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Corsair Gaming, Inc. (CRSR) Q3 2021 Earnings Call Transcript

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CRSR earnings call for the period ending September 30, 2021.

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Corsair Gaming, Inc. (CRSR -1.35%)
Q3 2021 Earnings Call
Nov 02, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good morning and welcome to the Corsair Gaming's third quarter 2021 earnings conference call. As a reminder, today's call is being recorded and your participation implies consent to such recording. [Operator instructions] With that, I'd now like to turn the call over to Ronald Van Veen, Corsair's vice president of finance and investor relations. Thank you, sir.

Please 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 third quarter ending September 30, 2021. On the call today, we have Corsair's CEO, Andy Paul; and 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 reference to non-GAAP financial measures.

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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-Q is on file the Q3 2020 numbers are preliminary. This conference call will be available for replay via webcast through Corsair's investor relations website at ir.corsair.com. Andy will begin with third quarter business highlights and a discussion on what we are seeing in the market and Michael will then take you through a review of the financials and our outlook 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 Q3 2021 earnings call. During the third quarter, we delivered revenues of $391 million and gross profit of $101 million, resulting in gross margin of 25.9%. While we continue to see solid demand for our products, our performance was impacted by a very difficult logistics and supply chain environment, particularly the availability of recently priced GPUs and we believe it's prudent to reset expectations for the year. Michael will walk through our financial results in greater detail later in our discussion.

I'd like to spend a few minutes to provide an update on what we are seeing in the market and why we remain confident that Corsair is well positioned navigate to the current industry headwinds to deliver sustainable shareholder value creation over the long term. First, Corsair is the leading global provider and innovator of high-performance gear for gamers and content creators. Our gaming gear helps gamers perform at their peak across PC or console platforms and our streaming gear enables creators to produce studio quality content to share with friends or to forecast to millions of fans. As gaming and streaming continues to become more mainstream, we believe Corsair is uniquely positioned with our comprehensive product suite to meet the needs of this rapidly growing market.

We have maintained our market leadership across most of our product lines with our relentless focus on enhancing the customer experience by delivering cutting-edge technology and creating innovative gaming and streaming gear and related software. Based on outside data, we believe that we gained market share in most categories in Q3. Since the start of 2021, we've maintained an astounding pace of innovation launching 113 new products, including the addition of several entirely new product lines, which we believe has greatly expanded our total addressable market opportunity. In July, we launched a new Elgato camera called Facecam designed specifically for streamers and content creators.

We are encouraged by the great momentum that we've seen so far and we are gaining market share very quickly. The global TAM for USB cameras is over $1 billion. In September, we debuted the Xeneon gaming monitor, which features an ultra-slim 32-inch QHD screen with the combination of powerful specs, smart features and thoughtful design that power users need. We're excited to enter this new and large market for gaming monitors, which we believe to be approximately $4.5 billion globally.

Finally, last week, we announced our new DDR5 memory products. DDR5 is the latest technology standard for DRAM, which allows speeds of over 6,000 megahertz, a huge performance increase compared to DDR4, the previous standard. And both Intel and AMD are supporting this interface on their latest processes. We expect that this will encourage many gaming enthusiasts to build new PCs around this platform.

We believe new product innovation remains an important driver of our future growth and we will continue to invest to increase value for our customers. Overall, demand has remained strong for gaming components and gaming peripherals. In fact, recent market data shows consumer demand for peripherals at close to the elevated 2020 work-from-home levels. We also recently conducted a survey of the PC gaming hardware market with DFC Intelligence.

And we found that the refresh cycle for building and upgrading PCs is shorter than previously thought, closer to one to two years rather than two to three years. The semiconductor shortage has caused graphics cards to be in very short supply compared to demand and has driven market prices of certain graphics cards to 150% to 200% of normal MSRP. This has caused gaming enthusiasts to hold back on building new high-end gaming PCs that use our components. By our estimate, approximately 10% of our natural demand for our components and memory products in our gaming components segment was held back in 2021.

We believe this should cause a bubble of pent-up demand, which will be released as GPA use return to normal MSRPs in 2022. We estimate the impact of the semiconductor shortage in our components business for 2021 is at least a $100 million revenue issue and has made growth in the components market difficult in 2021. Although we still expect some growth mainly from the fact that we have gained market share in components. Finally, we remain focused on strengthening our relationship with end users by increasing direct-to-consumer sales.

We acquired ORIGIN and SCUF in 2019, which are both direct-to-consumer and we have continued to expand our direct-to-consumer channel with our other product lines. During the third quarter, direct-to-consumer was 13.1% of sales, up from 10% in Q3 2020 and we expect this trend to continue. We truly believe direct-to-consumer sales represents a significant avenue to drive growth by facilitating increased engagement with our consumers. In closing, our third quarter results reflect good demand environment against challenging logistics and supply chain conditions.

We believe that as these constraints ease and GPUs become more available, we will return to our revenue and margin targets. While Q3 was only our second highest ever third quarter, it is notable that our revised full year outlook is in line with our initial expectations for the year, which we've outlined during our Q4 earnings call and well above our expectations during the time of our IPO. We firmly believe that Corsair remains uniquely positioned to capitalize on the underlying secular growth trends around gaming, esports and streaming. We feel good about our continued investments in R&D and marketing and the market reception of our new product introduction so far this year.

We plan on having an analyst day very early in 2022, where we will discuss our product lines in more detail including the new products we released since the IPO that have opened up a much larger TAM for us. We'll discuss our 2022 expectations then as well. 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.

Michael Potter -- Chief Financial Officer

Thanks, Andy, and good morning, everyone. During the third quarter, we delivered net revenue of $391.1 million, a decrease of 14.4% compared to $457.1 million in Q3 2020, but well above Q3 2019 pre-pandemic level of $284.4 million. Net revenue for the nine months ended September 30, 2021, was $1.393 billion, an increase of 21.6% year over year. As Andy mentioned earlier, our third quarter results were challenged by a very difficult logistics and supply chain environment.

Logistics is slower than usual, with many shipping lanes taking over double the normal shipping times and at a much higher cost. At times, we're not able to purchase all of certain semiconductors that we need. Finally, GPUs are difficult to find at or near MSRP. And we believe that many of our customers are waiting to build new systems or to upgrade until pricing returns to more normal levels.

We're trying to mitigate delays by building our inventory and our hubs closer to our markets, but it's been difficult to pass costs on to our customers. We estimate that the effect of increased supply costs have had a 2% to 3% headwind on our gross margin and resulting EBITDA percent during the third quarter and expect this to continue in the fourth quarter. Ocean freight of 40 foot containers, which historically would have been in the $3,000 to $5,000 range have gone up three, four, even fivefold. So we're seeing a slight easing in early October.

We expect continued elevated freight costs for Q4. Because of this, our adjusted EBITDA in the second half of the year is expected to be 7% to 9% and 10% to 11% for the full year compared to our planned 11% to 12%. Turning now to our segments. The gamer and creator peripheral segment provided $139.3 million of net revenue during the third quarter, a decrease of 13.8% from $161.6 million in Q3 2020, impacting by supply and logistics constraints.

The gamer and creator peripheral segment net revenue contributed 35.6% of net revenue, an increase of 30 basis points from 35.3% in Q3 2020. For the nine month period, gamer and creator peripheral segment net revenue was $470.3 million, an increase of 35.3% year over year. We expect our gamer and creator peripheral segment to grow by about 20% this year compared to 83% in 2020. We believe that our supply chain delays in 2021 have caused some loss of sales and growth could have been higher, perhaps by $50 million or an additional 10%.

The gaming components & systems segment provided $251.9 million of net revenue during the third quarter, a decrease of 14.8% and from $295.5 million in Q3 2020, primarily driven by a shortage of reasonably priced GPUs and supply and logistics constraints. Less than half of this revenue came from memory products, which contributed $115.5 million. For the nine month period, gaming components & systems segment net revenue was $923.1 million an increase of 15.6% year over year. Gross profit in the third quarter decreased by 20.8% to $101.4 million from $127.9 million in Q3 2020, which, as you recall, was a record third quarter result and is well above the Q3 2019 pre-pandemic level of $60.2 million.

The decrease over Q3 2020 was primarily driven by increased logistics costs and reduced revenues. Gross profit margin was 25.9%, a decrease of 210 basis points from 28% in Q3 2020, mainly due to significant increases in logistics costs, especially ocean freight. For the nine month period, this was $392 million, an increase of 25.8%. The gamer and creator peripheral segment gross profit was $48.6 million, a decrease of 19% from $60 million in Q3 2020, primarily driven by a decrease in revenue in the same period and increased supply chain and logistics costs.

Gross profit margin was 34.9% and a decrease of 220 basis points from 37.1% in Q3 2020. We continue to see an overall mix shift as gamer and creator peripherals contributed a record 47.9% of gross profit in Q3 2021 as compared to 46.9% in Q3 2020. This remains 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. For the nine months ended September 2021, gamer and creator peripheral segment gross profit was $172.1 million, an increase of 42.3%.

The gaming components and systems segment gross profit was $52.8 million, a decrease of 22.3% from $67.9 million in Q3 2020, primarily driven by the decrease in revenues in the same period and increased logistics costs. Gross profit margin was 21%, a decrease of 200 basis points from 23% in Q3 2020 primarily due to freight costs. gaming components and systems contributed 52.1% of the total gross profit in Q3 2021 as compared to 53.1% in Q3 2020. Our Memory Products margin in this segment was 13.8% for the quarter.

For the nine month period, gaming components and systems segment gross profit was $220 million, an increase of 15.3%. The third quarter SG&A expenses were $76.1 million, an increase of 16.5% compared to $65.3 million in Q3 2020, primarily driven by an increase in outbound freight costs due to increases in ocean and air freight offset by a decrease in volumes due to lower revenue, an increase due to expenses related to be a public company and an increase in personnel-related expenses. Third quarter product development expenses were $14.5 million, an increase of 12.3% compared to $12.9 million in Q3 2020, primarily driven by an increase in personnel-related expenses as we continue to focus on bringing an increasing number of products to the market. Operating income in the third quarter of 2021 was $10.8 million, a decrease of $39 million from $49.7 million in Q3 2020.

For the nine month period, this was $112.8 million, an increase of 13.4%. Adjusted operating income in the third quarter of 2021 was $26.4 million, a decrease of 57% from $61.4 million in Q3 2020. For the nine month period, this was $156 million, an increase of 16.6%. Third quarter net income was $1.8 million or $0.02 per diluted share as compared to net income of $36.4 million or $0.40 per diluted share in Q3 2020.

For the nine month period, net income was $76.3 million, an increase of 26.7%. Third quarter adjusted net income was $16.3 million or $0.16 per diluted share as compared to adjusted net income of $48.5 million or $0.54 per diluted share in Q3 2020. For the nine month period, this was $110.2 million an increase of $18.2 million or 19.8%. Adjusted EBITDA for Q3 2021 was $27.6 million a decrease of 56.6% compared to $63.7 million for Q3 2020, resulting in adjusted EBITDA margin of 7.1%, a decrease of 680 basis points from 13.9% in Q3 2020.

Adjusted EBITDA for the nine months ended September 30, 2021 was $159.6 million, an increase of 13.6% year over year. Turning now to our balance sheet. We continue to convert our strong financial performance into an opportunity to further strengthen our balance sheet. In Q3 2021, we refinanced our long-term debt substantially reducing the interest rate, doubled the available revolver to $100 million, increased the term and reduced the total outstanding debt by $24 million to $250 million of face value.

Our strong financial position has allowed us to adjust to the current environment by strategically increasing inventory and making longer-term supply chain commitments where needed. With this refinancing completed, we expect to continue to reduce debt over time on a more opportunistic basis, subject to business conditions and any need for additional growth capital. We expect the refinancing to save us approximately $2 million per quarter in cash interest expense. As of September 30, 2021, we had $100 million capacity under our revolving credit facility total GAAP debt of $248.8 million, of which $244.1 million is long term and cash, excluding restricted cash of $71.9 million.

Turning now to our outlook for the year. The actual demand environment remains quite good. We believe that as supply and logistics constraints ease and GPUs become more available, we will be able to return to our revenue and margin targets. However, the various challenges we discussed earlier are constraining our performance.

Therefore, we now expect our full year performance to track more closely to the initial expectations we outlined during our Q4 2020 earnings call. For 2021, we expect total revenue in the range of $1.825 billion to $1.925 billion, representing growth of 7.2% to 13.1%. The adjusted operating income in the range of $180 million to $195 million and adjusted EBITDA in the range of $190 million to $205 million. The additional modeling details underlying our outlook remain largely the same as we discussed in our prior earnings call, with the exception of a now reduced interest expense.

For ease, I'll repeat them. We expect gross margin to slightly decrease 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 of public company costs. Assuming no further debt pay down, we now expect interest expense of approximately $1 million per quarter. The $4 million patent trial win in Q1 2021 is not in our outlook.

This amount could vary depending on what the judge rules is subject to appeal and the timing of recognition of a gain of any is uncertain at this time. An effective tax rate of approximately 21% to 23% for 2021 and full year weighted average diluted shares outstanding of approximately 100 million to 102 million. 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

[Operator instructions] The first question comes from Mario Lu from Barclays. Please go ahead.

Mario Lu -- Barclays -- Analyst

Great. Thanks for taking the questions. The first one is on the fourth quarter revenue guide. I believe that the midpoint, it suggests down 13% growth year on year.

So I just wonder if you could provide some color in terms of the year-on-year growth rate you saw exiting the third quarter in September or any early trends in October that you are seeing that suggests 4Q revenue could accelerate slightly versus the third quarter?

Andy Paul -- Chief Executive Officer

Well, let me answer that question if I can look at ways Mario. So and good to hear from you by the way. So I'm tracking the velocity of performance gaming products pretty carefully. And we use as a bellwether for that keyboards and mouse.

We don't use headsets because lot of headsets are not thought for the purpose of increasing our skills in gaming. And what we're finding there is the sales both in Europe and in the U.S. are tracking to last year. So that gives us a good indication of the base demand for performance gaming gear.

Now, as we mentioned in the release and the remarks earlier, the biggest issue we have at the moment other than the supply chain is that GPU cards are very expensive and very short. And so gamers that want to build a high-performance gaming PC are holding back somewhat because they don't want to spend $1,500 or $2,000 for paying graphics card. So that's really what's causing -- and it's much worse today than it was in Q4 last year. So that's really what's causing the revenue outlook to be a little soft.

It's not really related to the underlying demand. It's just the fact that people can't get cards, when they can't get cards, then they won't be able to build PCs and buy cases in power prices and memory and cooling products.

Mario Lu -- Barclays -- Analyst

Got it. Makes sense. And then just one on the DDR5 memory. Do we have any color in terms of the timing of that release in 2022? And if there is an increase in ASP, is there a range of magnitude of that increase and how that should flow to the memory gross margins? Thanks.

Andy Paul -- Chief Executive Officer

Yeah. I think it's going to be a slow start. We've talked to the memory manufacturers. They're really not going to be in high production until second half of next year.

So we'll expect a few people and let me back up. So all the motherboards that are coming out will support DDR4 and DDR5. And so there'll be a few leading edge enthusiasts who want to go to DDR5, but there's going to be very limited quantities available. So I wouldn't expect to see anything until next year.

And then we'll see how that works. There's no reason -- yes, there's no reason to think that ASPs will do anything, but go up. But that can -- all that can be dwarfed by the amount of memory people are putting into systems. But I'd expect the way consumers are allocating budget to systems, I think it's going to go up a little bit in memory, just because of the added performance it can give.

But just to sort of conclude that the last question, I wouldn't expect to see any meaningful effect on margins until very late in '22 from DDR5.

Mario Lu -- Barclays -- Analyst

Great. Thanks.

Operator

The next question comes from Doug Creutz from Cowen. Please go ahead.

Doug Creutz -- Cowen and Company -- Analyst

Hey. Can you talk about what you're seeing as far as the level of discounting in the market right now? And are there areas, other product areas that you've been more aggressive or areas are less aggressive? Thanks.

Andy Paul -- Chief Executive Officer

Yes, I'd say it really depends on the category, but we're not seeing, in general, a lot of discounting. And where we are, we're not necessarily reacting to it. I mean in general, we're just coming off of a short supply situation and starting to have the channel filled up. So we don't see any need to discount heavily.

There are some categories where the demand is softer post work from home, we're seeing people come back to work. But we don't really -- that's a pretty small percentage of our sales. So I'd say on an overall basis, yeah I haven't seen too much discounting going on so far.

Doug Creutz -- Cowen and Company -- Analyst

OK, thank you.

Operator

The next question comes from Drew Crum from Stifel. Please go ahead.

Drew Crum -- Stifel Financial Corp. -- Analyst

OK, thanks. Hey, guys. Good morning. A lot discussion around new products in your preamble.

Given the supply chain disruptions and logistics issues you're dealing with, how is that affecting the cadence of new product launches? Are you slowing the pace? And then I have a follow-up.

Andy Paul -- Chief Executive Officer

No. In fact, we've increased our spending on R&D and we're cranking out products like nobody's business. So I think we would we say 113 this year so far. So well in excess of two a week.

So we're keeping that going. And the supply chain delays and now well understood. So it just means you have to plan longer, longer ahead. But that's not stopping the pace of innovation or products coming out.

Drew Crum -- Stifel Financial Corp. -- Analyst

Got it. OK. And then Michael, the adjusted EBITDA guidance would imply an uptick in margin for 4Q versus 3Q. Anything noteworthy to call out to explain that improvement?

Michael Potter -- Chief Financial Officer

I think the two main things are higher volumes. So we get a little bit better absorption and a little bit better coverage of the operating expenses and a slight easing in some of the logistics costs, at least at the beginning of the quarter is probably are the two things.

Drew Crum -- Stifel Financial Corp. -- Analyst

OK, thanks guys.

Operator

The next question comes from Tim Nollen from Macquarie. Please go ahead.

Tim Nollen -- Macquarie Bank -- Analyst

Great. Hi, thanks. I'd just like to ask again about the supply chain issues. It sounds like you're saying the same thing you said last quarter, which was the issue is really that the shipping prices have gone way up.

and also consumers are holding back on buying things. But just to be clear, it's not a matter of your inability to actually source the products and make them. Just to be clear on that.

Andy Paul -- Chief Executive Officer

Well, that's 95% accurate. What we found over the last year is the products that have the highest semiconductor content, which, of course, is the highest ASP products, things like our flagship keyboards and wireless headsets with bluetooth and standard wireless. Those have been a struggle to keep on the shelves. We are now in pretty good shape and that's been a fairly recent development.

So Yes, in general, we're fitting in reasonable shape. We've increased inventory to take care of the delays. The cost is obviously still a big issue. And they're probably now as worse as they've been.

We do hope to see some of the three and we're certainly doing less air freight. But yes, that's the situation. So it's not, it's not necessarily stopping us at retail other than a few products that are still a bit tight.

Tim Nollen -- Macquarie Bank -- Analyst

OK. No, I know you've said before that you had your -- sorry.

Andy Paul -- Chief Executive Officer

Yeah. It's all of this is really dwarfed by the amount of PCs that are getting built and that's really a situation of the graphics card. So I mean that's two-thirds of our revenue, right? It's from components and memory that go into gaming PCs.

Tim Nollen -- Macquarie Bank -- Analyst

Yeah. No, I know you've called out before, you were in pretty good shape supply chain-wise coming in. So I just wanted to make sure how things sit now. And then a follow-up, you called out $100 million of missed revenues basically and some pent-up demand that's building.

And I know you're not talking 22 numbers yet, but it sounds like we can't really call the timing of this supply chain getting back into normal, but I guess it spills into next year. How should we start to think about what demand looks like into next year? I mean if underlying growth is X and then you add $100 million to that, is that the right way to think about where your real growth trend is going?

Andy Paul -- Chief Executive Officer

Yeah, yeah. I think so. I mean it's very difficult to know exactly what's in consumers' minds. I mean we -- like I said, we think that we saw the growth last year, right? So about 70% increase in gaming hardware activity in the U.S.

and that was across all product lines. I'm talking market numbers now. And then this year, the PC builds are about level with 2019, so dropped back. So you could argue that there have been plenty of GPU cards available, the builds could have been 50%, 70% higher if they match last year.

So we're using a pretty conservative number where we think 10% is about the right number that we missed. And what we also don't know, of course, is how quickly graphics cards will get back to normal supply. There's two things going on there, right? One is the semiconductor issue because they're obviously lot of semiconductors in those cards; and also the fact you've got Bitcoin mining that's absorbing a lot of the supply. So hopefully, both of those things release next year and we'll see a pretty healthy market, but it's very difficult to say.

I think the only way to think about it on a fact basis is the fact that with cards that are $1,000 to $1,500, people are still building PCs at the same rate as they were in 2019. So how we model that for next year, we'll have to wait and see how we get there. But we do expect there will be a big surge to develop, yes.

Tim Nollen -- Macquarie Bank -- Analyst

OK. Cool. Can I just squeeze in one more, please? And that's -- you've got some interesting new product releases in categories you haven't necessarily been in before. Could you just give a little bit of color on how these are different from better -- different from better than competitors.

So I'm thinking the memory, the gaming monitor that you just mentioned and like the Elgato Facecam. How are these different and better than your competitors' products?

Andy Paul -- Chief Executive Officer

Well, so let's take the Elgato camera first Facecam That has been designed from the ground up for streamers, whereas as you probably know, most of the web cameras in the market were designed for pretty casual video conferencing. And that means because the people at the high end of the market, were using pretty expensive deals or cameras. And with that, you get a whole bunch of different settings, you can adjust white balance, you can adjust exposure, etc. We've built all of that into the Facecam and the settings are stored inside the Facecam.

So you can basically treat it like a DLSR camera. It's got a very, very fast refresh to it. So if you wave your hand in front of Facecam, you can see your hand moving. If you wave it in front of a standard webcam, you see a blur.

So yes, it's been very well reviewed, 4.5 stars on Amazon. So people are really liking that and we're basically making as many as we can. We gained quite a bit of market share already on that product. So pretty happy with that.

The monitor is very new. We've just launched it and just starting to sell it. Obviously, that's a big heavy product, so we had to make a decision early on how many we're going to load into the channel. And we didn't want to get too aggressive.

So that's really too early to say how that's going to go, but it's -- it's basically -- we picked the high end of the monitor market, so a very high refresh rate, 32 inch monitor built some really nice features into the mechanical parts of it for cable routing and camera mounts. So it's really designed for high-end enthusiast. And then the DDR5, we basically take an all standard technologies that we put into our normal modules in terms of overclocking and RGB control and we've added those to DDR5 platform. Now DDR5, the chips themselves are very, very fast and have got a huge amount of room for overclocking.

So we do expect that that's going to excite all the enthusiast. In terms of differential, the main differential that we offer, as I said, is enhanced speed and really nice IQ control, which means the RGB light sync with everything else. As you probably know, we have a massive market share now on memory. So we're almost at 60% market share.

So we're not necessarily looking to differentiate any more than we already do.

Tim Nollen -- Macquarie Bank -- Analyst

Thanks very much.

Operator

The next question comes from Thomas Forte from D.A. Davidson. Please go ahead.

Thomas Forte -- D.A. Davidson -- Analyst

Great. So one question and a follow-up. My first question, I wanted to hear your current thoughts on the progression of your core gamer. Are you still seeing an acceleration in the time line from mobile to console to build your own?

Andy Paul -- Chief Executive Officer

Well, it certainly looks like it. I think we've mentioned before that the gaming hardware is growing faster than software, which is growing faster than a number of gamers. So there's a steady acceleration of people that game moving into performance hardware and building gaming PCs. So we didn't see anything different.

And it's roughly three to one in terms of the pace of growth. So yes, we're seeing a steady movement. One of the things we just did recently was a survey among PC gamers. The interesting thing is that almost 90% of PC gamers also play on console also play on mobile.

So I don't think -- it's not quite the situation of people are migrating from one to another. They're just doing more things. And as far as we can see, once people can afford to build a gaming PC, they'll go ahead and do it.

Thomas Forte -- D.A. Davidson -- Analyst

Great. And then my follow-up question is, I think in the press release, you talked about the ability to take price or times where you felt like you couldn't take price to adjust for some of this inflation. Can you talk about your product portfolio and your ability to take price within different segments?

Andy Paul -- Chief Executive Officer

Sorry, it was a bit loud. But are you asking whether we were able to pass on cost increases in the form of price increases?

Thomas Forte -- D.A. Davidson -- Analyst

Yeah, Andy, if you think that there are certain segments you operate in, where you feel like you can take price versus others where we feel like you can't take price?

Andy Paul -- Chief Executive Officer

Yeah. I think that in the -- yeah, it's quite simple really. I think in the categories where we've got big healthy competitors that are more like us, I think most people are waiting on prices. So keyboards, mouse, headsets, typically, those prices, we're not seeing being raised, the companies are simply absorbing the costs.

With our smaller competitors that we see with our components and let's be -- if we get this specifically down to things like chairs, you have to increase prices. So otherwise, people would go out of business. So yes, where we've got smaller competitors, we are seeing prices go up to reflect that to a certain extent. So we've got some mitigation against the cost.

But in the peripheral areas and the streaming areas, we haven't seen people passing on a lot of cost yet. I think everyone is sort of waiting to see how quickly the shipping costs go back down. I mean it's sort of inconceivable to think that container prices would be $15,000 forever. So we're pretty sure that eventually, otherwise, we don't start up container companies.

So I think that's probably going to ease pretty quickly.

Thomas Forte -- D.A. Davidson -- Analyst

Great. Thanks for taking my question.

Operator

The next question comes from Rod Hall with Goldman Sachs. Please go ahead.

Unknown speaker

Hi. This is RK on behalf of Rod. Thanks for taking my question. Andy, I wanted to follow up on underlying demand.

Could you give us more color on how you track that, which areas were strong? And I think you also mentioned some categories were softer? And Michael, to follow up on the pricing question. Why is it harder to pass on the price increases given that demand is still strong?

Andy Paul -- Chief Executive Officer

So let's take the second one first. I think that it's not necessarily hard to pass on price increases mechanically, but in a competitive environment, like I said just now, you've got larger competitors that have healthy balance sheets. And the notion is that the shipping costs will ease within a year. A lot of times, where you've got products that are very heavily entrenched in retail, there's no point asking retailer to raise MSRP by $10 and then taking it down again in six months.

So that's where we tend to not see price increases. The other products, things like cases and power suppliers and chairs and everything, yes, in general, those prices have been rising up. In many cases, we've got situations where our retailers buy containers from us, FMB in China and they're incurring the cost themselves. So that naturally tends to lift prices up.

The first part of the question I missed, I'm sorry.

Unknown speaker

I wanted to ask on underlying finance. So how do you track that and which areas were stronger and softer?

Andy Paul -- Chief Executive Officer

Yeah, yeah. Sorry. So yeah, very straightforward. Look, we collect NPD data in the U.S.

We collect GFK data in Europe and many parts of the world. We do various surveys and of course, we see what's happening at the point of sale. So that's -- we've got a pretty good line on that. And as I said earlier, what I tend to focus on is performance products, those products are people are buying to improve their gaming.

And we see those rose by 70% from '19 to '20 and they're currently holding at the same level as '20, which is pretty remarkable because I think we all were a little nervous that perhaps that was a onetime surge that would relax back when people went back to work, but that hasn't happened. Now, we don't know what the true underlying demand is of gaming PCs for people building them. But just think about it, if prices have pushed up to 50% to 100% over standard MSRP, you can imagine that the demand is well in excess of the supply. And the current build rate in the U.S.

and Europe is about the level of 2019. So we know that it's somewhere in between '19 and '20 levels. Could be more than 20%, quite honestly. But I'd expect it's more likely closer to 20% if graphics cards were at the normal prices.

So that's basically how we're figuring it out.

Unknown speaker

And you mentioned that some categories were softer in underlying demand

Andy Paul -- Chief Executive Officer

So you said some categories?

Unknown speaker

I mentioned --

Andy Paul -- Chief Executive Officer

I think that, yeah, sorry, it's a bit muffled. Yes, now I understand the question. Yes when we look across all of the different categories that we're in, you can see that products that we used for work from home and perhaps not gaming. So webcams, for example, those were a bit softer.

And we're not really in that market, but we're looking at it because we just launched a camera, right? And some of the streaming products like lights and things that were bought by people not just gaming. So we've seen that ease a little bit. But in general, all the things that are related to performance gaming have remained steady.

Unknown speaker

Great. Thanks, Andy.

Operator

[Operator instructions] The next question comes from Colin Sebastian from Baird. Please go ahead.

Unknown speaker

Great. Thanks. This is Dalton on for Colin. I had two questions, if I may.

The first, can you talk a bit about how the supply chain constraints are impacting the gaming components and the gamer and creator peripherals differently? So it sounds like there's more of a connection to PC build cycles and that demand getting pushed back for the component side. But how much of the gamer and creator peripherals demand is tied to that kind of new PC build cycle? And are you seeing -- is it a matter of inventory constraints in both segments there or just kind of wondering why we're seeing the same declines in gamer and creator peripherals as the components if underlying demand trends are still healthy there?

Andy Paul -- Chief Executive Officer

Yeah. So I think that's a complicated question. So firstly, those two segments are disconnected, right? I mean people don't tend to build a gaming PC and then at the same moment buy a new keyboard and mouse. So those things are asynchronous.

And yes, the component we've got -- I mean there's no problem with supply in, let's say, 95% of our components. We're still short on things like very high wattage power supplies. But in general, we're in pretty good shape. And it's more of an issue of graphical prices that dictates that.

But that has no effect on the volume of gaming peripherals. So there are some other categories that are a little bit lighter in demand. We've also got our SCUF subsidiary that we bought a couple of years ago. We're still going through the transition of PS4 to PS5.

And so that's a little bit of held back sales with that, but that should rebound in 2022.

Unknown speaker

OK. Great. Thanks. And then you previously commented on some of your supply chain lead times.

I know we talked about the shipping cost increases recently, but what are you seeing in terms of lead times versus normal? And as you're looking ahead to planning to 2022 and this increase in demand, how are you thinking about kind of planning inventory ahead of that? And are you stocking up ahead of that in order to be prepared for when GPU supplies normalize a bit?

Andy Paul -- Chief Executive Officer

Yeah. Well, the -- think about it two ways. In terms of finished goods, we've increased inventory two different ways. One is you calculate your industry needs on the refresh reload time.

So that had to go up a little bit. We also have probably six weeks of inventory in containers on the water extra compared to last year because lead times in general going from six to 12 weeks in terms of container shipments. So that's how we deal with it. In terms of raw materials with our subcontractors, yes, we have many situations where microcontrollers and other semiconductors we use are anywhere from six to 12 months lead time.

So in those cases, we just bought ahead. So selling pretty good handle on the supply chain in this case. It does mean that, like I said earlier, there was a question on new products, we have to plan a little bit further ahead for volume. But at least we know where we stand now.

Operator

This concludes the question-and-answer session. I would like to turn the conference back over to Andy Paul for any closing remarks.

Andy Paul -- Chief Executive Officer

OK. Well, like to thank everybody for attending the call. Thanks very much for your interest. We're obviously looking forward to very exciting next 12 months and we look forward to seeing you again.

Operator

[Operator signoff]

Duration: 60 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

Doug Creutz -- Cowen and Company -- Analyst

Drew Crum -- Stifel Financial Corp. -- Analyst

Tim Nollen -- Macquarie Bank -- Analyst

Thomas Forte -- D.A. Davidson -- Analyst

Unknown speaker

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