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Corsair Gaming, Inc. (NASDAQ:CRSR)
Q4 2020 Earnings Call
Feb 09, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good morning and welcome to Corsair Gaming fourth-quarter and full-year 2020 earnings conference call. As a reminder, today's call is being recorded and your participation implies consent to such recording. [Operator instructions] A brief question-and-answer session will follow the formal presentation. [Operator instructions] With that, I would like to turn the call over to Ronald van Veen, Corsair's vice president of finance and investor relations.

Thank you, sir. You may begin.

Ronald van Veen -- Vice President of Finance and Investor Relations

Thank you. Good morning, everyone, and thank you for joining us for Corsair's financial results conference call for the fourth quarter ending December 31, 2020. On the call today, we have Corsair's CEO, Andy Paul; and the 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-K is on file, the 2020 numbers are unaudited. 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 2021 outlook, and Michael will then take you through a review of the financials before we proceed to Q&A.

With that, I'll now turn the call over to Andy.

Andy Paul -- Chief Executive Officer

Thank you, Ronald, and welcome to our Q4 2020 earnings call. While we are very pleased with our record results in the fourth quarter, and indeed all of 2020, which exceeded our expectations, as we delivered net revenue growth for the quarter of 70.4% to $556.3 million, adjusted EBITDA growth of 154.7% to $72.5 million, and adjusting -- adjusted earnings of $0.53 per diluted share, up $0.32 or 151%. For the full year, revenue growth was 52.2% to $1.7 billion, adjusted EBITDA growth of 197.5% to $230 million, and adjusted earnings of $1.60 per diluted share, up $1.25 or 355%. The market for gaming and streaming gear over the holiday period showed the same strong trends as previous quarters with consumers continuing to turn to gaming and streaming while they spend more time at home.

All categories showed strong growth compared to Q4 2019. Notably, including components that gamers are buying to build high-end gaming PCs, as well as gaming and streaming peripherals. Now, this is important because people who step up and build a $2,000 gaming PC are likely going to be committed to buying more peripherals in the future. In December, we saw YouTube reveal that they had 40 million gaming channels, a number that was far higher than most industry watchers have been estimating.

This underscores our thesis that streaming and sharing video content is becoming a way of life for millennials in the same way as playing video games has become. Looking back over the year, we don't see much evidence of a pull forward in sales. In other words, gamers buying in Q3 what they might have bought in Q4 without COVID. What we do continue to see is more people getting more committed to gaming and streaming and spending on gear to improve their game playing or overall experience.

We still see a light -- large white space available in the market where the number of PC gamers who say in surveys that they play PC games regularly is many times higher than our estimates of the number of people actually buying gaming gear. Corsair continued to be supply limited for most of Q4 in almost every category. In other words, our sales could have been substantially higher if we could have manufactured and shipped more products. Towards the end of the quarter, we were able to start filling retail shelves again and we saw our market share numbers starting to rise in many of our categories.

During the quarter, we introduced several new high-performance products, with those released since our last earnings call listed out in detail in the press release. Those include our SCUF-branded H1 customizable wired gaming headset, leveraging our SCUF brand into the headset category, two new keyboards including the K100 new flagship products, a new wireless mouse powered by Slipstream wireless technology, a new haptic headset, an innovative new range of cases including the 5000D family of mid-tower ATX with Corsair's rapid route cable management, an AirGuide cooling technology, a new family of CPU coolers, new low -- low profile Vengeance RGB memory kits, the MP600 family of SSDs, and new gaming PCs featuring the new and video in AMD GPUs, as well as latest Intel and AMD microprocessors. We expect to continue launching new products at a blistering pace, approximately one per week, and use these products to gain market share. Our new microphone, which started shipping in volume in Q3, continues to exceed our sales expectations.

It has been a great addition to the Elgato product portfolio. Our gamer and creative segment continues to benefit from the highly acclaimed products that we've launched throughout the year. And I'm pleased to see that sales in this segment more than doubled in Q4 compared to Q4 2019. Lastly, I was also very pleased to recently announced the promotion of Thi La to president and COO of Corsair, as well as several executive promotions and hires reporting to Thi on a new role.

With these strategic changes, the company further strengthens its ability to focus and gain market share in every product category that we offer -- operate in. Turning now to guidance for the full year of 2021. We are guiding total revenues in the range of $1.8 billion to $1.95 billion, representing growth of 5.7% to 14.5%, adjusted operating income in the range of $205 million to $220 million, and adjusted EBITDA in the range of $250 million to $230 million. We expect the first half of the year to do well compared to prior-year results.

The number of people actively gaming and streaming content has dramatically increased and we expect those people to continue to buy and upgrade new gear. We expect growth in the second half of the year to be more moderate as we expect a gradual return to activities outside the home. However, we do have many exciting new products that we introduced last year and more plans for this year. And we expect that our new larger customer base will want to add these products to their gaming and streaming setups.

We will be adding significant resources to the company this year, both in marketing and R&D, as well as infrastructure as we move toward the $2 billion revenue number. We invested substantially into our direct to consumer business in 2020, both in people and infrastructure, and we've seen some very promising results from those investments. We've also seen good growth from our software and services area, and we expect to continue to expand these offerings in 2021, both organic growth and from M&A. In closing, I'm very pleased with our strong fourth-quarter results and our progress in 2020 as we expanded our product portfolio, tapping into new and growing markets, and drive toward continued growth in 2021.

We continue to execute on our strategic growth initiatives, and we remain focused on capitalizing on the tremendous marketing opportunity before us. 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 and full year.

Michael Potter -- Chief Financial Officer

Thanks, Andy, and good morning, everyone. During the fourth quarter, we delivered net revenue of $556.3 million, an increase of $229.8 million, or 70.4%, compared to $326.6 million in Q4 2019. Our strong top -- top-line performance was driven by strong growth across both the gamer and creator peripheral segment and the gaming components and systems segment. We believe the strong revenue growth year over year is driven in part by the COVID-19 shelter-in-place orders as consumers spend more time working and gaming at home.

The gamer and creator peripheral segment provided $191.8 million of net revenue during the fourth quarter, an increase of $97.8 million, or 104%, from $94.1 million in Q4 2019, primarily driven by strong growth across all product categories, in particular, sales of our Elgato-br --branded streaming products in addition to the contribution from SCUF, which we own for just the last two weeks of Q4 2019. The gamer and creator peripheral's net revenue was 34.5% of total net revenue, an increase of 570 basis points, from 28.8% in Q4 2019. The gaming components and systems segment provided $364.5 million of net revenue during the fourth quarter, an increase of $132 million, or 56.8%, from $232.5 million in Q4 2019, primarily driven by strong growth across all products including our PSU cooling, PC cases, and DRAM due to continued strong market demand. Our memory products contributed $184.9 million of this revenue.

Gross profit in the fourth quarter was $153.8 million, an increase of $83.3 million, or 118.3%, from $70.5 million in Q4 2019, primarily driven by the increase in revenue in this period, as well as the positive margin impact from sales of the higher-margin SCUF products and streaming gear. Gross profit margin increased by 600 basis points to 27.6%, from 21.6% in Q4 2019. The gamer and creator peripheral segment gross profit was $68.9 million, an increase of $45.7 million, from $23.1 million in Q4 2019, primarily driven by increase in revenue in the same period. Gross profit margin was 35.9%, compared to 24.6% in Q4 2019.

The increase in gross margin was driven largely by product mix related to the strong growth in sales of higher-margin streaming products, coupled with last promotion activities, and the addition of higher-margin SCUF products. As Andy mentioned, we continue to see a mix shift as gamer and creator peripherals contributed 44.8% of total gross profit in Q4 2020 as compared to 32.8% in Q4 2019. This is a great overall story and formula for continued overall margin expansion as our fastest growing and highest margin segment also sits in our largest market. The gaming components and systems segment gross profit was $84.9 million, an increase of $37.6 million from $47.3 million in Q4 2019, primarily driven by the increase in revenue in the same period.

Gross profit margins -- margin was 23.3%, compared to 20.4% in Q4 2019, due to product mix and less promotional activities. Gaming components and systems contributed 55.2% of the total gross profit in Q4 2020, compared to 67.2% in Q4 2019. Our memory project -- products margin in this segment was 19.2% for the quarter. Fourth-quarter SG&A expenses were $81.1 million, an increase of $34.1 million, or 72.5%, compared to $47 million in Q4 2019, primarily driven by SG&A expense from SCUF, an increase in outbound freight costs due to -- due to the increase in revenue, and increase due to expenses related to being a public company, and an increase in personnel-related expenses.

Fourth-quarter product development expenses were $13.8 million, an increase of $4.6 million, or 49.9%, compared to $9.2 million in Q4 2019, primarily driven by an increase in personnel-related expenses and the acquisition of SCUF. Operating income in the fourth quarter of 2020 was $58.9 million, an increase of $44.7 million, from $14.2 million in Q4 2019. Adjusted operating income in the fourth quarter of 2020 was $71 million, an increase of $44.4 million, or 166.9%, from $26.6 million in Q4 2019. Fourth-quarter net income was $43 million, or $0.43 per diluted share, as compared to net income of $6 million, or $0.08 per diluted share, in Q4 2019.

Fourth-quarter adjusted net income was $53 million, or $0.53 for diluted share, as compared to adjusted net income of $16.8 million, or $0.21 per diluted share in Q4 2019. Adjusted EBITDA for Q4 2020 was $72.5 million, an increase of $44 million, or 154.7%, compared to $28.5 million for Q4 2019. For the full-year 2020, we delivered rec -- we delivered record net revenue of $1.7 billion, an increase of $0.6 billion, or 55.2%, compared to $1.1 billion in 2019. The gamer and creator peripherals segment provided $539.4 million of net revenue, an increase of $245.2 million, or 83.4%, from $294.1 million in 2019.

The gamer and creator peripherals net revenue was 31.7% of total net revenue, an increase of 490 basis points from 26.8% in 2019. The gaming components and systems segment broke the $1 billion mark and provided $1.163 billion of net revenue during the year, an increase of $360 million, or 44.8%, from $803 million in 2019. Our memory products contributed $609.1 million of this revenue. Gross profit in the full year was $465.4 million, an increase of $241.1 million, or 107.5%, from $224.3 million in 2019, primarily driven by the increase in revenue starting late March as well as a positive margin impact from sales of the higher-margin SCUF products and streaming gear and reduced promotional activity.

Gross profit margin increased by 690 basis points to 27.3% from 20.4% in 2019. The gamer and creator peripherals segment gross profit $189.7 million, an increase of $108.4 million from $81.4 million in 2019, primarily driven by an increase in revenue from the same periods. Gross profit margin with -- was 35.2%, compared to 27.7% in 2019. The increasing gross margin was driven largely by product mix related to the strong growth in sales of higher-margin streaming products coupled with less promotion activities and the addition of higher-margins SCUF products.

Gamer and creator peripherals contributed 40.8% of total gross profit in 2020, as compared to 36.3% in 2019. The gaming components and systems segment gross profit was $275.7 million, an increase of $132.8 million from $142.9 million in 2019, primarily driven by the increase in revenue in the same periods. Gross profit margin was 23.7%, compared to 17.8% in 2019, due to product mix and less promotion activities. Gaming components and systems contributed 59.2% of the total gross profit in 2020, as compared to 63.7% in 2019.

Our memory products margin in this segment was 20.5% for the year. 2020 SG&A expenses were $257 million, an increase of $94 million, or 57.6%, compared to $163 million in 2019, primarily driven by SG -- SG&A expense from SCUF. An increase in outbound freight cost due to -- due to the increase in revenue, an increase due to expenses related to being a public company, and an increase in personnel-related expenses. For the year, product development expenses were $50.1 million, an increase of $12.5 million, or 33.3%, compared to $37.5 million in 2019.

Highlighting our continued investment in new products and opportunities. The increase was primarily driven by an increase in personnel-related expenses and by the acquisition of SCUF. Operating income for 2020 was $158.4 million, an increase of $134.7 million from $23.7 million in 2019. Adjusted operating income for 2020 was $204.8 million, an increase of $139.1 million, or 211.4% from $65.8 million in 2019.

Net income for 2020 was $103.2 million, or $1.14 per diluted share, as compared to net loss of $8.4 million, or loss of $0.11 per share in 2019. Adjusted net income for 2020 was $145 million, or $1.60 per diluted share, as compared to adjusted net income of $27.5 million with $0.35 per diluted share in 2019. Adjusted EBITDA for 2020 with $213 million, an increase of $141.4 million, or 197.5%, compared to $71.6 million for 2019. As mentioned in our press release earlier this month, our SCUF and Ironburg subsidiaries received a favorable unanimous verdict in their patent infringement case against Valve Corp.

The jury awarded our subsidiaries over $4 million and unanimously found willful infringement. It should be noted that at this point that there is no final judgment and Valve Corp could appeal the verdict. Turning now to our balance sheet. As of December 31, 2020, we had cash and restricted cash of $133.6 million, $48.1 million capacity under over -- our revolving credit facility, and total long term debt of $321.4 million with a face value of $326.9 million.

As of December 31, 2020, consolidated total net debt, excluding restricted cash, was $197.4 million. Last 12 months consolidated adjusted EBITDA was $213 million, indicating a consolidated total net leverage ratio of 0.9 times. During 2020, we made debt repayments totaling $190 million, paying off our $50 million second lien in its entirety, and $140 million of the first lien. Annualized cash interest savings from these repayments are approximately $11.4 million.

We plan to continue to reduce our debt load over time while preserving cash for growth as well. For some additional modeling details under our outlook, we expect gross margins to slightly improve year over year and operating expense to increase as well to support our higher revenue level. The need to continue to innovate at a larger scale and a full-year public company costs. We expect interest expense of approximately $5 million per quarter assuming we do not pay down any debt.

At present, we expect to pay down $100 million of debt in 2021, subject to business conditions and any need for additional growth capital. The recent $4 million patent trial win is not in our outlook. This amount could vary in what the judge rules is subject to appeal in the timing of recognition of a gain if any is uncertain at this time. In effect, those tax rates of approximately 21% to 23% in 2021 and a full-year weighted average diluted shares outstanding of approximately $100 million to $102 million shares.

Overall, we're pleased with the progress we have made on our strategic initiatives and the performance of the business. For so as long we relied on and communicated with the PC gaming and streaming enthusiast community in designing and marketing our products, it's not a surprise to us that there's a fair amount of enthusiasm in potentially investing in us from this community and from other individual investors. We encourage any investor and we value all of our shareholders to read our SEC filings and to visit our website at ir.corsair.com. We do receive a lot of questions from individual investors and we both try and answer some of them and we update our FAQ section of the IR website when we see the same question coming from multiple people.

We try and make our investor relations events available to the general public by streaming just as we're doing for this call. With that, we're now happy to open the call for questions. Operator, will you please open the line for Q&A?

Questions & Answers:


Operator

Yes, thank you. [Operator instructions] Our first question is from Mario Lu with Barclays. Please proceed.

Mario Lu -- Barclays -- Analyst

Great. Thanks for taking the question. So, I have one on the fourth-quarter results and one on streaming. So, the first one, pleasantly surprised to see that most of the revenues be in the quarter it came from PC components rather than peripherals this time around.

Any particular drivers you can highlight that's causing this upside in PC components? And -- and how long will you typically describe the timing lab -- lags of a gamer or who purchased PC components and then peripherals afterward? And then on streaming, you mentioned some strong YouTube streaming numbers, and Twitch also recently announced that viewers watched over 1 trillion minutes on Twitch streams in 2020 with over 7 million unique creators each month. So, as streaming becomes more and more ingrained in Western culture, how should we think about the level of long-term growth of streaming peripherals and how confident are you to continue to grow share in this segment? Thank you.

Andy Paul -- Chief Executive Officer

Well, Mario, that's a lot of questions. So, has -- see if we can take a while to answer. So, I think the first question was you were surprised that the component revenue was higher than the peripheral revenue. I mean, that's been the case for -- for some time and -- and we do expect that peripherals will grow faster than components but they're not quite at that level yet.

So the other side of that answer is that, yes, the components revenue -- the components segment revenue was high, surprising growth during the year when you consider that people that are buying those components are typically building $2,000 gaming PCs. And that's been the surprising part of this year. It's not just people rushing out buying a gaming headset, it's people getting pretty committed to gaming and -- and building expensive gaming PCs. So, I think that's the -- that's the first thing.

Now, the next part of your question, I think, was about streaming and how we see the market evolving. At the moment, as you said, which we've we've seen very strong numbers out of YouTube, we've seen strong numbers out of Twitch, there's clearly a massive white space in this market. In other words, the number of people streaming, the of channels toward the number of, you know, peripherals that are sold whether it be cameras or microphones, and so, like gaming peripherals most -- most streamers are streaming from their phones or laptops and do not own any specialized gear yet. So, plenty of opportunities to sell in terms of our progression in the market.

We continue to gain market share, we're building up revenue very quickly gaining market share in every region. We're also adding products to our portfolio, and so far, every product we've launched has been -- has been a great success. So we're pretty confident about gaining market share. I'm very confident that the market will continue to grow.

Mario Lu -- Barclays -- Analyst

OK. Thanks, Andy.

Operator

Our next question is from Matt Cabral with Credit Suisse. Please proceed.

Matt Cabral -- Credit Suisse -- Analyst

Yes. Thank you. I wanted to dig a little bit into the outlook for 2021. I guess you guys are calling for roughly 10% growth at the midpoint.

Wondering first if you could just talk about visibility and confidence behind that forecast at this point in the year? And then, Andy, I think, in the prepared remarks you mentioned the first half will be stronger than the second half. I wonder if you could just expand on that and talk a little more about the trajectory through the year and if at this point you -- you think the business can still actually grow relative to last year in the back half of 2021?

Andy Paul -- Chief Executive Officer

Yeah. So, a number of questions there but it's all around 2021. Look, I think, the first thing is nobody knows exactly what's going to happen in the second half of '21 yet. All right? We don't know when people are going to go, you know, back to work when restaurants and bars will be fully open.

So that's an unknown. What we do know is that the base for gamers and streamers has expanded dramatically and we do think that there's a lot of, you know, still a lot of white space a lot of people that have bought small, you know, some -- one peripheral that saying can buy more. So now, having said that, this first half of the year we expect to be the same as -- the same as most of last year. We don't see any changes, the momentum is very, very strong.

People are still, you know, spending time at home buying gear. And yeah, we'll see -- we'll see how the second half plays out. So, I think we're going to have on one hand a larger base of -- of people wanting to buy gear, on the other hand, we're going to have some people who spend less time at home. So, that's why we think the -- the growth will be moderate in the second half.

If we look at Q1 last year, Q1 '20, which was of course really pre-COVID in terms of consumer spending, we grew 25% compared to Q1 '19. So, that's the last growth point we have of a non-COVID environment. So, we think that we've got good growth ability, you know, regardless of -- of COVID.

Matt Cabral -- Credit Suisse -- Analyst

Got it. And then, follow up. I'm wondering if you could just give a -- a little bit more detail around your supply -- supply chain. I think you talked about some constraints that you're seeing -- can you just expand a little more on you're facing the biggest shortages and the impact that's having on the business? And, yes, if there's any timeline we should think about for supply and demand that come a little bit more in balance going forward?

Andy Paul -- Chief Executive Officer

Well, I think in general, look, if you look at the IC level, you know, that's -- that's getting tighter and tighter. And we've -- we've kind of seen this coming a little bit, you know, with 5G and Cloud rollout, but we certainly didn't expect the rising consumer electronics, you know, from the last 12 months. So, semiconductor lead times, in many cases, have you know run out from, you know, 10 weeks to 20 weeks, in some cases, 40 or 50 weeks. Now, what that means is that you have to preplan what you're going to do.

So, I mean, clearly, we're planning to meet our current plans but it does limit the upside. So, if we see, you know, a huge surge in the second half of 2021, that could be difficult to execute on. But yeah that's -- that's, in general, the situation. We're still -- I wouldn't say it was sold out, we were generally sold out for most of last year.

We did start to restock shelves in Q4, so we started to catch up. But, you know, this year, you know, we expect the first half to be -- to be very strong. So -- so, at the moment, we're feeling pretty balanced about supply but we do recognize that, you know, what we've -- what we've planned and placed orders for is largely in many of the high-end products, you know, what we're going to -- what we're going to produce and -- and sell.

Matt Cabral -- Credit Suisse -- Analyst

Thank you.

Operator

Our next question is from Rod Hall with Goldman Sachs. Please proceed.

Rod Hall -- Goldman Sachs -- Analyst

Yeah. Good morning, guys. Thanks for the question. I -- I wanted to come back to the supply question but more related to peripherals.

The peripheral segment was below what we expected and I think, you know, it looks to me like probably supply constraint was the main driver there. I'm just curious how much supply -- how much you think it affected the peripherals business in the -- the fourth quarter. And then also curious how that rolls into Q1 and you said you were restocking, you know, in Q4. Do you catch up on some of that demand in Q1 or, you know, what's -- what's the flow of supply versus demand in Q4 and Q1? Thanks.

Andy Paul -- Chief Executive Officer

Yeah. So, I think that the first part of the question is -- is a tricky one to answer because everyone was supply constrained. So -- but there's no question that the market grew in gaming peripherals faster than our growth for most of the year. Now, you -- you will notice that Q4, we actually grew over 100%.

So, that's when we started to -- to catch up with the market and the weeks on hand in the channel has definitely started to increase. I mean, some parts of last year, we -- we were down to zero to one week. So, it's gone now out to a few weeks, still less than we'd like to see but starting to get on top of that. So, hopefully, that gives you some color.

Rod Hall -- Goldman Sachs -- Analyst

Do you -- Andy, would you -- just to elaborate on that, would you think seasonality into Q1 would be better than normal because of the flow here?

Andy Paul -- Chief Executive Officer

Well, I would say that the -- we did actually see a fairly big lift in the market in Q4. So, seasonality from the market seemed to be about on par. Seasonality for us, I think, will be a little different. Yeah.

Because we -- we weren't able to participate heavily in Black Friday and -- and the Christmas season. So, I think you're going to see a slightly different cadence from Q4 to Q1 than perhaps the last couple of years.

Rod Hall -- Goldman Sachs -- Analyst

OK. And then I -- you made this comment on DTC and, you know, early progress there. Could you elaborate on that? What you're doing, what you're seeing with DTC, how you would expect that to grow through '21 a little bit.

Andy Paul -- Chief Executive Officer

Yeah. I mean, we've got, you know, two of the last acquisitions as -- as you probably know are 100% direct-to -- to-consumer with -- with Scuff and -- and Origin. We've grown our own Corsair direct-to-consumer quite substantially, we more than doubled last year from 2019 and we expect to do substantial growth this year. What we've had to do is put quite a lot of infrastructure in place.

And so, we do now have a fairly robust CRM system. We've got a lot of data-gathering infrastructure put in place, so we can properly start to keep track of what consumers are buying, what they own, and how we -- we market to them, etc. So, we're getting a lot more sophisticated in how we do business directly with consumers. So, I'm feeling pretty good about it at this point.

But overall, if you look at all the direct-to-consumer business we do, we're -- we're -- we're getting very close to 10% of our overall revenue. And as we've said before, we think we can get up to 15% in -- in fairly rapid order.

Rod Hall -- Goldman Sachs -- Analyst

Great. OK. Thank you very much.

Operator

Our next question is from Drew Crum with Stifel. Please proceed.

Drew Crum -- Stifel Financial Corp. -- Analyst

OK. Thanks. Hey, guys, good morning. So, Andy, you termed the pace of new product launches as blistering.

Can you talk about what the cadence looks like for '21 relative to 2020? And are there any product segments that will see more launches, or is this more broad-based across the portfolio? And then for Michael, any more detail you can share in terms of the drivers behind your gross margin guidance for -- for '21 you could suggest would be up slightly and that's following a pretty big gain last year. Thanks.

Andy Paul -- Chief Executive Officer

Yeah. Let's start with the blistering pace. We -- we -- we now have, I think, over 25 different product lines. So, it continues to expand and each one of those has to, you know, refresh products.

So, some of our, you know, older product lines we've been in for a while, we clearly have most price points and SKUs in place. So, in largely, refreshing, bringing new features. Some of the newer product lines, we're adding completely new product segments. So, streaming, we're continuing to sort of push the boundaries, offering new both hardware and software solutions.

But I -- I expect to be launching, you know, roughly a product a week and a fairly major product every month next year.

Michael Potter -- Chief Financial Officer

And in terms of the margin question year over year, we do expect margins to improve year over year. You know, it's going to be sort of a tale of two halves during the year. First half of the year, there is more supply constraints and freight costs are higher, but we expect that promotional activities will remain relatively low. We sort of have a scenario where things return -- return a little bit more to normal in the back half of the year and we're going to see a little bit more promotional activity but freight expenses should come down.

So, between that, we think that we will be able to improve even with the constrained business environment in the first half to bring margins up year over year. We'll also get some benefit because we do expect for -- for, obviously, that keep growing faster than -- than our components and systems business and those enjoy higher margins.

Drew Crum -- Stifel Financial Corp. -- Analyst

Got it. OK. Thanks, guys.

Operator

Our next question is from Tim Nollen with Macquarie. Please proceed.

Tim Nollen -- Macquarie Bank -- ANalyst

Hi. Thanks very much. You've been talking for a little while now about kind of the rising tide of more gamers entering the, you know, the system, especially now during COVID. I wonder if it's possible to break down in some way how much of your growth in 2020 was that compared with maybe what might have come from this -- this console-cycle launch and the -- the rise of more of these cloud-gaming services.

You know, with gamepass being platform-agnostic, how much of that might have actually boosted your growth? Just anything in addition to COVID, you know, within the growth last year that may have come from -- from that.

Andy Paul -- Chief Executive Officer

Yeah, that's a good question. So, look, cloud gaming, I think and significant at this point. Console gaming, the main part of our revenue that is revolved around console gaming is our Scuff subsidiary and that's still, you know, a relatively small company compared to our overall revenue. So -- and, you know, we're in the middle of a console transition there.

So, we didn't expect huge growth in 2020, more so in '21 as -- as a lot of the new platforms get out there. But -- so, I'd say that, you know, pretty much 95% of our growth last year came from traditional PC gaming.

Tim Nollen -- Macquarie Bank -- ANalyst

OK. Thanks. And actually, belatedly into '21, I think your acquisition revenue now is getting fairly small after you've come through some recent deals. Just -- could you give us a breakdown maybe of what is acquisition revenue growth? And also, if there is an -- a -- a foreign exchange component within the growth guidance.

Michael Potter -- Chief Financial Officer

Yeah. So, in -- in terms of the growth year over year, we don't have any acquisitions planned in that growth number. That's our existing business. Just as an indication for 2020 for the total growth, it's just over 5% came from acquisitions mainly driven by Scuff.

So, most of the growth came from our -- our already-owned products. Obviously, any acquisitions that are not announced that we're working on and may or may not happen, we don't include in our -- in our numbers for our growth year over year.

Tim Nollen -- Macquarie Bank -- ANalyst

OK. And if foreign currency impact's baked into the number as well.

Michael Potter -- Chief Financial Officer

There's a little bit of foreign currency impact baked. The U.S. dollar has been a little bit weaker. So, I talk about margin improvement that makes it a little harder to because of our supply base in Asia and more heavily in China.

So, there's a little bit of margin impact baked into that in our assumptions, but not -- nothing dramatic and nothing that we've thought we needed to call out and talk about.

Tim Nollen -- Macquarie Bank -- ANalyst

OK. Thanks.

Operator

Our next question is from Colin Sebastian with Robert W. Baird. Please proceed.

Colin Sebastian -- Baird -- Analyst

All right. Thanks. Good morning, everyone. One question on Q4.

Just looking at the quarter-over-quarter decline in -- in the peripherals segment gross margin, I'm just wondering if product mix is the primary driver of that or -- or if there are other factors. And then secondly, wondering, Andy, if you could provide maybe a little bit more context on what's embedded in terms of pricing and promotional environment for this year, particularly as you look out into the second half realizing that there's still a lot of questions about what the overall market looks like then. Thank you.

Andy Paul -- Chief Executive Officer

So, the first part of the question in terms of margin progression, I think you're talking about the fact that the gross margins were about 1% down on game and creators -- the game and creators segment. I mean, that's down to two factors really. One is the fact that freight costs, you know, inbound freight start to go up significantly. We had to expedite because of the short supply.

And the second thing is I think the -- the -- the products you can imagine that are in most shortage of the high-ASP, full-featured products with high-semiconductor content. And so, that naturally is going to have a slight adverse effects. But overall, looks like there was about a, you know, 1% change and 6% -- 6% growth over the year. So, we weren't too disappointed with that.

Colin Sebastian -- Baird -- Analyst

Thanks. And just in terms of the pricing and promotional environment for the second half, what's embedded in your expectations?

Andy Paul -- Chief Executive Officer

Yeah. So, the -- we -- we -- like we said, we didn't -- it's tough -- it's tough to plan on the second half of the -- of this -- this point. But assuming the world goes back to normal and we do slightly more promotional activity, that would also almost imply that the freight costs come down significantly. They're -- they're very elevated at the moment with the amount of consumer electronics coming into the country.

And so, roughly, what we -- what we expect is the increase in promotion will roughly cancel out -- be canceled out by the decrease in -- in freight costs. So, expect it to be somewhat neutral.

Colin Sebastian -- Baird -- Analyst

Thank you.

Operator

Our next question is from Doug Creutz with Cowen and Company. Please proceed.

Doug Creutz -- Cowen & Co LLC -- Analyst

Hey, thanks. Just wondering as the -- as the market continues to evolve very rapidly, are there -- are there any areas of your business where you feel like some strategic M&A would make sense? Thanks.

Andy Paul -- Chief Executive Officer

Well, that's -- that's an interesting question because we've got a lot of targets in terms of product categories which we don't really want to reveal yet. And you have to find the right partners to show up. So, we're constantly looking and evaluating. I would say, if I look across all the companies we're talking to, and -- and that's quite a few, most of them are revolving around software and services either to do gaming or streaming.

So, with -- we're not really planning to do a lot of major consolidation. I mean, we're not looking around to buy the next three biggest power supply companies or case companies or anything like that. It's -- it's more about expanding and -- and having some more, you know, some more richer -- richer offerings for -- for consumers that we're looking at.

Doug Creutz -- Cowen & Co LLC -- Analyst

OK. That's helpful. Thanks.

Operator

Our next question is from Tevis Robinson with D.A. Davidson. Please proceed.

Tevis Robinson -- D.A. Davidson -- Analyst

Thanks so much and congrats on a great quarter. Last quarter, you talked about the notion that based on your conversations with retailers, you're confident that you're driving sales to new customers in gaming versus like repeat or refresh purchases. Do you think that was the case once again in the fourth quarter? And if so, was it across all your categories or specific to one or two areas? Thank you.

Andy Paul -- Chief Executive Officer

Yeah, that's a good question. Our sense is that it was much the same. And I think the -- the thing that surprised us mostly was how many people stepped up to start building gaming PCs. Now, that historically has been, you know, not a huge growth industry, you know, 5% or 10% a year.

And so, we were very surprised to see the amount of growth that was happening, especially in the second half where we saw many months where when we look at the -- the NPD market in the U.S. for example, we see, you know, 60% to 80% growth, you know, month -- compared to the month in the previous year. So, that was the most surprising thing, the amount of people who are stepping up to build, you know, $2,000 computers which is typically what people are building with our components. So, that then indicates a fairly heavy commitment to -- to gaming, you know, or streaming.

I think that was the most surprising thing. I mean, we knew people were going to start buying a lot of headsets and peripherals. That always happens when there's a surge in gaming. But yeah, the -- the system components was sort of the surprising thing for us.

We also saw very strong activity in -- in streaming. So, streaming, of course, we've got two things going on. One is the number of people streaming content is exploding, people streaming gaming is exploding, and people streaming non-gaming is also exploding. I think we mentioned the -- the number of streaming channels that YouTube now has which is 40 million gaming channels.

It's just astounding. So, I think those are some of the things that, you know, we saw through the year.

Tevis Robinson -- D.A. Davidson -- Analyst

Thanks so much for taking my question.

Operator

We have reached the end of our question-and-answer session. I would like to turn the conference back over to Andy Paul for closing remarks.

Andy Paul -- Chief Executive Officer

Well, thank you. Look, in summary, Corsair is at the forefront of a massively growing market, centered around gaming, esports, and streaming. With our unparalleled brand and quality of products, we think we are uniquely positioned to take advantage of this exploding market. Today, the global and passionate community of gamers and streamers is engaged in the relentless pursuit of better performance.

We're proud to be a leading provider and innovator of high-performance gear for this new era of entertainment. We are committed to give gamers and streamers the tools they need to play their best game, produce their best content, and have fun doing it. Thank you for your interest in Corsair and thank you for joining us on the call today.

Operator

[Operator signoff]

Duration: 54 minutes

Call participants:

Ronald van Veen -- Vice President of Finance and Investor Relations

Andy Paul -- Chief Executive Officer

Michael Potter -- Chief Financial Officer

Mario Lu -- Barclays -- Analyst

Matt Cabral -- Credit Suisse -- Analyst

Rod Hall -- Goldman Sachs -- Analyst

Drew Crum -- Stifel Financial Corp. -- Analyst

Tim Nollen -- Macquarie Bank -- ANalyst

Colin Sebastian -- Baird -- Analyst

Doug Creutz -- Cowen & Co LLC -- Analyst

Tevis Robinson -- D.A. Davidson -- Analyst

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