Corsair Gaming, Inc. (CRSR) Earnings Call Transcript & Summary

So welcome, everyone. Thanks for coming. I hope everybody is having a good conference so far. We've got the great pleasure of having Andy Paul, the CEO and Founder of Corsair here with us. So Andy, thanks for coming along. I'm sure your many, many years of wisdom and many years of going through economic cycles with us, although the people [ different ]. Michael Potter, the CFO, is also over there on the side, but he's going to let Andy take all the heat today.

Exactly.

So let me -- I guess, let me start off with just an overview. I think everybody here is going to understand your business, but there may be some investors new to it. So maybe just give us a quick overview of what Corsair is today. It's a lot of different company than it was 10 years ago. So give us maybe a little bit of a high-level on the company.

Yes. Well, as you mentioned, look, it's a 28-year-old company now, and I'm fortunate enough to have been there from the start. We are a premium gaming hardware company. We have about 28 product lines. And so we address a pretty broad market with the notion that anybody that's serious gamer with adjacent interests like streaming, then we want to be able to support them with high-quality gear. So we -- last year, revenue was up to about $1.9 billion. We went public in 2020. And we can talk a little bit later, I'm sure about how the markets are faring. But a good chunk of our revenue, probably 2/3 of our revenue comes from selling components that people use to build gaming PCs. And that's a very healthy market that's been going on well for 28 years since we've started. We started pretty much as people started to build gaming PCs. So a very well-known brand in that category. We pretty much make everything except for the GPUs and CPUs. So we like to think that it's Intel, NVIDIA, AMD ourselves that people use to build high-quality gaming PCs. And then, of course, all the prefers that you use, mouse, keyboard, a headset and now the streaming gear that people want to use to stream, live stream games or just stream with their friends, cameras, microphones, capture cards, et cetera. So we make all of those things. We just recently jumped into the prebuilt gaming PC platform. So we bought a company a couple of years ago called Origin PC, which is a boutique PC maker. And so for people that want to trick out gaming PC, but they don't want to build it themselves because they don't know how or they're too lazy. We do that for them. And then a couple of weeks ago, we just launched our first gaming laptop, very, very high-end, $3,000 gaming laptop. You could argue not the best time in the world to launch a $3,000 gaming laptop, but we did it anyway. And then we just launched recently an incredible 45-inch bendable monitor. I don't know if you've seen this thing. So you can actually -- this is an OLED bendable monitor, so you can bend it around yourself for full emersion games where you can flatten it out for normal gaming and work, a ridiculous response. And that, again, is going to be a $2,000-plus. So we're moving up from making components to making full -- so that gives you a general idea of what our company is about.

Great. So another high-level question for you because you've been around the industry so long. If we do get into a downturn, well, we are already in a slowdown, we're not necessarily in a recession yet. But let's say we go into it a little bit deeper recession, how does gaming fare in that? We've always had these -- there are certain things that investors in the olden days wanted to own in recession alcohol one of the first. So is gaming and other things like that, that has a countercyclical property to it? What have you seen in other downturns?

Yes. I mean, certainly -- well, a couple of ways of answer that. Firstly, like alcohol for the youth of today, let's put it that way, gaming is the thing they do. So it used to be when I was growing up, music going down to the pub, drinking that sort of thing. Now it's gaming. And so the thing -- the last thing you give up is the thing you're most interested in. So that's the first thing I'd say. And we saw this in COVID and lockdown. Obviously, everyone was just-- gaming exploded in 2020. I think the second thing is how fast the market is growing compared to what other economic slowdowns there are. So the U.S. market feels to me to be pretty solid. We're already now seeing consumer sales at or above levels from last year and dramatically ahead of pre-COVID. Europe is still a little slower. And I think Europe's got some macroeconomic issues in terms of energy prices, which we're not seeing here. Obviously, I mean, gas prices will have gone down over the last couple of months. But yes, I think Europe is going to be problematic. In other words, my view is if you've got money to spend, you're going to spend it on gaming. If you don't have any money, then you got to spend it on anything. So that's -- if your last $10 goes on heating your house, then that's what you're going to do. But yes, I think it's pretty resilient. That's what we've seen so far.

Do you think that -- what do you see and one of the things we're trying to sort out, now that we're on to the economic stuff is what is happening in the back-to-school period? And you're saying you see the back-to-school period relatively stable, so far.

So back-to-school for us is not really a thing. In other words, because that's not -- it doesn't -- I mean what is interesting for us is that Prime Day happens around the same time. So Prime Day is a much bigger effect. But yes, people aren't buying gaming gear to get back to school. They shouldn't be. Well, you're shopping for stuff to have a new keyboard. Yes. So Prime Day was bigger this year than last year. So that's exciting, pretty much across the world, whether that was due to incremental discounting or not, but more people bought stuff. So that was encouraging. We do think that 2/3 of our business is involved in people building gaming PC platforms. That is much more down to technology cycles than it is down to macroeconomic in general. So what we've seen over the last couple of years is really the issues that we faced in the market are that graphics cards have been unavailable or really expensive. Now, we've got new graphic cards coming on scene. So I think we're feeling as though all the data is lining up to say Q4 should be pretty good. And we should start to see a recovery and then 2023 should somewhat be back to normal with the caveat that I still think Europe is going to be tough. But I don't think the U.S. is going to be a problematic market for us next year. My sense.

When do you think you know better or have the data that you need to say, "Well, yes, that was the right call for the back end of this year or it was not right."?

I think we'll know in October, and we'll probably share it with everybody in the Q4 earnings call. Well, November a little bit. But yes, we'll give everybody a sense of the market. I mean, obviously, we weren't now for sure until the end of the quarter. But yes, I think I'll start to see signs in October.

You don't think you'll have to wait for Black Friday to know what's happening?

No, because I can see what is going on with the consumer sentiment and spending across the world. I mean we've got so much data. I mean I get POS reports every single week from all of our retailers, so we can see exactly what's going on. Literally week by week, we can see little pockets of things picking up and so it's tend to be encouraging. And of course, we've got to look through the whole inventory bulge that I'm sure we're going to talk about later.

Yes. Although it's bizarrely, I'm not as interested in that as I am in the demand side of the equation because that inventory thing. The other thing I'll say about this is we're very confused about… There's clearly been overspending people weren't going out at the restaurants, they weren't traveling. So they overspent on some of these categories, gaming gear would probably be one of those. And there's a normalization effect as you come out of that back to whatever the new normal for that is. And then at the same time, there's this economic effect. And it's not completely clear which is which. And I think it's really hard for companies that you didn’t know for sure, which are the 2 things. Would you agree with that?

Yes, it is. And a lot of that is because most of our business is through the channel, and Amazon doesn't exactly -- even if they know, they don't know when somebody buys a particular component or a keyboard, whether they also own something else or whether they're buying it for the first time and last time. So consumer data is difficult. Now, we're collecting a lot now. I mean we've got probably 10 million records, but we sold 200 million things overall. So we're gaining data very, very quickly. So what we saw happen over COVID was obviously a big surge, ridiculous surge in most of the categories we're in 100% increase in activity. Now with a 3- to 5-year refresh, some of that's going to be people saying, "Well, I was going to build again in PC in 2022 or buying new keyboard, I'll buy it now." And once you've done it, and you don't do it again. Clearly, that's not what actually happened because if that had happened when you've doubled the market all of a sudden, you have such a pull forward the be no business in 2022. So we think actually, there was a much more of an effect of new games coming in. So have never bought anything before and now start to build their first gaming PC or upgrade. But yes, you never know for sure, but exactly all the dynamics, but the feeling we get is that the market has increased. There was more people, more people have built gaming PCs and are still -- look, the data in the U.S. is that more people are building gaming PCs today than they were at the start of the pandemic. which says that there have been a huge pull forward or at least there's more new gamers than those that pull forward. So that's the way we're thinking about it.

Although if a lot of people build PCs, then they don't necessarily need to upgrade them for a couple of years.

That's right. But then you'd see that in the numbers. I mean the fact is that when we say people building, the bell with for that is cases, but I also look at the whole components market, and the whole components market is bigger now than it was before. Now, the other thing that's happened, which is in our favor is that the ASP has all gone up a lot. So all of the CPUs and GPUs, the people are using now are so much more powerful so they need bigger cases, bigger power supplies, more memory. And so in general, the ASPs over the last couple of years have gone up by like 20%. So we're getting the benefit even with a small growth in units, we've got a big lift in revenue.

Felt like server services.

Yes.

When do you expect the new GPUs to really start to become available to consumers where they could actually [ be in mind ].

Well, I think you have to wait until see what [ data ] says next week, week after next, but October is what we're thinking. I think fully -- the high-end ones for you should be fully available in Q4.

And that's part of why you think October is when you have an updated?

Yes, because we'll start to see that effect.

Once you brought up inventory, let's talk about the channel inventory a little bit. You called out some normalization. We've seen this in other places, too, where retailers, it seems like from the top down at CEOs even have said not buying anything, the putting of the inventory. We don't know. And it seems like we were talking to [ Corsair ] yesterday, and they were saying that I said, "Well, isn't this just inventory correction rather than a demand thing." He said, no, he thought that the retailers had seen a negative demand signal. So I'm curious where are we with inventory for Corsair? And then what do you think we can learn from what's happening with inventory with regards to…

So I think we'll be somewhat generalized. But in general, why do you have too much inventory and that's because when you ordered, you thought the market is going to be bigger than when the stuff arrives. And clearly, when people were ordering things in late '21, when everything was still surging -- coming off the big surge, but still very, very buoyant. They're ordering stuff that we're showing up in Q1. So Q1 happened, and this is especially in Europe, the day that Russia invaded Ukraine, the retail services were on the clear, across all consumer activity, could just stop buying because they're just concerned. So that's the main reason for it now. What are people doing about that? For us, it was about 2 months incremental inventory in the channel in Europe about a month to 2 months in the U.S. That's been cleared largely in the U.S. Europe is still working down because it's a little bit slower there. And while that happens, what ends up happening is it's not -- I mean, that's on a general basis. Obviously, some SKUs are out of stock, some SKUs have got a fact. But what it means is that you can be 20% to 30% less sales in than sells out while that helping is correcting. And it takes a lot longer than one thinks to correct. So I think this year is going to be a correction year. But we're feeling like should be pretty good because now everyone understands what the levels are, and so they're ordering in the right levels. And then '23, I think we're just going to be talking about consumer demand. And I hope I won't be talking about inventory correction after this year.

Why is it? Because a lot of times, we oversimplify in the investment community, everything, but things like inventory correction, you say it takes longer than people think of, "Well, why is that? Is it just more inventory than maybe we would perceive or what…"?

Well, because oftentimes, what happens is you've got so many moving parts between the manufacturers, what they're going to do, marketing programs, what people decide to do with discounting and it just steers consumers in all sorts of ways. And obviously, it also depends on how big the issue is. So oftentimes, what happens is you'll have a product that let's say, Best Buy has a product on the shelf that they're thinking should have 8 weeks. It's now about 16 weeks. Okay, we'll stop buying that for a while, but then another product comes on that's better. And so now it goes down even worse. And so these are the sort of things that happen. And then all of a sudden, the container shows up that they didn't -- they forgot about, and we didn't see that they shipped in September last year, and all of a sudden, it jumps up again. So there's all these things that are going on that make it a little bit more complicated.

We're going to -- we'll wait until October and wait. Let's talk about shift gears into more fun stuff, which is products and what's going on with some of that. If you don't mind, I'll start with product road map a little bit. You talked about the bendable monitor. I hadn't seen that, by the way. So yet another thing and probably show up in my house this fall. What -- are you principally done with product announcements? What's your product announcement cycle headed into the holiday period? Or do you have more to go?

Well, we're still cranking out about a product a week actually. And of course, as the number of product lines we have, keeps growing, then there's more stuff to bring out. Now, some of the product lines we're in, like this laptop, we'll probably only release 1 laptop every year. I mean we're not going to -- but we've got broad categories such as keyboards or powerplay, where every month, we're releasing a new model. So that will continue to happen because we've got to stay on top of the changes in technology. And some of these are pretty big ships. I mean the new 4,000 [ source ] cards at Avids bringing out look like they're going to need 1,000 watt power supply at minimum to drive them. But as a couple of years ago, 750 watts was fine for most cards. So yes, we're going to continue to bring them out. And we're in some big media categories now. So as I said, monitors, we just launched some other monitors, not bendy ones, but a couple of months ago, and we've got new cameras coming, new microphones coming.

Have you thought about -- well, I'm sure you have, but why not consolidate some of these to do an Apple-like thing where you launched a bunch of stuff at once, "Okay, this is our holiday season."?

Well, we do that. Yes, we're doing that with Elgato. So Elgato, we did launch in the late summer where we came out with a whole bunch of stuff. It was like an Elgato Day, and then we lined up all the influencers. And so when you've got products that are clearly all working together, we'll be doing that. You'll see that when AMD launches the AM5, which needs DDR5 platforms will have a lot of solutions that are for that platform, the same thing when NVIDIA launches. But typically, you don't tend to wait. So with gaming PCs because the key thing is the GPU or the CPU and we're making all the stuff around the works. We'd rather have the staff available beforehand so people are ready, rather than trying to do it simultaneously. But streaming gear is we're already at that.

What about peripherals, like keyboards, headsets, et cetera?

We do some lifestyle things like that. But again, it's not -- most of the -- we're still gaining market share or trying to gain market share in that area. And so that means you have to see what's going on. So okay, one of the things that's happened is that we're in a market where features keep getting richer and richer, ASPs going up. And so you're always testing the water. And so all of a sudden will say, "Well, maybe you can now sell a $300 headset." I mean we're selling keyboards for $250 now pack features just because the market is getting more and more mature. And sometimes, you just don't want to wait until one time to launch that.

Right. So you talked about streaming a little bit. Stream Deck's a very popular product. Stream Cam. You have some pretty good products out there, very popular stuff. Where does streaming go for Corsair? I mean you've got coaching video games as well. Where do you see the company participating in the market over the next few years?

Well, so streaming is going mainstream. And I think we've all seen this. Everyone wants to be a YouTuber. But in addition to that, everybody now is conditioned to be on Zoom. So every one of us is now essentially a content creator. And so what we realize you go the -- whether you call it a prosumer or a B2B… Because a lot of people are buying stuff now around streaming. They're not going to the right T department to buy and they just buy themselves and expensing it. So it's much more a consumer sell. Stream Deck, for example, is very, very popular now in office use. So I have on my desk, and I'm not playing games at the office, but I am getting on Zoom and changing the volume and changing the lights that sort of thing, changing the cameras. And so we're doing more and more integration with companies like Zoom, like Teams, Microsoft so that it's native. So when you plug it in, it instantly comes up. So I think going mainstream, recognizing that the market is a lot of people are now professional content creators in their business world opens up a huge market for us as well as all the YouTubers and Twitch.

Does it remain a hardware product or hardware-software product integrated market for you, so you're selling stuff to people? Or do you eventually -- is there a services layer like the coach thing.

Well, so 2 of the things, -- in streaming, we're launching the Stream Deck marketplace in later this year in Q4. And what we found is that there's a ton of people that are writing applications for Stream Deck that don't have anywhere to sell them. So at the moment, they just give them away and you can download them. But we're going to create a marketplace that will launch on Stream Deck so that you can download and pay for an app. And that could be an Adobe app. It could -- someone has written that says, "Okay, here's all the controls for Adobe." When you're using editing photos or anything you can do this a few strokes with your fingers. So that launch, that will start driving revenue because we'll be very much like Apple will be a 30% cut for us. And we'll be able to do our own apps and sell those. So that's going to be a pretty important revenue driver. But more importantly, once people start using Stream Deck in mainstream, it's an obvious thing to use all other streaming peripherals because you can control all the cameras and the lights and the microphone and that sort of thing. And those are all natively built in. So that's what we're hoping. That sort of thing becomes essentially the iCUE of the -- for us of the streaming world.

That's interesting. And then the coaching and the other…

So what we focus that now is on college. So interestingly, we've always thought about how do we get engaged with the younger gamers. And a lot of people have been experimenting over the years with marketing budgets into e-sports, into tournaments, that sort of thing. We realized it's not super effective. So we started a college program. We actually now have ambassadors that we are recruiting all over the world. And what we realized just by chance last year is that we said that and looked at the fact that all these colleges building esports arenas, huge growing trend. And even small college is suddenly building these massive -- I mean, not massively, but I mean size of this room. And we realize that we can offer the PCs, we can customize and put their university logos on, all the peripherals, all streaming gear, and we can train their people. And obviously, where is the best coaching and training that's in the university environment? So we've started to go to puts and packages together to present and in saying the colleges [ universities say ] so far, "Yes, this is the best thing I've seen." We want to -- because the alternative is you got a Dell or HP and buy some hardware and then find a bar to do the installation. So I think that's where we're going to head down with coaching is really driving into the university.

The universities. Yes, because my kids are in college and they've all got their e-sports team.

Yes. So we have -- so a lot of people that hang around that area are ex-sports, directors from colleges. And so we're very ingrained into that area.

Wanted to ask you about competition a little bit weird but Apple is trying -- they keep trying to make some headway in the gaming, but it doesn't really seem like much is happening, but the gaming community doesn't seem to be doing somewhat with it. Do you worry that -- and is it even a problem for you? Like let's say, Apple machines became for popular gaming machines. Is that opportunity? Is it an issue?

Yes, I don't think we see that. I mean I think the more likely is that the whole evolution of casual cloud gaming in the same way as Apple taken over -- well, everyone is trying to be in the music business. But you can just talk to your phone now and say, "Play me some songs." It could come from Amazon, Apple, but I think that's the more likely thing that we're going to see is that form of entertainment will be available. And so that really comes back down to mobile gaming, casual gaming. But they've got a lot of competition there, of course, with Xbox with their cloud gaming and Game Pass to Xbox. So I think they're going to be -- I can't see Apple migrating all of a sudden to having a platform. And really, if you want to be successful in gaming, you got to start with the platform. Either you've got a hardware platform or you've got a great game. But it's really tough to further needle in between. And we saw this with Google, with Stadium. We didn't really have any one key ingredient. So they don't -- so now, obviously, they're trying to get into a studio business. But I mean -- and we saw this again with Netflix, until Netflix started to create their own content, they couldn't be successful against cable TV. So I think that's going to be -- let Apple decide they are going to go in and really buy some big studios and get into the gaming world. And even if they do, I think that's going to be something they want to push to their existing hardware.

I was going to say they seem to have done it gone down the path of TV Plus, where they finance some people to make shows, maybe some games, but that hasn't really panned out very well. So and I don't -- well, who knows it seems unlikely they'd want to buy a gaming studio. They'll probably do it tomorrow now that…

That's right.

So I wanted to -- I guess I wanted to ask about iCUE a little bit, how that's resonating now. That's one of the big players that pulls a lot of the products together. And I would think provide some continuation of sales, repeat sales, that kind of thing. But I'm just curious from your point of view, how is that doing, how are the developers resonating with it as well.

Yes. So I think -- I mean, look, iCUE is recognized in the industry as the best software for both controlling RGB and also for controlling components in terms of setup. And we hear this from people we hire from our competitors to say, "Oh, my God, we were wishing we could get software like iCUE." So the next question is, yes, so what is the added benefit? What we see is in the self-built PC market, so in other words, our people are using multiple components. And that's really where this thing started, where you want to control the calling -- I was going to say the heating, but you’re not trying to heat anything up. Controls is the calling and the airflow and that's something in other words, all these software programs started with measuring temperature, turning to fans on harbor. That was the basic thing. And now we can do an incredible amount of things, change the pump speed in more to call -- that is definitely resonating. And the biggest thing we did there was we started to ship cases with built-in iCUE controllers. And now since we did this, our market share just on cranking up on cases and everything else around it. So we've seen that -- if you have a really good ecosystem in one particular area like where people are building game PCs, works really, really well. We've had moderate success, I'd say, in peripherals just because our market share is lower. I'm pretty sure that the majority of the market share we have in peripherals is people that already have built our -- build the gaming PC with the stuff, and then they built on keyboards because it works together from an RGB perspective. I think it's less obvious that if someone buys a headset, then iCUE would drive to buy keyboard from us. We haven't seen any data like that. I hope it would. But there's just -- there's a limited amount of control that you need in the [ words when you were ]. You don't need to plugging software from a headset or a mouse. I mean some people do to get the calibration right, but it's not the mainstream thing, whereas when you're putting together compute, you really have to get it sell up properly. So streaming is very different, right, because with streaming, there's so much interconnectivity and you want to change the light balance of the cameras and the microphone volume and everything. So that's something where software comes into place. So I think, yes, it really helps us dominate the world of components. Look, since we started on this, we started to realize that people really like to have RGB elements on even memory modules. So now 1/3 of our memory modules have got RGB elements on them. We had a 70% market share in the U.S. in memory. It's ridiculous. We completely dominate. So if you go to Amazon to try and buy gaming memory or any memory craft, you'll see Corsair top it all, it's all us.

And you think it's all because of…

Well, it's a lot that... Because if you want to have -- because when you build a gaming PC, most of them have got glass cases you're looking and the first thing you see is a CPU with one of our callers on top of it, and then you see the memory modules. And so to make it really not call, you want to always want the RGB [ to be control ]. So that's the obvious thing that's worked.

So let's talk a little bit about -- so we've seen stuff like Region II starting to come out, Open Source. So over COVID, I bought a mechanical keyboard. It's a...

Tell me it’s from us.

It wasn't -- but it's got LEDs on it, but it's not a I wish I had iCUE because it has LEDs, but they can't really do much other than flash and stuff like that. But you -- there are a lot of different designers out there. You guys make great keyboards for sure. But you guys -- there are going to be people buying little portable keyboards and all kinds of other stuff. How open would you be to open source stuff like that, people integrating these things into your system? Or -- and have you seen a...

We've done it already. So we licensed it to over quite some time ago. And we have just done an announcement with iCUE a few weeks ago. Last year, we announced a partnership with ASUS with the AURA. So yes, there's an awful lot -- so we have an open SDK, so you can integrate with it. And then, of course, we do a lot with the games as well. But yes, that's the idea. We want regardless of where you buy stuff and we're not a fan of people buying other competitive products and have them work, but we can control most stuff. And the main thing we -- the reason we did it is ASUS was so we could control the elements on the motherboard, which we don't make. So if you buy it on motherboard and you've got it in the system, then you can use iCUE do everything and vice versa. If you don't want to do any complexity and you have a very simple set up with an ASUS motherboard, you can also control the memory through that. So those things, we're all trying to work together.

I would have thought you get people using -- because your products are very high quality. So maybe somebody enters with a lower quality thing. I think that's what I've actually ended up doing because I've got -- I wanted a 75% keyboard you didn't have yours out yet. But then suck back into your ecosystem because it does work and you think I've got to have that now.

So you're going to see more and more things. We've got another announcement coming out in a few weeks on iCUE, but we're going to integrate with more and more, not just competitors, but other things people want to integrate because one of the things that happens is that when people build these really nice gaming setups, the other thing that's happening is there's lights around. So you got these lights bars, light elements pool so you can basically have the entire room in tune with what's going on in the game. And so that's what we really focus on. So you're going to have a completely immersive experience. So you're just going to supply another one of our keyboards...

We can... That would be if the room starts glowing. M&A, you've been very acquisitive. I mean, you've bought some great assets on Elgato and so on. And I'm just curious how that -- how you see that today. Do you feel like you've got all the assets you need? Are there areas you'd like to get deeper into? How you're thinking about that?

Well, we -- so there's a couple of ways of thinking about it. So firstly, with M&A, you have a few targets. And the things you've already thought of, you're typically working on inside. So we say, for example, 60% keyboards, we can do that ourselves. We're just -- we are a bit late, but we've now -- we've got them out. Areas like streaming is when we bought Elgato, streaming, we were watching it, but we didn't really understand it as something we realized wow, this is exploding around us, and it's just a little bit outside of our peripheral vision. So there we bought the expert. Now, there's a lot of areas that in the world of interactive entertainment that are still quite small and they simple they're growing. And I list AR, VR, simulators, both racing Sims and flight Sims really picking up. I'd say mobile gaming is another one. Again, small just because of the nature of it. So you've got kids playing games that sometimes want some buttons around mostly this is 50 controllers that we're not interested in, but I can see where that's going. So the those of the areas that I'm talking to all these companies. And you know that the recipe works very well because most companies, when they get to $30 million or $50 million of revenue, they feel great initially when they realize when they made a couple of calls to Best Buy and can't even get through. We're got we difficult it is to actually break into the worldwide retail networks. And that's usually where we have the most synergies. So I'd say it was always a long pipeline of M&A. And yes, we'll continue to do it. I mean, it just depends on what comes up. But I'm usually -- I've got usually 1 or 2 the guys I'm talking to. Sometimes these things don't work out. People want to go in different directions or people have ridiculous valuation expectations, but...

Probably a lot of that...

We've had -- I think we've done 8 so far. Some of them are quite small. Some of them, we don't really talk about much, we bought companies that are in the background doing -- that are web design for streamers. So if your professional streamer and you want to look like a TV presenter, so you've got backdrops and icons and sort of thing. We have a company that does that, which we've folded into Elgato. So we learned early on that Elgato should really be doing service revenue as well as hardware. So we've tried to bolster. Some of these tiny acquisitions, a couple of million of revenue, and then we've got -- there's plenty of companies around that have in this 50 to 100, some even bigger that we look at. But we prefer -- we prefer to get people in the early in this $50 million to $100 million range because for that time, people usually have had some success, they realized what they need to do, and they realize that it's very, very difficult to get into retail. You talk to small companies. They're ultimately going to cover the world next year, 23-year-old CEO, he didn't know yet how complicated it is.

But you explained it to him because you've been there.

That will continue to happen, yes.

So how about operating the company in a -- let's say, it gets into a worse recession than you think it's going to or demand weakens or things go wrong. How do you operate the company? You've got a little bit of cost-cutting so far. How are you thinking about that as the further cost triggers you would pull or other things that you would do from an operating point of view?

I think some of this is philosophical if you bind to the fact that it's a temporary thing and you're looking at it long term, obviously, we've got the benefit of been doing this for 28 years, so we can look at it long term. The last thing you want to do is cut R&D for a temporary market slowdown because it takes a couple of years sometimes to develop these products. So what you do is and what we've done is we've cut some of the expenses that you naturally were put in place because this year, I think we've guided to, what, 15 or something, 14. So last year, we did almost $2 billion. Obviously, there's things you put in place for that size company when you think you're going to keep growing that you have to adjust down. At the same time, bearing in mind that number for this year is much higher at the consumer level. And so we've still got all the tech support, all the interaction with consumers, and that sort of thing going on at the same level. And so yes, we don't want to cut and then someone try and add back because especially in the Bay Area, hiring is not easy or easy than it was, but the Google and Apple and Facebook have trimmed down. So our main thinking this year has been, we'll trim some unnecessary expenses. We did a very small cut, but we'll freeze hiring for a while. And we'll let the market grow back to where we're at, and then we'll continue. But our OpEx is pretty small. I mean we have a very, very skinny OpEx because in the hardware business, the margins are -- do tend to be a little lower, so you can't get carried away.

That was another thing I wanted to ask you about is that the products keep multiplying and you get a lot of SKUs. How do you manage all that? I mean are you concerned about the complexity of all of it? Or how do you manage that complexity?

Yes, I mean, it turns out once you got the infrastructure in place, you don't need that many people. And so we've got an OpEx structure, where we've got key people doing key things other than operations or channel marketing or product marketing to manage the SKUs. So we're getting quite good at it. I think that what you realize we have a lot of SKUs you have to be as rigorous at calling the old SKUs as introducing new ones. Otherwise, you just get everyone focused on the new SKUs, and then they're going to get bored with the dirty work of like, "Okay, you've got to cut this thing and stop it." So I think that's we're pretty balanced now. So we told everybody look we don't -- if you're in the Powersports business, I don't want more Powersports SKUs. We go to 100 sometimes. But yes, that's how you do it. And obviously, once you get to a mature in a category and you've got a good market share, then it's all about maximizing margin. And then you start looking at every single SKU and every single cost structure and decide, "Okay, do we really need the SKU?" You've got SKU that's not generating enough margin, say, "Why do we even have it?" Is this a particular SKU for -- have a SKU that says, all right, the only way we're going to sell a power plan to India is if we have it at this price point, and we just deliver with that margin. That's one thing. But if we're doing that in the U.S., why do we need that? That's consumer -- the only reason the consumers are buying that because we're offering them at low price. So we've been generally cutting a lot of the low-end SKUs out, realizing that the market we're after is the guy that's going to spend $2,000 or $3,000 every few years is the one we want. And I don't want to chase down a consumer that is going to spend -- one is going to spend $20 on a headset and then forget about the brand and never know about it. So we're making the conscious decision to abandoned the very low end and entry-level and concentrate on the higher end.

So you've been doing this for a long time, started the company, running the company for a long period of time here. What are you most excited about at Corsair now, having seen so many things and built the company up to where it is today?

Yes. I mean, successful new product launches is what doesn't really excited. And I think that's true of any company. If you launch a product and all of a sudden, YouTube goes on fire and Twitter goes on fire and every of the view is saying it's the best product ever, then what better high can you have? If you walk into Best Buy and you're standing at the arm and a couple of guys are looking at products and one of them says, "Hey, just buy everything from Corsair. That's the best pinning you can get. And conversely, the opposite is [ that not ] have happened. So I think that -- and that's pretty much which everybody looks for in a product company, making great products and getting the feedback because it's a consumer product and the consumers that buy our stuff are enthusiasts. So that's really the high.

Right. Any misconception you think people have about the company here as we said that…

Well, I think everyone is educated now. I mean, look, when we started talking to Wall Street, most investors weren't gamers. And the view was, "Well, surely, you're making PC parts. I mean that's like as your customers down or somebody, obviously, you can't make any margin. "And so it took quite a lot of education to realize that no, in the new world of gaming PCs, people build them themselves. And it's like looking back to the hot rod market of the 60s, who we build them on cards. It's a very similar thing where people want to hang out together, talk about what they bought, talk about the brands, talk about the features. So it’s a social thing. And that's really what we've seen with gaming in general. It's become as much as a social activity as it is just the old view of somebody -- some 5-year kids sitting in a basement or bedroom never talking to anybody. It's very, very different well we're in now. So I think gaming everybody realizes now because where all the kids do it is that is with us in its mainstream. And it's here to stay. And as these people get older, they've got some budgets in the same way as you might spend money on golf clubs or in your case, mountain bikes. Now, kids are spending it on building a $3,000 gaming PC and everybody understands that. So I think what's happened in the investment community, of course, is a lot of the younger people, the analysts have come through. So I've been sitting in these rooms with the older portfolio managers trying to understand it and then the analyst in the back saying, "Give me the [ phone ]."

You get you to give...

Yes. Exactly.

Great. Well, we're out of time, unfortunately, but great to have you, Andy. Thank you for doing this. Excellent to have Corsair here at the conference.

Yes. Thank you.

Thanks, everyone.