美國
證券交易委員會
華盛頓特區20549
表格
(標記一個)
根據1934年證券交易法第13或15(d)條款的季度報告。 |
截至2024年6月30日季度結束
或
根據1934年證券交易法第13或15(d)條款的過渡報告 |
在從_________到_________的過渡期間
委員會檔案編號：
（根據其組織憲章規定的正式名稱）
（成立或組織的）州或其他轄區 或組織成立的州或其他司法管轄區) |
(國稅局雇主識別號碼) |
(總執行辦公室地址和郵遞區號) |
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（註冊人的電話號碼，包括區號） |
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不適用
（前名稱、前地址和前財政年度，
如果與上一份報告相比有所更改)
根據法案第12(b)條規定註冊的證券：
每種類別的名稱 |
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交易標的（s） |
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每個註冊交易所的名稱 |
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請在核對標記上打勾，確認申報人（1）已在前12個月（或申報人被要求提交此類申報的縮短期間）內提交證券交易所法案第13條或第15(d)條要求申報的所有報告，以及（2）過去90天一直處於此類申報要求的範圍內。
請打勾表明申報人在過去的12個月（或申報人需在該較短期間內提交這些檔案）中已根據《對S-t法規（本章節第232.405條）的規定405條》提交了所有必須提交的交互式資料檔案。
請勾選指示登記者是否為大型快速提交人、快速提交人、非快速提交人、較小的報告公司或新興成長型公司。請參閱交易所法規120億2條，了解「大型快速提交人」、「快速提交人」、「較小的報告公司」和「新興成長型公司」的定義。
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加速歸檔人 |
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非加速歸檔人 |
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小型報告公司 |
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新興成長型企業 |
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如果一家新興成長型公司，請用勾選標記表示該申報人已選擇不使用根據證交所法案13(a)條款提供的任何新的或修訂過的財務會計準則的延長過渡期。 ☐
請勾選是否為外殼公司 (依照交易所法規定定義的外殼公司條款120億2)。是 ☐ 否
截至2024年10月28日，申報人持有
目錄檔案內容
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頁面 |
第一部分 |
2 |
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項目一。 |
2 |
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2 |
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3 |
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4 |
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5 |
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7 |
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8 |
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項目二。 |
22 |
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第三項目。 |
33 |
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第四項。 |
34 |
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第二部分 |
35 |
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項目一。 |
35 |
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項目 1A。 |
35 |
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項目二。 |
35 |
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第三項目。 |
35 |
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第四項。 |
35 |
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第五項。 |
35 |
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第六項 |
36 |
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37 |
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i
有關前瞻性陳述的注意事項
本季度報告表格10-Q中包含了根據1934年證券交易法第21E條的定義的前瞻性聲明，這些聲明反映了我們對我們的業務運作和財務表現等事務的當前看法。這些前瞻性聲明在整個季度報告中都有所提及，並涉及我們的行業板塊以及我們所運作的市場、業務策略、目標和預期，包括我們的市場定位、未來運營、利潤率、盈利能力、資本支出、流動性和資本資源以及其他財務和運營信息。我們使用了“預期”、“假設”、“相信”、“繼續”、“可能”、“估計”、“期望”、“可預見的”、“未來”、“打算”、“可能”、“計劃”、“潛在”、“預測”、“項目”、“尋求”、“將會”及類似的術語和短語來識別這些前瞻性聲明。
本季度報告（表格10-Q）中所包含的前瞻性聲明基於管理層當前的預期，並且受到不確定性與情況變化的影響。無法保證影響我們的未來發展將是我們所預期的。由於全球、區域或地區的經濟、業務、競爭、市場、監管及其他因素的變化，實際結果可能與這些預期有重大差異，其中許多因素超出了我們的控制範圍，例如，整體經濟狀況和供應鏈問題。我們相信這些因素包括但不限於我們在2023年12月31日結束的年度報告（表格10-K）第I部分，第1A項下描述的「風險因素」。這些因素不應被解釋為穩定的，並且應與本季度報告（表格10-Q）中包含的其他警示性聲明一起閱讀。我們不承擔公開更新或審查任何前瞻性聲明的義務，無論是由於新信息、未來發展還是其他原因，除非根據任何適用的證券法要求。
海盜船遊戲有限公司 | 2024年第三季10-Q表格 | 1
第一部分—財務AL資訊
第一項。財務報表。未經審計的財務報表。
航海王遊戲公司
現金流量彙總簡明財務報表損益表
(未經審核，以千計，除每股金額外)
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截至三個月 |
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九個月結束 |
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2024 |
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2023 |
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2024 |
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2023 |
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淨營業收入 |
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$ |
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$ |
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$ |
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成本收入 |
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毛利潤 |
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營運費用： |
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營業、一般及行政費用 |
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產品開發 |
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營業費用總額 |
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營運虧損 |
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其他（費用）收入： |
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利息支出 |
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利息收入 |
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其他收入（費用），淨額 |
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( |
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( |
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( |
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總其他費用，淨額 |
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( |
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( |
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稅前損失 |
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所得稅效益（費用） |
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淨虧損 |
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減：歸屬於非控制權益的凈利潤 |
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歸屬於Corsair Gaming, Inc.的凈虧損。 |
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( |
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$ |
( |
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$ |
( |
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$ |
( |
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計算歸屬於Corsair Gaming, Inc.普通股股東的凈虧損每股： |
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歸屬於Corsair Gaming, Inc.的凈虧損。 |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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可贖回非控制性權益的贖回價值變動 |
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( |
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— |
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( |
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Corsair Gaming, Inc.普通股股東的淨虧損 |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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Corsair Gaming, Inc.普通股股東的每股淨虧損以下： |
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基本 |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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攤薄 |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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加權平均在外流通股數： |
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基本 |
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攤薄 |
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附註說明是這些基本報表不可分割的一部分
海盜船遊戲公司 | 2024年第三季度10-Q表格 | 2
航海王遊戲公司
綜合賬目摘要綜合虧損數
（未經審計，以千為單位）
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截至三個月 |
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九個月結束 |
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2024 |
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2023 |
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2024 |
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2023 |
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淨虧損 |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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其他綜合損益： |
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匯率期貨外幣翻譯調整，稅後效益（支出）為$ |
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( |
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來自長期公司间貸款的未實現匯率期貨收益（損失），稅收效益（費用）淨額為 |
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( |
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綜合虧損 |
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( |
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( |
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( |
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( |
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減：歸屬於非控股權益的綜合收益（損失） |
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( |
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歸屬於Corsair Gaming, Inc.的綜合虧損。 |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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附註說明是這些基本報表不可分割的一部分
Corsair Gaming, Inc. | 2024年第三季度10-Q表格 | 3
航海王遊戲公司
縮短的資產負債表已簡化的資產負債表
(未經審核，以千計，除每股金額外)
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九月三十日， |
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12月31日, |
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資產 |
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流動資產: |
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現金 |
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$ |
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$ |
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受限現金 |
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應收帳款，淨額 |
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存貨 |
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預付費用及其他流動資產 |
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流動資產總額 |
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受限現金，非流動性 |
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不動產及設備，淨額 |
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商譽 |
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無形資產，扣除累計攤銷 |
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其他資產 |
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總資產 |
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$ |
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$ |
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負債 |
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流動負債： |
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一年內到期的負債，淨額 |
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$ |
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$ |
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應付賬款 |
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其他負債及應計費用 |
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流動負債總額 |
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長期負債淨額 |
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遞延所得稅負債 |
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其他負債，非流動 |
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總負債 |
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暫時性權益 |
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可贖回非控制權益 |
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永久資本 |
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海盜船遊戲公司股東權益： |
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優先股，面額$0.01，授權股數為5,000,000股，發行且流通股數為截至2024年6月30日和2023年12月31日之184,668,188股和181,364,180股。 |
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0.01 |
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資本公積額額外增資 |
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(累積赤字)保留盈餘 |
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累積其他全面損失 |
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( |
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( |
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Corsair Gaming, Inc.的總股東權益 |
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不可贖回的非控股權益 |
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總永久資本 |
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總負債、暫時性權益和永久性權益總計 |
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$ |
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$ |
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附註說明是這些基本報表不可分割的一部分
Corsair Gaming, Inc. | 2024年第三季度10-Q表格 | 4
航海王遊戲公司
綜合收益簡明綜合財務報表股東權益
（未經審核，以千計）
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截至2024年9月30日的三個月 |
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普通股 |
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追加 |
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保留盈餘 |
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累計其他 |
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總計Corsair Gaming, Inc. |
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不可兌換 |
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總計 |
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股份 |
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金額 |
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資本 |
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赤字 |
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損失 |
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權益 |
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利息 |
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權益 |
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截至2024年6月30日的餘額 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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凈利潤（損失） |
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— |
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— |
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其他綜合收益（虧損） |
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— |
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— |
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— |
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— |
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發行普通股以配合員工股權激勵計劃 |
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— |
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— |
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— |
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因淨股份結算而被扣留的分享 |
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— |
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— |
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— |
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— |
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基於股票的薪酬 |
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— |
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— |
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可贖回非控制性權益的贖回價值變動 |
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— |
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— |
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— |
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— |
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— |
|
|
|
( |
) |
支付給不可贖回的非控股權益的分紅 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
購買額外的所有權利益 |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|||
重新分類為臨時權益（參見附註15） |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
截至2024年9月30日的結餘 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||
|
|
截至2023年9月30日的三個月 |
|
|||||||||||||||||||||||||||||
|
|
普通股 |
|
|
追加 |
|
|
保留 |
|
|
累計其他 |
|
|
總Corsair Gaming, Inc. |
|
|
不可兌換 |
|
|
總計 |
|
|||||||||||
|
|
股份 |
|
|
金額 |
|
|
資本 |
|
|
盈餘 |
|
|
損失 |
|
|
權益 |
|
|
利息 |
|
|
權益 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
截至2023年6月30日的結餘 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
凈利潤（損失） |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
其他綜合損失 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
向不可贖回的非控股權益支付的股息 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
與員工股權激勵計劃相關的普通股發行 |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
與凈股份結算相關的股份被扣留 |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
基於股票的薪酬 |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
2023年9月30日的結餘 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Corsair Gaming, Inc. | 2024年第三季度10-Q表格 | 5
|
|
截至二零二四年九月三十日止九個月 |
|
|||||||||||||||||||||||||||||
|
|
普通股 |
|
|
額外 |
|
|
保留盈利 |
|
|
累積其他 |
|
|
托爾科賽爾遊戲股份有限公司 |
|
|
不可兌換 |
|
|
總計 |
|
|||||||||||
|
|
股票 |
|
|
金額 |
|
|
資本 |
|
|
赤字) |
|
|
損失 |
|
|
股票 |
|
|
利息 |
|
|
股票 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
截至二零二三年十二月三十一日止餘額 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
淨收入（虧損） |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
其他綜合收益（虧損） |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
發行有關員工股權激勵計劃的普通股 |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
與股份淨額結算有關的扣押股份 |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
基於股票的補償 |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
可贖回非控制權益贖回價值變動 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
派發股息予不可贖回非控制權益 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
購買額外的所有權利 |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|||
重新分類為臨時股權（參閱註 15） |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
截至二零二四年九月三十日止餘額 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||
|
|
Nine Months Ended September 30, 2023 |
|
|||||||||||||||||||||||||||||
|
|
Common Stock |
|
|
Additional |
|
|
Retained |
|
|
Accumulated Other |
|
|
Total Corsair Gaming, Inc. |
|
|
Nonredeemable |
|
|
Total |
|
|||||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Earnings |
|
|
Loss |
|
|
Equity |
|
|
Interest |
|
|
Equity |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance as of December 31, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Other comprehensive income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Change in redemption value of redeemable noncontrolling interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Dividend paid to nonredeemable noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Issuance of common stock in connection with employee equity incentive plans |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Shares withheld related to net share settlement |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Balance as of September 30, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 6
Corsair Gaming, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
|
|
Nine Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
|
|
|
|
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
|
||
Depreciation |
|
|
|
|
|
|
||
Amortization |
|
|
|
|
|
|
||
Deferred income taxes, net of valuation allowance |
|
|
|
|
|
( |
) |
|
Other |
|
|
|
|
|
|
||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
( |
) |
|
Inventories |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other assets |
|
|
|
|
|
( |
) |
|
Accounts payable |
|
|
( |
) |
|
|
|
|
Other liabilities and accrued expenses |
|
|
( |
) |
|
|
|
|
Net cash (used in) provided by operating activities |
|
|
( |
) |
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
||
Acquisition of business, net of cash acquired |
|
|
( |
) |
|
|
( |
) |
Purchase of property and equipment |
|
|
( |
) |
|
|
( |
) |
Purchase of intangible asset |
|
|
( |
) |
|
|
— |
|
Purchase price adjustment related to business acquisition |
|
|
|
|
|
— |
|
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Repayment of debt |
|
|
( |
) |
|
|
( |
) |
Borrowings from line of credit |
|
|
|
|
|
— |
|
|
Repayment of line of credit |
|
|
( |
) |
|
|
— |
|
Purchase of additional ownership interest |
|
|
( |
) |
|
|
— |
|
Payment of deferred and contingent consideration |
|
|
( |
) |
|
|
( |
) |
Proceeds from issuance of shares through employee equity incentive plans |
|
|
|
|
|
|
||
Payment of taxes related to net share settlement of equity awards |
|
|
( |
) |
|
|
( |
) |
Dividend paid to noncontrolling interest |
|
|
( |
) |
|
|
( |
) |
Payment of other offering costs |
|
|
— |
|
|
|
( |
) |
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Effect of exchange rate changes on cash |
|
|
( |
) |
|
|
( |
) |
Net decrease in cash and restricted cash |
|
|
( |
) |
|
|
( |
) |
Cash and restricted cash at the beginning of the period |
|
|
|
|
|
|
||
Cash and restricted cash at the end of the period |
|
$ |
|
|
$ |
|
||
Supplemental cash flow disclosures: |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Cash paid for income taxes, net |
|
|
|
|
|
|
||
Supplemental schedule of non-cash investing and financing activities: |
|
|
|
|
|
|
||
Equipment purchased and unpaid at period end |
|
$ |
|
|
$ |
|
||
Right-of-use assets obtained in exchange for operating lease liabilities |
|
|
|
|
|
|
||
The accompanying notes are an integral part of these condensed consolidated financial statements
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 7
Corsair Gaming, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Description of Business
Corsair Gaming, Inc., a Delaware corporation, together with its subsidiaries (collectively, “Corsair” the “Company”, “we”, “us”, or “our”), is a global provider and innovator of high-performance products for gamers and digital creators, many of which build their own PCs using our components.
Corsair is organized into
2. Summary of Significant Accounting Policies
Basis of Presentation
Our interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The accounting policies we follow are set forth in Part II, Item 8, Note 2, “Significant Accounting Policies”, of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10K for the year ended December 31, 2023 which was filed with the SEC on February 27, 2024.
The condensed consolidated balance sheet as of December 31, 2023, included herein, was derived from the audited consolidated financial statements as of that date. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed, combined or omitted pursuant to such rules and regulations. Therefore, these interim condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, 2023, included in our Annual Report on Form 10-K.
The interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements, and in management’s opinion, include all adjustments, which consist of only normal recurring adjustments necessary for the fair statement of our condensed consolidated balance sheet as of September 30, 2024 and our results of operations for the three and nine months ended September 30, 2024 and 2023. The results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results expected for the current fiscal year or any other future periods.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of Corsair and its subsidiaries, after the elimination of intercompany accounts and transactions. We consolidate subsidiaries in which we have a controlling interest. For the consolidated subsidiaries in which we own less than 100% of the equity, our consolidated net comprehensive income (loss) is reduced by the portion attributable to the noncontrolling interest. The ownership interest of other investors is recorded as noncontrolling interest in the condensed consolidated balance sheets.
In determining whether an entity is considered a controlled entity, we apply the VIE (variable interest entity) and VOE (voting interest entity) models. Entities that do not qualify as a VIE are assessed for consolidation under the VOE model. Under the VOE model, we consolidate the entity if we determine that we have a controlling financial interest in the entity through our ownership of greater than 50% of the outstanding voting shares of the entity and that other equity holders do not have substantive voting, participating or liquidation rights.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include, but are not limited to, the valuation of intangible assets, accounts receivable, sales return reserves, reserves for customer incentives, warranty reserves, inventory, derivative instruments, stock-based compensation, and deferred income
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 8
tax. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the potential impacts from events in the current economic and geopolitical environment. We adjust such estimates and assumptions when facts and circumstances dictate. The extent to which the current macroeconomic conditions and the development of the geopolitical unrest will impact our business going forward depends on numerous dynamic factors that we cannot reliably predict. Actual results could differ materially from those estimates.
Recently Adopted Accounting Pronouncements
None.
Accounting Pronouncements Issued but Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvement to Reportable Segment Disclosure. This ASU updates the reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of a segment's profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment's profit or loss in assessing segment performance and deciding how to allocate resources. The ASU will be effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. This ASU will result in additional required disclosures in our consolidated financial statements, when adopted. We are currently evaluating the provisions of this ASU and expect to adopt them for the year ended December 31, 2024.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires disaggregated information about a reporting entity's effective tax rate reconciliation as well as additional information on income tax paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024, with early adoption permitted. This ASU will result in additional required disclosures in our consolidated financial statements, when adopted. We are currently evaluating the provisions of this ASU and expect to adopt them for the year ended December 31, 2025.
3. Fair Value Measurement
U.S. GAAP establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The hierarchy is broken down into the following three levels of inputs that may be used to measure fair value:
Level 1—Quoted prices are available in active markets for identical assets or liabilities as of the measurement date.
Level 2—Pricing inputs are other than quoted prices in active market, which are either directly or indirectly observable as of the report date. The nature of these securities includes investments for which quoted prices are available but traded less frequently and investments that are fair valued using other securities, the parameters of which can be directly observed.
Level 3—Securities that have little to no pricing observability as of the report date. These securities are measured using management’s best estimate of fair value, where the inputs into the determination of fair value are not observable and require significant management judgment or estimation.
Fair value accounting is applied to all financial assets and liabilities that are recognized or disclosed at fair value in our condensed consolidated financial statements on a recurring basis. Our financial instruments, including cash, restricted cash, accounts receivable, accounts payable, and other liabilities and accrued expenses approximate fair value due to their short-term maturities.
Our financial assets and liabilities that were measured at fair value on a recurring basis consisted of foreign currency forward contracts and the fair values of these contracts, which were classified as Level 2 of the fair value hierarchy, were based on similar exchange traded derivatives and the related asset or liability. The balances of our financial assets and liabilities as of September 30, 2024 and December 31, 2023 were not material.
4. Derivative Financial Instruments
From time to time, we enter into derivative instruments such as foreign currency forward contracts, to minimize the short-term impact of foreign currency exchange rate fluctuations on certain foreign currency denominated assets and liabilities. The derivative instruments are recorded at fair value in prepaid expenses and other current assets or other liabilities and accrued expenses on the condensed consolidated balance sheets. We do not designate such instruments as hedges for accounting purposes; accordingly, changes in the value of these contracts are recognized in each reporting period in other (expense) income, net in the condensed consolidated statements of operations. We do
The foreign currency forward contracts generally mature within to
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 9
2023, respectively. The net fair value gains (losses) recognized in , net in relation to these derivative instruments was $(
5. Business Combinations
Fanatec Acquisition
On September 13, 2024, one of our subsidiaries, Corsair GmbH (“GmbH”) executed an Asset Purchase Agreement (“APA”) to purchase the business (the “Fanatec Business”) of Endor AG (“Endor”), which includes certain assets and all the personnel of Endor, as well as the equity interests of certain of Endor’s subsidiaries. Endor AG is a German public entity that created the leading end-to-end premium Fanatec sim racing product line. The Fanatec sim racing product line, which fully complements our sim racing chassis, gaming PCs, gaming and streaming peripherals, and monitors, will expand our product offerings in these markets.
The Fanatec APA was consummated on September 19, 2024 (the “Fanatec Acquisition Date”) for a cash purchase consideration of approximately $
Prior to the Fanatec acquisition, another of our subsidiaries, Corsair Components Ltd (“CCL”), entered into a Bridge Loan Agreement (“Bridge Loan”) in May 2024 and a Debtor-In-Possession Loan Agreement (“DIP Loan”) in September 2024 with Endor to provide short-term financing for Endor's operations in connection with our intent to acquire the Fanatec Business through a German restructuring process. Pursuant to the terms of the APA, the total principal and interest owed by Endor to CCL as of the Fanatec Acquisition Date for the Bridge Loan and DIP Loan of approximately $
Because the Fanatec acquisition met the definition of a business, it has been accounted for as a business combination using the acquisition method of accounting. Fanatec’s results of operations are included in our condensed consolidated statements of operations with effect from September 19, 2024.
The following table summarizes the preliminary allocation of the purchase consideration to the estimated fair value of the assets acquired and liabilities assumed as of the Fanatec Acquisition Date. The primary areas of the purchase price allocation that are not yet finalized consist of income tax and indirect tax considerations and the validation of certain inventory values, accounts payables and accrued liabilities. We will continue to reflect measurement period adjustments to purchase price allocation, if any, in the period in which the adjustments are recognized.
|
|
Amounts |
|
|
|
|
|
|
|
Inventories |
|
$ |
|
|
Prepaid and other assets |
|
|
|
|
Property and equipment |
|
|
|
|
Identifiable intangible assets |
|
|
|
|
Goodwill |
|
|
|
|
Accounts payable |
|
|
( |
) |
Accrued liabilities |
|
|
( |
) |
Deferred tax liabilities |
|
|
( |
) |
Purchase consideration, net of cash acquired |
|
$ |
|
|
|
|
|
|
|
|
|
Valuation |
|
|
Useful |
|
||
|
|
(In thousands) |
|
|
(In years) |
|
||
|
|
|
|
|
|
|
||
Trade name |
|
$ |
|
|
|
|
||
Product technology |
|
|
|
|
|
|
||
Total identifiable intangible assets |
|
$ |
|
|
|
|
||
The fair value of the working capital related items, as well as the fair value of property and equipment approximated their book values at the Fanatec Acquisition Date. The fair value of the inventories was estimated by major category, at an estimate of net realizable value, which we believe approximates the price a market participant could achieve in a current sale. The difference between the fair value of the inventories and the book value recorded on the Fanatec Acquisition Date was $
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 10
recognized $
The goodwill of $
The $
The acquisition-related costs incurred in the three and nine months ended September 30, 2024 was $
Unaudited Pro Forma Financial Information
Pro forma information is not included because the effects of the Fanatec Acquisition were not material to our condensed consolidated statements of operations for the periods presented.
Drop Acquisition
On July 14, 2023 (the “Drop Acquisition Date”), we completed the acquisition of the assets and business of Massdrop Inc. (“Drop”), including the assumption of trade payables and certain accrued liabilities (the “Drop Acquisition”) for a cash purchase consideration of approximately $
Drop, a community-based e-commerce company was headquartered in San Francisco, California, and specialized in customized DIY keyboards and keycaps. We expect this acquisition to give Corsair a leading presence in the personalized keyboards market which is one of the fastest growing trends in the gaming peripherals space as well as allow us to offer specialized Corsair and Elgato products to the enthusiast community that Drop is engaged with. Drop’s results of operations are included in our condensed consolidated statements of operations with effect from July 14, 2023.
The Drop Acquisition was accounted for as a business combination under the acquisition method of accounting. The final allocation of the Drop Acquisition purchase consideration to the estimated fair value of the assets acquired and liabilities assumed, inclusive of immaterial measurement period adjustments, was as follows (in thousands):
|
|
Amounts |
|
|
|
|
|
|
|
Accounts receivable |
|
$ |
|
|
Inventories |
|
|
|
|
Prepaid and other assets |
|
|
|
|
Property and equipment |
|
|
|
|
Identifiable intangible assets |
|
|
|
|
Goodwill |
|
|
|
|
Accounts payable |
|
|
( |
) |
Accrued liabilities |
|
|
( |
) |
Purchase consideration, net of cash acquired |
|
$ |
|
|
The fair value of certain working capital related items, including accounts receivable, prepaid and other assets, accounts payable and accrued liabilities, as well as the fair value of property and equipment approximated their book values at the Drop Acquisition Date. The fair value of the inventories was estimated by major category, at net realizable value, which we believe approximates the price a market participant could achieve in a current sale. The difference between the fair value of the inventories and the book value recorded on the Drop Acquisition Date was $
The goodwill of $
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 11
The $
The acquisition-related costs incurred in the nine months ended September 30, 2024 and 2023 were not material.
6. Goodwill and Intangible Assets
Goodwill
We conduct our goodwill impairment analysis annually on October 1 or more frequently if changes in facts and circumstances indicate that it is more likely than not that the fair value of a reporting unit may be less than its carrying value.
Due to a change in business strategies, with effect from July 1, 2024, two of our existing reporting units (the Systems reporting unit and the Components reporting unit) within the Gaming Components and Systems segment were combined (refer to as the Component and Systems reporting unit) because they now satisfy the aggregation criteria under the applicable accounting guidance. Since the composition of our other reporting units, the Peripherals reporting unit and the Memory reporting unit did not change, the carrying value of the goodwill for the Component and Systems reporting was determined as the sum of the goodwill carrying value for the Components reporting unit and the Systems reporting unit as of July 1, 2024.
During the three months ended September 30, 2024, the sustained decline in our stock price, combined with a reduction in our revenue forecasts, was considered a triggering event indicating that it was possible that the fair value of our reporting units could be less than their carrying amounts, including goodwill. As a result, we performed an interim quantitative goodwill impairment test as of September 30, 2024 using a combination of the income valuation approach and market approach methodologies. The determination of the fair value of the reporting units using the aforementioned methodologies requires significant estimates and assumptions, including but not limited to, discount rate, terminal growth rates, market multiple data from selected guideline companies, and management's internal forecasts. Management determined that the fair values of the reporting units were not less than their respective carrying amounts. As of September 30, 2024, the indicated fair value was in excess of carrying value for our Component and Systems, Peripherals, and Memory reporting units by approximately
The following table summarizes the changes in the carrying amount of goodwill by reportable segment (in thousands):
|
|
Gaming |
|
|
Gamer and |
|
|
Total |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Balance as of December 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Addition from business acquisition |
|
|
— |
|
|
|
|
|
|
|
||
Measurement period adjustments |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Effect of foreign currency exchange rates |
|
|
( |
) |
|
|
|
|
|
|
||
Balance as of September 30, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Intangible assets, net
As a result of the goodwill triggering event described above, we also performed an interim impairment test for our indefinite-lived intangible asset and our finite-lived intangible assets as of September 30, 2024. The fair value of our indefinite-lived intangible assets was determined based on the relief from royalty method and the recoverability of our finite-lived intangible assets was determined based on the undiscounted cash flows method. No impairment resulted from these interim impairment tests.
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 12
The following table is a summary of intangible assets, net (in thousands):
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||||||||||||||||||
|
Gross |
|
|
Accumulated |
|
|
Net |
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Developed technology |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Trade name |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Customer relationships |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Patent portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Supplier relationships |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total finite-life intangibles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Indefinite life trade name |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Other |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Total intangible assets |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
In the year when an identified intangible asset becomes fully amortized, the fully amortized balances from the gross asset and accumulated amortization amounts are removed from the table above.
The estimated future amortization expense of intangible assets as of September 30, 2024 is as follows (in thousands):
|
|
Amounts |
|
|
|
|
|
|
|
Remainder of 2024 |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
7. Balance Sheet Components
The following tables present the components of certain balance sheet amounts (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
|
|
|
|
|
||
Cash |
|
$ |
|
|
$ |
|
||
Restricted cash—short term |
|
|
|
|
|
|
||
Restricted cash—noncurrent |
|
|
|
|
|
|
||
Total cash and restricted cash |
|
$ |
|
|
$ |
|
||
|
|
September 30, |
|
|
December 31, |
|
||
|
|
|
|
|
|
|
||
Accounts receivable |
|
$ |
|
|
$ |
|
||
Due from Factor |
|
|
— |
|
|
|
|
|
Allowance for doubtful accounts |
|
|
( |
) |
|
|
( |
) |
Accounts receivable, net (1) |
|
$ |
|
|
$ |
|
||
|
|
September 30, |
|
|
December 31, |
|
||
|
|
|
|
|
|
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work in progress |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Inventories |
|
$ |
|
|
$ |
|
||
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 13
|
|
September 30, |
|
|
December 31, |
|
||
|
|
|
|
|
|
|
||
Manufacturing equipment |
|
$ |
|
|
$ |
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Computer equipment, software and office equipment |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Total property and equipment |
|
$ |
|
|
$ |
|
||
Less: Accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
|
|
September 30, |
|
|
December 31, |
|
||
|
|
|
|
|
|
|
||
Right-of-use assets |
|
$ |
|
|
$ |
|
||
Deferred tax asset |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Other assets |
|
$ |
|
|
$ |
|
||
|
|
September 30, |
|
|
December 31, |
|
||
|
|
|
|
|
|
|
||
Accrued reserves for customer incentive programs |
|
$ |
|
|
$ |
|
||
Accrued reserves for sales returns |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Accrued payroll and related expenses |
|
|
|
|
|
|
||
Accrued freight expenses |
|
|
|
|
|
|
||
Accrued legal expense |
|
|
|
|
|
|
||
Accrued warranty |
|
|
|
|
|
|
||
Contract liabilities |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Other liabilities and accrued expenses |
|
$ |
|
|
$ |
|
||
|
|
September 30, |
|
|
December 31, |
|
||
|
|
|
|
|
|
|
||
|
$ |
|
|
$ |
|
|||
Other |
|
|
|
|
|
|
||
Other liabilities, noncurrent |
|
$ |
|
|
$ |
|
||
8. Debt
On September 3, 2021, we refinanced the First Lien Credit and Guaranty Agreement with a new Credit Agreement (as amended, the “Credit Agreement”). The Credit Agreement provides for a $
The following table presents the carrying value of our Term Loan (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
|
|
|
|
|
||
Term Loan (variable rate) due |
|
$ |
|
|
$ |
|
||
Debt discount and issuance cost, net of amortization |
|
|
( |
) |
|
|
( |
) |
Total debt |
|
|
|
|
|
|
||
Less: debt maturing within one year, net |
|
|
|
|
|
|
||
Long-term debt, net |
|
$ |
|
|
$ |
|
||
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 14
As of September 30, 2024, the estimated fair value of the Term Loan, which we have classified as a Level 2 financial instrument, was approximately $
As of September 30, 2024, and December 31, 2023, we had $
The Credit Agreement has a variable rate structure. According to the provisions in the Third Amendment to the Credit Agreement (“Third Amendment”), beginning 2024, the Term Loan and the Revolving Facility carry interest at our election at either (a) Bloomberg Short-Term Bank Yield Index rate (“BSBY”) plus a percentage spread (ranging from
On August 19, 2024, we entered into a Fourth Amendment (the “Fourth Amendment”) to the Credit Agreement, which provides for, among other things, (i) effectuates the transition of the underlying variable interest rate from the BSBY to a forward-looking interest rate based on the Secured Overnight Financing Rate (“SOFR”), with no change to the applicable margin percentage spread, but with the addition of a rate spread adjustment in the amount of
The effective interest rate of our Term Loan, inclusive of the debt discount and debt issuance costs, was approximately
The Credit Agreement contains covenants with which we must comply during the term of the agreement, which we believe are ordinary and standard for agreements of this nature, including the maintenance of a maximum Consolidated Total Net Leverage Ratio (“CTNL Ratio”) and a minimum Consolidated Interest Coverage Ratio (“CIC Ratio”) (as defined in the Credit Agreement). According to the provisions in the Third Amendment, beginning 2024, we are required to maintain a maximum CTNL Ratio of
Our obligations under the Credit Agreement are guaranteed by substantially all of our U.S. subsidiaries and secured by a security interest in substantially all assets of the Company and the guarantor subsidiaries, subject to certain exceptions detailed in the Credit Agreement and related ancillary documentation.
The following table summarizes the interest expense recognized for all periods presented (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit Agreement: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Contractual interest expense for term loan |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Contractual interest expense for revolving facility |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Amortization of debt discount and issuance cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The future principal payments under our total long-term debt as of September 30, 2024 are as follows (in thousands):
|
|
Amounts |
|
|
|
|
|
|
|
Remainder of 2024 |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
— |
|
2028 |
|
|
— |
|
Total debt |
|
$ |
|
|
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 15
9. Commitments and Contingencies
Product Warranties
Changes in our assurance-type warranty obligations were as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Beginning of the period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Liabilities assumed from business acquisition |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Warranty provision related to products shipped |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deductions for warranty claims processed |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
End of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Unconditional Purchase Obligations
In the normal course of business, we enter into various purchase commitments for goods or services. Our long-term non-cancelable purchase commitments consist primarily of multi-year contractual arrangements relating to subscriptions for cloud computing hosting arrangements for applications used in R&D.
|
|
Amounts |
|
|
|
|
|
|
|
Remainder of 2024 |
|
$ |
— |
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
— |
|
Thereafter |
|
|
— |
|
Total |
|
$ |
|
|
Our total non-cancelable long term purchase commitments outstanding as of December 31, 2023 was $
Letters of Credit
There were
Legal Proceedings
We may from time to time be involved in various claims and legal proceedings of a character normally incident to the ordinary course of business. Litigation can be expensive and disruptive to normal business operations, and the results of complex legal proceedings are difficult to predict, and our view of these matters may change in the future as the litigation and events related thereto unfold. We expense legal fees as incurred and we record a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Based on currently available information, we believe that existing claims or proceedings are not likely to have a material adverse effect on our financial position, or the outcome of these matters is currently not determinable. An unfavorable outcome to any legal matter, if material, could have an adverse effect on our operations or financial position, liquidity of results of operations.
Indemnification
In the ordinary course of business, we may provide indemnifications of varying scope and terms with respect to certain transactions. We have entered into indemnification agreements with directors and certain officers and employees that will require Corsair, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No demands have been made upon Corsair to provide indemnification under such agreements, and thus, there are
10. Stockholders’ Equity
Shelf-Registration Statement
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 16
On July 22, 2022, we filed a shelf registration statement on Form S-3 with the SEC, which was declared effective August 1, 2022 (the “2022 Shelf Registration Statement”). The 2022 Shelf Registration Statement registered securities to be offered by us, in an amount up to $
As of September 30, 2024, $
11. Equity Incentive Plans and Stock-Based Compensation
As of September 30, 2024, we have two active equity incentive plans: the 2020 Equity Incentive Plan and the Employee Stock Purchase Plan (“ESPP”).
In February 2024, we granted performance stock units (“PSU”) to certain senior members of our management team under the 2020 Equity Incentive Plan. The vesting of PSUs is conditional upon the achievement of certain internal financial targets for the year ended December 31, 2024 and these will vest over a
We measure and recognize compensation for all stock-based compensation awards, including stock options, stock purchase rights, restricted stock units (“RSU”) and PSU, based upon the grant-date fair value of those awards. The grant-date fair value of our stock options and stock purchase rights is estimated using a Black-Scholes-Merton option-pricing model. The fair value of our RSUs and PSUs are calculated based on the market value of our stock at the grant date.
The following table summarizes stock-based compensation expense by line item in the condensed consolidated statements of operations (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Sales, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock-based compensation expense, net of amounts capitalized (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Excess income tax benefits (deficiencies) related to stock-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table summarizes by type of grant, the total unrecognized stock-based compensation expense and the remaining period over which such expense is expected to be recognized (in thousands, except number of years):
|
|
September 30, 2024 |
||||
|
|
Unrecognized Expense |
|
|
Remaining weighted average period (In years) |
|
|
|
|
|
|
|
|
Stock options |
|
$ |
|
|
||
RSUs |
|
|
|
|
||
PSUs (1) |
|
|
— |
|
|
- |
ESPP |
|
|
|
|
||
Total unrecognized stock-based compensation expense |
|
$ |
|
|
|
|
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 17
12. Net Loss Per Share
The following table summarizes the calculation of basic and diluted net loss per share (in thousands, except per share amounts):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Less: Net income attributable to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss attributable to Corsair Gaming, Inc. |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Change in redemption value of redeemable noncontrolling interest |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
|
Net loss attributable to common stockholders of Corsair Gaming, Inc. |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic weighted-average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total diluted weighted-average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per share attributable to common stockholders of Corsair Gaming, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Anti-dilutive potential common shares (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
13. Income Taxes
The following table presents our loss before income taxes, income tax benefit and effective income tax rates for all periods presented (in thousands, except percentages):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss before income taxes |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Income tax benefit (expense) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Effective tax rate |
|
|
( |
)% |
|
|
% |
|
|
( |
)% |
|
|
% |
||
We are subject to income taxes in the United States and foreign jurisdictions in which we do business. These foreign jurisdictions have statutory tax rates different from those in the United States. Accordingly, our effective tax rates will vary depending on the relative proportion of foreign to United States income, the utilization of net operating loss and tax credit carry forwards, changes in geographic mix of income and expense, changes in management’s assessment of matters such as the ability to realize deferred tax assets, and changes in tax laws.
We assess our deferred tax assets and liabilities to determine if it is more likely than not they will be realized; if not, a valuation allowance is required to be recorded. During the three months ended September 30, 2024, we have reached a cumulative loss position over the previous three years, and with consideration of other negative evidence, we concluded that U.S. federal and state deferred tax assets are not more likely than not to be realizable. As a result of the foregoing, a full valuation allowance was recorded in the current quarter. The deferred tax liability related to indefinite-lived assets was excluded from sources of future taxable income, as the timing of its reversal cannot be predicted due to the nature of its indefinite life.
Our effective tax rates were tax expense of (
Our effective tax rates were tax expense of (
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 18
against our U.S. federal and state deferred tax assets, partially offset by a tax benefit recognized for the transfer of customer relationship intangible asset from Hong Kong to United Kingdom as a result of our global tax restructuring initiative completed on July 1, 2024.
Unrecognized tax benefits were $
On December 15, 2022, the European Union (“EU”) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (“OECD”) Pillar Two Framework that was supported by over 130 countries worldwide. The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive. A significant number of other countries are expected to also implement similar legislation, including United Kingdom which approved the legislation on July 11, 2023 with a full effective date of January 1, 2024. We have evaluated the potential impact from the OECD Pillar Two rules and determined that there is no impact to our financial position for the year 2024.
14. Segment and Geographic Information
We have
The segments are defined as those operations our CODM regularly reviews to analyze performance and allocate resources. Our CODM is determined to be Corsair’s Chief Executive Officer. The results of the reportable segments are derived directly from our reporting system and are based on the methods of internal reporting which are not necessarily in conformity with GAAP. Management measures net revenue and gross profit to evaluate the performance of, and allocate resources to, each of the segments.
The following table summarizes the financial information for each reportable segment (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gamer and Creator Peripherals |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Gaming Components and Systems |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross Profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gamer and Creator Peripherals |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Gaming Components and Systems |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total gross profit |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The CODM manages assets on a total company basis, not by operating segments; therefore, asset information and capital expenditures by operating segments are not presented.
Geographic Information
The following table summarizes our net revenue by geographic region based on the location of the customer (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Americas |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Europe and Middle East |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 19
Revenues from sales to customers in the United States represented
The follow table sets forth the customers that individually comprised 10% or more of our total net revenue for the periods presented:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Customer A |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Customer B |
|
* |
|
|
* |
|
|
|
% |
|
* |
|
||||
* Customer represents less than
15. Redeemable Noncontrolling Interest ("RNCI")
RNCI, included in temporary equity on our condensed consolidated balance sheet, of $
RNCI that is redeemable and not solely within our control is classified within temporary equity in our condensed consolidated balance sheet. RNCI is measured at the greater of the redemption value, or the carrying value before giving effect to the redemption feature. The redemption value is calculated based on the formula stipulated in the Shareholders Agreement between the iDisplay Seller and Corsair and including the amounts for dividends not currently declared or paid, for which the payment is not solely within our control. The redemption value is remeasured each quarter and changes in the value are recognized immediately. Any resulting change in the value of the redeemable noncontrolling interest is recognized through retained earnings and this adjustment also impacts the net income or loss attributable to common stockholders of Corsair Gaming, Inc used in the net income (loss) per share calculation.
On January 1, 2022, we acquired a
Corsair and the iDisplay Seller did not exercise their call or put option under the SHA, but instead on
The SPAA also replaced the call option and put option in the SHA with new options. Under the SPAA, a put option (the “Put Option”) was provided to the iDisplay Seller to sell up to
According to the applicable accounting guidance, purchase of noncontrolling interest that does not result in a change in control of the subsidiary is accounted for as equity transaction. Since we continue to maintain control of iDisplay after the Additional Purchase Transaction, the net deficit of $
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 20
ownership stake and its carrying value as of the Closing Date was recognized as an adjustment to our additional paid-in capital in the three months ended September 30, 2024.
Additionally, according to the SPAA, the remaining
The following table presents the changes in RNCI for the periods presented (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance at beginning of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Share of net income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Share of other comprehensive income (loss) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Dividend paid |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Change in redemption value |
|
|
|
|
|
— |
|
|
|
|
|
|
( |
) |
||
Purchase of additional ownership interest |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Other (1) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Balance at end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
16. Related-Party Transactions
We have a management services agreement with our majority owner in which the majority owner provides management, consulting and advisory services to us. Such services are provided without charge, other than for the reimbursement of travel and out-of-pocket expense as set forth in the management services agreement. Total travel and out-of-pocket expenses incurred were $
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q as well as in conjunction with the Risk Factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the United States Securities and Exchange Commission (“SEC”) on February 27, 2024. The following discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those discussed under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023.
Overview
We are a leading global provider and innovator of high-performance products for gamers and digital creators, such as streamers, Vloggers and broadcasters, many of which build their own PCs using our components. Our industry-leading gaming products help digital athletes, from casual gamers to committed professionals, perform at their peak across PC or console platforms, and our streaming products enable creators to produce studio-quality content to share with friends or to broadcast to millions of fans. Our PC components products offer our customers multiple options to build their customized gaming and workstation desktop PCs. Our solution is the most complete suite of products that address the most critical components for both game performance and streaming. Our product offering is enhanced by our two proprietary software platforms: iCUE for gamers and the Elgato streaming suite for content creators, including our Stream Deck control software, which provide unified, intuitive performance, and aesthetic control and customization across their respective product families. We also offer digital services to enhance the customer experience by integrating esports, Elgato's marketplace, customer care and extended warranty into our product offerings.
We group our products into two categories (operating segments):
On September 19, 2024, we completed the acquisition of the Fanatec Business for a purchase consideration of $43.7 million. Refer to Note 5, “Business Combinations-Fanatec Acquisition” for more information on this transaction. The Fanatec sim racing product line, which fully complements our sim racing chassis, gaming PCs, gaming and streaming peripherals, and monitors, will expand our product offerings in these markets. Fanatec’s results of operations are included in our condensed consolidated statements of operations with effect from September 19, 2024.
Summary of Financial Results
Our net revenue was $304.2 million and $363.2 million for the three months ended September 30, 2024, and 2023, respectively. Our gross margin was 22.9% and 24.6% for the three months ended September 30, 2024 and 2023, respectively. We had a net loss of $51.6 million and $2.9 million for the three months ended September 30, 2024 and 2023, respectively.
As of September 30, 2024, we had cash and restricted cash, in the aggregate of $61.6 million and the principal balance outstanding on our Term Loan was $177.8 million. Cash used in operations was $19.7 million for the nine months ended September 30, 2024, and cash provided by operations was $32.1 million for the nine months ended September 30, 2023.
Key Factors Affecting Our Business
Our results of operations and financial condition are affected by numerous factors, including those discussed under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 and those described below.
Impact of Macroeconomic Conditions
Our business and financial performance depend significantly on worldwide economic conditions. We continue to face global macroeconomic challenges including the ongoing effects of geopolitical conflicts, such as the ongoing war between Russia and
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 22
Ukraine, the ongoing conflict in Gaza, including the heightened tensions in the Red Sea, and any potential conflicts between China and Taiwan, supply chain constraints, uncertainty in key financial markets and the risk of a recession, inflationary trends, volatility in exchange rates and evolving dynamics in the global trade environment. We also experience seasonality in the sale of our products, which may be affected by general economic conditions. The extent of the impact of macroeconomic conditions and geopolitical tensions on our business, sales, results of operations, cash flows and financial condition will depend on future developments, which are not within our control and are highly uncertain and cannot be predicted. We will continue to evaluate these risks and uncertainties and further our mitigation plans.
We are exposed to fluctuations in foreign currency exchange rates. As a result of our foreign sales and operations, we have revenue, payroll and other operating expenses denominated in foreign currencies, in particular the Chinese Yuan, Euro and British Pound. Unfavorable movement in the exchange rate between the U.S. dollar and the currencies we conduct sales or operate in may negatively impact our financial results. While the foreign currency fluctuations did not have a material impact to our operating results for the nine months ending September 30, 2024, there can be no assurance that future foreign currency fluctuations will not have a material impact to our operating results.
Impact of Industry Trends
Our results of operations and financial condition are impacted by industry trends in the gaming market, including:
Impact of Customer Concentration
We operate a global sales network that consists primarily of retailers (including e-retailers), as well as distributors we use to access certain retailers. Further, a limited number of retailers and distributors represent a significant portion of our net revenue, with e-retailer Amazon accounting for 31.5% and 29.2% of our net revenue for the nine months ended September 30, 2024 and 2023, respectively, and sales to our ten largest customers accounting for approximately 53.4% and 54.9% of our net revenue for the nine months ended September 30, 2024 and 2023, respectively. Our customers, including Amazon, typically do not enter into long-term agreements to purchase our products but instead enter into purchase orders with us. As a result of this concentration and the lack of long-term agreements with our customers, a primary driver of our net revenue and operating performance is maintaining good relationships with these retailers and distributors. To help maintain good relationships, we implement initiatives such as our updated packaging design which helps e-retailers such as Amazon process our packages more efficiently. Further, given our global operations, a significant percentage of our expenses relate to shipping costs. Our ability to effectively optimize these shipping costs, for example
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 23
utilizing expensive shipping options such as air freight for smaller packages and more urgent deliveries and more cost-efficient options, such as ground or ocean freight, for other shipments, has an impact on our expenses and results of operations.
Impact of New Product Introductions
Gamers demand new technology and product features, and we expect our ability to accurately anticipate and meet these demands will be one of the main drivers for any future sales growth and market share expansion. We have continued to enter new markets both through acquisitions, for example the sim racing market from the Fanatec Acquisition, and through extending our product lines. We launched 108 and 65 new products in 2023 and in the nine months ended September 30, 2024, respectively. While we intend to continue to develop and release new products, there can be no assurance that our new product introductions will have a favorable impact on our operating results or that customers will choose our new products over those of our competitors.
Impact of Seasonal Sales Trends
We have experienced and expect to continue to experience seasonal fluctuations in sales due to the buying patterns of our customers and spending patterns of gamers. Our net revenue has generally been lower in the first and second calendar quarters due to lower consumer demand following the fourth quarter holiday season and because of the decline in sales that typically occurs in anticipation of the introduction of new or enhanced CPUs, GPUs, and other computer hardware products, which usually take place in the second calendar quarter, and which tend to drive sales in the following two quarters. Further, our net revenue tends to be higher in the third and fourth calendar quarters due to seasonal sales such as “Black Friday” and “Cyber Monday” as well as “Singles Day” in China, as retailers tend to make purchases in advance of these sales. Our sales also tend to be higher in the fourth quarter due to the introduction of new consoles and high-profile games in connection with the holiday season. As a consequence of seasonality, our net revenue for the second calendar quarter is generally the lowest of the year followed by the first calendar quarter. Historical seasonal patterns may not continue in the future and may be further impacted in the future, by macroeconomic factors, increasing supply constraints, GPU shortages, and shifts in customer behavior. For example, our revenue seasonality for the third quarter of 2024 was negatively impacted due to a lower demand for our products in the Gaming Components and Systems segment which was primarily attributable to the push out of the launch of new, reasonably priced GPUs and CPUs, as well as the release of new game titles to early 2025.
Impact of Product Mix
Our Gamer and Creator Peripherals segment has a higher gross margin than our Gaming Components and Systems segment. As a result, our overall gross margin is affected by changes in product mix. External factors can have an impact on our product mix, such as popular game releases that can increase sales of peripherals and availability of new CPUs and GPUs that can impact component sales. In addition, within our Gamer and Creator Peripherals and Gaming Components and Systems segments, gross margin varies between products, and significant shifts in product mix within either segment may also significantly impact our overall gross margin.
Impact of Fluctuations in Integrated Circuits Pricing
Integrated circuits, or ICs, account for most of the cost of producing our high-performance memory products. IC prices are subject to pricing fluctuations which can affect the average sales prices of memory modules, and thus impact our net revenue, and can have an effect on gross margins. The impact on net revenues can be significant as our high-performance memory products, included within our Gaming Components and Systems segment, represent a significant portion of our net revenue.
Components of our Operating Results
Net Revenue
We generate materially all of our net revenue from the sale of gamer and creator peripherals and gaming components and systems to retailers, including e-retailers, gamers and distributors worldwide. Our revenue is recognized net of allowances for returns, discounts, sales incentives and any taxes collected from customers.
Cost of Revenue
Cost of revenue consists of product costs, including costs of contract manufacturers, inbound freight costs from manufacturers to our distribution hubs as well as inter-hub shipments, cost of materials and overhead, duties and tariffs, warranty replacement cost to process and rework returned items, depreciation of tooling equipment, warehousing costs, excess and obsolete inventory write-downs, and certain allocated costs related to facilities and information technology, or IT, and personnel-related expenses and other operating expenses related to supply chain logistics.
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 24
Operating Expenses
Operating expenses consist of sales, general and administrative expenses and product development expenses.
Sales, general and administrative. Sales, general and administrative, or SG&A, expenses represent the largest component of our operating expenses and consist of distribution costs, sales, marketing and other general and administrative costs. Distribution costs include outbound freight and the costs to operate our distribution hubs. Sales and marketing costs relate to the costs to operate our global sales force that works in conjunction with our channel partners, gaming team and event sponsorships, advertising and marketing promotions of our products and services, costs of maintaining our web store and credit card processing fees related to sales on our webstore, personnel-related cost and allocated overhead costs. General and administrative costs consist primarily of personnel-related expenses for our finance, legal, human resources, IT and administrative personnel, as well as the costs of professional services related to these functions and allocated overhead costs.
Product development. Product development costs are generally expensed as incurred. Product development costs consist primarily of the costs associated with the design and testing of new products and improvements to existing products. These costs relate primarily to compensation of personnel and consultants involved with product design, definition, compatibility testing and qualification, as well as depreciation costs of equipment used, prototype material costs and allocated overhead costs.
Interest Expense
Interest expense consists of interest associated with our debt financing arrangements, including our revolving line of credit, and amortization of debt issuance costs and debt discounts.
Interest Income
Interest income consists of interest earned on interest-bearing bank deposits and interest-bearing Bridge Loan, net of amortization of Bridge Loan origination costs.
Other Income (Expense), Net
Other expense, net consists primarily of our foreign currency exchange gains and losses relating to transactions and remeasurement of asset and liability balances denominated in foreign currencies, and net fair value gains and losses from our foreign currency forward contracts.
Income Tax Benefit (Expense)
We are subject to income taxes in the United States and foreign jurisdictions in which we do business. These foreign jurisdictions have statutory tax rates different from those in the United States. Accordingly, our effective tax rates will vary depending on the relative proportion of foreign to United States income, the utilization of foreign tax credits and changes in tax laws. Deferred tax assets are reduced through the establishment of a valuation allowance, if, based upon available evidence, it is determined that it is more likely than not that the deferred tax assets will not be realized.
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the tax and financial reporting bases of our assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in future years in which those temporary differences are expected to be recovered or settled.
Net Income Attributable to Noncontrolling Interest
Net income attributable to noncontrolling interest represents the share of the net income of subsidiaries in which we own less than 100% of the equity attributable to the ownership interest that we did not acquire.
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 25
Results of Operations
The following tables set forth the components of our condensed consolidated statements of operations, in dollars (thousands) and as a percentage of total net revenue, for each of the periods presented.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net revenue |
|
$ |
304,199 |
|
|
$ |
363,193 |
|
|
$ |
902,756 |
|
|
$ |
1,042,589 |
|
Cost of revenue |
|
|
234,538 |
|
|
|
273,840 |
|
|
|
683,371 |
|
|
|
785,000 |
|
Gross profit |
|
|
69,661 |
|
|
|
89,353 |
|
|
|
219,385 |
|
|
|
257,589 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales, general and administrative |
|
|
74,072 |
|
|
|
74,000 |
|
|
|
224,677 |
|
|
|
211,482 |
|
Product development |
|
|
16,533 |
|
|
|
16,111 |
|
|
|
50,585 |
|
|
|
48,542 |
|
Total operating expenses |
|
|
90,605 |
|
|
|
90,111 |
|
|
|
275,262 |
|
|
|
260,024 |
|
Operating loss |
|
|
(20,944 |
) |
|
|
(758 |
) |
|
|
(55,877 |
) |
|
|
(2,435 |
) |
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
(3,011 |
) |
|
|
(4,271 |
) |
|
|
(10,138 |
) |
|
|
(13,069 |
) |
Interest income |
|
|
297 |
|
|
|
1,742 |
|
|
|
3,020 |
|
|
|
5,194 |
|
Other income (expense), net |
|
|
(910 |
) |
|
|
304 |
|
|
|
(1,887 |
) |
|
|
(1,326 |
) |
Total other expense, net |
|
|
(3,624 |
) |
|
|
(2,225 |
) |
|
|
(9,005 |
) |
|
|
(9,201 |
) |
Loss before income taxes |
|
|
(24,568 |
) |
|
|
(2,983 |
) |
|
|
(64,882 |
) |
|
|
(11,636 |
) |
Income tax benefit (expense) |
|
|
(27,018 |
) |
|
|
97 |
|
|
|
(21,240 |
) |
|
|
3,023 |
|
Net loss |
|
|
(51,586 |
) |
|
|
(2,886 |
) |
|
|
(86,122 |
) |
|
|
(8,613 |
) |
Less: Net income attributable to noncontrolling interest |
|
|
122 |
|
|
|
193 |
|
|
|
1,345 |
|
|
|
958 |
|
Net loss attributable to Corsair Gaming, Inc. |
|
$ |
(51,708 |
) |
|
$ |
(3,079 |
) |
|
$ |
(87,467 |
) |
|
$ |
(9,571 |
) |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net revenue |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of revenue |
|
|
77.1 |
|
|
|
75.4 |
|
|
|
75.7 |
|
|
|
75.3 |
|
Gross profit |
|
|
22.9 |
|
|
|
24.6 |
|
|
|
24.3 |
|
|
|
24.7 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales, general and administrative |
|
|
24.3 |
|
|
|
20.4 |
|
|
|
24.9 |
|
|
|
20.3 |
|
Product development |
|
|
5.4 |
|
|
|
4.4 |
|
|
|
5.6 |
|
|
|
4.6 |
|
Total operating expenses |
|
|
29.7 |
|
|
|
24.8 |
|
|
|
30.5 |
|
|
|
24.9 |
|
Operating loss |
|
|
(6.8 |
) |
|
|
(0.2 |
) |
|
|
(6.2 |
) |
|
|
(0.2 |
) |
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
(1.0 |
) |
|
|
(1.2 |
) |
|
|
(1.1 |
) |
|
|
(1.3 |
) |
Interest income |
|
|
0.1 |
|
|
|
0.5 |
|
|
|
0.3 |
|
|
|
0.5 |
|
Other income (expense), net |
|
|
(0.3 |
) |
|
|
0.1 |
|
|
|
(0.2 |
) |
|
|
(0.1 |
) |
Total other expense, net |
|
|
(1.2 |
) |
|
|
(0.6 |
) |
|
|
(1.0 |
) |
|
|
(0.9 |
) |
Loss before income taxes |
|
|
(8.0 |
) |
|
|
(0.8 |
) |
|
|
(7.2 |
) |
|
|
(1.1 |
) |
Income tax benefit (expense) |
|
|
(8.9 |
) |
|
|
— |
|
|
|
(2.4 |
) |
|
|
0.3 |
|
Net loss |
|
|
(16.9 |
) |
|
|
(0.8 |
) |
|
|
(9.6 |
) |
|
|
(0.8 |
) |
Less: Net income attributable to noncontrolling interest |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.1 |
|
Net loss attributable to Corsair Gaming, Inc. |
|
|
(17.0 |
)% |
|
|
(0.9 |
)% |
|
|
(9.7 |
)% |
|
|
(0.9 |
)% |
Components of Results of Operations
Net Revenue
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
(In thousands) |
|
|||||||||||||
Net revenue |
|
$ |
304,199 |
|
|
$ |
363,193 |
|
|
$ |
902,756 |
|
|
$ |
1,042,589 |
|
Net revenue decreased by 16.2% and 13.4% for the three and nine months ended September 30, 2024, respectively, as compared to the same periods last year.
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 26
The decrease in net revenue in the three-month period was due to a 25.9% decrease in sales for our Gaming Components and Systems segment, which was partially offset by a 12.8% increase in sales for our Gamer and Creator Peripherals segment.
The decrease in net revenue in the nine-month period was due to a 23.6% decrease in sales for our Gaming Components and Systems segment, which was partially offset by a 17.5% increase in sales for our Gamer and Creator Peripherals segment.
For further discussions specific to our Gaming Components and Systems and Gamer and Creator Peripherals segments, refer to “Segment Results” section below.
Gross Profit and Gross Margin
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
(In thousands, except percentages) |
|
|||||||||||||
Gross profit |
|
$ |
69,661 |
|
|
$ |
89,353 |
|
|
$ |
219,385 |
|
|
$ |
257,589 |
|
Gross margin |
|
|
22.9 |
% |
|
|
24.6 |
% |
|
|
24.3 |
% |
|
|
24.7 |
% |
Gross margin decreased by 1.7% for the three months ended September 30, 2024, as compared to the same period last year. Higher spending on promotional activities as a proportion of net revenue resulted in a 1.8% decrease in gross margin, while higher product costs from suppliers and factory underutilization accounted for 1.7% of the decrease. These decreases were partially offset by an increase of 1.7% in gross margin from an improved product mix shift with more sales in the Gamer and Creator Peripherals segment.
Gross margin decreased by 0.4% for the nine months ended September 30, 2024, as compared to the same period last year. Higher spending on promotional activities as a proportion of net revenue accounted for 1.3% of the decrease, and higher inventory reserves accounted for 0.7% of the decrease. These decreases were partially offset by an increase of 1.5% in gross margin from an improved product mix shift with more sales in the Gamer and Creator Peripherals segment.
For further discussions specific to our Gaming Components and Systems and Gamer and Creator Peripherals segments, refer to the “Segment Results” section below.
Sales, General and Administrative (SG&A)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
(In thousands) |
|
|||||||||||||
Sales, general and administrative |
|
$ |
74,072 |
|
|
$ |
74,000 |
|
|
$ |
224,677 |
|
|
$ |
211,482 |
|
SG&A expenses remained relatively consistent for the three months ended September 30, 2024 as compared to the same period last year with a $1.5 million increase in distribution costs and a $0.5 million increase in professional fees being largely offset by lower bonus payments and marketing spend.
SG&A expenses increased by $13.2 million, or 6.2%, for the nine months ended September 30, 2024 as compared to the same period last year primarily due to a $8.4 million increase in legal expense, which were mainly attributable to a one-time settlement and the Fanatec Acquisition, as well as a $3.7 million increase in distribution costs, which was largely attributable to rationalization costs for distribution hubs, as well as increased freight costs.
Product Development
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
(In thousands) |
|
|||||||||||||
Product development |
|
$ |
16,533 |
|
|
$ |
16,111 |
|
|
$ |
50,585 |
|
|
$ |
48,542 |
|
Product development expenses remained relatively consistent for the three months ended September 30, 2024 as compared to the same period last year.
Product development expenses increased by $2.0 million, or 4.2%, for the nine months ended September 30, 2024 as compared to the same period last year primarily due to a $1.7 million increase in personnel-related costs resulting from increase in headcount.
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 27
Interest Expense, Interest Income and Other Income (Expense), Net
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
(In thousands) |
|
|||||||||||||
Interest expense |
|
$ |
(3,011 |
) |
|
$ |
(4,271 |
) |
|
$ |
(10,138 |
) |
|
$ |
(13,069 |
) |
Interest income |
|
|
297 |
|
|
|
1,742 |
|
|
|
3,020 |
|
|
|
5,194 |
|
Other income (expense), net |
|
|
(910 |
) |
|
|
304 |
|
|
|
(1,887 |
) |
|
|
(1,326 |
) |
Interest expense decreased by 29.5% and 22.4% for the three and nine months ended September 30, 2024, respectively, as compared to the same periods last year. The decrease was primarily due to lower principal balance on our Term Loan combined with lower interest rates on our Term Loan in the three and nine months ended September 30, 2024.
Interest income decreased by 83.0% and 41.9% for the three and nine months ended September 30, 2024 and 2023, respectively, as compared to the same periods last year primarily due to lower cash balance in our interest-bearing account.
Other expense, net is primarily comprised of foreign exchange gains and losses on cash, accounts receivable and intercompany balances denominated in currencies other than the functional currencies of our subsidiaries. Our foreign currency exposure is primarily driven by fluctuations in the foreign currency exchanges rates of the Euro, British Pound and the Chinese Yuan.
Income Tax Benefit (Expense)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
(In thousands, except percentages) |
|
|||||||||||||
Loss before income taxes |
|
$ |
(24,568 |
) |
|
$ |
(2,983 |
) |
|
$ |
(64,882 |
) |
|
$ |
(11,636 |
) |
Income tax benefit (expense) |
|
|
(27,018 |
) |
|
|
97 |
|
|
|
(21,240 |
) |
|
|
3,023 |
|
Effective tax rate |
|
|
(110.0 |
)% |
|
|
3.3 |
% |
|
|
(32.7 |
)% |
|
|
26.0 |
% |
We are subject to income taxes in the United States and foreign jurisdictions in which we do business. These foreign jurisdictions have statutory tax rates different from those in the United States. Accordingly, our effective tax rates will vary depending on the relative proportion of foreign to United States income, the utilization of net operating loss and tax credit carry forwards, changes in geographic mix of income and expense, changes in management’s assessment of matters such as the ability to realize deferred tax assets, and changes in tax laws.
We assess our deferred tax assets and liabilities to determine if it is more likely than not they will be realized; if not, a valuation allowance is required to be recorded. During the three months ended September 30, 2024, we have reached a cumulative loss position over the previous three years, and with consideration of other negative evidence, we concluded that U.S. federal and state deferred tax assets are not more likely than not to be realizable. As a result of the foregoing, a full valuation allowance was recorded in the current quarter. The deferred tax liability related to indefinite-lived assets was excluded from sources of future taxable income, as the timing of its reversal cannot be predicted due to the nature of its indefinite life.
Our effective tax rates were tax expense of (110.0)% and tax benefit of 3.3% for the three months ended September 30, 2024 and 2023, respectively. The change in our effective rate in the three-month period was primarily due to an income tax provision of $28.0 million for valuation allowance recorded against our U.S. federal and state deferred tax assets, partially offset by a tax benefit recognized for the transfer of customer relationship intangible asset from Hong Kong to United Kingdom as a result of our global tax restructuring initiative completed on July 1, 2024.
Our effective tax rates were tax expense of (32.7)% and tax benefit of 26.0% for the nine months ended September 30, 2024 and 2023, respectively. The change in our effective rate in the nine-month period was primarily due to a change in the mix of income and losses in the various tax jurisdictions in which we operate, an income tax provision of $28.0 million for valuation allowance recorded against our U.S. federal and state deferred tax assets, partially offset by a tax benefit recognized for the transfer of customer relationship intangible asset from Hong Kong to United Kingdom as a result of our global tax restructuring initiative completed on July 1, 2024.
On December 15, 2022, the European Union (“EU”) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (“OECD”) Pillar Two Framework that was supported by over 130 countries worldwide. The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive. A significant number of other countries are expected to also implement similar legislation, including United Kingdom which approved the legislation on July 11, 2023 with a full effective date of January 1, 2024. We have evaluated the potential impact from the OECD Pillar Two rules and determined that there is no impact to our financial position for the year of 2024.
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 28
Segment Results
Segment Net Revenue
The following table sets forth our net revenue by segment expressed both in dollars (thousands) and as a percentage of net revenue:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gamer and Creator Peripherals Segment |
|
$ |
101,966 |
|
|
|
33.5 |
% |
|
$ |
90,356 |
|
|
|
24.9 |
% |
|
$ |
303,168 |
|
|
|
33.6 |
% |
|
$ |
258,053 |
|
|
|
24.8 |
% |
Gaming Components and Systems Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Memory Products |
|
|
96,979 |
|
|
|
31.9 |
|
|
|
131,713 |
|
|
|
36.2 |
|
|
|
303,640 |
|
|
|
33.6 |
|
|
|
371,931 |
|
|
|
35.6 |
|
Other Component Products |
|
|
105,254 |
|
|
|
34.6 |
|
|
|
141,124 |
|
|
|
38.9 |
|
|
|
295,948 |
|
|
|
32.8 |
|
|
|
412,605 |
|
|
|
39.6 |
|
|
|
|
202,233 |
|
|
|
66.5 |
|
|
|
272,837 |
|
|
|
75.1 |
|
|
|
599,588 |
|
|
|
66.4 |
|
|
|
784,536 |
|
|
|
75.2 |
|
Total Net Revenue |
|
$ |
304,199 |
|
|
|
100.0 |
% |
|
$ |
363,193 |
|
|
|
100.0 |
% |
|
$ |
902,756 |
|
|
|
100.0 |
% |
|
$ |
1,042,589 |
|
|
|
100.0 |
% |
Gamer and Creator Peripherals Segment
Net revenue of the Gamer and Creator Peripherals segment increased by 12.8% and 17.5% for the three and nine months ended September 30, 2024, respectively, as compared to the same periods last year. The increase was primarily driven by the success of recent new product launches, increased demand for most of the products in this segment and the inclusion of post-acquisition revenues from our July 2023 acquisition of Drop, a community-based e-commerce company.
Gaming Components and Systems Segment
Net revenue of the Gaming Components and Systems segment decreased 25.9% and 23.6% for three and nine months ended September 30, 2024, respectively, as compared to the same periods last year. The demand for our products in this segment is largely driven by the activity in the self-built PC market, which is heavily influenced by the launch of new, reasonably priced GPUs and CPUs, as well as the release of new game titles. However, in 2024, we are mid-cycle for new GPU platforms, resulting in a relatively flat-to-low market trajectory for the self-built PC market since the beginning of the year. This has led to a greater than anticipated decrease in demand for our products in this segment during both the three- and nine-month periods. Additionally, we experienced a downward adjustment in inventory levels at our channel partners during the three- and nine-month periods compared to an increase in channel inventory levels during the same periods last year, contributing to the lower net revenues for those periods.
Segment Gross Profit and Gross Margin
The following table sets forth our gross profit expressed in dollars (thousands) and gross margin (which we define as gross profit as a percentage of net revenue) by segment:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gamer and Creator Peripherals Segment |
|
$ |
39,032 |
|
|
|
38.3 |
% |
|
$ |
29,928 |
|
|
|
33.1 |
% |
|
$ |
118,374 |
|
|
|
39.0 |
% |
|
$ |
82,085 |
|
|
|
31.8 |
% |
Gaming Components and Systems Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Memory Products |
|
|
10,409 |
|
|
|
10.7 |
|
|
|
21,074 |
|
|
|
16.0 |
|
|
|
37,889 |
|
|
|
12.5 |
|
|
|
57,780 |
|
|
|
15.5 |
|
Other Component Products |
|
|
20,220 |
|
|
|
19.2 |
|
|
|
38,351 |
|
|
|
27.2 |
|
|
|
63,122 |
|
|
|
21.3 |
|
|
|
117,724 |
|
|
|
28.5 |
|
|
|
|
30,629 |
|
|
|
15.1 |
|
|
|
59,425 |
|
|
|
21.8 |
|
|
|
101,011 |
|
|
|
16.8 |
|
|
|
175,504 |
|
|
|
22.4 |
|
Total Gross Profit |
|
$ |
69,661 |
|
|
|
22.9 |
% |
|
$ |
89,353 |
|
|
|
24.6 |
% |
|
$ |
219,385 |
|
|
|
24.3 |
% |
|
$ |
257,589 |
|
|
|
24.7 |
% |
Gamer and Creator Peripherals Segment
The gross margin of the Gamer and Creator Peripherals segment increased by 5.2% for the three months ended September 30, 2024 as compared to the same period last year. The increase was primarily attributable to a 4.2% increase from a more favorable product mix within this segment and lower product costs from suppliers and successful launches of new products with higher average margins, and a 2.2% increase due to lower costs to process inventory returns in the three months ended September 30, 2024. These increases were partially offset by a 1.0% decrease due to higher spending on promotional activities as a proportion of net revenue.
The gross margin of the Gamer and Creator Peripherals segment increased by 7.2% for the nine months ended September 30, 2024 as compared to the same period last year. The increase was primarily attributable to a 4.7% increase from a more favorable product mix within this segment and lower product costs from suppliers and successful launches of new products with higher average margins, a 2.3% increase from lower inventory reserve, and a 1.1% increase due to lower costs to process inventory returns. These increases were partially offset by a 0.9% decrease due to higher air freight costs.
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 29
Gaming Components and Systems Segment
The gross margin of the Gaming Components and Systems segment decreased by 6.7% for the three months ended September 30, 2024 as compared to the same period last year. The decrease was primarily attributable to a 2.3% decrease from an unfavorable product mix within this segment and pricing pressures from market competition, a 2.2% decrease from increased promotional activities as a proportion of net revenue, and a 2.2% decrease from higher inventory reserves.
The gross margin of the Gaming Components and Systems segment decreased by 5.6% for the nine months ended September 30, 2024 as compared to the same period last year. The decrease was primarily attributable to a 2.5% decrease from an unfavorable product mix within this segment and pricing pressures from market competition, a 1.9% decrease from increased promotional activities as a proportion of net revenue, and a 1.5% decrease from factory underutilization and higher inventory reserves.
Liquidity and Capital Resources
Overview
We have financed our operations and acquisitions through cash from operations, and when applicable, through debt facilities and issuance of equity securities. As of September 30, 2024, our principal sources of liquidity were cash and restricted cash, in aggregate of $61.6 million, and our borrowing capacity under the Revolving Facility (as defined below) of $100.0 million.
We have a shelf-registration statement on Form S-3 on file with the SEC, which allows us to offer securities, including common stock, preferred stock and warrants, through August 1, 2025. As of September 30, 2024, $216.7 million remained available for issuance under the shelf-registration statement.
Our principal uses of cash generally include purchases of inventory, payroll and other operating expenses related to the development and marketing of our products, capital expenditure, repayments of debt and related interest, income tax payments, future investments in business and technology, and selective mergers and acquisitions.
We believe that the anticipated cash flows from operations based on our current business outlook, combined with our current levels of cash balances at September 30, 2024, supplemented with the borrowing capacity under our Revolving Facility, if and as needed, will be sufficient to fund our principal uses of cash for at least the next twelve months. In the longer term, liquidity will depend to a great extent on our future revenues and our ability to appropriately manage our costs based on the demand for our products. We may require additional funding and need or choose to raise the required funds through borrowings or public or private sales of debt or equity securities. The sale of additional equity would result in additional dilution to our stockholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financial covenants that would restrict our operations. There can be no assurance that any such equity or debt financing will be available on favorable terms, or at all.
Liquidity
The following table summarizes our cash flows for the periods presented (in thousands):
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
|
|
|
|
|
||
Net cash provided by (used in): |
|
|
|
|
|
|
||
Operating activities |
|
$ |
(19,678 |
) |
|
$ |
32,060 |
|
Investing activities |
|
|
(50,541 |
) |
|
|
(25,004 |
) |
Financing activities |
|
|
(46,616 |
) |
|
|
(13,205 |
) |
Cash Flows from Operating Activities
Net cash used in operating activities for the nine months ended September 30, 2024 was $19.7 million and consisted of a net loss of $86.1 million and a net cash outflow of $10.3 million from changes in our net operating assets and liabilities, offset partially by non-cash adjustments of $76.8 million. The net cash outflow from changes in our net operating assets and liabilities was primarily related to a decrease in accounts payable due to timing of payments and a decrease in other liabilities and accrued expenses mainly due to a reduction in the accruals needed for sales returns and customer incentives with lower revenues, and lower bonus, as well as an increase in inventories as we ramp up for year-end sales. These net cash outflows were partially offset by a decrease in accounts receivable from lower revenue. The non-cash adjustments primarily consisted of amortization of intangibles, depreciation and stock-based compensation expense, as well as changes in deferred income taxes.
Net cash provided by operating activities for the nine months ended September 30, 2023 was $32.1 million and consisted of non-cash adjustments of $56.0 million, offset partially by a net loss of $8.6 million and a net cash outflow of $15.4 million from changes in our net operating assets and liabilities. The non-cash adjustments primarily consisted of amortization, depreciation and stock-based compensation expense, which were partially offset by changes in deferred income taxes. The net cash outflow from
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 30
changes in our net operating assets and liabilities was primarily related to an increase in accounts receivable from timing of receipts and an increase in inventories due to higher purchases. These net cash outflows were partially offset by an increase in accounts payable.
Cash Flows from Investing Activities
Cash used in investing activities was $50.5 million for the nine months ended September 30, 2024 and primarily consisted of $43.1 million cash used for the Fanatec Acquisition (refer to Note 5, “Business Combinations” for more information on the Fanatec Acquisition), $8.4 million of capital expenditure, partially offset by $1.0 million cash received from escrow for the purchase price adjustment related to the Drop Acquisition.
Cash used in investing activities was $25.0 million for the nine months ended September 30, 2023 and consisted of $14.2 million cash used for the Drop Acquisition and $10.8 million of capital expenditure primarily for equipment and software.
Cash Flows from Financing Activities
Cash used in financing activities was $46.6 million for the nine months ended September 30, 2024 and primarily consisted of $21.3 million repayment of debt, $19.8 million purchase of additional ownership interest in iDisplay (refer to Note 15, "Redeemable Noncontrolling Interest" for more information on the additional ownership interest purchase), $4.9 million settlement of deferred consideration related to a prior business acquisition in 2019, $5.2 million payment of dividends to noncontrolling interest, and $0.6 million payment of taxes related to net share settlement of equity awards, partially offset by $5.1 million proceeds received from the issuance of shares through the employee equity incentive plans. During the nine months ended September 30, 2024, we borrowed $21.5 million from our Revolving Facility to fund our operations and the full amount was repaid within the same period.
Cash used in financing activities was $13.2 million for the nine months ended September 30, 2023 and primarily consisted of $16.3 million repayment of debt, $1.3 million payment of taxes related to net share settlement of equity awards, as well as $1.0 million payment of dividends to noncontrolling interest, which were partially offset by $6.8 million proceeds received from the issuance of shares through the employee equity incentive plans. We did not borrow from our Revolving Facility for the nine months ended September 30, 2023.
Capital Resources
On September 3, 2021, we refinanced the First Lien Credit and Guaranty Agreement with a new Credit Agreement (as amended, the “Credit Agreement”). The Credit Agreement provides for a total commitment of $350.0 million, consisting of a $100.0 million revolving credit facility (the “Revolving Facility”) and a $250.0 million term loan facility (the “Term Loan”). The Credit Agreement is available for a period of five years, maturing September 2026, and provides for additional incremental facilities up to a maximum aggregate principal amount of $250.0 million, subject to the satisfaction of certain conditions. We may prepay the Term Loan and the Revolving Facility at any time without premium or penalty. We prepaid $11.9 million and $34.1 million of the Term Loan principal in the nine months ended September 30, 2024 and in the year ended December 31, 2023, respectively. As of September 30, 2024, the total principal outstanding of the Term Loan was $177.8 million and the available and uncommitted capacity under the Revolving Facility was $100 million.
The Credit Agreement has a variable rate structure. According to the provisions in the Third Amendment to the Credit Agreement (“Third Amendment”), beginning 2024, the Term Loan and the Revolving Facility carry interest at our election at either (a) Bloomberg Short-Term Bank Yield Index rate (“BSBY”) plus a percentage spread (ranging from 1.25% to 2.25%) based on our total net leverage ratio, or (b) the base rate (as described in the Credit Agreement as the greatest of (i) the prime rate, (ii) the federal funds rate plus 0.50% and (iii) one-month BSBY plus 1.0%) plus a percentage spread (ranging from 0.25% to 1.25%) based on our total net leverage ratio. Additionally, the commitment fees on the unused portion of the Revolving Facility ranges from 0.2% to 0.4% based on our total net leverage ratio.
On August 19, 2024, we entered into a Fourth Amendment (the “Fourth Amendment”) to the Credit Agreement, which provides for, among other things, (i) effectuates the transition of the underlying variable interest rate from the BSBY to a forward-looking interest rate based on the Secured Overnight Financing Rate (“SOFR”), with no change to the applicable margin percentage spread, but with the addition of a rate spread adjustment in the amount of 0.10% per annum, (ii) increases the letter of credit sublimit from $15 million to $65 million and (iii) the issuance of letters of credit denominated in Euro.
The Credit Agreement contains covenants with which we must comply during the term of the agreement, which we believe are ordinary and standard for agreements of this nature, including the maintenance of a maximum Consolidated Total Net Leverage Ratio (“CTNL Ratio”) and a minimum Consolidated Interest Coverage Ratio (“CIC Ratio”) (as defined in the Credit Agreement). According to the provisions in the Third Amendment, beginning 2024, we are required to maintain a maximum CTNL Ratio of 3.00 to 1.00 and a minimum CIC ratio of 3.00 to 1.00, with the provision that the maximum CTNL Ratio can be temporarily increased to 3.50 to 1.00
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 31
upon the occurrence of a Qualified Acquisition (as defined in, and subject to the requirements of the Credit Agreement). As of September 30, 2024, we were not in default under the Credit Agreement.
Our obligations under the Credit Agreement are guaranteed by substantially all of our U.S. subsidiaries and secured by a security interest in substantially all assets of the Company and the guarantor subsidiaries, subject to certain exceptions detailed in the Credit Agreement and related ancillary documentation.
Contractual Cash and Other Obligations
The following table summarizes our contractual cash and other obligations as of September 30, 2024 (in thousands):
|
|
Payments Due by Period |
|
|||||||||||||||||
|
|
Total |
|
|
Less than |
|
|
1-3 |
|
|
3-5 |
|
|
More than |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Debt principal and interest payments (1) |
|
$ |
193,636 |
|
|
$ |
21,672 |
|
|
$ |
171,964 |
|
|
$ |
— |
|
|
$ |
— |
|
Inventory-related purchase obligations (2) |
|
|
55,025 |
|
|
|
55,025 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Operating lease obligations (3) |
|
|
77,176 |
|
|
|
16,234 |
|
|
|
22,302 |
|
|
|
15,566 |
|
|
|
23,074 |
|
Other purchase obligations (4) |
|
|
10,811 |
|
|
|
10,636 |
|
|
|
175 |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
336,648 |
|
|
$ |
103,567 |
|
|
$ |
194,441 |
|
|
$ |
15,566 |
|
|
$ |
23,074 |
|
As of September 30, 2024, we had $4.5 million in non-current income tax payable, including interest and penalties, related to our income tax liability for uncertain tax positions. At this time, we are unable to make a reasonably reliable estimate of the timing of payments in individual years in connection with these tax liabilities; therefore, such amounts are not included in the contractual cash obligation table above.
Critical Accounting Polices and Estimates
A critical accounting policy is defined as one that has both a material impact on our financial condition and results of operations and requires us to make difficult, complex and/or subjective judgments, often as a result of the need to make estimates about matters that are inherently uncertain. Our condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the condensed consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe to be applicable and evaluate them on an ongoing basis to ensure they remain reasonable under current conditions. Actual results may differ significantly from those estimates, which could have a material impact on our business, results of operations, and financial condition.
There have been no material changes to our critical accounting policies and estimates during the nine months ended September 30, 2024 as compared to the critical accounting policies and estimates described in our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 27, 2024.
Recent Accounting Pronouncements
Refer to Note 2 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for recent accounting pronouncements adopted and to be adopted.
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 32
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in interest rates and foreign currency exchange rates.
Interest Rate Risk
As of September 30, 2024, we had cash and restricted cash of $61.6 million, which consisted primarily of bank deposits. Our cash is held for working capital purposes.
As of September 30, 2024, under the Credit Agreement, we had $177.8 million Term Loan outstanding (face value), and the Term Loan bears variable market rates, primarily SOFR, effective from September 2024. See Note 8, “Debt - Credit Agreement” to our condensed consolidated financial statements for additional information on the Credit Agreement. A significant change in these market rates may adversely affect our operating results. As of September 30, 2024, a hypothetical 100 basis point change in interest rates would result in a change to annual interest expense by approximately $1.7 million.
Foreign Currency Risk
Approximately 20.2% of our net revenue for the nine months ended September 30, 2024 was denominated in foreign currencies, primarily Euro, and to a lesser extent, the British Pound. Any unfavorable movement in the exchange rate between U.S. dollars and the currencies in which we conduct sales in foreign countries could have an adverse impact on our net revenue and gross margins as we may have to adjust local currency product pricing due to competitive pressures if there is significant volatility in foreign currency exchange rates. Our operating expenses are denominated in the currencies of the countries in which our operations are located, which are primarily in the United States, Europe, China and Taiwan. Our operating results and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates.
We enter into forward currency contracts to reduce the short-term effects of currency fluctuations on Euro, British Pound, and Chinese Yuan denominated cash, accounts receivable, and intercompany receivable and payable balances. These forward contracts generally mature within two to four months, and we do not enter into foreign currency forward contracts for trading purposes. The outstanding notional principal amount was $19.5 million and $44.3 million as of September 30, 2024 and December 31, 2023, respectively. The gains or losses on these contracts are recognized in earnings based on the changes in fair value of the foreign currency forward contracts.
The impact of changes in foreign currency rates, including the gains or (losses) on the forward currency contracts, recognized in other expense, net was $(1.9) million and $(1.5) million for the nine months ended September 30, 2024 and 2023, respectively. A hypothetical ten percent change in exchange rates between foreign currencies and the U.S. dollar would increase or decrease our gains or losses on foreign currency exchange of approximately $3.1 million in our condensed consolidated financial statements for the nine months ended September 30, 2024.
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 33
Item 4. Controls and Procedures.
Limitations on Effectiveness of Controls and Procedures
The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but there can be no assurance that such improvements will be sufficient to provide us with effective internal control over financial reporting.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and our principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q.
Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of September 30, 2024, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 34
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We may from time to time be involved in various legal proceedings of a character normally incident to the ordinary course of our business. Although the outcome of any pending matters, and the amount, if any, of our ultimate liability and any other forms of remedies with respect to these matters, cannot be determined or predicted with certainty, we do not believe that the ultimate outcome of these matters will have a material adverse effect on our business, results of operations or financial condition.
Item 1A. Risk Factors.
We have disclosed under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 the risk factors that materially affect our business, financial condition or results of operations. There have been no material changes from the risk factors previously disclosed. You should carefully consider the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2023 and the other information set forth elsewhere in this Quarterly Report on Form 10-Q. The risks that we describe in our public filings are not the only risks we may face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely effect on our business, financial condition and/or future operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
(a) None.
(b) None.
(c)
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 35
Item 6. Exhibits.
|
|
|
|
Incorporated by Reference |
|
|
||||||
Exhibit Number |
|
Description |
|
Form |
|
Exhibit |
|
Date Filed |
|
Filed Herewith |
||
|
|
|
|
|
|
|
|
|
|
|
||
3.1 |
|
|
8‑K |
|
3.1 |
|
09/25/2020 |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
||
3.2 |
|
|
8‑K |
|
3.2 |
|
09/25/2020 |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
||
4.1 |
|
|
S-1/A |
|
4.2 |
|
09/18/2020 |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
||
4.2 |
|
Investor Rights Agreement, by and between Corsair Gaming, Inc. and Corsair Group (Cayman), LP. |
|
10-Q |
|
4.2 |
|
11/10/2020 |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
4.3 |
|
|
10-K |
|
4.3 |
|
03/11/2021 |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
||
4.4 |
|
Registration Rights Agreement, by and between Corsair Gaming, Inc. and Corsair Group (Cayman), LP. |
|
S-1/A |
|
4.4 |
|
09/14/2020 |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
10.1 |
|
|
|
|
|
|
|
|
X |
|||
|
|
|
|
|
|
|
|
|
|
|
||
31.1 |
|
|
|
|
|
|
|
|
X |
|||
|
|
|
|
|
|
|
|
|
|
|
||
31.2 |
|
|
|
|
|
|
|
|
X |
|||
|
|
|
|
|
|
|
|
|
|
|
||
32.1* |
|
|
|
|
|
|
|
|
X |
|||
|
|
|
|
|
|
|
|
|
|
|
||
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document |
|
|
|
|
|
|
|
X |
||
|
|
|
|
|
|
|
|
|
|
|
||
101.SCH |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
|
|
|
|
|
|
|
X |
||
|
|
|
|
|
|
|
|
|
|
|
||
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
|
|
|
|
|
X |
||
* |
The certification attached as Exhibit 32.1 that accompanies this Quarterly Report on Form 10-Q is not deemed filed with the SEC and is not to be incorporated by reference into any filing of Corsair Gaming, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing. |
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 36
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
Corsair Gaming, Inc.
|
|
|
|
|
|
Date: November 6, 2024 |
|
By: |
/s/ Michael G. Potter |
|
|
|
Michael G. Potter |
|
|
|
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
|
Corsair Gaming, Inc. | Q3 2024 Form 10-Q | 37