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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

2


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

 

3


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

 

 

4


Table of Contents

 

 

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

 

5


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

6


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: