Blog Corsair Stock Dips on Lackluster Q2 Results

Corsair Stock Dips on Lackluster Q2 Results

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Gaming accessory specialist Corsair Gaming (NASDAQ: CRSR) reported second quarter earnings on Tuesday morning, and investors were not impressed.

Sales were held back by component shortages as the global semiconductor shortage continues to create supply chain bottlenecks for a wide range of industries.

As of 1:15 p.m. EDT, Corsair stock had dipped by 6%.

Livestreaming engagement remains strong

Revenue in the second quarter increased 24% to $472.9 million, slightly shy of the consensus estimate of $475.2 million in sales. Fortunately, the Gamer and Creator Peripherals segment continues to grow faster than the Gaming Component and Systems business, which bodes well for profitability as the former segment enjoys much higher gross margins.

Gamer and Creator Peripherals revenue grew 41% to $155.2 million, outpacing the 18% growth that the Gaming Component and Systems segment posted. 

Segment Revenue Gross Profit Gross Margin
Gamer and Creator Peripherals $155.2 million $54.6 million 35.2%
Gaming Components and Systems $317.7 million $75.7 million 23.8%
Data source: SEC filings.

Even as pandemic restrictions are easing in certain regions where vaccines are helping combat COVID-19, livestreaming remains incredibly popular and engagement is proving to be resilient.

The total number of hours watched across all livestreaming platforms grew 2.5% in the second quarter to 8.99 billion hours, according to StreamLabs. Livestreaming engagement surged in the second quarter of 2020 as the public health crisis escalated, and has remained elevated ever since.

“Our results highlight the strength of the underlying fundamentals of our business, as gamers continue to purchase and upgrade their gear, even as entertainment outside of the home and travel began to open back up,” CEO Andy Paul commented in a release. “We experienced growth in every category despite key components shortages, such as graphics cards for enthusiasts to build gaming PCs, logistics issues and port delays.”

In addition to seeing its own products hindered by constraints, Corsair has been indirectly hurt by shortages of NVIDIA (NASDAQ: NVDA) graphics cards. That company commands over 80% of the market for discrete GPUs, and gamers have been scrambling to get their hands on the latest GPUs.

Adjusted net income was $35.7 million, or $0.36 per share. That was below the market’s expectations of $0.39 per share in adjusted profits. Adjusted EBITDA was $51.6 million.

Looking ahead

After raising its full-year outlook last quarter, Corsair maintained the same guidance this time around. Revenue in 2021 is still expected to be in the range of $1.9 billion to $2.1 billion, with adjusted EBITDA forecast at $245 million to $265 million. Adjusted operating income should be $235 million to $255 million.

Corsair continues to funnel operating cash flow into debt repayment, reducing its overall debt load while also cutting interest expense.

The company paid down an additional $25 million in debt during the quarter, bringing total long-term debt to $270 million. Corsair finished the quarter with $138.6 million in cash and $48.6 million of liquidity available through a revolver.

CFO Michael Potter said that Corsair is exploring additional options to reduce the carrying cost of its debt. The finance chief also warned that logistics costs are expected to “remain elevated” in the third quarter.

“Shutdowns from the ongoing pandemic in several large regions we operate in also negatively impacted our operations,” Potter added. “We are also continuing to invest in future growth to maintain our high new product launch rate.”

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Evan Niu, CFA owns shares of Corsair Gaming, Inc. The Motley Fool has no position in any of the stocks mentioned. Millennial Money is part of The Motley Fool network. Millennial Money has a disclosure policy.