Turtle Beach Corporation (TBCH) Q1 2021 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen, and welcome to the Turtle Beach first quarter 2021 conference call. Delivering today's prepared remarks are Chairman and Chief Executive Officer, Juergen Stark; and Chief Financial Officer, John Hanson. [Operator Instructions] Before we go further, I would like to turn the call over to Sean McGowan of Gateway Investor Relations, Turtle Beach's IR Advisor, as he reads the company's safe harbor that provides important cautions regarding forward-looking statements. Sean, please go ahead.

Thank you, Liz. On today's call, we will be referring to the press release filed this afternoon that details the company's first-quarter 2021 results, which can be downloaded from the Investor Relations page at corp.totalbeach.com, where you'll also find the latest earnings presentation that supplements the information discussed on today's call. Finally, a recording of the call will be available on the Investors section of the company's website later today. Please be aware that some of the comments made during this call may include forward-looking statements within the meaning of the federal securities law. Statements about the company's beliefs and expectations containing words such as may, will, could, believe, expect, anticipate, and similar expressions constitute forward-looking statements. These statements involve risks and uncertainties regarding the company's operations and future results that could cause Turtle Beach's results to differ materially from management's current expectations. While the company believes that its expectations are based on reasonable assumptions, numerous factors may affect actual results and may cause results to differ materially. So the company encourages you to view the safe harbor statements and risk factors contained in today's press release and in its filings with the Securities and Exchange Commission, including, without limitation, its annual report on Form 10-K and other periodic reports which identify specific risk factors that also may cause actual results or events to differ materially from those described in our forward-looking statements. The company does not undertake to publicly update or revise any forward-looking statements after this conference call. The company also notes that on this call, that we'll be discussing non-GAAP financial information. The company is providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States, or GAAP, and you can find a reconciliation of these metrics to the company's reported GAAP results in the reconciliation tables provided in today's earnings release and presentation. And now, I'll turn the call over to Juergen Stark, the company's chairman and chief executive officer. Juergen?

Good afternoon, and thank you for joining us. We're very pleased to report 2021 got off to a great start with another strong quarter. Q1 revenues were up 166% year over year, exceeding expectations as both the market and our products continue to perform very well. Furthermore, we delivered adjusted EBITDA of over $15 million in the quarter and operating cash flow of over $21 million, both of which set records for the first quarter. As we've often said, gaming is a great category in which to be a leader. The past years have now shown two surges that dramatically expanded the base of gamers, gaming headset users, and gaming accessory buyers, both in console and in PC. The first surge in 2018 was driven by Fortnite, and the second in 2020 was driven by stay-at-home orders. In both surges, we outperformed the market and demonstrated excellent execution that leverage those surges to significantly move our business forward. Those dynamics continued in Q1 2021, with us outperforming the market and leveraging our execution to generate excellent financial results and to significantly progress our business strategy. With so many new and lapsed gamers being drawn into the market and existing gamers spending even more time gaming, we continue to see the overall market for gaming accessories grow. New console launches have typically been followed by an uptick in sales of the console accessories, and this is happening again with sell-through up after the fall 2020 launches of Xbox Series X and S and PlayStation 5. In the first quarter, according to NPD, retail sales of console gaming headsets in the U.S. were up just over 60% in dollars compared to the first-quarter 2020. Because stay-at-home mandates last year didn't really kick in until the very end of the quarter, this year-over-year increase was not up against the strong increase in consumer demand that occurred when everyone was staying at home but still reflects strong growth, including over 2019. First-quarter year to date, seven of the top 10 and 12 of the top 20 best-selling console headset models in the U.S. were Turtle Beach models. Our new Gen 2 Stealth 600 and 700 wireless models continue to take the market by storm, holding four of the top five selling product spots in the U.S. per NPD. What a great proof point of our ability to launch market-winning products year after year. In fact, nearly 50% of our revenues in Q1 came from products we launched last year. The PC accessory market for headsets, keyboards, and mice also grew substantially, up over 90% in U.S. retail sales per NPD. And we way more than doubled the market growth. Our progress in expanding our award-winning ROCCAT portfolio of PC accessories and gaining share in that $3.5 billion market is going well, and there are more very exciting products coming. On Monday, we announced two incredible new PC gaming keyboards. First is the Magma, which has a fully illuminated top plate, showcasing ROCCAT's innovative IMO RGB lighting technology for a great price of $59.99. There are also our new Pyro keyboard, which takes inspiration from ROCCAT's award-winning Vulcan line and is one of the most feature-packed mechanical gaming keyboards available for under $100. We also continued expanding ROCCAT's line of Vulcan keyboards with our recent launch of a new version of the Vulcan Pro optical keyboard. In April, another really big announcement for ROCCAT was the new Kone Pro series PC gaming mice. ROCCAT's first Kone mouse debuted in 2007, early in ROCCAT's life as a company. And since then, it has undergone well over a decade's worth of research into hand sizes, grip types, and button clicks. The Kone Pro series combines ROCCAT's iconic mouse design with their latest technologies like the ridiculously fast Titan Optical Switch, Titan Wheel Pro, and more. Beyond all the amazing new PC products, we've also secured partnerships for our ROCCAT brand with several leading streamers and e-sports organizations, including noted variety streamer, Brennon GoldGlove O'Neill; leading Korean e-sports organization, Gen.G; and Riot Games' League Championship series, North America's largest e-sports league and the third most popular professional sports league among young adults in the U.S. As you can probably tell, I'm excited both about the products we've launched but also about the products we still have coming this year. As John will detail in a minute, the balance sheet continues to get stronger. We ended Q1 with $63 million in cash and no debt. The solid cash position and strong outlook for cash generation led us to extend and expand our share buyback program at the beginning of last month, approving up to $25 million in buybacks over the next two years. More importantly, the rock-solid balance sheet allows us to make strategic and tactical moves focused on generating future growth. After John reviews the numbers, I will come back and talk more about our longer-term growth plans, as well as the details of our increased outlook for 2021. With that, I'll turn the call over to John to review our financial performance. John?

Hey, thanks, Juergen, and good afternoon to everyone. As Juergen has noted, we continued to see very strong sales momentum, margin expansion, and operating cost leverage during the first quarter of 2021, driving better-than-expected results across all of our financial metrics. Net revenue for the first quarter of 2021 was $93.1 million, up 166%, compared to $35 million in the year-ago quarter. This compares to the guidance of $88 million, which we issued in early March. Revenue growth in the first quarter was the result of several factors working together to increase demand, as well as our expanded product offering in the PC accessories category. It is relevant to the year-over-year comparisons that last year, the console market in Q1 was soft, as expected, ahead of the new console launches. This reversed with stay-at-home orders at the end of March. Gross margin in the first quarter was 37.5% of sales. That's 670 basis points higher than the 30.8% we reported in the first quarter of 2020. This increase was driven by two primary factors: continued lower-than-expected promotional spending and volume-driven fixed-cost leverage. Operating expenses in the first quarter of 2021 were $22.6 million, compared to $15.8 million in the same quarter of 2020. The increase was driven by volume-related selling costs, aligning our cost structure to a business that has grown dramatically, as well as investments to expand our PC accessories business and drive future growth. OpEx as a percentage of revenues decreased significantly, indicating strong operating leverage. As a result of the revenue growth, gross margin increase, and operating expense leverage, adjusted EBITDA in the first quarter of 2021 was $15.3 million, an $18 million improvement over the year-ago quarter when adjusted EBITDA was a negative $2.7 million. GAAP net income in the first quarter of 2021 was $8.8 million, compared to a net loss of $3.6 million in the year-ago quarter, reflecting the trends I just discussed. GAAP net income per share in the first quarter of 2021 was $0.49 on 18.1 million weighted average diluted shares outstanding compared to a net loss per share of $0.25 on a 14.5 million weighted average diluted shares outstanding in the year-ago quarter. The increase in the diluted share count is primarily the result of the fact that, in quarters showing a net loss, the basic and diluted share counts do not include options and other common share equivalents. Adjusted net income for the first quarter of 2021 was $9.4 million or $0.52 per diluted share, compared to an adjusted net loss of $3.4 million or $0.23 per diluted share in the 2020 period. Cash flow from operations was $21.1 million in the first quarter of 2021. That's up 20% from $17.5 million in the first quarter of 2020. Our effective tax rate for the first quarter was 23.8% compared to 33.9% a year ago. This was somewhat lower than the 28% rate we had expected for 2021, but we do expect the full-year tax rate to be around 27%. Now, turning to the balance sheet. As of March 31, 2021, we had $63 million of cash and cash equivalents with zero debt, including no borrowings on our revolving credit line. That's a $54.5 million net improvement from the end of March 2020. Inventories at March 31, 2021, were $59.1 million, compared to $39.3 million as of March 31, 2020, and $71.3 million as of December 31, 2020. The increase in inventory was driven by expected continued strong demand in early 2021, a higher revenue run rate for the business, and the anticipated launches of new products in the coming months and quarters. So now, I'll turn the call back over to Juergen for some additional comments. Juergen?

Thanks, John. I'll finish with some comments on what we see for the market and update on our expected results for 2021. To quickly recap our strategy, over the last two years, we have expanded into new categories, significantly increasing our addressable market, and we will continue to add new categories over time. The global gaming market has a $94 billion addressable market in hardware, $188 billion in software, and $3 billion in services. And all of those segments are expected to grow at mid- to high single-digit rates or more over the next several years. We currently compete only in the hardware market. I say only, even though the gaming hardware market is nearly $100 billion in size. Within this market backdrop, we see tremendous opportunities to, one, continue our leadership in console headsets and participate in what we expect will be continued strong demand following the new console launches; two, continue our rapid expansion into the $3.5 billion PC accessories market with our expanding portfolio of ROCCAT products; three, expand into the $2.3 billion market for microphones, with the first products coming from Neat soon; and four, continue to launch into new categories within that enormous, growing $100 billion market. And while all of that is focused on hardware, software and services are of high interest to us over time as well. And there are certainly categories within those markets which would be highly complementary to our gaming hardware business. As I said before, we are not just looking to enter new categories. Our long-term goal very simply is to lead each category in which we compete. I realize this is ambitious, but we've led in the console gaming headset market for more than a decade by delivering high-quality products with innovations that create a better experience or even a competitive advantage for all levels of gamers. That's a core part of our formula for building the strong Turtle Beach brand and gamer fan base. We're applying that same formula in our ROCCAT PC headsets, keyboards, and mice with the goal to lead those categories over time. Our newly acquired Neat microphones team has exactly the same mindset with their coming portfolio. Frankly, they are very determined to, again, redefine the microphone market like they did years ago with blue microphones. When combined with our exceptionally strong retail relationships and great execution, we believe we can lead in every category we pursue over time, and that's our goal. We intend to continue to make organic investments to expand into new product categories. In spring last year, recognizing that we were headed for a strong year financially, we proactively invested into that strength and began working on multiple new products in adjacent gaming accessory categories, which we'll launch this year. Those adjacent category investments, as well as continued growth in PC accessories, are meaningful contributors to our results this year, and we expect them to continue to grow significantly in the coming years. We also intend to grow through acquisitions. We're very selective and make the decision to acquire only when a stringent set of financial and strategic criteria are met, including high-quality products, a strong team with a culture and mindset that matches ours, and underlying deal economics that can generate a superior return within a reasonable period. We are also highly confident that our performance culture, strong execution, and rigorous operational processes can add value to any company we acquire, like we have with ROCCAT. From a financial standpoint, this boils down to a simple set of long-term goals: number one, maintain the goal of 10% to 20% top-line growth over time; number two, deliver category-leading EBITDA margins while making investments to drive that growth; number three, utilize our strong balance sheet to enable the above, including organic investments and selective acquisitions of companies that meet our criteria. Let's turn now to our increased outlook for 2021 and beyond. Our view of how the gaming accessory market will play out in 2021 is consistent with what we shared two months ago, when we first laid out our 2021 outlook. We believe the incredible market surge in 2020 led to another step-function increase in the total base of gamers, just as it did in 2018 with the Fortnite surge and, as a result, significantly increased the size of the market. Q1 U.S. console headset retail sales being up over 50% from Q1 2019 is a good indicator of this. Of course, it's going to create some tough comps, particularly in the second and third quarters, where stay-at-home surge was focused. But as you can see from the first quarter market stats I covered, the gaming market continues to be very robust in all segments. And in our case, we expect revenue growth on top of the underlying markets given our progress in growing share in the PC accessories market, our entry into the microphone market, and our entry into two new gaming categories over the coming months. With that context, we are raising our revenue outlook to approximately $385 million this year, up from our prior guidance of $370 million and up 7% from the record $360 million in revenue we delivered last year. We raised our target for adjusted EBITDA margin to 13% of revenue, up from our prior target of 12%, which would bring our EBITDA in 2021 to roughly $50 million, up from our prior guidance of approximately $45 million. We believe a 13% EBITDA margin compares quite favorably to others in our category despite our somewhat smaller size. The approximately $50 million in expected EBITDA reflects several important dynamics we expect this year. So let me quickly review those. First, gross margins starting in Q2 of 2020 were benefited by significantly lower-than-normal promotional levels given constrained supply for several quarters. The benefit from that unusual lower promotional spending was large and flowed directly to gross margin and EBITDA. Our guidance anticipates promotional levels that return to more normal levels this year, starting in the second quarter. Second, gross margins last year were negatively impacted by a higher-than-normal airfreight to expedite supply and capture the surge in market demand. The airfreight spend at around $9 million was much higher than the normal few-million-dollar level we typically have. We expect airfreight this year to be much lower than last year, although it could be a bit higher than our normal annual spend due to supply and logistics constraints. Note that our revised guidance has factored in our current view of semiconductor supply, associated expediting costs, and increased shipping time frames and costs. Nevertheless, the situation on components and logistics, both of which have been and continue to be constrained, is very dynamic and could change for the better or for the worse over the course of the year. Third, in addition to staff and infrastructure to support a business that's expected to be 60% higher than it was in 2019, we will continue to invest in sales and marketing to support the targeted growth this year, as well as set us up for continued growth in 2022 and beyond. As a result of the higher revenue and adjusted EBITDA expectations, we now expect adjusted net income per diluted share to be approximately $1.50 for 2021, up from our prior guidance of $1.35, using an average share count of roughly 18 million and a tax rate of approximately 27%. As a reminder about expected revenue phasing this year and our expectations for Q2, as we pointed out last year, revenue phasing in 2020 was different from past years. Q1 started soft, as expected, ahead of the new console launches, stay-at-home orders caused an enormous spike in Q2, and the replenishment of channel inventory, as well as continued strong sell-through, caused an even bigger increase in Q3 sales. In Q4, things started to normalize, but strong sell-through continued with the launch of the new consoles. We expect 2021 to have similarly atypical quarterly revenue phasing. This means quarterly year-over-year comps, in essence, trying to compare an unusual year with another unusual year, won't be a good indicator of the underlying markets or our financial progress. So we continue to encourage investors to remain focused on annual results. That said, we expect our revenue in Q2 of this year to be approximately $70 million. We're expecting second-quarter adjusted EBITDA to be approximately $2 million. That Q2 EBITDA expectation reflects alignment of staff and infrastructure to support our now much larger business, as well as the fact that many of our new product announcements, supported by the corresponding marketing campaigns, are actually coming in Q2. So we will have more of our full-year marketing spending in Q2 than normal. For the second quarter of 2021, we expect adjusted net loss per share to be approximately $0.07. We are very pleased with our strong start to 2021 and the opportunity to further increase our expectations for the year. We continue to put ourselves in a position to achieve our long-term goals of 10% to 20% growth while delivering category-leading EBITDA margins and strong cash flow. And we've, again, demonstrated an ability to execute extremely well across our entire business. Our balance sheet has never been stronger, and we continue to be laser-focused on progressing our business forward to continue increasing shareholder value. Let me reiterate in closing my appreciation for the global Turtle Beach team members. It may seem like delivering these stellar results has become routine, but it doesn't happen without the incredible performance and dedication of every person at the company. Our people are what makes Turtle Beach succeed, and I'm very proud to be a part of this great team with you. Operator, we're now ready to take questions.

Thank you, sir. [Operator Instructions] And our first question will come from Thomas Forte, D.A. Davidson. Please proceed.

Great. So Juergen and John, congrats on an excellent quarter. So one question and one follow-up. So the question I had is, Juergen, I don't want to doubt your projections because you're -- it's one of your core competencies. But if 2021, on a full-year basis, is a year of, call it, elevated demand for gaming accessories, is there a possibility that promotional activity may not return to, for example, a 2019 level, so on that basis, there could be a stronger gross margin and EBITDA than you're currently thinking about? So that's my first question, and then I'll come back with my follow-up.

Thanks very much, Tom. That's a great question. We are -- as I mentioned, our guidance is projecting promotional levels to return to normal in Q2, and we're already seeing some signs of that. So we think that's the right way to do our projections. Of course, it's possible that it may not go fully back to normal. And I would just remark that that would be more driven by supply constraints than strong market demand. It's a common misperception that strong market growth or demand drives a reduction in promotions when it's really the supply side that drives the reduction. A very simple example. If you can't get enough supply of your products to meet demand, you are not going to spend extra money to put them on sale or to get additional placements at the front of retail stores, things that go beyond discounting price that are a very typical part of a normal promotional model for consumer electronics.

Excellent. Right. And then for my follow-up question, I wanted to ask you, as a longtime industry participant, what your view was on the Epic games versus Apple situation.

Well, we're obviously following that closely, Tom, and I respect Epic's desire to challenge the model, but we'll let those guys fight it out and see what happens.

[Operator Instructions] Our next question comes from Mark Argento with Lake Street.

Hi, guys. Congrats on the strong quarter. Just wanted to kind of peel the onion a little bit on your expectations for the second half in terms of the phasing, as you call it. Is the kind of the 2019, kind of what we saw from a quarter-in, quarter-out basis, is that kind of what we should kind of key off of in terms of percentage of business in the various quarters? And then I just wanted to talk about how much your marketing spend are you going to pull forward into Q2.

Sure, Mark, happy to answer those questions. So based on Q1 actuals and Q2 guidance and the full-year results, that would put about 42% of revenues in the first half, so leaving 58% in the second half. And we would roughly break that Q3 and Q4 with 20%, 21% of the annual revenues in Q3. We'll guide the second half in August, as we always do. And it's important to keep in mind that revenue can easily flow between those two quarters just based on days of -- differences of order timing. But that's roughly how we think about the phasing.

That's helpful. And then in terms of the marketing spend, what -- it sounds like you're going to launch a few programs. Is it a substantial pull forward? Just trying to get more of a case of a modeling question, but any thoughts there?

Yeah, sure. And I mentioned, actually, it's going to be an exciting couple of months coming up here. We got a lot of launches. PC launches tend to be more spring and early summer-focused versus console, which is later in the year. So given all the products we're launching in PC, you're going to see a lot of activity in Q2 and the associated marketing spend to support them. So that moves, I would say, about $5 million more marketing into Q2 than normal. And it really is just a different phasing of the spend during the year. Just as an example, that would put almost 30% of the marketing spend for the year in total into Q2 versus just under 20% last year.

Great. Super helpful. And then when you're looking at the growth of the PC business, what are -- in terms of the marketing spend, are you guys -- is that, at retail, kind of marketing spend, get shelf placement? Is that traditional brand advertising? You know, just talk about the go-to-market on PC would be helpful. Thanks.

Yeah, sure. So marketing spend covers the gamut. It's promotions with retailers. It is brand building. It's social, web, and digital marketing. It's also some of the partnerships that we've signed up, the quarterly deck covers, a bunch of those, and I just mentioned them. But all of that counts into the marketing spend. And the time to spend that money is upfront when you're launching the product. I equate with the team here to launching a ROCCAT. You got to have enough fuel to get it into orbit, and that's exactly how we're planning our launches.

Our next question comes from Martin Yang with Oppenheimer.

Martin, you might be muted if you're trying to ask a question.

Oh, sorry, I was indeed muted. Thanks for taking my questions, Juergen and John. So recently, there has been some reports on activist involvement in the company. Can you maybe give us an updated view on how you think about the value of Turtle Beach? I mean, given the exciting growth opportunities ahead of you, would you seriously consider such recommendation? And at what kind of valuation would you engage in a more meaningful conversation with a buyer?

Sure. So I have a very clear view on this. The board, me included, is focused on increasing shareholder value, period. That value could come from us continuing to execute on our strategy, which is working quite well, as evidenced by the over 1,000% return we've generated in the past three years, or alternatively, from a transaction that would yield more value to shareholders. And we would always thoroughly and objectively evaluate any potential transaction without, frankly, needing anyone claiming to be pushing us or pushing us to do so. It's a normal part of our fiduciary responsibilities as a board that we take very seriously. You might be on mute again.

All right. Thanks. No, sorry. Thanks for your answer. You mentioned that during 1Q, there were some investments associated with ROCCAT and new products. Would you consider them one-time investments in the new product categories? Are they -- for instance, if you were to make similar acquisitions or enter into new products, would those cost items recur like what you had in 1Q?

Well, two comments. One, the biggest driver of the opex increase is, frankly, the staff and infrastructure to support a business that's tracking to be more than 60% larger than it was in 2019, right? When we hit Q2 of last year, as an organization, you just can't respond quickly enough, and you end up understaffed, under-resourced, under-infrastructured to support the business. So that's the biggest driver of the opex increase for Q1 and going forward. Of course, alongside that, we have marketing campaigns that support any product launches, whether it's in new categories or in our core console market category. And the timing of those launches, when you launch a product, you spend some marketing alongside the launch in all forms, as I just mentioned, to support those launches. So what's a little bit different this year is that we have more of the launches coming earlier in the year. And so that's just shifting some of the marketing spend around a bit.

Thank you. That makes sense. One more question if I may. Can you talk -- can you maybe give us more details on how much ROCCAT and other products have grown year over year in the first quarter?

Yeah. We're not going to provide a lot of detail, but the market, and we're using, as always, NPD U.S. data where we have the most detail, but I'll tell you that other large countries track similarly. So U.S. NPD, the PC gaming categories of headsets, mice, and keyboards grew over 90%. And we way outgrew that. So we said more than doubled that growth rate, but the real number is actually far higher than that, which, for competitive reasons, we don't want to state. So that, to us, is very good demonstration of continued significant progress in our PC growth strategy.

[Operator Instructions] Our next question comes from Jack Vander Aarde with Maxim Group.

Great. Congrats on the solid results, guys. Juergen and John, thank you for taking my questions. Juergen, just kind of one question for me. Just as I look at -- clearly, you've continued to execute, beat, and raise, outperformed expectations all throughout 2021 and last year. But I want to focus a question on more of the long-term target range just to understand the consistency you expect with all these new market opportunities you're expanding into. I really think that diversifies the business a bit more. So that CAGR range of 10% to 20%, just where you see things today and given the unusual elevated market environment in 2020, just curious how to interpret that growth CAGR range when looking at, say, '22 and 2023. How much of this is a long-term average formula? Or how much of this is like a literal consistent range you think is achievable?

Yeah. Great question, Jack. So first of all, our ability to leverage the diversification, the expansion into PC and new product categories to deliver growth after a record 2020 is already a first good testament to the strategy of growing and expanding the TAM working because I think wouldn't have been expected. Growing -- 2022 and onwards, in my view, will actually be easier because we're not going to be comping against a year that certainly had significant kind of first-time buyer effect like 2020 did. So for us, 10% to 20%, it's absolutely a long-term goal. The actual growth, we would expect to move around within those ranges. But we are targeting. And as a management team, we have incentives aligned to outgrowing the market, and we would look to deliver 10-plus percent growth as an average over time.

Got it. Understood. And maybe just a follow-up, too. With all these other businesses that you've acquired and you're grooming and scaling up, how do you see just all of these business -- I guess the three markets and maybe the fourth kind of TAM expansion opportunity, how do you see that maybe from like a mix perspective? They're various-size markets here. They're all very large. But five years down the road, is this something where you see a really true, well-balanced portfolio from a revenue-mix perspective?

Absolutely. So we're -- this year will likely be more than 10% revenue outside of the core console market. And the core console business for us is obviously huge given that we have nearly half of the market. And it's one of the largest – actually, the largest accessory category of gaming keyboards and mice. And don't look at it as different businesses. These are product ranges that, for the most part, leverage very common infrastructure, common marketing, common supply chain, common retail distribution, all that. So the ability for us to add to the portfolio, and you'll see a few more good examples this year, without significantly complicating our business is very high, right? And so that's how we look at it and how we'll continue to progress the business going forward.

[Operator Instructions] We have a question from the line of Martin Yang with Oppenheimer.

Hi, Juergen. I have a follow-up question on your PC accessories, especially relating to the new product announcements coming from ROCCAT in second quarter. Last year, I think PC access rates also benefited from the stay-at-home trend in the second quarter of 2020. So with new product announcements this quarter, how should we think about the year-over-year cadence or growth? We have the stay-at-home trend offsetting some of the organic growth, but maybe new product will be a bigger positive tailwind for the second quarter. Any comment would be helpful.

Sure. So we guided the $70 million of net revenue for Q2. That's a bit below last year's Q2 numbers, keeping in mind that the market -- our sales grew more than 93% in Q2 in 2020, right? So we're getting into a couple of quarters of some tougher comps. But that number is way up over 2019. That's a reflection of the larger market. And even within that number, I don't have all the details in front of me, but I would fully expect our PC business to have grown significantly, even against the very strong market backdrop of last year's Q2.

Currently, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Stark for closing remarks.

Thank you very much. We wish everybody safety and good health as we inch back toward normal. It's going to be an action-packed couple of months of new product announcements, and we look forward to speaking with our investors and analysts when we report our second-quarter results in August. Have a great day. Thank you.

Ladies and gentlemen this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.