- Earnings call transcript Q3 2022

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Corsair Gaming Third 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, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] With that, I would now like to turn the conference over to Ronald Van Veen, Corsair's Vice President of Finance and Investor Relations. sir. you, Thank Please begin.

Ronald Van Veen

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

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

time We questions. any have for will then

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

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

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

Andy Paul

Thank many to you, inventory above achieved channel Sales above and level. our all that everyone, the to significantly deal Ronald, continuing year with higher-than-normal QX from XX% XXXX consumers our were QX XXXX, a in to almost revenue XXXX report sequential lines growth levels. we very I'm while and product were levels from earnings pre-pandemic call. in ago QX welcome, pleased to levels

Europe. we has especially inventory this the been year have marked earnings in excessive reported in calls, As by channel, recent in

from clarity into well consumer progress sales are on as making. the comments channel We continue our our from on provide to channel report the we to make as sales revenue and

position stock the US, inventory closer are now level. elevated, and slowly normalizing. a levels we progress but For inventory European also example, more have channel normal remains is reducing to great this in made in

$XXX go more our and channel million of worldwide end and by year, left segment channel creative to inventory. from our the this is inventory roughly of to start XXXX in overhang European little to Our reduce our target peripheral the a with

in for with quarters, from been the in cards to for has market on crypto over demand demand prices years, high pandemic, past GPU of miners As the rise during self-built previous cases graphics to two held computers had increased which we mentioned PC the double. some caused back top

Now to that are decline as use cannot crypto mining prices a or as GPUs demand standard before, back been and effectively MSRP there's below. in

expect launches be for NVIDIA, been new years. which two customers AMD, also take been that in gaming all have or expert larger built DDRX, these There updated power platforms of several gaming technology, see supplies categories starting are PCs general, cooling market In capability early Additionally, shown our in QX positive year, also more build look enthusiast strong faster market memories demand helping of year. full a than and to to for approximately tracking new a obtained new now last have to has PCs built QX as could X,XXX-watt peripherals. QX through the PC cost Europe games we more and share. currently in dominant lower as and we through demand improvements, growth gaming move and second the drive half or lower than year, is immersive compared over market US compared higher the This better PC Intel, in for is from exciting market the continues in with have QX. they them months, Asia technology new to the the platforms also was added and such we last continued expect last use for Revenue as The still lower technologies categories. but recent to higher, can in recover we and see are better a of Corsair play. to in of seen flat to growth and into and XXXX. need with be there The launched making that accelerating a the GPUs, part the that we recent product to demand self-built all is faster

developments. began a software AMD an Advantage to the take company's experience. streaming AMD's update our Corsair combines history, R&D minute selling Voyager Corsair our latest laptop. In platforms now branded on end top our product laptop, Edition This with CPU me we of you the some it our and the to create and and been laptop Let market. single has the first QX in entering aXXXX investment This QX, of and technologies laptop gaming GPU unparalleled is gaming highest

display hand We by curve cases also the from monitor This gaming of be launched in looking a in to new bendable XX-inch for the LG. flat partnership incredibly OLED developed and market. use is adjusted with kind first gaming its different

shipping to market recent are environment elevated in include Air quarter gaming mechanical and the keyboard, a next wireless get encouraged self-built XX gaming We term, numbers consumers a expect we in significant as and spending cards. launched should made higher the the our expansion as new in in market from expect further expect as as launches of down during gears and activity benefit we GPUs active progress our compatible reduce drive targets. driving in with NVIDIA's this lower-priced summary, very market levels, latest monitor series both we channel We've of PC Other base Longer months. well gaming in which in graphics the components In over the further by normal levels internally full pandemic, we coming years. KXXX to inventory of expect back the remains few first these start to move PC QX announced XXXX. models to continue in availability of demand QX we new while challenging, the the the

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

Michael Potter

QX We of This reflects everyone. demand. be revenue by but reasonably sequential in execution, XX% growth of were environment. in Thanks good the and strength our the Gross achieved underlying sharp recent sustained US dollars challenging Andy to strength margins afternoon currencies, and Asian our continued the pressured a more stable. position, market and appear currencies against European

going to changes taken have some to should actions that currency We improvements margin related gross lead forward. the

revenue the compared $XXX.X In specifics, terms XXXX. QX QX XXXX. $XXX.X in in of million QX $XXX.X to increased to million This compares million XXXX

consumer transit caused and lead current the inventories thus longer reduced pandemic. to Our overhang demand and times channel removing the their XXXX effects reduce partners expected placed continue to the of of orders in times, the periods by COVID in to much prior lead due QX and from

We more inventory contributed our inventory XX% Americas, historic the XXXX. be to about quarter-over-quarter revenues, high also but reduced about levels. in of and own the below to up European continue markets softer XX we percentile, drive QX XX% in by historic XX% average normalized our as than approximately from well our the

$XXX.X million third by & XX.X% XX.X% to from QX QX Memory primarily revenue of QX to in QX margins XXXX revenues. a $XXX.X $XX.X in XXXX. from segment basis decrease points million newer $XXX.X profit quarter now quarter actions XQ net decreased during with compared quarter, we net by profit Gamer was in XXXX. XXXX of margin third from XXXX. XX.X% contributed and million starting to million Peripheral to million compared total products XXXX. the $XXX.X reduced up from the from was in quarter and positive segment in prior success prior decrease compared third in XX.X% we contributed the believe Components a the forward. contributed last our QX revenue We're million XXXX. quarter XX.X% the Creator of gross Turning revenue Creator from of of segments. The in moving and quarter, we and the $XXX.X products XX.X% XXX in Overall decrease million Systems XXXX. million driven QX released, of $XX cost $XXX.X recently The a along a in Gaming on of up which have Gamer XX% quarter, net Peripheral revenue, significant million from $XX.X will in during The effect million contributed announced $XXX.X benefit to to The Gross net the segment decrease

a Gross QX of $XX.X XX% million, and and Gamer of fully which and XXXX, typically XXXX. a and $XX.X supply were including reductions logistics pre-pandemic. the reflected was four in systems Some primarily chain same which chain million compared in Peripheral There gross in same the cost in segment supply QX five-month chain in gaming was profit The XX.X% XXXX and was driven of rates these and times, primarily is encouraged million, in our to quarter. period and QX the costs. in logistics reduction components levels by We're lag I also decrease inventory from from we a before third realized they gross profit XX.X% supply to segment was by The XX.X% lead profit mentioned. in decrease higher in approaching freight just $XX.X a as to million revenue in the compared are rapidly are our $XX.X P&L Creator QX decrease the margin XXXX. XX.X% significant improving as a turns. Gross the costs profit by driven revenue XX.X% decrease environment,

was Our Memory Products margin in this quarter. for the XX.X% segment

SG&A compared quarter XXXX. a million, in third $XX.X expenses decrease XX% The million were QX $XX.X to

continuing was monitor income million of from third while million closely all million, to income QX $XX.X decrease a quarter to areas. continue We in XXXX of support revenue-generating $XX.X operating of expenses in the operating our $X.X XXXX. Adjusted

diluted The as compared Corsair net share $X.XX Third $X.X XXXX income is This of loss million adjusted for per of per in was share XXXX. the $X.X or $X.X was EBITDA for of million million QX as diluted compared or $XX.X or to million, which $XX.X million net million compared in income XXXX. QX diluted to share $X.XX $XX.X Third attributable $X.X quarter quarter of represents million income quarter $X.XX Inc. Gaming, Adjusted income to share $X.XX of per of QX was net third a net loss net adjusted diluted XXXX. per to

of at quarter cash $X.X Milpitas. our CapEx, balance our million the $XXX now available. includes We on of $XXX in value related headquarters ended $XX.X million debt to $X.X Turning to with face and new fully which million million revolver We the with million spent sheet.

reducing opportunities, We balance time expect borrowing and a further over investment look we bring up basis. level on mostly that resume this to is strategic elevated more behind CapEx debt our us cash accelerated

market challenging are XXXX, headwinds the adjusting continued slightly see we of in year environment of comments our I the signs earlier. starting while and reflect full my outlook discussed terms to are we to improvement, In the

the million $X.XX year $X.XX we prior. full compared of revenue to $XX million EBITDA of to now compared range $XX total in $XX $XX $X.XXX billion $X.XXX to range million income For XXXX, prior. million billion to range Adjusted $XX to to million million of the in operating prior the and million adjusted to billion $XX expect million $XX to billion the in compared $XX to

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

to and we're trimming development while We'll We're improvement, no full signs million further generation. $XXX being in diluted and approximately higher second QX as revenue. $X challenging. XXXX we million. also managing normalizing, of but and while down, enter rate on few summarize, in prudent We monitoring forward. product see actions and existing $X of to expense will future margins revenue half where support to To $XX shares outstanding some we we're and year our the invest support that, started of working see OpEx, with expected starting significant took, revenue capital continuing market to to debt closely carefully the of needed this average Assuming quarter. weighted and starting positive the year the expect we are An Inventory of which marketing levels XX% per previously continuing into to effect remains and effective we have this XX% XXXX. moving product million paydown, believe product expenditures, all year. improvement expect and reduction to interest We freight another tax coming million are approximately points approximately margin of benefit percentage benefit see of cost to costs are for to

now Finally, to QX. mentioned, moving will the gaming It's new the cryptocurrency happy for Q&A? into we're launches demand questions. line please the Session downturn in Operator, self-built Question-and-Answer us for GPU open in for demand that, With and reducing that another uptick positive for from PCs on non-gaming the Andy GPUs. call open you

Operator

you. Our are question at Crum [Operator the Q&A Drew comes now session. Ladies and from Stifel. we Thank gentlemen, of Instructions]

Drew Crum

Good afternoon.

reducing how or So consumer intended behavior? forward, inventory based I just holiday in to have And then going demand change a quarter? use that is channel promotional comments follow-up. activity the much the through by how around your much on that is And stimulated

Andy Paul

channel So promotional. consumer if been inventory we're has demand talking how about versus much based on reduced

answer in me that different by in a war. after from parts increase demand reduction Europe, was Let in The consumer a the especially Ukraine in of channel ordering slight way. caused with, over the coupled inventory world, some the

the been effect. that's main So

little mainly has of Now done the not as amounts, We've I'd excessive a promotion, normal. bit say. shipping but reduction been just per

Drew Crum

ahead. go Andy And –

Andy Paul

Yeah.

shipped the think way is done consume that so some less about the the channel that, sell-out have we've into of inventory. would normally obviously, words, other to in So the consumers it we than to

Drew Crum

it. Got

if inventory Okay. of gaming would business. with correctly, more the And you normalize? you more there's When to peripheral then heard – I inventory expect overhang that an

Andy Paul

Probably peripheral, itself it's and by -- is mostly a QX. in bit that thing there's the little left to we'd and with of really, expect overhang resolve an gaming Europe, only

Drew Crum

Okay.

a Okay. contributions that new the further And actions for and that sequential on it in And you Michael, outlined, saw the business think assume cost do gross margin year? you leaves then, business relief just the fair Is the with XQ XQ? Thanks. in experiences versus gross from you on XQ where margin, the chain. supply improvement to some improvement products

Andy Paul

of two scale we'll higher like get I mean or a more of kind freight through couple rates the little the percentage works from inventory. improvement. with difference X a in as it points over alone to That's economies next the bit revenue. X And quarter the

in percentage what increase year. we better next the should inventory into market with So points going should us without a is, account few down, position sentiment this as get levels we taking final a put enter

Drew Crum

it. Thanks, guys. Got

Operator

The next from Mario Lu comes question Barclays. of

Mario Lu

Great. Thanks for the taking question.

moving guide business It seasonality. about Is should one of seasonality the the is XXXX? parts in of in midpoint terms over is first just The There's in of how light fiscal fourth Thanks. and were lot Q-on-Q. could years a up general. there couple use into looks think quarter of a been the like framework last we the we XX%

Andy Paul

you this the from history, the was at of Well, QX last morning, cadence five is looking Mario, hi, I QX at the years XX% this if to thing is, look up. anywhere to XX%

roughly middle the I that are of we is say in the based thing the But is would other consumers. seasonality So that. on

just fact, somewhere consumer from normally the see QX, sales difference in all the from channel. going and and bit good clearly a out it. Intel in there's get that's based platforms because just was to even because of to less. so the a QX NVIDIA that be be in any reason why chance a -- about new just little we from be XX% have don't so we'd activity And And But think to technologies XX% less, to and lift a higher. less way our than adjusting pickup lower consumers channel that's that's launched And to that's a the going on inventory And history. to fact that AMD, into expect we expect sells of we're should revenue little

be going strong just chance Now obviously, demand the any there's about. wouldn't because a from near-term, XXXX, different that seeing average QX that we're should platforms the launch. to I you But told be imagine new I is still in that fair

the XXXX then top XXXX of is which launched think weeks' the QX. just two in XXXX we ago, card And weeks in got And then come launched. of a we've will out graphics time, being had the the line. couple So of the I

a there's are going to different to drive start with So of building. launches lot people budgets that

Mario Lu

Thank Great. you.

Operator

[Operator Davidson. comes Instructions] from question The Franco Granda D.A. of next

Unidentified Analyst

should for we in William profile? about Granda. margin How the Franco I'm Hi, think

Andy Paul

Hi.

Unidentified Analyst

Flex Hi. have the of think monitor? are like and products for coming the some came that profile How the that new margin should out laptop the we out about

Andy Paul

that particular -- and get want would what new does, our And products don't out some I every products and The make and peripherals. components try more to to trying margins say the specifics than would you equivalent I few monitor Well, monitors, I margin. margin and into lower company last more But at imagine typically of one. than that, bring in years. a the we're typically obviously to of obviously, that products going PCs gaming can higher itself, like have other that's

Unidentified Analyst

second And question.

your cloud of current have outlook stance to gaming gaming. cloud is on products market? Some catering What peers your introduced and the

Andy Paul

it's is PC age is what we've cloud, people that on think the More an through at eventually phones platform. to early people seen better, the migrate that think we marvelous. games we play Well, the games, a play because

cloud roadmaps So that we is is it. entry areas certainly our level entry at sector. in lot spend those mobile effect gaming that see happening a don't the we're of biggest today the in typically on We but resource of looking level, in

I is don't we see short-term. them So platforms. more long-term, -- huge a PC into in buying the opportunity drive in of better But I for think to revenue us going gaming people expect terms

Unidentified Analyst

End the questions, Q&A taking guys. of for Thanks Okay.

Operator

to remarks. and gentlemen, just [Operator Okay. the would session. like I final question-and-answer lines. Paul today's conference closing for Ladies instructions] Gentlemen, don’t further a Andy concludes the you. and have now to questions gentlemen, over that turn on seem Thank reminder to any we Ladies

Andy Paul

for continued support. today you, Thank call everyone, for the joining your and

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

Operator

that your lines. And conference. Thank disconnect participation. you may you now you. your for Ladies today's and Thank concludes gentlemen,

Corsair Gaming (CRSR) 3 Nov 222022 Q3 Earnings call transcript