Q3 2024 Corsair Gaming Inc Earnings Call and Business Update
The End
Speaker Change: Good afternoon and welcome to Corsair Gaming's third quarter, 2024 earnings conference call. As a reminder, today's call is being recorded and your participation implies consent to such recording.
at this time, I'll participate in our enlist and only mode.
A brief question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance during the conference, please press pound zero on your telephone keypad. With that, 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.
Speaker Change: Good afternoon, everyone, and thank you for joining us for Corsair's financial results conference call for the third quarter end of September 30th 2024. On the call today, we have Corsair CEO Andy Paul and CFO Michael Potter.
Speaker Change: Andy will review highlights from the quarter. Michael will then review the financials and our outlook. We will then have time for any questions.
Speaker Change: 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.
Speaker Change: The risks and uncertainties that forward-looking statements are subject to are described in our earnings release and other SEC filings. Note that until an order 10-2 has been filed, these numbers are preliminary.
Speaker Change: Today's remarks will also include references to non-GAAP financial measures. Additional information, including reconciliation between non-GAAP financial information to 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 starting this earnings call, I'd like to say that I've rarely been so excited for Corsair's future as I am right now.
Speaker Change: Our business depends on four fundamental premises. First, the desire and ability of consumers, mostly gamers and creators, to build high-performance gaming PCs and buy peripherals in order to play the latest games or optimize their studio setup.
Speaker Change: Second, our ability to continuously bring compelling products to the market.
Speaker Change: who, for most of our brands, are where we sell our products.
Speaker Change: With those things in mind, let's get into some of the details and then you'll see why I'm so excited.
Speaker Change: Let's start with the ecosystem. I think we all know that for any sport or pastime the base platform is very important. Lots of snow brings out skiers, sunshine brings out golfers, mountain bikers and runners, and great games engage gamers.
Speaker Change: For the last two years, consumers have not seen many blockbuster games launching, but the recent Call of Duty Black Ops 6 launch in October was an overwhelming hit.
Speaker Change: Roughly two-thirds of our business relies on people building high-end gaming PCs in order to play the ladies' games at high frame rates.
Speaker Change: To build such a gaming PC, you need a high performance CPU from Intel or AMD, and a high performance GPU from NVIDIA or AMD, those in the form of graphics cards from their board partners.
Speaker Change: The GPU is generally of most importance to gamers, and normally the graphics cards containing these processors are refreshed every two years.
Speaker Change: This year, however, that cycle extended to two and a half years. Latest industry speculation is that NVIDIA will launch new cards in early Q1 2025, perhaps as early as January.
Speaker Change: This GPU launch, which the industry expects will use the same black hole technology as NVIDIA's AI cards.
Speaker Change: has been eagerly awaited by the gaming enthusiast community. The expectation is that these cards, probably called 50 Series, will be able to hit high frame rate gaming at 4K and possibly 8K with ray tracing enabled, supported by AI framing generation for smoother gameplay.
Speaker Change: I want to stress here that this is industry speculation. NVIDIA has not released any launch plans yet, and all partners, including ourselves, are under strict NDA.
Speaker Change: With that said, we will be showcasing at CES in January a wide portfolio of Corsair components that will be ready to power, cool and house these new GPUs.
Speaker Change: You can imagine that with the industry initially expecting this launch to be in the second half of 2024 and now expecting it in Q1 2025, gamers looking to build a very high-end system have been holding off building anything for most of this year.
Speaker Change: So, while the unit numbers of components sold for self-built PCs are down perhaps 5-15% between the different geographies, a large part of the high-end market has been absent.
Speaker Change: and for us that has resulted in a market that is mostly lower end components where we tend to have lower ASPs and lower margins.
Speaker Change: We therefore expect a surge of high-end gamers to be jumping back into the market in early 2025. What does that mean for Corsair? The expectation would be for the PC gaming components part of our business to sow growth in units, ASP and margins.
Speaker Change: And while we have high market share in these categories already, we would expect our new product launches to increase share further.
Speaker Change: Switching our attention to peripheral sales, which have a slightly different dynamic and price point, i.e. $50 to $200 ASP products rather than $2,000 to $3,000 for gaming PCs,
Speaker Change: We've done very well this year in terms of growth. In fact, year-to-date, we have shown 17% growth, which is one in excess of the data we see for recent town growth.
Speaker Change: But let's look quickly at the longer term market dynamics.
Speaker Change: The gaming peripheral market has shown good long-term growth over the last five years. In fact, if we use the America's PC gaming headset market as a bellwether,
Speaker Change: Third party data indicates that there are roughly 80% more headsets sold in 2024 compared to pre-pandemic years.
Speaker Change: And simple math would suggest that means there are roughly 80% more active PC game players in the market.
Speaker Change: Now, as we all know, a huge number of new gamers enter the market during COVID lockdowns.
Speaker Change: and some will have abandoned gaming after return to work, but there are still 80% more headsets being sold. And for the first time since the COVID lockdown, we are now seeing the gaming peripheral market are starting to turn from negative year-on-year numbers to positive growth.
Speaker Change: So our expectation here is for our Peripherals and Creators segment...
Speaker Change: to continue to grow well in the next few years. In terms of consumer spending, which is probably more of a concern for $2,000 gaming PCs rather than $100 peripherals.
Speaker Change: We saw some very encouraging recent data where Amazon reported record Prime Day sales overall and we witnessed stronger hardware gaming sales
Speaker Change: during Amazon Prime period this year compared to the previous years.
Speaker Change: The retailers in general also appear to be encouraged by this data, and so we saw very good bookings activity in October as our channels start to lean in on inventory, both for the holiday period and also for the expected NVIDIA GPU launch.
Speaker Change: In summary, we feel better about consumer spending activity now than we felt for a while.
Speaker Change: Let's move on to products. We've launched some very exciting products recently. Our flagship headset, the Virtuoso Max, with a price point of $329, is off to a great start and has encouraging reviews.
Speaker Change: We launched several small form-factor keyboards.
Speaker Change: Some with programmable hall effect switches that can offer desirable features such as rapid trigger and flash tap.
Speaker Change: We launched our Corsair custom lab where consumers can customize their desktop with peripherals offered in multiple patterns and genres.
Speaker Change: At Elgato, we also introduced our Stream Deck Studio that is powered by Bitfocus software, a hyper-customizable control service for probe broadcast systems.
Speaker Change: This solution will simplify complex workflows and will enable Elgato to enter a completely new part of the market.
Speaker Change: And we did not stop there. In September, we completed the acquisition of Fanatec, who is generally recognized as the leading brand for high-end components which are used in racing simulators.
Speaker Change: More on that later.
Speaker Change: Moving on to partnerships, both from an industry and retail standpoint, we have several very significant things to report. First, we are very proud to be selected as the exclusive launch partner for the Activision Call of Duty Black Ops 6 title.
Speaker Change: This is a multi-year, multi-product Call of Duty partnership which will involve a strong collaboration on marketing activations and branded products.
Speaker Change: For the Black Ops 6 launch, we showcased Call of Duty-themed products from many of our product lines which are now available on our websites.
Speaker Change: According to Microsoft...
Speaker Change: Last week's launch of Black Ops 6 was the biggest Call of Duty release ever, setting a record for Day 1 players, as well as Game Pass subscribers ads on launch day. And unit sales on PlayStation and Steam were also up 60% year over year.
Speaker Change: Lastly, we are also very pleased to report that we will have products in Apple stores for the holidays. You will see more on this when the launch occurs.
Speaker Change: We continue to perform well at our biggest retailers, which in the US are Best Buy and Amazon, and we continue to make progress with retail expansion on a worldwide basis.
Speaker Change: Let me now give you some more details on our recent Fanatec acquisition.
Speaker Change: This is a company that has been a leading provider of high-end sim racing components for many years. In fact, the company is roughly 30 years old, same age as Corsair.
Speaker Change: Like many companies in our industry, the surge from COVID lockdown and resulting dip after resulted in excess inventory for most of them but for Fanatec it really stretched their financials and unfortunately at the same time they decided to build a new very expensive headquarters.
Speaker Change: All of this led to excessive losses, excessive debt, and finally the banks took over and we ended up buying the company out of insolvency.
Speaker Change: To give you some perspective on size, the sim racing market is roughly $1 billion in growing fast, according to industry data.
Speaker Change: And Fanatec's revenue in 2023 was in excess of €100 million, almost all of it coming from their direct-to-consumer website.
Speaker Change: With the SIEM community uncertain of Fanatec's business health while going through insolvency, maintaining revenue became challenging.
Speaker Change: So that we can stimulate and manage further growth and deliver great customer support. We anticipate that the integration process will take us roughly two quarters.
Speaker Change: The team at Fanatec is now very encouraged, they have a great team of product experts to bring world class sim racing products to market and now with Corsair backing we are confident that this team will shine.
Speaker Change: We expect to add roughly 20 million dollars of Fanatec revenue to our Q4 2024 numbers.
Speaker Change: and while it's too early to talk about 2025 numbers, we do expect to get them back to a growth path and back to a very profitable business.
Speaker Change: We expect to be able to grow Fanatec in several ways. First, channel expansion where it makes sense. We do have many interested partners at the moment.
Speaker Change: Second, we can add to their lineup some sim racing products that Corsair independently developed. And last, with our other complementary product lines, we can offer complete solutions.
Speaker Change: All simracing setups either need a PC or console to power the game, and monitor and peripherals to view and control the setup.
Speaker Change: We have also seen quite a few professional sim racing setups using Stream Deck as a control panel.
Speaker Change: Overall, as I said at the beginning, I am very encouraged about our immediate future based on all these things mentioned, and with inflation steadily coming down, we would expect further growth as consumer spending confidence increases.
Speaker Change: This year our EBITDA will end up at only three to four percent. This is not what we expect moving forward and with the growth expected from our peripherals and components segment and from Fanatec we should see EBITDA levels at double that for 2025.
Speaker Change: The post-COVID lockdown period has not been an easy one for us to forecast and we hope from here on out the gamer and creator markets will return to consistent growth.
Michael Potter: Now over to Michael.
Michael Potter: Thanks, Andy, and good afternoon, everyone.
Michael Potter: This quarter was typical, as it started slowly during the traditional vacation months of July and August, and then accelerated in September. Our gaming and streaming business continued to grow year over year with strong margins. But we continued to see a shift towards lower end of our components product offerings, as our end customers deferred building higher end systems.
Michael Potter: These products tend to have lower margins, which impacted Q3 results.
Michael Potter: We took cost savings actions during the quarter, and will continue to be prudent in our spending plans so we can drive improved profitability while investing in areas that will drive our long-term growth.
Michael Potter: In terms of the specifics, Q3 2024 net revenue was $304.2 million compared to $363.2 million in Q3 2023.
Michael Potter: For the first nine months of 2024, net revenue was $902.8 million, from $1 billion in the year-ago period.
Michael Potter: European markets contributed 38.4 percent of our Q3 2024 revenues compared to 33 percent in Q2 2024.
Michael Potter: while the APAC region was 10.3% of our Q3 2024 revenues compared to 10.9% in Q2 2024.
Michael Potter: Turning now to our segments.
Michael Potter: The gamer and creator peripheral segment contributed $102 million of net revenue during the third quarter, compared to $90.4 million in Q3 2023.
Michael Potter: For the first nine months of 2024, Gamer and Creator Peripheral Segment Revenue was $303.2 million compared to $258.1 million for the first nine months of 2023.
Michael Potter: The gaming components and systems segment contributed $202.2 million of net revenue during the third quarter, from $272.8 million in Q3 2023. Memory products contributed $97 million in Q3 2024, compared to $131.7 million in Q3 2023.
Michael Potter: For the first nine months of 2024, gaming components and system segment revenue decreased to $599.6 million from $784.5 million in the first nine months of 2023.
Michael Potter: with revenue from memory products decreasing to $303.6 million from $371.9 million.
Michael Potter: Overall gross profit in the third quarter was $69.7 million compared to $89.4 million in Q3 2023, reflecting the lower revenue level and generally lower gross margins in our components and systems business.
Michael Potter: Gross margin decreased to 22.9% compared to 24.6% in Q3 2023.
Michael Potter: Overall, gross profit decreased to $219.4 million for the first nine months of 2024, compared to $257.6 million in the first nine months of 2023.
Michael Potter: Gross profit in the gamer and creator peripheral segment was $39 million, compared to $29.9 million in Q3 2023.
Michael Potter: Gross margin was 38.3% compared to 33.1% in Q3 2023. We continue to be pleased to see the rebound in this business and believe we're on track for further improvements while higher sales volume continues.
Michael Potter: The gaming components and systems segment gross profit was $30.6 million compared to $59.4 million in Q3 2023, reflecting the lower sales volume.
Michael Potter: Gross margin was 15.1% compared to 21.8% in Q3 2023. Our memory products gross margins in this segment were 10.7% for the third quarter compared to 16% in Q3 2023.
Michael Potter: Third quarter SG&A expenses were $74.1 million compared to $74 million in Q3 2023.
Michael Potter: Third quarter R&D expenses were $16.5 million compared to $16.1 million in Q3 2023. This reflects our investments in support of our expanded product line, and new areas including mobile controllers and sim racing.
Michael Potter: Our cost reduction efforts we started in July 2024, which included a planned reduction of approximately 100 employees, is expected to generate between $1 million and $2 million of cost savings per quarter, starting in Q4 and extending into next year.
Michael Potter: We remain committed to controlling operating expenses while continuing to support growth in our overall business.
Michael Potter: GAAP operating loss in the third quarter of 2024 was $20.9 million compared to a GAAP operating loss of $0.8 million in Q3 2023.
Michael Potter: Third Quarter Adjusted Operating Income was $2.4 million compared to Adjusted Operating Income of $19.6 million in Q3 2023.
Michael Potter: Adjusted operating income was $14 million for the nine months of 2024 compared to $53.6 million in the first nine months of 2023. Third quarter net loss attributable to common shareholders was $58.4 million or
Michael Potter: $0.56 per diluted share as compared to a net loss of $3.1 million or $0.03 per diluted share in Q3 2023.
Michael Potter: This includes the effect of net $32.5 million non-cash charge from a valuation allowance on deferred tax assets.
Michael Potter: On an adjusted basis, third quarter net loss was $30.3 million, or $0.29 per diluted share, compared to an adjusted net income of $13.4 million, or $0.13 per diluted share in Q3 2023.
Michael Potter: For the first nine months of 2024, adjusted net loss was $27.6 million or $0.27 per diluted share compared to an adjusted net income of $35.1 million or $0.33 per share in the first nine months of 2023.
Michael Potter: The 2024 results include the effect of the Tax Valuation Allowance.
Michael Potter: Finally, third quarter adjusted EBITDA was $4.8 million, compared to $23 million for Q3 2023.
Michael Potter: For the first nine months of 2024, adjusted EBITDA was $21.6 million compared to $61.3 million in the year-ago period. Turning now to our balance sheet.
Michael Potter: We ended Q3 with a cash balance including restricted cash of $61.6 million. We continue to maintain a healthy balance sheet with sufficient cash to fund the development of our expanding product portfolio.
Michael Potter: We further reduced inventory during the third quarter before the effect of the acquired Fanatec inventory, and we expect to again further reduce inventory in Q4.
Michael Potter: Under a normal cash cycle, we expect these efforts should result in increased cash generation starting in Q1 2025.
Michael Potter: We ended Q3 with $177.8 million of debt at face value, and our $100 million working capital revolver remains undrawn and fully available.
Michael Potter: Corsair updated its financial outlook for the full year 2024. The company continues to expect revenue to improve through 2024 with a further improvement in adjusted EBITDA led by an additional improvement in margin, stabilized shipping costs, and continued tight operating expense controls.
Michael Potter: The company reiterated its expectations for revenue for the full year 2024 to be in the range of $1.25 billion to $1.35 billion, including approximately $20 million of Ibidon neutral revenue in Q4 2024 from its recent Fanatec acquisition.
Michael Potter: Adjusted operating income is now expected to be in the range of $28 million to $43 million compared to $48 million to $63 million previously.
Michael Potter: Adjusted if it dies, now expected to be in the range of $40 million to $55 million compared to $60 million to $75 million previously.
Michael Potter: With that, we're now happy to open the call for questions. Operator, will you please open up the call for Q&A?
Speaker Change: We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw it, please press star then 2. At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from George Wang of Barclays. Please go ahead.
George Wang: Oh, hey, guys, and thanks for taking my question. I have two quick ones. Just firstly, can you kind of double-click on, you know, eBeta Margin Improvement Plan? Just curious, any, you know...
George Wang: particular levers you guys might be targeting near-term in terms of the path returning to high single-digit EBITDA margin just kind of for any sort of measures you can gain more color on just in terms of profitability going forward.
Speaker Change: Well, George, there's a couple of things, right? We've got a big year coming up for us with game launches and technology launches. That will drive sales of.
Speaker Change: drive sales of higher margin, higher ESP products.
Speaker Change: So that's the first thing. The second thing is that we're continuing to grow our peripheral business.
Speaker Change: and we expect that to continue next year. Now our peripheral business as you know is much higher
Speaker Change: 40% gross margin product lines.
Speaker Change: compared to our much lower margin memory and components.
Speaker Change: That has continued to grow over the years, in fact, we are now, for this year, making more gross margin from our peripherals group.
Speaker Change: than our components of memory. And we actually, even with the rebound of the memory and components group next year, we expect that to continue. So that is the biggest leverage because that mix will drive our overall...
Speaker Change: overall margin up.
Speaker Change: Do you want to make any comments on the costs and things? The only other thing is, we've already covered our operating expenses at the lower revenue level this year. So as our revenue goes up and we generate more total gross profit dollars, more of that will fall to the bottom line as well.
Speaker Change: Okay, great. Just a quick follow-up if I can.
Speaker Change: Maybe we can take a step back, maybe you can talk about just...
Speaker Change: general consumer demand versus, you know,
Speaker Change: three months ago. Just any notable changes. Also kind of as it relates to GPU refresh kind of early next year, just you know additional data point we could be you know looking out for kind of in the interim. Just any kind of high-level thoughts on the industry trends there. Thanks.
Speaker Change: Well I think there's a couple of things to talk about. One's short term, one's long term. So short term, you've probably heard from Amazon, they announced record prime day.
Speaker Change: We also had Rekord Prime Day and I think we were the leader in the gaming space in terms of growth.
Speaker Change: So what does that mean? We saw leading up to Prime Day, resale data that was slightly under last year immediately popped above in Prime and we're seeing that to continue to go up. Now I think what that means is that
Speaker Change: Shoppers are there and they want to buy gaming gear. They're a little bit more price conscious and that's what you'd expect in a Inflationary environment, but as that eases I think people are now getting more You know more
Speaker Change: able to shop. And I think we also saw, as I mentioned in my notes, that
Speaker Change: Since Prime Day, the retail channel has been very much more confident, and so we're seeing really good bookings as they get ready for the holiday season and for Q1. So I think the whole retail channel in general is feeling good about consumer sentiment.
Speaker Change: The other thing I'd say at a much more macro level is that we are now four and a half years from lockdown.
Speaker Change: and you know so we're over the historical refresh periods and I'm pretty sure that we're going to see a lot of refreshes going on where now people have peripherals and graphics cards that are just too old to keep up with current requirements.
Speaker Change: Thank you for watching!
Speaker Change: Great, great. Thank you.
Speaker Change: Thank you for watching!
Speaker Change: Our next question comes from Aaron Lee from Macquarie. Please go ahead.
Aaron Lee: Hey, good afternoon. Thanks for taking my question. With regard to your updated guidance, can you unpack for us how much of the change was related to your third quarter performance versus
Aaron Lee: a change in expectations for fourth quarter and on the latter, what are the major drivers of that change just given some of your comments around the solid bookings activity from October? Thank you.
Speaker Change: Most of it was a Q3 shortfall. We exited, as you saw, for Q2 at a pretty slow pace, and that continued in July and August.
Speaker Change: So it really wasn't until September that it started picking up, and it wasn't enough.
Speaker Change: to pull the quarter up to the level we had expected. So most of it comes from Q3.
Speaker Change: There may be a little bit of conservatism in the Q4 numbers, because we left Q3 a little lower than we wanted, so there is a little bit of effect in Q4, but most of it is from the Q3 shortfall.
Speaker Change: The most of the shortfall was in gross margin percentage in the components and systems. So even with revenue not too far off of what we were expecting after a decent September, it was in lower margin and lower cost components, and that brought the total margin dollars down.
Speaker Change: Gotcha, okay. Aaron, let me add one thought to that. I also think in Q3, we had two pieces of information come in. One was that the NVIDIA launch, which everyone was expecting, was going to be at the end of the year.
Speaker Change: suddenly realized that it was probably more likely going to be Q1. So I think that caused the channel to be a bit apprehensive. We also saw generally in the middle of the year the retailers being a bit wary of inventory.
Speaker Change: and so that started to flip in Q4. I think people are a lot more confident so you know so that means distributors and retailers buying a little less inventory than planned in Q2 and a little more towards the end of Q3 and Q4 sorry Q3 to Q4 yeah
Speaker Change: Does that make sense?
Speaker Change: Understood. Yep, that makes sense. Thank you for that.
Speaker Change: And as a quick follow-up, I wanted to talk about your Stream Deck. Can you just update us on the Stream Deck Marketplace and where the trends there have been like? And what are your expectations around the marketplace becoming a more material revenue stream in 2025? Thank you.
Speaker Change: So, the marketplace has well over a million accounts now, growing very fast, that's the first thing. We historically have used the marketplace as a
Speaker Change: Free App Marketplace. We started about a year ago to allow third parties to charge, but mostly it's free. So the download numbers are absolutely enormous, but mostly free.
Speaker Change: I've got two thoughts here. One is...
Speaker Change: that the number of free downloads actually drives...
Speaker Change: stream deck hardware revenue and so we've actually seen since we launched the marketplace a good growth in stream deck units sold.
Speaker Change: and then the second thought is that at some point we'll be able to start charging for very compelling apps.
Speaker Change: as well.
Speaker Change: Software sales is fairly insignificant but it's certainly driving growth in hardware sales.
Speaker Change: OK, thank you. Appreciate all the color.
Speaker Change: Our next question comes from Drew Crum from Stiefel.
drew Crum: Thanks. See you guys.
drew Crum: I think you suggested 2025 would be a rebound year for the components and memory businesses with the anticipation of the new GPU serving as a catalyst.
Speaker Change: 23 that the type of sales threshold we should anticipate for the segment when looking ahead to next year just trying to understand the magnitude of a recovery we should look for next year and then I have a follow-up.
Speaker Change: Well, that's a billion-dollar question, right? Here's the way I think about it. What's different is that 23 was still very early after COVID, so...
Speaker Change: We have to realize now we've got our backward looking glasses on that there was a lot of pull forward in COVID years. In other words, a lot of people built gaming PCs and bought peripherals in 20 and 21.
Speaker Change: that then caused them not to do that in 22 or 23.
Speaker Change: So imagine you've got a certain amount of the market pulled for one or two years. So in 22, obviously there was a massive over-inventory and demand went down because people had already bought and built everything. There was still some of that hanging over in 23.
Speaker Change: So while the early adopters were growing the new cards, a big chunk of the market had already built machines. We typically see about an average of two cycles for people to upgrade, so in other words
Speaker Change: people with 40 series cards.
Speaker Change: were upgrading 20-series cards and we'd expect, in the 50-series cards launched next year, people to upgrade the 30-series.
Speaker Change: That's why we think now that the COVID or let's say the the ripples from the COVID surge are kind of over and we should see more more steady growth now from here on out.
Speaker Change: Got it. That's helpful. And then, Andy, can you comment on your channel inventory heading into the holidays? You know, I think you mentioned healthier booking trends that you're seeing.
Speaker Change: across your ecosystem and then the dynamics with retailers maybe less willing to take on more stock back in 2Q but more willing to get a little more aggressive heading into 4Q. Where are you positioned going into the holidays?
Speaker Change: Well, we're still in the middle of the rebound. I'd say, if you look at the middle of the year, we were under-inventory compared to our plans.
Speaker Change: which obviously means that our sell-out was a little higher than our sell-in and That's now starting to reverse. So I think all the retailers have now
Speaker Change: realize that it's time to lean in and everyone's getting signals that it's going to be a strong Christmas especially after these Prime Day activity and all the people that are selling enthusiast gear for the
Speaker Change: People building game PCs are also realizing this is going to be a big year. Because the rumors, I'll say rumors because obviously NVIDIA hasn't announced it directly, but the rumors are that NVIDIA will launch all four top cards.
Speaker Change: early in the year. So if it's called 50 Series, we should expect it is 50-90, 50-80, 50-70, 50-60, all very quickly.
Speaker Change: So there's going to be a card at all price ranges that will be expensive obviously, but for all price ranges early in the year So I think this is going to be a little different
Speaker Change: than 23 for a lot of those reasons. Now the other thing for us to remember is that
Speaker Change: As I said earlier, we're now getting more gross margin out of our peripherals group than our memory and...
Speaker Change: components group and we do expect on a macro level that the peripherals market firstly grows faster it's much less prone to
Speaker Change: economic issues because spending a hundred or two hundred dollars on a peripheral is much easier than building a two or three thousand dollar PC.
Speaker Change: And the overall market in general is going faster because there's more gamers that are coming to the market, you know, that are teenagers that can afford to buy a peripheral band.
Speaker Change: can build a very expensive gaming PC. So we expect that market to continue to grow, and we continue to grow within that, both organically as well as with acquisition.
Speaker Change: and our plans, you know, we're not planning to do all these acquisitions that we've done already and then stop.
Speaker Change: What we're finding is there's a lot of companies around with revenues in this 50 to 100 million dollar level that which really have a tough time getting traction in the market.
Speaker Change: because there's billion-dollar players there.
Speaker Change: There's a lot of opportunities we have for acquisition, and we're planning to continue to do them. And where we focus is high gross margin, mostly direct to consumer.
Speaker Change: And that will just continue to add to our gross margin of that division. So expect the peripherals segment to grow faster in general than the components in memory, even though the components in memory group should have a healthy rebound next year.
Speaker Change: Got it. Okay, thanks guys.
Speaker Change: Thank you for watching!
Speaker Change: As a reminder, if you have a question, please press star, then 1.
Speaker Change: Our next question comes from Colin Sebastian from Baird.
Speaker Change: Please go ahead. There you go.
Speaker Change: Hey guys, this is Colin Molliet, on for Colin Sebastian. So just beyond, you know, waiting for the broader product refresh cycle for chips and PC builds, what gives you confidence in the underlying demand within the industry? And then second question, you know, you guys did the mobile controller as well as the racing simulation this year, kind of as a, you know, as a key focus. So is there any any more details on product development pipeline for 2025 and then any specific categories that are going to be in focus? Thank you.
Speaker Change: well we're trying to focus on everything at the same time right but look starting with sim racing
Speaker Change: That's a big market with very few players in it, mostly small. The only big player really is Logitech. Then there's a lot of enthusiast companies. We've bought the biggest one.
Speaker Change: biggest enthusiast player.
Speaker Change: One of the things that we realize is that...
Speaker Change: There's a big market there for complete systems
Speaker Change: and that's right now being serviced by a lot of very small integrators.
Speaker Change: and we're going to hope to really add to that because remember we make monitors, we make gaming PCs, we make chassis, so we make the whole solution and this is very different from the industry as it was before. So I think we're going to we're going to make a big impact there and we're all very excited about that. The other parts of the business, I mean the Stream Deck
Speaker Change: and the Elgato portfolio is very powerful. We just launched into a new B2B business where we're hitting up all the professional broadcast booths.
Speaker Change: A lot of them have been experimenting with Stream Deck, and so we actually made a Stream Deck specially for them, and we've launched that at some of the broadcast shows, and tremendously popular. So I think that's an additional part of the business that's going to grow.
Speaker Change: And then lastly, our overall peripherals section, or segment, which makes the traditional peripherals, gaming headsets, keyboards and mice, is really doing very well. We've got a magnificent portfolio of new...
Speaker Change: products that have just arrived. Some of those we mentioned are going to be taken up by the Apple Store, but I think we're really heading that market in full force now, getting the right products out at the right time.
Speaker Change: Thank you for watching!
Speaker Change: Okay, great. Thank you.
Speaker Change: Thank you for watching!
Speaker Change: This concludes our question and answer session. I'd like to turn the conference back over.
Speaker Change: and Mr. Andy Paul for any closing remarks.
Andy Paul: Thank you everyone for joining us on the call today and for continued support.
Andy Paul: If you have any follow-up questions, please contact our Investor Relations Department.
Andy Paul: We look forward to updating you next quarter. Thank you and have a good evening.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.