Corsair Gaming (CRSR) 1 Aug 24 2024 Q2 Earnings call transcript

Corsair Gaming, a leading global provider of high-performance gaming hardware, recently held its second quarter 2024 earnings call, revealing a mixed financial performance and outlining strategic plans for future growth. The call, led by CEO Andy Paul and CFO Michael Potter, provided valuable insights into the company's current financial situation and future outlook, with a particular focus on the gaming peripherals and components markets.

Financial Performance and Market Dynamics

Corsair reported a challenging second quarter, with revenue for the period coming in lower than expected due to macroeconomic trends and lengthened refresh cycles. The gamer and creator segment showed strong growth, with revenue up approximately 20% year-on-year, driven by successful product launches, including the K65 wireless keyboard, which quickly became a top seller in the U.S. market. However, the gaming components and systems segment experienced a dip of approximately 15% year-on-year, reflecting market dynamics where consumers are holding off on upgrades due to the anticipation of new gaming hardware technology.

CEO Andy Paul highlighted the impact of COVID-19 on the gaming market, noting that the demand for gaming headsets and self-built PCs has more than doubled since pre-pandemic levels. The gaming headset market, in particular, is now roughly double the size it was pre-COVID, while the self-built PC market remains relatively flat. This suggests a shift in consumer behavior, with gaming becoming increasingly popular as a form of entertainment and a way to connect with others during the pandemic.

Future Growth and Strategic Initiatives

Looking ahead, Corsair remains optimistic about the future of the gaming market, with a particular focus on the peripherals segment. The company has seen high teens percentage growth in this area for the third consecutive quarter, driven by a combination of organic growth and strategic acquisitions. Corsair has recently entered new markets, such as teleprompters, PC controllers, and mobile controllers, and is exploring opportunities in the SIM racing market. The company is also interested in acquiring the SIM racing brand Fanatec, which recently filed for insolvency.

In the components and memory businesses, Corsair continues to dominate the market with leading market share in most categories. The company plans to run these businesses efficiently while waiting for the market to recover and return to growth. Corsair's long-term fundamentals remain strong, with expectations for a strong refresh cycle when the new GPUs launch later this year.

Financial Outlook and Challenges

The financial outlook for Corsair remains cautious, with a forecasted revenue range of $1.25 billion to $1.35 billion for the full year 2024. The company expects adjusted operating income to be in the range of $48 million to $63 million, and adjusted EBITDA to be between $60 million and $75 million. These figures reflect the challenging market conditions and the company's efforts to navigate the current economic landscape.

Corsair is implementing cost-saving measures to mitigate the impact of lower revenue, including the reduction of approximately 100 employees and the reduction of some external expenses. The company remains committed to controlling operating expenses while supporting growth in its gamer and creative peripheral segment, which is expected to become larger than its traditional components business within a few years.

Conclusion

Corsair's second quarter 2024 earnings call provided a comprehensive overview of the company's financial performance and strategic initiatives. While the current market conditions have presented challenges, Corsair remains optimistic about the future of the gaming market and is focused on expanding its product offerings and market reach. The company's strategic acquisitions and entry into new markets, such as SIM racing, position it well for future growth. However, the company must navigate the current economic conditions carefully, implementing cost-saving measures and focusing on its core gamer and creative peripheral segment to drive long-term success.