Annual Report 2020 Contents

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Annual Report 2020 Contents STOCK CODE: 1337 ANNU A L REPO ANNUAL REPORT 2020 R T 2020 RAZER INC. INCORPOraTED IN THE CaYMAN ISLANDS WITH LIMITED LiaBILITY Contents 2 Corporate Information 6 Financial Summary and Highlights 10 Chairman’s Statement 18 Management Discussion and Analysis 26 Directors and Senior Management 34 Report of the Directors 46 Corporate Governance Report 62 Environmental, Social and Governance Report 81 Independent Auditor’s Report 87 Consolidated Statement of Profit or Loss and Other Comprehensive Income 89 Consolidated Statement of Financial Position 91 Consolidated Statement of Changes in Equity 93 Consolidated Cash Flow Statement 95 Notes to the Consolidated Financial Statements 147 Definitions and Glossary of Technical Terms RAZER INC. 2 ANNUAL REPORT 2020 CORPORATE INFORMATION BOARD OF DIRECTORS Executive Directors Non-executive Director Mr. Min-Liang TAN Mr. LIM Kaling (Chairman & Chief Executive Officer) Ms. LIU Siew Lan Patricia Independent (resigned on March 24, 2021) Non-executive Directors Mr. TAN Chong Neng Mr. CHAU Kwok Fun Kevin Mr. LEE Yong Sun Mr. Gideon YU Audit and Risk Management Committee Registered Office Mr. CHAU Kwok Fun Kevin (Chairman) Maples Corporate Services Limited Mr. LEE Yong Sun PO Box 309 Ugland House Mr. Gideon YU Grand Cayman KY1-1104 Cayman Islands Remuneration Committee Mr. Gideon YU (Chairman) Corporate Headquarters Mr. CHAU Kwok Fun Kevin 9 Pasteur, Suite 100, Irvine, CA 92618, Mr. Min-Liang TAN United States Nomination Committee 514 Chai Chee Lane Mr. LEE Yong Sun (Chairman) #07-05 Mr. CHAU Kwok Fun Kevin Singapore 469029 Mr. LIM Kaling Principal Place of Business in Hong Kong Joint Company Secretaries Level 54, Hopewell Centre Mr. CHOO Wei Pin 183 Queen’s Road East Ms. CHAN Wai Ling Hong Kong Auditors Principal Share Registrar and Transfer Office KPMG, Public Interest Entity Auditor Maples Fund Services (Cayman) Limited registered in accordance with the PO Box 1093 Financial Reporting Council Ordinance, Boundary Hall, Cricket Square 8th Floor, Prince’s Building Grand Cayman KY1-1102 10 Chater Road, Central Cayman Islands Hong Kong Hong Kong Share Registrar and Transfer Office Computershare Hong Kong Investor Services Limited Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong Investor Relations Contact Corporate Website Email: [email protected] www.razer.com STOCK CODE: 1337 FINANCIAL SUMMARY AND HIGHLIGHTS RAZER INC. 6 ANNUAL REPORT 2020 FINANCIAL SUMMARY AND HIGHLIGHTS For the Year ended December 31, 2020 Record high revenue Turned profitable on GAAP basis (ahead of all expectations) US$517.9M CAGR -US$165.8M +32.7% US$712.4M -US$97.9M US$820.8M -US$83.5M US$1,214.6M US$0.8M FY2017 (IPO year) FY2018 FY2019 FY2020 Gross profit margin improvement Positive operating cashflow +180bps 20.5% -US$38.5M 22.3% US$152.9M FY2019 FY2020 One of the strongest balance sheets in the industry NO DEBT WITH OVER US$600M IN CASH FINANCIAL SUMMARY AND HIGHLIGHTS 7 Condensed Consolidated Statements of Profit or Loss and Other Comprehensive Income Year ended December 31, 2016 2017 2018 2019 2020 US$’000 US$’000 US$’000 US$’000 US$’000 Revenue 392,099 517,937 712,439 820,795 1,214,570 Gross profit 109,451 151,025 170,078 168,063 271,008 Profit/(loss) before income tax (63,270) (164,585) (89,547) (77,816) 4,352 Profit/(loss) for the year (59,616) (165,839) (97,908) (83,470) 805 Total comprehensive income for the year (59,696) (164,877) (103,308) (83,252) 6,955 Profit/(loss) attributable to equity shareholders of the Company (59,332) (164,020) (96,966) (84,179) 5,626 Total comprehensive income attributable to equity shareholders of the Company (59,412) (163,058) (102,453) (81,755) 11,381 Condensed Consolidated Statements of Financial Position As at December 31, 2016 2017 2018 2019 2020 US$’000 US$’000 US$’000 US$’000 US$’000 (Restated) Non-current assets 52,722 93,429 144,576 146,879 200,273 Current assets 263,758 911,834 885,156 847,928 1,042,618 Total assets 316,480 1,005,263 1,029,732 994,807 1,242,891 Current liabilities 164,776 217,966 353,879 401,920 620,568 Net current assets 98,982 693,868 531,277 446,008 420,050 Non-current liabilities 3,516 3,921 13,911 18,099 15,099 Net assets 148,188 783,376 661,942 574,788 607,224 Total equity attributable to equity shareholders of the Company 144,601 781,608 659,810 568,275 581,921 Non-controlling interests 3,587 1,768 2,132 6,513 25,303 Total equity 148,188 783,376 661,942 574,788 607,224 CHAIRMAN’S STATEMENT RAZER INC. 10 ANNUAL REPORT 2020 CHAIRMAN’S STATEMENT 2020 was an extraordinary year for the world and a truly Cashflow from operating activities turned positive to extraordinary year for us at Razer. US$152.9 million, driven by strong operating profits, efficient working capital management and cash discipline Despite the global market uncertainty Cash Balance increased to over US$600 million caused by the COVID-19 pandemic, with no debt, one of the strongest balance sheets in Razer had a stellar year and crossed the the industry US$1 billion revenue milestone for the In addition to delivering a strong set of results for full year 2020, we first time ever. Ahead of all expectations, remain a global Environmental, Social and Corporate Governance (“ESG”) leader in the corporate space. We are not just fully compliant the Group turned profitable on a GAAP with the ESG standards set out by the Hong Kong Stock Exchange but basis, as a result of our dominant brand have gone above and beyond to outline how we, as one of the largest position, compelling offerings across our youth and millennial brands in the world, intend to contribute towards a more sustainable future in our #GoGreenWithRazer manifesto. ecosystem of Hardware, Software and Services, and strong execution. Key highlights for the financial year ended December 31, 2020 were: Record high revenue of US$1.2 billion with 48.0% year-on-year growth, driven by robust demand, as well as market share gains for the Hardware business and continued exponential growth of the Services segment Gross Profit Margin improved to 22.3%, driven by improving margins in the Hardware segment and increased contribution of the higher margin Services business to the Group Turned profitable with GAAP Net Profit of US$0.8 million, ahead of all expectations, fuelled by exceptional revenue growth and productivity improvements CHAIRMAN’S STATEMENT 11 Record awards at CES year after year with tremendous gains in Systems Growth solutions as Razer expands further into gaming desktops and introduces high end gaming components Core Segment SOFTWARE: HARDWARE: 53.8% YEAR-ON-YEAR GROWTH TO APPROXIMATELY 123 MILLION TOTAL 51.8% YEAR-ON-YEAR GROWTH TO USER ACCOUNTS WITH OVER 68.2% US$1,083.7 MILLION GROWTH IN MONTHLY ACTIVE USERS In 2020, our Hardware business grew by 51.8% year-on-year to Our Software business continued to expand with a 53.8% year-on- US$1,083.7 million, driven by the robust growth of our Peripherals year increase in total user accounts to approximately 123 million and Systems businesses. Our ability to roll out innovative, as of December 31, 2020. Monthly active users surged by over category-defining products puts us at the forefront of the industry. 68.2% as of December 31, 2020. This increase was attributable Razer was crowned the official Consumer Electronics Show’s to strong growth across all our software offerings boosted by (“CES”) Best of CES for the 9th time in the Company’s history. increased gaming, esports and livestreaming activities. Our Peripherals business recorded strong growth across the core During 2020, we continued our efforts to further enrich user categories of mouse, keyboard and headset during the year, with experience and drive stickiness to the Razer ecosystem. particularly strong demand for our flagship products such as Razer Viper Ultimate, Razer DeathAdder V2, Razer Huntsman Mini and the Razer BlackShark V2 Pro. Our Core Peripherals business has maintained its market leading position for gaming peripherals across the US, Europe, Asia-Pacific and China while taking significant market share from the competition1. Our Systems business has maintained its market leading position in the premium gaming laptop segment in the US while growing market share in new markets outside of the US2. 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. During the year, we saw further expansion across growth areas such as mobile/cloud gaming, console gaming, live-streaming products as well as gaming chairs. RAZER INC. 12 ANNUAL REPORT 2020 RAZER GOLD Razer Gold, a global game/digital entertainment payment service, recorded an 102.4% year-on-year increase in total payment volume (“TPV”). This was driven primarily by the increase in the number of transactions effected through the Razer Gold platform. TPV hit new records for our content partners such as Mobile Battle Royale and MOBA game genres, as well as live-streaming platforms. As of December 31, 2020, Razer Gold recorded over 26 million registered users, representing 23.8% growth year-on-year. During 2020, we further expanded our footprint and added a total of 1.6 million channel touchpoints including in places such as the Middle East and North Africa region (“MENA”).
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