Good afternoon and welcome to Corsair Gaming's third quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's prepared remarks, we will conduct a question and answer session. To ask a question at that time, please press star 1 on your telephone keypad. I would now like to turn the call over to David Pasquale with Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us today. With me on the call are Thi La, our Chief Executive Officer, and Gordon Mattingly, our Chief Financial Officer. Before we begin, I'd like to remind you that today's discussion contains forward-looking statements, including but not limited to our guidance for the fourth quarter and full year 2026, potential future growth in certain product categories, and other statements that are not historical in nature, are predictive in nature, or depend upon or refer to future events or conditions. These four looking statements are based on our current assumptions and expectations. Actual results could differ materially. Please refer to the risk factors in our most recent annual report on Form 10-K filed with the SEC, our subsequent SEC filings, and today's earnings press release for a full discussion of the factors that could cause our actual results to differ. We undertake no obligation to update these forward-looking statements. Additionally, we will discuss certain non-GAAP financial measures today. Definitions and reconciliations to the most comparable GAAP measures are included in our earnings press release and the investor presentation posted to our investor relations website at ir.corsair.com. With that, I'd like to now turn the call over to Corsair's CEO Thi La. Thi, please go ahead.

Thank you, David, and good afternoon, everyone. We delivered third quarter results above the high end of our guidance in a dynamic market. Revenue was $367 million, up 6% from a year ago. Operating expenses increased by less than $1 million year over year, including the recently acquired track racer, and decreased slightly excluding it. That discipline, along with our diversified portfolio, helped adjust EBITDA growth 38% to $22.4 million. Non-GAAP earnings per share was $0.13, more than double the $0.06 a year ago. Memory left the quarter while pre-built systems grew in every category. Together, they more than offset continued industry-wide weakness in DIY components. We also maintain a disciplined approach to managing our balance sheet. We ended the quarter with $136.2 million in cash and restricted cash, which is nearly double the year-ago cash balance. That is after funding the Track Racer acquisition and partnership investments, and strategically building inventory to support expected holiday season demand. Let me now give you color on our segments. I will start with the gaming components and system segment. where revenue grew 7% led by memory. Memory revenue was a record for a third quarter at $167.3 million, up 43% year-over-year. Demand was strong, prices were higher, and we gained market share sequentially. Our supply chain execution made that possible. It reflects our operational know-how and the strength of our product portfolio. During the quarter, we built memory inventory by 37 million. We did that deliberately to be well positioned for the demand we expect in the fourth quarter. We feel good about our inventory position heading into the holiday season. Moving on to pre-built systems, we benefited from growth across all categories. Pursuers are upgrading their platforms. They want to run more advanced games and AI compute. DIY components remain soft. Higher memory prices continue to delay builds. We believe that demand is deferred, not lost. AI workstations under Corsair Pro family continue to gain momentum since their introduction in the second half of last year. These customers want local computing, protection of their data, and lower cloud token consumption. The enhanced security and Lower token consumption costs of local computing are a big focus for businesses of all sizes. We expect these capitalists to help drive Corsair demand as we move forward. To calibrate expectations, please note that the business is still in its early phase and is dealing with market-wide CPU, GPU, and memory shortages. We expect a more meaningful revenue contribution in the latter part of 2027 and beyond when semiconductor availability normalizes. Now turning to gamer and creator peripherals segment. Revenue grew 3% to $116.5 million. Growth in the quarter was affected by timing. Several new product launches moved from the third quarter into the beginning of the fourth. Logistics delays and the hub transition also led to a higher than planned backlog at quarter end. Those products are now arriving. Our hub transition is completed and we enter the fourth quarter with a healthy backlog. Accordingly, we expect double-digit growth in peripherals in the fourth quarter. Momentum also built ahead of the upcoming GTA 6 launch. We are seeing console gaming hardware demand reflected in sales of both SCUF controllers and Elgato products. We expect more than that to the holiday season based on pent-up demand for the evergreen GTA franchise. The SCUF Omega licensed controller also gives us broader premium offering for PlayStation 5. With Fanatec and Track Racer, we can now outfit a sim racer's complete setup. Fanatec supplies the electronics, Track Racer adds cockpits, seats and accessories, and we expect to begin seeing the benefit of integration in Q4. Both of our brands have direct-to-consumer businesses, which will help us access even more sim drivers. At October's Sim Racing Expo, Fanatec and Track Racer showed their products together and customers responded well. Fanatec launched Podium Pedal Sport, which brings premium pedal technology to a wider group of racers, Track Racer also shows its sim motorbike, which we expect to ship in the first quarter of 2027. It is a new category for us. It opens another popular sim sport to esports enthusiasts and gives our customers a new way to race. We were also very active on new product introductions, which we expect will drive growth over the coming quarters. We launched Pure Vector in our Sabre V3 Pro mice in October. This is a very exciting technology with a lot of potential. Developed with our partner Aimlabs on a patented algorithm and billions of proprietary data points, PureVector personalizes mouse sensitivity to each player's own biomechanics. In testing, it improved accuracy and aim speed by up to 33%. Pro players are already putting it to the test. Raptor of BNK FearX recently played on Pure Vector at the Demacia Cup Global Invitational. His team went on to win the event, and Raptor was also named MVP. Elgato separately entered mobile streaming and recording in October with the introduction of WaveGo. It's our first noise-canceling wireless microphone, and it converts between clip-on and handheld use. So creators get Elgato audio quality away from their desk. Social apps and short form video have made remote recording the default for a growing share of creators. WaveGo gives us a strong product to win share in this important growth market. Reflecting our momentum, Elgato Marketplace added more than 1 million new accounts year over year. New hardware launches brought many of those users in. and the wider Corsair ecosystem is pulling more of them onto the platform. Makers in our community are also using AI tools to ship digital products at an accelerating pace. This is the important flywheel model we have discussed in prior quarters and demonstrates both our progress and long-term potential for Corsair. We are also continuing to connect capabilities across our brands. You will recall we outlined this as a priority a few quarters back and we continue to execute on this initiative. In September, we launched Boxera. It pairs a premium Corsair USB RGB gaming microphone with Elgato's Wavelink software. This is a visually stunning device with high fidelity performance to match. Corsair's gamers get more control over their audio and Elgato's software reaches a wider audience. Looking ahead, Given the strong demand and capitalists I just detailed, we are raising our full-year outlook. The midpoint of our revenue guidance is increasing $36 million, and the midpoint of adjusted EBITDA is moving up $3 million. Gordon will take you through the details. For the fourth quarter, we expect double-digit growth in gaming peripherals and creator segment. In components and systems, we expect DIY demand to stay soft while memory prices remain high. We believe memory supply should remain adequate, and we expect to gain further share. Fourth quarter's adjusted EBITDA is anticipated to be below last year, mainly because we expect memory gross margin to return to a more normal level, but still about our historical average. As you will recall, last year's fourth quarter memory gross margin was unusually high. Memory prices rose very quickly ahead of inventory costs, resulting in rapid margin expansion. Overall, our priorities remain focused on expanding in sim racing, extending the Elgato and Stream Deck ecosystem, expanding Corsair Pro product lines, and deepening our direct-to-consumer relationships. We will also consider acquisitions that add to our existing businesses, provided the valuation, earnings contribution, and integration requirements fit our model. With that, I will turn it over to Gordon to take you through the financials. Gordon?

Thank you, Thi, and good afternoon, everyone. Third quarter revenue grew 6% year over year to $367 million. Gross profit grew 5%, and adjusted EBITDA grew 38% to $22.4 million. We held expense growth below gross profit growth, which is what drove that operating leverage, and we narrowed our gap net loss to $2.4 million, an $8 million improvement. We also exceeded the high end of our guidance for revenue, adjusted EBITDA, and non-GAAP earnings per share. As Thi noted, we are raising our full year outlook, and we used our cash position to build inventory ahead of our seasonally strongest fourth quarter. We enter Q4 with confidence, and I'll now walk you through the details. Revenue for the third quarter was $367 million, up 6% year-over-year and $17 million above the high end of our guidance range of $320 to $350 million. Gross profit increased 5% year-over-year to $97.8 million. Gross margin was 26.7% compared with 26.9% a year ago. Gap operating loss narrowed to $1.6 million from $5.6 million a year ago. Gap net loss narrowed to $2.4 million from $10.4 million in the prior year quarter. Gap diluted loss per share was $0.02 compared with a loss of $0.09 a year ago. Adjusted EBITDA increased 38% to $22.4 million from $16.2 million a year ago and adjusted EBITDA margin expanded to 6.1% from 4.7%. Non-gap diluted EPS increased to 13 cents from 6 cents. Both adjusted EBITDA and non-gap diluted EPS exceeded the high end of our guided ranges of $21 million and 12 cents respectively. For the first nine months of 2026, while revenue was essentially flat at $1.036 billion, Gross profit grew 13% to $318.1 million. Gross margin improved to 30.7% from 27.2% and adjusted EBITDA nearly doubled to $89 million from $47 million. Turning to our segment performance, gaming components and systems revenue grew 7% to $250.5 million. Gross profit increased 8% to $52.8 million and gross margin rose to 21.1% from 20.9%. Memory revenue grew 43% to $167.3 million on strong demand, higher selling prices and sequential share gains supported by our supply chain execution. Systems grew across every category. Together, these businesses more than offset continued market weakness in DIY builds and standalone components. Gamer and creator peripherals revenue grew 3% year-over-year to $116.5 million. Timing held back growth in the quarter as several new product introductions shifted into the fourth quarter. Logistics delays and a hub transition also led to a higher-than-planned backlog at quarter end. Gross profit increased 2% to $45 million and gross margin was 38.7% compared with 39.3% a year ago. With those product launches now arriving and the backlog we carried out of the quarter, we expect double-digit growth in the fourth quarter. Operating expenses were $99.5 million, up less than $1 million from $98.7 million a year ago. Excluding the recently acquired track racer, operating expenses decreased slightly year over year. Because gross profit grew $4.7 million ahead of expense growth, we narrowed our gap operating loss by $4 million. As Thi noted, we built inventory ahead of our seasonally strongest fourth quarter. Inventory grew $80 million sequentially to $344.6 million, including a $37 million increase in memory and approximately $13 million added through TrackRacer. We will continue to manage inventory, collections, and vendor terms closely. We ended the quarter with cash and restricted cash of $136.2 million, up $70.2 million year-over-year. That is down $57.6 million from $193.9 million at the end of the second quarter. The decline reflects approximately $37 million used for the M&A transactions that closed during the quarter and our inventory build, partly offset by cash from operations and higher payables. Our first priority remains funding growth at attractive returns. including smaller acquisitions that fit our existing businesses. We will also remain opportunistic on share repurchases and keep our balance sheet flexible. Now, turning to our outlook. For the fourth quarter of 2026, we expect net revenue of $420 million to $450 million adjusted EBITDA of $38 million to $42 million, a non-GAAP diluted EPS of $0.26 to $0.31. The fourth quarter outlook assumes double-digit year-over-year growth in gamer and creator peripherals, led by SimRacing, Elgato, and Scuf, and supported by new product launches and the backlog we carried out of the third quarter. We expect a higher margin mix and continued progress in direct consumer sales to support consolidated gross margin. Gaming components and systems is expected to remain pressured by softness in DIY PC demand as elevated memory prices continue to delay builds across the industry. Memory supply availability is expected to remain adequate. On memory margin, last year's fourth quarter was unusually high at about The fourth quarter outlook for non-gap diluted EPS assumes approximately 112 million diluted shares outstanding. For the full year 2026, we are raising our outlook. We now expect net revenue of $1.456 billion to $1.486 billion, adjusted EBITDA of $127 million to $131 million, and non-gap diluted EPS of $0.89 to $0.94, compared with $0.85 to 94 cents previously. The midpoint of our four-year net revenue outlook is up approximately $36 million compared with our prior guidance range of $1.4 billion to $1.47 billion. The midpoint of our adjusted EBITDA outlook is up $3 million compared with our prior range of $121 million To summarize, we again delivered results above expectations, narrowed our gap net loss and grew adjusted EBITDA 38% on revenue growth of 6%, a clear demonstration of our operating leverage. Our diversified product portfolio underpins that performance and combined with our strong cash position, it gives us the confidence to raise our full year outlook. We remain focused on disciplined expense and working capital management and converting earnings into cash. Thank you for joining us today. Operator, we're ready to open the line for questions.

Thank you.

We will now open the line for questions. To ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 2. Please limit yourself to one question and one follow-up. We'll pause for a moment to compile the Q&A roaster. Our first question is from Sean McGowan with Ross Capital Partners. Please proceed with your question.

Thank you for the opportunity to ask questions. The first one is about the shift in revenue that you described. How much of the timing shift was expected versus unexpected? What specific products were affected by the logistics delayed and hub transition? Was it general or did it affect a couple of products in particular?

Hey, Sean. It's Gordon here. Great to speak to you. Thanks for the question. Unexpected amount of the miss is around about $6 to $8 million. We exited Q3 with specifically peripherals-related backlog elevated by $6 to $7 million sequentially, and that was associated with the logistics delays and the one-time hub transition. The hub transition is now complete. The other thing on top of that was about $1 to $2 million of new product introduction delays. It was not specific to any particular peripherals category. It was kind of across the board. But that's the magnitude of it. And obviously, if you do the math, we guided double-digit peripherals growth year over year for Q3. And if you add back the kind of $6 to $8 million I just mentioned, we would have been at double-digit growth. It gives us confidence heading into Q4.

All right, thank you. My follow-up is, can you talk a little bit about how the TrackRacer integration is going?

Yeah, the TrackRacer integration is going quite well. This is T. We are expecting to see contribution from the integration starting from Q4. Q3 contribution was non-materials. and we're pleased with the progress that we're making from the track racer side and we feel like right now we're on track. No pun intended. So Q4 is looking promising.

Okay, thank you.

Thanks, Joanne.

Our next question is from Catherine Murphy with Goldman Sachs. Please proceed with your question.

Thank you for the question. Following up on your outlook for double digit growth in the gamer and peripherals category for next quarter, you just provided some helpful details thinking about some of the moving parts as we head into 4Q and the elevated backlog. But my question is, excluding some of those timing impacts, is there any change in your outlook or your expectations from an underlying demand perspective, thinking specifically around the

I'll start out and then hand it over to T. But no, there's nothing changed in our outlook of the underlying because, you know, we had the orders. We had the backlog at the end of Q3. It was $67 million more than we actually recognized in revenue. And on top of that, we had the I think that we did see an extended lead time from some of the logistic partners and we made the adjustment for it.

So if we look at Q4 right now, toward the end of Q3, we already saw elevated booking for GTA 6 related demand, meaning our console part of the business, such as SCUF controllers, PS5, Xbox, as well as the Elgato product family is already seeing some benefit from that. And we are expecting Q4, we will see more benefit from it.

Just as a quick follow-up, recognize that it's still only heading into the calendar fourth quarter, but any preliminary thoughts you could share just on the demand outlook for the broader gamer and creator peripherals category as we look to 27, especially as you look to enter new categories like sim motorbike and continue to invest behind Elgato with the million new ads to the platform this quarter? Thank you.

So I would say if we look at where we are in terms of Q4 booking pace, it's on target. In a way, some of the numbers are even a little bit better than target. We have some really nice product launch coming in Q1, and those are on pre-order. For example, the motorbike, the pre-order and the excitement around that is strong, and it's a high ASP product. were just happy to see that there are still an appetite for a lot of enthusiasts to embrace new product categories. So from a GTA 6, and then if you look at the rumble around whether or not a PC version is becoming available earlier than planned, some of the side comments were even talking about Q1 being available in terms of a PC version. So all these things are pretty positive momentum. Whether or not that will come earlier than later is yet to be seen. But for us, 2027 has a lot of really good tailwind in order to drive more gaming sales.

Thank you for the thoughts. Thank you.

Our next question is from Aaron Lee with Mack Wire. Please proceed with your question.

Hey, good afternoon. Thanks for taking my question. So you mentioned you're heading into 4Q with confidence. As we think about the holiday season, can you just provide some more detail on what you're seeing with channel inventory, promotions, and competitive environment, please?

With regards to our channel inventory, we would say that we're comfortable with where we are. So, you know, we're coming into October, looking at November as the Black Friday, Cyber Monday channel partners are definitely feeling pretty optimistic about the sales coming up. And we're seeing order coming through as expected. As I mentioned, if not, some of the channel partners are even, you know, moving ahead with a more positive momentum than planned. So right now, again, there's no really key concerns from our side with regards to holiday sales.

Okay, great. And then just on the memory picture, nice to see you were able to increase your inventory there. Can you just talk about looking ahead Your confidence levels in continuing to get allocation from your partners going forward, just given all the moving pieces in that space. Thank you.

Yes, so we believe that we have demonstrated after so many quarters now in 2026 that we're able to manage the availability of memory chips and run our business in a way that we can stay ahead of the market and even demonstrated growth in Q3. For the holiday season, with the additional inventory that we invested in, we feel pretty good about the next four to five months and continue to use the same methodology to manage 2027. We still see that semiconductor, especially memory capacity, to be short. There is really no change in pricing. and you also heard that the big four are still staying with the same CapEx. So there is no shift in terms of the supply-demand situation on memory, right? Supply is still behind demand and if we look at some of the data center consumption and growth, they're all seeing triple-digit growth in terms of capacity consumption. So for us, the memory chip price will continue to be elevated. And we will continue to use the same operational excellence that we have on DRAM operation, something that we've been practicing and been driving for the past 30 years. We are not concerned that we cannot stay ahead of that game.

Aaron, thanks for the question. This is Gordon. Just to add to that, we feel that growing memory 43% year over year in the quarter and growing the ending inventory by 37 million speaks pretty loudly to our ability to execute in this area.

Perfect. Appreciate the color.

Thank you, Aaron.

Our next question is from Drew Crum with B. Reilly. Please proceed with your question.

Okay, thanks. Good afternoon, everyone. Maybe one for Thi and one for Gordon. Thi, last year, when you started as CEO, you outlined a list of strategic priorities, one being channel expansion in underserved markets, including Asia. I peeked at the queue, and that business was up 30% year on year. Can you talk about what has worked thus far and where you see opportunities for further growth with the business? And then, Gordon, just on the performance memory gross margin, it's moved around quite a bit. I know you and I have discussed this in the past. There's several puts and takes here, but the 18% to 20% range that you shared for 4Q is above the historical trend. Is that where we should expect it to settle out at going forward, or... It's going to continue to be volatile going forward. Thanks.

Hi, Drew. So with regards to your question on what is working as outlined when I step into the role, we are focusing on controlling OPEX and improving cash flow and drive growth in the growth area. Also really focusing on growing direct-to-consumers and since then we've done a really good job from our perspective in terms of growing our cash flow as you can see in the numbers and we also are really controlling OpEx so that any additional revenue that we generated or margin that we generated would be additive and again you know we demonstrated that the OpEx number is well under control even with acquisition We also continue to expand our direct-to-consumer business. We went from roughly 13% as a mix to now almost 20%, and our plan is to continue to grow that. So, you know, I think everything is working out the way we intended. The gaming segment is growing, as well as the M&A activities is going to add to that in Q4, as well as 2027 and beyond. and we will continue to investigate opportunities to either grow organically or bolt on additional companies to service our business better. And I'm going to hand over to Warren to talk about your other question.

Thanks, Thi. Yep, on the memory growth margin, we've always said that when prices are rising, we will benefit in terms of the growth margin. We saw that probably most acutely a year ago in Q4, where we saw roughly a 67% increase in the price from the beginning of Q4 last year to the end, peaking out at kind of a 60% price range in a very short period of time towards the end of November last year. Accordingly, we saw roughly 35% gross margin on memory in Q4 a year ago, and obviously you've seen the The guide for Q4, 18 to 20, I think that's realistic for Q4 in terms of the long-term margin profile and where it's going to shake out in the kind of short to medium term. I don't think there's going to be a lot of movement. I think it's probably more trended on the slight downside to the upside just because the That speed of price changes slowed down somewhat on the memory side, but our long-term average is kind of mid-teens. We're guiding 18 to 20 for Q4, so we're kind of getting back to more normalized margin levels at this point. But I think she's got some additional colors she can add to that.

Yeah, and I would say that we already mentioned as of last Q4, the acceleration was not norm. because we are seeing as much as 60 to 70% ASP acceleration within the same quarter. And naturally, when you have inventory in the quarter, you're going to benefit a lot more than not. And as that inventory normalizes, we now see what we consider as, you know, I would say an elevated inventory comparing to before, but it's something that is more sustainable at this time. and the number that we forecasted for the full year since last year is basically coming in as what we said. So even if maybe the number seems like it's changing, but it was not unexpected.

Okay. All right.

Thanks, everyone.

Thank you.

Once again, if you would like to ask a question, please press star 1 on your telephone keypad. We have reached the end of the question and answer session. I would like to turn the floor back over to Thi La for closing comments. Please proceed.

Thank you for joining us today's call and on your continued support. We entered the important holiday season with new products arriving and a clear plan. We have an opportunity to build on our Q3 results and our attention is on executing our growth strategy. We look forward to sharing our progress when we report our fourth quarter results. Have a good evening, everyone.