Corsair Gaming Reports Q2 2024 Financial Results

Business Wire 1-Aug-2024 4:00 PM

Corsair Gaming, Inc. (NASDAQ:CRSR) ("Corsair" or the "Company"), a leading global provider and innovator of high-performance products for gamers, streamers, content-creators, and gaming PC builders, today announced financial results for the second quarter ended June 30, 2024, and its updated financial outlook for the full year 2024.

Second Quarter 2024 Select Financial Metrics

• Net revenue was $261.3 million compared to $325.4 million in the second quarter of 2023, a decrease of 19.7%. Gaming Components and Systems segment net revenue was $167.1 million compared to $246.7 million in the second quarter of 2023, while Gamer and Creator Peripherals segment net revenue was $94.2 million compared to $78.8 million in the second quarter of 2023.
• Net loss attributable to common shareholders was $29.6 million, or a net loss of $0.28 per diluted share, compared to net income of $1.1 million, or a net income of $0.01 per diluted share, in the second quarter of 2023.
• Adjusted net loss was $6.8 million, or an adjusted net loss of $0.07 per diluted share, compared to adjusted net income of $9.8 million, or an adjusted net income of $0.09 per diluted share, in the second quarter of 2023.
• Adjusted EBITDA was a loss of $1.2 million, compared to adjusted EBITDA of $17.8 million in the second quarter of 2023.
• Cash and restricted cash was $94.6 million as of June 30, 2024.

First Half 2024 Select Financial Metrics

• Net revenue was $598.6 million compared to $679.4 million in the first six months of 2023, a decrease of 11.9%. Gaming Components and Systems segment net revenue was $397.4 million compared to $511.7 million in the first six months of 2023, while Gamer and Creator Peripherals segment net revenue was $201.2 million compared to $167.7 million in the first six months of 2023.
• Net loss attributable to common shareholders was $42.1 million, or a net loss of $0.41 per diluted share, compared to net income of $43 thousand, or a net income of $0.00 per diluted share, in the first six months of 2023.
• Adjusted net income was $2.7 million, or an adjusted net income of $0.03 per diluted share, compared to adjusted net income of $21.8 million, or an adjusted net income of $0.20 per diluted share, in the first six months of 2023.
• Adjusted EBITDA was $16.8 million, compared to adjusted EBITDA of $38.3 million in the first six months of 2023.

Andy Paul, Chief Executive Officer of Corsair, stated, "Clearly we are disappointed by our Q2 2024 results, which were driven by a softer-than-expected self-built PC market. The surge of activity during the COVID lock-down period, where the number of gaming PCs that were built approximately doubled from the prior year, and headset sales almost tripled, which we believe means that the installed base of gaming hardware is now at an all-time high. Even with this surge, we now are seeing the market for headsets, which is usually the entry point for first-time gaming hardware purchases, almost twice the size of the market before COVID lock-downs. We believe this shows the gaming market is continuing to grow.

"For the self-built PC market, where our components and memory product lines are used, we see the market a little softer than it was pre COVID, but we believe it is still at a healthy level. We are expecting an 'echo' of the COVID surge to occur as we move into a natural refresh cycle, which based on prior cycles is typically a 3 to 5 year period. This is very dependent on consumer spending power, inflation, and of course new games and the timing of new graphics hardware. Our expectation last year was that this coming refresh surge would happen in 2024 through 2026, 3 to 5 years after the COVID lock-down. It now appears that is more likely going to start a little later than expected, since we expect to see new GPUs from NVIDIA launching around the end of 2024, with many highly anticipated games expected to launch in late 2024 and 2025, notably Call of Duty: Black Ops 6 later this year and Grand Theft Auto VI in 2025. This will affect our sales of products in our Gaming Components and Systems segment and we have reforecast this accordingly. For Q2 2024, we did see some adjustments downwards of our channel inventory in our Memory product line, meaning that the sales out of our channel were ahead of our sales in by approximately 15%.

"In our Gamer and Creator Peripherals segment, we are seeing strong growth. While the market for those products is showing slight improvement, we also continue to launch products in new categories. Notably, this year we launched teleprompters, PC controllers and mobile controllers, as well as many other innovative new products in our existing categories. We also announced our entry into the Sim racing market, with our own designed products, which we recently showcased at Computex. We remain interested in the Sim racing brand Fanatec, owned by ENDOR AG. Although we were disappointed to see the company file for insolvency, we intend to continue exploring a potential acquisition. Such acquisition would likely be within the framework of the pending insolvency proceedings, and as a result, we cannot provide any assurance our bid will be successful. Q2 2024 was another good quarter for this segment as it grew by 19.6% YoY, which is the third successive quarter of strong, high-teens to 20% growth. We intend to continue to grow the Gamer and Creator Peripherals segment organically, as well as with strategic acquisitions. We believe this business has the potential to become larger than our traditional components business within a few years. For our Gaming Components and Systems segment, which includes our memory business, we continue to dominate the market with leading market share in most categories. We intend to continue that trend, while running these businesses as efficiently as we can from a cost standpoint, while we wait for the market to recover and return to growth."

Michael G. Potter, Chief Financial Officer of Corsair, stated, "We are executing on cost savings, and took additional action in July 2024, including the reduction of approximately 100 employees, and will reduce some external expenses which we anticipate will lower operating expenses in the second half of 2024. We remain committed to controlling operating expenses, while continuing to support growth in our Gamer and Creator Peripherals segment, which generally has higher operating expense demands for R&D and marketing. We continue to see inflation and high interest rates having a negative effect on high-value consumer purchases, and are seeing higher-than-average credit declines on system purchases. Adding to this, we had a 1% to 2% margin impact from fixed costs allocated over lower than expected volumes. We continue to maintain a healthy balance sheet, with sufficient cash to fund the development of our expanding product portfolio. We expect to further reduce inventory during the third quarter, as we move into the traditionally stronger second half, which we expect will also generate additional cash. Finally, we further reduced our channel inventory, ending the quarter in a healthy position, which will benefit us in the second half of 2024 as we focus on driving revenue growth and profitability."

Updated 2024 Financial Outlook

Corsair updated its financial outlook for the full year 2024. The Company continues to expect revenue to improve through 2024, with a further improvement in adjusted EBITDA led by an additional improvement in margin, stabilized shipping costs and continued tight operating expense controls.

• Net revenue to be in the range of $1.25 billion to $1.35 billion.
• Adjusted operating income to be in the range of $48 million to $63 million.
• Adjusted EBITDA to be in the range of $60 million to $75 million.

Certain non-GAAP measures included in our financial outlook were not reconciled to the comparable GAAP financial measures because the GAAP measures are not accessible on a forward-looking basis. We are unable to reconcile these forward-looking non-GAAP financial measures to the most directly comparable GAAP measures without unreasonable efforts because we are currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact GAAP measures for these periods but would not impact the non-GAAP measures. Such items may include stock-based compensation charges, amortization, and other items. The unavailable information could have a significant impact on our GAAP financial results.

The foregoing forward-looking statements reflect our expectations as of today's date. Given the number of risk factors, uncertainties and assumptions discussed below, actual results may differ materially. We do not intend to update our financial outlook until our next quarterly results announcement.

Recent Product Developments

• Entered Popular Sim Racing Category: Our initial launch includes a ground up designed sleek cockpit, constructed with a robust steel frame, and engineered to withstand the rigors of intense, high-octane racing.
• New Mobile Controller: The SCUF Nomad is an innovative iPhone® Bluetooth controller providing a premium mobile gaming experience in a compact design that can be taken anywhere. SCUF + Nomad is accompanied by a free iOS companion app that does not require a paid subscription.
• Customization: CORSAIR Custom Lab is a personalized shopping experience where gamers can choose from multiple peripherals with customized matching patterns or themes.
• K65 achieves #1 Revenue position in the United States for Q2. Third party data shows the newly launched K65 wireless keyboard achieved the highest revenue in the gaming keyboard category for Q2.

Conference Call and Webcast Information

Corsair will host a conference call to discuss the second quarter 2024 financial results today at 2:00 p.m. Pacific Time. The conference call will be accessible on Corsair's Investor Relations website at https://ir.corsair.com, or by dialing 1-844-825-9789 (USA) or 1-412-317-5180 (International) with conference ID 10190926. A replay will be available approximately 2 hours after the live call ends on Corsair's Investor Relations website, or through August 8, 2024 by dialing 1-844-512-2921 (USA) or 1-412-317-6671 (International), with passcode 10190926.

About Corsair Gaming

Corsair (NASDAQ:CRSR) is a leading global developer and manufacturer of high-performance products and technology for gamers, content creators, and PC enthusiasts. From award-winning PC components and peripherals, to premium streaming equipment and smart ambient lighting, Corsair delivers a full ecosystem of products that work together to enable everyone, from casual gamers to committed professionals, to perform at their very best. Corsair also sells products under its Elgato brand, which provides premium studio equipment and accessories for content creators, SCUF Gaming brand, which builds custom-designed controllers for competitive gamers, Drop, the leading community-driven mechanical keyboard brand and ORIGIN PC brand, a builder of custom gaming and workstation desktop PCs.

Forward Looking Statements

Except for the historical information contained herein, the matters set forth in this press release are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, Corsair's expectations regarding market headwinds and tailwinds, including its expectations regarding the gaming market's continued growth, as well as the timing and impact from product refresh cycles; its expectations regarding sales and revenue growth in 2024 and 2025; statements regarding new product launches, the entry into new product categories and demand for new products; its ability to successfully close and integrate acquisitions, including its bid for ENDOR AG; its plans and expectations regarding continuing to grow its Gaming and Creator Peripherals segment and the size of this segment in the future; the impact of the Company's cost-saving measures; its plans regarding reducing inventory; and its estimated full year 2024 net revenue, adjusted operating income and adjusted EBITDA. Forward-looking statements are based on our management's beliefs, as well as assumptions made by, and information currently available to them. Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. Factors which may cause actual results to differ materially from current expectations include, but are not limited to: current macroeconomic conditions, including the impacts of high inflation and risk of recession, on demand for our products, consumer confidence and financial markets generally; the lingering impacts and future outbreaks of the COVID-19 pandemic and its impacts on our operations and the operations of our manufacturers, retailers and other partners, as well as its impacts on the economy overall, including capital markets; our ability to build and maintain the strength of our brand among gaming and streaming enthusiasts and our ability to continuously develop and successfully market new products and improvements to existing products; the introduction and success of new third-party high-performance computer hardware, particularly graphics processing units and central processing units as well as sophisticated new video games; fluctuations in operating results; the risk that we are not able to compete with competitors and/or that the gaming industry, including streaming and esports, does not grow as expected or declines; the loss or inability to attract and retain key management; the impacts from geopolitical events and unrest; delays or disruptions at our or third-parties' manufacturing and distribution facilities; the risk that we are not able to successfully identify and close acquisitions, as well as integrate any companies or assets we have acquired or may acquire; currency exchange rate fluctuations or international trade disputes resulting in our products becoming relatively more expensive to our overseas customers or resulting in an increase in our manufacturing costs; and the other factors described under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission ("SEC") and our subsequent filings with the SEC. Copies of each filing may be obtained from us or the SEC. All forward-looking statements reflect our beliefs and assumptions only as of the date of this press release. We undertake no obligation to update forward-looking statements to reflect future events or circumstances. Our results for the quarter ended June 30, 2024 are also not necessarily indicative of our operating results for any future periods.

Use and Reconciliation of Non-GAAP Financial Measures

To supplement the financial results presented in accordance with GAAP, this earnings release presents certain non-GAAP financial information, including adjusted operating income (loss), adjusted net income (loss), adjusted net income (loss) per diluted share and adjusted EBITDA. These are important financial performance measures for us, but are not financial measures as defined by GAAP. The presentation of this non-GAAP financial information is not intended to be considered in isolation of or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We use adjusted operating income (loss), adjusted net income (loss), adjusted net income (loss) per share and adjusted EBITDA to evaluate our operating performance and trends and make planning decisions. We believe that these non-GAAP financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses and other items that we exclude in such non-GAAP measures. Accordingly, we believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects, and allowing for greater transparency with respect to the key financial metrics used by our management in our financial and operational decision-making. We also present these non-GAAP financial measures because we believe investors, analysts and rating agencies consider it useful in measuring our ability to meet our debt service obligations.

Our use of these terms may vary from that of others in our industry. These non-GAAP financial measures should not be considered as an alternative to net revenue, operating income (loss), net income (loss), cash provided by operating activities, or any other measures derived in accordance with GAAP as measures of operating performance or liquidity. Reconciliations of these measures to the most directly comparable GAAP financial measures are presented in the attached schedules.

We calculate these non-GAAP financial measures as follows:

• Adjusted operating income (loss), non-GAAP, is determined by adding back to GAAP operating income (loss), the impact from amortization, stock-based compensation, one-time costs related to legal and other matters, acquisition and related integration costs, restructuring and other charges, and acquisition accounting impact related to recognizing acquired inventory at fair value.
• Adjusted net income (loss), non-GAAP, is determined by adding back to GAAP net income (loss), the impact from amortization, stock-based compensation, one-time costs related to legal and other matters, acquisition and related integration costs, restructuring and other charges, acquisition accounting impact related to recognizing acquired inventory at fair value, and the related tax effects of each of these adjustments.
• Adjusted net income (loss) per diluted share, non-GAAP, is determined by dividing adjusted net income (loss), non-GAAP by the respective weighted average shares outstanding, inclusive of the impact of other dilutive securities.
• Adjusted EBITDA is determined by adding back to GAAP net income (loss), the impact from amortization, stock-based compensation, one-time costs related to legal and other matters, depreciation, interest expense, net, acquisition and related integration costs, restructuring and other charges, acquisition accounting impact related to recognizing acquired inventory at fair value, and tax expense (benefit).

We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view these non-GAAP financial measures in conjunction with the related GAAP financial measures.

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