Razer narrows H1 losses as pandemic lockdowns drive record sales

HONG KONG-LISTED Razer, a gaming hardware, software and services company, posted a narrower loss of US$17.3 million for the first half of 2020, compared with a loss of US$48.1 million a year ago, with the global stay-home situation driving sales to record highs.

Revenue for the half-year ended June 30 was up 25.3 per cent to US$447.5 million on the back of better performance from the hardware business and the services business.

Razer's hardware segment, which contributed to 85.5 per cent of revenue, consists of the gaming peripherals business - the sale of gaming mice, keyboards, audio devices and mouse mats - and the systems business, which comprise laptop sales.

Sales of peripherals grew 40.9 per cent to US$252.7 million. Razer noted that the stay-home situation had boosted sales for live-streaming devices such as the Kiyo camera and Seiren streaming microphone.

Revenue from the systems segment increased by 4.6 per cent to US$130 million, primarily due to sales from refreshed model lines.

Revenue from the software and services segment, which comprise the provision of software, virtual credits and payment-related services, grew 79 per cent to US$64 million. Total user accounts for software increased 42.8 per cent to about 100 million, with monthly active users surging by over 45 per cent, driven by strong growth across all software offerings.

Razer Gold, the group's virtual credits programme for gamers, recorded a 125.9 per cent year-on-year increase in total payment volume.

Gross profit margin improved slightly to 22 per cent from 21.2 per cent as a result of a higher contribution from the services business. It lent almost 30 per cent to the company's gross profit and had a gross profit margin of 45.9 per cent. This was partially offset by the increase in freight costs to facilitate surges in demand for Razer's products.

The group posted an adjusted Ebitda (earnings before interest, taxes, depreciation and amortisation) of US$3.2 million, compared with a negative Ebitda of US$20.6 million a year ago. Ebitda was adjusted for restructuring expense, merger and acquisitions (M&A) expense, and share-based compensation expense.

Operating expenses fell 9.8 per cent to US$115.5 million, representing 23.9 per cent of net revenue. The decrease was driven by falls in research and development (R&D) expenses, and general and administrative expenses. Razer recorded a decrease of US$2.2 million in employee benefits after it exited the loss-making mobile handset business, and a fall in share-based compensation expense of US$11.1 million.

Selling and marketing expenses grew 1.4 per cent to US$54.8 million due to higher personnel costs. This was offset by an overall fall in spending as marketing programmes were streamlined and spending for Razer Phone was cut.

The Covid-19 lockdowns boosted Razer's fintech business. The group, which is gunning for a digital banking licence in Singapore with a consortium, generated a 114.3 per cent increase in total payment volume (TPV) to US$1.8 billion for H1. As a means of comparison, TPV for the whole of FY2019 was US$2.1 billion.

The group generated operating cashflow of US$66 million for the half-year ended June. Cash and cash equivalents were US$585.9 million as at June 30, 2020, with no debt.

Razer said it will continue with R&D investments in new hardware categories and development of new services, continued share buybacks and M&A activities.

Loss per share was 0.2 US cent, compared with 0.55 US cent the year before.

The counter closed flat at HK$1.70 on Wednesday.