had for so many years in audio and now with PDP also in controllers. When I look across the new products that are coming out, I'm really excited about what's going to be out there for new hardware and next-generation gaming systems, because it does open up new opportunities. If you look at Nintendo Switch 2 as an example, what they've done with Game Chat and some of the great new functionality that's in there, it enables more accessory functionality and some advanced features for gaming that wasn't in the prior generation as an example. We like those trends and we'd like to see what that's going to do. We also are interested to see what's coming out from competitors and we stay very much on top of those markets. I think as we look at how those are going to evolve, particularly with all the macroeconomic impacts of tariffs and things, I feel like we're in a very strong position to really capitalize on those competitive opportunities. Makes sense. Switching gears to more financial-related questions, in recent earnings, you reiterated outlook for 2025. With the same outlook, is there any moving pieces in revenue and margin composition that may have shifted? Yeah, when you look at the revenue for this year, you know, we reiterated where we were following the tariff announcements, you know, with our Q1 guidance. We assumed at that time that we were going to see some continued volatility and some continued announcements, which we have, you know, around some of those macroeconomic factors. We are seeing some shifts of mix, you know, in the revenue number, even though the overall number is remaining the same. Some of that for us is depending on when we can make the transition, you know, from China to Vietnam. We have moved some of our plans around and we've adapted as that news has come out. As an example, you know, when we talked about going from roughly 10% of our purchases to roughly 15% of our purchases, that's really us optimizing margins, timing. There's a lot of factors that go into how we're going to achieve the guidance that we've put out there. We will see some product mix shifts in there a bit. For the most part, you know, when we had guided initially in Q1 and provided that visibility to our shareholders, it was important for us to get out there and do that despite, you know, some of the volatility in the market. We accommodated for the increase that we saw in Vietnam tariffs going from 10% - 20%. We've made adjustments in our product mix to account for that. It's mainly a mix shift. I would say to your question is what we're seeing, just slight mix shift based off the tariff situation. Got it. In your margin structure, you know, how much of a margin structure depends on product mix compared to supply chain efficiencies? It's important. You know, mix does have an impact. Fortunately for us, many of our categories with the work that we've done over the last couple of years that I talked about earlier, we have strong margins in each category. There's not one category that has a significant difference to the other categories. We can lean in on each, which is really nice having all those additional legs on the table that we can lean on depending on how the market is going for a particular category and really not see too much of a margin dip or increase depending on how that mix moves around. It is a factor. Mix always has some influence on the overall margins. The 200 basis point improvement that we saw year- over- year in Q2, we reached up to about 32.2%, I believe, is where we were for Q2. We do see that improving to the back half of the year as we get more revenue coming in and we see some of that leverage come back into the business to be back in the mid to high 30%s on gross margin percentage in the back half of the year. It's really more of a function of what we're able to do from the transfers of our production, negotiating with our manufacturing partners and with our retail customers, and also in some cases adjusting price, right? Some of those prices have come up a bit based off of the tariff amounts. It's something that we certainly haven't applied in a broad sense. We've looked very carefully to make sure we're still giving great value to customers in the case that we do have to adjust any prices. Those are the main factors really. You look at gross margin improvements we've made, it's a much better overall mix and build for us from on the new generation products. It's also all the adjustments we've made due to the tariffs. Is it fair to say that within this guidance, you have not baked in an additional price increase for the year? There are some additional price increases planned for the back half. That's really a part of what we saw with the announcement in early July of going from 10% - 20% in Vietnam. We had included the plans for that in our original guidance. We had made an assumption that we were going to see some increase from the 10% baseline. As those have come in, we're actioning those additional moves. It's not just price increases. There are some additional negotiations that we're having to pull costs out of the business, and we'll continue to have those discussions. It's important for us, looking forward, that we continue to pull costs out of products and still provide a great experience so that we can maintain those margins. I see. Are component costs and freight costs a tailwind now? How much relief do you get from them, if any, in the next 12 months? Yeah, I think we've included that pretty much in that mid to high 30%s. We've included those factors in that guidance. That's where we believe we'll end up here for the full year and also for the back half. We try to account for all those factors. It is a very dynamic environment to be operating in, to account for all those. We believe those are already in the guidance. I see. Switching to product categories, especially on the topic of headsets versus controllers, between those two major categories, do you see different product refresh patterns and growth drivers? We see actually that those two categories tend to behave rather similarly from a market performance standpoint. What I mentioned earlier is, you know, the compression we saw in the headset market and third-party controller market was pretty similar in Q1 and Q2. The markets tend to move fairly closely because they're tied into things like new hardware releases, like new consoles coming out or new game launches. A new game launch comes out, something like Call of Duty, something like Grand Theft Auto VI. It drives purchases across all accessory categories, primarily in headsets and in controllers. We see those move together in a lot of those kind of catalyst situations where you get something new that's going to drive purchases for customers. The benefit is that when there are opportunities like on a controller or a specialty controller, Riffmaster being a great example, or a guitar controller for Fortnite Festival, that will provide some nice lift on something that may not have an opportunity on the audio side. We'll get the benefit of both having that offering in both categories. Within headsets, particularly on the competitive landscape for headsets, we've seen a number of consolidation going on in this category. For the next, let's say, one to three years, how do you see yourself competitively speaking, or how do you see your competitive positioning evolving in the premium category for headsets? Sure. It's a really great opportunity for us to actually leverage all the great expertise and all the technology that we've got built in across our audio product line and really push that. Our focus has been in the recent years to really push that across all platforms. We know that gamers have changed and evolved. Gamers are not just, it used to be they were much more focused on a single platform. There are so many great games out there and there are so many great platforms to game on that you really have to think about all those use cases, including for audio, that a gamer might want to be able to transfer between systems and not have to transfer their accessories, and not have to pull a new accessory out of the box there. As we evolve our strategy on how we're going to support gamers in that way, I think that we're in a very good position knowing what's in the technology pipeline and seeing we stay very much on top of those trends to make sure that we're tracking well with what gamers want to see and where their priorities are. I feel like we're in a really good position to capitalize that over the next couple of years from a growth cycle for the entire audio industry. Likewise, with controllers, we see that evolving landscape in that category. There's great new tech that comes online, and we continually refresh our products like we've just done with the Victrix BFG products. Really, premium controllers are premium experience, and we'll continue to refresh those lines as we need. Yeah, makes sense. You are in a consumer product category where visibility to consumers through marketing is very important. Also, the product is a tech product. You need to think about investments in R&D, product innovation. How do you balance the two between R&D and marketing? Looking at Turtle Beach itself, where do you think your strengths lie? Is it lying in one area or the other, and why? That's a great question. Actually, both of those categories for us, I'm really excited about what the team has been able to accomplish and the direction we're heading, not only on our R&D side of the house, but also the great work that the marketing team has done here. I can touch on each of those. From a research and development standpoint, we invest about 5% of our revenue back into R&D. We've consistently invested on that through the years, and it's given us great results like those newly platformed headsets that we launched last year and the ability to then leverage that platform across more products as we go. It brings all the new tech benefits with it as we're able to get those platform solutions out there. When you look at the tech pipeline that we've got and the product pipeline really over the next 18 - 24 months, really excited about what our R&D team is bringing there. We'll continue to make investments in that team and in our development. If you look across how we allocate our capital, that's one of the key pillars that we've got there is to continue to make sure we invest to maintain our leadership position in both audio and in the controller space. That team is key because it really all starts with the product and having a great product that gamers love to use. On the marketing side, we've gone through so many changes there with brand transitions. We've integrated the ROCCAT products and the PDP products under the Turtle Beach brand, and that's still in process on the PDP side. The team's done such a great job. We've refreshed our whole brand, a brand new logo, and a really great new feel to the brand moving forward. We'll continue to look for opportunities to engage with gamers, be out there in their field working with them and really get their feedback and make sure that that's getting into our messaging. Makes sense. Definitely see the categories of Stealth and Recon going across, not just headsets, but going to the controllers and potentially other categories. Very good. When you think about maybe the macro trends we've talked about, is there any particular things you would call out that could drive changes in how you design your products and or how you market your product? We do see that gamers are playing sort of the large franchise games. A lot of those gaming hours are going towards those large franchise games. We've got a lot of great partnerships with many of those folks and finding ways to really bring something with an accessory and an experience, whether it's on audio or whether it's a controller or a specialty controller, to those gamers is going to be very important moving forward. To have, you know, be ingrained in the community there and understand what they're looking for and the trends that are emerging, that's something that we keep a very close focus on for the business and for our development team and also with a lot of the outreach that we're doing in the gaming community. Got it. Let's move on to finance or capital allocation and financing questions. You recently executed on your debt to a lower cost basis. Looking at your current balance sheet and cash flow generation, can we go through your allocation priorities? Sure. Yeah, the refinancing that we just completed, very pleased with the execution there. We were able to reduce the cost of capital on our term loan by 450 basis points approximately, which is a massive increase for us, a massive improvement. It's annually going to save us about $2 million in cost. We'll drive about $2 million in cost savings just on the reduced interest rate, which helps us. Part of our strategy there is to continue to drive high cash generation from the business. If you think about this year, midpoint of guidance being about $50 million or so, we expect to generate north of $30 million in cash from that guidance. Moving forward, we think that that's going to improve that profile. Cash flow will improve to be north of 70% of our EBITDA in 2026 and beyond. We've got the benefit of being a very low capital, very high cash flow business. I think that having a lower cost of capital and giving us the additional flexibility that this new loan gives us around our three pillars of capital allocation is going to be very helpful for us. Those three pillars for us, first and foremost, is invest in our own business. As we've talked about some of those opportunities there organically that we can drive growth. Secondly is M&A. When you look at PDP and the transformative nature of that acquisition and what it's allowed us to do from a broader portfolio and a broader technology standpoint and really just adding scale to the business as well, it's been a very beneficial acquisition for us. It's given us a playbook that we can now take a look at additional opportunities. If it's accretive to execute the same kind of playbook on future M&A. Third is also share repurchases. We've executed on that program in the last year. Actually, the last 18 months, we've made $35 million of share repurchases, applying that cash and that capital for that purpose. It will continue to be a focus area for us moving forward. The balance of those three pillars is what we're talking about all the time here in the management team and also with the board of directors and with our shareholders on how we move forward and get the best outcome balancing those three pillars of our capital. Particularly on M&A, are you seeing any potential acquisition opportunities that could accelerate growth in the headset category? I think across all categories, there's always opportunities, you know, and we're reviewing these on a regular basis and out seeking also opportunities that would be accretive to the business. Again, when you look at PDP, it shows how beneficial it can be, you know, if you find the right partnership and you find the right merger that can really drive your business forward and drive that strategic growth. We're always open to those opportunities. I think in the headset category and in the controller category and, you know, across the other two categories of PC and sim that we play in, there are opportunities out there. It's something that we consider very carefully and weigh that against the other opportunities we have for use of capital. It will continue to be part of our core strategy. Yeah, makes sense. I see no further questions from the audience. Is there any closing remarks you would like to make? Just that I'm so excited about what's going on right now in gaming. Despite it being a tough first half of the year, when you look ahead and you think about what Nintendo Switch 2 is going to mean for 2026, particularly in the first half of the year, which was very slow this year, as people were awaiting the new hardware, we see a huge opportunity for growth there in that area. Grand Theft Auto VI is really going to be a huge catalyst when it comes along in 2026 as well to drive growth. Even looking forward from there, having those new kits coming from Microsoft and Sony at some point in the future, we see a really nice opportunity here for a multi-year cycle of growth. On top of that, there is a tailwind out there that all those pandemic purchases, we've never really seen a full replacement cycle. We started to see it a little bit last year with accessories outperforming the market where people were replacing and upgrading. We know with this upcoming cycle of high gamer engagement that it's going to give us a great opportunity to really have folks upgrade their accessories and drive sales. We're really excited about that. The folks here love creating new products for gamers and looking forward to the upcoming couple of years. Yeah, that's right. I think the last point is really worth highlighting. We're seeing games that are truly supporting only the next-gen consoles and hardware now, where previous games are supporting multiple generations. This new upgrade in the content quality may present new opportunities for overall accessory sales. Thank you so much for your time and insight today. It's a pleasure to have you and hope you have a good rest of the day. Likewise, thank you, Martin. Thank you, Cris. That's a wrap.