Corsair Gaming (CRSR) 7 May 242024 Q1 Earnings call transcript

Good afternoon, everyone, and welcome to Corsair Gaming's First Quarter 2024 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. begin. please Sir,

have afternoon, the for Good first thank for review will and today, you ended CFO, financials Paul; Thank Potter. the and Michael financial everyone, Michael results us Andy we call the Corsair's XX, highlights the outlook. CEO, conference joining Andy March and from you. review XXXX.On and Corsair's quarter, call our quarter then for will

regarding risks me risks have described call, then that questions.Before for statements. Andy. GAAP between filings. projections references to the provide including time is are in actual to including measures.Additional disclaimer statements may related the allow number press are will the in other We to the future we that, uncertainties. financial Q&A a provided subject remarks our turn and information, after company our due a results the forward-looking any our and are forward-looking forward-looking of statements.Our call, to to The will and differ This may to expected SEC from of call begin, forward-looking issued I'll to portion the and close include financial information today.With of we market also therefore financial now Today's results release over include uncertainties the information statements non-GAAP non-GAAP release earnings reconciliation materially

out is in Ronald, our expected, and peripheral XXXX earnings starting new as you, products Thank welcome, to a growth. everyone, with call. driving rebound QX

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As a June will Computex launch both mobile X is and gaming for expect XXXX. result, launches standout we racing our Sim set product our to upcoming controller racing line upcoming at be us.Corsair in

driver. the we video largest which looking. high-end Deck. over through be light, and By launch expect launch and Elgato's combining additive Card the we and for sales as new opportunity for expand mobile encouraged Sim Neo the us, developed performance is And Capture This components a gain for in which continues large Stream response excited with to fully cam, casual we to and live different of to been and components PC one large to that recent also market our Elgato setup, base microphone, ability controller. experience. easier another plug-and-play SCUF with immersive because of to Corsair high-growth new experience of market's of launch category, in have and Key unique very We the fastest-growing more peripherals.We're is have will racing segment simplicity, market targeting expect a launches monitors U.S. coming Sim-racing This with XXXX the interest and Elgato our user history. our our combining we our the all produce areas the growth of of is very has relevant to share.Our market long-term expect professional engineered this than the represents racing prosumer important global in our customers.The years. our growth especially offer is streams gaming gaming included the more become Place This Wave Neo make a we're Formula This as a upcoming calls product ramp family, a advantage our very another positive, one total curve live will is traditional X PCs, we a a and

expect even drive this growth also Stream expanding faster Deck will our ecosystem. in help We

new to launching opened of of website. In marketplace addition on QX, users.As our over estimated accounts the the have add marketplace Stream Deck Deck to new base XX% Stream application models, installed rapidly the continues

of of production of to expect with lines half coming suite XXXX. regional were course, Atlanta very of expanded of factory including of successfully closure in retail over and the our this, expanded latter introduced boost Deck, creator the retail expensive presence, progressing will the our and our are We've to new the anticipated retail of facility.Adding channels, U.K. to product through increase gamer revenue our expansion factory last products, drop popularity call, operational taking years.On efforts we a for well revenue SCUF as and we Taiwan, moving in also our expansion many and the stream retail stage gaming set highlighted lines Given SCUF the controllers actions success of in partnerships and an in the years product growth Stream initiatives meaningful strengthened in with marketplace our efficiency, our position our online ahead. the become we the market our several and in major solidify continued retailers.These full proactive

active the peripheral which remain the in is key driver Finally, segment. front, we a M&A on

early contributing. and we of will that the and as business, those records with recent fully carefully of Our other to and GPU our standpoint course until not balance long-term integrated SCUF forward our fit are evaluating M&A a of is regular of Systems valuation.Looking expand gaming growth success be and X to Drop part launched, XXXX, cards product builds the look do are impressive This from in growth we Elgato, plans segment acquisition will and of the brand pursue on of transactions.We track opportunities XXXX. we expect or which the 'XX the expect late components

X new we we're creator growth, about as recently launched XXXX, especially simulating the peripheral our expect product new in mobile last categories launch.In we from update, gamer mentioned the to products that and we For be controllers. and we'll in addition, significant segment, more entering

expect We me on market CFO, as in to history.Let effects the the overall pandemic back Michael historical the to financials. call the Potter, received levels go the turn our please of now details now for the growth Michael, to resume gaming ahead. over

XXXX, gross general. peripheral Andy, and and am everyone. good start report in pleased gamer afternoon, for and key creator a to especially solid Thanks, segment margins I to our

and compared QX continued XX.X%, this reflecting million our Memory track XX.X% gamer first and Systems revenue mix. in & contributed $XX.X $XXX healthy, headwinds.Our to $XXX.X Products the were compared shipments. we million segment XXXX.Gross region and margin resulting $XXX.X to to X.X% through despite peripheral to incremental million margin million expansion compared as an with $XXX.X necessitating strong margin of success segment revenue and of of QX $XXX EBITDA net new to XX.X% contributed with in remain gross financial Gaming Gross XX.X% compared a challenges first in XXX QX Red and XX.X% in expansion quarter Components XXXX. quarter margins quarter markets specifics, XXXX. contributed start $XX.X XXXX.We half.The our QX period.Memory XXXX. the XXXX, to up XX.X% in compared million peripheral mix Systems delays to our XX.X% contributed Sea segment basis on gains to and and $XX.X was this QX XX.X% compared growth of $XXX in business XXXX during the $XX.X growth compared million million position.In stemming record profit share The creator while million in achieved in profit to $XX for this to markets our $XX.X basis quarter of net X,XXX in to now in million & was cost revenues was in revenue the build gamer second gross QX XXXX and ago QX costs segments. the first points QX QX segment primarily in the XXXX. Products eye was reflecting given in turmoil improved organic in revenues terms QX Gaming million XX% from during to gross first profit APAC XX.X% compared QX compared QX compared million was to our was to compared segment. on accelerated million The QX increased million our gamer XX.X% net year increased market $XXX.X The in to notable compared points million creator on in We record to such and with the in air freight gross the Components European Overall, revenue the of quarter segment XXXX. XXXX.Turning our $XX.X Overall was products XXXX. The to peripheral XXXX, expansion XXXX expect QX our M&A continue XXXX, growth is margin driving Gross in and creator execute compared QX in

recent First million segments major $XX.X compared as a launches and quarter introductions and SG&A Elgato invest $XX.X to QX compared new in mobile in share. response XXXX, to continue building Gaming, Sim with expenses expenses major our products has peripheral in take momentum been both we SCUF were QX to in of million million racing category encouraged $XX.X positive, and category support are new gaming.Consumer million to are while with R&D we leadership and continue market XXXX.We were from the coming components we in very $XX.X

in SG&A, QX of million was QX XXXX. million $XX.X $XX.X operating first of income investments compared in quarter in $XX.X compared GAAP to adjusted a XXXX in result million quarter our operating XXXX.First operating of million to income loss the $X was As

sheet. or XXXX.First diluted in was in continue quarter QX of through compared grow to we We $XX.X QX was XXXX in loss net or in net to now and opportunities. XXXX. value and position behind at of we plan million revolver we including $XX.X includes attributable our have first was million million On continue $X.X we share $X.X our adjusted strategic cash undrawn as long with invest million increase expect QX to remains diluted move QX $X.XX $XXX.X the per These $XX quarter available. outlook First was EBITDA to to are to balance, compared million diluted $XX.X expected million loss QX compared million We and financial basis, million face to or per next shareholders share or affirming term.In operations, further per to $X.XX our debt capital so common million. $XXX $X.XX neutrals ended a share resources Drop with quarter the XXXX. accelerate fully adjusted of QX growth cash reduced integration debt XXXX.Turning strong also our terms balance QX which as income over further XXXX. net an per a our $XXX it in us, share coming to the doing the actively the ended out our of restricted profitability over balance a our strong year flexibility outlook, continue decreasing debt for working sheet, and M&A with in and quarters.Given We seeking to designed initiatives to full while allocating in are $X.XX

have effective $X expect of we total $XXX of weighted balances diluted in to cash $XXX to using with interest shares normal range the million year billion to million XXX billion, in approximately the approximately revenue and range quarter the million EBITDA range We're continue for we a an in XX% reminder, adjusted $X.X XXXX, shares.As we quarter. full debt XXXX to million.Assuming We of rate in seasonality income of tax million year. year XX% QX adjusted outstanding lowest XXX to this in million of expense and are would being to to net of revenue typically approximately and operating per expecting the the $X.XX same $XXX average $XX the maintain expect million

growth with strength year-over-year creator in also summary, our we our are We share. market with peripheral expect throughout in continued segment year.In peripheral creator strong gamer our and pleased segment and gamer strong the and the

new led in into expect products half growth categories. major to by second X increased new We of achieve expansion and the our XXXX

gains committed open the components.With we're in we Operator, products investing happy the remain for we share to that, the both and call Q&A. our call drive and to strong, is growth will market that sheet across balance peripherals further up for open Our questions. and now

first Barclays. instructions] Wang George [Operator Our today question comes from from

X I quick ones. have

of about drove weaker more the kind Definitely give the than just partially the expectation. memory business? Firstly, can kind overall a below you of color little bit component expected

a half You guys XXXX. launch GPU/CQ talked about second new in the as until well no growth as

now, a rate what's basis? kind confident of of tangible few curious decline a the it kind you for a terms are my seems this rebound refresh in model, So tracking quarters. growth Just year-over-year a in based year it's slight on how of on

they thing their Well, we out to year, room now haven't when see announced new cards. we're end every And same early GPU 'XX. is, cycle, but officially starting the I of NVIDIA this the already what is launch happens. out there mean going rumors is Obviously, of it the

new And start a a people in it. gearing up will so, in start that.And take for of machine machines building fact, lot to building of the people to advance cards, times

part slightly gives build that game which the of say, are So, be new early the by that's for the less are this definitely cards wait QX and to to pretty on why now card, the to that that customers year, But you we're going using overall, offset flat that's mainstream world. good. PCs.So expecting you, adopters a to expensive market as depending down

retail of the kind Secondly, prepared versus kind I about of of smaller Asia can a noticed talked in still remarks? is of expansion kind low also, And mix you address you the regional kind total kind of that teens. and

opportunity some expansion. on likely the So, Asia

So, maybe about the well regional expansion. you in investment can as retail your talk as the

product Yes, expanding sure. our Target with into of lines. the weakest doing U.S., globe, a things the additional are well. that's right our because into Well, new been expanding is of you footprint China we're We're not some on. retailers. has there's In and going Asia and mostly Walmart few part the Worldwide,

a where parts lower lots do our we the and pretty know, big As you we we've to there down share of in double world. and switched opportunities, much attention the see on than we market now in some Japan, of this really other probably have China.So, Korea unemployment

lot pretty for self-built just in in said, we're doing to of Asia just market, the expect sales we'd in with and but like Korea strong we Europe is So, quite week and but is they're bounce also U.S. China, all well. as places the in positive. a guys categories, back, not spent but cards. I in new the Japan.Europe gaming extremely PC And waiting our the

from from Our next question comes Stifel. Drew Crum

On that have do and should unique you was the gross follow-up. that margin we segment, the the period fall see assume And sequentially? as going sustainable it drove a gamer there And anything then Or forward? during record creator performance? I

expecting in this supply the some Well, There's product no. our on we Elgato know, it We're that is invested should from where be. chain think, from perspective. a going a you things mix few I lines. of as And

actually So, we and margins And of Stream that is margins. margins. that's of to back amount our us allows driving quite a had part Elgato very portfolio high bought significant that and We which company, now.So, SCUF, with have again one very us developed increase the bounce our direct-to-consumer We've that good biggest a manufacturer is the healthy that Deck. substantially. with really

mixed So, is traditional of of drive and a the is our segment. that mics XX% also got very the some creator headsets, kind in gaming has and sequentially this high, mix categories which different that lot margin of parts increasing. parts We've been categories, are the Keyboards, peripherals up.But

So, and here. I this we'll base as keep would from hope a that margin use building

for And product can launching mobile remarks, line in Any in the then, way about June. Sim prepared racing you're the gaming controller both your talked you new of size Andy, and the those? TAM you

lot Sim tell, $X very good is, market, roughly, really roughly the there's data. of enter initially. the around and probably best half top would of And that is as reason to Crisp we Well, I very can going we're not the now. I a say say billion

a is $X want in everyone products way making not as for with pulled a there market end kits. not The up the gaming going we're that to to thousand not us a people making to stay one the make ramp do that's be is market. it get one in $XXX-plus $XX that $XXX mean of be to can categories.Tangible or can of probably little area where that the there to PC you string $XXX sure there. for going less. another So, what same million on is our into be $XXX premium thinking million $XXX the spending billion stay are dollars easily is mobile $XXX to the we yet, is fastest-growing few or ASP and categories. well rig, category.So, but And We'll we or I we're

question from Lee Aaron Our comes from Macquarie. next

Just general, the state of on in to on like to room you the costs? can you start, feel still any color up provide or And general pass consumer? ASPs there's do push

as mean, hardware that's I Well, would simply we in consumer to than exactly gaming the question. I other as sports said, play equipment features of follow presentations, what's it rather the was remember going are feeling IPO trend And up an that to people enable I games and new words, electronic better. interesting my happened. found in keep if that's hardware.In general

So, quite if whereas $XXX market.So, or to are firmly headset or look for $XXX to for go keyboards, people if keyboard paying comfortable you continues the the and these $XXX $XX were market, up. go $XXX to at headsets XX you ASP now years, back

on power. the lot horsepower can, DPOs of Folks, we this components and do the as Jensen's you depends use with listen much a think but tends in of that he's to cramming happens we lot space, Now, absolutely a what helping that as possibly when of power needs on to

to are use the think mean rather more X,XXX or than XXX the generation people to next is going X,XXX were.And we as cards be tends to power supplies XXX So, that hungry to power XXX starting watts. so, first

little components there's space, increase maintain plenty in ASPs, a on but So, we'll to the a healthy bit the I see some room of grow. think maybe

just product you've potential? quarters. and Are these new stood obviously demand any categories then categories on new And or some the terms in launches, that growth launched surprised several over of you of few out the there past have

Yes.

the console PC out compared like was PC the expectations game, the whole controller have admit the wouldn't And, a a that, to that they're some lot that out from consumers that to console some Call months.So, to brought only. PSX staff on something transitioned or our League I use that And, of course, they but in been realize skeptical must that of brought work controller from Xbox I has would people for were has fact, PC SCUF. that demand console buying I play best move little certainly them. success and we was in of was we been had one to out from a knew that very and Duty we've we confuse of our color think of impressive. we sold X a to the overwhelming, PC.So, first PC the

that launched thing been The ever that think, sold other or teleprompter the out October out. surprised has us in starting brought just in, We're was to that Elgato since November. I place. get And literally now inventory we

taken thing So, think casual storm does this and one. has seen the we've I the that calls market prosumer now. was buy by to streaming video that everybody And regularly

question next Sebastian Our instructions] in [Operator from the Baird. from call comes

for Sebastian. Colin Moon Colin It's

Just one air XX% then quarter. the you'll the this did be peripheral that cost segment a do seeing so not you degree utilizing in QX? to think freight you freight quarter far seen us. in you margin any in And at relief same gross QX? Have Are this from

some Well, successful of launches we In are of out not. we inventory new because have launches keep product care get I but air and to we occurs increasing cases, our hope so to that we take sold certainly freight them, that. airfreight

of go crystals going majority I hope gaming certainly are So, to small. fairly our that's down.The vast

because yes, flying the just I effect overall it freight mean, to many cost up like benefit freight costs effect, supplies earlier, things affected I get rates don't said as container.But a effect go and and issues, having the we'd and the I down, get think are really same and But, Air container much as how quite keep power realize putting when from can't some on So, an Red things we we'll time. into Michael Sea flying that go of cases. QX, that. the definitely the up people both Those doesn't have had expect that, on QX, know lead went mentioned in

[Operator Paul, instructions] over I'd floor comments. for back the and I'm no to closing additional at Ladies CEO, to like time, showing gentlemen, this questions. turn Andy

Well, continued Any very questions, thanks your further updating support. evening. please look and for a call, and thank Thank you follow-up contact and Investor attending the much, you, to for Relations our next department, forward you quarter. have good everybody, we

gentlemen, and today's ladies conference and call presentation. we'll conclude with thank We And that, you for joining.

You lines. may now your disconnect