Good afternoon, and welcome to Corsair Gaming's Fourth Quarter and Full Year 2024 Earnings Conference Call. Today's call is being recorded, and your participation signifies your consent to the recording. Currently, all participants are in listen-only mode. A brief question-and-answer session will follow the presentation. I would now like to turn the call over to Ronald van Veen, Corsair's Vice President of Finance and Investor Relations. Thank you, sir. Please begin.

Thank you. Good afternoon, everyone, and thank you for joining us for Corsair's financial results conference call for the fourth quarter and full year ended December 31, 2024. On the call today, we have Corsair's CEO, Andy Paul; Thi La, currently Corsair's President and Chief Operating Officer and Chief Executive Officer, effective July 1, 2025; and CFO, Michael Potter. Andy will review highlights from the quarter, followed by Thi. And Michael will then review the financials and our outlook. We will then have time for any questions. Before we begin, allow me to provide a disclaimer regarding forward-looking statements. This call, including the Q&A portion of the call, may include forward-looking statements related to the expected future results of our company and are therefore forward-looking statements. Our actual results may differ materially from our projections due to a number of risks and uncertainties. The risks and uncertainties that forward-looking statements are subject to are described in our earnings release and other SEC filings. Note that until our 10-Q has been filed, these numbers are preliminary. Today's remarks will also include references to non-GAAP financial measures. Additional information, including reconciliation between non-GAAP financial information to the GAAP financial information is provided in the press release we issued after the market closed today. With that, I'll now turn the call over to Andy.

Thanks, Ron. In our last earnings call, we talked about how exciting the future looks because of new technology GPU cards around the corner, about the success of the Black Ops 6 launch, and about how the high end of the gaming enthusiast market was on hold waiting for these new GPUs. So here we are now in Q1, and it's all happening. 50 Series Blackwell GPUs are out and shipping. Enthusiasts are lining up to buy components from us to support these GPU cards. And GTA 6, the most anticipated and hardware demanding game, is now in sight, although still likely a year away. Our gaming business has never looked so strong. And we are well into the integration of the Fanatec sim racing company. Q4 was the start of what we believe will be a strong ramp in our business over the next few years. Revenue and margins were all strong, especially around Black Friday in the latter part of the quarter. We ended with a solid quarterly revenue number of $414 million and adjusted EBITDA at $33 million. We took over the Fanatec sim racing business in late September. We are even more positive on the Fanatec business and sim racing opportunity now that we've had a quarter to work with them. We are getting them fully integrated into our systems and sales and customer support networks, and expect this to be a positive revenue and EBITDA driver for us as we move forward. We have seen overwhelmingly positive sentiment from the customer base who are delighted that an enthusiast company is now overseeing what we would call the ultimate enthusiast category. We're in contact with many of the F1 teams and other parts of the racing ecosystem, and we see the same level of enthusiasm there about Fanatec joining with Corsair. Corsair is in the unique position that we can offer every part of a sim racing solution from the frame, the seat, the wheels, pedals and accessories to the gaming PC and monitor. This gives us huge opportunities to expand our current footprint. And this is a fast growing market with the Netflix series Drive to Survive having really opened up F1 racing interest in the U.S. For our components and memory business, we mentioned in the last earnings call that the high end early adopters were on hold waiting for the new GPU launch. Now they are back, and we have immediately seen a rush for the high end components that are needed to build the latest gaming PCs using these new GPU cards. The cards are all higher power than before, so we immediately see demand for higher wattage power supplies and better cooling components, which will drive up our component ASPs. Our gaming and creator business has been growing all year, with 20% year-on-year numbers. The Fanatec acquisition accelerated this in Q4. Our Elgato business is also doing extraordinarily well, with product hit after product hit and the Stream Deck product line now forming an entirely new category in the market for peripherals as more and more people consider a Stream Deck as a must-have device alongside a keyboard, mouse, camera, and microphone. Creator products give us the ability to add more and more features for consumers to use and enjoy, and Elgato has also started to incorporate artificial intelligence into some of our new products to expand these feature sets even more. We have seen some great wins in our gaming peripheral products with our K65 wireless keyboard winning several industry awards and being picked by Apple along with our M75 wireless mouse to feature in their stores as gaming accessories. Our Custom Labs initiative, which gives us the ability to customize products at the one-off or short-run level, gives us a huge advantage over our competitors. In summary, we look forward to a great 2025 and expect continued growth now in the coming years. Lastly, we announced today along with earnings, that after 31 years at the helm of Corsair, it is time for me to retire at the end of the second quarter. It has been an incredible journey for me to lead the wonderful global team at Corsair, and we achieved more than I could ever have imagined. And I look forward to cheering the company on as it continues to innovate and build on its leadership position. Thi La, our current President and COO, has been selected by the Board to become the new CEO of Corsair, effective July 1. Thi has been with the company for 14 years now and has been President and COO since 2017. In that role, she has led all the commercial, operations, and product development functions in the company through a massive growth period. So this transition to the CEO role over the next few months will be quite straightforward and well deserved. I am very confident Thi will do a great job leading the company through its next phase of growth. Let me now turn the call over to Thi, before Michael reviews our financials. Thi, please go ahead.

Thank you, Andy. I'm honored and excited to have the opportunity to become the Chief Executive Officer of Corsair. As Andy said, I have been part of Corsair for 14 years now and love working with gamers and creators. I have been working alongside Andy to build a moderate DIY business to now over 30 exciting product lines and six great brands, growing the company from $300 million to the current level. Prior to Corsair, my experience spanned from running R&D operations to managing product lines that generated over $3 billion in revenue. My passion is to make great products for our enthusiast consumers and my goal is to put the customer first while growing our presence in a robust market. 2025 is an excellent time for Corsair. With the acquisition of Fanatec and NVIDIA 5000 series launch, I feel good about starting our next phase under these tailwinds. Let me now turn the call over to Michael for a review.

Thank you, Andy and Thi. Our stronger than expected performance in Q4 helped us to end the year in a strong financial position, and we had balanced inventory levels in both the channel and our warehouses. Throughout 2024, we remain committed to strategically expanding our portfolio, investing in innovation, reducing operating costs and debt, and strengthening our balance sheet. This includes the purchase of Fanatec and the increased investment into Elgato supply chain, reinforcing our capabilities in key growth areas. As Andy highlighted, we believe we're well positioned to capitalize on healthier demand trends, as we return to growth and expect to continue our disciplined approach to debt reduction in 2025. In terms of the specifics, Q4 2024 net revenue was $413.6 million, compared to $417.3 million in Q4 2023. For the full year 2024, net revenue was $1,316.4 million compared to $1,459.9 million in 2023. European markets contributed 38% of our Q4 2024 revenues compared to 38.4% in Q3 2024, while the APAC region was 9.1% of our Q4 2024 revenues compared to 10.3% in Q3 2024. Turning now to our segments. The Gamer and Creator Peripherals segment contributed $169.6 million of net revenue during the fourth quarter compared to $136.8 million in Q4 2023. For the full year 2024, Gamer and Creator Peripherals segment revenue was $472.7 million compared to $394.9 million for the full year 2023. The Gaming Components and Systems segment contributed $244.1 million of net revenue during the fourth quarter compared to $280.5 million in Q4 2023. Memory products contributed $126.3 million in Q4 2024 compared to $145.5 million in Q4 2023. For the full year 2024, Gaming Components and Systems segment revenue was $843.7 million compared to $1.65 million for the full year 2023, with memory products contributing $429.9 million compared to $517.4 million in 2023. Overall gross profit in the fourth quarter was $108.2 million compared to $102.7 million in Q4 2023, reflecting the strong growth in our Gamer and Creator Peripherals segment. Gross profit for Q4 includes the impact of $4.2 million of fair value step-up of inventory acquired from the purchase of the Fanatec business. Gross margin increased to 26.2% compared to 24.6% in Q4 2023. For the full year 2024, gross profit was $327.6 million compared to $360.3 million in 2023. Gross profit in the Gamer and Creator Peripherals segment was $63.9 million compared to $50.9 million in Q4 2023. Gross margin improved to 37.7% compared to 37.2% in Q4 2023. Without the impact of the $4.2 million fair value adjustment, gross profit would have been $68.1 million and gross margin would have been 40.2%. We are pleased with the strength in this business and expect it to continue in 2025. The Gaming Components and Systems segment gross profit was $44.3 million compared to $51.8 million in Q4 2023, reflecting the lower sales volume. Gross margin was 18.1% compared to 18.5% in Q4 2023. Our memory products gross margins in this segment were 15.3% for the fourth quarter compared to 13.5% in Q4 2023. Fourth quarter SG&A expenses were $85.3 million compared to $73.8 million in Q4 2023. Fourth quarter R&D expenses were $17 million compared to $16.7 million in Q4 2023. We continue to invest in innovation, including our peripherals business and new growth opportunities like sim racing that will help us to accelerate revenue growth. GAAP operating income in the fourth quarter of 2024 was $5.9 million compared to $12.1 million in Q4 2023. Fourth quarter adjusted operating income was $31.7 million compared to adjusted operating income of $31.8 million in Q4 2023. Adjusted operating income was $45.7 million for the full year 2024, compared to $85.4 million in 2023. We're pleased to end the year on such a strong note and remain focused on further improvements as we return to our growth mode. Fourth quarter net income attributable to common shareholders was $1.3 million or $0.01 per diluted share as compared to net income of $6.2 million or $0.06 per diluted share in Q4 2023. On an adjusted basis, fourth quarter net income was $24.8 million or $0.23 per diluted share compared to an adjusted net income of $23.2 million or $0.22 per share in Q4 2023. For the full year 2024, adjusted net loss was $2.7 million or $0.03 per diluted share from adjusted net income of $58.3 million or $0.55 per diluted share in 2023. The 2024 results include the adverse effect of a net $32.5 million non-cash charge from a valuation allowance on deferred tax assets. Finally, fourth quarter adjusted EBITDA was $33.1 million compared to $33.7 million for Q4 2023. For the full year 2024, adjusted EBITDA was $54.7 million compared to $95.1 million in the year-ago period. As noted earlier, we're pleased to end the year on such a strong note and remain focused on further improvements as we return to our growth mode. Turning now to our balance sheet. We ended Q4 with a cash balance, including restricted cash, of $109.6 million. We ended the year with inventory up slightly compared to last year, mainly caused by the newly purchased Fanatec business. We continue to expect that under our normal cash cycle, we will have increased cash generation starting in Q1 2025. We ended Q4 with $174 million of debt at face value, down $25 million year-over-year. And our $100 million working capital revolver remains undrawn and fully available. Overall, we expect liquidity to remain excellent through 2025, allowing us to be flexible as opportunities present themselves. And we will continue to reduce our debt in 2025. In terms of the full year 2025, we expect revenue growth to improve through the coming year, with a further improvement in adjusted EBITDA, led by an additional improvement in margin and a rebound in demand for the company's high performance gear for gamers, streamers, content creators, and gaming PC builders. We expect every quarter in 2025 to be better than 2024, with the biggest year-over-year improvement expected to be in the second quarter, mainly due to the timing of the new NVIDIA GPU launches. As fairly typical in the new GPU launch, initial volumes are lower and expected to ramp throughout Q1. So the year-over-year impact is expected to be less significant in Q1. We're also expecting our typical seasonality with the second half revenue higher than the first half. Finally, our current outlook reflects what we believe the impact of the newly announced tariffs in the USA will be after mitigation. As a reminder, we had already moved much of our production of USA bound products out of China five years ago and had planned further actions in case more or expanded tariffs were announced. Mitigation is always some combination of source location, supplier price adjustments, and price increases. For the full year 2025, we are expecting total revenue in the range of $1.4 billion to $1.6 billion, adjusted operating income in the range of $67 million to $87 million and adjusted EBITDA in the range of $80 million to $100 million. Assuming we maintain the same debt and cash balances in 2025, we'd expect to have approximately $2.2 million of net interest expense per quarter. We're using an effective tax rate of approximately 15% to 17% for 2025, full year weighted average diluted shares outstanding of approximately 106 million to 110 million shares.

Thank you. We will now begin the question-and-answer session. Your first question today will come from Aaron Lee with Macquarie. Please go ahead.

Thanks for taking my question. Andy, congratulations on a storied career. It's great working with you, and I hope we'll see you pop up again somewhere in the industry in the future. I wanted to start with maybe the Fanatec acquisition. Sorry if I missed this earlier, but is that still on track to be done by the second quarter? And what items are still ahead to work through as you course correct that asset? And along those lines, can you also talk a bit more about your expectations for this business's growth in 2025?

Yeah. Well, thanks for the kind words, Aaron. In terms of the integration, we are largely through it. There are two parts, right? One was to sort out the customer service aspects. We've largely done that. And the second part of it is to integrate them in with our systems. Some of that is just sort of nice to have, like putting them in with our financial system so you can track things better. The other part of it is just better logistics. So we're getting there. I think in terms of getting them back to where they were, we're pretty much there now. However, the potential of expansion is really what we're working on now and that's a combination of re-engaging with or engaging with retail, which they hadn't done before. And secondly, engaging with the network of people that actually build the complete sim rigs for customers. So those are things we're looking forward to. But I would say that having discussed it with our wholesales channel and our retailers, everyone is super excited about this opportunity.

That's great to hear. And then wanted to touch on partnerships. Over the last couple of quarters, you've announced some major partnerships with Activision and Apple. Can you just talk about how these partnerships have impacted the business, whether it's increased brand awareness, sales volumes, anything like that to help us understand how partnerships like these just kind of flow through the business? Thank you.

Yeah. I'll turn that one over to Thi, because she's been mostly involved in the partnership activity with Apple. So Thi, you want to take that?

Yes. Thank you, Aaron for the questions. And thank you, Andy. We are pretty pleased with the Call of Duty franchise picking us as a strategic exclusive partner for the full product range. During the holiday season, after the launch of Call of Duty: Black Ops 6, we see a significant traffic increase coming to our website to look for information on products, and the excitement level is high. So we see this as a very valuable marketing relationship for multiple years, and we're looking for additional participation between the two companies on the next wave of game launches. Regarding the Apple relationship, we are happy with the results during the holiday season. We think that from a gaming brand perspective, we brought really good value to the relationship, and Apple and Corsair are happy with the holiday results.

Great, and I appreciate it. Thanks, Andy, and thank you, Thi. Looking forward to working with you.

Thank you.

And your next question today will come from George Wang with Barclays. Please go ahead.

Hey, Andy. Thanks for working with you in the past, and wish you all the best. And Thi, welcome to the CEO position and look forward to working with you in the future. Just two quick ones. Firstly, obviously, top of mind in terms of the GPU refresh in the first half, and especially a bit more selling momentum into the second quarter. Can you kind of unpack and maybe give more color just in terms of cadence? You gave a range for the revenue low and high. Just curious what's going to drive towards the high end of the guidance for the full year, and just how to think about the cadence for the GPU refresh?

Yeah. So look, we've been talking for a while about the fact that there's a lot of pent-up demand for this GPU refresh. The way I was thinking about it was that, any time you look back or you look across at what people are using, we always talk about the average refresh time being sort of three to five years for gaming stuff. But of course, that's an average and there are going to be people with 10-year old gear and seven-year old gear. I think what happened before COVID or at COVID was all the people with old gear renewed it. And so we've had sort of a skewed distribution since COVID. But if you think about it, we're now three years exactly since the start of COVID or almost three years, and we're five years from the beginning of it, three years to the end of it. So we're now right into that point where the big bulge is really ready to upgrade. And so I think there's been huge anticipation with the 50 series cards. And I think it's funny watching the media comparing the 50 series cards with the 40 series cards, but that's not what consumers are thinking about. Most consumers have got 20 series and 30 series cards, and so they're going to be upgrading five-year-old gear. So in terms of the cadence, we don't know exactly what NVIDIA's plans are. I mean, they've been sold out in fairly limited quantities in January. Those were sold out in hours. And so I think that the big volume is going to be when the 5070 and 5070 Ti start to get shipped, the more affordable ones. So I think in terms of volume for us, it's going to be a gradual pickup through the year. At the moment, I'd say, for the last two months, we've been kind of sold out on some of our component SKUs, power supplies and memory. So we're seeing pretty good activity in terms of the channel bringing products in. But I think we're looking forward here to the next two years of solid refresh activity. That's the way I think about it. It's not going to be a one-quarter blip or anything like that.

Okay. Great. Just a follow-up in terms of the margin. In the prepared remarks, you talked about margin improvement, especially kind of cyclical recovery on the DIY components and continuing the margin trends for the peripherals. Maybe you can unpack across both ends of the spectrum and any other lever you guys can pull to kind of further improve the EBITDA margin for 2025?

I believe we are aiming for a gross margin in the mid-20s for the entire components category, and we have been steadily growing in that area. However, the post-COVID period has presented significant challenges. When demand falls short of expectations, partly due to lingering impacts from COVID and increased inflation, it puts a strain on consumers. This situation often leads competitors with fewer resources to resort to desperate discounting. Looking ahead, I anticipate a more favorable market where we can achieve greater stability in inventory and demand, allowing us to quickly return to our target gross margins. Thi has been working diligently with the team to address these issues. Thus, when we compare the expected EBITDA for this year to last year, much of the improvement is attributed to better margins rather than just increased revenue.

Okay. Great. I'll go back to the queue. Thanks again.

And your next question today will come from Doug Creutz with TD Cowen. Please go ahead.

Hey. Thank you. You mentioned that your guidance incorporates the expected impact of the tariffs. I was just curious if you think that kind of relative to your competitors, if you're sort of relatively better positioned or worse positioned with tariffs, could it be a competitive advantage? Any color you can give in that would be great. Thank you.

Well, there's two parts to that. I'll give you a general sense, and then Thi can give you a much more detailed view of where we stand on tariffs. It really depends on the industry. What we saw the last time tariffs came into play, which were mostly against China, a third of our business is memory, which we build in Taiwan, the chips are not made in China. Many of our competitors then had assembly plants in China, for example. So it depends competitor by competitor and segment by segment, to be quite honest with you. I mean, some of the peripheral categories, we've already got a lot of production outside of China, some of our competitors. I don't think, other than some very specific areas, we're going to be any better or worse off than our competitors, but we're in pretty good shape. So Thi, do you want to just give a...

Yeah. So tariffs are really not a new problem for Corsair, especially tariffs from China. We've been working around the clock for the past four years to mitigate the supply chain so that we don't have any significant impact. Now for some of the newer ones, for example, Mexico and Canada potential tariffs, we actually don't have any factory location in both of those countries versus maybe other manufacturers or OEMs who had invested in those countries in recent years. So at this point, we feel comfortable with the current guidance. Of course, depending on the news coming out next, that might change the picture, but at the moment, we feel pretty good about our supply chain.

Great. Thank you. And congratulations both to Andy and Thi.

Thank you.

Your next question today will come from Colin Sebastian with Baird. Please go ahead.

Hey, this is Colin Loyet on for Colin Sebastian. Thanks for taking our questions. Just two from us. So the commentary in the release around the shaping of the rebound of components was helpful. So just kind of on that, our first question would be around components. How beneficial do you think NVIDIA's AI services business is for Corsair? For example, are you seeing people pair Corsair products with their products in that sense? And then our second question, kind of stepping back and looking at the broader video game market, have you seen any games recently spur purchases of either peripherals or components? Or do you think it's going to be more back half weighted with the likes of GTA 6 and games like that? Thank you.

Yeah. Let's take the second question first. We're going to come back to the first one, because I didn't quite hear it. But in terms of new games, I mean, there's been a steady stream of games. What we really haven't had for the last year or two is what we could call a Fortnite moment or PUBG moment. So people are typically playing older games. For our component business and for people looking at new cards, obviously, that tends to depend on new games that are super demanding, right, that you need high-performance graphics in order to get 60 frames per second. Games like Fortnite tend to drive headset sales and keyboard sales. But if you actually look at the numbers, across the last five years, peripheral sales are substantially up, like 50% or 60% compared to pre-COVID. So more people are gaming, but they're not all gaming on new games. The activity around PC builds or gaming PC builds is roughly on par with pre-COVID now. Obviously, we know that there was a little bit of a pull forward from '22 to '24 in '20 and '21. So that's why we expect this refresh to build up and give us a little growth in that area. But yeah, GTA 6 is probably the one everyone is talking about. We'll get a glimpse of that, I think, later on in the year for consoles. My understanding now is that it's going to come out in the fall for consoles and then early '26 for PC. Now, the first part of the question in terms of NVIDIA AI helping or affecting our component sales, I didn't quite understand. Maybe you can give me that one again.

Yeah. So for example, people are training AI models with H100s, etc. Are you seeing people use Corsair products in their kind of trading Data Centers or facilities?

I should be saying. So look, we have not targeted data centers. I mean, we sell products that are premium through consumers. If you're putting together a data center, once you've bought the graphics cards, everything else is just treated as a volume purchase at the lowest price. So I wouldn't think about that. I tell you what we have seen, though, is that there's a lot of people we're seeing building workstations with standard graphics cards or two graphics cards to start playing around with AI models.

Machine learning.

Yeah. So I actually do think there's going to be a little bit of demand from that, but we can't really size it at the moment.

Okay. That's great and yeah, congrats, Andy. I really appreciate it.

Seeing no further questions, this will conclude our question-and-answer session. I would like to turn the conference back over to Andy Paul, President and CEO, for any closing remarks.

Thank you. So thank you everybody for joining us on the call today and for your continued support. If you've got any follow-up questions, please contact our Investor Relations department. We look forward to updating you next quarter. Thank you, and have a good evening.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.