What changed in this filing

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Item 1. Financial Statements

2021-05-04 compared with 2020-11-10 · 130 added, 458 removed, 349 unchanged (63% of the section changed)

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Three Months Ended

September 30,

Nine Months Ended

September 30,

Cost of revenue

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Interest expense

Other (expense) income, net

Other expense, net

Total other expense, net

Income (loss) before income taxes

Income tax (expense) benefit

Net income (loss)

Net income (loss) per share

Weighted-average shares used to compute net income

(loss) per share

Income before income taxes

Income tax expense

Net income per share

Weighted-average shares used to compute net income per share

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

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Three Months Ended

September 30,

Nine Months Ended

September 30,

Net income (loss)

Other comprehensive gain (loss):

Foreign currency translation adjustments, net of zero tax

Unrealized foreign exchange gain (loss) from long-term intercompany loans, net of

tax benefit (expense) of $(128) and $134 for the three months ended September 30,

2020 and 2019, respectively and $(24) and $139 for the nine months ended

September 30, 2020 and 2019, respectively

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

tax benefit of $ 44 and $ 61 for the three months ended March 31,

2021 and 2020, respectively

Comprehensive income (loss)

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(Unaudited, in thousands, except per share amounts)

September 30,

Current assets:

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Accounts payable

Current portion of debt, net

Other liabilities and accrued expenses

Total current liabilities

Debt, net including related party balance of nil and $5,779 as of September 30, 2020 and

December 31, 2019, respectively

Deferred tax liabilities

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5,000 shares authorized, nil and nil shares issued

and outstanding as of September 30, 2020 and December 31, 2019, respectively

and outstanding as of March 31, 2021 and December 31, 2020, respectively

Common stock, $ 0.0001 par value:

300,000 shares authorized, 92,087 and 91,935

shares issued and outstanding as of September 30, 2020 and December 31, 2019,

shares issued and outstanding as of March 31, 2021 and December 31, 2020,

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive loss

Retained earnings (accumulated deficit)

Accumulated other comprehensive income

Total Stockholders’ Equity

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(Unaudited, in thousands)

Three months ended September 30, 2020

Comprehensive

Stockholders’

Balance as of June 30, 2020

Issuance of common stock for stock option exercises

Issuance of common stock upon vesting of restricted

Issuance of common stock upon initial public

offering, net of underwriting discounts and

commissions and other offering costs

Stock-based compensation

Other comprehensive income

Balance as of September 30, 2020

Three months ended September 30, 2019

Comprehensive

Stockholders’

Balance as of June 30, 2019

Issuance of common stock in relation to acquisitions

Issuance of common stock for stock option exercises

Stock-based compensation

Other comprehensive loss

Balance as of September 30, 2019

Nine months ended September 30, 2020

Three Months Ended March 31, 2021

Comprehensive

Stockholders’

Income (Loss)

Balance as of December 31, 2020

Issuance of common stock to directors

Issuance of common stock for stock option exercises

Issuance of common stock upon vesting of restricted

Issuance of common stock upon initial public

offering, net of underwriting discounts and

commissions and other offering costs

Stock-based compensation

Other comprehensive loss

Balance as of September 30, 2020

Nine months ended September 30, 2019

Balance as of March 31, 2021

Three Months Ended March 31, 2020

Comprehensive

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Balance as of December 31, 2019

Cumulative effect of adoption of new accounting

Issuance of common stock in relation to acquisitions

Issuance of common stock for stock option exercises

Repurchase of common stock (Note 11)

Stock-based compensation

Other comprehensive loss

Balance as of September 30, 2019

Balance as of March 31, 2020

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

2 unchanged sentences

(Unaudited, in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by

Adjustments to reconcile net income to net cash provided by

operating activities:

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Deferred income taxes

Gain on currency forward contract

Loss on foreign exchange

Changes in operating assets and liabilities:

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Acquisition of business, net of cash acquired

Payment of deferred consideration

Payment of deferred and contingent consideration

Purchase of property and equipment

2 unchanged sentences

Repayment of debt

Payment of debt issuance costs

Repayment of line of credit, net

Proceeds from initial public offering and private placement, net of

underwriting discounts and commissions

Payment of other offering costs

Repurchase of common stock

Proceeds from exercise of stock options

Net cash provided by (used in) financing activities

Net cash used in financing activities

Effect of exchange rate changes on cash

Net increase (decrease) in cash and restricted cash

Net decrease in cash and restricted cash

Cash and restricted cash at the beginning of the period

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Equipment purchased and unpaid at period end

Issuance of common stock relating to business acquisitions

Deferred purchase consideration (Note 5)

Initial deferred and contingent purchase consideration

Measurement period adjustment relating to business acquisitions

Forward contract on common stock repurchase

Deferred offering costs included in accounts payable and accrued expenses

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Gamer and creator peripherals .

Includes our high-performance gaming keyboards, mice, headsets and controllers, as well as our streaming gear including capture cards, studio accessories, and microphones, among others.

Includes our high-performance gaming keyboards, mice, headsets, controllers, and streaming gear, which includes capture cards, Stream Decks, USB microphones, studio accessories and EpocCam software, as well as coaching and training services and content design services, 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, among others.

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, among others.

Reorganization

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As all legal entities included in the Reorganization are under common control of the Parent, all steps of the Reorganization were accounted for as a combination of entities under common control.

Unless otherwise indicated, the accompanying condensed combined consolidated financial statements and related notes that reference Corsair’s capitalization, including other matters relating to equity, share, and per share information, have been retroactively revised to reflect the Reorganization for all periods presented.

Accordingly, references in the footnotes related to transactions entered into by the Parent involving the Parent’s units or options to purchase the Parent’s units have been revised as common share equivalents of Corsair and options to purchase shares of Corsair’s common stock using the ratio of Corsair’s issued and outstanding shares immediately post-Reorganization to the Parent’s issued and outstanding units immediately post-Reorganization but prior to the unit exchanges described above.

Initial Public Offering

Initial Public Offering and Secondary Offering

On September 25, 2020, we completed our initial public offering (“IPO”) .

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Subsequent to the IPO, certain stockholders further sold 1,135,375 shares pursuant to the underwriters’ exercise of their option to purchase additional shares.

We did not receive any of the proceeds from the sale of shares by the selling stockholders.

On January 26, 2021, we completed a secondary offering of our common stock where certain selling stockholders sold 8,625,000 , shares of common stock at $ 35.00 per share.

We did no t receive any of the proceeds from the sale of shares by the selling stockholders in either the IPO or the secondary.

Deferred offering costs consist primarily of accounting, legal, and other fees related to the IPO.

Prior to the IPO, all deferred offering costs were capitalized in other assets in the condensed combined consolidated balance sheets.

After the IPO, $11.8 million of deferred offering costs were reclassified into stockholders’ equity as a reduction of the IPO proceeds in the condensed combined consolidated balance sheets.

The amount of deferred offering costs capitalized as of December 31, 2019 was $5.8 million.

After the IPO, $ 12.0 million of deferred offering costs were reclassified into stockholders’ equity as a reduction of the IPO proceeds in the condensed combined consolidated balance sheets as of December 31, 2020.

Basis of Presentation

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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 Combined Consolidated Financial Statements included in our Annual Report on Form 10K for the year ended December 31, 2020 which was filed with the SEC on March 11, 2021.

The condensed combined consolidated balance sheet as of December 31, 2020, included herein, was derived from the audited consolidated financial statements as of that date.

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GAAP have been condensed, combined or omitted pursuant to such rules and regulations.

Therefore, these interim condensed combined consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the final prospectus dated and filed on September 24, 2020 (the “Prospectus”) with the SEC pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended , (the “Securities Act”) .

The interim condensed combined 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 combined consolidated balance sheet as of September 30, 2020 and our results of operations for the three and nine months ended September 30, 2020 and 2019.

The results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results expected for the current fiscal year or any other future periods.

Except as described elsewhere to the condensed combined consolidated financial statements, there have been no material changes to our significant accounting policies as described in Note 2 “Summary of Significant Accounting Policies” in the Notes to the consolidated financial statements in our Prospectus.

Therefore, these interim condensed combined consolidated financial statements should be read in conjunction with our combined consolidated financial statements and notes thereto for the year ended December 31, 2020, included in our Annual Report on Form 10-K.

The interim condensed combined consolidated financial statements have been prepared on the same basis as the audited combined 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 combined consolidated balance sheet as of March 31, 2021 and our results of operations for the three months ended March 31, 2021 and 2020.

The results for the three months ended March 31, 2021 are not necessarily indicative of the results expected for the current fiscal year or any other future periods.

Principles of Consolidation

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We adjust such estimates and assumptions when facts and circumstances dictate.

As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.

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

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This negative financial impact has been offset by strong revenue growth year-over-year partly due to an increase in demand for our gear as more people in more countries are under shelter-in-place restrictions.

The increase in demand has continued into the third quarter of 2020 and we expect it to continue through the remainder of the year as the COVID-19 pandemic continues.

However, as the global economic activity slows down, the demand for our gear could decline despite these trends.

In contrast, if the COVID-19 pandemic subsides in the second half of 2021, resulting in shelter-in-place and other similar restrictions being eased, it could result in consumers returning to other alternative forms of entertainment and interaction.

This in turn could result in a decline in demand for our products.

The extent to which the COVID-19 outbreak ultimately impacts our business, sales, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.

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Actual results could differ from those estimates and any such differences may be material to the condensed combined consolidated financial statements.

Advertising Costs

Advertising costs are expensed as incurred and are included as a component of sales, general and administrative expense in the condensed combined consolidated statements of operations.

Advertising and promotion expenses were $4.1 million and $2.6 million for the three months ended September 30, 2020 and 2019, respectively, and $12.3 million and $7.4 million for nine months ended September 30, 2020 and 2019, respectively.

Nonmonetary Transactions

We have sales and repurchases of inventory with our manufacturers, which are accounted for as nonmonetary transactions.

Upon sale of raw materials to the manufacturer, for the inventories on-hand with the manufacturer where there is an anticipated reciprocal purchase by Corsair, we will record prepaid inventories and accrued liabilities as a nonmonetary transaction.

When the reciprocal purchase of inventory from the manufacturer is transacted, a payable to the manufacturer at the repurchase price will be recorded, which replaces the initial nonmonetary transaction and inventory will be reflected at carrying value, which includes the costs for the raw materials and the incremental costs charged by the manufacturer for additional work performed on the inventory.

As of September 30, 2020, we recognized $2.1 million prepaid inventory and $2.4 million accrued liabilities in the condensed combined consolidated balance sheet for such nonmonetary transactions with our manufacturers.

Because the transactions are nonmonetary, they have not been included in the condensed combined consolidated statements of cash flows pursuant to ASC 230, Statement of Cash Flows .

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, which was further updated and clarified by the FASB through issuance of additional related ASUs.

ASU 2016-13 replaces the incurred-loss impairment methodology and requires immediate recognition of estimated credit losses expected to occur for most financial assets, including trade receivables.

We adopted this standard effective January 1, 2020 using a modified retrospective approach.

The adoption of this new standard did not have a material impact on our condensed combined consolidated financial statements.

In January 2017, the FASB issued ASU No.

2017-04, Intangibles – Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment .

The ASU simplifies the subsequent measurement of goodwill by eliminating the second step of the goodwill impairment test.

The second step measures goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill.

Under the new guidance, a company will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value.

In December 2019, the FASB issued ASU No.

2019-12 , Income Taxes (Topic 740) , to simplify various aspects related to the accounting for income taxes.

We adopted this standard effective January 1, 2021 .

The adoption of this new standard did not have a material impact on our condensed combined consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820) , to modify certain disclosure requirements on fair value measurements in Topic 820.

We adopted this standard effective January 1, 2020.

The adoption of this new standard did not have a material impact on our condensed combined consolidated financial state ments.

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) , and subsequent updates (collectively, referred to as Accounting Standard Codification 842 or Topic 842).

Topic 842 requires a lessee to recognize right of use ( “ROU” ) assets and lease liabilities for a lease with terms longer than 12 months on the consolidated balance sheets and to disclose key information related to the leasing arrangements.

On January 1, 2020, we adopted Topic 842 using the modified retrospective method, applying Topic 842 to all leases existing at the date of initial application.

We elected to use the effective date as the date of initial application.

Consequently, prior period balances and disclosures have not been restated.

We elected the package of transitional practical expedients, which among other provisions, allows us to carry forward prior conclusions about lease identification and classification.

In addition, for operating leases, we elected to account for lease and non-lease components as a single lease component.

We also made an accounting policy election not to apply the recognition guidance of Topic 842 to record all leases that, at the lease commencement date, have a lease term of 12 months or less on the consolidated balance sheet.

The adoption of Topic 842 had a material impact to our condensed combined consolidated balance sheet but did not have an impact on our condensed combined consolidated statement of operations or cash flows.

As a result of adopting Topic 842 as of January 1, 2020, we recognized lease liabilities of $17.9 million and corresponding ROU assets of $17.7 million.

See Note 16, Leases, for additional information.

Accounting Pronouncements Issued but Not Yet Adopted

In December 2019, the FASB issued ASU No.

2019-12 , Income Taxes (Topic 740) , to simplify various aspects related to the accounting for income taxes.

The new guidance is effective for us beginning in year 2021.

We are in the process of evaluating the effects of this new guidance on our condensed combined consolidated financial statements.

In March 2020, the FASB issued ASU No.

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The following tables summarize our financial assets and liabilities that were measured at fair value on a recurring basis, and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value:

September 30, 2020

March 31, 2021

(in thousands)

Interest rate cap contract (4)

Foreign currency forward contracts (1)

Contingent consideration in connection with a

business acquisition—Origin (1)

Contingent consideration in connection with an immaterial

business acquisition

Deferred cash consideration in connection with a

business acquisition—SCUF (2)

Deferred cash consideration in connection with a

business acquisition—Origin (3)

Foreign currency forward contracts (4)

Total liabilities

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Total liabilities

The fair value of the Origin earn-out liability (Refer to Note 5 for further details on this acquisition) is estimated using a Monte Carlo Simulation, a simulation-based measurement technique with significant inputs that are not observable in the market and thus represents a level 3 fair value measurement.

The significant inputs in the fair value measurement not supported by market activity included the expected future standalone EBITDA growth of Origin during the earn-out period, appropriately discounted by a risk adjustment factor, considering the uncertainties associated with the obligation, its associated volatility, and calculated in accordance with the terms of the Unit Purchase Agreement for this acquisition.

Significant changes of these significant inputs, in isolation or in combination, would result in a material change in fair value estimates.

The interrelationship between these inputs is not considered significant.

The fair value of the Origin earn-out liability is remeasured at every reporting period and the change in fair value is recorded to sales, general and administrative expenses.

During the year ended December 31, 2019, a $0.6 million credit to sales, general and administrative expenses was recorded resulting from a reduction in the fair value remeasurement.

The earn-out liability of $2.4 million contingent upon Origin’s 2019 standalone EBITDA was fully paid in April 2020.

During the nine months ended September 30, 2020, there was no material change in the fair value of the remaining earn-out liability that is contingent upon Origin’s 2020 standalone EBITDA results.

The Origin contingent consideration balance as of September 30, 2020 also included $0.3 million related to the finalization of pre-acquisition sales tax liabilities owed to Origin’s sellers according to the terms of the Origin Unit Purchase Agreement and this balance will be settled together with the Origin 2020 earn-out liability in 2021.

The fair values of the forward contracts were based on similar exchange traded derivatives and the related asset or liability is included within Level 2 of the fair value hierarchy.

The fair value of the SCUF contingent consideration was determined based on the estimates of acquired tax benefits owed to SCUF’s sellers according to the merger agreement.

These estimates involved inputs unobservable in the markets and thus represent a level 3 fair value measurement.

The measurement of this liability was provisional at the SCUF Acquisition Date (as defined in Note 5) and as of September 30, 2020 and will be finalized in the fourth quarter of 2020.

The amount is subject to update upon filing the tax returns for 2019 through 2021.

Refer to Note 5 for further details on this acquisition.

The fair value of Origin’s deferred cash consideration is determined at the Origin acquisition date by using a discount rate of 6.5%.

This discount rate approximated our borrowing rate under the revolving line of credit and represented a Level 3 input under the fair value hierarchy.

The fair values of the forward contracts and interest rate cap contract are based on similar exchange traded derivatives and the related asset or liability is, therefore, included within Level 2 of the fair value hierarchy.

The $ 1.3 million liability as of March 31, 2021 and December 31, 2020 consists of $ 0.1 million based on a contractual amount and the remaining $ 1.2 million is subject to update upon filing our tax returns for tax years 2020 and 2021.

The Origin earn-out liability of $ 2.9 million and deferred cash consideration of $ 1.5 million were fully paid and settled in the three months ended March 31, 2021.

Derivative Financial Instruments

We are exposed to foreign currency risk relating to our ongoing business operations and use derivative financial instruments, principally foreign currency forward contracts, to reduce the risk.

The notional principal amount of outstanding foreign exchange forward contracts was $21.5 million and $18.3 million as of September 30, 2020 and December 31, 2019, respectively, none of which have been designated as hedging instruments during the periods presented.

The fair value gain (loss) recognized in other (expense) income, net in relation to these derivative instruments was $(1.1) million and $0.9 million for the three months ended September 30, 2020 and 2019, respectively, and $(1.2) million and $0.5 million for the nine months ended September 30, 2020 and 2019, respectively.

In April 2020, we purchased interest rate cap contracts for $0.5 million with a notional amount of $465 million to manage our exposure to interest rate movements on our variable rate debt when 3-month LIBOR exceeds 1.0%.

Refer to Note 8 for further information relating to the interest rates on our debts.

The interest rate cap contracts mature on June 30, 2022 and none of which have been designated as hedging instruments.

Accordingly, we recognized $55 thousand and $0.5 million net loss for the change in fair value of the interest rate contracts in interest expense for the three and nine months ended September 30, 2020, respectively.

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, and interest rate cap contracts, to minimize our exposure to interest rate movements on our variable rate debts.

The derivative instruments are recorded at fair value in prepaid expenses and other current assets or other liabilities and accrued expenses on the condensed combined 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 combined consolidated statements of operations.

We do no t enter into derivative instruments for trading purposes.

The foreign currency forward contracts generally mature within three to four months .

The notional principal amount of outstanding foreign exchange forward contracts was $ 38.6 million and $ 41.6 million as of March 31, 2021 and December 31, 2020, respectively, none of which have been designated as hedging instruments during the periods presented.

The fair value gain recognized in other (expense) income, net in relation to these derivative instruments was $ 0.7 million and $ 0.3 million for the three months ended March 31, 2021 and 2020, respectively.

Business Combinations

2021 Immaterial Acquisition

On August 31, 2020, we completed an acquisition that is not material to our consolidated financial position, results of operations or cash flows.

We believe that the acquisition will enhance the product offering in our gamer and creator peripherals segment.

The purchase consideration was $1.0 million and consisted of $0.8 million of cash and $0.2 million of additional cash earn-out based on the achievement of certain net revenue targets of the acquiree from the acquisition date through December 31, 2021.

We acquired intangibles of $0.7 million, goodwill of $0.2 million and accounts receivable of $0.1 million.

These intangibles will be amortized over a weighted-average estimated useful life of 3.1 years.

SCUF Acquisition

On December 19, 2019 (the “SCUF Acquisition Closing Date”) , one of our subsidiaries entered into an Agreement and Plan of Merger with Scuf Holdings, Inc.

and subsidiaries (collectively “SCUF”) and acquired 100% of their equity interests (the “SCUF Acquisition”) .

SCUF, headquartered in Georgia, U.S., specializes in delivering high-performance accessories and customized gaming controllers for consoles and PCs used by top professionals as well as casual gamers.

We believe that the SCUF Acquisition will enhance our product and service offerings to both console and PC gamers.

Because the acquired companies met the definition of a business, the SCUF Acquisition has been accounted for as a business combination using the acquisition method of accounting.

Subsequent to the SCUF Acquisition Closing Date, we recorded measurement period adjustments which reduced purchase price, inventories and goodwill by $1.5 million, $0.5 million and $1.0 million, respectively, and accordingly, the SCUF Acquisition total adjusted purchase consideration was $136.3 million.

The SCUF Acquisition purchase consideration consisted of (i) $128.2 million cash consideration (including the payment of SCUF’s transaction costs and debt on behalf of SCUF), (ii) $8.0 million equity consideration (an issuance of approximately 2.1 million units of the Parent which was equivalent to approximately 1.1 million shares of Corsair common stock immediately post-Reorganization and prior to the exchange agreements described in Note 1), (iii) $1.6 million estimated contingent cash consideration relating to the our expected utilization of the acquired SCUF tax liabilities or tax benefits relating to pre-acquisition SCUF results over the next 4 years of tax filings, (iv) additional cash earn-out based on the achievement of certain SCUF standalone EBITDA targets for 2019 and the ability of SCUF to renew a licensing agreement with a certain vendor, and these contingent cash earn-outs were determined to have zero value based on the assessment of the outcome of these contingent events on the SCUF Acquisition Closing Date, and (v) net of $1.5 million contingent cash consideration paid on the SCUF Acquisition Closing Date that is expected to be returned by the sellers to us to fund an incentive payment to certain ex-SCUF employees who joined Corsair and are required to remain employed through a contractual service period.

The purchase price is subject to further adjustments of certain net working capital items within 12 months of the SCUF Acquisition Closing Date.

Preliminary purchase price allocation

The following table summarizes the preliminary allocation of the purchase consideration to the estimated fair value of the assets acquired and liabilities assumed at the SCUF Acquisition Closing Date.

The allocation of the purchase price was based upon a preliminary valuation, and the estimates and assumptions are subject to change within the measurement period.

The primary areas of the purchase price allocation that are not yet finalized consist of federal and state income tax and other tax considerations and the valuation of identifiable intangible assets acquired.

We will continue to reflect measurement period adjustments to purchase price allocation, if any, in the period in which the adjustments are recognized.

Final determination of the fair values may result in adjustments to the values presented in the following table:

(In thousands)

Assets acquired:

Accounts receivable

Prepaid and other assets

Identifiable intangible assets

Property and equipment

Liabilities assumed:

Accounts payable

Sales tax payable

Deferred revenue

Other liabilities and accrued expenses

Deferred tax liabilities

Net identifiable net assets acquired

Net assets acquired

The excess of the purchase price over the preliminary net tangible assets and preliminary intangible assets was recorded as goodwill.

Goodwill of $72.6 million, derived from the SCUF Acquisition, is primarily related to the value of the acquired workforce and the ability to design and generate revenue from future technology and customers.

The goodwill and identifiable intangible assets are not deductible for tax purposes.

The fair value of the inventory acquired was estimated using the expected selling price of the inventory, then deducting direct selling expenses and a reasonable allocation of profit to a likely buyer.

The difference between the fair value of the inventories and the amount recorded by SCUF immediately before the acquisition date is $1.5 million, which is recognized in cost of revenue in the condensed combined consolidated statements of operations upon the sale of the acquired inventory.

The following table summarizes the components of identifiable intangible assets acquired and their estimated useful lives as of the SCUF Acquisition Closing Date:

Average Useful

(In thousands)

Developed technology

Customer Relationships

Total identifiable intangible assets

Intangible assets acquired as a result of the SCUF Acquisition are being amortized over their estimated useful lives using the straight-line method of amortization, which reflect the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up.

Amortization of patent and developed technology are included in cost of revenue and product development expense, respectively.

Amortization of customer relationships and trade names are included in sales, general and administrative expense in the condensed combined consolidated statements of operations.

Origin Acquisition

On July 22, 2019 (the “Origin Closing Date”) , one of our subsidiaries acquired all the equity interests in Origin PC Corporation (“Origin” and such acquisition, the “Origin Acquisition”) .

Origin, based in Florida, U.S., specializes in delivering hand-built, personalized PCs.

We believe the integration of Origin’s expertise in personalized custom gaming systems and Corsair’s strength in performance PC hardware and the iCUE software ecosystems enhances and expands our product and service offerings to PC gamers.

Origin met the definition of a business, and therefore this acquisition is accounted for as a business combination.

Subsequent to the Origin Closing Date, we recorded measurement period adjustments which increased the purchase price by $0.2 million and reduced other liabilities and accrued expenses by $0.3 million and goodwill by $0.1 million, and accordingly, the Origin Acquisition total adjusted purchase consideration was $13.8 million.

The Origin Acquisition purchase consideration consisted of (i) $5.5 million cash consideration (including the payment of Origin’s transaction costs and debt on behalf of Origin), (ii) $2.0 million equity consideration provided by Corsair, which was immediately exchanged for approximately 0.5 million units of the Parent, which was equivalent to approximately 0.2 million shares of Corsair common stock immediately post-Reorganization and prior to the exchange agreements described in Note 1), (iii) $1.4 million deferred cash consideration payable 18 months after closing, not contingent on any future conditions, (iv) $4.6 million of additional cash earn-out based on the achievement of certain Origin standalone EBITDA targets for 2019 and 2020, and (v) $0.3 million estimated contingent cash consideration relating to the finalization of pre-acquisition sales tax liabilities owed to Origin’s sellers according to the terms of the Origin Unit Purchase Agreement.

The final allocation of the Origin Acquisition purchase consideration to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date is as follows:

(In thousands)

Assets acquired:

Cash, net of cash acquired

Accounts receivable

Prepaid and other assets

Identifiable intangible assets (customer relationship with estimated 6 years of useful life)

Property and equipment

Liabilities assumed:

Accounts payable

Other liabilities and accrued expenses

Other liabilities, noncurrent

Net identifiable assets acquired

Net assets acquired

The goodwill and identifiable intangible assets are deductible for tax purposes.

The estimated fair value of Origin’s contingent earn-out decreased from $4.6 million at the Origin Closing Date to $4.0 million at December 31, 2019, primarily resulting from Origin’s lower-than-expected EBITDA for the projected 2020 earn-out period.

The reduction in fair value of $0.6 million was recorded as a reduction to sales and general administrative expenses in the condensed combined consolidated statement of operations in the fourth quarter of 2019.

The earn-out liability of $2.4 million contingent upon Origin’s 2019 standalone EBITDA was fully paid in April 2020.

During the nine months ended September 30, 2020, there was no material change in the fair value of the remaining earn-out liability that is contingent upon Origin’s 2020 standalone EBITDA results.

Acquisition-related costs

We incurred acquisition-related costs of approximately $0.3 million and $1.1 million for the three months ended September 30, 2020 and 2019, respectively, and $0.8 million and $1.4 million for the nine months ended September 30, 2020 and 2019, respectively, and these costs are recorded in sales, general and administrative expenses in the condensed combined consolidated statement of operations.

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information combines the unaudited condensed combined consolidated results of operations as if the SCUF Acquisition had occurred as of January 1, 2019:

Three months Ended

September 30, 2019

Nine months Ended

September 30, 2019

(in thousands)

The unaudited pro forma adjustments primarily include amortization for intangible assets acquired, the purchase accounting effect on contract liabilities assumed and inventory acquired, acquisition-related costs and interest expense related to financing arrangements.

The unaudited pro forma condensed combined consolidated information is provided for informational purposes only and is not indicative of the results of operations that would have been achieved if the SCUF Acquisition and any borrowings undertaken to finance the SCUF Acquisition had taken place at the beginning of the periods presented.

Pro forma financial information for the Origin Acquisition and the 2020 immaterial acquisition have not been prepared because the effects of these acquisitions were not material to our condensed combined consolidated statements of operations individually or in aggregate for all periods presented.

In February 2021, we completed the immaterial acquisition of Visual by Impulse (“ VBI ”), a business that provides creative design services to streamers looking to professionalize the look of their broadcast.

Total cash consideration for VBI was approximately $ 1.7 million and it was accounted for using the acquisition method of accounting.

2020 Immaterial Acquisitions

For the year ended December 31, 2020, we completed two immaterial acquisitions, EpocCam and Gamer Sensei, for total cash consideration of $ 1.3 million, which were accounted for using the acquisition method of accounting.

Goodwill and Intangible Assets

2 unchanged sentences

Balance as of December 31, 2020

Addition from business acquisition

Measurement period adjustments

Addition from an immaterial business acquisition

Effect of foreign currency exchange rates

Balance as of September 30, 2020

Balance as of March 31, 2021

Intangible assets, net

The following table is a summary of intangible assets, net:

September 30, 2020

March 31, 2021

December 31, 2020

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Indefinite life trade name

Indefinite life

Total intangible assets

For the three months and nine months ended September 30, 2020, the gross amount for int angible assets increased $0.7 million as a result of an immaterial acquisition.

Refer to Note 5 for additional information on our business acquisitions.

The gross carrying amounts of intangible assets are removed when fully amortized.

The estimated future amortization expense of intangible assets as of September 30, 2020 is as follows:

In the year after an identified intangible asset becomes fully amortized, we remove the fully amortized balances from the gross asset and accumulated amortization amounts from the table above.

The estimated future amortization expense of intangible assets as of March 31, 2021 is as follows:

(in thousands)

2020 (remaining three months)

Remainder of 2021

Balance Sheet Components

Cash and Restricted Cash

September 30,

(In thousands)

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Accounts Receivable, net:

September 30,

(In thousands)

2 unchanged sentences

Accounts receivable, net

As of September 30, 2020, and December 31, 2019, two customers each represented 10% or more of our consolidated accounts receivable, net.

September 30,

As of March 31, 2021, and December 31, 2020, two customers each represented 10% or more of our consolidated accounts receivable, net.

(In thousands)

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Property and Equipment, Net

September 30,

(In thousands)

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Other Liabilities and Accrued Expenses

September 30,

(In thousands)

3 unchanged sentences

Income tax payable

Sales and use tax and value-added tax payables

Contract liabilities

Operating lease liabilities, current

Other liabilities and accrued expenses

Contract Balances

Contract assets represent amounts that have been recognized as revenue but for which we did not have the unconditional right to invoice the customer yet.

There were no unbilled accounts receivable recorded within our accounts receivable, net on the condensed combined consolidated balance sheets as of September 30, 2020 and December 31, 2019.

Contract liabilities consist of deferred revenue and unearned revenue.

Deferred revenue consists primarily of amounts that have been shipped and invoiced, but the control of the inventory has not been passed to the customer yet.

The current portion of deferred revenue balances are recognized over the next 12 months.

As of September 30, 2020, the current and long-term portion of our deferred revenue was $1.1 million and $0.4 million, respectively.

As of December 31, 2019, the current and long-term portion of our deferred revenue was $3.3 million and $0.4 million, respectively.

Unearned revenue consists of payments received from customers in advance of product shipment for our webstore orders.

These orders are generally shipped within two weeks from order date.

The unearned revenue balance as of September 30, 2020 and December 31, 2019 was $4.1 million and $1.3 million, respectively.

Unearned revenue and the current portion of deferred revenue are included in other liabilities and accrued expenses, and the long-term portion of deferred revenue is included in other liabilities on the condensed combined consolidated balance sheets.

Nonmonetary Transactions

The sales and purchases of inventory with our manufacturers are accounted for as nonmonetary transactions.

Upon sale of raw materials to the manufacturer, for the inventories on-hand with the manufacturer where there is an anticipated reciprocal purchase by us, we will record this nonmonetary transaction as prepaid inventories and accrued liabilities.

When we transact the reciprocal purchase of inventory from the manufacturer, we will record a payable to the manufacturer at the purchase price, which replaces the initial nonmonetary transaction and inventory will be reflected at carrying value, which includes the costs for the raw materials and the incremental costs charged by the manufacturer for additional work performed on the inventory.

As of March 31, 2021 and December 31, 2020, we recognized $ 10.8 million and $ 5.9 million, respectively, prepaid inventory and accrued liabilities in the condensed combined consolidated balance sheet for such nonmonetary transactions with our manufacturers.

Because the transactions are nonmonetary, they have not been included in the condensed combined consolidated statements of cash flows pursuant to ASC 230, Statement of Cash Flows .

First Lien Credit and Guaranty Agreement

On August 28, 2017, we entered into a syndicated First Lien Credit and Guaranty Agreement ( “First Lien” ) with various financial institutions.

In August 2017, we entered into a syndicated First Lien Credit and Guaranty Agreement ( “First Lien” ) with various financial institutions.

The First Lien originally provided a $ 235 million term loan ( “First Lien Term Loan” ) for a business acquisition and to repay existing indebtedness of the acquired company and a $ 50 million revolving line-of-credit ( “Revolver” ).

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The First Lien Term Loan initially carried interest at a rate equal to, at our election, either the (a) greatest of (i) the prime rate, (ii) sum of the Federal Funds Effective Rate plus 0.5 %, (iii) one month LIBOR plus 1.0 % and (iv) 2 %, plus a margin of 3.5 %, or (b) the greater of (i) LIBOR and (ii) 1.0 %, plus a margin of 4.5 %.

The Revolver initially bore interest at a rate equal to, at our election, either the (a) greatest of (i) the prime rate, (ii) sum of the Federal Funds Effective Rate plu s 0.5%, (iii) one month LIBOR plus 1.0% and (iv) 2%, plus 3.5%, or (b) the greater of (i) LIBOR and (ii) 1.0%, plus a margin of 4.5%.

The Revolver initially bore interest at a rate equal to, at our election, either the (a) greatest of (i) the prime rate, (ii) sum of the Federal Funds Effective Rate plus 0.5 %, (iii) one month LIBOR plus 1.0 % and (iv) 2 %, plus 3.5 %, or (b) the greater of (i) LIBOR and (ii) 1.0 %, plus a margin of 4.5 %.

As a result of the First Lien amendment in October 2018, the First Lien term loan and Revolver margin were both changed to range from 2.75 % to 3.25 % for base rate loans and to range from 3.75 % to 4.25 % for Eurodollar loans, based on our net leverage ratio.

Additionally, new contingent repayment provisions were added in the First Lien amendment in October 2018.

Five business days after the initial public offering ( “IPO” ) of our stock, we were required to prepay all amounts (principal and interest) outstanding under the Second Lien term loan.

Concurrently, we also were required to prepay the First Lien Term Loan in an amount equal to the IPO proceeds, less the amount used to repay the Second Lien Term Loan, multiplied by 50%.

Accordingly, in September 2020, with the IPO proceeds, we repaid the mandatory minimum amount of $55.8 million and made an additional $30.8 million voluntary repayment.

According to the repayment schedule, the Consolidated Excess Cash Flow (as defined in the First Lien) and the IPO repayment provisions as set forth in the First Lien, we have made required repayments of the First Lien Term Loan of $ 59.6 million, in aggregate, in 2020, consisting of $ 1.2 million in March 2020, $ 2.6 million in April 2020 and $ 55.8 million in September 2020, with our IPO proceeds.

There is no further repayment required under the First Lien Term Loan until it matures in full in August 2024 .

We may prepay the First Lien Term Loan and the Revolver at any time without premium or penalty other than customary LIBOR breakage.

According to the Consolidated Excess Cash Flow clause as defined in the First Lien, in April 2020, we prepaid $2.6 million of the First Lien Term Loan.

The amendments to the First Lien were accounted for as loan modifications.

With the excess cash on hand, we have made voluntary prepayments in aggregate of $ 80.8 million in 2020, consisting of $ 30.8 million in September 2020, with our IPO proceeds, $ 25.0 million in November 2020 and $ 25.0 million in December 2020.

We further prepaid $ 28.0 million in March 2021.

The following table summarizes the carrying value of the First Lien Term Loan:

September 30,

(In thousands)

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Carrying amount

The fair value of the First Lien Term Loan was approximately $ 298.2 million and $ 326.5 million as of March 31, 2021 and December 31, 2020, respectively.

The fair values were determined based on the quoted bid price of the First Lien Term Loan in a syndicated loan market on the reporting date.

The First Lien Term Loan is classified as Level 1 of the fair value hierarchy.

Our obligation under the First Lien is secured by substantially all of our personal property assets and those of our United States-organized subsidiaries, including intellectual property.

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These restrictive covenants include operating covenants restricting, among other things, our ability to incur additional indebtedness, effect certain acquisitions or make other fundamental changes.

As of September 30, 2020, we were in compliance with all covenants.

As of March 31, 2021, we were in compliance with all covenants.

In addition, the First Lien contains events of default that include, among others, non-payment of principal, interest or fees, breach of covenants, inaccuracy of representations and warranties, cross defaults to certain other indebtedness, bankruptcy and insolvency events, material judgments and events constituting a change of control.

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Second Lien Credit and Guaranty Agreement

On August 28, 2017, we also entered into a syndicated Second Lien Credit and Guaranty Agreement ( “Second Lien” ) with various financial institutions.

In August 2017, we also entered into a syndicated Second Lien Credit and Guaranty Agreement ( “Second Lien” ) with various financial institutions.

The Second Lien initially provided a $ 65 million term loan ( “Second Lien Term Loan” ), with a maturity date of August 28, 2025 , for a business acquisition and for general corporate operations purposes.

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We had the ability to prepay the Second Lien Term Loan any time after the first and second anniversary without premium or penalty.

In the second and third quarter of 2020, with excess cash on hand, we repaid an aggregate of $50 million of the outstanding principal balance of the Second Lien Term Loan and following these repayments, the Second Lien Term Loan was fully repaid and all obligations and covenants thereunder were terminated.

The following table summarizes the carrying value of the Second Lien Te rm Loan:

September 30,

(In thousands)

Principal amount outstanding

Debt discount, net of amortization

Debt issuance costs, net of amortization

Carrying amount

In 2020, with excess cash on hand, we repaid an aggregate of $ 50 million of the Second Lien Term Loan, consisting of $ 10.0

million in May 2020, $ 15.0 million in August 2020 and $ 25.0 million in September 2020.

F ollowing t h ese repayment s , the Second Lien Term Loan was fully repaid and all obligations and covenants thereunder were terminated.

The following table summarizes the interest expense recognized for the First Lien and Second Lien:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

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Total interest expense recognized

The estimated future principal payments under our total long-term debt as of September 30, 2020 are as follows:

The annual weighted average effective interest rate used for amortizing the debt discount and debt issuance costs for the First Lien and Second Lien, in aggregate, were approximately 6.45 % and 6.92 % for the three months ended March 31, 2021 and 2020, respectively.

The estimated future principal payments under our total long-term debt as of March 31, 2021 are as follows:

(In thousands)

2020 (remaining three months)

Remainder of 2021

Discount and debt issuance costs

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Three Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

Beginning of the period

Balance assumed from business combinations

Warranty provision related to products shipped

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Unconditional Purchase Obligations

Our total non-cancelable purchase commitments outstanding was $103.1 million and $44.1 million as of September 30, 2020 and December 31, 2019, respectively.

Our long-term non-cancelable purchase commitments consist primarily of multi-year contractual arrangements relating to subscriptions for cloud computing hosting arrangements for our enterprise resource planning (ERP) system and the related support services as well as marketing sponsorship.

Long-term non-cancelable purchase commitment as of March 31, 2021 were as follows :

(in thousands)

Remainder of 2021

Our total non-cancelable purchase commitments outstanding as of December 31, 2020 were $ 6.8 million.

Letters of Credit

The letters of credit outstanding, in aggregate, was $2.0 million and $1.5 million as of September 30, 2020 and December 31, 2019, respectively.

The total letters of credit outstanding, in aggregate, was $ 2.0 million and $ 2.0 million as of March 31, 2021 and December 31, 2020, respectively.

No amounts have been drawn upon the letters of credit for all periods presented.

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We currently have directors’ and officers’ insurance.

Significant Operating Lease Arrangement Executed After March 31, 2021

On April 27, 2021, we entered into an operating lease agreement for our new Milpitas headquarters in California, U.S.

The lease term of this new agreement is 10.5 years with the accounting lease commencement date expected to be in May 2021 and the total undiscounted fixed lease payment for this agreement is approximately $ 45.6 million.

The lease agreement for our existing Fremont headquarters will expire in March 2022 .

Stockholders’ Equity

On December 19, 2019, the Parent issued 14,092,098 units, which following the Reorganization and prior to the exchange agreements described in Note 1, represents 7,046,049 equivalent shares of our common stock, as a result of a capital call, for a total capital contribution of $53.5 million to fund the SCUF Acquisition.

For the year ended 2019, the Parent issued an aggregate of 2,644,151 units, which following the Reorganization and prior to the exchange agreements described in Note 1, represents 1,322,075 equivalent shares of our common stock, as part of the consideration for acquisitions.

The units had an estimated fair value of $10.0 million, in aggregate, at the time of issuance.

Refer to Note 5 for additional information regarding our acquisitions.

On September 15, 2020, we completed a Reorganization through a series of steps as discussed in Note 1.

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On September 25, 2020, in connection with the closing of the IPO, we filed an Amended and Restated Certificate of Incorporation which increased the authorized shares of common stock for issuance to 300,000,000 and authorized 5,000,000 shares of preferred stock, with a par value of $ 0.0001 per share, for issuance.

There were no shares of preferred stock outstanding as of September 30, 2020.

There were no shares of preferred stock outstanding as of March 31, 2021.

Equity Incentive Plans and Stock-Based Compensation

Equity Incentive Plans

I n 2017, the Parent adopted the 2017 Equity Incentive Program ( the “2017 Plan” ).

The 2017 Plan was administered by the General Partner, EagleTree-Carbide (GP), LLC, who determines the types of awards to be granted, the number of units subject to the awards, the exercise price and the vesting requirements.

Only our employees and directors participated in this program.

In connection with the Reorganization discussed in Note 1, we assumed the 2017 Plan and all the outstanding options to acquire units of the Parent under the 2017 Plan were converted into options to purchase our common stock on a pro rata basis with an adjusted exercise price to reflect the assumption.

No other modifications were made to the options and no further options will be granted under the 2017 Plan following the Reorganization.

In September 2020, we adopted the 2020 Incentive Award Plan ( the “2020 Plan” ), which became effective on September 22, 2020, the day prior to the first public trading date of our common stock.

The 2020 Plan is the successor and continuation to the 2017 Plan.

The 2020 Plan provides for the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock unit ( “RSU” ) awards, performance awards and other forms of awards.

Incentive stock options may be granted only to employees.

All other awards may be granted to eligible employees, non-employee directors and consultants, at the discretion of our board of directors ( the “Board” ).

Under the 2020 Plan, 5,125,000 shares of our common stock are initially reserved for issuance.

The 2020 Plan reserve also includes any shares under the 2017 Plan and the 2020 Plan that may become available for issuance if the award terminates without the

delivery of shares or if shares are tendered to satisfy the exercise price or tax withholding obligation wit h respect of the award.

The 2020 Plan reserve increases annually on January 1 of each calendar year, starting on January 1, 2021 through January 1, 2030, by an amount equal to the lesser of (a) 4% of the shares outstanding on the last day of the immediatel y preceding fiscal year or (b) a smaller number of shares as determined by the Board;

provided, however, no more than 75,000,000 shares of our common stock may be issued upon the exercise of incentive stock options.

All stock options under the 2017 Plan and the 2020 Plan are issued at exercise prices not less than the fair market value on the date of grant.

RSUs have no exercise price.

Both stock options and RSUs vest over a period of time as determined by the Board, generally four to five years, and expire ten years from date of grant.

As of September 30, 2020, 4,941,580 shares were available for grant under the 2020 Plan.

Employee Stock Purchase Plan

In September 2020, we adopted the 2020 Employee Stock Purchase Plan ( the “ESPP” ), which became effective September 22, 2020, the day prior to the first public trading date of our common stock.

The ESPP is intended to qualify under Section 423 of the U.S.

Internal Revenue Service Code.

The ESPP initially reserved 1,025,000 shares of our common stock for issuance.

The ESPP reserve increases annually on January 1 of each calendar year, starting on January 1, 2021 through January 1, 2030, by an amount equal to the lesser of (a) 1% of the shares outstanding on the last day of the immediately preceding fiscal year or (b) a smaller number of shares as determined by the Board;

provided, however, no more than 20,000,000 shares of our common stock may be issued under the ESPP.

The ESPP is designed to allow eligible employees to purchase shares of our common stock, at semi-annual intervals, with their accumulated payroll deductions.

Under the ESPP, participants are offered the option to purchase shares of our common stock at a discount during a series of successive offering periods, the duration and timing of which will be determined by the ESPP administrator.

The offering period may not be longer than 27 months in length.

The option purchase price will be the lower of 85% of the closing trading price per share of our common stock on the first trading date of an offering period in which a participant is enrolled or 85% of the closing trading price per share on the purchase date, which will occur on the last trading day of each offering period.

Employees may participate through payroll deductions of 1% to 15% of their earnings.

No participant may purchase more than 30,000 shares in each offering period and may not subscribe for more than $25,000 in fair market value of shares of our common stock (determined at the time the option is granted) during any calendar year.

The first offering period will begin on January 1, 2021.

Stock Options Activities

The following table summarizes the stock option activities and related information for the nine months ended September 30, 2020:

Stock Options

Price Per Share

Intrinsic Value

(In thousands)

Balance as of December 31, 2019

Forfeited/cancelled

Balance as of September 30, 2020

Vested and exercisable as of September 30, 2020

The weighted average grant-date fair value of the stock options granted for the nine months ended September 30, 2020 was $8.59 per share.

As of September 30, 2020, the unrecognized stock-based compensation costs related to outstanding unvested stock options was $15.4 million, which is expected to be recognized over a weighted average period of 3.3 years.

RSUs Activities

The following table summarizes the RSUs activities and related information for the nine months ended September 30, 2020:

Unvested RSUs

Grant Date Fair

Value Per Share

Balance as of December 31, 2019

Balance as of September 30, 2020

As of September 30, 2020, the unrecognized stock-based compensation costs related to outstanding unvested RSUs was $0.1 million, which is expected to be recognized over a weighted average period of 1.0 year.

Stock-based Compensation

As of March 31, 2021, we have two active equity incentive plans:

the 2020 Equity Incentive Plan and the Employee Stock Purchase Plan (“ ESPP ”).

The following table summarizes stock-based compensation expense by line item in the accompanying condensed combined consolidated statements of operations:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

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Total stock-based compensation expense

Valuation Assumptions

We estimate the fair value of the stock options on the date of grant using the Black-Scholes-Merton pricing model, with the following valuation assumptions:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Weighted average grant date fair value of

common stock (per share)

Expected term (years)

Expected volatility

Dividend yield

Range of risk-free interest rate

Net Income (Loss) Per Share

Following the Reorganization, all share and per share information in this section has been revised as Corsair common share equivalents.

The following table summarizes the calculation of basic and diluted net income (loss) per share:

Income tax benefit

Total stock-based compensation expense, net of income tax benefit

As of March 31, 2021, we had $ 30.3 million of total unrecognized stock-based compensation relating to options and restricted stock units which is expected to be amortized over a weighted-average period of 3.0 years.

As of March 31, 2021, we had $ 0.5 million of total unrecognized stock-based compensation relating to ESPP which is expected to be amortized over a weighted-average period of 0.5 years.

The total intrinsic value of options exercised for the three months ended March 31, 2021 was $ 4.4 million .

There were no stock options exercises for the three months ended March 31, 2020.

Net Income Per Share

The following table summarizes the calculation of basic and diluted net income per share:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands, except share and per share amounts)

Net income (loss), basic and diluted

Weighted-average shares used to compute net income (loss) per

(in thousands, except per share amounts)

Net income, basic and diluted

Weighted-average shares used to compute net income per share, basic

Effect of dilutive securities (1)

Weighted-average shares used to compute net income (loss) per

share, diluted

Net income (loss) per share:

As a result of our net loss, potentially dilutive ordinary share equivalents of approximately 1.8 million options were excluded from the calculation of diluted net loss per share for the nine months ended September 30, 2019.

Share equivalents attributable to outstanding stock options and RSUs totaling approximately 22 thousand and 1.2 million for the three months ended September 30, 2020 and 2019, respectively, and 2.1 million and 1.7 million for the nine months ended September 30, 2020 and 2019, respectively, were excluded from the calculation of diluted net income per share because the combined exercise price and average unamortized grant date fair value upon exercise of the stock options or vesting of RSUs were greater than the average market price of our shares during the periods presented herein, and therefore their inclusion would have been anti-dilutive.

Weighted-average shares used to compute net income per share, diluted

Net income per share:

Anti-dilutive potential common shares (1)

Potential common share equivalents were not included in the calculation of diluted net income per share as the effect would have been anti-dilutive

The table below presents our income (loss) before income taxes, income tax (expense) benefit and effective income tax rates for all periods presented:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

Income (loss) before income taxes

Income tax (expense) benefit

Effective income tax rate

Income before income taxes

Income tax expense

Effective tax rate

We are subject to income taxes in the United States and foreign jurisdictions in which we do business.

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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, and changes in management’s assessment of matters such as the ability to realize deferred tax assets, and changes in tax laws.

The Coronavirus Aid, Relief, and Economic Security Act ( “CARES Act” ), enacted on March 27, 2020, provides tax relief to individuals and businesses in light of the impacts of COVID-19.

Changes in tax laws or rates are accounted for in the period of enactment and as a result, additional income tax benefits of $0.6 million were recorded during the nine months ended September 30, 2020 resulting from the enactment of the CARES Act.

Our effective tax rates were tax expense of 8.1% and tax benefit of 5.2% for the three months ended September 30, 2020 and 2019, respectively, and tax expense of 14.4% and tax benefit of 24.4% for the nine months ended September 30, 2020 and 2019, respectively.

The change in the effe ctive income tax rate for the three months ended September 30, 2020, compared to the same period last year was primarily due to the mix of income and losses in the various tax jurisdictions in which we operate, as well as the recognition of a $1.5 million tax benefit in the three months ended September 30, 2019 versus a $4.3 million tax benefit recognized in the three months September 30, 2020, resulting from the change in management’s assessment of the realizability of certain deferred tax assets as a resu lt of the Reorganization.

The change in the effective tax rate for the nine months ended September 30, 2020, compared to the same period last year was primarily due to the recognition of a $4.3 million tax benefit in the nine months ended September 30, 202 0 resulting from the change in management’s assessment of the realizability of certain deferred tax assets as a result of the Reorganization, and a $0.6 million one-time benefit from the change in tax law resulting from the enactment of the CARES Act in th e first quarter 2020.

Unrecognized tax benefits were $0.6 million and $0.7 million as of September 30, 2020 and December 31, 2019, respectively, and i f recognized, would favorably affect the effective income tax rate in future periods .

Related-Party Transactions

A company affiliated with a major shareholder, EagleTree-Carbide (GP), LLC, provided management and consulting services to us.

We incurred $21 thousand and $33 thousand for the three months ended September 30, 2020 and 2019, respectively, and $0.1 million for each of the nine months ended September 30, 2020 and 2019, which primarily covered travel and out-of-pocket expenses related to such services.

The unpaid services were $21 thousand and $0.1 million as of September 30, 2020 and December 31, 2019, respectively.

This management and consulting service agreement was terminated in September 2020.

One of our directors, through one of his companies, entered into a service agreement to serve as our business management consultant.

We incurred $30 thousand and $8 thousand of consulting fees under the service agreement for the three months ended September 30, 2020 and 2019, respectively, and $92 thousand and $55 thousand for the nine months ended September 30, 2020 and 2019, respectively.

The unpaid services were $44 thousand and $30 thousand as of September 30, 2020 and December 31, 2019, respectively.

This service agreement was terminated in September 2020.

As discussed in Note 8, we had a Second Lien Term Loan outstanding as of December 31, 2019.

The total net carrying value of the Second Lien Term Loan balance held by all related parties, an affiliate of the Parent and one of our directors, was $5.8 million as of December 31, 2019.

As of September 30, 2020, the outstanding balance of the Second Lien Term Loan was fully repaid and as a result, there was no debt held by related parties as of September 30, 2020.

Our effective tax rates were tax expense of 22.0 % and 68.8 % for the three months ended March 31, 2021 and 2020, respectively.

The decrease in the effective income tax rate from the three months ended March 31, 2020 was primarily due to U.S.

tax losses and credits in that period being subject to a valuation allowance, whereas only an insignificant valuation allowance was necessary for the three months ended March 31, 2021.

In the three months ended March 31, 2020 we recorded a $ 0.6 million one-time tax benefit from the change in tax law resulting from the enactment of the CARES Act in the first quarter 2020.

Unrecognized tax benefits were $ 1.3 million and $ 1.2 million as of March 31, 2021 and December 31, 2020, respectively, and i f recognized, would favorably affect the effective income tax rate in future periods .

Segment and Geographic Information

We have two reportable segments:

Gamer and Creator Peripherals , which includes high-performance gaming keyboards, mice, headsets and controllers, as well as our gaming gear including capture cards, studio accessories, among others.

Gaming Components and Systems , which includes 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, among others.

Gamer and Creator Peripherals , which includes high-performance gaming keyboards, mice, headsets, controllers, and streaming gear, which includes capture cards, Stream Decks, USB microphones, studio accessories, and EpocCam software, as well as coaching and training services and content design services, among others.

Gaming Components and Systems , which includes high-performance power supply units, or PSUs, cooling solutions, computer cases, DRAM modules, as well as high-end prebuilt and custom-built gaming PCs, among others.

The segments are defined as those operations our chief operating decision maker ( “CODM” ) regularly reviews to analyze performance and allocate resources.

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Three Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

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Three Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

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Total net revenue

No other countries besides United States represented 10% or more of total net revenue for each of the periods presented.

Revenues from sales to customers in the United States represented 36.2 % and 32.9 % for the three months ended March 31, 2021 and, 2020, respectively.

No other countries besides the United States represented 10 % or more of total net revenue for each of the periods presented.

One customer represented at least 10% of total net revenue for each of the periods presented.

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The following table summarizes property and equipment, net by country:

September 30,

(In thousands)

2 unchanged sentences

Total property and equipment, net

Our lease portfolio consists primarily of real estate facilities under operating leases and we determine if an arrangement is or contains a lease at inception.

ROU assets and lease liabilities are recognized at commencement based on the present value of the lease consideration in the contracts over the lease term.

We apply the incremental borrowing rate in determining the present value of the lease consideration in the contracts, as most of our leases do not provide an implicit rate.

Our incremental borrowing rate is the rate of interest we would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.

Because we generally do not borrow on a collateralized basis, we apply an estimate of what the collateralized credit rating would be as an input to deriving an appropriate incremental borrowing rate.

Certain of our lease agreements include options to extend or renew the lease terms.

Such options are excluded from the ROU assets and lease liabilities, unless they are reasonably certain to be exercised.

Operating lease expense is recognized on a straight-line basis over the lease term.

Certain lease agreements contain variable lease payments, which primarily include variable costs for warehousing and distribution services related to our outsourced distribution hubs, and to a lesser extent, variable costs related to office common area maintenance charges.

The table below summarizes the components of lease expenses:

Three Months Ended

September 30,

Nine months ended

September 30,

(In thousands)

Operating lease expense

Variable lease expense

Total lease expense

During the three and nine months ended September 30, 2020, we made $2.6 million and $6.7 million, respectively, in payments for operating leases included within cash provided by operating activities in our condensed combined consolidated statement of cash flows.

As of September 30, 2020, the weighted-average remaining lease term was 3.6 years and the weighed-average discount rate was 4.0%.

Amounts of future undiscounted cash flows related to operating lease payments over the lease term included in the measurement of lease liabilities as of September 30, 2020 are as follows:

(In thousands)

2020 (remaining three months)

Total future lease payments

Imputed interest

Present value of operating lease liabilities

Current portion of operating lease liabilities (1)

Long-term operating lease liabilities (1)

The current portion and long-term portion of operating lease liabilities are included in “other liabilities and accrued expenses” and “other liabilities, noncurrent”, respectively, on our condensed combined consolidated balance sheets.

Future minimum lease payments under non-cancelable operating leases as of December 31, 2019, as defined under the previous lease accounting guidance of ASC Topic 840, were as follows:

(In thousands)

No other countries represented 10 % or more of total combined consolidated property and equipment, net as of March 31, 2021 and 2020.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements