Corsair Gaming, Inc. (CRSR) Q1 2021 Earnings Report, Transcript and Summary

Good morning, and welcome to Corsair Gaming First Quarter 2021 Earnings Conference Call. As a reminder, today’s call is being recorded, and your participation implies consent to such recordings. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] With that, I would 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. Good morning, everyone, and thank you for joining us for Corsair’s financial results conference call for the first quarter ending March 31, 2021. On the call today, we have our CEO, Andy Paul; and CFO, Michael Potter. 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. The risks and uncertainties that forward-looking statements are subject to are described in our earnings release and other SEC filings. Today’s remarks will also include references to non-GAAP financial measures. Additional information, including reconciliation between non-GAAP financial information to the GAAP financial information, is provided in the press release. I would also like to remind everyone that until our 10-Q is on file Q1 2021 numbers are preliminary. This conference call will be available for replay via webcast through Corsair’s Investor Relations website at ir.corsair.com. Andy will begin with our first quarter business highlights, and our updated 2021 outlook, and Michael will then take you through a review of the financials before we proceed to Q&A. With that, I’ll now turn it over the call over to Andy.

Thanks, Ronald, and welcome to our Q1 2021 earnings call. While we are delighted with our Q1 results, which exceeded our expectations, as we continue to see elevated levels of gaming activity and the conversion of casual gamers to committed gamers who spend money on new gear. During Q1, we delivered net revenue growth of 71.6% to $529.4 million, which is our second strongest quarterly performance surpassed only by our record Q4 2020. Adjusted EBITDA nearly tripled, growing 196.6%, to a record $80.4 million and adjusted earnings of $0.58 per diluted share, which is up from $0.45 per share over Q1 2020. We saw continued growth on buying and building $2,000 plus gaming PCs, which we believe indicates expected heavy PC game playing over the next few years, and subsequent accessory purchases. Q1 estimated advantage shipment mixes of high-margin products, leading to record high gross margins in both of our segments, a 39.1% on Gaming segment and 25.9% in our Components segment. While we are pleased to see evidence that we can achieve these levels, we caution not to expect these margins in every subsequent quarter. However, internally underscores our strong conviction that margins will increase over time as we continue to bring out high future products and become more dominant in the market. We’re also very pleased to see that in Q1, we were the number one market share position in every gaming components category that NVD monitors in the U.S., which is our largest market. We saw massive growth year-over-year in both of our financial segments, but most notably in gaming and creator peripherals, where the market continues to grow strongly, and our Elgato branded streaming products continue to outgrow the overall segment. The Gamer and Creator Peripherals segment has more than doubled in revenue from Q1 2020 and nearly tripled from Q1 2019. In creative peripherals, we continue to be the market leader in video capture cards and lighting. Our Wave microphone launched last year has gained significant market share very quickly. Our stream deck has now become the standard for home broadcasting and sales over the last three quarters has exploded. On Gaming Peripherals, we launched several new keyboards and mice, with the most notable being our new 60% keyboard, the K65, which has been sold out ever since we launched it in March. The gaming systems and components, we continue to gain share in almost every category. Our new 4000 and 5000 series of gaming PC cases have helped us drive our market share in the U.S. to 28%, a 9% lead over our nearest competitor. Over 40% of our gaming case sales are now smart cases, meaning that they are shipped with an IQ controller installed. This further drives sales of IQ RGB accessories as gamers continue to upgrade and modify their gaming PC. Our CORSAIR ONE a200 with Liquid-Cooled Ryzen CPU and RTX 3080 graphics card, received an Editors award from Tom’s Hardware. In our gaming memory sub segment, we also have over 30% of our shipments, which are IQ enabled, again, which we believe drives additional IQ accessory purchases. We had rapid sales of pre-built systems from both ORIGIN PC as well as our CORSAIR VENGEANCE PC. We’re also thrilled to start shipping our enhanced CORSAIR ONE gaming PC with 30 series NVIDIA GPU cards and offer with both Intel and AMD CPUs. We increased our pace of new products launch to almost two per week in Q1. We launched 29 new products, including five power supplies, eight case and related cooling products, three Elgato studio accessory products, four new keyboards, four new mouse pads, three high speed solid state drives and two prebuilt PC models. We will continue to expand in R&D and marketing to drive and execute on our roadmap. R&D was up over 31% over Q1 2020, and we expect that growth will continue at a higher pace for the rest of the year. We will continue to invest at a similar pace in product marketing, and you should expect us to continue to launch new high-performance products for the blistering pace and use these products to gain market share. During the quarter, we announced the acquisition of Visuals by Impulse, the world’s premium design platform for creators. VBI provides professional and individualized designs for creators and streamers who use VBI overlays, alerts and widgets to customize their broadcast, helped to find that online persona and grow that fan basis. Based on our strong Q1 results and positive outlook for gaming gear demand, we are raising our guidance for the full year of 2021. Total revenue in the range of $1.9 billion to $2.1 billion, representing growth of 11.6% to 23.4%, up from prior guidance of $1.8 billion to $1.95 billion. Adjusted operating income in the range of $235 million to $255 million, and adjusted EBITDA in the range of $245 million to $265 million. As discussed before, we’ll be adding significant resources to the company this year, both in marketing and R&D as well as infrastructure as we move towards a $2 billion revenue number. Thank you for your time and continued support. I’ll now turn the call over to Michael to discuss our financial results for the quarter.

Thanks, Andy, and good morning, everyone. During the first quarter, we delivered net revenue of $529.4 million, an increase of 71.6% compared to $308.5 million in Q1 2020. The Gamer and Creator Peripheral segment more than doubled and provided $175.9 million of net revenue during the first quarter, an increase of 131.9% from $75.9 million in Q1 2020, driven by strong growth across all product categories. In particular, sales of our Elgato branded streaming products. The Gamer and Creator Peripherals segment net revenue contributed 33.2% of total net revenue, an increase of 860 basis points from 24.6% in Q1 2020. The Gaming Components and Systems segment provided $353.5 million of net revenue during the first quarter, an increase of 51.9% from $232.7 million in Q1 2020, primarily driven by strong growth across all product categories as consumers continued to buy and build gaming PCs. Less than half of this revenue came from memory products, which contributed $161.9 million. Gross profit in the first quarter more than doubled to a record $160.3 million, an increase of 103.9% from $78.6 million in Q1 2020 even beating the last quarter’s $153.8 million. The increase over Q1 2020 was primarily driven by increased revenues as well as the positive net margin impact from sales of higher margin products, including streaming gear. Gross profit margin increased by 480 basis points to 30.3% from 25.5% in Q1 2020. The Gamer and Creator Peripherals segment gross profit was $68.9 million, an increase of $46.7 million from $22.1 million in Q1 2020, primarily driven by an increase in revenue in the same periods. Gross profit margin was 39.1% compared to 29.2% in Q1 2020. The increase in gross margin was driven largely by product mix related to strong growth in sales of higher margin streaming products, coupled with less promotional activities. We continue to see a mix shift as Gamer and Creator Peripherals contributed 43% of total gross profit in Q1 2021 as compared to 28.2% in Q1 2020. This is a great overall story and formula for continued overall margin expansion as our fastest growing and highest margin segment also sits in our largest market. The Gaming Components and Systems segment gross profit was $91.5 million, an increase of $35 million from $56.5 million in Q1 2020, primarily driven by the increase in revenue in the same periods. Gross profit margin was 25.9% compared to 24.3% in Q1 2020, primarily due to product mix. Gaming Components and Systems contributed 57% of the total gross profit in Q1 2021 as compared to 71.8% in Q1 2020. Our memory products margin in this segment was 21% for the quarter. First quarter SG&A expenses were $77.9 million, an increase of $24.1 million or 44.9% compared to $53.7 million in Q1 2020, primarily driven by an increase in outbound freight costs due to an increase in revenue, an increase due to expenses related to being a public company and an increase in personnel-related expenses. First quarter product development expenses were $15.2 million, an increase of $3.6 million or 31.4% compared to $11.6 million in Q1 2020, primarily driven by an increase in personnel-related expenses as we continue to focus on bringing an increasing number of products to the market. Operating income in the first quarter of 2021 was $67.3 million, an increase of $54 million from $13.3 million in Q1 2020. Adjusted operating income in the first quarter of 2021 was $80.4 million, an increase of $55.4 million or 221.4% from $25 million in Q1 2020. First quarter net income was $46.7 million or $0.47 per diluted share as compared to net income of $1.2 million or $0.01 per diluted share in Q1 2020. First quarter adjusted net income was $58.2 million or $0.58 per diluted share as compared to adjusted net income of $11.2 million or $0.13 per diluted share in Q1 2020. Adjusted EBITDA for Q1 2021 was $80.4 million, an increase of $53.3 million or 196.6% compared to $27.1 million for Q1 2020, bringing adjusted EBITDA margin to 15.2%, an increase of 640 basis points year-over-year. Turning now to our balance sheet. We were able to convert our strong financial performance in the first quarter into an opportunity to further strengthen our balance sheet. We reduced debt by an additional $28 million with face value now at $299 million and net debt of $177.3 million, resulting in a net leverage ratio well below 1. We did this while growing quickly and leaving sufficient resources to further accelerate growth in the future. We expect to continue to reduce debt in 2021, subject to business conditions, any need for additional growth capital. The $28 million debt payoff will result in approximately $1 million in interest expense savings during the year. As of March 31, 2021, we had $48.1 million capacity under our revolving credit facility, total GAAP long-term debt of $294.3 million and cash excluding restricted cash of $121.6 million. Our strong financial performance in 2020 and the debt pay down plans for 2021 resulted in S&P increasing our corporate rating from B+ to BB- on February 25, 2021. That reduction is not as exciting as the new products Andy just discussed, but it does give increased confidence to our suppliers and customers that Corsair Gaming continues to be a strong and reliable company to do business with. It helps what our supply chain teams are working to overcome the different shortage and logistics challenges we face today. The additional modeling details underlying our outlook remain the same as we discussed in our fourth quarter earnings call with the exception of a now reduced interest expense. For ease, I’ll repeat them. We expect gross margins to slightly improve year-over-year and operating expense to increase as well to support our higher revenue level, the need to continue to innovate at a larger scale and a full year of public company costs. Assuming no further debt pay down, we now expect interest expense of approximately $4.6 million per quarter. As noted, we’ve already paid down $28 million of our debt this year and expect to pay down approximately an additional $72 million for a total of $100 million of debt reduction in 2021, subject to business conditions and any need for additional capital. The $4 million patent trial win in Q1 2021 is not in our outlook. This amount could vary depending on what the judge rules, is subject to appeal, and the timing of recognition of a gain, if any, is uncertain at this time. An effective tax rate of approximately 21% to 23% for 2021 and full year weighted average diluted shares outstanding of approximately 100 million to 102 million shares. Overall, we’re pleased with the continued progress we’ve made on our strategic initiatives and performance of the business. We grew more than we expected in Q1 2021, and we are expecting growth in revenue and adjusted operating income for 2021, where our competitors are expecting down compared to 2020. We believe that as supply and logistics constraints ease, we’ll be able to increase market share as we are more fully stock in the channel with the full range of our products. With that, we’re now happy to open the call for questions. Operator, will you please open the line for Q&A.

Yes. Thank you. [Operator Instructions] Our first question is from Matt Cabral with Credit Suisse. Please proceed.

Yes. Thank you. Andy, you talked 90 days ago about a stronger first half than second half during this year. Wondering if you could just update us in how we should think about trends compared to the typical seasonalities we had into the second quarter. And then thinking about sort of the transition has moved from the first half into the back half of the year, just your latest thoughts.

Yes. Well, we’ve given out to guidance of what we think is going to happen, my best estimates. All the signs that we see at the moment is that people are still spending a lot of time gaming and more importantly, more people are starting to play games in a more committed fashion and buy gear. Now we expect that to continue, in fact, what we’re focused on now is really looking past COVID and pre-COVID and trying to compare the numbers that we’re seeing now with 2019 comes. So you can see what the true growth is in the sector. And it’s pretty encouraging what’s going on. So obviously, we don’t know for sure what’s going to happen in the second half, the assumption is that 2020 was a fairly good acceleration of people migrating to committed gaming. And we’ll have to see how that plays out in the second half. So we’ve been somewhat conservative in our outlook thinking that it’ll be relatively low growth in second half, but so far, clearly we’re seeing a lot higher acceleration than we planned.

Got it. And then from the prepared remarks, it sounds like supply constraints are still an issue that you’re seeing. I guess, wondering if you can update us on where you’re feeling those the most across the portfolio and how the constraints look today versus where they were 90 days ago? And I don’t know if you just have a guess on when do you think you’ll finally be able to catch up to demand from a supply chain standpoint?

Well, so I think the last part of the question, it all depends on the supply and demand. At the moment, demand for consumer electronics goods is obviously outstripping the supply capability of the semiconductor industry. And if you listen to different parts of the industry, the big guys, the TSMCs and Intel, et cetera, then obviously this is a short-term thing. Now for us, specifically, the good news is we could have shipped even more. So Q1 results as good as they are, could have been higher if we would have more supply. So what are we doing? We’ve obviously got a team of operations and procurement people that are working hard to make sure we can get the supply we need. At this point, we have enough supply to meet the plans we have and the forecast we’re giving out, but we’d like to get more. That’s for sure. Whether or not demand in the second half, overall will ease up and we don’t know. But certainly, this is not a short-term issue. So what we’re doing about it is, as you sort of expect, we’re trying to make sure we prioritize the high feature products that we know the most committed game is one. And for those products we have, the more entry level, that still have some of the semiconductor controllers in them, we’re easing off on those. And so that helps, obviously, with the product mix and that sort of thing, but that’s what we’re trying to focus to supply.

Got it. Thank you.

Our next question is from Mario Lu with Barclays. Please proceed.

Thanks very much for taking the questions. I have one, the first one on new products. So you mentioned in your slides that 33 million units sold in the past 12 months as well as 84 product launches. So how important are these new launches each year in terms of revenue compared to existing? And what would you say are the main gaps you’re still hoping to fill in your product portfolio?

Well, so first off, obviously, the very company, new products are important. We haven’t actually looked at how many of those products are refresh versus brand-new segments, but there’s quite a significant number of the products last year for brand-new segments. And when you think about microphones, for example, some of the lighting products we brought out, we didn’t have those before. So that’s incremental growth, incremental revenue, incremental TAMs that we’re addressing. There’s a certain amount of products, probably two-thirds of the ones that we introduced that are we have to keep refreshing or we want to keep refreshing to make sure that we use the latest technology and supply the latest features. But yes, any tech company making products like we do, you’ve got to keep bringing products out. We try and refresh most of our product lines every 18 months. That’s a little bit faster than the inherent refresh rate that consumers are looking for, but we want to make sure we’re ahead of that curve. So as soon as consumers are looking to refresh or upgrade that there’s the latest and greatest product available.

Got it. Thank you. And then just one on SCUF. You mentioned that SCUF was one of the drivers of peripherals outperforming. I believe the Xbox controller currently is compatible with the Xbox Series console. But I believe that PlayStation controller still isn’t compatible solely with PlayStation 5. So any updates you can provide on the Playstation 5 controller and just a high-level overview of that segment? Thanks.

Yes. Well, the first thing is, as you probably know, we have a license agreement with Microsoft for Xbox. And so it’s a slightly different split between Xbox and PS4. In other words, we have a higher sales of PS4. So it is the majority of the revenue of SCUF. If you look at the installed base, it’s well over 100 million units of PS4 versus a few million of PS5. So still, by far, the majority of the demand comes from that segment. We’re obviously working as fast as we can to get out of PS5 controller. We haven’t released when that will be, but I suspect we’ll be pretty early in the market compared to any of our competitors.

That makes sense. Thank you.

Our next question is from Rod Hall with Goldman Sachs. Please proceed.

Yes. Hi, guys. Thanks for the question. I wanted to just kind of come back to the guidance because when we calculate the implied Q2 through Q4 revenue guide, it just comes in line with consensus, which seems pretty conservative, considering how significantly beat in Q1. So I’m just curious, is supplies the main reason you’re being so conservative there or are you seeing some early signs that demand is tailing off or what’s kind of affecting that and coloring that guidance? And then secondly, I wanted to come back to performance memory and see if you could quantify for us just how big that was in the quarter? And I’m also kind of curious about the margins there, whether the supply issue is helping, hurting margins, what’s going on with performance memory? Thanks.

Yes. Well, let’s see if we can handle the first part of the question. So I think in general, as we’ve approached 2021, we’re not suggesting that there’s going to be massive growth in 2020, because over the years, where we’ve looked at the growth in gaming, you get surges that are due to various things. 2018 was Fortnite, a big surge of growth. And 2020, obviously, shelter at home helps. So when we look over our shoulder, we see that there’s waves of growth that drive the market rather than a steady linear growth. And so that’s how we expected 2020 and 2021 will look as we get through it. We don’t have any new information at this point suggests any different. Clearly, we’ve got a fantastic Q1 result. And so we’re pretty optimistic, but no reason yet to get ahead of ourselves and suggest that there’s going to be massive growth in the rest of the year. But obviously, there could be. Now the second thing on memory, well, we’ll ask Michael to give you the breakout. You want to…

The gross margin of memory was – I mentioned in my remarks, was 21%. So that’s higher than our total – like, our average in the last few years, but sort of in line with performance last year. Memory chip pricing went up, starting at the end of last year through Q1, and that tends to help our margins when chip prices are going up. It hasn’t quite hit the point where it’s impacting how much memory people buy yet, but if it does get too expensive, that starts become a consideration because people tend to have a set budget per system for memory. So it was a good quarter for us for margin and performance, but obviously, our Gamer and Creator Peripherals than our rest of our components outgrew memory in Q1.

Okay, thank you.

Yes, Rod, from a supply standpoint, I think what’s happening is we are starting to get a little more dominant. We got a very high market share in memory. Well over half the market is Corsair now in the U.S. As you probably know, HyperX is a brand got sold to HP. So that brand has to exit the market for memory. So some of this is just the fact we’ve got a slightly more dominant position in this channel. The other thing is we’re up to almost 35% of our shipments now are RGB or IQ-enabled memory and so rather different. So we’re really not a standard. So we’re really not shipping a lot of commodity memory at this point. And that obviously allows some differential in margins.

Great. Okay. Thanks a lot.

Our next question is from Drew Crum with Stifel. Please proceed.

Okay, thanks. Hey, guys, good morning. Andy, in some past calls, you’ve noted an influx of new gamers to the business. Can you comment on what you saw in 1Q? I know there’s been some concerns that as economies reopen, this is going to slow. Just based on your observations, is the velocity of new course of their consumers continued or is it decelerated? And then separately, can you comment on M&A and your decision to accelerate debt paydown, what does that portend to or suggest in terms of M&A opportunities that the business has? Thanks.

Yes. So look, in terms of games and consumers, we’ve got the benefit now of having quite a few research reports done by the usual suspects, so Nezu, JPR, et cetera. I think what we’re seeing is that although the gamers continue to increase, now the numbers are getting around 3 billion gamers in the world. The more important number for us, firstly, those people that are actually paying money of any sort at all for games or hardware. And specifically for us, how many people are playing games at a higher level, so that they started by gear. As you probably know, it’s still a small fraction of the people who are playing games who are buying specialized gaming gear. So we’re nowhere near any kind of saturation, in fact quite the opposite. The vast majority of people that are playing video games have bought no specialist gaming gear at all. So we still have a very untapped market and that’s really what we’ve seen now looking over our shoulder over the last 12 months. It’s less of a factor that more gamers are coming to the market, more factors that the gamers that exist are playing more and starting to buy more gear. Now the most encouraging part of that is the number of people in the PC gaming sector that have actually stepped up to buy or build gaming PCs because my notion is, if you’re buying a $2,000 plus gaming PC now, you’re planning to play a lot of games, not just in the next few months, but well into after COVID, shelter home stops. So that’s the most encouraging thing we’ve seen. And we had record sales in Q1 for all of our prebuild gaming systems, ORIGIN and CORSAIR. And we have very, very healthy growth in our components business, and that’s directly tied to certainly to the products we make, it’s truly tied to people building $2,000 plus gaming PCs. So that’s a very different dynamic than somebody – the parent buying a pair of headsets for their kids because they’re home. So I do think we’re seeing a continued long-term growth as people get more and more into gaming and especially the PC gaming sector and decided buy specialist gear, either maybe move from playing on laptop to dedicated high-performance gaming PC.

And quickly on the M&A question and the debt paydown, for the average smaller product-oriented acquisitions we’ve done over the last two years, we certainly have sufficient capital to execute on those type of acquisitions out of our cash flow, while still continuing to reduce debt somewhat. When it comes to a quarter-by-quarter choice, I mean, our debt is from an earlier stage in the company’s history at slightly higher interest rates. So it’s an immediate return in terms of higher EPS via lower interest expense. So we don’t have anything needs to use the cash for. I usually choose to paydown debt and get that immediate benefit. Andy and the team came with a larger acquisition, I always couch what I say about what is kind of going in the future with subject to business conditions and need for further growth capital. So we could see more cash flow to acquisitions versus debt paydown because we’re not committed to making any specific debt paydowns.

Okay.

Yes. And first, the only thing I’d add on that is the smaller acquisition. We’ve got a pretty good pipeline of a bit we’re talking to. The smaller acquisitions, as Michael said, we can pay out of cash flow, bigger acquisitions would take – now they went public, would take some time to close. So yes, we’re not sort of staring into – obviously, we had a massive cash need in front of us, we wouldn’t be paying down debt. So there’s nothing on the horizon. Yes.

Okay. Thanks, guys.

[Operator Instructions] Our next question is from Thomas Forte with D.A. Davidson. Please proceed.

Great. Thanks for taking my question. First of all, congrats on an excellent quarter. I have one question and one follow-up. So for my first question, I wanted to talk about – you were asked about kind of the pace of reopening and the demand for gaming. I was curious if you were seeing anything geographically. So locations in the globe that maybe are still having a greater challenge with the pandemic versus perhaps the U.S., which is progressing with the inoculations. Are you seeing any variance in demand for gaming in that regard?

Well, we are for sure. I mean I think it’s more to do with sort of seasonal patterns so far. I mean towards the end of the quarter, Europe started to slow down a little bit, but that’s quite normal. The U.S., which is now sort of ahead of the curve, I think in terms of reopening, we haven’t seen any slowdown. So I think that’s the only data we really have in front of us that’s sort of handy and people can understand what’s going on. I mean where I led this people in the streets, in restaurants, everybody’s out on about and we don’t see any effect, so – but that’s the only thing I can really point to. It’s still too early to comment on Q2 activity. Remember, last year, the lockdown sort of went into effect late March, early April, when people were really starting to be stuck at home and realize are going to be there for a while. So it’s really too early to sort of draw a lot of conclusions. But so far, in the results we’ve seen, yes, no obvious country that’s suddenly changing direction.

Excellent. And then Andy, I wanted to ask you, as a long time participant in the gaming industry. What your high-level thoughts were on Epic games versus Apple court battles?

Yes. We’ll let them fight that out. That’s a complicated question of how going to get distributed, but I’m not going to comment on that.

All right. Thank you.

Yes.

Our next question is from Tim Nollen with Macquarie. Please proceed.

Hey guys, thanks. This is Sean on for Tim. My question is on DTC. Could you give us an update, you mentioned the goal of 15% DTC revenue by 2023. Could you tell us where that’s at now? And any trends you’re seeing around that area? Thanks.

Yes. Well, we – I mean we’re well north of 10% now. It’s the first thing across our portfolio companies. Almost every acquisition we’ve done over the last year has been mostly direct-to-consumer with their business. So that’s helpful. And then our own business, we’ve really doubled down on. So we hired a pretty new dedicated team Q4 last year. And then really coming up to speed pretty quickly. We’ve added a lot of infrastructure to keep track of customers and up-sell and cross-sell. So yes, that’s what’s happened. So it’s already at a pretty good pace. And so I think we’ve set that target, I think, pretty reasonable. We’ll probably get that before 2023, as we said. But anyway, yes, that’s where it’s at now well north of 10%.

Got it. Thanks.

And our final question is from Doug Creutz with Cowen and Company. Please proceed.

Hey, thanks. Maybe comment on how the Gamer Sensei acquisition is going? You’ve had it now for several months and just wanted to know that’s progressing and according to what you had hoped?

Yes. I mean, it’s still early days. I mean we’ve had a few months to get the team sort of integrated and figure out what we’re going to do. I think we’ve mentioned in previous calls that the main thing we’re doing with Gamer Sensei is to relook at the entire coaching roster and look at all the pricing structures and change – sort of change how it works. So when we bought Gamer Sensei, they were operating in more like an open table structure where they had a platform where gamers and coaches could get together and the coaches consider on prices. We’re going to move to a slightly different model, more like you’d see at a health club, where you book lessons to the health club and the health club sets the prices. And then we will – we’re going to drastically reduce the number of coaches obviously, we’ve got access with our influencer network to a lot of really good coaches, same thing with the sponsored teams we have. So we’ll upgrade coaches hopefully, upgrade prices a little bit, and then we’ll set the pricing tiers. We’ve got a lot more deeply ambitious plans of doing not just one-on-one training but doing camps and master classes and that sort of thing. So it will be a – I think the time we get into the middle of the year, it will be quite a different business than it was when we grow them.

Great. Thank you.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to Andy for closing comments.

All right. Thank you. Well, look, we’ve stated this before, we’re at the forefront of a massively growing market centered around gaming, e-sports and streaming. We can see a clear path to strong growth in revenue and margins over the next few years. Obviously, help in 2020 by shelter at home by giving gamers more time to play games and learn about how better gear can improve their gameplay. We’re not seeing any signs of trends reversing as shelter home subsides in different parts of the world. In fact, in the U.S., where most shops, bars and restaurants are already open, we’ve not noticed any significant drop in demand other than normal seasonal patents. On the contrary, we continue to see demand, exceed our ability to supply in many of the product lines due to worldwide shortages of key semiconductors. We remain focused and committed to give gamers and streamers the tools they need to play their best game, produce the best content and have fun doing it. Thank you for your interest in Corsair, and thanks for joining us on the call today.

Thank you. This does conclude today’s conference. You may disconnect your lines at this time, and thank you for your participation.