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Corsair CEO: Demand for gaming gear has exploded over the last few years

Andy Paul, Corsair CEO & Founder, joins Yahoo Finance to discuss Corsair earnings, the chip shortage, outlook for the gaming industry, and impacts from port delays.

Video transcript

ALEXIS CHRISTOFOROUS: A mixed earnings report from Corsair Gaming this week, the company reporting strong sales growth, also reiterated its full-year outlook. But adjusted earnings per share came in below estimates. Joining us now is Corsair's founder and CEO Andy Paul. Andy, good to see you back on the show again. We all agree you have one of the coolest backgrounds we've seen in quite some time.

ANDY PAUL: Thanks.

ALEXIS CHRISTOFOROUS: So fitting for a video game equipment maker to have that background. I know that you're attributing the earnings-per-share shortfall to higher logistics costs, but I'm wondering if you could break down for us what those costs are and how long do you expect to see them remain elevated?

ANDY PAUL: Yeah. Well, look, this is a good point. So firstly, this is really a short-term issue, right? We've got a little-- a situation where there's-- the supply chain is a little clogged up. And you know, there's a tough time getting containers. But this is a short-term issue. This will all be resolved by the end of this year, I think.

So you know, we tend to look at this as a long-term investment, and I think that's the way investors should really look at it. I'm not, to be honest with you, focused on quarter-by-quarter, you know, earnings, whether we're getting 99% or 101% of the analysts' consensus. That's really the last thing. You know, what we're investing-- what we're concentrating on here is being right in front of a massively growing market and bringing great products to market. So that's really what I'm focused on.

KRISTIN MYERS: Andy, let's talk about something else that has been impacting the business and just the industry at large, not just yours, and that's chip shortages. We've seen this impact so many different fields. Automakers, for example, have been squeezed right now because of those shortages. How has that been impacting Corsair? I hear what you're saying about some of the logistical issues and supply chain issues being short term. Are you still seeing that as well with some of the chips?

ANDY PAUL: Well, we certainly do. It's been a tough year to keep up with the Demand as you probably know, the demand for, you know, gaming equipment, gaming gear has exploded over the last few years and even more so with people spending more time at home for the last year. So that's definitely stretched the supply line, and a lot of our flagship products that have high semiconductor content have been tough to keep on the shelves because the demand's been so high. So you know, again, that should resolve itself with time. Right now, we've got a pretty good inventory position, and so we're looking forward to, you know, the next couple of years. We will continue to bring some of these great products out.

ALEXIS CHRISTOFOROUS: And I'm wondering, you know, it's sort of like a one-two punch for companies like yours across a lot of different industries, Andy. When you look at the delays we're now experiencing at the ports, which is one of the reasons why we're seeing higher prices and inflation pick up, how impacted are you by what's happening at our ports and with backed up freight?

ANDY PAUL: Yeah, it just makes the supply chain longer. So you know, what used to take us six weeks to get a container from Asia into the US or Europe now takes 10 weeks. And so once you, you know, understand that and plan around it, it's OK. But suddenly, there's more ships on the ocean. That's more inventory. But you know, we've got we've got a good balance sheet now, so we can afford to carry more inventory.

So all of those things, you know, again, are short-term problems that have to be adjusted to. But you know, it doesn't really affect the overall business that much. It just gives us a couple of short-term hiccups.

KRISTIN MYERS: I'm curious to know, because of the pandemic, we saw, obviously, everyone staying at home in lockdown-- obviously, a big boon for the business as so many folks were instead playing video games. But now that trend is starting to reverse just a little bit as we see folks starting to travel again and leave their homes and go to restaurants and movies and other outdoor activities and events. How do you see that impacting the company and the business going forward? How do you see that impacting demand? Or are you anticipating, perhaps, that as the Delta variant continues to surge that, you know, folks are going to continue to stay at home and keep playing some video games?

ANDY PAUL: Well, yeah, so it's not a digital yes or no. I mean, people aren't playing more games now because of COVID. Certainly this has been a long-term trend, right? I mean, I've been looking at video game-- number of gamers, you know, over the last 10 years and it's steadily going up, obviously, a slight acceleration last year. But it's not as though people are going to come away and start going to restaurants and stop playing games.

What's really happening here is that the amount of games that people were playing last year obviously stepped up, or the amount of hours played. And that's increased everyone's skill levels. So now you've got a lot of people that are much better at playing whatever game they were playing, whether it's Call of Duty or Valorant or whatever. Once you get better at a game, then you start looking for equipment. So what's really happened is we've sort of had a big surge in activity that's now starting to see a surge in people wanting to buy better keyboards, better mouse, better gaming PCs. And that's why the demand is so high.

So I don't think this is going to be a situation where as soon as people go out to restaurants, they're going to stop gaming and demand falls away. I think this is laying out a-- you know, a carpet for the next few years of really high demand of gaming gear.

ALEXIS CHRISTOFOROUS: Now, I know as a CEO, you can't be fixated on the company's stock price. But I'd love to get your thoughts on what's been happening with Corsair's stock. For a little while, it got caught up in that whole meme frenzy. And I know that according to the Reddit crowd, in June, your company's stock was mentioned something like 860 times. It's been on a bit of a roller coaster ride and is down more than 20% year to date. Given the fundamentals of the company, that seems a bit odd. What would your message be to investors right now and especially those so-called meme investors?

ANDY PAUL: Yeah, no, it's very straightforward. Look-- and I should say, you know, I've been a Corsair investor for 27 years, so one of the biggest private investors. So this is not a stock that you do short-term gains on. And obviously, we're not building the company for the benefit of day traders. But if you invest in a company like this, you invest in the long-term secular gaming growth, the long-term streaming growth, and the fact that we've got an ability to bring out lots and lots of great products. That should be the investment thesis. It's not what we think-- you know, you think the stock's going to be doing tomorrow.

So yeah, so this is a long-term play, and I think, ultimately, that's going to, you know, play out. Obviously, we've got a lot of things going on between, you know, retail investors versus hedge fund shorting, and that's a battle we watch with sort of vague interest. But the fundamentals of the stock, really, in my opinion, should be based on long-term growth and our ability to win in the market.

ALEXIS CHRISTOFOROUS: Yeah, sounds like a novel idea. Corsair's CEO Andy Paul, thanks so much for joining us. We appreciate your time.