After the last few weeks of IPOs, you’d be forgiven if you missed Corsair Gaming’s own public offering.
The company is not our usual fare. Here at TechCrunch, we care a lot of about startups, usually technology startups, which often collect capital from private sources on their way to either the bin, an IPO or a buyout.
Corsair is some of those things. It is a private company that builds technology products and it has raised some money while private. But from there it’s a slim list. The company was founded in 1994, making it more a mature business than a startup. And it sold a majority of itself to a private equity group in 2017, valued at $525 million at the time.
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Fair enough. But flipping through the company’s S-1 filings this morning over coffee, I was impressed all the same and want to walk you through a few of the company’s numbers.
If you care about the impending public debuts of Asana (more here) and Palantir (more here) that we expect next week, Corsair will not provide much directional guidance. But its IPO will be a fascinating debut all the same.
Corsair has managed to stay in the gaming hardware world since I was in short pants, and, even better, has managed to turn the streaming boom into material profit. Its S-1 is an interesting document to read. So let’s get into it, because Corsair Gaming is expected to price later today and trade tomorrow morning.
A gaming giant
As with any private-equity-backed IPO, the company’s SEC filings are a mess of predecessor and successor companies, along with long sections that, once you boil them down, ensure that the private equity firm will retain control.
But once you parse the firm’s numbers, here’s the gist from the first six months of 2020:
- Revenue of $688.9 million, up around 42% from the year-ago period.
- Gross profit of $183.7 million, up 96% from the year-ago period.
- Gross margins of around 27%, up from around 19% in the year-ago period.
- Net income of $23.8 million, up from a loss of $15.9 million in the year-ago period.
This, from a company that grew just 17% from 2018 to 2019, is a rather exciting set of results.
Why? Growth has accelerated. Gross margins have improved. And a swing to real net income is rare, and welcome, amidst the usual mix of money-losing SaaS IPOs we tend to see.
What’s helping Corsair put up such impressive numbers? It appears that streaming is boosting esports, which is boosting streaming, all of which requires the sort of hardware that Corsair Gaming is more than welcome to provide. From the company’s S-1, which features 146 mentions of “streaming” and 54 mentions of “esports,” the following notes:
A virtuous circle of eSports players, viewers and revenue, catalyzed by the growing proliferation of streaming, is both attracting new gamers and increasing the performance focus of existing gamers, who advance from less engaged gaming to high-performance gameplay.
As it seems unlikely that gaming is going anywhere soon, streaming seems strong and esports remain popular, the market should continue to perform for Corsair. Streaming as a catalyst for more gaming hardware makes sense, even if I have to admit that I didn’t think of it before reading this filing.
So, what is it worth? We’ll find out more after the bell today, but Corsair is targeting a $16 to $18 per-share IPO price range. With 91,849,366 shares outstanding after the IPO (discounting shares reserved for its underwriters), Corsair would be worth $1.47 billion to $1.65 billion.
That’s not much for a SaaS company of similar size, but Corsair is not a software shop. It manufactures and sells hardware for far lower margins. But it’s still an attractive technology unicorn and that makes its debut something to track.
What’s the bad news from the generally strong numbers? The fact that Corsair Gaming is saddled with debt. Indeed, before the IPO Corsair is sitting on around $493.2 million in debt. That’s super gross, and, we presume, a quirk of its private equity transaction. After the IPO that figure is expected to drop to around $406.6 million, which is still an obscene amount of debt for the company to have.
Still, tomorrow we’ll have a short note on the company’s pricing and opening trades. What a fun little IPO!
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