Razer reports first profit since 2014 after record year

Most of Razer's income comes from hardware, with that unit contributing US$1.08 billion in sales.
Most of Razer's income comes from hardware, with that unit contributing US$1.08 billion in sales.PHOTO: RAZER

HONG KONG (BLOOMBERG) - Razer surpassed forecasts and its annual revenue high mark as it recorded its first profit since 2014.

The gaming peripherals maker posted US$5.63 million (S$7.58 million) in net income off US$1.2 billion in revenue in the year to Dec 31. Both were above analysts' expectations, with the pandemic-afflicted 2020 spurring demand for PC gear that saw Razer's sales rise 48 per cent.

Most of Razer's income comes from hardware, with that unit contributing US$1.08 billion in sales. Beside its core business of gaming keyboards, mice and other accessories, the company also offers a lineup of laptops under its systems division, which it says has grown its market share outside of the US.

"Despite the initial impact on our supply chain at the start of the year due to the Covid-19 pandemic, our Systems business saw an acceleration in growth with strong double-digit percentage growth year-on-year since May as a result of pent-up demand from consumers," Razer said in a statement.

"We will seek to deliver outsized revenue growth and continued profitability in 2021" by focusing on hardware products with higher margins among other efforts, Razer chief strategy officer Lee Limeng said during a conference call on Wednesday.

This year is likely to be tough for Razer and other gaming peripheral makers because of the high base set in 2020, said Matthew Kanterman, an analyst at Bloomberg Intelligence.

"Looking beyond, as gamers continue to adopt more premium hardware and as live streaming demand continues to rise, premium brands such as Razer are set to capture more market share and outperform the market's roughly 10 per cent growth rate in 2022 and beyond," Kanterman said.

Key highlights

• Peripherals sales rose to US$773.2 million in 2020, accounting for 64 per cent of total revenue. In 2019, they accounted for 54 per cent of the company's sales.

• Razer Gold, a digital entertainment payment service, had more than 26 million registered users at the end of 2020, up 24 per cent from a year earlier.

• Razer Fintech generated US$4.3 billion in total payment volume in 2020, doubling from a year ago, aided by online shopping and digital entertainment consumption.

• After its failed bid to obtain a digital banking license in Singapore, Razer Fintech is looking at opportunities in Southeast Asia and emerging markets in Latin America, the Middle East and Africa, Lee said.

Market reaction

Razer shares lost 1.3 per cent in Hong Kong after falling as much as 3.5 per cent earlier on Wednesday.