Corsair gaming reports second quarter 2022 financial results
Milpitas, calif.--(business wire)--corsair gaming, inc. (nasdaq: crsr) (“corsair” or the “company”), a leading global provider and innovator of high-performance gear for gamers and content creators, today announced financial results for the quarter ended june 30, 2022. second quarter 2022 highlights net revenue was $283.9 million, in line with the company’s preliminary revenue provided on july 21, 2022. net revenue was $380.7 million in the first quarter of 2022 and $472.9 million in the second quarter of 2021. the sequential and year-over-year declines reflect the adverse impact of macro-economic headwinds affecting consumer spending on gaming gear, especially in europe, and a channel inventory correction. gamer and creator peripherals segment revenue was $89.0 million compared to $134.1 million in the first quarter of 2022 and $155.2 million in the second quarter of 2021. gaming components and systems segment revenue was $194.9 million compared to $246.5 million in the first quarter of 2022, and $317.7 million in the second quarter of 2021. operating loss was $55.0 million compared to operating loss of $2.5 million in the first quarter of 2022 and operating income of $34.7 million in the second quarter of 2021. net loss per diluted share was $0.62 compared to net loss per diluted share of $0.05 in the first quarter of 2022 and net income per diluted share of $0.28 in the second quarter of 2021. adjusted ebitda was a loss of $11.0 million compared to $15.4 million in the first quarter of 2022 and $51.6 million in the second quarter of 2021. definitions of the non-gaap financial measures used in this press release and reconciliations of such measures to their nearest gaap equivalents are included below under the heading “use and reconciliation of non-gaap financial measures.” andy paul, chief executive officer of corsair, stated, “headwinds from q1 persisted through q2, which is seasonally the lowest quarter for us, with macro-economic headwinds affecting consumer spending on gaming gear, especially in europe combined with global inflation, the continued russia and ukraine conflict, and high freight costs. this resulted in a buildup of inventory both in our warehouses as well as in the retail channel, thus causing our channel partners to delay ordering while they clear this stock. despite the challenging environment, we continue to see positive underlying growth trends in the gaming hardware sector, and we see spending levels significantly above pre -pandemic levels. we are also starting to see more enthusiasts building gaming pcs again as graphics cards are now more readily available at reasonable prices. we saw very positive signs during amazon prime week, with component activity significantly higher than in 2021, both in europe as well as in the united states. while we are disappointed with the lower results in q2, we are very pleased to see positive market activity recently and with our channel inventory moving back into line during q2 and q3 2022, we expect demand for our products to recover well as we finish the year and look forward to an exciting 2023.” michael g. potter, chief financial officer of corsair, stated, “we have already taken actions to adjust to the lower revenue level in the first half of 2022 and our expectations for the remainder of the year. we have proactively taken actions to reduce operating expenses and we have adjusted product ordering and took a $19.5 million reserve against potential inventory overhangs. we believe our business fundamentals remain strong with a positive long-term outlook, and we continue to believe the self-built gaming pc market will begin to accelerate in the second half of 2022. despite the headwinds we have been facing, we have continued to invest in product development and have and will continue to release innovative and what we believe to be industry leading products.” financial outlook for the full year 2022, we currently expect: net revenue to be in the range of $1.35 billion to $1.45 billion. adjusted operating income to be in the range of $35 million to $50 million. adjusted ebitda to be in the range of $50 million to $65 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, depreciation and amortization, inventory write-down charges 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 developments unveiled corsair’s innovative first gaming and streaming laptop, the corsair voyager a1600 amd advantage™ edition. combining a powerful amd ryzen™ 6000 series processor, amd radeon™ rx 6800m mobile graphics with corsair and elgato’s vast ecosystem of exclusive software and technologies, the corsair voyager a1600 amd advantage™ edition laptop was designed for aspiring content creators, avid gamers, full-time streamers and more. announced vengeance rgb ddr5, the newest addition to corsair’s lineup of cutting-edge ddr5 memory optimized for the latest gaming pcs and workstations to deliver sensational ddr5 performance with stunning rgb style. announced it is working with nvidia to integrate key features from nvidia broadcast into corsair icue, elgato wave link, and elgato camera hub software. for owners of nvidia geforce rtx graphics cards, nvidia broadcast ai effects enhance microphones and cameras in real-time to improve the gaming, streaming, and video conferencing experience, all controllable from corsair and elgato software interfaces. expanded its corsair xeneon family of gaming monitors with two new additions: the corsair xeneon 32uhd144 and xeneon 32qhd240, with stunning uhd 4k resolution gaming or qhd at an incredibly smooth 240hz refresh rate, both monitors deliver the beautiful design, brilliant display, and innovative technologies. conference call and webcast information corsair will host a conference call to discuss the second quarter 2022 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 1-877-407-0784 (usa) or 1-201-689-8560 (international) with conference id 13730682. a replay will be available approximately 2 hours after the live call ends on corsair's investor relations website, or through august 11, 2022 by dialing 1-844-512-2921 (usa) or 1-412-317-6671 (international), with passcode 13730682. about corsair gaming, inc. corsair is a leading global developer and manufacturer of high-performance gear and technology for gamers, content creators, and pc enthusiasts. from award-winning pc components and peripherals to premium streaming equipment, smart ambient lighting and esports coaching services, 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 gear 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, origin pc brand, a builder of custom gaming and workstation desktop pcs and laptops and gamer sensei brand, an esports coaching platform. 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 its substantial progress during the quarter to reduce inventory levels, its belief there are positive underlying growth trends in the gaming hardware sector and that the self-built gaming pc market will begin to accelerate in the second half of 2022, its expectations regarding the end of the year 2022 and 2023, its ability to continue to release innovative and what it believes to be industry leading products, and its estimated full year 2022 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: the impact the covid-19 pandemic, including the potential end of the pandemic and the cessation of pandemic-related restrictions, will have on demand for our products as well as its impact on our operations and the operations of our manufacturers, retailers and other partners, and its impact 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 gear and improvements to existing gear; 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 impact of global instability, such as the war between russia and ukraine, and any sanctions or other geopolitical tensions that may result therefrom; delays or disruptions at our or third-parties’ manufacturing and distribution facilities; currency exchange rate fluctuations or international trade disputes resulting in our gear becoming relatively more expensive to our overseas customers or resulting in an increase in our manufacturing costs; general economic conditions that adversely effect, among other things, the financial markets and consumer confidence and spending; and the other factors described under the heading “risk factors” in our quarterly report on form 10-q for the quarter ended june 30, 2022 filed with the securities and exchange commission (“sec”) on or about the date hereof 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, 2022 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, adjusted net income, adjusted net income 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, adjusted net income, adjusted net income 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 acquisition accounting impact related to recognizing acquired inventory at fair value, change in fair value of contingent consideration for business acquisitions, inventory impairment and related charges, stock-based compensation, amortization, certain acquisition-related and integration-related expenses, restructuring costs, non-deferred secondary offering costs, and debt modification costs. adjusted net income (loss), non-gaap, is determined by adding back to gaap net income (loss) the acquisition accounting impact related to recognizing acquired inventory at fair value, change in fair value of contingent consideration for business acquisitions, inventory impairment and related charges, stock-based compensation, amortization, certain acquisition-related and integration-related expenses, restructuring costs, non-deferred secondary offering costs, debt modification costs, loss on extinguishment of debt, 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 acquisition accounting impact related to recognizing acquired inventory at fair value, change in fair value of contingent consideration for business acquisitions, inventory impairment and related charges, stock-based compensation, certain acquisition-related and integration-related expenses, restructuring costs, non-deferred secondary offering costs, debt modification costs, amortization, depreciation, interest expense (including loss on extinguishment of debt) 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. corsair gaming, inc. condensed consolidated statements of operations (unaudited, in thousands, except per share amounts) three months ended june 30, six months ended june 30, 2022 2021 2022 2021 net revenue $ 283,908 $ 472,903 $ 664,599 $ 1,002,317 cost of revenue 247,449 342,552 537,384 711,638 gross profit 36,459 130,351 127,215 290,679 operating expenses: sales, general and administrative 73,393 80,169 149,524 158,022 product development 18,026 15,469 35,136 30,655 total operating expenses 91,419 95,638 184,660 188,677 operating income (loss) (54,960 ) 34,713 (57,445 ) 102,002 other (expense) income: interest expense (1,676 ) (4,508 ) (2,955 ) (9,454 ) other income (expense), net 633 (175 ) 134 (2,600 ) total other expense, net (1,043 ) (4,683 ) (2,821 ) (12,054 ) income (loss) before income taxes (56,003 ) 30,030 (60,266 ) 89,948 income tax benefit (expense) 4,164 (2,285 ) 5,147 (15,480 ) net income (loss) (51,839 ) 27,745 (55,119 ) 74,468 less: net income (loss) attributable to noncontrolling interests 174 — (233 ) — net income (loss) attributable to corsair gaming, inc. $ (52,013 ) $ 27,745 $ (54,886 ) $ 74,468 calculation of net income (loss) per share attributable to common stockholders of corsair gaming, inc.: net income (loss) attributable to corsair gaming, inc. $ (52,013 ) $ 27,745 $ (54,886 ) $ 74,468 change in redemption value of redeemable noncontrolling interests (7,379 ) — (9,640 ) — net income (loss) attributable to common stockholders of corsair gaming, inc. $ (59,392 ) $ 27,745 $ (64,526 ) $ 74,468 net income (loss) per share attributable to common stockholders of corsair gaming, inc.: basic $ (0.62 ) $ 0.30 $ (0.68 ) $ 0.81 diluted $ (0.62 ) $ 0.28 $ (0.68 ) $ 0.74 weighted-average common shares outstanding: basic 95,467 92,792 95,372 92,374 diluted 95,467 100,074 95,372 100,145 corsair gaming, inc. segment information (unaudited, in thousands, except percentages) three months ended june 30, six months ended june 30, 2022 2021 2022 2021 net revenue: gamer and creator peripherals $ 88,989 $ 155,157 $ 223,137 $ 331,069 gaming components and systems 194,919 317,746 441,462 671,248 total net revenue $ 283,908 $ 472,903 $ 664,599 $ 1,002,317 gross profit: gamer and creator peripherals $ 10,558 $ 54,634 $ 53,615 $ 123,500 gaming components and systems 25,901 75,717 73,600 167,179 total gross profit $ 36,459 $ 130,351 $ 127,215 $ 290,679 gross margin: gamer and creator peripherals 11.9 % 35.2 % 24.0 % 37.3 % gaming components and systems 13.3 % 23.8 % 16.7 % 24.9 % total gross margin 12.8 % 27.6 % 19.1 % 29.0 % corsair gaming, inc. condensed consolidated balance sheets (unaudited, in thousands) june 30, 2022 december 31, 2021 assets current assets: cash and restricted cash $ 38,471 $ 65,149 accounts receivable, net 170,309 291,287 inventories 292,586 298,315 prepaid expenses and other current assets 53,331 51,024 total current assets 554,697 705,775 restricted cash, noncurrent 231 231 property and equipment, net 22,598 16,819 goodwill 347,907 317,054 intangibles assets, net 236,481 225,709 other assets 69,978 71,808 total assets $ 1,231,892 $ 1,337,396 liabilities current liabilities: debt maturing within one year, net $ 4,707 $ 4,753 accounts payable 193,530 236,120 other liabilities and accrued expenses 158,296 205,874 total current liabilities 356,533 446,747 long-term debt, net 240,377 242,898 deferred tax liabilities 23,247 25,700 other liabilities, noncurrent 49,374 53,871 total liabilities 669,531 769,216 temporary equity redeemable noncontrolling interests 26,749 — permanent equity corsair gaming, inc. stockholders’ equity: common stock and additional paid-in capital 498,751 470,373 retained earnings 33,621 98,147 accumulated other comprehensive loss (7,660 ) (340 ) total corsair gaming, inc. stockholders' equity 524,712 568,180 nonredeemable noncontrolling interests 10,900 — total permanent equity 535,612 568,180 total liabilities, temporary equity and permanent equity $ 1,231,892 $ 1,337,396 corsair gaming, inc. condensed consolidated statements of cash flows (unaudited, in thousands) three months ended june 30, six months ended june 30, 2022 2021 2022 2021 cash flows from operating activities: net income (loss) $ (51,839 ) $ 27,745 $ (55,119 ) $ 74,468 adjustments to reconcile net income (loss) to net cash provided by operating activities: stock-based compensation 6,087 4,768 11,234 7,844 depreciation 2,545 2,502 5,149 4,938 amortization 13,434 8,712 23,572 17,414 debt issuance costs amortization 86 515 172 1,052 loss on debt extinguishment — 358 — 797 deferred income taxes (6,742 ) (2,183 ) (10,820 ) (5,188 ) other 2,348 (250 ) 2,915 1,066 changes in operating assets and liabilities: accounts receivable 65,612 45,924 120,046 32,508 inventories 11,221 (45,387 ) 10,559 (58,895 ) prepaid expenses and other assets (1,334 ) (5,226 ) (9,481 ) (9,645 ) accounts payable (8,188 ) (10,674 ) (43,496 ) (37,662 ) other liabilities and accrued expenses (17,073 ) 4,825 (44,680 ) 30,700 net cash provided by operating activities 16,157 31,629 10,051 59,397 cash flows from investing activities: acquisition of business, net of cash acquired — — (19,534 ) (1,684 ) payment of deferred consideration (95 ) — (95 ) (4,353 ) purchase of property and equipment (7,556 ) (2,858 ) (11,921 ) (4,894 ) investment in available-for-sale convertible note (1,000 ) — (1,000 ) — net cash used in investing activities (8,651 ) (2,858 ) (32,550 ) (10,931 ) cash flows from financing activities: repayment of debt (1,500 ) (25,000 ) (2,750 ) (53,000 ) borrowing from line of credit 110,000 — 403,000 — repayment of line of credit (110,000 ) — (403,000 ) — payment of contingent consideration (146 ) — (438 ) — proceeds from issuance of shares through employee equity incentive plans 2,985 9,281 3,508 9,466 payment of taxes related to net share settlement of equity awards (110 ) (7 ) (997 ) (7 ) net cash provided by (used in) financing activities 1,229 (15,726 ) (677 ) (43,541 ) effect of exchange rate changes on cash (2,018 ) (76 ) (3,502 ) 58 net increase (decrease) in cash and restricted cash 6,717 12,969 (26,678 ) 4,983 cash and restricted cash at the beginning of the period 31,985 125,582 65,380 133,568 cash and restricted cash at the end of the period $ 38,702 $ 138,551 $ 38,702 $ 138,551 corsair gaming, inc. gaap to non-gaap reconciliations non-gaap operating income (loss) reconciliations (unaudited, in thousands, except percentages) three months ended june 30, six months ended june 30, 2022 2021 2022 2021 operating income (loss) - gaap $ (54,960 ) $ 34,713 $ (57,445 ) $ 102,002 acquisition accounting impact related to recognizing acquired inventory at fair value 7 — 282 — change in fair value of contingent consideration for business acquisitions — 21 — 93 inventory reserve in excess of normal run rate to address overhang in the channel 19,489 518 19,489 518 stock-based compensation 6,087 4,768 11,234 7,844 amortization 13,434 8,712 23,572 17,414 acquisition-related and integration-related costs 227 538 470 746 restructuring costs 1,488 — 1,488 — non-deferred secondary offering costs — — — 1,031 debt modification costs 27 — 27 — adjusted operating income (loss) - non-gaap $ (14,201 ) $ 49,270 $ (883 ) $ 129,648 as a % of net revenue - gaap -19.4 % 7.3 % -8.6 % 10.2 % as a % of net revenue - non-gaap -5.0 % 10.4 % -0.1 % 12.9 % non-gaap net income (loss) and net income (loss) per share reconciliations (unaudited, in thousands, except per share amounts and percentages) three months ended june 30, six months ended june 30, 2022 2021 2022 2021 net income (loss) - gaap $ (51,839 ) $ 27,745 $ (55,119 ) $ 74,468 acquisition accounting impact related to recognizing acquired inventory at fair value 7 — 282 — change in fair value of contingent consideration for business acquisitions — 21 — 93 inventory reserve in excess of normal run rate to address overhang in the channel 19,489 518 19,489 518 stock-based compensation 6,087 4,768 11,234 7,844 amortization 13,434 8,712 23,572 17,414 acquisition-related and integration-related costs 227 538 470 746 restructuring costs 1,488 — 1,488 — non-deferred secondary offering costs — — — 1,031 debt modification costs 27 — 27 — loss on debt extinguishment — 358 — 797 non-gaap income tax adjustment (7,923 ) (6,970 ) (11,272 ) (9,059 ) adjusted net income (loss) - non-gaap $ (19,003 ) $ 35,690 $ (9,829 ) $ 93,852 diluted net income (loss) per share: adjusted, non-gaap $ (0.20 ) $ 0.36 $ (0.10 ) $ 0.94 weighted-average common shares outstanding: adjusted, non-gaap 95,467 100,074 95,372 100,145 corsair gaming, inc. gaap to non-gaap reconciliations adjusted ebitda reconciliations (unaudited, in thousands, except percentages) three months ended june 30, six months ended june 30, 2022 2021 2022 2021 net income (loss) - gaap $ (51,839 ) $ 27,745 $ (55,119 ) $ 74,468 acquisition accounting impact related to recognizing acquired inventory at fair value 7 — 282 — change in fair value of contingent consideration for business acquisitions — 21 — 93 inventory reserve in excess of normal run rate to address overhang in the channel 19,489 518 19,489 518 stock-based compensation 6,087 4,768 11,234 7,844 acquisition-related and integration-related costs 227 538 470 746 restructuring costs 1,488 — 1,488 — non-deferred secondary offering costs — — — 1,031 debt modification costs 27 — 27 — amortization 13,434 8,712 23,572 17,414 depreciation 2,545 2,502 5,149 4,938 interest expense (includes loss on debt extinguishment) 1,676 4,508 2,955 9,454 income tax expense (benefit) (4,164 ) 2,285 (5,147 ) 15,480 adjusted ebitda - non-gaap $ (11,023 ) $ 51,597 $ 4,400 $ 131,986 adjusted ebitda margin - non-gaap -3.9 % 10.9 % 0.7 % 13.2 %
