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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, 2022

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.)

 

47100 Bayside Pkwy

Fremont, CA 94538

(Address of principal executive offices and zip code)

 

(510) 657-8747

(Registrant’s telephone number, including area code)

 

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, 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 28, 2022, the registrant had 95,399,909 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


Table of Contents

 

 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

2

Item 1.

Financial Statements (Unaudited)

2

 

Condensed Consolidated Statements of Operations - Three Months Ended March 31, 2022 and March 31, 2021

2

 

Condensed Consolidated Statements of Comprehensive Income (Loss) - Three Months Ended March 31, 2022 and March 31, 2021

3

 

Condensed Consolidated Balance Sheets - As of March 31, 2022 and December 31, 2021

4

 

Condensed Consolidated Statements of Shareholder’s Equity - Three Months Ended March 31, 2022 and March 31, 2021

5

 

Condensed Consolidated Statements of Cash Flows – Three Months Ended March 31, 2022 and March 31, 2021

6

 

Notes to Condensed Consolidated Financial Statements

7

Item 2.

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

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

35

PART II.

OTHER INFORMATION

36

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

67

Item 3.

Defaults Upon Senior Securities

67

Item 4.

Mine Safety Disclosures

67

Item 5.

Other Information

67

Item 6.

Exhibits

68

Signatures

69

 

 

 

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, 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, the COVID-19 pandemic. We believe that these factors include but are not limited to those described under Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q. 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.

 

 

 

 

 

  

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,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

Net revenue

 

$

380,691

 

 

$

529,414

 

Cost of revenue

 

 

289,935

 

 

 

369,086

 

Gross profit

 

 

90,756

 

 

 

160,328

 

Operating expenses:

 

 

 

 

 

 

 

 

Sales, general and administrative

 

 

76,131

 

 

 

77,853

 

Product development

 

 

17,110

 

 

 

15,186

 

Total operating expenses

 

 

93,241

 

 

 

93,039

 

Operating income (loss)

 

 

(2,485

)

 

 

67,289

 

Other (expense) income:

 

 

 

 

 

 

 

 

Interest expense

 

 

(1,279

)

 

 

(4,946

)

Other expense, net

 

 

(499

)

 

 

(2,425

)

Total other expense, net

 

 

(1,778

)

 

 

(7,371

)

Income (loss) before income taxes

 

 

(4,263

)

 

 

59,918

 

Income tax benefit (expense)

 

 

983

 

 

 

(13,195

)

Net income (loss)

 

 

(3,280

)

 

 

46,723

 

Less: Net loss attributable to noncontrolling interests

 

 

(407

)

 

 

 

Net income (loss) attributable to Corsair Gaming, Inc.

 

$

(2,873

)

 

$

46,723

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Net income (loss) attributable to Corsair Gaming, Inc.

 

$

(2,873

)

 

$

46,723

 

Change in redemption value of redeemable noncontrolling interests

 

 

(2,261

)

 

 

 

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

 

$

(5,134

)

 

$

46,723

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share attributable to common stockholders of

Corsair Gaming, Inc.:

 

 

 

 

 

 

 

 

Basic

 

$

(0.05

)

 

$

0.51

 

Diluted

 

$

(0.05

)

 

$

0.47

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

95,275

 

 

 

91,951

 

Diluted

 

 

95,275

 

 

 

100,211

 

 

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

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Table of Contents

 

 

Corsair Gaming, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited, in thousands)

 

 

 

Three Months Ended

March 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(3,280

)

 

$

46,723

 

Other comprehensive gain (loss):

 

 

 

 

 

 

 

 

   Foreign currency translation adjustments, net of tax benefit of $151 and $0 for the

   three months ended March 31, 2022 and 2021, respectively

 

 

(2,258

)

 

 

165

 

   Unrealized foreign exchange loss from long-term intercompany loans, net of tax

    benefit of $19 and $44 for the three months ended March 31, 2022 and 2021, respectively

 

 

(95

)

 

 

(224

)

Comprehensive income (loss)

 

 

(5,633

)

 

 

46,664

 

Less: Comprehensive loss attributable to noncontrolling interests

 

 

(606

)

 

 

 

Comprehensive income (loss) attributable to Corsair Gaming, Inc.

 

$

(5,027

)

 

$

46,664

 

 

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

 

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Table of Contents

 

 

 

Corsair Gaming, Inc.

Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except per share amounts)

 

 

 

March 31,

2022

 

 

December 31,

2021

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash

 

$

29,049

 

 

$

62,415

 

Restricted cash

 

 

2,705

 

 

 

2,734

 

Accounts receivable, net

 

 

236,472

 

 

 

291,287

 

Inventories

 

 

300,423

 

 

 

298,315

 

Prepaid expenses and other current assets

 

 

57,877

 

 

 

51,024

 

Total current assets

 

 

626,526

 

 

 

705,775

 

Restricted cash, noncurrent

 

 

231

 

 

 

231

 

Property and equipment, net

 

 

19,607

 

 

 

16,819

 

Goodwill

 

 

348,424

 

 

 

317,054

 

Intangible assets, net

 

 

249,841

 

 

 

225,709

 

Other assets

 

 

74,796

 

 

 

71,808

 

Total assets

 

$

1,319,425

 

 

$

1,337,396

 

Liabilities

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Debt maturing within one year

 

$

4,754

 

 

$

4,753

 

Accounts payable

 

 

203,454

 

 

 

236,120

 

Other liabilities and accrued expenses

 

 

176,556

 

 

 

205,874

 

Total current liabilities

 

 

384,764

 

 

 

446,747

 

Long-term debt

 

 

241,709

 

 

 

242,898

 

Deferred tax liabilities

 

 

29,241

 

 

 

25,700

 

Other liabilities, noncurrent

 

 

52,176

 

 

 

53,871

 

Total liabilities

 

 

707,890

 

 

 

769,216

 

Commitments and Contingencies (Note 9)

 

 

 

 

 

 

 

 

Temporary equity

 

 

 

 

 

 

 

 

Redeemable noncontrolling interests

 

 

19,424

 

 

 

 

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, 2022 and December 31, 2021, respectively

 

 

 

 

 

 

Common stock, $0.0001 par value: 300,000 shares authorized, 95,373 and 94,510

   shares issued and outstanding as of March 31, 2022 and December 31, 2021,

   respectively

 

 

10

 

 

 

9

 

Additional paid-in capital

 

 

489,745

 

 

 

470,364

 

Retained earnings

 

 

93,013

 

 

 

98,147

 

Accumulated other comprehensive loss

 

 

(2,494

)

 

 

(340

)

Total Corsair Gaming, Inc. stockholders’ equity

 

 

580,274

 

 

 

568,180

 

Nonredeemable noncontrolling interests

 

 

11,837

 

 

 

 

Total permanent equity

 

 

592,111

 

 

 

568,180

 

Total liabilities, temporary equity and permanent equity

 

$

1,319,425

 

 

$

1,337,396

 

 

 

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

 

 

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Corsair Gaming, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited, in thousands)

 

 

 

Three Months Ended March 31, 2022

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Retained

 

 

Accumulated

Other

Comprehensive

 

 

Total

Corsair

Gaming, Inc.

Stockholders’

 

 

Nonredeemable

Noncontrolling

 

 

Total

Permanent

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Equity

 

 

Interests

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2021

 

 

94,510

 

 

$

9

 

 

$

470,364

 

 

$

98,147

 

 

$

(340

)

 

$

568,180

 

 

$

 

 

$

568,180

 

Issuance of common stock in relation to

   business acquisition

 

 

690

 

 

 

1

 

 

 

14,504

 

 

 

 

 

 

 

 

 

14,505

 

 

 

 

 

 

14,505

 

Noncontrolling interests from business

   combination

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,084

 

 

 

12,084

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(2,873

)

 

 

 

 

 

(2,873

)

 

 

(166

)

 

 

(3,039

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,154

)

 

 

(2,154

)

 

 

(81

)

 

 

(2,235

)

Change in redemption value of redeemable

   NCI

 

 

 

 

 

 

 

 

 

 

 

(2,261

)

 

 

 

 

 

(2,261

)

 

 

 

 

 

(2,261

)

Issuance of common stock in connection

   with employee equity incentive plans

 

 

214

 

 

 

 

 

 

527

 

 

 

 

 

 

 

 

 

527

 

 

 

 

 

 

527

 

Shares withheld related to net share

   settlement

 

 

(41

)

 

 

 

 

 

(867

)

 

 

 

 

 

 

 

 

(867

)

 

 

 

 

 

(867

)

Stock-based compensation

 

 

 

 

 

 

 

 

5,217

 

 

 

 

 

 

 

 

 

5,217

 

 

 

 

 

 

5,217

 

Balance as of March 31, 2022

 

 

95,373

 

 

$

10

 

 

$

489,745

 

 

$

93,013

 

 

$

(2,494

)

 

$

580,274

 

 

$

11,837

 

 

$

592,111

 

 

 

 

Three Months Ended March 31, 2021

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Retained

Earnings

(Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Corsair

Gaming, Inc.

Stockholders’

 

 

Nonredeemable

Noncontrolling

 

 

Total

Permanent

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit)

 

 

Income (Loss)

 

 

Equity

 

 

Interests

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2020

 

 

91,935

 

 

$

9

 

 

$

438,667

 

 

$

(2,813

)

 

$

1,527

 

 

$

437,390

 

 

$

 

 

$

437,390

 

Net income

 

 

 

 

 

 

 

 

 

 

 

46,723

 

 

 

 

 

 

46,723

 

 

 

 

 

 

46,723

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(59

)

 

 

(59

)

 

 

 

 

 

(59

)

Issuance of common stock in connection

    with employee equity incentive plans

 

 

152

 

 

 

 

 

 

577

 

 

 

 

 

 

 

 

 

577

 

 

 

 

 

 

577

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,076

 

 

 

 

 

 

 

 

 

3,076

 

 

 

 

 

 

3,076

 

Balance as of March 31, 2021

 

 

92,087

 

 

$

9

 

 

$

442,320

 

 

$

43,910

 

 

$

1,468

 

 

$

487,707

 

 

$

 

 

$

487,707

 

 

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

 

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Table of Contents

 

 

Corsair Gaming, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

 

 

Three Months Ended

March 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(3,280

)

 

$

46,723

 

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

 

 

 

 

 

 

 

 

   Stock-based compensation

 

 

5,147

 

 

 

3,076

 

   Depreciation

 

 

2,604

 

 

 

2,436

 

   Amortization of intangible assets

 

 

10,138

 

 

 

8,702

 

   Debt issuance costs amortization

 

 

86

 

 

 

537

 

   Loss on debt extinguishment

 

 

 

 

 

439

 

   Deferred income taxes

 

 

(4,078

)

 

 

(3,005

)

   Other

 

 

567

 

 

 

1,316

 

   Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

      Accounts receivable

 

 

54,434

 

 

 

(13,416

)

      Inventories

 

 

(662

)

 

 

(13,508

)

      Prepaid expenses and other assets

 

 

(8,147

)

 

 

(4,419

)

      Accounts payable

 

 

(35,308

)

 

 

(26,988

)

      Other liabilities and accrued expenses

 

 

(27,607

)

 

 

25,875

 

         Net cash provided by (used in) operating activities

 

 

(6,106

)

 

 

27,768

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

   Acquisition of business, net of cash acquired

 

 

(19,534

)

 

 

(1,684

)

   Payment of deferred contingent consideration

 

 

 

 

 

(4,353

)

   Purchase of property and equipment

 

 

(4,365

)

 

 

(2,036

)

         Net cash used in investing activities

 

 

(23,899

)

 

 

(8,073

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

   Repayment of debt

 

 

(1,250

)

 

 

(28,000

)

   Borrowing from line of credit

 

 

293,000

 

 

 

 

   Repayment of line of credit

 

 

(293,000

)

 

 

 

   Payment of contingent consideration

 

 

(292

)

 

 

 

   Proceeds from issuance of shares through employee equity incentive plans

 

 

523

 

 

 

185

 

   Payment of taxes related to net share settlement of equity awards

 

 

(887

)

 

 

 

         Net cash used in financing activities

 

 

(1,906

)

 

 

(27,815

)

Effect of exchange rate changes on cash

 

 

(1,484

)

 

 

134

 

Net decrease in cash and restricted cash

 

 

(33,395

)

 

 

(7,986

)

Cash and restricted cash at the beginning of the period

 

 

65,380

 

 

 

133,568

 

Cash and restricted cash at the end of the period

 

$

31,985

 

 

$

125,582

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

1,207

 

 

$

3,961

 

Cash paid for income taxes

 

 

4,354

 

 

 

413

 

Supplemental schedule of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

   Equipment purchased and unpaid at period end

 

$

3,322

 

 

$

1,558

 

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

 

 

633

 

 

 

3,817

 

   Deferred and contingent purchase consideration related to business acquisitions

 

 

 

 

 

735

 

 

 

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

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Table of Contents

 

Corsair Gaming, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Description of Business

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 gear for gamers, streamers and content 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 our streaming gear, which includes capture cards, Stream Decks, USB microphones, our Facecam streaming camera, studio accessories and EpocCam software, as well as coaching and training services, among others.

 

 

Gaming components and systems. Includes our high-performance power supply units, or PSUs, cooling solutions, computer cases, DRAM modules, as well as high-end prebuilt and custom-built gaming PCs, and gaming monitor, 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, 2021 which was filed with the SEC on March 1, 2022.

The condensed consolidated balance sheet as of December 31, 2021, 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, 2021, 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, 2022 and our results of operations for the three months ended March 31, 2022 and 2021. The results for the three months ended March 31, 2022 are not necessarily indicative of the results expected for the current fiscal year or any other future periods.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Corsair and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. For consolidated entities where we own less than 100% of the equity, our consolidated net comprehensive income (loss) is reduced by the portion attributable to the noncontrolling interests.

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.

On January 1, 2022 (the “Closing” or “Closing Date”), we completed the acquisition of a 51% ownership stake in Elgato iDisplay Holdings LTD. and its related companies (together “iDisplay”). (See Note 5, Business Combination - iDisplay Acquisition for more details on the iDisplay Acquisition). We have determined that iDisplay does not qualify as a VIE and Corsair has a controlling financial

7


Table of Contents

 

interest in iDisplay under the VOE model and therefore, iDisplay’s results of operations are fully consolidated with Corsair with effect from January 1, 2022. As a result, we recorded a net loss of $0.4 million attributable to noncontrolling interests in our condensed consolidated statement of operations for the three months ended March 31, 2022, equal to the 49% of the ownership interest retained in iDisplay by the noncontrolling interests.

Noncontrolling Interests

We have included both redeemable noncontrolling interests and noncontrolling interests in our condensed consolidated balance sheet in connection with our consolidation of the 51% ownership of iDisplay.

Redeemable noncontrolling interests that are redeemable and not solely within our control are classified within temporary equity in the condensed consolidated balance sheets. Redeemable noncontrolling interests are measured at the greater of the redemption value (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), or the carrying value before giving effect to the redemption feature. The redeemable noncontrolling interests are recorded at their maximum redemption value at each reporting date. 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 interests 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. (See Note 16 for more information regarding the redeemable noncontrolling interests).

In addition, we have noncontrolling interests recorded at carrying value which do not have redemption features and are classified within permanent equity in our condensed consolidated balance sheet.

 

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 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 current economic environment. We adjust such estimates and assumptions when facts and circumstances dictate. Actual results could differ materially from those estimates due to risks and uncertainties, including uncertainty in the current economic environment due to COVID-19.

Risks and Uncertainties related to the COVID-19 Pandemic

Due to the COVID-19 pandemic, there has been and will continue to be uncertainty and disruption in the global economy and financial markets. Since early 2020, we have experienced an increase in demand for our gear as more people were under shelter-in-place restrictions, which we believe have limited people’s access to alternative forms of entertainment and social interaction, and thus have increased the demand for home entertainment and connecting with others through content creation. In contrast, as the COVID-19 pandemic subsides, it has resulted in shelter-in-place and other similar restrictions being eased. Such easing of restrictions has resulted in consumers returning to other alternative forms of entertainment and interaction. This in turn has resulted in a decline in demand for our products since the second half of 2021. The extent to which the COVID-19 outbreak ultimately impacts our business, sales, results of operations, cash flows and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the severity, duration and spread of the outbreak, how quickly and to what extent normal economic and operating conditions can resume, and the actions to contain the virus and prevent any reoccurrence. For example, China's zero-COVID policy has negative implications for global supply chains generally; factory shutdowns and transport backlogs may result in inventory shortfalls for our products, which could negatively impact our sales. Even after the COVID-19 outbreak has subsided, we may continue to experience significant impacts to our business as a result of its global economic impact, including any economic downturn or recession that has occurred or may occur in the future.

As of the date of issuance of these condensed consolidated financial statements, we are not aware of any specific event or circumstance that would require updates to our estimates and judgments or revisions due to COVID-19 to the carrying value of our assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the condensed consolidated financial statements.

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Recently Adopted Accounting Pronouncements

 In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848), to provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. We adopted this standard effective January 1, 2022. The adoption of this new standard did not have a material impact on our condensed consolidated financial statements.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805), which requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. Historically, such amounts were recognized by the acquirer at fair value in acq