Corsair Gaming, Inc. (CRSR) Q4 2021 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the Corsair Gaming's Fourth Quarter 2021 Earnings Conference Call. As a reminder, today's call is being recorded, and your participation implies consent to such recording. 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 now like to turn the call over to Mr. Ronald van Veen, Corsair's Vice President of Finance and Investor Relations. Thank you, sir, please begin.

Thank you. Good afternoon, everyone, and thank you for joining us for Corsair's financial results conference call for the fourth quarter ending December 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, the Q4 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 fourth quarter business highlights, and a discussion on what we are seeing in the market and Michael will then take you through a review of the financials and outlook before we proceed to Q&A. With that, I'll now turn the call over to Andy.

Thank you, Ronald, and welcome to our Q4 2021 earnings call. We're pleased to report that for the fourth quarter, revenues were $510.6 million at the high end of our guidance, resulting in a record $1.9 billion for 2021, 11.8% growth over 2020. Gross profit for the quarter came in at $121.8 million and a record $513.9 million for the year. We accomplished this as the world started to move towards a post-pandemic environment and in the second half of '21 outside entertainment has mostly opened back up and shelter at home guidelines have generally been relaxed. Throughout 2021 and continuing today, we continue to be in a challenging supply chain environment. And based on feedback from our customers, we believe that the market for self-build gaming PCs continues to be constrained by the shortage of high performance graphics cards. Michael will walk through more of our financial results in greater detail later in our call and address some of the questions we received at our Investor Day related to 2021 and short-term business conditions, which we weren't able to address at the time. It was our first ever Investor Day as a public company. And we received quite a bit of positive feedback. If you've not yet had a chance to listen to the recording, I encourage you to do so. I'll now take a moment to recap some of the highlights of our Investor day. We outlined three pillars of our growth strategy, which I'll quickly repeat now. Firstly, the gaming and creative market continues to grow quickly. And gaming hardware is growing much faster than gaming software revenue as consumers start to become more competitive and want to buy better PCs and peripherals. The creative market is exploding as video interaction becomes the norm. Secondly, we continue to take market share in most categories. This was highlighted by the fact that in the markets we track from external sources we have number one market share in almost every category of components that we sell, that allow gamers to build high performance gaming PCs. And we're in the top 3 in almost every peripheral category. Thirdly, that we continue to enter new categories by both organic development and by acquisitions. And in the last 18 months, we have entered three large new markets, microphones and cameras for content creators; and monitors for both gainers and content creators. We also showed our internal goals of reaching $3.5 billion of revenue by 2026. During 2021, we launched 141 new products and we've increased our number of product lines to 30. We have several examples of how new products and innovative marketing is helping us to grow our direct-to-consumer business. In November, we kicked off our CORSAIR COLLECTIONS product line with the Flavor Rush Series of our K65 RGB 60% mechanical gaming keyboard. This was a fun, colorful, custom and limited release providing unique and deeper personalization for our most engaged customers. The 60% keyboard has been quite a success in the market since we released it early last year, and the CORSAIR COLLECTIONS are exclusive to our Corsair web store in North America. In December, we introduced our long-awaited PlayStation 5 controllers, the SCUF Reflex Series, with price points ranging from $199 to $259, the Reflex, Reflex Pro and Reflex FPS use our patented remappable paddles and these adjustable controls give players the edge in most competitive games. The customer demand was simply incredible and we saw our initial launch stocks sell out in minutes. The Reflex Series of controllers are currently available exclusively on our SCUF website. And in our overall retail channel, we launched our new line of DDR5 memory products, as well as gaming systems using DDR5. DDR5 is the latest technology standard for DRAM and we are currently shipping kits with speeds up to 6,400 megahertz. Both Intel and AMD are supporting this interface on the latest processes, which helps to dramatically improve system performance. Overall, demand has remained strong for gaming components and gaming peripherals. In fact, recent market data shows, consumer demand for peripherals are close to the elevated 2020 work-from-home levels. As I mentioned before, the semiconductor shortages caused graphics cards to be in very short supply compared to demand, and has driven market pricing of certain graphics cards to 150% to 200% of normal MSRP. This has caused gaming enthusiasts to hold back on building new high-end gaming PCs that use our components. By our estimate, approximately 10% of the natural demand for our components and memory products in our Gaming Components segment was held back in 2021. We believe this should cause a bubble of pent-up demand, which will be releases as GPUs returned to normal MSRP in 2022. So in closing, after the extraordinary growth in 2020 caused by gamers spending more time at home gaming and the large growth in the creator economy, we are pleased to see that after lockdowns and shelter-at-home were lifted, our Q4 '21 network revenues were within about 8% of Q4 '20. Despite the ongoing logistical and supply chain challenges impacting markets, including the lack of availability of reasonably priced GPUs in the retail channel, we experienced healthy growth over 2020 in both our operating segments. Our Gaming and Creative Peripheral segment grew 20% year-over-year, demonstrating the underlying secular growth trends in the overall gaming, eSports, content creator and streaming hardware and services market. We remain focused on expanding our presence in the market and are well-positioned to continue to gain market share. We remain pleased with our fiscal year '21 results and the positive momentum we have retained in the overall business in 2022, which provides us confidence in achieving our full year and longer-term outlook. We have an exciting growth potential and plenty of market share to capture. 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 afternoon, everyone. We have a lot of numbers to run through as we released both quarterly and annual results, so please bear with me. In Q4, we delivered net revenue of $510.6 million, though a decrease of 8.2% compared to our record $556.3 million in Q4 2020, it remains well above Q4 2019 pre-pandemic level of $326.6 million. Net revenue for the year was $1.904 billion, an increase of 11.8% year-over-year. As Andy mentioned earlier, our fourth quarter results and really the whole second half remain challenged by a very difficult logistics and supply chain environment. Logistics remains slower than usual with many shipping lanes taking over doubled in normal shipping times and at a much higher costs. We estimate that the effect of increased supply chain costs continues to have a 2% to 3% headwind on our gross margin and resulting EBITDA percent during the fourth quarter. And we expect this to continue in the upcoming quarter. Ocean freight of 44 containers remains elevated compared to historical prices. But we did see some slight easing at the end of 2021 fourth quarter and expect somewhat better rates for 2022. Turning now to our segments. The Gamer and Creator Peripherals segment provided $176.9 million of net revenue during the fourth quarter impacted by supply and logistics constraints, a decrease of 7.8% from $191.8 million in Q4 2020, and well above Q4 2019 of $94.1 million. The Gamer and Creator Peripherals segment net revenue contributed 34.6% of total net revenue, an increase of 10 basis points from 34.5% in Q4 2020. For the year Gamer and Creator Peripherals segment net revenue was a record $647.2 million, an increase of 20% year-over-year. The Gaming Components and Systems segment provided $333.7 million of net revenue during the fourth quarter, a decrease of 8.4% from $364.5 million in Q4 2020, primarily driven by a shortage of reasonably priced GPUs and supply and logistics constraints, and well above Q4 2019 level of $232.5 million. Just over half of this revenue came from memory products, which contributed $176.8 million. For the year net revenue was $1,256.9 million, an increase of 8.1% year-over-year. Gross profit in the fourth quarter decreased by 20.8% to $121.8 million from the record $153.8 million in Q4 2020 and is well above the Q4 2019 pre-pandemic level of $70.5 million. The decrease over Q4 2020 was primarily by increased logistics costs, a return to more normal seasonal promotional activity and reduced revenues. Gross profit margin was 23.9% a decrease of 370 basis points from 27.6% in Q4 2020, mainly due to significant increases in logistics costs, especially ocean freight and promotion activity. For the year, this was a record $513.9 million, an increase of 10.4%. The Gamer and Creator Peripherals segment gross profit was $52.8 million, a decrease of 23.3% from $68.9 million in Q4 2020, primarily driven by a decrease in revenue in the same periods, increased supply chain and logistics costs and a return to more normal pre-pandemic level of holiday promotions. Gross profit margin was 29.9%, a decrease of 600 basis points from 35.9% in Q4, largely due to the previously mentioned supply chain and logistics costs and rebate levels. For the year, Gamer and Creator Peripherals segment gross profit was $224.9 million, an increase of 18.5% and a record 43.8% of total gross profit. This continues to be a great overall story and a formula for overall margin expansion as our fastest growing and highest margin segment also sits in our largest growth market. The Gaming Components and Systems segment gross profit was $69 million, a decrease of 18.8% from $84.9 million in Q4 2020, primarily driven by the decrease in revenue in the same periods and increased logistics costs. Gross profit margin was 20.7%, a decrease of 260 basis points from 23.3% in Q4 2020, primarily due to freight costs. Our memory products margin in this segment was 17.5% for the quarter. For the year Gaming Components and Systems segment gross profit was $288.9 million, an increase of 4.8%. Fourth quarter SG&A expenses were $81.5 million, a modest increase of 0.5% compared to $81.1 million in Q4 2020 primarily driven by an increase in outbound freight costs due to increases in ocean and air freight, offset by a decrease in volumes due to lower revenue and an increase in personnel related expenses. Fourth quarter product development expenses for $15.1 million, an increase of 9.9% compared to $13.8 million in Q4 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 fourth quarter of 2021 was $25.1 million, a decrease of $33.8 million from $58.9 million in Q4 2020. For the year this was $137.9 million, a decrease of $20.5 million from $158.4 million in 2020. Adjusted operating income in the fourth quarter of 2021 was $38.5 million, a decrease of $32.6 million from $71 million in Q4 2020. For the year this was $194.5 million, a decrease of $10.3 million from $204.8 million in 2020. Fourth quarter net income was $24.7 million, or $0.25 per diluted share as compared to net income of $43 million or $0.43 per diluted share in Q4 2020. For the year net income was $101 million, or $1.01 per diluted share compared to $103.2 million or $1.14 per diluted share in 2020. Fourth quarter adjusted net income was $34.7 million or $0.35 per diluted share as compared to adjusted net income of $53 million or $0.53 per diluted share in Q4 2020. For the year, this was $144.9 million or $1.45 per diluted share compared to $145 million or $1.60 per diluted share in 2020. Adjusted EBITDA for Q4 2021 was $39.5 million, a decrease of $33 million compared to $72.5 million in Q4 2020, resulting in adjusted EBITDA margin of 7.7%, a decrease of 530 basis points from 13% in Q4 2020. Adjusted EBITDA for the year was $199.2 million, compared to $213 million in 2020. Turning now to our balance sheet. As we discussed in our Q3 earnings call, in order to mitigate logistics delays, we strategically put more inventory in our hubs closer to our markets. They certainly paid off as reflected by our sequential growth over Q3, but we did pay for much of this inventory last year, and have not collected in all the sales, resulting in an increase in our net working capital and a relatively low AP balance, compared to our inventory. As funds come in during Q1 '22, net working capital will return to more normal levels. During 2021, we paid off over $78 million in debt, refinanced our remaining long-term debt to more favorable terms in Q3, saving over $8 million in interest expense per year, and increased our revolver capacity to $100 million, which was unutilized at the end of the year. We ended the year with $248.8 million in debt at face value and $62.4 million of unrestricted cash and a net leverage ratio below 1. We continue to look for strategic opportunities to use the cash we generate, such as our recent investment in iDisplay. Following such opportunities, we look to continue to reduce our debt. The last two years marked our transformation of a relatively leveraged LBO to a comfortably leveraged growth company. We are comfortable with our current debt levels and will value growth investments over debt reduction. But we do expect to continue to reduce debt. Turning now to our outlook for the year. For 2022, we expect total revenue in the range of $1.9 billion to $2.1 billion, representing growth of approximately 0% to 10%. Adjusted operating income in the range of $195 million to $215 million and adjusted EBITDA in the range of $205 million to $225 million. For 2022, we are expecting an approximately 45%-55% revenue split for the first half and second half. We expect supplies of reasonably priced GPUs to be more available as the year progresses, thus unlocking the pent-up demand Andy discussed earlier. Because of the timing of the holiday period in 2021 and Lunar New Year in 2022, we expect greater than average seasonal effect on Q1 revenue. The additional modeling details underlying our outlook remain largely the same as we have discussed in our prior earnings calls. For ease, I'll repeat them. We expect gross margins to remain pressured by logistics costs, especially in the first half of the year. Operating expense will increase to support our higher revenue level and our continued investment in new products. Assuming no further debt pay down, we expect interest expense of approximately $1 million per quarter. The $4 million patent trial win in Q1 2021 is not in our outlook. This amount could vary depending on what the judge rules and is subject to appeal and the timing of recognition of a game if any is uncertain at this time. An effective tax rate of approximately 21% to 23% for 2022 and a full year average weighted diluted shares outstanding of approximately 100 million to 102 million shares. To summarize, we’re pleased with our strong financial performance to conclude 2021 with fourth quarter revenue and profitability metrics achieving the high end of our expectations. We remain focused on growth following the transformation of our debt levels, and cost management efficiencies over the past two years. As we begin 2022, we expect to continue to experience elevated freight costs and ongoing supply chain issues. But we currently believe these circumstances will ease as the year progresses. As these macroeconomic conditions improve, we expect to increase our cash position, which should allow us to execute on M&A opportunities that fulfill our investment criteria or further reduce debt. With that, we're now happy to open the call for questions. Operator, will you please open up the line for Q&A?

[Operator Instructions] Our first question comes from Drew Crum with Stifel.

Andy, you mentioned launching some products tied to DDR5 during 4Q. Can you comment on how those have performed to date and what your expectations are for 2022? How material are these to your forecast? And then separately for Michael, the business experienced a little bit of gross margin slippage in '21 as you highlighted. And you mentioned some expected pressure in the first half. Just wanted to confirm that you're assuming gross margins for the year improved and whether or not you think '22 gross margin can get back to exceed where you were in 2020?

Okay. So first question was about DDR5. In terms of expectation, I mean, we've sold out of everything that we built. So the way to think about this is, the -- so semiconductor fabs that make memory chips will gradually move from DDR4 to DDR5. I think next year, maybe 20%, 25% of their capacity will move from DDR4 to DDR5 because the sort of people that are buying our components and the set of machines they're building tend to be higher end, the big 1 of the latest performance, there's a much higher demand. I think everybody, if they could spend a few more dollars will go to the DDR5 platform. And so yes, whatever we can get, we get probably an unshared fair of the supply because we have such a high market share now in consumer memory, but yes, everything we're getting was sold out. Now we're not assuming it's going to be a massive effect. It will help us a little bit because the ASPs are a little higher on DDR5 from DDR4 and it depends on the percentage. But we haven't remodeled that at the moment as a huge tailwind. And the reason for that is that the overall market for people building high-performance PCs is still somewhat limited by GPUs because they're so expensive and the difference in pricing GPUs of DDR5 versus DDR4. So I think the big effect that we're going to have in that side of our business is second half of '22 as GPUs become more widely available. I hope that answers the question.

In terms of your question on gross margin, if you look at the ranges we gave for EBITDA, there is a slight improvement if you use a midpoint range year-over-year expected. So we do expect there to be some small improvements in gross margin year-over-year, and they're going to be weighted more towards the back half of the year.

Our next question comes from Mario Lu with Barclays.

Yes, the first 1 is a little bit more high level. In terms of the Analyst Day, you guys said a couple of weeks ago, you mentioned the long-term revenue goal of $3.5 billion by 2026. So yes, I think that implies close to a 15% CAGR growth starting in 2023. So just curious, does that -- if you could provide more color in terms of if that includes like a breakout year needed to achieve that number or any drivers that are kind of embedded in that goal?

Well, what I would say there is that when you do year-to-year comparisons, it's very difficult to do that if you include a year where there was shelter at home. And for the purposes of the analysis, I think you remember in the Investor Day, we showed that from Q2 '20 through the end of Q2 '21, those 5 quarters were really shelter at home. And clearly, now we see that, that caused a bulge in consumer spending and consumer electronics spending. I mean, that's half the reason the supply chain is so stressed. Now out of that cycle -- but remember the first half of '21 was still in shelter at home. So we're not going to see the growth in '22 that matches the CAGR that you're talking about. We should start to see that in '23 and onwards. So what we showed you was that when you look at the side of the pandemic, and you look at the increase in gamers will spend and that sort of thing, that's the sort of growth that you see that will result from market growth plus our market share increases and that sort of thing. So hopefully, that gives you the expectation. Now there's a lot of reasons to be optimistic about the second half of '22, right? We've got Intel that's probably going to release graphics card in the middle of the year. We've got a theory of mining, which sometime during '22, I think, is going to be less profitable or in fact, impossible to do mining the way it's being done now. And I think all of those factors are going to result in much more available graphics cards should be much more affordable as well. So we think that's going to spur probably some late -- mid- to late '22 to '23, I'd expect there to be a lot of demand as people have been waiting for a reasonable priced graphic card to start building again.

Great. That's helpful. Thanks, Andy. And then maybe a follow-up on gross margin improvement. Is there any updates in terms of the D2C strategy that you guys are implementing I believe it's up to 11% of revenue now versus 9% a year ago. I guess, how is that trending versus your expectations? And are there any other products kind of outside of Origin and cuff that you're seeing a higher percentage to the D2C.

Yes. Well, I think now that we're well into the cycle of having a web store team and think strategically about the 2 things. One is as we release new products, we think about the web store strategy as we do it. So for example, we might launch, let's say, a microphone in the channel and then in our web store, we might launch a microphone plus populous shop mount, for example. So we've got lots of ways of differentiating now. The second thing is that, yes, as you mentioned, with SCUF and ORIGIN, most of the M&A opportunities we're looking at that are smaller tend to be direct-to-consumer because these days, if you start a new company, it's so easy with Shopify to start your own web store that most people just go in and do that. So both of those 2 things are going to continue to happen that will drive things up. Obviously, our base business of components in memory and keyboards and mice, we're not changing too much. So most of that business we expect to stay in the channel. The direct to consumer is clearly a higher-margin business, but it also has costs associated with it. And at the moment, we're not trying to aggressively drive customers from the channel to the store. We're more just trying to differentiate between some of the product offerings.

[Operator Instructions]. Our next question comes from Tim Nollen with Macquarie.

I wonder if I could push a bit more on the seasonality question. In Q1, you called that out. Looking back, it's a little difficult for us to assess what your kind of seasonality impacts are given that you came public during COVID. You've had this big run-up. And now you've got the supply chain question, and I've heard you in the second half, hopefully, the supply chain issues ease. It's just a little bit difficult to understand kind of how we should be phasing the revenues and therefore the margins throughout the 4 quarters of the year. Could you just maybe -- whatever color you're willing to give us, could you please give us?

Yes. So that's a difficult 1 because we don't want to start guiding quarterly. But I think what we can say is that, as you've heard from all the discussions just now, Clearly, there's a lot more tailwinds going to happen in the second half of this year than the first half in terms of growth from previous periods because the first half of last year was shelter at home year or period. And really, for the last 18 months, we've had chronic shortages and MSRP increases on graphics cards. So that really stops through the building gaming systems. So I think this year, like last year and the year before, is not going to be anything to do with historical seasonal norms. But I would say we -- our internal expectations are that, firstly, that we're more focused this year on comparing with 2020. In other words, 2019 and '20 pre-pandemic, that's what we're looking for now is to try and gauge how the market is doing post shelter at home, at length the long-term effects are. And the answer to that is really good news. But as I said, we're not going to match the surge of -- when people will step out of home with nothing else to do. Now everything, bars, restaurants are open and around here anywhere therefore. So that's the first part of it. But yes, I would say the message from here is that internally, we're assuming that there's going to be a much bigger headwind in the second half than the first because of graphics cards and also the easing of freight costs we expect. I'm surprised that hasn't happened already, but we expect that to start going down. Yes. Mike is there anything to add on that?

I mean we tried to say expect about 45% first half, 55% second half in total. And I've been here a little bit over 2 years now, and most of it was during the pandemic time. So I haven't seen a normal quarter yet. I did go back at the time with my team because I get asked this question all the time, what's normal seasonality. And Q1 tends to be down from Q4 but less than 10%. And then Q2 tends to be a little bit up and then -- sorry a little bit down from there and then Q3 and Q4 go up. When Lunar New Year timing is like it was a little earlier, tends to have a little bit bigger impact on Q1 and that conversely tends to help Q2. Not sure how much that's going to play through with the logistics environment we're in, but that would be more typical, but a more impact on Q1 than normal but less impact on Q2 based on the timing of the holidays.

Okay. That's actually very helpful because I was trying to go back to prior quarters, and it was just hard to determine a pattern given the information we have, given what's happened in the last couple of years. Could I ask 1 other numbers question actually, please, which is about promotion rebate costs. You mentioned those going up. I guess just curious how much is that related to product launches? How much is this just general cost inflation or choosing to market more? And what can we expect on that front in 2022?

I think '22, we'd expect it to get back to normal levels. I mean, with the surge that happened in the period, I described, right, Q2 '20 early -- I mean April '20 through sort of July of '21, there was no need to do any promotions because everything was completely sold out. I mean I think April, when shelter at home started pretty much every one of our retailer’s retail was sold out immediately. Yes, so I'd expect it to be more normal compared to what we saw in 2019.

More like 2019. Okay.

In terms of percentage, yes.

Our next question comes from Doug Creutz with Cowen.

It's been a bit over a year since you guys acquired Gamer Sensei, just wondering how that's proceeding, whether it's sort of going according to your expectations? And how maybe your experience has sort of affected your interest in other gamer service type acquisitions?

Yes. So we're actually still pretty bullish on the whole space around not just services, but sort of how we engage with the gaming community and how we interact with them. And as we sort of get more engaged with our direct-to-consumer initiatives, this is certainly an important stepping stone. I'd say as we've gone through the year, there's been a few changes in terms of how gamers are expecting to do lessons and what's going on in the [promotive] environment and that sort of thing. So I think at the top level, we'd probably say still a work in process, still very bullish in the space. But a little different than we initially thought we went into it.

Our next question comes from Rod Hall with Goldman Sachs.

My first question comes back to the promotional activity, Andy, and the increase there. I'm just curious how close to normal we were in Q4? And when you think promotional activity would be back to whatever the new normal level is, does that take until the middle of the year and what does that mean for, I guess, your gross margins in the first part of the year? And then I've got a follow-up to that.

Yes. No, I think Q4 was pretty much at normal levels. I'm thinking…

The reason why I talked about it and went through that section is because I was comparing to 2020 with the prior year where there was almost no promotion activity because that was in the heart of the shelter at home period. I think I've characterized the end of last year of '21 more like a normal promotional type of environment, sort of like in the prior year of '19, '18 and so on. So we didn't see anything wild and out of ordinary, but certainly compared to the prior quarter, the year before, it was a lot more.

Okay. That's helpful. And then that kind of leads to my second question, which is you guys are saying gross margins up in '22, which they were 27% mathematically in '21. So I guess that puts them at 28% in '22, but yet you just pointed 24% with normal promotional activity. So it kind of seems hard to get back to 28%. And I was wondering if there's any way that you guys could -- or even above 27%, can you bridge back to that somehow help us understand how that happens.

And the 2 main elements, Rod. The first is the easing of the logistics costs and the entanglement around there. So that will certainly give us a pretty big help. The second part of it is going to be just the continued shift to a higher percentage of our higher gross margin products. They have a higher growth rate. So over time, that shows us the total margins. So between the two of them, we're relatively confident we can increase margins. Obviously, it's difficult to overcome the very high margins at the end of '20 and at the very beginning of 2021, when promotional activity was quite low due to shelter at home. But longer term, we don't see a problem with getting the margins back up.

Right. So you just feel like removal of logistics and some of these excess costs will kind of help to put those back to where you're thinking? It sounds like not far above 27%, if I'm kind of reading between the lines here, though, Michael, is that right?

I mean if you look at year-over-year, the first half of '21 was quite strong, and we're saying that second half of '22 would be stronger. So we certainly think we'll start recovering and bringing up. But we're not projecting -- if you look at the EBITDA ranges and bigger we're growing our OpEx, as we said, some are probably around where our revenue levels are based on the numbers here in the operating income and EBITDA. You should see there'll be just a slight year-over-year margin increase.

Yes. I’d add is, we did have a few things going on in the last few months related to COVID, some of our factories in Vietnam were really shut down for a while and we had to then revert back to sources out of China, which then started affecting the tariffs. So we did have some unusual costs that were flowing through because of that, and that's generally behind us now. So we're planning next year on essentially being -- won't be done with COVID, but it's ceasing to have the same effect as it did before. And surely, freight costs will drop down. The other thing I just would say is that the biggest increase in terms of dollars a PC gamer who wants to build PC is in graphics cards and keep talking about that. But the place where we sell our highest end products is for people that are building $2,500, $3,000 PCs. And so that's really where the biggest sort of holdback is in builds because you'd be talking about a $1,000 increase in the graphics card. So I think that we're being held back on some of our high-end products that normally would yield the highest margin. So that's -- that should change during the year.

Yes. Operator, are there any more questions? Operator? I'm not quite sure what happened for our operator there. Hopefully everybody else can hear us. I'll wait another minute or 2 and see if he comes back on. If not, we may have to take questions after the call during our scheduled call time.

All right. Well, I think the operator has gone, well.

Oh, he is not. No, no go ahead.

Yes. So look, thanks, everybody, for attending. We'll follow up with the analysts in our usual meetings, and we'll see you again next time.

Goodbye.