Q4 2020 Corsair Gaming Inc Earnings Call
Good morning, and welcome to Corsair gaming fourth quarter and full year 'twenty 'twenty earnings Conference call. As a reminder, today's call is being recorded and your participation implies consent to such recording at this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
That anyone should require operator assistance during the conference. Please press the pound zero on your telephone keypad with that I would like to turn the call over to Ronald Fanfare, Cortes, Vice President of Finance and Investor Relations. Thank you Sir you may begin.
Thank you good morning, everyone and thank you for joining us for for sure exponential results come from school for the fourth quarter ending December 31.
'twenty on.
On the call today, we have coursera, CEO and Paul and <unk>.
CFO Michael power.
Before we begin allow me to provide a disclaimer regarding forward looking statements.
Call, including the Q&A portion of the call May include forward looking statements related to the expected future results of our company and a day.
All forward looking statements are.
Actual results may differ materially from our projections due to a number of risks and uncertainties.
Risks and uncertainties that forward looking statements are subject to are described in our earnings release and other SEC filings.
Today's remarks will also include references to non-GAAP financial measures additional information.
Reconciliations between non-GAAP financial information to the GAAP financial information is provided in the press release.
I'd also like to remind everyone that until our 10-K is on file the 2020 numbers on.
What is it.
This conference call will be available for replay via webcast through Corsair, <unk> Investor Relations website at IR Corsair.
And it will begin with our fourth quarter business highlights and 2021 outlook and Michael will then take you through a review of the financials before we proceed to Q&A.
I'll now turn the call over to Ed.
Thank you Ronald and welcome to our Q4 'twenty 'twenty earnings call.
Well, we are very pleased with our record results in the fourth quarter and indeed, all of 2020, which exceeded our expectations.
As we delivered net revenue growth for the quarter was 74%.
Two $556 3 million.
Adjusted EBITDA growth of 154, 7% to $72 5 million.
And adjusting adjusted earnings of 53 cents per diluted share up 32 cents on 151%.
For the full year revenue growth was 52, 2% to $1 7 billion.
Adjusted EBITDA growth of 197, 5% to $213 million.
On adjusted earnings of $1 60 per diluted share up.
$1 25 or 355%.
The market for gaming and streaming gave us the holiday period.
Showed the same day.
Volume trends as previous quarters.
With consumers continuing to tell on the gaming and streaming while they spend more time at home.
All categories showed strong growth compared to Q4 2019.
Notably, including components. The gamers are buying to build high end gaming Pcs as well as gaming and streaming peripherals.
This is important because people, who step up and build a $2000 gaming P C.
Likely going to be committed to buying more peripherals in the future.
In December we saw Youtube revealed that they had 40 million gaming channels.
Number was far higher than most industry watchers had been estimating.
This on the schools, our thesis that streaming and sharing video content is becoming a way of life for millennials in the same way as playing video games become.
Looking back over the year we.
We don't see much evidence of a pull forward in sales in other words gamers buying in Q3, what they might've bought in Q4 without Covid.
While we do continue to see is more people getting more committed to gaming and streaming and spending on gear to improve their game play while overall experience.
We still see a lie large white space available on the market.
Well the number of PC gamers Hussein surveys that they play PC games regularly is.
He has many times higher than our estimates of the number of people actually buying gaming gear.
Corsair continues to be supply limited for most of Q4 in almost every category.
Words are sales could have been substantially higher if we could have manufactured and shipped more products.
Towards the end of the quarter, we were able to start filling retail shelves again.
And we saw on market share numbers, starting to rise in many of our categories.
During the quarter, we introduced several new high performance products with those released since our last earnings call list it out in detail on the press release.
Those include all scuffed trended H, one customizable wide gaming headset leveraging on our scuff brand into the headset category.
Two new keyboards, including the K 100, new flagship products.
Our new wireless mouse pallette by Slipstream wireless technology.
Our new haptic headset.
On innovative new range of cases, including the 5000 D family of Midtown ATX with Cool says rapid route cable management and Ed Guide cooling technology.
Our new family of CPU coolers.
The low profile vengeance RGB memory kits.
The MP 600 family of Ssds.
And new gaming Pcs, featuring the new N video in a M D Gpus as well as latest didn't tell him ANZ microprocessors.
We expect to continue launching new products.
On a blistering pace.
Approximately one per week.
I use these products to gain market share.
On your microphone, which started shipping in volume in Q3.
Continues to exceed our sales expectations.
It has been a great addition to the El Gallo product portfolio.
All gaming and creates a segment continues to benefit from the highly acclaimed products that we've launched throughout the year and I'm pleased to see the sales in this segment more than doubled in Q4 compared to Q4 2019.
Lastly, I was also very pleased to recently announce the promotion of T law suit President and CMO of course, there as well as several executive promotions and hires reporting to tee in her new role.
With these strategic changes the company further strengthens its ability to focus on gain market share on every product category that we offer operating.
Yeah.
Turning now to guidance for the full year 2021.
Okay.
We are guiding total revenue in the range of 1.8 to $1 95 billion.
Representing growth of five 7% to 14, 5%.
Adjusted operating income in the range of 205 million to $220 million.
And adjusted EBITDA in the range of 250 million to $230 million.
We expect the first half of the year to do well compared to prior year results.
The number of people actively gaming and streaming content cause dramatically increased and we expect those people to continue to buy and upgrade new gas.
We expect growth in the second half EBITDA to be more moderate.
We expect a gradual return to activities outside the home.
However, we do have many exciting new products that we introduced last year and more planned for this year and we expect that our new larger customer base, who want to add these products to like gaming and streaming setups.
We will be adding significant resources to the company this year, both in marketing and R&D.
As well on infrastructure as we move towards the 2 billion revenue number.
We invested substantially into our direct to consumer business in 2020, both in people and infrastructure.
And we've seen some very promising results from those investments.
We've also seen good growth from our software and services area.
And we expect to continue to expand these offerings in 'twenty and 'twenty one.
Both from organic growth from from M&A.
In closing I'm very pleased with Australia fourth quarter results and our progress in 2020, as we expanded our product portfolio tapping into new and growing markets and drive towards continued growth in 2021.
We continue to execute on our strategic growth initiatives.
And we remain focused on capitalizing on the tremendous market opportunity before us.
Thank you for your time and continued support on.
Now I'll turn the call over to Michael to discuss our financial results for the quarter on full year.
Thanks, Andy and good morning, everyone.
During the fourth quarter, we delivered net revenue of $556 $3 million, an increase of $229 $8 million or 74% compared to $326 $6 million in Q4 2019.
Our strong topline performance was driven by strong growth across both the gamer and creator peripheral segment and the gaming components and system segment. We believe the strong revenue growth year over year is driven in part by the COVID-19 shelter in place orders as consumers spend more time working on gaming at home.
On.
The gamer and create a peripheral segment provided $191 $8 million of net revenue during the fourth quarter, an increase of $97 $8 million or 104% from $94 $1 million in Q4, 2019, primarily driven by strong growth across.
All product categories in particular sales of our al got on.
Branded streaming products. In addition to the contribution from scarp, which we owned for just the last two weeks of Q4 2019, the gaming and create a peripheral net revenue was 34, 5% of total net revenue an increase of 570 basis points from 28, 8% in Q.
For 2019.
The gaming components and system segment provided $364 $5 million on net revenue during the fourth quarter, an increase of $132 million or 56, 8% from $232 $5 million in Q4 2019.
Primarily driven by strong growth across all products, including our PSU cooling PC cases in DRAM due to continued strong market demand on memory products contributed $184 $9 million of this revenue.
Gross profit in the fourth quarter was $153 $8 million, an increase of $83 $3 million or 118, 3% from $75 million in Q4, 2019, primarily driven by the increase in revenue in these periods as well.
It is the positive margin impact from sales of the higher margin Scott products and streaming gear.
Gross profit margin increased by 600 basis points to 27, 6% from 21, 6% in Q4 2019.
The game room creator peripheral segment gross profit was $68 $9 million, an increase of $45 7 million from $23 $1 million in Q4, 2019, primarily driven by increase in revenue in the same periods.
Gross profit margin was 35, 9% compared to 24, 6% in Q4 2019.
The increase in gross margin was driven largely by product mix related to the strong growth in sales of higher margin streaming products, coupled with lots of promotion activities and.
And the addition of higher margin scuffed products as Andy mentioned, we continue to see a mix shift as gamer and greater peripheral has contributed 44, 8% of total gross profit in Q4 2020 as compared to 32, 8% in Q4 2019.
This is a great overall story and Formula from continued overall margin expansion as our fastest growing and highest margin segment also sits on our largest market.
The gaming components and systems segment gross profit was $84 $9 million, an increase of $37 6 million from $47 $3 million in Q4, 2019, primarily driven by the increase in revenue in the same periods gross profit margins.
<unk> margin was 23, 3% compared to 24% in Q4 2019 due to product mix and less promotional activities gaming components and systems contributed 55, 2% of the total gross profit in Q4 2020 compared to 67 two.
Percent in Q4 2019, our memory project products margin in this segment was 19, 2% for the quarter.
Fourth quarter, SG&A expenses were $81 $1 million, an increase of $34 $1 million or 72, 5%.
<unk> to $47 million in Q4 2019.
Primarily driven by SG&A expense from scarf, an increase in outbound freight cost due to two due to the increase in revenue and increased due to expenses related to being a public company and an increase in personnel related expenses.
Fourth quarter product development expenses were $13 $8 million, an increase of $4 $6 million or <unk> 49, 9% compared to $9 $2 million in Q4, 2019, primarily driven by an increase in personnel related expenses and the acquisition.
On a scarf.
Operating income in the fourth quarter of 2020 was $58 $9 million, an increase of $44 7 million from $14 2 million in Q4 2019.
Adjusted operating income in the fourth quarter of 2020 was $71 million, an increase of $44 $4 million or 166, 9% from $26 $6 million in Q4 2019.
Fourth quarter net income was $43 million or <unk> 43 cents per diluted share as compared to net income of $6 million or <unk> <unk> per diluted share in Q4 2019.
Fourth quarter, adjusted net income was $53 million or <unk> 53 per diluted share as compared to adjusted net income of $16 $8 million or 21 cents per diluted share in Q4 of 2019.
Adjusted EBITDA for Q4, 2020 was $72 $5 million, an increase of $44 million or 154, 7% compared to $28 5 million for Q4 2019.
For the full year 2020, we delivered record we delivered record net revenue of $1 $7 billion, an increase of <unk>.
$6 billion, or 55, 2% compared to $1 $1 billion in 2019.
The gamer and greater peripheral segment provided.
$539 4 million of net revenue, an increase of $245 2 million or.
Or <unk> 83, 4% from.
On $294 $1 million in 2019.
The game or inquiry, either peripherals net revenue was 31, 7% of total net revenue an increase of 400 and 490 basis points from.
26, 8% in 2019.
The gaming components and system segment broke the $1 billion Mark and provided.
$1 billion 163 on.
Net revenue during the year, an increase of $360 million.
There were 44, 8% from $803 million in 2019, our memory products contributed $609 $1 million of this revenue.
Gross profit in the full year was $465 $4 million, an increase of $241 one.
$1 million or 107, 5% from $224 $3 million in 2019, primarily driven by the increase in revenue starting late March as well as the positive margin impact from sales of our higher margin Scott products.
And streaming gear and reduced promotional activity.
Gross profit margin increased by 690 basis points to 27, 3% from 24% in 2019.
The gamer and create a peripheral segment gross profit was $189 $7 million, an increase of $108 $4 million from $81 $4 million in 2019.
Primarily driven by increase in revenue from the same periods.
Gross profit margin was 35, 2% compared to 27, 7% in 2019.
The increase in gross margin was driven largely by product mix related to the strong growth in sales of higher margin streaming products, coupled with less promotion activities and the addition of higher margin scoff products.
<unk> contributed 48% of total gross profit in 2020 as compared to 36, 3% in 2019.
The gaming components and system segment gross profit was $275 $7 million, an increase of $132 8 million from $142 9 million in 2019, primarily driven by the increase in revenue in the same.
Periods gross profit margin was 23, 7% compared to 17, 8% in 2019 due to product mix and less promotional activities.
Gaming components and systems contributed 59, 2% of the total gross profit in 2020 as compared to 63, 7% in 2019 on.
Our memory products margin in this segment was 25% for the year.
2020, SG&A expenses were $257 million, an increase of $94 million or 57, 6% compared to $163 million in 2019, primarily driven by SGA SG&A expense from scarf an increase in outbound.
Freight costs due to due to the increase in revenue and increased due to expenses related to being a public company and an increase in personnel related expenses.
For the year product development expenses were $51 million, an increase of $12 5 million or 33, 3% compared to $37 $5 million in 2019, highlighting our continued investment in new products and opportunities. The increase was primarily driven.
And by an increase in personnel related expenses and by the acquisition of scarf.
Operating income for 2020 was $158 $4 million, an increase of $134 $7 million from $23 7 million in 2019.
Adjusted operating income for 2020 was $204 $8 million, an increase of 131, $139 $1 million or 211, 4% from $65 $8 million in 2019.
Net income for 2020 was $103 $2 million or $1 14 per diluted share as compared to net loss of $8 4 million or loss of <unk> 11 per share in 2019.
Adjusted net income for 2020 was $145 million or $1 60 per diluted share as compared to adjusted net income of $27 $5 million or <unk> 35 per cent per diluted share in 2019.
Adjusted EBITDA for 2020 was $213 million, an increase of 141 $4 million or 197, 5% compared to $71 6 million for 2019.
As mentioned in our press release earlier this month, our scoffed and Iron Berg subsidiaries received a favorable unanimous verdict in their patent infringement case against South court. The jury awarded us subsidiaries over $4 million and unanimously found willful infringement. It should be noted at this point that there is.
No final judgment and valve court could appeal of the verdict.
Turning now to our balance sheet.
As of December 31, 2020, we had cash and restricted cash of $133 $6 million.
$48 1 million capacity under our revolving credit facility and total long term debt of 321 $4 million with a face value of $326 $9 million.
As of December 31, 2020, consolidated total net debt excluding restricted cash was 197 $4 million last 12 months consolidated adjusted EBITDA was $213 million, indicating a consolidated total net leverage ratio of point.
Nine times.
During 2020, we made debt repayments totaling $190 million paying off our $50 million second lien in its entirety and $140 million of the first lien.
Annualized cash interest savings from these repayments are approximately 11 $4 million, we plan to continue to reduce our debt load over time, while preserving cash for growth as well.
For some additional modeling details under our outlook.
We expect gross margins to slightly improve year over year and operating expense to increase as well to support our higher revenue level. They need to continue to innovate at a larger scale and a full year of public company costs.
We expect interest expense of approximately $5 million per quarter, assuming we did not pay down any debt.
At present, we expect to pay down $100 million of debt in 2021 subject to business conditions and any need for additional growth capital.
The recent $4 million patent trial win is not in our outlook. This amount could vary on what the judge rules is subject to appeal and the timing of recognition of a gain if any is uncertain at this time.
In effect this tax rate of approximately 21% to 23% in 2021 and a full year weighted average diluted shares outstanding of approximately 100 to 102 million shares.
Overall, we're pleased with the progress we've made on our strategic initiatives and performance of the business.
Coursera has long relied on and communicated with the PC gaming and streaming enthusiasts community in designing and marketing of our products is not a surprise to us that there's a fair amount of enthusiasm and potentially investing in us from this community and from other individual investors.
We encourage any investor and we value all of our shareholders.
To read our SEC filings and to visit our website at IR Dot Corsair Dot com, we do receive a lot of questions from individual investors and we both try and answer some of them and we update our F. Q section of the IR website. When we see the same question coming from multiple people.
We try and make our investor relations events available to the general public by streaming just as were doing for this call.
With that we're now happy to open the call for questions. Operator will you. Please open the line for Q&A.
Yes. Thank you.
He would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is on the question. Kim You May Press Star two if he likes train moving a question from the queue.
All participants using speaker equipment, it may be necessary to pick up your handset before pressing the pause on key our first question is from Marianne Lou with Barclays. Please proceed.
Great. Thanks for taking the questions have one on the fourth quarter results and one on streaming.
So the first line pleasantly surprised to see that most of the revenue in the quarter. It came from PC components, rather than peripherals. This time around.
Any particular drivers you can highlight this upside on PC components, and and how long will you typically describe the timing lab lags on the Gamer, who purchase PC components and then peripherals afterwards.
And then on streaming.
You mentioned, some strong Youtube streaming numbers and Twitch also recently announced that viewers watched over one trillion minutes on twitch streams in $2021 7 million unique traders each line so as streaming becomes more and more ingrained in western culture, how shall we think about the level of long term growth.
Of streaming peripherals and how confident are you to continue to grow share in this segment. Thank you.
Well, there's a lot of questions.
So we can take a line of sight. So I think the first question was youre surprised on the competitive revenue was higher than the peripheral revenue I mean, that's been the case for <unk>.
For some time and we do expect that officials.
We'll go faster than components, but they don't quite have that level yet so the other side of that answer is yes.
Yes, the components.
Revenue for the components segment revenue was high.
Surprising growth during the year when you consider the people that are buying these components typically building.
$2000 gaming Pcs.
And that's been the surprising part of this year, it's not just people rushing out buying a gaming headset, it's people getting pretty committed to gaming.
And building expenses gaming Pcs. So I think that's the that's the first thing.
<unk>.
Now the next part of your question I think it was about streaming.
And how we see the market evolving.
As you said, we've seen very strong numbers out of Youtube has seen strong numbers out of Twitch.
This is clearly a massive wide space in this market in other words, the number of people streaming and number of channels dwarfs that I'm aware of.
Thresholds for the sold whether it would be cameras on microphones and so like gaming peripherals, most most streamers.
Our streaming from their phones or laptops and do not have any specialized gear, yet so plenty of opportunities to them.
To sell.
In terms of our progression in the market, we continue to gain market share with building up our revenues very quickly gaining market share in every region. We are also adding products to our portfolio.
And so far on every product we've launched has been Oh.
It's been a great success, so I'm pretty confident about gaining nutshell very confident on the market will continue to growth.
Alright, Thanks, Andy.
Our next question is from Matt Cabral with Credit Suisse. Please proceed.
Yeah. Thank you I wanted to dig a little bit into the outlook for 2021, I guess you guys are calling for roughly 10% growth at the midpoint I'm wondering first if you could just talk about visibility and confidence behind that forecast at this point in the year and then Andy I think in the prepared remarks, you mentioned the first half will be stronger than the SEC.
Have I wonder if you can just expand on that and talk a little more about the trajectory through the year and if at this point do you think the business can still actually grow relative to last year on the back half of 2021.
Yeah. So.
A number of questions, but it's all around 2021.
Look I think the first thing is.
Nobody knows exactly what's going to happen in the second half of 'twenty one yet so we don't know when people are going to go back.
Back to work when the restaurants and bars will be fully open so that's an unknown.
Juno.
Is that the base for gamers streamers has expanded dramatically.
And we do think that there's a lot of.
Still on a white space a lot of people look for small cell lung threshold, let's say income by more so.
Now having said that.
This first half of the year of expenses for the same as <unk>.
The same is most of last year, we don't see any changes the momentum is very very strong.
People are still.
Spending time at home buying gear.
And yes, we will see we will see how second half.
Plays out so I think we're going to have on one hand on larger base of.
Of people wanting to buy gear on the other hand, we're going to have some people will spend less time on home. So that's why we think the growth will be moderate in the second half.
Look at Q1 last year Q1 'twenty.
Which was of course really pre COVID-19 in terms of consumer spending.
We grew 25% compared to Q1 98, so thats the lost.
Gross point, we have of a non COVID-19 environment. So we think we've got good growth ability.
Regardless of.
Of Covid.
Yes.
Got it and then.
Follow up I'm wondering if you could just give a little bit more detail around your supply chain supply chain. I think you talked about some constraints that you're seeing can you could expand a little more on your facing the biggest shortages and the impact that's having on the business and just if there's any timeline, we should think about for supply and demand they come a little bit more on balance going forward.
Word.
Well I think in general look if you look at the IC level.
That's getting tighter in China.
We've kind of seen this coming a little bit.
With <unk> cloud rollout, but we certainly didn't expect devising consumer electronics from the last 12 months. So.
On the conduct of lead times in many cases have.
Got out from.
10 weeks to 20 weeks in some cases to 40 or 50 weeks.
Now what that means is that you have to pre plan.
What are you going to do so.
I mean, clearly we are planning.
To meet our current plans, but it does limit the upside so we see huge surge in the second half of 2021 that could be difficult to execute on.
But yes in.
In general the situation, we're still up.
I wouldn't say it was sold out we were generally sold out for most of last year we.
We did start to restock shelves in Q4.
So we started to catch up.
But.
This year.
We expect the first half to beat to be very strong so.
So at the moment, we're sitting pretty balanced about supply, but we do recognize that.
What we've what we've planned and placed orders for us.
Largely in many of the high end products, you know, what we're going to we're going to produce and sell.
Yes.
Thank you.
Our next question is from Rod Hall with Goldman Sachs. Please proceed.
Yeah. Good morning, guys. Thanks for the question I wanted to come back to the supply question, but more related to peripherals. The peripheral segment was below what we expected and I think.
It looks to me like probably supply constraint was the main driver there, but I'm just curious how much supply how much you think it affected the peripherals.
Business in the fourth quarter and then also curious how that rolls into Q1, Andy You said you were restocking in Q4 do you catch up on some of that demand in Q1 or.
What's the flow of supply versus demand in Q4 and Q1.
Yes, so I think that the first part of the question.
Is it just a tricky one to answer because everyone on the supply constraint. So.
But theres no question that the market grew in gaming peripherals faster than our growth.
So most of the year you will notice that Q4.
We actually gross 100%. So that's what we started to catch up with the market.
And the weeks on hand.
And the channel is definitely starting to increase I mean in some parts of last year, we were down to zero to one week. So it's building now out to a few weeks still less than we'd like to see but.
Starting to get on top of that.
So hopefully that gives you some color.
Do you Andy would you just to elaborate on that would you think seasonality into Q1 would be <unk>.
Better than normal because of the flow here.
Well I would say that the we did actually see a fairly big lift in the market in Q4, so seasonality.
Seasonality from the market.
Seems to be about on par seasonality for us I think it will be a little different because we really weren't able to participate heavily in black Friday and the Christmas season. So.
I think youre going to see a slightly different cadence from Q4 to Q1 than perhaps the last couple of years.
Yes.
Okay, and then you made this comment on DTC and <unk>.
Early progress there could you elaborate on that.
What youre doing what youre seeing with DTC, how you would expect that to grow through 'twenty, one a little bit.
Yeah, I mean, we've got.
Two of the last acquisitions as you probably know a 100% direct to consumer with scuff in origin.
<unk> grown our own.
Cole said, George consumer quite substantially more than doubled last year.
From 2019.
And we expect to do substantial growth this year.
We've had to do is put quite a lot of infrastructure in place and.
And so we do now have.
Starting with our CRM system.
We've done a lot of data gathering infrastructure put in place. So we can properly staff keep track of what consumers are buying what they own and how we market to them et cetera. So we're.
We're getting a lot more sophisticated in how we do business directly with consumers.
So I'm feeling pretty good about it at this point, but.
Overall, if you look at all the direct to consumer business. We do it we are getting very close to 10% of our overall revenue.
And as we said before we think we can get up to 15%.
It all day.
Yes.
Great. Okay. Thank you very much.
Yeah.
Our next question is from drew Crum with Stifel. Please proceed.
Okay. Thanks, Hey, guys. Good morning, So Andy you term the pace of new product launches this blistering.
Can you talk about what the cadence looks like for 'twenty, one relative to 2020.
And are there any product segments that we will see more launches or is this more broad based across the portfolio and then from Michael any more detail you can share in terms of the drivers behind your gross margin guidance for 'twenty. One like you suggest it would be up slightly and that's following a pretty big gain last.
Sure. Thanks.
Yes.
Start with the blistering pace.
We are we now have over 25 different product line. So it continues to.
Expand on each one of those has to.
Refresh products.
So some of them.
Older product lines, we've been in for a while we clearly have most price points and.
Skus.
In place so we largely refreshing, bringing new features some of the newer product lines, adding completely new products segment. So streaming with continuing just sort of pushed the boundaries of ing U both hardware and software solutions.
But I expect it to be launching roughly a product a week.
And on 30 May you put out every month next year.
And in terms of the margin question year over year, we do expect margins to improve year over year.
It's going to be sort of a tale of two halves. During the year first half of the year. There was more supply constraints and freight costs are higher but we expect that promotional activities will remain relatively low and we sort of have a scenario where things were.
On a little bit more than normal in the back half of the year.
Are going to see a little bit more promotional activity, but freight expenses should come down. So between that we think that we will be able to improve even with constrained business environment in the first half to bring margins up year over year. We'll also get some benefit because we do expect peripherals, obviously to keep growing faster than.
Then our components and systems business and those enjoy higher margins.
Got it okay. Thanks, guys.
Okay.
Our next question is from Tim Nolan with Macquarie. Please proceed.
Alright, thanks, very much you've been talking for a little while now about.
Just kind of a rising tide of more gamers entering to the system, especially now during Covid I wonder if it's possible to break down in some way how much of your growth in 2020 was that.
Compared with maybe what might have come from this this console cycle launch on the rise of more of these cloud gaming services.
On past being platform agnostic, how much of that might have actually boosted your growth just anything in addition to COVID-19 within the growth last year that may have come from up from that.
Yeah.
Good question total cloud gaming I think insignificant at this point.
Cultural gaming.
The main part of our revenues.
Sure.
Is it revolves around the cultural gaming as a sculptor subsidiary.
And that's still.
Relatively small company compared to Huawei from our revenue so.
And moving in the middle of a console transition there so are we.
We didn't expect huge growth.
2020.
Also in 'twenty, one is lower than your platforms get out there, but so I'd say that.
Pretty much 95% of our growth last year came from traditional PC gaming.
Okay, Thanks, and actually Relatedly into 'twenty one.
Thank you your acquisition revenue now is getting fairly small after you've come through some recent deals just could you give us a break down maybe on some <unk>.
What does the acquisition revenue growth and also if there isn't a foreign exchange component within the growth guidance.
Yes, so in terms of the growth year over year, we don't have any acquisitions.
And that growth number thats our existing business.
As an indication for 2020 for the total growth. It's just over 5% came from acquisitions, mainly driven by Scott. So most of the growth came from our already on products.
Obviously any acquisitions that are not announced that we're working on and may or may not happen. We don't include in our numbers for our growth year over year.
Okay, and then foreign currency impacts baked into the number as well.
There is a little bit of foreign currency impact based on the U S dollar spend a little bit weaker so talk about margin improvement that makes it a little harder to because of our supply base in Asia and more heavily in China. So there's a little bit of margin impact baked into that our assumptions.
But not nothing dramatic, but nothing that we felt we needed to call out to talk about.
Okay. Thanks.
Yes.
Yeah.
Our next question is from Colin Sebastian with Robert W. Baird. Please proceed.
Alright. Thanks. Good morning, everyone. One question on Q4, just looking at the quarter over quarter decline in the peripheral segment gross margin I was just wondering.
Product mix is the primary driver of that or if there are other factors and then secondly, I'm wondering Andy if you could provide maybe a little bit more context on what's embedded in terms of pricing and promotional environment for this year, particularly as you look out into the second half realizing that there is.
A lot of questions about what the overall market looks like when thank you.
So.
The first part of the question.
There was a margin progression I think youre talking about the size of the gross margins from about 1% down.
Gaming creators gaming.
Gaming credit segment, I mean, that's down to two factors really one is the.
Signs of freight costs inbound freight.
Does it go up significantly.
We had to expedite.
This is the short supply.
On the second thing is I think the.
The.
So you can imagine that in most shortage on the.
Uh huh.
Hi, Asps full featured products with high semiconductor content.
So that.
Naturally is going to have a slight adverse effects.
But overall it looks like it was about a 1% change.
Yeah.
And six 6% growth over the year, so we want to disappointed with that.
Thanks, and just in terms of the pricing and promotional environment for the second half whats embedded in your expectations, Yes, So do we.
Like we said we didn't.
It's tough to plan on the second half a day.
This point, but assuming the world goes back to normal when we did was slightly more promotional activity that would also almost imply is that the.
<unk>.
Freight costs come down significantly that's very elevated at the moment with the amount of consumer electronics coming to the country.
And so roughly what we what we expect is the increase in promotional were roughly cancel out be canceled out by the decrease in freight costs.
So I expect it to be somewhat neutral.
Thank you.
Yeah.
Our next question is from Doug <unk> with Cowen and company. Please proceed.
Hi, Thanks, just wondering if there's some more.
Market continues to evolve very rapidly are there are there any areas of your business, where you feel like.
M&A would make sense. Thanks.
Well.
That's a that's an interesting question because we've got a lot of targets in terms of product categories, which we don't really want to reveal it yet.
And you have to find the right partners to show up so we're constantly looking at evaluating.
I would say.
As I look across all the companies, we're talking to and that's quite a few.
Most of them are evolving around software and services.
It was gaming on streaming.
So with we're not really planning to do a lot of major consolidation I mean, we're not looking around by the next.
So the biggest power supply companies on a case companies or anything like that it's more about expanding.
And having some more.
Simple Richard Richard offerings for consumers.
So we're looking at.
Yeah.
Okay. That's helpful. Thanks.
Our next question is from Kevin Robinson with D. A Davidson. Please proceed.
Thanks, so much and congrats on a great quarter on la.
Last quarter, you talked about the notion that based on your conversations with retailers, you're confident that you're driving sales to new customers on gaming firsthand like repeat a refresh purchases do you think that was the case once again in the fourth quarter and if so what is it across all of your categories or specific to one or two areas. Thank you.
Yeah, that's a good question.
Our sense is that.
It was much the same but I think the the thing that surprised us mostly was.
How many people stepped.
Stepped up to stop building gaming Pcs now.
That historically has been.
On a huge growth industry, five or 10% a year.
And so we were very surprised to see the amount of growth.
It was happening, especially in the second half, but we sold many months where.
When we look at the the MPD market in the U S. For example, we see <unk>.
60% to 80% growth.
Month compared to the amongst of the previous year. So that was the most surprising thing the amount of people who are stepping up.
To bills too.
$2000 of computers, which is typically what people are building low components.
So that indicates a fairly heavy commitment to gaming or streaming.
I think that was the most.
Surprising thing I mean, we knew people, we're going to stop buying a lot of headsets and peripherals.
This happens on the surge in gaming.
But yes, the system components with the surprising thing for us.
So very strong activity in streaming.
So streaming of course, you've got two things going on one is the number of people.
Streaming content is exploding.
People streaming gaming is exploding on people streaming non gaming is also exploding.
I think we mentioned.
The numbers streaming channels that Youtube now has which is 40 million gaming channels.
It's just astounding.
So I think those are some of the things that are.
We saw through the year.
Thanks, so much for taking my question.
We have reached the end of our question and answer session I would like to turn the conference back over to Andy <unk> for closing remarks.
Well thank you.
So in summary, corsair as the forefront of a massively growing market centered around gaming esports streaming.
With our unparalleled brand and quality of products. We think we are uniquely positioned to take advantage of this exploding market.
Today, the global and passionate community of gamers streamers is engaged in the relentless pursuit of better performance.
We are proud to be a leading provider of an innovative high performance give for this new era of entertainment.
We are committed to give gaming stream has the tools they need to play their best game produce the best content and have fun doing it.
Thank you for your interest in Corsair, and thank you for joining us on the call today.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Okay.