SINGAPORE -- After logging yearly losses since listing on the Hong Kong stock exchange in 2017, Singapore-U.S. gaming peripherals maker Razer finally turned the corner in 2020.
The company, co-founded by Singaporean entrepreneur Tan Min-Liang, on Wednesday reported a net profit of $5.6 million for the year ended December, reversing its $84.2 million loss in 2019, as it vowed to expand its offerings beyond gaming and into digital financial services.
Like other new economy businesses that rode the wave of faster digitization last year amid the coronavirus pandemic, Razer saw its business benefit as the COVID-19 health crisis kept people at home.
The company booked record revenue of $1.2 billion, up 48%, year on year, as it saw gains for its hardware business and growth in its services unit. Besides making products like high-end gaming laptops, keyboards and controllers, Razer operates a financial technology segment, offering digital payments and virtual credits for gamers.
"We have turned profitable," LiMeng Lee, Razer's chief strategy officer and chief executive of Razer Fintech, declared at an earnings briefing on Wednesday. "Market investors have been asking a few questions around: 'Are you guys ever going to be profitable?' I think we have beat all expectations," he said.
In its core hardware segment, the company, which is backed by Singapore state investor Temasek, saw revenue rise 51.8% on the year to $1.08 billion, accounting for the lion's share of income for the company. Razer said its mouse, keyboard and headset products recorded strong growth.
"When people started having to work from home, [these] are users or nongamers who wanted the best equipment for their work-from-home, [and they] actually [were] coming in to buy more and more Razer products," Lee said.
Revenue from its financial services arm grew 66.8% on the year to $128.4 million and contributed 20.8% of the group's gross profit, an increase from the 19.4% share it had in 2019.
Apart from the boost from the pandemic, Lee said the company has concurrently taken steps to pare expenses and lift its bottom line. Operating costs as a percentage of net revenue were trimmed from 32.1% in the 2019 financial year to 22.9% from January to December 2020.
"Some of the things we did during the time -- we went out and negotiated new contracts, better rates, et cetera -- and this is how we are able to control our spending," Lee said, adding that he expects Razer to continue its profitability in 2021.
The company, founded in 2005 and dual-headquartered in Irvine, California, and Singapore, has of late diversified beyond gaming hardware and looked to financial services as a driver of growth.
A consortium led by Razer was one of 21 candidates that applied for five new digital banking licenses offered by Singapore's central bank last year. But it failed to obtain a permit, which in the end went to players such as a consortium made up of super app provider Grab and Singtel, Southeast Asia's largest telecom operator by market capitalization. Sea, the region's biggest public company, was another successful bidder.
Razer is undeterred however, vowing to earmark more investment for its services business. Driven by surges in online shopping and digital entertainment consumption last year, it said total payment volume for its fintech business doubled from $2.09 billion in 2019 to $4.28 billion in 2020.
The company envisions creating a digital banking business that targets youth who are underserved by traditional financial institutions. At the briefing on Wednesday, Lee was coy about the company's future plans for financial services in the rest of Southeast Asia in the absence of the Singapore virtual banking permit.
"In terms of digital banking licenses, I mean, we are always watching and seeing, I think, depending on the competition, depending on the situation on the ground. ... We will watch it and, if and when we do end up finally applying [for virtual banking permits elsewhere], we will probably announce," he said.
Lee said being headquartered in Singapore, Razer believed it had fulfilled the requirements for the city-state's digital banking permits in offering an innovative service, so not being able to nab the license was "disappointing after spending so much time" in bidding for the opportunity.
"Things have moved on," he said. "My fintech business, our services business continues to grow, whether or not we won the digital banking license. I would say that ... the ultimate goal of still making sure that we are servicing the financial needs of our ... gamers, our users, remains," Lee emphasized.
For Razer Fintech, he said the attention is on growing the geographic reach of the services segment, with efforts geared toward acquiring more users.
"So, where our focus [is] right now is to really kind of use the opportunity and the dollars to grow that presence, build the pipes, make sure that we are connected into more and more countries."