10-Q
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Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 001-39533

 

Corsair Gaming, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

82-2335306

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer
Identification No.)

 

115 N. McCarthy Boulevard

Milpitas, CA 95035

(Address of Principal Executive Offices and zip code)

 

 

(510) 657-8747

(Registrant’s Telephone Number, Including Area Code)

 

 

 

Not Applicable

(Former name, former address and former fiscal year,

if changed since last report)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

CRSR

 

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of April 26, 2024, the registrant had 103,905,563 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

2

Item 1.

Financial Statements (Unaudited)

2

Condensed Consolidated Statements of Operations

2

Condensed Consolidated Statements of Comprehensive Loss

3

Condensed Consolidated Balance Sheets

4

 

Condensed Consolidated Statements of Stockholders' Equity

5

Condensed Consolidated Statements of Cash Flows

6

Notes to Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

Item 4.

Controls and Procedures

29

PART II.

OTHER INFORMATION

30

Item 1.

Legal Proceedings

30

Item 1A.

Risk Factors

30

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30

Item 3.

Defaults Upon Senior Securities

30

Item 4.

Mine Safety Disclosures

30

Item 5.

Other Information

30

Item 6.

Exhibits

31

Signatures

32

 

i


Table of Contents

 

 

NOTE ABOUT FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the Exchange Act) that reflect our current views with respect to, among other things, our operations and financial performance. These forward-looking statements are included throughout this Quarterly Report and relate to matters such as our industry and the markets we operate in, business strategy, goals and expectations concerning our market position, future operations, margins, profitability, capital expenditures, liquidity and capital resources and other financial and operating information. We have used the words “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “foreseeable,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “will” and similar terms and phrases to identify the forward-looking statements.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on management’s current expectations and are subject to uncertainty and changes in circumstances. There can be no assurance that future developments affecting us will be those that we have anticipated. Actual results may differ materially from these expectations due to changes in global, regional or local economic, business, competitive, market, regulatory and other factors, many of which are beyond our control, including, for example, general economic conditions and supply chain issues. We believe that these factors include but are not limited to those described 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. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this Quarterly Report on Form 10-Q. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.
 

Corsair Gaming, Inc. | Q1 2024 Form 10-Q | 1


Table of Contents

 

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

Corsair Gaming, Inc.

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except per share amounts)

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

Net revenue

 

$

337,257

 

 

$

353,964

 

Cost of revenue

 

 

250,618

 

 

 

268,560

 

Gross profit

 

 

86,639

 

 

 

85,404

 

Operating expenses:

 

 

 

 

 

 

Sales, general and administrative

 

 

80,217

 

 

 

67,529

 

Product development

 

 

16,641

 

 

 

16,838

 

Total operating expenses

 

 

96,858

 

 

 

84,367

 

Operating income (loss)

 

 

(10,219

)

 

 

1,037

 

Other (expense) income:

 

 

 

 

 

 

Interest expense

 

 

(3,691

)

 

 

(4,302

)

Interest income

 

 

1,565

 

 

 

1,474

 

Other expense, net

 

 

(461

)

 

 

(496

)

Total other expense, net

 

 

(2,587

)

 

 

(3,324

)

Loss before income taxes

 

 

(12,806

)

 

 

(2,287

)

Income tax benefit

 

 

1,777

 

 

 

639

 

Net loss

 

 

(11,029

)

 

 

(1,648

)

Less: Net income attributable to noncontrolling interest

 

 

536

 

 

 

364

 

Net loss attributable to Corsair Gaming, Inc.

 

$

(11,565

)

 

$

(2,012

)

 

 

 

 

 

 

 

Calculation of net loss per share attributable to common stockholders of Corsair Gaming, Inc.:

 

 

 

 

 

 

Net loss attributable to Corsair Gaming, Inc.

 

$

(11,565

)

 

$

(2,012

)

Change in redemption value of redeemable noncontrolling interest

 

 

(975

)

 

 

958

 

Net loss attributable to common stockholders of Corsair Gaming, Inc.

 

$

(12,540

)

 

$

(1,054

)

 

 

 

 

 

 

 

Net loss per share attributable to common stockholders of Corsair Gaming, Inc.:

 

 

 

 

 

 

Basic

 

$

(0.12

)

 

$

(0.01

)

Diluted

 

$

(0.12

)

 

$

(0.01

)

Weighted-average common shares outstanding:

 

 

 

 

 

 

Basic

 

 

103,563

 

 

 

101,685

 

Diluted

 

 

103,563

 

 

 

101,685

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

Corsair Gaming, Inc. | Q1 2024 Form 10-Q | 2


Table of Contents

 

 

Corsair Gaming, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited, in thousands)

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

Net loss

 

$

(11,029

)

 

$

(1,648

)

Other comprehensive gain (loss):

 

 

 

 

 

 

Foreign currency translation adjustments, net of tax benefit (expense) of $124 and $(18) for the three months ended March 31, 2024 and 2023, respectively

 

 

(1,415

)

 

 

1,667

 

Unrealized foreign exchange gain (loss) from long-term intercompany loan, net of tax benefit (expense) of $160 and $(127) for the three months ended March 31, 2024 and 2023, respectively

 

 

24

 

 

 

(26

)

Comprehensive loss

 

 

(12,420

)

 

 

(7

)

Less: Comprehensive income attributable to noncontrolling interest

 

 

292

 

 

 

400

 

Comprehensive loss attributable to Corsair Gaming, Inc.

 

$

(12,712

)

 

$

(407

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

Corsair Gaming, Inc. | Q1 2024 Form 10-Q | 3


Table of Contents

 

 

Corsair Gaming, Inc.

Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except per share amounts)

 

 

 

March 31,
2024

 

 

December 31,
2023

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$

127,768

 

 

$

175,620

 

Restricted cash

 

 

2,174

 

 

 

2,705

 

Accounts receivable, net

 

 

204,920

 

 

 

253,268

 

Inventories

 

 

251,747

 

 

 

240,172

 

Prepaid expenses and other current assets

 

 

34,573

 

 

 

39,824

 

Total current assets

 

 

621,182

 

 

 

711,589

 

Restricted cash, noncurrent

 

 

241

 

 

 

239

 

Property and equipment, net

 

 

31,185

 

 

 

32,212

 

Goodwill

 

 

354,410

 

 

 

354,705

 

Intangible assets, net

 

 

178,151

 

 

 

188,009

 

Other assets

 

 

72,022

 

 

 

70,709

 

Total assets

 

$

1,257,191

 

 

$

1,357,463

 

Liabilities

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Debt maturing within one year, net

 

$

12,213

 

 

$

12,190

 

Accounts payable

 

 

191,401

 

 

 

239,957

 

Other liabilities and accrued expenses

 

 

138,487

 

 

 

166,340

 

Total current liabilities

 

 

342,101

 

 

 

418,487

 

Long-term debt, net

 

 

171,106

 

 

 

186,006

 

Deferred tax liabilities

 

 

14,104

 

 

 

17,395

 

Other liabilities, noncurrent

 

 

40,629

 

 

 

41,595

 

Total liabilities

 

 

567,940

 

 

 

663,483

 

Commitments and Contingencies (Note 9)

 

 

 

 

 

 

Temporary equity

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

15,925

 

 

 

15,937

 

Permanent equity

 

 

 

 

 

 

Corsair Gaming, Inc. stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value: 5,000 shares authorized, nil and nil shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

 

 

 

 

Common stock, $0.0001 par value: 300,000 shares authorized, 103,859 and 103,255 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

10

 

 

 

10

 

Additional paid-in capital

 

 

640,293

 

 

 

630,642

 

Retained earnings

 

 

27,870

 

 

 

40,410

 

Accumulated other comprehensive loss

 

 

(4,634

)

 

 

(3,487

)

Total Corsair Gaming, Inc. stockholders’ equity

 

 

663,539

 

 

 

667,575

 

Nonredeemable noncontrolling interest

 

 

9,787

 

 

 

10,468

 

Total permanent equity

 

 

673,326

 

 

 

678,043

 

Total liabilities, temporary equity and permanent equity

 

$

1,257,191

 

 

$

1,357,463

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

Corsair Gaming, Inc. | Q1 2024 Form 10-Q | 4


Table of Contents

 

 

Corsair Gaming, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited, in thousands)

 

 

 

Three Months Ended March 31, 2024

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Retained

 

 

Accumulated Other
Comprehensive

 

 

Total Corsair Gaming, Inc.
Stockholders’

 

 

Nonredeemable
Noncontrolling

 

 

Total
Permanent

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Equity

 

 

Interest

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2023

 

 

103,255

 

 

$

10

 

 

$

630,642

 

 

$

40,410

 

 

$

(3,487

)

 

$

667,575

 

 

$

10,468

 

 

$

678,043

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

(11,565

)

 

 

 

 

 

(11,565

)

 

 

219

 

 

 

(11,346

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,147

)

 

 

(1,147

)

 

 

(100

)

 

 

(1,247

)

Change in redemption value of redeemable noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

(975

)

 

 

 

 

 

(975

)

 

 

 

 

 

(975

)

Dividend paid to nonredeemable noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(800

)

 

 

(800

)

Issuance of common stock in connection with employee equity incentive plans

 

 

633

 

 

 

 

 

 

2,351

 

 

 

 

 

 

 

 

 

2,351

 

 

 

 

 

 

2,351

 

Shares withheld related to net share settlement

 

 

(29

)

 

 

 

 

 

(398

)

 

 

 

 

 

 

 

 

(398

)

 

 

 

 

 

(398

)

Stock-based compensation

 

 

 

 

 

 

 

 

7,698

 

 

 

 

 

 

 

 

 

7,698

 

 

 

 

 

 

7,698

 

Balance as of March 31, 2024

 

 

103,859

 

 

$

10

 

 

$

640,293

 

 

$

27,870

 

 

$

(4,634

)

 

$

663,539

 

 

$

9,787

 

 

$

673,326

 

 

 

 

Three Months Ended March 31, 2023

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Retained

 

 

Accumulated Other
Comprehensive

 

 

Total Corsair Gaming, Inc.
Stockholders’

 

 

Nonredeemable
Noncontrolling

 

 

Total
Permanent

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Equity

 

 

Interest

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2022

 

 

101,385

 

 

$

10

 

 

$

593,486

 

 

$

37,223

 

 

$

(6,881

)

 

$

623,838

 

 

$

10,229

 

 

$

634,067

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

(2,012

)

 

 

 

 

 

(2,012

)

 

 

149

 

 

 

(1,863

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,605

 

 

 

1,605

 

 

 

14

 

 

 

1,619

 

Change in redemption value of redeemable noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

958

 

 

 

 

 

 

958

 

 

 

 

 

 

958

 

Issuance of common stock in connection with employee equity incentive plans

 

 

671

 

 

 

 

 

 

2,117

 

 

 

 

 

 

 

 

 

2,117

 

 

 

 

 

 

2,117

 

Shares withheld related to net share settlement

 

 

(39

)

 

 

 

 

 

(556

)

 

 

 

 

 

 

 

 

(556

)

 

 

 

 

 

(556

)

Stock-based compensation

 

 

 

 

 

 

 

 

7,321

 

 

 

 

 

 

 

 

 

7,321

 

 

 

 

 

 

7,321

 

Balance as of March 31, 2023

 

 

102,017

 

 

$

10

 

 

$

602,368

 

 

$

36,169

 

 

$

(5,276

)

 

$

633,271

 

 

$

10,392

 

 

$

643,663

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements

Corsair Gaming, Inc. | Q1 2024 Form 10-Q | 5


Table of Contents

 

 

Corsair Gaming, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(11,029

)

 

$

(1,648

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

 

 

 

Stock-based compensation

 

 

7,691

 

 

 

7,246

 

Depreciation

 

 

3,087

 

 

 

2,897

 

Amortization

 

 

9,515

 

 

 

9,741

 

Deferred income taxes

 

 

(6,059

)

 

 

(2,209

)

Other

 

 

758

 

 

 

128

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

46,928

 

 

 

14,623

 

Inventories

 

 

(12,101

)

 

 

4,672

 

Prepaid expenses and other assets

 

 

4,437

 

 

 

(1,077

)

Accounts payable

 

 

(47,962

)

 

 

18,156

 

Other liabilities and accrued expenses

 

 

(21,582

)

 

 

(10,703

)

Net cash (used in) provided by operating activities

 

 

(26,317

)

 

 

41,826

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchase price adjustment related to business acquisition

 

 

1,041

 

 

 

 

Purchase of property and equipment

 

 

(2,520

)

 

 

(4,677

)

Net cash used in investing activities

 

 

(1,479

)

 

 

(4,677

)

Cash flows from financing activities:

 

 

 

 

 

 

Repayment of debt

 

 

(15,000

)

 

 

(10,000

)

Payment of deferred and contingent consideration

 

 

(4,942

)

 

 

(950

)

Proceeds from issuance of shares through employee equity incentive plans

 

 

2,351

 

 

 

2,117

 

Payment of taxes related to net share settlement of equity awards

 

 

(398

)

 

 

(556

)

Dividend paid to noncontrolling interest

 

 

(1,960

)

 

 

 

Payment of other offering costs

 

 

 

 

 

(497

)

Net cash used in financing activities

 

 

(19,949

)

 

 

(9,886

)

Effect of exchange rate changes on cash

 

 

(636

)

 

 

730

 

Net (decrease) increase in cash and restricted cash

 

 

(48,381

)

 

 

27,993

 

Cash and restricted cash at the beginning of the period

 

 

178,564

 

 

 

154,060

 

Cash and restricted cash at the end of the period

 

$

130,183

 

 

$

182,053

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

Cash paid for interest

 

$

3,553

 

 

$

4,184

 

Cash paid (refunded) for income taxes, net

 

 

626

 

 

 

(546

)

Supplemental schedule of non-cash investing and financing activities:

 

 

 

 

 

 

Equipment purchased and unpaid at period end

 

$

1,171

 

 

$

2,234

 

Right-of-use assets obtained in exchange for operating lease liabilities

 

 

1,763

 

 

 

365

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements

Corsair Gaming, Inc. | Q1 2024 Form 10-Q | 6


Table of Contents

 

 

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 two reportable segments:

Gamer and Creator Peripherals. Includes our high-performance gaming keyboards, mice, headsets, controllers, and streaming products, which includes capture cards, Stream Decks, microphones and audio interfaces, our Facecam streaming cameras, studio accessories, and gaming furniture, among others.
Gaming Components and Systems. Includes our high-performance power supply units, or PSUs, cooling solutions, computer cases, and DRAM modules, as well as high-end prebuilt and custom-built gaming PCs and laptops, and gaming monitors, among others.

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 March 31, 2024 and our results of operations for the three months ended March 31, 2024 and 2023. The results for the three months ended March 31, 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. | Q1 2024 Form 10-Q | 7


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, borrowings from credit lines 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 March 31, 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 not enter into derivative instruments for trading purposes.

Corsair Gaming, Inc. | Q1 2024 Form 10-Q | 8


The foreign currency forward contracts generally mature within two to four months. The notional principal amount of outstanding foreign exchange forward contracts was $28.5 million and $44.3 million as of March 31, 2024 and December 31, 2023, respectively. The net fair value gains (losses) recognized in other (expense) income, net in relation to these derivative instruments was $0.6 million and $(0.4) million for the three months ended March 31, 2024 and 2023, respectively.

5. Business Combinations

Drop Acquisition

On July 14, 2023 (the “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 $14.2 million, net of $0.6 million of cash acquired. On January 29, 2024, in connection with a joint release letter executed between us and Drop's seller, we received a refund of $1.0 million from escrow funds in relation to a purchase price adjustment for net working capital. With this refund, total purchase consideration, net of cash acquired, decreased to $13.2 million.

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

 

$

135

 

Inventories

 

 

7,739

 

Prepaid and other assets

 

 

866

 

Property and equipment

 

 

109

 

Identifiable intangible assets

 

 

9,160

 

Goodwill

 

 

5,960

 

Accounts payable

 

 

(7,064

)

Accrued liabilities

 

 

(3,726

)

Purchase consideration, net of cash acquired

 

$

13,179

 

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 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 Acquisition Date was $2.0 million, of which we recognized $0.2 million and $1.5 million in cost of revenue in the condensed consolidated statements of operations for the three months ended March 31, 2024 and for the year ended December 31, 2023, respectively, upon the sale of the acquired inventory.

The goodwill of $6.0 million represents the expansion of our market presence by utilizing Drop's strength in direct consumer reach as well as the ability to expand the customizable keyboard and keycap market. The goodwill is deductible for tax purposes and is assigned to our Gaming Peripherals reporting unit.

The $9.2 million identifiable intangible assets acquired include developed technology of $5.2 million, trade name of $2.3 million and domain name of $1.7 million. The fair values of the identified intangible assets were estimated primarily using the income approach and were based on inputs that are not observable in the market which we consider to be Level 3 inputs. These intangible assets are being amortized over their estimated useful lives, ranging from 5 to 15 years, using the straight-line method of amortization. The identifiable intangible assets acquired are deductible for tax purposes.

The acquisition-related costs incurred in the three months ended March 31 2024 and 2023 were not material.

Corsair Gaming, Inc. | Q1 2024 Form 10-Q | 9


Table of Contents

 

 

6. Goodwill and Intangible Assets

Goodwill

The following table summarizes the changes in the carrying amount of goodwill by reportable segment (in thousands):

 

 

Gaming
Components
and
Systems

 

 

Gamer and
Creator
Peripherals

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2023

 

$

148,936

 

 

$

205,769

 

 

$

354,705

 

Measurement period adjustments

 

 

 

 

 

(27

)

 

 

(27

)

Effect of foreign currency exchange rates

 

 

(34

)

 

 

(234

)

 

 

(268

)

Balance as of March 31, 2024

 

$

148,902

 

 

$

205,508

 

 

$

354,410

 

Intangible assets, net

The following table is a summary of intangible assets, net (in thousands):

 

March 31, 2024

 

 

December 31, 2023

 

 

Gross
Carrying
Amount

 

 

Accumulated
Amortization

 

 

Net
Carrying
Amount

 

 

Gross
Carrying
Amount

 

 

Accumulated
Amortization

 

 

Net
Carrying
Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Developed technology

$

47,221

 

 

$

23,227

 

 

$

23,994

 

 

$

47,221

 

 

$

21,206

 

 

$

26,015

 

Trade name

 

34,050

 

 

 

9,633

 

 

 

24,417

 

 

 

34,114

 

 

 

9,060

 

 

 

25,054

 

Customer relationships

 

218,452

 

 

 

144,292

 

 

 

74,160

 

 

 

218,453

 

 

 

138,800

 

 

 

79,653

 

Patent portfolio

 

34,512

 

 

 

18,046

 

 

 

16,466

 

 

 

34,781

 

 

 

17,031

 

 

 

17,750

 

Supplier relationships

 

5,888

 

 

 

2,208

 

 

 

3,680

 

 

 

6,136

 

 

 

2,045

 

 

 

4,091

 

Total finite-life intangibles

 

340,123

 

 

 

197,406

 

 

 

142,717

 

 

 

340,705

 

 

 

188,142

 

 

 

152,563

 

Indefinite life trade name

 

35,430

 

 

 

 

 

 

35,430

 

 

 

35,430

 

 

 

 

 

 

35,430

 

Other

 

4

 

 

 

 

 

 

4

 

 

 

16

 

 

 

 

 

 

16

 

Total intangible assets

$

375,557

 

 

$

197,406

 

 

$

178,151

 

 

$

376,151

 

 

$

188,142

 

 

$

188,009

 

 

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 March 31, 2024 is as follows (in thousands):

 

 

Amounts

 

 

 

 

 

Remainder of 2024

 

$

28,488

 

2025

 

 

37,620

 

2026

 

 

34,315

 

2027

 

 

24,661

 

2028

 

 

4,370

 

Thereafter

 

 

13,263

 

Total

 

$

142,717

 

 

7. Balance Sheet Components

The following tables present the components of certain balance sheet amounts (in thousands):

 

 

March 31,
2024

 

 

December 31,
2023

 

 

 

 

 

 

 

 

Cash

 

$

127,768

 

 

$

175,620

 

Restricted cash—short term

 

 

2,174

 

 

 

2,705

 

Restricted cash—noncurrent

 

 

241

 

 

 

239

 

Total cash and restricted cash

 

$

130,183

 

 

$

178,564

 

 

Corsair Gaming, Inc. | Q1 2024 Form 10-Q | 10


 

 

 

March 31,
2024

 

 

December 31,
2023

 

 

 

 

 

 

 

 

Accounts receivable

 

$

206,156

 

 

$

254,433

 

Due from Factor

 

 

 

 

 

283

 

Allowance for doubtful accounts

 

 

(1,236

)

 

 

(1,448

)

Accounts receivable, net

 

$

204,920

 

 

$

253,268

 

As of March 31, 2024, two customers represented 42.3% and 17.8% of our accounts receivable, net balance, respectively. As of December 31, 2023, two customers represented 42.9% and 18.5% of our accounts receivable, net balance, respectively.

 

 

March 31,
2024

 

 

December 31,
2023

 

 

 

 

 

 

 

 

Raw materials

 

$

45,876

 

 

$

64,576

 

Work in progress

 

 

8,980

 

 

 

5,204

 

Finished goods

 

 

196,891

 

 

 

170,392

 

Inventories

 

$

251,747

 

 

$

240,172

 

 

 

 

March 31,
2024

 

 

December 31,
2023

 

 

 

 

 

 

 

 

Manufacturing equipment

 

$

29,121

 

 

$

28,168

 

Leasehold improvements

 

 

20,419

 

 

 

19,789

 

Computer equipment, software and office equipment

 

 

15,932

 

 

 

16,083

 

Furniture and fixtures

 

 

3,846

 

 

 

3,825

 

Total property and equipment

 

$

69,318

 

 

$

67,865

 

Less: Accumulated depreciation and amortization

 

 

(38,133

)

 

 

(35,653

)

Property and equipment, net

 

$

31,185

 

 

$

32,212

 

 

 

 

March 31,
2024

 

 

December 31,
2023

 

 

 

 

 

 

 

 

Right-of-use assets

 

$

35,049

 

 

$

36,324

 

Deferred tax asset

 

 

30,794

 

 

 

27,749

 

Other

 

 

6,179

 

 

 

6,636

 

Other assets

 

$

72,022

 

 

$

70,709

 

 

 

 

March 31,
2024

 

 

December 31,
2023

 

 

 

 

 

 

 

 

Accrued reserves for customer incentive programs

 

$

32,391

 

 

$

41,148

 

Accrued reserves for sales returns

 

 

32,951

 

 

 

36,822

 

Accrued payroll and related expenses

 

 

14,056

 

 

 

17,989

 

Accrued freight expenses

 

 

9,968

 

 

 

13,553

 

Operating lease liabilities, current

 

 

9,151

 

 

 

9,721

 

Accrued legal expense

 

 

6,516