CRSR - Earnings call transcript Q2 2022

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Operator

Good afternoon, and welcome to the Corsair Gaming Second Quarter 2022 Earnings Conference Call.

As a reminder, today's call is being recorded, and your participation implies consent to such recording at this time. [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. may you Sir,

Ronald Van Veen

afternoon, financial thank the results XX, ending Good us second for for June Corsair's conference XXXX. everyone, you. you and joining quarter Thank call for

today, have will review and and from Andy call On environment. Corsair the quarter our time we highlights questions. have review Michael Michael Andy CFO, outlook, will the CEO then the for Potter. any Paul we and and then business second will our financials the

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

uncertainties. subject from other forward-looking differ results Our also The projections to actual financial and and materially to our statements Today's in filings. uncertainties include and are that release to references our earnings non-GAAP a described are due will may remarks risks SEC number risks of measures.

between to that, I'll we the information, market With issued today. non-GAAP release Additional over to closed call financial after press financial reconciliation the information now provided the information including the in is Andy. GAAP turn

Andrew Paul

and Ronald, call. to our welcome QX XXXX earnings everybody you, Thank

perspective. been encouraging recently of down, consumer But half a times, costs reduction lead we shipping with The first activity up. on coming in and hand, challenging a started from other XXXX signs has the picking see macro have to supply chain

purchases at consumers came higher. million, this entering quarter revenues our which in not quarter, $XXX does retailers, was from for of second the the Our but the below our significantly reflect expectations

the arrived, growth. quarter our long Ukraine demand shipping consistent after consumer was concerns inventory, of been was demand was sell-in and longest prevalent the more half lead have rising to where less immediately a is see of Russia channel partners due widely lingering inventory broader will and the times versus in macro the the on forecasted. especially second war, than we to helping normalizes, and level in inventory much dropped with channel and ordered times, sell-through the This stronger consumer and spent discussed. the war when Europe were first prices. This balanced reduce the lead start which about weaknesses energy that We that about As return the

mentioned new become as long-term expensive year we and the and with long-term the This chain now the build of key strong calls, our are last our previous in of graphics in We at year upgrade gaming see now their the our enthusiasts and higher into build excited why we is starting so fundamentals in remain the second again levels underlying pleased business hold and move either As many also we CPUs, gaming cards half. report to prohibitively or I'm This than needs earnings consumers over their that opportunities. situation about most to of unavailable building PCs. PCs generally available. gaming more readily items, expensive. line consumers many to platforms turn the off to to shortages components gaming last caused are supply caused that

In for modest Europe fact, consumer than U.S. only year, increase with in higher we year spending. during were this in which the gaming Amazon both area, Prime And saw significant build moved PCs last sales to used growth week and promotional July, to this components in

during trend continue half. to now second this the expect We

from the expect our that and levels levels, during channel and our in sales inventory second more is warehouses revenues coming Our the with in will partners. be we consumer in our half, to down more now line reasonable channel out

Voyager of on streaming division. our significant aXXXX our second designed quarter. is the some laptop, partnership to notable The from minute a new products now update announcement AMD, with take the Elgato features which most in gaming combines me high-performance you in introduced technology our our of new with Let gaming

our revenue has there for enthusiasts gaming market majority past gaming a laptops. the growing is While PC in from come to the of platforms from components, build who their like

In gaming to highest platforms. in the we shipments the we This during and in quarter. company's single to it's and prebuilt area laptop fact, third been launch, we our gaming expect fastest-growing the growth start significant our investment platforms has that see will plan history, R&D due in this

where designed see K-XX and Mini, significant We caps, allow also also launched and And quality. a market. area new software customize of that products, broadcast significantly NVIDIA, is their streaming gaming launched enhance our we the growth keyboard in new the to gamers to with a to the key incorporated keyboard, allowing XX% partnership we this we the onto switches an broadcast suite streamers

and We during from AMD new forward second new increase purchases. looking hardware of release and the platforms are the from which cards NVIDIA builds new to graphics we believe gaming stimulate CPU will platform half,

now their activity every in. the leads to Which encouraged spending come surge clearly in very gaming that for and now experience. XXXX XXXX and time that that started While to indicates spending we're exciting category new into the higher continue growth. to market the during pandemic looking there of almost pandemic, before products consumer a is COVID in was that being This continued we see for in gamers due an home spending more help people all XXXX at than

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

Michael Potter

second was that benefited QX, demand. good XXXX, and revenue a to checks delivered $XXX.X compares everyone. record Andy, in QX Thanks, stimulus and afternoon, pent-up Corsair from we million for This million. net In quarter of which $XXX.X

percentiles. underperform QX whole of XXs high channel the and current to in below the Sales XXXX consumer to transit to lead company expected partners continues region the about the demand as reduce our times. contribute revenues, average and inventories continued Our a their and in reduced X/X European historic and the well to

to mentioned we are Andy signs. earlier, As see positive starting

level inventory see This them. more sales into up sales channel inventory at to moving indicates of match point from our normal rise continue our is is exceed we the which inventory the demand. channel and coming example, down consumer to For back towards sales gradually level partners' our out will a overhang

components of the million XXXX. $XXX.X from points of in net revenue our a gamer segment second revenue, revenue QX $XXX.X The to quarter, revenue during XX.X% of segment and a the XX.X% net from of contributed The and from decrease creator quarter, basis net total $XX segments. million gaming peripheral QX of creator now million gamer peripheral systems XX.X% The of contributed million segment Turning XXXX. contributed decrease during QX XXXX. XX.X% net decrease in and a XXX $XXX.X in

$XX.X and margin $XX.X lower a ocean return profit in from XXXX, half came Adjusting and compared promotional Just QX XX.X% in overhang charge, mainly gross a activity, record incremental volumes. driven gross by in to was higher Gross the which products costs, an was on $XXX.X increased The logistics was million Overall logistic due over by compared from costs record million a inventory a profit primarily normal this QX especially activity. the margin promotional revenues, to absorption to in for decreased reduced under freight, revenue XX%. reserve more decrease to XXXX reserve just reduced XX.X% significant increased memory charge, million. contributed million quarter XXXX. XX% to QX inventory second $XX.X increases

these inventory profit seasonal gross Gross supply QX by a QX was and to costs X million, reductions reserve and impact the about to P&L charge, logistics by such a XX.X% charge, as and QX. revenue compared costs, Gross in for XX.X% and in gamer are though around The largely peripheral was gaming driven return compared the have chain from cost a inflation of primarily The was by margin gross $XX.X was QX headwinds levels. expect inventory raising more as logistics systems $XX.X $XX.X increased to and previously periods Adjusting working for due XXXX, before costs. where was moderate are margin inventory segment prices the to in a and to reserve decrease continue decrease the increased XXXX. We promotions. inventory revenue, profit is XX.X% in supply costs XXXX, X-month same mentioned of reserve XX.X% continued margin record during lag actions of in the logistics discussed to before, and profit turns. charge, components to level a offset segment decrease million, in reserves, rebate normal inventory primarily million to of was our and a margin pre-pandemic XX.X% in there profit appropriate chain reflected decrease Adjusting from XXXX, QX, XX.X% XX%. $XX.X gross gross Logistics in typically the million QX creator in driven XX%.

memory this was quarter. Our products in for margin X% segment the

of in million, million to freight QX X.X% second air rates. a of XXXX. quarter to a QX million $XX.X costs compared outbound offset from were expenses of SG&A decrease was Second Adjusted The $XX.X was reduced operating of million $XX.X $XX.X loss by revenue increases outbound income in impact the ocean operating slight decrease quarter due in in freight and $XX.X million, XXXX of XXXX.

due was of attributable of in loss an share impact associated of as per million for $XX accounting Gaming, $X.XX to to QX net in to which Inc. loss There put on is $XX.X or diluted largely million, income was a per million Second $X.XX $XX.X share $X.XX QX This iDisplay, XXXX. compared EPS approximately quarter represents net XXXX diluted rights. Corsair with of

income adjusted diluted earnings EBITDA of loss was share $XX.X per as QX second net quarter adjusted XXXX loss or or of the net a of Second for million in compared QX to million diluted XXXX. per to compared $XX $XX.X million XXXX. million quarter Adjusted $X.XX of $X.XX for share was $XX

we QX to cash has new to debt for we've million ended draw expectations an strategic the the revenue and been no remainder challenging, quarter so look of to of our Barring lower $X.X quarter, of Turning year. We $X.X in and million XXXX cash, increase to our XXXX $XXX far over million headquarters or the levels sheet. million over with and $XXX.X the at on $XX.X adjust relating value. now investment million of taken CapEx, face unrestricted million bring our included XXXX Milpitas. on to revolver, our actions already spent our of last balance time. first which balance $X.X in We to half opportunities, the the QX level

have continue taken $XX.X strong layoff, a operating inventory We and adjusted ordering to a will begin have our we headwinds remain continue and including we've and in we accelerate industry-leading release to We the potential a outlook, fundamentals and actions of Despite believe with reduce gaming believe products. development to self-build and product have long-term facing, market positive small that and million to believe in invest business the we been against XXXX. continued reserve be PC to will half to second took proactively expenses, the have innovative we overhangs. what product

are revenue we and first normalization, in outlook. our starting close components an are of the of And the should the inventory some we billion follows. in the of is and in combination to $XX expect priced inventory further reasonably our in half the terms million our total particularly, full million year year. operating underlying lift that continue to XXXX, changes in in and adjusted $X.XX income $XX the we new updating We AMX of of to help become to that adjusted the to the second half billion, $XX the this advanced outlook with modeling now In range correction, $X.XX to EBITDA be million, range There AMD's additional GPUs We release of revenue details believe channel to range it in $XX but as million. platform. believe

changing successful of appropriately actually the caused during right as and quite retailers have changes largest and believe levels inflationary our the we gross in by struggled has the market year call in has on half the to the that not and Like Some margins Revenue as be circumstances difficult customers believe most and of inventory pressures. half. much first end have we market been the demand to forecast as responded to orders will slowly our positive to impact costs have. reduced logistics a have second demand XXXX the compared inventory, from fallen that

maintain product release order a We invest in to new in rigorous will continue to schedule. development

a more the We XXXX EBITDA not good rate contributing with tune annual half as is range will current expenses operating a business to essentially moderate of run not in the first lower-than-expected is annual environment. indication number. other normalized the

expense the hike With progress, Fed more difficult. in forecasting rate cycle interest is

QX approximately to To million we of year of and in for below outstanding million XXXX, effective of $X summarize, expect signs shares paydown, to but approximately tax of shares. our our approximately to XXX further expense we're to now no full debt million improvement were interest diluted Assuming our per $X expectations, see XX% XX quarter, rate XX% million starting average weighted channels. results an

need coupled questions. products. expect will show than including new and improve levels moderated of We the customers. end first hold will we the In good slow improvement of half. container of expect the overall reduction the releases Q&A? call for happy the open lines, NVIDIA foundation should results now If components we're demand the half open with in through plus that the now the product continues expected a easing for product margins less That available GPUs exciting absorptions to releases, please start prices the AMD we GPUs, over margins consumer you seen Operator, to to generally up, end through mix, that improving XXXX that, costs are at a help motherboards have provide for airfreight half, line XXXX. the at will good as for from will to lower for second GPU our to improve, business. foundation expected new our and product us With revenue We've also should Higher a our and rates but our particular, second logistics provide end of year. will and

Operator

Instructions]. [Operator

from comes first Barclays. question Lu with Mario Your

Mario Lu

from Two Mario. for me. on Jessie is This

weaker-than-expected the peripheral customers the a of market And and guys the landscape to you some the business? down if how against mentioned of second insulated market environments? and has in pressure. second, in share walls offset fairly bit current trade margin type guys to gains you then both the consumer macro, think started segments product talk light you With are can trends about in ASPs? First, in premium continuing have the recessionary from tighten gaming price see of you quarter, increases shifted do components little terms starting guys competitive to is Or

Andrew Paul

of types questions there. Two Yes.

components terms competitive are memory. competitiveness, very In we of and on

recent over most months. increased fact, market In our share we the

at In about fact, share. in memory, now we're U.S. market in X% the

So channel, who margins inventory. We've share have peripherals, that's On in to at done and some very because competitors we and of so them back similar bit peripherals, obviously have balance very some on and overhangs been stepped well. trying of the we have gaming clearing a aggressive bigger revenue little that. inventory market been in

back their once expect We that inventory. out gain everyone has excess to cleared

In That terms pricing, and went little like cases, shipping items, our consumers up going to a bulky some Pricing and some been in bit in on not because chairs things stop of cases of of a of there's tariffs. does things on. of itself few sort buying. tend because

and most been CPUs, expensive items, the components cards graphics down on those you're focused obviously If like you you're are coming building think which it, recently. have $X,XXX and buying if for very a PC, things gaming about the

over the other are bit doing. to less. general, those pay categories, the fact seen trade the not your Other people answer spending categories this, are able that think people of prioritize heavily people past than we've discounting to got enthusiast really. little is down, question, that that tend we've in they're a part some so In like the competitors of and and seeing the I we other

Operator

Next question Sachs. comes from Rod Hall Goldman with

Roderick Hall

more it it or what on you're want I the give about? us Obviously, us inventory there's that. got risk something kind million, bit a check color of the that? Like end the a then of can mainly come that in reserving kind through against? you some I there's you're what peripherals inventory worried saying reserve and any more sell us guess think reserve inventory inventory. color board? why little kind the that on follow-up. taking that guess to correction, across Or like here. of Michael, the I is of I Or more to you're doesn't just but Is that, just the you to wanted back, I've against give you kind on you're $XX.X is detail any Could just maybe

Michael Potter

peripherals It's want have components. the than variation for Sales products than products more of next weighted get get you year, the was prices beginning move quicker quickly you to old area the in components reserve, if replaced you more little to and we'd the of wanted year on products lower expected, of out taking the come the in area. ones peripherals heavily later we rid be future. what at are looked and of in the bit coming came more products a the realizing better we by a a And more out it out to That faster. new to are when to than slower little that going some have sales the little

Now new that time us fit year. pricing you just the to channel kind our stuff and and in market consumer adjust all We to demand. companies, have better expect with to of inventory electronics happens the every strategies end have

Roderick Hall

Okay. then you -- of peripherals? you want maybe, things here you of Andy, but the sit come builds back as end today. developing help you together. think here we is just how kind in Or you do understand the see reduction Are pessimism in year X us to most makes saying gamer the guidance, the of the the that I the PC sense. those also guidance of wanted to kind year. you're and on pretty Yes, guys ask are total And try that I optimistic later -- to juxtapose cutting in about And back

Andrew Paul

the of graphics PCs. That's side. to positive few a from have market come clear because MSRP, around MSRP. think we of NVIDIA in in really cases, a leads X some can strong pleased naturally are and series that will they're the balanced we're reduce what's pandemic inventory. to us of happened. What Most below we're numbers. we We're a here. graphics experiencing seeing playing and is spending. were war and in in bit a inflation But is now now this the about higher gaming That months, Yes. every people kind Clearly, now are Europe, of to home new launching together what sales little than in, down the pre-pandemic. cards activity in that's we XXXX, got is XXXX higher they've at completely, than gaming shocked will the already be There little through see was that more. consumer out shell a building in was pickup Because obviously and people stuck where still the surge have category a next quite we're so we it Those significantly cards

years few we back now so average of get is last over And compelling. pretty can sort an and look growth the that

Operator

[Operator Instructions].

comes Drew with question next from Your Stifel. Crum

Andrew Crum

can gaming Are you previous to have to to the grow a category? second Andy, you clarify laptop profile And for the that what in just want growth self-built year-on-year? the in go suggesting just And this. the business TAM I then for remind half gaming PCs us follow-up. are question, your back the

Andrew Paul

quite seen you we've that. part self-build cards rise. questions MSRP. and were the it, be start And year, graphics starting, second of asked compared first another significant year a growth you if to half Prime would market Yes, The year clearly to Unless we already Prime Week, this as was XXX% because that or we get the couple was last of there. of to half last last growing second this war will year really, of saw like, of Day year. expect continue we PC

that. that's So

XXX% also PCs laptop laptops. platform much the talked and gaming very self-built Of the It's, it's the about market, a and between gaming $XX and billion $XX pretty about prebuilt. gaming before prebuilt. market Now total split in we're XX/XX very, is Laptop XX/XX, PC talking to market. terms, billion market, rough we've that's of almost

You can't market. a DIY -- size. really It's laptop there's good no pretty

we're to going with, I'm talking This to majority business back is seen. reception stream be features, you've a Now, packed targeting our It's market. and gaming is $X,XXX. be we're much to targeting of $X,XXX systems top that's in it's this what like do we conservative We to it. as laptops, more with good, the going and going be double We'll end year, And about, what of to the it's with year. see you'll winner. be level. we're where vast than pretty how really next more down. laptops that we're then are terms We're taking in we'll the canopies with coming conservative $X,XXX ORIGIN market, But $X,XXX think that. if probably the like then But the features not out and to of

Michael Potter

TAM gaming than the specifically that's that segregate they high-end TAM. coming about into, about estimate a based that $X billion, our we Drew, when $X anything and more very area, for is on segment laptop And laptop price That it. billion

Andrew Crum

proactively Okay. a it. there company the we has actions half? layoff. activity be reduce of out and costs Are Will second OpEx, you taken Michael, mentioned mentioned you business? to more in the I then, And see modest the think taken to more Got

Michael Potter

sort more where to first about deteriorate of the spend. had expecting, action. take to We're we to current for we're things Obviously, But sort second be that hiring half of very we we're we the in continue think I the adjusted if expect now that and do audit and more careful they revenue the at from we'll where I think the positioned be. run are, lower level better and half. we rate need at we

Operator

[Operator Instructions].

Next Davidson. question from Granda comes Franco D.A. with

Franco Granda

at And I under you normal you an or did where missed might environment? indication years us some come in discounting than or to it, on Day second, previous then of inventory due sales have were but the give real in questions Week today. you Just a guess clarity Prime demand? couple sales of jump Could I think a me revenues provide Prime have would from whether perhaps heavier

Andrew Paul

Two questions.

that question have sales in think matching what our if delta what that the you're our would were out, Is second sales asking? been? I was

Franco Granda

Correct.

Andrew Paul

basis, say does It was question region, on Europe the the I estimate. about as a worldwide but And discount. probably we roughly having country first Day that's biggest, Yes. best XX%. Prime and reasonable can would number the a vary by

Michael Potter

didn't Prime participate strongly We customers some at areas is products aim areas, Day. discount We to a -- excessive not strategic didn't were in did few them actually or those as use didn't because in are more normal really We the categories no. of a and discounts we and than customer. but we we our seeking well, sort compared prior in years, super heavily high-end discount

Operator

[Operator would Instructions]. over like closing Paul the Andy I now you. turn remarks. Thank to floor for to

Andrew Paul

the look, thank on Okay, Well for call and us for your continued thanks everyone today support. you. joining

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

Operator

today's concludes teleconference. This

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

Corsair Gaming (CRSR) 5 Aug 222022 Q2 Earnings call transcript