GlobeNewswire Inc | Aug 3, 2021 07:00AM EDT

August 03, 2021

FREMONT, Calif., Aug. 03, 2021 (GLOBE NEWSWIRE) -- Corsair Gaming, Inc. (NASDAQ:CRSR) (Corsair), a leading global provider and innovator of high-performance gear for gamers and content creators, today announced financial results for the second quarter ended June 30, 2021.

Second Quarter 2021 Highlights

-- Net revenue was $472.9 million, an increase of 24.3% year-over-year. Gamer and creator peripherals segment net revenue was $155.2 million, an increase of 40.9% year-over-year. Gaming components and systems segment net revenue was $317.7 million, an increase of 17.6% year-over-year. -- Gross profit was $130.4 million, an increase of 24.1% year-over-year, with gross margin of 27.6%, flat year-over-year. Gamer and creator peripherals segment gross profit was $54.6 million, an increase of 41.0% year-over-year. Gaming components and systems segment gross profit was $75.7 million, an increase of 14.2% year-over-year. -- Operating income was $34.7 million, a decrease of 4.7% year-over-year. -- Adjusted operating income was $49.3 million, an increase of 3.9% year-over-year. -- Net income was $27.7 million, or $0.28 per diluted share, compared to net income of $22.6 million in the same period last year, or $0.26 per diluted share. -- Adjusted net income was $35.7 million, or $0.36 per diluted share, compared to adjusted net income of $32.3 million in the same period last year, or $0.37 per diluted share. -- Adjusted EBITDA was $51.6 million, an increase of 4.0% year-over-year, with adjusted EBITDA margin of 10.9%, a decrease of 210 basis points year-over-year. -- As of June30, 2021, we had cash and restricted cash of $138.6 million, $48.6 million capacity under our revolving credit facility and total long-term debt of $270.0 million. -- Cash flows from operations was $31.6 million, which decreased from $73.6 million in the same period last year.

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.

I am pleased with our performance in the second quarter, where we delivered year-over-year revenue growth of 24%. Our results highlight the strength of the underlying fundamentals of our business, as gamers continue to purchase and upgrade their gear, even as entertainment outside of the home and travel began to open back up.We experienced growth in every category despite key components shortages, such as graphics cards for enthusiaststo build gaming PCs, logistics issues and port delays, stated Andy Paul, Chief Executive Officer of Corsair.

The mid-point of our full-year outlook calls for run-rate revenue of $2 billion compared to our pre-IPO revenue of $1.1 billion in 2019 which shows our strong improvement since then. We are investing in R&D, marketing and infrastructure as we remain focused on expanding our resources. As an example, we are extremely excited by the recent launch our first camera, which has received an overwhelmingly positive response from the creator community. We have launched over 75 new products so far this year, which is an astounding pace of innovation, concluded Andy Paul, Chief Executive Officer of Corsair.

We utilized our increased cash flow to repay an additional $25 million in debt during the second quarter, and we remain focused on further optimizing our capital structure and exploring options to reduce the carrying cost of our debt. During the second quarter, we experienced higher than expected costs for logistics, and we expect logistics costs to remain elevated in the third quarter. Shutdowns from the ongoing pandemic in several large regions we operate in also negatively impacted our operations. We are also continuing to invest in future growth to maintain our high new product launch rate, said Michael G. Potter, Chief Financial Officer of Corsair.

Financial Outlook

For the full year 2021 our outlook remains unchanged from Q1 2021 at:

-- Net revenue to be in the range of $1.9 billion to $2.1 billion. -- Adjusted operating income to be in the range of $235 million to $255 million. -- Adjusted EBITDA to be in the range of $245 million to $265 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, public offering related charges, depreciation and 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.

Please see Use and Reconciliation of Non-GAAP Financial Measures below for a discussion on how we calculate the non-GAAP measures presented herein and a reconciliation to the most directly comparable GAAP measure.

Recent Developments

-- On July 15, 2021, Corsair under its Elgato brand announced the Facecam, a new premium webcam, alongside three more new products for content creators, including the Wave XLR, which is an XLR to USB Type-C microphone interface and digital audio mixer, and Wave Mic Arm and Wave Mic Arm LP, two fully adjustable boom arms for optimal desktop microphone positioning. Facecam features a high quality multi-layer glass lens and Sony sensor plus software to adjust contrast, white balance and exposure. Facecam outputs true Full HD at 1080p60fps without artifacts thanks to an advanced image engine that outputs uncompressed video. -- On June 29, 2021, Corsair announced a new series of full-tower ATX cases: the Corsair 7000D AIRFLOW and the Corsair iCUE 7000X RGB. With the launch of the 7000 Series, ORIGIN PC is adding the 7000D AIRFLOW and 7000X RGB cases to its award-winning line of GENESIS custom PCs. Boasting some of the highest-end hardware, from Intel Core i9 and AMD Ryzen CPUs to NVIDIA GeForce RTX 30-Series graphics, ORIGIN PCs GENESIS line of desktops combines superpowered specs with maximum customization. -- On May 13, 2021, Corsair announced the launch of its flagship VIRTUOSO family of premium gaming headsets: the VIRTUOSO RGB Wireless XT. Connecting via hyper-fast SLIPSTREAM WIRELESS and Bluetooth for simultaneous dual-wireless connections, in addition to high-fidelity USB and universal 3.5mm wired connection options, the VIRTUOSO RGB Wireless XT combines exquisite sound quality, comfort, and versatility. -- On May 6, 2021, Corsair announced the launch of its 5000D RGB Hydro X Edition and 5000X RGB Signature Series Mid-tower cases. Whether PC enthusiasts choose the 5000D RGB Hydro X Edition with the brand-new XD7 RGB distribution plate system or the attention-grabbing designs of the 5000X RGB SIGNATURE SERIES, there are now more options to make the Corsair 5000 Series the starting point for a standout PC.

Conference Call and Webcast Information

We will host a conference call to discuss the second quarter 2021 financial results on August 3, 2021, at 5:30 a.m. PT. The conference call can be accessed live over the phone by dialing 1-855-327-6838, or for international callers 1-604-235-2082. A replay will be available from 8:30 a.m. PT on August 3, 2021 through August 10, 2021, by dialing 1-844-512-2921, or for international callers 1-412-317-6671. The replay passcode is 10015620.

The call will also be webcast live from our investor relations website at https://ir.corsair.com. Following completion of the call, a recorded replay of the webcast will be available on the website.

About Corsair Gaming, Inc.

Corsair Gaming, Inc. (NASDAQ:CRSR) 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 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 gear under our Elgato brand, which provides premium studio equipment and accessories for content creators, SCUF Gaming brand, which builds custom-designed controllers for competitive gamers, and ORIGIN PC brand, a builder of custom gaming and workstation desktop PCs and laptops.

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, our estimated full year 2021 net revenue, adjusted operating income and adjusted EBITDA; the strength of our underlying fundamentals; ; and whether we will be able to optimize our capital structure, reduce the carrying cost of debt and continue to reduce our existing debt. Forward-looking statements are based on our managements 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 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; 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; 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; 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; the impact of the coronavirus on our business; general economic conditions that adversely effect, among other things, 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, 2021 to be 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, 2021 are 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 EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Net Income Per Share. 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 EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Net Income Per Share to evaluate our operating performance and trends and make planning decisions. We believe that these non-GAAP 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 Adjusted Operating Income, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Net Income Per Share 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 performance measures because we believe investors, analysts and rating agencies consider them 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 revenues, operating income, net income, 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, non-GAAP, is determined by adding back to GAAP operating income the acquisition accounting impact related to recognizing acquired inventory at fair value, change in fair value of contingent consideration for business acquisition, non-cash inventory impairment, stock-based compensation, intangible asset amortization, certain acquisition-related and integration-related expenses, non-deferred costs associated with the IPO, secondary offering costs, and debt modification costs. -- Adjusted net income, non-GAAP, is determined by adding back to GAAP net income the acquisition accounting impact related to recognizing acquired inventory at fair value, change in fair value of contingent consideration for business acquisition, non-cash inventory impairment, stock-based compensation, intangible asset amortization, certain acquisition-related and integration-related expenses, non-deferred costs associated with the IPO, secondary offering costs, debt modification costs, loss on extinguishment of debt, and the related tax effects of each of these adjustments. -- Adjusted net income per diluted share, non-GAAP, is determined by dividing adjusted net income, 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 the acquisition accounting impact related to recognizing acquired inventory at fair value, change in fair value of contingent consideration for business acquisition, non-cash inventory impairment, stock-based compensation, certain acquisition-related and integration-related expenses, non-deferred costs associated with the IPO, secondary offering costs, debt modification costs, intangible asset amortization, depreciation and amortization, interest expense (including loss on extinguishment of debt) and tax expense. -- Adjusted EBITDA margin is determined by dividing adjusted EBITDA by net revenue for the respective periods.

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.

Source: Corsair Gaming, Inc.

Investor Relations Contact:Ronald van Veenir@corsair.com510-578-1407

Media Contact:Adrian Bedggoodadrian.bedggood@corsair.com510-657-8747+44-7989-258827

Corsair Gaming, Inc.Condensed Combined Consolidated Statements of Operations(Unaudited, in thousands, except per share amounts)

Three Months Ended Six Months Ended June30, June30, 2021 2020 2021 2020 Net revenue $ 472,903 $ 380,407 $ 1,002,317 $ 688,925 Cost of revenue 342,552 275,343 711,638 505,239 Gross profit 130,351 105,064 290,679 183,686 Operating expenses:Sales, generaland 80,169 56,827 158,022 110,556 administrativeProduct 15,469 11,827 30,655 23,383 developmentTotal operating 95,638 68,654 188,677 133,939 expensesOperating income 34,713 36,410 102,002 49,747 Other (expense) income:Interest expense (4,508 ) (9,572 ) (9,454 ) (18,946 )Other (expense) (175 ) 11 (2,600 ) (52 )income, netTotal other (4,683 ) (9,561 ) (12,054 ) (18,998 )expense, netIncome before 30,030 26,849 89,948 30,749 income taxesIncome tax (2,285 ) (4,249 ) (15,480 ) (6,932 )expenseNet income $ 27,745 $ 22,600 $ 74,468 $ 23,817 Net income per share:Basic $ 0.30 $ 0.27 $ 0.81 $ 0.28 Diluted $ 0.28 $ 0.26 $ 0.74 $ 0.28 Weighted-averageshares used to compute netincome per shareBasic 92,792 84,098 92,374 84,089 Diluted 100,074 86,333 100,145 86,201

Corsair Gaming, Inc.Segment Information(Unaudited, in thousands, except percentages)

Three Months Ended Six Months Ended June30, June30, 2021 2020 2021 2020 Net revenue:Gamer andCreator $ 155,157 $ 110,115 $ 331,069 $ 185,976 PeripheralsGamingComponents 317,746 270,292 671,248 502,949 and SystemsTotal Net $ 472,903 $ 380,407 $ 1,002,317 $ 688,925 Revenue Gross Profit:Gamer andCreator $ 54,634 $ 38,743 123,500 $ 60,876 PeripheralsGamingComponents 75,717 66,321 167,179 122,810 and SystemsTotal Gross $ 130,351 $ 105,064 $ 290,679 $ 183,686 Profit Gross Margin:Gamer andCreator 35.2 % 35.2 % 37.3 % 32.7 %PeripheralsGamingComponents 23.8 % 24.5 % 24.9 % 24.4 %and SystemsTotal Gross 27.6 % 27.6 % 29.0 % 26.7 %Margin

Corsair Gaming, Inc.Condensed Combined Consolidated Balance Sheets(Unaudited, in thousands)

June30, December31, 2021 2020 Assets Current assets: Cash and restricted cash $ 138,320 $ 133,338 Accounts receivable, net 258,789 293,629 Inventories 273,399 226,007 Prepaid expenses and other current assets 61,465 37,997 Total current assets 731,973 690,971 Property and equipment, net 16,034 16,475 Goodwill 314,205 312,760 Intangible assets, net 243,711 259,317 Restricted cash, noncurrent 231 230 Other assets 72,250 34,362 TOTAL ASSETS $ 1,378,404 $ 1,314,115 Liabilities and Stockholders? Equity Current liabilities: Accounts payable $ 261,656 $ 299,636 Other liabilities and accrued expenses 232,373 205,745 Total current liabilities 494,029 505,381 Debt, net 270,013 321,393 Deferred tax liabilities 30,983 29,752 Other liabilities, noncurrent 53,693 20,199 TOTAL LIABILITIES 848,718 876,725 Stockholders? Equity: Common stock and additional paid-in capital 456,019 438,676 Retained earnings (accumulated deficit) 71,655 (2,813 )Accumulated other comprehensive income 2,012 1,527 Total Stockholders? Equity 529,686 437,390 TOTAL LIABILITIES AND STOCKHOLDERS? EQUITY $ 1,378,404 $ 1,314,115

Corsair Gaming, Inc.Condensed Combined Consolidated Statements of Cash Flows(Unaudited, in thousands)

Three Months Ended Six Months Ended June30, June30, 2021 2020 2021 2020 Cash flows from operating activities:Net income $ 27,745 $ 22,600 $ 74,468 $ 23,817 Adjustments toreconcile net income to net cash provided byoperating activities:Stock-based 4,768 1,550 7,844 2,655 compensationDepreciation 2,502 2,206 4,938 4,364 Amortization of 8,712 8,392 17,414 16,839 intangible assetsDebt issuance costs 515 703 1,052 1,282 amortizationLoss on debt 358 392 797 392 extinguishmentDeferred income taxes (2,183 ) (1,537 ) (5,188 ) (1,531 )Other (250 ) 236 1,066 738 Changes in operating assets and liabilities:Accounts receivable 45,924 (55,723 ) 32,508 (18,291 )Inventories (45,387 ) 926 (58,895 ) 1,071 Prepaid expenses and (5,226 ) (1,149 ) (9,645 ) 5,163 other assetsAccounts payable (10,674 ) 58,761 (37,662 ) 15,228 Other liabilities and 4,825 36,251 30,700 23,881 accrued expensesNet cash provided by 31,629 73,608 59,397 75,608 operating activitiesCash flows from investing activities:Acquisition ofbusiness, net of cash ? ? (1,684 ) ? acquiredPayment of deferred andcontingent ? ? (4,353 ) ? considerationPurchase of property (2,858 ) (1,159 ) (4,894 ) (3,006 )and equipmentNet cash used in (2,858 ) (1,159 ) (10,931 ) (3,006 )investing activitiesCash flows from financing activities:Repayment of debt (25,000 ) (12,626 ) (53,000 ) (13,820 )Payment of other ? (154 ) ? (269 )offering costsProceeds from issuanceof shares through 9,281 965 9,466 965 employeeequity incentive plansPayment of taxesrelated to net share (7 ) ? (7 ) ? settlement of equityawardsNet cash used in (15,726 ) (11,815 ) (43,541 ) (13,124 )financing activitiesEffect of exchange rate (76 ) 198 58 (110 )changes on cashNet increase in cash 12,969 60,832 4,983 59,368 and restricted cashCash and restrictedcash at the beginning 125,582 50,483 133,568 51,947 of the periodCash and restrictedcash at the end of the $ 138,551 $ 111,315 $ 138,551 $ 111,315 period

Corsair Gaming, Inc.GAAP to Non-GAAP Reconciliations

Non-GAAP Operating Income Reconciliations(Unaudited, in thousands, except percentages)

Three Months Ended Six Months Ended June30, June30, 2021 2020 2021 2020 Operating Income - GAAP $ 34,713 $ 36,410 $ 102,002 $ 49,747 Acquisition accountingimpact related to ? (27 ) ? 394 recognizing acquiredinventory at fair valueChange in fair value ofcontingent consideration 21 ? 93 ? for business acquisitionNon-cash inventory 518 ? 518 ? impairmentStock-based compensation 4,768 1,550 7,844 2,655 Intangible asset 8,712 8,392 17,414 16,839 amortizationAcquisition-related and 538 774 746 1,750 integration-related costsNon-deferred IPO and ? 316 1,031 754 secondary offering costsDebt modification costs ? ? ? 288 Adjusted Operating Income $ 49,270 $ 47,415 $ 129,648 $ 72,427 - Non-GAAPAs a % of net revenue - 7.3 % 9.6 % 10.2 % 7.2 %GAAPAs a % of net revenue - 10.4 % 12.5 % 12.9 % 10.5 %Non-GAAP

Non-GAAP Net Income and Net Income Per Share Reconciliations(Unaudited, in thousands, except per share amounts and percentages)

Three Months Ended Six Months Ended June30, June30, 2021 2020 2021 2020 Net Income - GAAP $ 27,745 $ 22,600 $ 74,468 $ 23,817 Acquisition accountingimpact related to ? (27 ) ? 394 recognizing acquiredinventory at fair valueChange in fair value ofcontingent consideration 21 ? 93 ? for business acquisitionNon-cash inventory 518 ? 518 ? impairmentStock-based compensation 4,768 1,550 7,844 2,655 Intangible asset 8,712 8,392 17,414 16,839 amortizationAcquisition-related and 538 774 746 1,750 integration-related costsNon-deferred IPO and ? 316 1,031 754 secondary offering costsDebt modification costs ? ? ? 288 Loss on debt 358 392 797 392 extinguishmentNon-GAAP income tax (6,970 ) (1,717 ) (9,059 ) (3,432 )adjustmentAdjusted Net Income - $ 35,690 $ 32,280 $ 93,852 $ 43,457 Non-GAAP Diluted Net income per share:GAAP $ 0.28 $ 0.26 $ 0.74 $ 0.28 Adjusted, Non-GAAP $ 0.36 $ 0.37 $ 0.94 $ 0.50 Shares used to computediluted net income per share:GAAP 100,074 86,333 100,145 86,201 Adjusted, Non-GAAP 100,074 86,333 100,145 86,201

Corsair Gaming, Inc.Adjusted EBITDA Reconciliations(Unaudited, in thousands, except percentages)

Three Months Ended Six Months Ended June30, June30, 2021 2020 2021 2020 Net Income - GAAP $ 27,745 $ 22,600 $ 74,468 $ 23,817 Acquisition accountingimpact related to ? (27 ) ? 394 recognizing acquiredinventory at fair valueChange in fair value ofcontingent consideration 21 ? 93 ? for business acquisitionNon-cash inventory 518 ? 518 ? impairmentStock-based compensation 4,768 1,550 7,844 2,655 Acquisition-related and 538 774 746 1,750 integration-related costsNon-deferred IPO and ? 316 1,031 754 secondary offering costsDebt modification costs ? ? ? 288 Intangible asset 8,712 8,392 17,414 16,839 amortizationDepreciation 2,502 2,206 4,938 4,364 Interest expense (includesloss on debt 4,508 9,575 9,454 18,946 extinguishment)Tax expense 2,285 4,249 15,480 6,932 Adjusted EBITDA - Non-GAAP $ 51,597 $ 49,635 $ 131,986 $ 76,739 Adjusted EBITDA margin - 10.9 % 13.0 % 13.2 % 11.1 %Non-GAAP