Q1 2021 Turtle Beach Corp Earnings Call
Today's conference is scheduled to begin momentarily. Please continue to standby. Thank you for your patience.
[music].
Good afternoon, ladies and gentlemen, and welcome to the Turtle Beach first quarter of 2021 conference call.
Delivering today's prepared remarks are chairman and Chief Executive Officer, Juergen, Stark and Chief Financial Officer, John Hanson.
Following their prepared remarks of the management team will open up the call for any questions.
Before we go further I would like to turn the call over to Sean Mcgowan of Gateway Investor Relations Turtle Beach of IR adviser as he reads. The Companys Safe Harbor that provides important cautions regarding forward looking statements. Sean. Please go ahead.
Thank you Liz on today's call, we will be referring to the press release filed this afternoon. The details of the company's first quarter 2021 results, which can be downloaded from the Investor Relations page at Corp.
For the Turtle Beach Dot Com, where you'll also find the latest earnings presentation that supplements. The information discussed on today's call. Finally, the recording of the call will be available on the investors section of the company's website later today.
Please be aware that some of the comments made during this call may include forward looking statements within the meaning of the federal Securities laws statements about the company's beliefs and expectations containing words, such as May will could believe expect anticipate and similar expressions constitute forward looking statements. These statements involve risks and then.
Certainties regarding the company's operations and future results of that could cause turtle beach as results to differ materially from management's current expectations. While the company believes that its expectations are based on reasonable assumptions numerous factors may affect actual results and may cause results to differ materially. The company encourages you to review the safe Harbor.
Statements and risk factors contained in today's press release and in its filings with the Securities and Exchange Commission, including without limitation. Its annual report on form 10-K, and other periodic reports, which identify specific risk factors that also may cause actual results or events to differ materially from those described in our forward looking statements.
The company does not undertake to publicly update or revise any forward looking statements. After this conference call the <unk>.
Company also notes that on this call it will be discussing non-GAAP financial information. The company is providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States or GAAP.
You can find the reconciliation of these metrics to the company's reported GAAP results in the reconciliation tables provided in today's earnings release and presentation.
And now I'll turn the call over to Juergen Stark, the company's chairman and Chief Executive Officer Jurgen.
Good afternoon, and thank you for joining US we're very pleased to report 2021 got off to a great start with another strong quarter Q1 revenues were up 166% year over year exceeding expectations as both the market and our products continue to perform very well. Furthermore.
We delivered adjusted EBITDA of over $15 million in the quarter and operating cash flow of over 21 million, both of which set records for the first quarter.
As we've often said gaming is of great category in which to be a leader. The past years have now shown two surges that dramatically expanded the base of gamers gaming headset users and gaming accessory buyers both in console and PC.
The first surge in 2018 was driven by for ignite and the second in 2020 was driven by stay at home orders in both searches we outperformed the market and demonstrated excellent execution that leverage those surges to significantly move our business forward those.
Those dynamics continued in Q1 2021 with us outperforming the market and leveraging our execution to generate excellent financial results and two significantly progressed our business strategy.
With so many new and lapsed gamers being drawn into the market and existing gamers spending even more time gaming we continue to see the overall market for gaming accessories growth new console launches of typically been followed by an uptick in sales of the council of accessories and this is happening again with sell through.
After the fall 2020 launches of Xbox series X and S and Playstation five.
In the first quarter. According to NPD retail sales of console gaming headsets in the U S were up just over 60% in dollars compared to the first quarter 2020.
Because of stay at home mandates last year didn't really kick in until the very end of the quarter. This year over year increase was not up against the strong increase in consumer demand that occurred when everyone was staying at home.
But still reflects strong growth, including over 2019.
First quarter year to date seven of the top 10, and 12 of the top 20, best selling counsel headset models in the U S.
We're turtle Beach models, our new Gen to sell 600 700 wireless models continue to take the market by storm holding for of the top five selling products spot in the U S per NPD what of.
Great proof point of our ability to launch market winning product year after year.
In fact, nearly 50% of our revenues in Q1 came from products, we launched last year.
The PC accessory market for headsets keyboards, and mice also grew substantially up over 90% in U S retail sales per NPD.
And we weigh more than doubled the market growth our progress in expanding our award winning rocket portfolio of PC accessories, and gaining share in that $3 $5 billion market is going well and there are more very exciting products coming.
On Monday, we announced two incredible new PC gaming keyboards first is the magma which has a fully illuminated top plate showcasing rockets innovative iron.
Mo RGB lighting technology for a great price of $59 99.
There are also our new payroll keyboard, which takes inspiration from Rockets award winning Vulcan line and is one of the most feature packed mechanical gaming keyboards available for under $100. We also continued expanding rockets line of Balkan keyboards, with our recent launch of of <unk>.
<unk> version of the Vulcan Pro optical keyboard.
In April another really big announcement for rocket wasn't the new cone Pro series PC gaming mice.
Rockets first cone Myles.
Whilst at the.
The beauty in 2007 early in the rockets life as a company and since then it has undergone well over a decade's worth of research in the hand sizes grip types and button clicks.
The cone pro series combines rockets iconic mouse design with the latest technologies like the ridiculously fast tightened the optical switch tightened wheel pro and more.
Beyond all of the amazing New PC products. We've also secured partnerships for our rocket brand with several leading streamers and E sports organizations, including noted variety of streamer Brennan.
Gold Glove O'neill, leading Korean E Sports organization Gen G and riot Games League Championship series, North America's largest E Sports League and the third most popular professional sports League among young adults in the U S.
As you can probably tell I'm excited both the.
The products, we've launched but also about the products, we still have coming this year.
As John will detail in a minute the balance sheet continues to get stronger we ended Q1 with $63 million in cash and no debt the solid cash position and strong outlook for cash generation led us to extend and expand our share buyback program at the beginning of last month of proving up to 25.
And buybacks over the next two years.
More importantly, the rock solid balance sheet allows us to make strategic and tactical moves focused on generating future growth.
After John reviews, the numbers I will come back and talk more about our longer term growth plans as well as the details of our increased outlook for 2021 with that I'll turn the call over to John to review our financial performance John.
Hey, Thanks, Juergen and good afternoon to everyone as Youre going to as noted we continue to see very strong sales momentum margin expansion and operating cost leverage during the first quarter of 2021 driving better than expected results across all of our financial metrics.
Net revenue for the first quarter of 2021 was $93 1 million up 166% compared to $35 million in the year ago quarter. This compares to the guidance of $88 million, which we issued in early March.
Revenue growth in the first quarter was the result of several factors working together to increase demand as well as our expanded product offering in the PC accessories category. It is relevant to the year over year comparisons that last year of the console market in Q1 was soft as expected ahead of the new console launches.
This reversed with stay at home orders at the end of March.
Gross margin on the first quarter was 37, 5% of sales at 670 basis points higher than the 38% we reported in the first quarter of 2020.
This increase was driven by two primary factors continued lower than expected promotional spending and volume driven fixed cost leverage.
Operating expenses in the first quarter of 2021 were $22 6 million compared to $15 8 million in the same quarter of 2020.
The increase was driven by volume related selling cost aligning our cost structure to a business that has grown dramatically as well as investments to expand our PC accessories business and drive future growth.
Opex as a percentage of revenues decreased significantly, indicating strong operating leverage.
As a result of the revenue growth gross margin increase and operating expense leverage adjusted EBITDA in the first quarter of 2021 was $15 $3 million.
An $18 million improvement over the year ago quarter, when adjusted EBITDA was a negative $2 7 million.
GAAP net income in the first quarter of 2021 was $8 8 million compared to a net loss of $3 6 million in the year ago quarter, reflecting the trends of just discussed.
GAAP net income per share in the first quarter of 2021 was <unk> 49 on $18 1 million weighted average diluted shares outstanding compared to a net loss per share of 25, <unk> on a $14 5 million weighted average diluted shares outstanding in the year ago quarter.
The increase in the diluted share count is primarily the result of the fact that in quarter showing the net loss the basic and diluted share counts do not include options and other common share equivalents.
Adjusted net income for the first quarter of 2021 was $9 4 million or <unk> 52 per diluted share compared to an adjusted net loss of $3 4 million or 23 per diluted share in the 2020 period.
Cash flow from operations was $21 1 billion in the first quarter of 2021, that's up 20% from $17 5 million in the first quarter of 2020.
Our effective tax rate for the first quarter was 23, 8% compared to 33, 9% of year ago. This was somewhat lower than the 28% rate. We had expected for 2021, but we do expect for the full year tax rate to be around 27%.
Now turning to the balance sheet as of March 31, 2021, we had $63 million of cash and cash equivalents with zero debt, including no borrowings on our revolving credit line, that's a $54 $5 million net improvement from the end of March 2020.
Inventories at March 31, 2021 were $59 1 million compared to $39 3 million as of March 31, 2020, and $71 3 million as of December 31 of 2020. The increase in inventory was driven by expected continued strong demand in early two.
2021, a higher revenue run rate for the business and the anticipated launches of new products in the coming months and quarters.
So now I'll turn the call back over to Juergen for some additional comments juergen.
Thanks, John I'll.
I'll finish with some comments on what we see for the market an update on our expected results for 2021.
To quickly recap our strategy over the last two years, we have expanded into new categories significantly increasing our addressable market and we will continue to add new categories over time, the global gaming market has a 94 billion dollar addressable market in hardware of $188 billion in software.
And $3 billion in services and all of those segments are expected to grow at mid to high single digit rates were more over the next several years. We currently compete only in the hardware market I'd say only even though the gaming hardware market is nearly $100 billion in size.
Within within this market backdrop, we see tremendous opportunities to one continue our leadership and counsel headsets and participate in what we expect will be continued strong demand. Following the new council launches to continue our rapid expansion into the $3 5 billion dollar PC accessories market.
With our expanding portfolio of rocket products three expand into the $2 $3 billion market from microphones with the first products coming from meat soon and for continuing to launch into new categories. When we the.
That enormous growing $100 billion market.
And while all of that is focused on hardware software and services are of high interest to us over time as well and there are certainly categories within those markets, which would be highly complementary to our gaming hardware business.
As I've said before we're not just looking to enter new categories. Our long term goal very simply is to lead each category in which we compete.
I realize this is ambitious but we've led in the council of gaming headset market for more than the decade by delivering high quality products with innovations that create a better experience or even a competitive advantage for all levels of gamers that as a core part of our formula for building the strong Turtle Beach brand and Gamer.
Fan base.
We're applying that same formula in our rocket PC headsets keyboards, and mice with the goal of the lead those categories over time.
Our newly acquired microphones team has exactly the same mindset with the are coming portfolio frankly, they are very determined to again redefine the microphone market like they did years ago with blue microphones.
When combined with our exceptionally strong retail relationships and great execution. We believe we can lead in every category, we pursue overtime and Thats our goal.
We intend to continue to make organic investments to expand into new product categories. In spring last year, recognizing that we were headed for a strong year financially, we proactively invested into that strength and began working on multiple new products in adjacent gaming accessory categories, which will launch this year.
Those adjacent category investments as well as continued growth in PC accessories are meaningful contributors to our results. This year and we accept expect them to continue to grow significantly in the coming years.
We also intend to grow through acquisitions, we're very selective and make the decision to acquire only when a stringent set of financial and strategic criteria are met including high quality products, a strong team with the culture and mindset that matches ours and underlying deal economics of that can generate a superior.
Return within a reasonable period.
We are also highly confident that our performance culture strong execution and rigorous operational processes can add value to any company, we acquire like we have with rocket.
From a financial standpoint, this boils down to a simple set of long term goals number one maintain the goal of 10% to 20% top line growth over time number two deliver category, leading EBITDA margins, while making investments to drive that growth number three utilize our strong balance sheet to enable the above.
Including organic investments and selective acquisitions of companies that meet our criteria.
Let's turn now to our increased outlook for 2021 and beyond our view of how the gaming accessory market will play out in 2021 is consistent with what we share two months ago. When we first laid out our 2021 outlook we.
We believe the incredible market surge in 2020 led to another step function increase in the total base of gamers just as it did in 2018 with the fortnite surge and as a result significantly increase the size of the market Q.
Q1 U S counsel headset retail sales being up over 50% from Q1 2019 is a good indicator of this.
Of course, it's going to create some tough comps, particularly in the second and third quarters, where stay at home surge was focused but as you can see from the first quarter market stats I covered the gaming market continues to be very robust in all segments and in our case, we expect revenue growth on top of the underlying markets.
Given our progress in growing share in the PC accessories market, our entry into the microphone market and our entry into two new gaming categories over the coming months.
With that context, we are raising our revenue outlook to approximately $385 million. This year up from our prior guidance of $370 million and up 7% from the record $360 million in revenue we delivered last year.
We raised our target for adjusted EBITDA margin to 13% of revenue up from our prior target of 12%, which would bring our EBITDA in 2021 to roughly $50 million up from our prior guidance of approximately $45 million, we believe of 13% EBIT margin compares quite favorably.
To others in our category despite are somewhat smaller sites.
The approximately $50 million in expected EBITDA reflect several important dynamics. We expect this year. So let me quickly review those first gross margins starting in Q2 of 2020, we're benefited by significantly lower than normal promotional levels given constrained supply of for several quarters.
The benefit from that unusual lower promotional spending was the large and flow directly to gross margin and EBITDA our guidance anticipates promotional levels of that returned to more normal levels for this year starting in the second quarter.
Second gross margins last year were negatively impacted by a higher than normal airfreight to expedite supply and capture the surge in market demand the air freight spend at around $9 million was much higher than the normal few million dollar level. We typically have we expect air freight this year to be much lower.
And last year, although it could be a bit higher than our normal annual spend due to supply and logistics constraints.
Note that our revised guidance has factored in our current view of semi conductor supply associated expediting costs and increased shipping time frames and costs. Nevertheless, the situation on components and logistics, both of which had been and continue to be constrained is very dynamic and could change.
For the better or for the worse over the course of the year.
Third in addition to staff and infrastructure to support the business that's expected to be 60% higher than it was in 2019, we will continue to invest in sales and marketing to support the targeted growth this year as well as set us up for continued growth in 2022 and beyond.
As a result of the higher revenue and adjusted EBIT. The expectations. We now expect adjusted net income per diluted share to be approximately of $1 50 for 2021 up from our prior guidance of $1 35, using an average share count of roughly $18 million and a tax rate of approximately 27%.
As a reminder, about expected revenue phasing this year in our expectations for Q2, as we pointed out.
Last year revenue phasing in 2020 was different from past years Q1 started soft as expected ahead of the New Council launches stay at home orders caused an enormous spike in Q2, and the replenishment of channel inventory as well as continued strong sell through caused an even bigger increase in Q3.
Sales in Q4 things started to normalize but strong sell through continued with the launch of the new counsels.
We expect 2021 to have similarly, atypical quarterly revenue phasing. This means quarterly year over year comps in essence trying to compare on unusual year with another unusual year won't be a good indicator of the underlying markets or our financial progress. So we'd continue to incur.
<unk> investors to remain focused on annual results.
That said, we expect our revenue in Q2 of this year to be approximately $70 million, we're expecting seven second quarter adjusted EBITDA to be approximately $2 million.
That Q2, EBIT the expectation reflects alignment of staff and infrastructure to support our now much larger business as well as the fact that many of our new product announcements supported by the corresponding marketing campaigns are actually coming in Q2. So we will have more of our full year marketing spending in Q2 than normal.
For the.
The quarter of 2021, we expect adjusted net loss per share to be approximately seven.
We are very pleased with our strong start for 2021 and the opportunity to further increase our expectations for the year.
We continue to put ourselves in a position to achieve our long term goals of 10% to 20% growth, while delivering category, leading EBITDA margins and strong cash flow and we have again demonstrated an ability to execute extremely well across our entire business. Our balance sheet has never been stronger and we continue to be laser focused.
<unk> on progressing our business forward to continue increasing shareholder value.
Let me reiterate in closing my appreciation for the global Turtle Beach team members. It may seem like delivering the stellar results has become routine, but it doesn't happen without the incredible performance and dedication of every person at the company. Our people are what makes turtle beach succeed.
Very proud to be of part of this great team with you.
Operator, we're now ready to take questions.
Thank you Sir.
If you'd like to ask a question at this time, please press the star and the number one key on your Touchtone telephone.
All of your question press the pound key.
Again that is star then one to ask a question at this time.
And our first question will come from Thomas Forte D. A Davidson. Please proceed.
Great So youre going to John Congrats on the excellent quarter. So one question and one follow up so the question I had the Milligan.
On a.
Doubt your projections because.
It's one of your core competencies, but if 2021 on the.
Full year basis, as the year of call it elevated demand for gaming accessories.
Is there a possibility that promotional activity may not return to for example, the 2019 level so on that basis there could be.
<unk> gross margin and EBITDA than you're currently thinking about so that's my first question then I'll come back for my follow up.
Thanks, very much Tom.
That's a great question.
We are as I mentioned, our guidance is projecting promotional levels to return to normal in Q2, and we're already seeing some signs of that so we think thats the right way to do our projections.
Of course, it's possible that it may not go fully back to normal.
And I would just from market that would be more driven by supply constraints than strong market demand. It's a common misperception that strong market growth of demand drives.
Drives a reduction in promotions when it's really the supply side debt.
Drives the reduction of very simple example, if you can't get enough supply of your products to meet demand you are not going to spend extra money to put them on sale or to or to get additional placements at the front of retail stores things that go beyond discounting price that are very typical part of it.
Of the normal promotional model for consumer electronics.
Excellent Alright, and then for my follow up question I wanted to ask you as a long time industry participant on what your view was on the epic games versus Apple situation.
Well, we're obviously following that closely Tom and I respect ethics desire to challenge the model.
But we'll let those guys fight it out and see what happens.
Great. Thanks for taking my questions. Thanks, Tom.
As a reminder, if you'd like to ask a question at this time that's star then one.
Our next question comes from Mark Argento with Lake Street.
Hey, guys. Congrats on the strong quarter, just Rob just wanted to kind.
Peel, the onion of a little bit on your expectations for the second half in terms of the phasing as you call. It.
Is that the Jonathan.
The 2019 is kind of what we saw for the quarter any quarter out basis.
What we should.
The key off of in terms of.
Percentage of business from the various quarters of non just wanted to talk about.
Much of how much of your marketing spend are you going to pull forward into Q2.
Sure Mark happy to answer those questions. So based on Q1, actuals and Q2 guidance.
And the full year results that would put about 42% of revenues in the first half so leaving 58% in the second half and we would roughly break that Q3 and Q4.
With 2021% of the annual revenues in Q3.
We will guide the second half in the August as we always do and it's important to keep in mind debt revenue can easily flow between those two quarters just based on days of differences of order timing, but that's roughly how we think about the phasing.
Okay.
Helpful and then in terms of the marketing spend.
And so on but youre going to launch of new programs and I was on the substantial pull for destroying a bit more of a.
So a modeling question, but on it.
Yes, sure I mentioned actually it is.
Is going to be a an exciting couple of months coming up here. We've got a lot of launches PC launches tend to be more <unk>.
Spring and early summer focused versus council, which is later in the year. So given all of the products, we're launching and PC youre going to see a lot of activity in Q2, and the associated marketing spend to support them. So that that moves I would say about $5 million more marketing into Q2 than normal.
And it really is just the different phasing of the spend during the year just as an example of that would put it on.
Almost 30% of the marketing spend for the year in total into Q2 versus just under 20% last year.
For sure.
For hopeful that when Youre looking for.
At the.
The.
The growth of the PC business.
What are the in terms of the marketing spend are you guys.
At retail kind of marketing spend get shelf placement is that true.
First of all brand advertisers.
Just talk about the go to market on PC would be helpful.
Yes sure Joe.
The marketing spend covers the gamut.
It's promotions with retailers.
It is brand building, it's social web and digital marketing. It's also some of the partnerships that we signed up.
The quarterly debt covers a bunch of those and I, just mentioned them, but all of that counts into the marketing spend and the time to spend that money is upfront. When you are launching the product I equated with the team here to launching of rocket you got to have enough fuel to get it into orbit and thats exactly how were planning.
<unk> our launches.
Great. Thanks, guys. Thanks.
Thanks, Mark Thanks, Mark.
Our next question comes from Martin Yang with Oppenheimer.
Martin you might be muted if youre trying to ask the question.
Oh, sorry, I was indeed muted.
Thanks for taking my questions or getting them Jon. So recently there has been some reports of activist involvement in the company.
Can you maybe give us an update for you on how you think about the value of Turtle Beach.
Given the exciting growth opportunities ahead of the would you seriously consider such recommendation and what kind of valuation would you engage in a more meaningful conversation with the buyer.
Sure so.
I have a very clear view on this the <unk>.
<unk> me included.
It's focused on increasing shareholder value period.
The value could come from us continuing to execute on on our strategy, which is working quite well as evidenced by the over 1000% return we generated in the past three years or alternatively from a transaction that would yield more value to shareholders and we would always thoroughly and objectively evaluate any potential true.
<unk> without frankly, needing anyone claiming to be pushing us or pushing us to do so it's a normal part of our fiduciary responsibilities as the board it that we take very seriously.
Alright, Thanks again.
No.
Thank you for answering.
You mentioned that the during the <unk> there were some investment associated with rocket the new products.
Would you consider the one time investments in the new product categories.
Our day for instance, if you were to make similar acquisitions for entry into new products, where those cost items recur.
Like the.
What you have in the <unk>.
Well two comments one the biggest driver of the Opex increase is frankly, the staff and infrastructure to support the business, that's tracking could be more than 60% larger than it was in 2019 right. When we hit Q2 of last year as an organization you just can't.
Respond quickly enough and you end up under staff under resource under infrastructure to support the business. So that's the biggest driver of the Opex increase for Q1 and going forward of course alongside that.
We have marketing campaigns that support any product launches, whether it's the new categories for.
In our core counsel market category and the timing of those launches when you launch a product you spend some marketing alongside the launch.
On all forms as I, just mentioned to support those launches so what's a little bit different. This year is the we have more of the launches coming earlier in the year.
And so that's just shifting some of the marketing spend around a bit.
Thank you the makes sense one more question. If I may can you talk can you maybe give us more details zone.
How much rockier than other products have grown year over year in the first quarter.
Yes, we're going on that kind of provide a lot of detail, but the market and we are using as always NPD U S data, where we have the most detailed but I'll tell you that other other large countries track. Similarly, so U S. NPD the PC gaming categories of headsets mice and keyboards grew.
Over 90% and we way outgrew that so we said more than doubled that growth rate, but the real number is actually far higher than that which for competitive reasons. We don't we don't want to state. So that to US is very good demonstration of continued significant progress.
In our PC growth strategy.
Thank you.
But really impressive quarter I'll get back into the queue.
Thanks Martin.
<unk>.
And the reminder, that is star then one if you'd like to ask the question at this time.
Our next question comes from Jack Vander Ark with Maxim Group.
Great.
Congrats on the solid results guys.
John Thank you for taking my questions.
They're going to just kind of of one question from me just as I look at clearly you have continued to execute beat and raise the outperformed expectations. All throughout 2021 and last year, but I was wondering I want to focus the question on more of the long term target range.
Just to understand the consistency of you expect with all of these new.
The market opportunity as you're expanding into I really think that diversifies the business a bit more.
So that CAGR range of 10% to 20%, just where you see things today and given the unusual elevated margin environment in 2020.
Just curious how to interpret that growth CAGR range when looking at say 22, and 2023 is how much of this is a long term <unk>.
The average formula or how much of this is like a literal.
Consistent range, you think is achievable.
Yes, great Great question Jack.
First of all of our ability to leverage.
The diversification of the expansion into PC of new product categories to deliver growth.
After a record 2020 is already the first good testament to the strategy of of.
Growing and expanding the Tam working because I think that wouldn't have been expected.
Growing 2022 and onwards in my view will actually be easier because we're not going to be comping against the year that certainly had significant kind of first time buyer effect like.
Like 2020 did.
So for us 10% to 20%, it's absolutely the long term goal the actual growth we would expect to move around.
Within those ranges, but.
We are targeting and as a management team we have.
The incentives.
Your line to outgrowing the market and we would look to deliver 10 plus percent growth.
As on average over time.
Got it understood and.
Maybe just a follow up to with all of these other businesses that you have.
You've acquired and Youre grooming and scaling up.
How do you see just just all of these business I guess, the three markets and maybe the force kind of Tam expansion opportunity how do you see that maybe from the mix perspective.
There are various sized markets here, they're all very large but.
Five years down the road is this something where you see of really true well balanced portfolio.
The portfolio from a revenue mix perspective.
Absolutely so.
For this year will likely be more than 10% revenue outside of the core console market and the core cultural business for US is obviously huge given the debt we have nearly half of the market and it's from one one of the largest actually the largest accessory category of gaming keyboards and mice.
So and don't look at it as different businesses. These are these are product range is that for the most part leverage very common infrastructure of common marketing common supply chain common retail distribution on all of that so so the ability for us to add to the port.
Folio and Youll see a few more good examples of this year without significantly complicating our business is very high and.
And so.
That's how we look at it and and how we will continue to progress of the business going forward.
Excellent that's very helpful. That's it for me and congrats again.
Thanks, Thanks Jack.
As a reminder, if you'd like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone.
Again that of Star then one to ask a question at this time.
Yeah.
We have a question from the line of Mike <unk> with Oppenheimer.
How youre going to have a follow up question on your PC accessories, especially relating to the new product announcements coming for rocky in the second quarter.
Not sure I think of the PC accessories also benefits from the sitting on home trend in the second quarter of 2020, so with new product of announcements this quarter, how should we think about the year over year cadence our growth.
No.
Al.
We have the stay on the whole trend offsetting some of the organic growth, but maybe new product will.
The a bigger positive tailwind for the second quarter any comment would be helpful.
Sure. So we guided the 70 million of net revenue for Q2, that's a bit below last year's Q2 numbers keeping in mind debt the market. Our sales grew more than 93% in Q2 in 2020 right. So we're getting into a couple of quarters of some tougher comps.
But that number is way up over 2019, that's a reflection of the larger market and even within that number I don't have all the details in front of me, but I would fully expect our PC business to have grown significantly even against the very strong market backdrop of last year's.
Q2.
Thank you.
Okay.
Currently this concludes our question and answer session I would now like to turn the call back over to Mr. Stark for closing remarks. Thank.
Thank you very much and we wish everybody safety and good health as we inch back towards normal it is.
Going to be an action packed couple of months of new product announcements and we look forward to speaking with our investors and analysts when we report our second quarter results in August have a great day.
Thank you.
Ladies and.
Gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
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