Corsair Gaming (CRSR) 7 Nov 232023 Q3 Earnings call transcript

Good afternoon, and welcome to the Corsair Gaming Third Quarter 2023 Earnings Conference Call.

As a reminder, today's call is being recorded, and your participation implies consent to such recording. [Operator Instructions] With that, I would now like to turn the call over to Ronald Van Veen, Corsair's Vice President of Finance and Investor Relations. Thank you, sir. Please begin.

you. Thank and Call joining ended for XXXX. everyone, Financial for September you Conference Results the thank afternoon, us for Corsair's XX, Good Third Quarter

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

We will any for time questions. then have

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

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

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

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

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

and growth our achieved strong everyone, Ronald, net year-on-year we profit with growth basis. on Thank to and XX.X% XX.X% first, The revenue and of QX earnings key for income adjusted are: revenue you, a welcome, of takeaways QX growth call.

uplift margin to along to in continue seeing practices the level promotional new across healthier Second, we ASP industry. and from expansion. inventory with We're margin drive a gross and return an products, a more normal

from major gamers slate full systems. of titles new new our for both being to triples demand the Third, continue released drive and

Overall, with and these we're games hardware as needed run New [ maximum Gate momentum the positive settings. popular Baldur's serve and catalysts, ] like given we the requirements our releases Cyberpunk increased building. IV, pleased Starfield, to progress are at Diablo

take expand points. few a on me these to let Now minutes

First off, growth in strong QX.

compared markets the hardware, elevated consumer that we XXXX pre-pandemic see softer spending can general periods. that XXXX, and the is gaming far to to in seeing are close in we're While

we this are XX% product our growth, with new beating to momentum components and for launches. XXXX. gaming the the that from point, and both compared In getting fact, peripherals reflects market higher roughly At are we

the to Our recent a PCs We added XXXX segment observations. these believe number months. within from PC of the play. build enthusiasm with We new started This buy enhance next hardware that game competitive gamers, spend PC found spend pandemic hardware high-speed Intelligence next of XX% agrees the plans on DFC new who significant over decade. XX and survey will competitive gamers, to their or continue systems over that enthusiasts believe built who gamers either to in the that to our

to continue level Secondly, a by led this were we practices new across drive more and to products, normal inventory ASP QX XX% to last year. compared XX.X% gross margin in Gross margin from an and quarter promotional return expansion the industry. in uplift margins in healthy

Thirdly, wireless headsets. few We the we've launched fund release also in very our high-performance recently and active that been new own months. several on product over our switches use and the keyboards line KXX wired past new

for new well wired sound MAX to Pro back HSXX more been Virtuoso radios has new features And our Our to its headset open connect received more headset devices. characteristics. excellent

a PC And players. Envision. significant Scuf console some the a new star market we to with is organized sticks to sign controller PC recently enhancements brought This our in with arrangement, controller, PSX but

were the are for launch sold on inputs, programmable. While Scuf games, added Envision, which of immediately certain mouse. and then many do number keyboard and to inputs additional out available PC like PC controllers we same XX is a gamers, fully using changer day. have This they gamers not game With have a for use console we

only will our buy about of of to stream third-party apps our allows from but marketplace creators, who over installed growing We experience Elgato us. Stream excited very hardware. our for let us. in-house recent will with which not sales This launch new from This Deck stream users, a creators users help also the believe Stream base partnered completely We're revenue programmers base also to enrich the turn and and XXX Marketplace. and drives accelerate for in plug-ins Deck installed have of this the unit

our content days with people, We also anyone of was a a face allows this also behind maintain recently cam to the mount at a first cameras. call out doing at This which X any display launch. with or Priced you launched script. an while video contact X-way streamers Elgato comes teleprompter, a or Elgato product can sold eye looking $XXX, which in DLSR mirror, complete in or either

to regard feel and the healthy have entering position point channel at QX of inventory, a good this in level we With our QX. about inventory

We expect again, of seeing to activity compared market aspects the to level top hardware the all prepandemic. resume gaming of growth that on of now we're elevated

have expect will We year launches will positive new market products XXXX. that in in of start we QX to on the product take new in this recent Corsair as well share XXXX. And our to effect a our as channel drop

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

and afternoon, everyone. good Andy, Thanks,

year. Revenue, continue QX reflect financial EBITDA all the in gross We for be themselves. over prior to margin products. very present debt encouraging our QX, flexible half as expect the further results of to allowing substantial of in with first remain rest strong peripheral that of the and a Our year-over-year we us margin continuation to opportunities core improved and gross improvement the recovery started year, liquidity XXXX, the adjusted in excellent reduced

million compared revenue In terms QX was of million net specifics, $XXX.X the XXXX. $XXX.X in QX to XXXX

] of revenues, signs from to $XXX.X did year period. European billion increased X X.X% is ago $X.XXXX 'XX. revenue XXXX, the XX.X% be markets contributed months an million net about from of XX.X% Americas, [ in than and continue the of our but in which to improvement increase For softer QX first show

XXXX. of to net $XX.X during third revenue now Turning contributed compared quarter million QX Gamer to million and segments. segment Creator in our The the Peripheral $XX.X

of $XXX.X Creator revenue the and first segment was for Gamer Peripheral the compared X months XXXX, million $XXX to For of million X first months XXXX.

quarter, million from XXXX. $XXX.X $XXX.X Systems net an & Components QX the XX.X% during of revenue contributed in million of Gaming segment increase The

Products to XXXX. million $XXX.X $XXX.X XQ XQ compared million in Memory contributed XXXX in

For revenue the XXXX. million from revenue of $XXX.X $XXX.X increased to months first Components in Systems With of Gaming & Products $XXX.X $XXX.X to first increasing X million. months segment million from million from XXXX, the X Memory

QX was the third profit gross quarter. $XX.X reflecting to million XXXX, quarter revenue Overall $XX.X in higher in the the current compared million in

XX.X% Gross to compared margin to in increased QX XXXX. XX%

LINK from improvements a well Deck as in and We costs continue with our product latest new name Stream products the from iCUE as freight few. introductions to to an benefit uplift

X Overall of first $XXX.X million XXXX. of XXXX, X profit compared million to gross increased $XXX.X the for first to in the months months

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

Memory were in this Products Our XX.X% gross XX% margins QX third XXXX. the for segment to quarter in compared

XX.X% The at. in expenses compared the $XX XXXX, in million, revenue QX million faster $XX.X given we a third SG&A to grew increase quarter rate the leverage our were reflecting business, operating

of in products. a XXXX. QX was compared continue $XX.X GAAP to Third expenses we quarter operating XXXX to to up loss new our $XXX,XXX the as XXXX third X% in investments operating prioritize million, compared $XX quarter loss million GAAP in were QX R&D of

XXXX. spot million of compared was in quarter for us, Third increased first income first again $X.X X income to $XX.X X QX operating million XXXX. the bright increasing a operating months to from the for million months million of in $XX.X XXXX the adjusted Adjusted $X

to loss a quarter share in Third shareholders million $X.X net per attributable or loss was as net $X.X of $X.XX million QX of a per loss share, to or compared XXXX. $X.XX common diluted diluted

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

$X.XX first XXXX. For the of of months loss adjusted to per first loss months improved $XX.X income adjusted of share diluted million from net diluted net $X.X a XXXX, an X of $X.XX in the or share X per or million

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

recently Drop, the resulted include $X impact results adjusted approximately in which of QX a acquired EBITDA million. decrease net Our the of of

year provides, opportunities and the We channel. our as to grow help expect we revenue direct-to-consumer to are acquisition continue cross-selling turn positive we'll next this Drop and excited about

million X adjusted XXXX, increased first of the in EBITDA million $XX.X $XX.X the months to to For period. ago year

ended the material, all-cash ahead transaction QX, a financial Turning in investment balance, balance strong $XXX.X We sheet. of quarter. QX, as QX an seasonally was as of of This with inventory a Drop our which cash now including largest reflects our not million. to an close of and our in position restricted cash well acquisition after

in expect revolver $XXX QX remains million again for ended debt of as We present in to allowing remain and themselves. liquidity working further XXXX, reduced plan excellent We us Overall, with debt fully at we reducing $XXX.X million on and to available. opportunities of QX. undrawn capital flexible it our be face and QX the rest value,

M&A cash of strong outstanding to on debt a our us priority will remains expected basis. for cash, regular reduce generation use but a to continue allow

now In $XX adjusting Adjusted million $XXX XXXX, income outlook. in terms the of $X.X to of of of expected $XX EBITDA the our revenue and now the total million expect billion. previous to is range are range to range be in year full operating billion we $X.X adjusted We million to in the $XX million.

integrate a generate our loss in people which and Drop, supply as we includes small systems, Outlook XXXX we to chains. EBITDA expect

to expect and We cost realize from synergies in XXXX, we this well. savings positive generate year turn revenue quickly this as the as

We believe positioned we're for and year QX for that beyond. the well

growing has been to able including economic We on have for been what our XXXX, a at plans execute tough well backdrop.

in robust product release opened to rounded during These us last a us releases and new new year downturn lines for markets The for both our recent new year. have allowed schedule investment product products our peripherals out market. up existing core this has the have

our margins growth. is year. even of normal inferred year demonstrated the to generate our debt, of lower ample middle that So expectations. environment current tougher and cash guidance, adjusted debt with a in remains year, year we than company have reduce the has our improved annual both far, the more our promotional steadily we're end doubling carry M&A beginning revenue through the over at last the at the and of Even low. Gross and than delivering The EBITDA our net

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

begin question now will [Operator Instructions] with Wang session. will the We George first come Our from Barclays. question-and-answer

you Drop positive you give going and and curious integration forward. synergies if in can on calendar the color more terms you Just can double-click the synergies generating firstly, of of cost XXXX? guys to in alluded Just kind the revenue EBITDA

to George, meet firstly, nice you. Well,

yet. We haven't spoken

have to you on great So board.

So many EBITDA acquisition. slightly when was obviously a we're It bought details not on Drop. really too was giving negative them. we small out It

fairly quickly slightly expansion. positive so 'XX it's that much move We from not going is expect to in to as to would say synergies be most able cost to EBITDA. And revenue I a the of come

the in So platform both some Drop selling channel. selling our and Drop's our products on products

Great. have Okay. quick I just follow-up. a

kind thoughts of of kind where As environment? overall It's But this you promotional can of restocking? as guidance? head any environment stand of comment the of update holiday kind in year. encouraging has to your quarter promo end Any first retail we sort into kind of relates of environment retail the versus on normalized we channel the the to third half on high the on season, the the it today, just see

chart time down. we're say positive softness for get, all inputs gaming this in a X% on Well, show pretty hardware Europe, we're what mostly I at I is growth that this put deck the hearing. U.S. that point, the and the about we that or in to We -- would

QX. So that's for

last So we're basically year. with tracking to on par be

follow is Prime the as year, was maybe same to noticed gaming same a bit QX it Day roughly had was little that October we the -- pattern. stronger. think Day We Amazon going little a and hardware, the Prime last There

at So similar stocking holiday is the anticipation good moment, a up for to the season, channel last pretty in year.

Our next Aaron from question come Lee with Macquarie. will

I product revenue launches. wanted on that touch your growth. with result to Nice

that product think new of about I'm year launched So we at cadence cadence terms you've how even of next new year. a maintain the year launches all bunch this the unusual for this or curious, XXXX? Or could Was increase? of of product obviously, products introductions? in should you number

and products bought Well, the I that fact comments the we think more were price hit about of terms in our the we marks performance. made

-- And products that line, were significant. the we One HSXX that HSXX very launched doing which so X had well. we pretty headset MAX was are

which is airfreight Core, fact, mechanical sold $XX. is which at is moment, In being so a out the having KXX called And other we're the a retailed we're product them feature to keyboard, full one in. for

in is We out so and switches we've Corsair both our brought magnetic. switches. now And optical using and -- that mechanical, own --

new us. So for thing that's a

of some those So things. were the main

we We was think especially alluded I first Scuf first day. PC Teleprompter that out also launched the launched. Elgato the sold sold the control, was of enthusiasts some that to products were the out X days. in

brand-new think a recently out that are So And or we'd same get we have week I products teleprompter. a typically one Obviously, on next new just hit PC segments not expect have of to the really year. we've segments. had like controller the marks and refreshes more the but or been product average, the about new lot as do -- in those and

the can you launched, on this up on And I it you ramp helpful. the and know That's and been of usage it's early Perfect. you. Got the and in on how month, you've XXXX? which days uptake Marketplace, plan anything recently only a the then share but to Elgato

been it's we creators. Well, this is, early were to of bringing you thing a it apps. huge couple launch There's of third-party complicated. to as of happy -- number XXX did very quite say, Yes. days. is we years providers or It with market, over But

is is The the or person seen over order ASP per spend that so interesting high. thing far per we've pretty

to So is ASP on people spending not the and but plug-ins, $XXX. on we've up average, got that $XXX

So that than was we higher thought.

whether some know mean of to how $X $X,XXX. don't the dollars I just don't get yet know model we Stream going we is or data. until don't yet is we What $XXX per or more the user Deck that year. is We average know that pay amount what to that's

keep through we go as we'll So appraised you QX.

I on of marketplace like sell-through and sense the think how hardware. people next looks year, Stream good the by marketplace, in of a how jumping we'll this own are early model have what many of Stream terms that the affects also Deck Decks

Perfect. Okay.

it. forward Looking to

question from with will come Crum next Our Drew Stifel.

and David revenue the on Can for It's takes XQ Drew. on the you puts implied provide outlook?

top You of market to does the of conditions? that? end the mean range bottom what of compared terms means range the end Is in the

Yes.

Yes. Well, how strong is. holiday I how season think it's to -- the all the down strong

on closer we just holiday Friday is it, in not to these Friday, the Black earlier. start season As get people days, promoting

I we're with and seeing see to what confident as at think going get comfortable we've more. the And people with more we'll more range So that. to they're out. spending, get moment, in then and load pretty up comfortable the we're given But pretty

did touched you but a Prime And bit, coming hoping of a Day. on detail demand in the Day? consumer little terms Okay. or was I around this out the get consumer little learn health to What the or bit more color you of Prime of

with buys buying them what's no people day the Well, one the these is few this get spending stopped happen then year get now it's of a we similar a a it -- is starting spike of before, get to that so many that days net then last you a and you right? after. complicated, the think I bit Unfortunately, year. to some is holidays, of

number. up neutral So almost end with you a

But the last the we seems see interest is for consumers, that par to thing can be and key level with year. on that

it. Got

Instructions] with Our next come Creutz Doug [Operator Cowen. will from question

sort where you of noted headed the As normal you to back which things of your several range, disrupted. of ability according pretty suggests has forecast levels year much to expected guidance gone your after initial this is middle that you're sort what to years towards were

historical there if its still at that you is could trajectory that you not, of Analyst the Day? to Given do you what you to sort as headed hinder talked going growth sort think that? about about industry that, see your And year, next you think be do out long-term of back think

great Yes. That's just question planning our for next we're year. starting a because

the So thick right in of that.

would and bulge there us So words, is rates other cycle what assume from X to us refresh get that where we later, in that of the gives came 'XX we an some will we is, that cycle they of to is is this confirmation 'XX. And which referenced positive eventually, one echo which refresh DFC, back years, later. about happen growth would survey is X thought were. feelings one be COVID What just for out

expect So bulge. a do we

is refresh a pretty that's to market an I during that There's and overall think rebuy, be buying starting perhaps they're time gamers and offsetting were new the in the hardware lot of with a what's market. or happening and first at means flat. gamers may increased net end the of those, up moment some for And the the softness lockdown. we that that today of number

see continue and to bulge We growth. start will would this hope into some next that we'll year,

we're growth for 'XX first XX% we'd modeling expect think and of components. I'm up. growth lot the X% the XX% hoping not but And and I traditional back it plus still to So 'XX, peripherals get we gaming half, to to a pick in by for

So that's the as at best forecast it can as moment. we

Our next with from question Sebastian Baird. come will Colin

Andy [ and Colin. on for Reese Michael, it's ]

an We one have could might next with guess would you be, that revenues Drop how guys mix going I update given provide DXC overall especially the company, first higher. the the change presumably, and year, of on X it's questions.

then a If year, specifically, I difference end? this you you launched a around changes launched And seen you like launch that. that gaming behavior year to the more are that you and gaming seeing things that state behavior were have things versus from in consumer last launches gaming maybe consumer and take going gain in the to gain the launch? well a guess are are from what it But second, around guess seeing, guys maybe sounds more of like I

Okay.

X So different questions.

maintained actually a acquisition growth obviously with big is about percentage. one are hoping We So Drop it DXC last a number. revenue same Drop. was in the or some not year. big is the as for percentage first DXC

hugely be I overall is have small goals XX% We're not that got a And positive to obviously, plus of Drop XX% and direct-to-consumer. right running that. significant. will it think, will now, raising we've on So about up effect

was of The around launches. what more to some are second we these question related seeing

Fortnite everyone what lot an game. other anything was buy We not a when haven't launched, In have engagement. of out is seen like But individual from seen we words, rushing to headsets.

that's Starfield's of I number had So number terms of Gate, the one of jumped the probably most think was hours. in. that players think, I the biggest surprise in Baldur's

got All have the help all think hardware. requirements of with I And games memory. more these that new need things

there's ] which gigs for we've push for or helpful data a DRAM, is is XX because Steam, less. of of of from lot people's right collects XX% [ seen configuration XX now that gig So people have us the what who

of latest we upgrading, So part graphics. the the think people and people other it machines the new is are using cycle I in building of

Starfield, So all that I of of outstanding between Baldur's that's but these Cyberpunk, It's Gate, games that's had one say we've have out pretty come there's a there's in that particular high wouldn't a just lot have level. driven. that help, that new games lot games been

from [Operator from Instructions] with Lee Macquarie. Aaron a Our question will follow-up come next

to of on highlighted Just the the your and generally refresh experience, kind Or is the cycle. that there about a the leads cycle wanted peripherals? to quick do I refreshing one you refresh components other? In survey find refreshing follow-up. difference touch you people a between in

X to they Typically, X not X gaming systems. from to X for years Anywhere upgrade. People have is spent when we've system. $X,XXX seen on They're No. a coupled.

cycle it's being X-year peripherals, much some and For a like more faster.

end break entry the the seen, level headsets, sit and people lower on in cases, them of especially at some of tend them. we've to So

So XX months. can as be as low those

for X where to to it. X model But is usually for years X X we components years peripherals,

from Barclays. be next Our will question follow-up Wang with a George

follow-up. quick a have to Just

space peripherals? quite next Just any new terms launched product into white of in obviously, new bit sort the And of curious, in of the year. a So guys more products. terms of you just categories

in were of products of competitors targeting? or guys Just level you to feel curious space next additional kind launch years, over with guys of the compete terms be couple may kind high if of of sort potentially to -- new of can gap white of the you kind potentially any you which kind

Yes.

looking at or next the to talked products that and we've launch will The sim X is be think before. ] about this racing probably that I areas [ we're mobile categories gaming.

And that a from really did Corsair Scuf, the what to. think mean lot something just extra into of of people's just a used for from see something, than PC Envision a controller games. market lot made you controller, added does we do the of console we could better it but ours controllers is A we are I that functionality PC good coffee controller when

when product we're the come to it. So stuff type that we that that's market really and some hit the what add like good that, innovation with out is do we a of at needs

Okay. Great.

good. Sounds

session. Andy are conference like any [Operator over Paul no This our Instructions] I for question-and-answer It there the to further concludes appears questions. would closing to remarks. turn back

you, today thank call everyone, support. continued for Well, the for and joining

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

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