Corsair Gaming (CRSR) 10 May 232023 Q1 Earnings call transcript

Good afternoon, and welcome to the Corsair Gaming's First Quarter 2023 Earnings Conference Call.

As a reminder, today's call is being recorded and your participation implies consent to such recording. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]

like Corsair's the and Vice now Ronald over Investor I'd Veen, Van President that, to call turn to Relations. With of Finance sir. you, Thank

You may begin.

you. first quarter for March XX, thank financial Thank conference ended everyone, for results the us Corsair's you for call XXXX. afternoon, Good joining and

Paul; the highlights the quarter, from On Andy Michael today, financials Potter. Michael will have we CFO, call review and the outlook. our Andy CEO, then Corsair's and will review

time have for any then will questions. We

me a include Company of expected disclaimer allow related statements. to call, including portion of forward-looking and the begin, Q&A This forward-looking statements. the we Before our provide therefore future results to forward-looking regarding are the may call, statements

risks and The uncertainties results are to forward-looking our and may subject uncertainties. statements materially that filings. actual on described release projections and differ earnings of in due SEC our are our risks Our number from to a

non-GAAP also remarks measures. references financial to Today's include will

in information, today. release reconciliation market to close provided information including between issued the we is financial information, Additional non-GAAP after GAAP the the financial press

that, over call to now I'll turn Andy. With the

to Ronald, earnings you, everyone, our welcome, and call. Thank

We a improvement adjusted off strong compared to are EBITDA period. the XX% to year-ago in XXXX, in pleased to start be with a

and components see categories to market are our also gain continue those significantly new to share build PCs of enthusiast-level We pleased positions in most of at pre-pandemic Recent hold that Corsair gaming third-party to that continues consumers levels. gaming in above rate a used builds. data shows

notably while U.S. and recovered. in have economic levels, conflict at on what level gaming line market talked largely significantly by Russia-Ukraine for up Europe, This quarters above broader Europe pre-pandemic the most slightly XXXX, with the peripherals where although was a has prior weakness. is we is impacted holding also about market behind The in

quality and Corsair From a of high for. continue enthusiast premium standpoint, to we to the that products innovation drive level product turn

engineered in bendable partnership our started QX XX-inch with to we Flex ship XXXX, LG. monitor, OLED During

are with We HSXX industry-leading grow by gaming Kits, headsets experience skip new launched and lightweight initiative, an to audio with and headset new allowing customers Build hunting PC. models. alone. easy to that should gaming it our We expanded lineup research out the parts great Corsair providing building self-built wireless new box solution people TAM a compatibility. when also These of a do This and HSXX but the are PC, building in our the without multi-platform the for for a interested

to everything a build kits different These six videos clear all by enthusiast high-performance build With kits made memory they CPU, with an instructions. in-depth follow card, supported graphics are get start components gaming with, off PC, step-by-step the Corsair. need to including to by and can the of easy other tutorial motherboards,

allows Stream run of now Deck, to website. creators our and base for Elgato believe marketplace be a and and users. Deck dramatically Elgato’s our to famous added Stream easily plug-ins rapidly We Stream Deck able applications on which content Developers Stream base. installed directly will our the that launched Deck We world increase plug-ins third-party be large available growing that applications will access to these installed from

PC. play with entered of XX,XXX. better gear, the gaming Corsair’s and viewership in will high-performance daily a and including million gaming Kolchoff, ORIGIN and Nickmercs, well also average using Nick Elgato's over multi-year hardware an from known gaming as with streaming stream and We PCs known Controllers, the into personality followers Scuf community Nick streaming partnership exclusively XX

that year, titles in market are being with many released can we lower will believe such and Back as that entering. road new Corsair market new confident our we our the with XXXX the and map, XXXX continue the markets, we levels recent market of product priced share higher and categories exciting grow continue to GPUs to off are the NVIDIA coming the grow this gaming to to game

the our please Potter, to Michael, turn now the me call CFO, Let over Michael for ahead. on go details financials.

afternoon, good components continue and to above good the line we momentum Revenue from expectations the able for to We gaming our off were demand slightly financial strong flexibility, build Andy, margin to expected continue benefited used start everyone. into were Thanks, build improve and gross strength and and QX to to XXXX. our year to with as PCs. our in

million of net XX to the XX% to in QX markets average XXXX European million QX and up continue but below $XXX.X XXXX. contributed historic percentile, are specifics, QX of in improving revenue $XXX XXXX. softer Americas, our in but compared revenues, terms from high In about be was than the XX%

Gamer Memory segments. net $XX.X to segment of contributed The Products QX now our quarter million during revenue Creator to $XXX.X and contributed million an compared XXXX Gaming Peripherals in to first million in revenue $XXX in in XXXX. The million contributed compared $XXX.X XQ of $XXX.X million segment during Turning net the $XXX.X Components the X.X% quarter, Systems increase XXXX. and million XXXX. of XQ QX from

driven the quarter million increased was The basis million XXXX. The in $XX.X profit profit million XXXX. gross decrease driven QX Overall Gross decrease XX.X% by in $XX.X QX profit compared to was XXXX, Peripherals and primarily reduced primarily XX XX.X% the was to in Gamer first compared reduced margin revenues. million by in gross $XX.X points Creator to compared QX $XX.X revenues. to segment

that hope promotions in in peripherals to was XXXX. XXXX. margins We excess which first in later profit end signs Gross gaming on of quarter, lead competitors showed of compared we improvements XX% easing will further near the some QX XX.X% to leading by the margin believe

of QX gross profit Systems $XX.X Gross $XX.X to XX.X% from QX profit in segment XX.X% XXXX. The and million million, was Gaming compared XXXX. an was XX.X% Components margin increase in

was XX.X% Our to XXXX. the for QX XX.X% Memory Products segment quarter first margin this in in compared

see with to starting operating actions cost we expenses last year-over-year. are of XX% took almost benefit We down the year,

freight XX.X% costs reductions, freight continued our to along with all also reflects out revenue-generating to we some and This compared part as driven decrease $XX.X management $XX.X expenses areas. rates million million, by and XXXX, QX to lower expenses were our revenues. support customers prior headcount of First quarter impact XXXX in SG&A on close the reduced in

control a during last this a better channel to and year have into period cost us position excess market of year actions invest inventory put Our products. our

will increase We to able market spending, prudent improves. slowly expect continue as to in but our to the we be and are spending

X% operating to of XXXX. $XX.X loss new quarter in $X was XXXX the million, of with R&D in year QX first products. ago but income from First million we flattish period, continue in as QX up to quarter XXXX $X.X our invest expenses operating were GAAP GAAP million compared the

quarter loss reduced share XXXX. to XX.X% income million loss in spot compared first to First as to for common XXXX. in We was per adjusted to bright attributable diluted operating shareholders million net per net $X.X quarter compared million QX our another $X.XX to or diluted a of million us, $X.XX $XX.X increasing QX $X.X or $XX.X share

our net or On $XX.X to an share, per to diluted $X.XX or QX adjusted improved basis, million income quarter XXXX. million $X.XX first compared in $X.X

we for to $XX.X by third to XXXX. first million QX a Finally, quarter EBITDA $XX.X million compared increased adjusted

continue sheet. remains to that more was to Turning After $XXX a further face in revolver ended us and with inventory million QX million $XX capital capital million We cash ended at $XXX to working driven working positive return of of allowed The and available. a reduction levels QX now debt, our start efforts partially by with in invest balance million debt after down to approximately normal $XX to increasing reduce growth. we our capital fully balance to XXXX. debt while XXXX our fully million paying $XXX of debt value, net of undrawn

to the revenue. of are we XXXX, our In terms previous of outlook full-year reiterating up flat

the revenue adjusted to EBITDA billion operating to and of range to million. in adjusted the million in to expect income range $XXX billion, total of range of $X.XX $XX million $XX continue $XX We the in million $X.XX

we the last being the of than as stronger pandemic, the second QX on earnings As half. call, was the distributed and quarter in being of past it XXXX expect with lowest see the we first before to more half noted revenue revenue our

we to are questions. the please call the open will up open that, With for call you Q&A? now happy Operator, for

Thank you.

question be Goldman Sachs. session. go First conducting Eric will ahead. from Sheridan a Please question-and-answer with We [Operator Instructions] now comes

much I big would a question. one maybe to the taking picture so ask love off. for to Thanks kick us

that. more of addressable continuing to now, little Thanks broadly? folks to bringing friction the into for broader bit much. the So widening people long-term seeing for to the enthusiast in about get the more can who and medium sort secular market gaming think market. gamers market about control we’re talked and tailwinds can their bringing lowering Components How do the Systems love category on you of against where to you gear widen addressable out perspective a more your We’d own Gaming and the you as so elements build

and question, by welcome the long the This be a That’s very way. you earnings for first call on. to Eric, is

by about And expanding. we expand So the The help general way the I question is easier to the PCs news self-built build. it PC good how to making is think market. can is is

new reason between forces put in game easier driving to a first years. easier at to But year and cases easy a made together GPU the availability with together. prices they it power place and them, involves and is or different than is we couple the slightly there’s a cost whether a lot those CPU Clearly, last been and a that’s this the better of were to connections put the it way compelling making building PC with that fans, our between the job supplies make in

try got well. going what it are the things we’ve that we do that’s lot moving so in as make easier forward And works of and and to a

versus terms a buying know the actually they task. of a the most of be if can them, PC is, building So it they anybody built? in daunting get And that can can PC help don’t question a people bit it,

put comes it, the build That’s kits better. details we steps. these easy together in why we launched one, the thing two, So three with to of make easier whole a how build kit the that

build the could PC people do it than felt easily. So that’s they they one would really buy idea. think most rather own We if their

Great. welcome. the Thanks for the thanks for and color

with question, Crum Drew ahead. Stifel. Next Please go

guys, Hey afternoon. thanks. Okay, good

understanding what So have that your of in their rebounds what your your level by course restock broadly segment? unwillingness half that if in declines second be and segment comments the a light correctly. to across the and Peripheral share you Andy, of can excessive retailers is I’m And outperform of inventory then seen the to the more speaking, that, function part market? of the In confidence performance business terms you on the competitors appear thus in

and business question have We We profitable in of quite market mean, the soft in Yes. is there. that the the and a that ship business need Well, business. that’s we core got Components share – to loss, categories market. and parts a the high this Memory are complex is because we’ve very it bit I in don’t

there’s example, in happening. the running reason share for just at or hold market are what’s market. And headsets for price us to that’s points no if been So loss in certain a keyboards

the once just It’s year. has – tries then that off to half half way you of the general last share selling market often and through we a But into it of good things their most holding second deal saw Once the inventory. in inventory, means discount that or become excess everybody consumers. for

of sort the Once we we be when is of level say wasn’t Price no purchases categories, certain shipping price more, level. I tends and $XX tends inventory, I say points that $XXX under to problem. suppose point majority there’s our in to $XXX in or I the And certain to a then casual what could be more categories. between prosumer much enthusiast points excess to you so mean $XXX had the the of cleared decided entry

So away We from we basically market. yes, what did. that’s that stepped

are being markets generally think back. coming we is this Now that – the

this we to already. So And it’s in in countries. starting happen U.S. Europe, certain in see

in competitors more should the and much second So return And as market healthy half we’ve to the we that year. of see a already strengthened this I’d to expect our then their up which burn happen markets. also done, excess inventory,

Thanks it. Got Andy.

Aaron go Next Please Lee Macquarie. Instructions] from with comes question [Operator ahead.

taking Hi. for Thanks question. my

could He streaming focus So should this you like you course partnership business? give Thanks. partnership color be whether and on name, if highlighted we is big putting that. is you normal the the with to on of so expect a this? partnerships more congratulations Nickmercs. more Or just on Any

Yes, thanks for the question.

with a experimented years some over think that methods we’ve last I marketing our of few of have different as lot competitors. the

this natural first that eSports areas. be – is think thought the this what started we I when gaming moving peripherals, obviously we into do the tournaments you would see and other to way teams and was sports in have

long to teams profitability. really struggled the quite a get to ride. It’s been have But eSports

there’s what great a concluded is investment we that that. so return And doing not really on

So we backed from away that.

only teams, our sponsoring lot competitors. handful In the fact, a we’re of with noticed of a thing this year and same we’ve

what has worked and sales us we component But our And the or is, to worked this for what in call, proven third-party both – endorsers successful. peripheral in past, influencers. be sales that’s

back players who’ve so But streamer, gone many audience. especially influencer – to younger our influential, to like good player roots. there’s we’re going online So a Nickmercs, you if to from highly and now being really an they are like

installed how it. for the with expect launch your lot respect the to also a the you talk to Stream then Can about Got this just makes of Elgato Deck. base? impact Yes, that And marketplace third-party sense. you recent of just

do only lot think which to We a units. it’s it been We’ve hardware the We allows into about not that’s Deck three streaming X.X base traditional would now, but And expand the Deck for people installed and to software I obviously. a business a in shipping only the version phone, applications. Stream up years the it right or throughout applications, expect something, available units. Well, try out functions. have million also on Stream to on go is it going actually

working So and that and both for been we Microsoft’s well now as Teams have released example, actually just Zoom we’ve plug-ins for pushing us. on Teams

try that’s or at complex from Zoom sharing your look things workflows screen, raise are the we not that anything don’t using or Teams and be i.e., hand windows different thing. funding around streaming, are those of that to a as so that and And complex, but applications, if to that start you’re mute you sort other with

to do external where button So people to really have that’s like an it.

dedicated is launching. where I nice have thing Adobe the be to sort we’re complex and some functions that’s buttons think great another of the do fairly So some going really simplify example, there’s workflow. to to that’s workflows

Stream So and outside the Deck base. that to activity more I’d see expect buying people are typical customer more our

Great. Thank you much. very

Barclays. [Operator go with question, Next Instructions] Lu ahead. Please Mario

to recent This wanted you Butler Mario. the in and my lean question. Hey, for future. I is get for taking your into a some of releases what might Thanks great. Jack maybe product into to sense on get of look

curious well quarter just guess launches could another with recent product color past So of that exciting expectations product lines lines or on announcements. any maybe you product specifically some there this was quarters. that I product you’re couple have these your forward? was been some or then any share I are lagged your if moving excited maybe If about a And performing or what most have exceptionally bit? products maybe

were right mean Well, Yes, a I people launched we think the where items launched maybe and thinking about laptop $X,XXX we question. was that’s high-value I $X,XXX launched, we a monitor good coming. that recession the a a period in

most the timing. wasn’t that So brilliant

expected. we well gone haven’t as as So those

been getting Stream the of that we Having limited feel it more launched couple ever although that cranks said the a things been that we It’s in The quantities up. a Flex sold just Deck that’s and we that, marketplace for there. monitor see since on fairly opportunities streaming ready. working has getting we’ve years about good out are production because actually

going that’s be I think terrific. to

we’ve so good got there redo line Headsets, most SKUs now. some product we’ve our and to managed of just really

last a market. we’re is half two the The happy total headsets of pretty wireless and market obviously the launched So market. headset big about that’s about we peripheral

very point. X.XX cameras, there. of webcam we out camera, price XKXX best high-end again, the that’s And a In probably terms a that’s launched

competitors, Again, as expensive heard from But markets. as we’re the you’ve we again, sell. market make, dramatically. can of webcam out some well our shrunk sold And as very doing the we’re has there. current for So we many

That’s it. you. Got helpful color. Thank

further no the turn closing questions. to Paul like There are floor for Andy to would remarks. I over

your Well and for continued everyone, for joining support. right. All thank us call on the you,

our forward contact please questions, you evening. updating have follow-up we Relations any and and quarter. a Thank department you next have you If to Investor look good

today’s teleconference. This concludes

may for this You and at time, participation. disconnect lines your you thank your