What changed in this filing

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Item 1. Financial Statements

2021-08-03 compared with 2021-05-04 · 130 added, 77 removed, 402 unchanged (34% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Cost of revenue

6 unchanged sentences

Interest expense

Other expense, net

Other (expense) income, net

Total other expense, net

5 unchanged sentences

Corsair Gaming, Inc.

Condensed Combined Consolidated Statements of Comprehensive Income (Loss)

Condensed Combined Consolidated Statements of Comprehensive Income

(Unaudited, in thousands)

Three Months Ended

Six Months Ended

Other comprehensive gain (loss):

Foreign currency translation adjustments, net of zero tax

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)

Unrealized foreign exchange gain (loss) from long-term intercompany

loans, net of tax benefit (expense) of $( 12 ) and $ 43 for the three months

ended June 30, 2021 and 2020, respectively and $ 32 and $ 104 for the

six months ended June 30, 2021 and 2020, respectively

Comprehensive income

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

22 unchanged sentences

5,000 shares authorized, nil and nil shares issued

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

and outstanding as of June 30, 2021 and December 31, 2020, respectively

Common stock, $ 0.0001 par value:

300,000 shares authorized, 93,790 and 91,935

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

shares issued and outstanding as of June 30, 2021 and December 31, 2020,

Additional paid-in capital

7 unchanged sentences

(Unaudited, in thousands)

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Comprehensive

Stockholders’

Balance as of March 31, 2021

Issuance of common stock in

connection with employee equity

incentive plans

Taxes paid related to net share

settlement of equity awards

Stock-based compensation

Other comprehensive income

Balance as of June 30, 2021

Three Months Ended June 30, 2020

Comprehensive

Stockholders’

Income (Loss)

Balance as of March 31, 2020

Issuance of common stock to directors

Issuance of common stock in

connection with employee equity

incentive plans

Stock-based compensation

Other comprehensive income

Balance as of June 30, 2020

Six Months Ended June 30, 2021

Comprehensive

Stockholders’

Balance as of December 31, 2020

Issuance of common stock for stock option exercises

Issuance of common stock in

connection with employee equity

incentive plans

Taxes paid related to net share

settlement of equity awards

Stock-based compensation

Other comprehensive loss

Balance as of March 31, 2021

Three Months Ended March 31, 2020

Other comprehensive income

Balance as of June 30, 2021

Six Months Ended June 30, 2020

Comprehensive

Stockholders’

Income (Loss)

Balance as of December 31, 2019

Issuance of common stock to directors

Issuance of common stock in

connection with employee equity

incentive plans

Stock-based compensation

Other comprehensive loss

Balance as of March 31, 2020

Balance as of June 30, 2020

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

2 unchanged sentences

(Unaudited, in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

6 unchanged sentences

Deferred income taxes

Gain on currency forward contract

Loss on foreign exchange

Changes in operating assets and liabilities:

12 unchanged sentences

Payment of other offering costs

Proceeds from exercise of stock options

Proceeds from issuance of shares through employee equity incentive plans

Payment of taxes related to net share settlement of equity awards

Net cash used in financing activities

Effect of exchange rate changes on cash

Net decrease in cash and restricted cash

Net increase in cash and restricted cash

Cash and restricted cash at the beginning of the period

5 unchanged sentences

Equipment purchased and unpaid at period end

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

Initial deferred and contingent purchase consideration

1 unchanged sentence

Deferred offering costs included in accounts payable and accrued expenses

Debt issuance costs unpaid at period end

Stock-based compensation included in capitalized inventory overhead

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

44 unchanged sentences

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.

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 June 30, 2021 and our results of operations for the three and six months ended June 30, 2021 and 2020.

The results for the three and six months ended June 30, 2021 are not necessarily indicative of the results expected for the current fiscal year or any other future periods.

Principles of Consolidation

14 unchanged sentences

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.

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.

In contrast, if the COVID-19 pandemic subsides, 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.

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 prevalence and severity of any variants, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.

Even after the COVID-19 outbreak has subsided, we may continue to experience significant impacts to our business as a result of its global economic impact, including any economic downturn or recession that has occurred or may occur in the future.

21 unchanged sentences

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:

March 31, 2021

June 30, 2021

(In thousands)

16 unchanged sentences

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

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.

The $ 1.3 million liability as of June 30, 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 six months ended June 30, 2021.

Derivative Financial Instruments

5 unchanged sentences

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.

The notional principal amount of outstanding foreign exchange forward contracts was $ 48.3 million and $ 41.6 million as of June 30 , 2021 and December 31, 2020, respectively, none of which have been designated as hedging instruments during the periods presented.

Total fair value gains (losses) recognized in other (expense) income, net in relation to these derivative instruments was $( 0.6 ) million and $( 0.3 ) million for the three months ended June 30 , 2021 and 2020, respectively, and was $ 0.1 million and $( 0.1 ) million for the six months ended June 30, 2021 and 2020, respectively.

Business Combinations

10 unchanged sentences

Effect of foreign currency exchange rates

Balance as of March 31, 2021

Balance as of June 30, 2021

Intangible assets, net

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

March 31, 2021

June 30, 2021

December 31, 2020

8 unchanged sentences

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:

The estimated future amortization expense of intangible assets as of June 30, 2021 is as follows:

(In thousands)

11 unchanged sentences

Accounts receivable, net

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

As of June 30, 2021, and December 31, 2020, two customers each represented 10% or more of our consolidated accounts receivable, net.

(In thousands)

11 unchanged sentences

Property and equipment, net

(In thousands)

Right-of-use assets (1)

Deferred tax asset

Other Liabilities and Accrued Expenses

4 unchanged sentences

Income tax payable

Sales and use tax and value-added tax payables

Accrued freight expenses

Contract liabilities

Operating lease liabilities, current

Operating lease liabilities

Other liabilities and accrued expenses

Other Liabilities, Noncurrent

(In thousands)

Operating lease liabilities, noncurrent (1)

Other liabilities, noncurrent

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

with lease term over 10.5 years and an accounting lease commencement date of May 14, 2021.

The balances of this lease as of June 30, 2021 consisted of $ 3.4 million of lease incentive receivables that were recorded under prepaid and other assets, $ 25.1 million of right-of-use assets that were recorded under other assets and $ 28.6 million of lease liabilities that were recorded under other liabilities noncurrent in our condensed combined consolidated balance sheet.

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.

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.

In connection with such nonmonetary transactions with our manufacturers , as of June 30 , 2021 , we recognized $ 17.5 million prepaid inventory and $ 18.4 million accrued liabilities and as of December 31, 2020, we r ecognized $ 5.9 million prepaid inventory and accrued liabilities in the condensed combined consolidated balance sheet.

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 .

11 unchanged sentences

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.

We further prepaid $ 28.0 million and $ 25.0 million in March and June 2021, respectively.

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

4 unchanged sentences

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 value of the First Lien Term Loan was approximately $ 273.6 million and $ 326.5 million as of June 30, 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.

3 unchanged sentences

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

As of June 30 , 202 1 , 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.

7 unchanged sentences

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

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.

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.

Following these repayments, 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

Six Months Ended

(In thousands)

Contractual interest expense for First Lien and Second Lien

Contractual interest expense for First Lien and Second

Lien Term Loan

Contractual interest expense for Revolver

3 unchanged sentences

Total interest expense recognized

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:

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 6.46 % and 6.94 % for the three months ended June 30, 2021 and 2020, respectively, and were approximately 6.45 % and 6.93 % for the six months ended June 30, 2021 and 2020, respectively.

The estimated future principal payments under our total long-term debt as of June 30, 2021 are as follows:

(In thousands)

8 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

5 unchanged sentences

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 :

Long-term non-cancelable purchase commitment as of June 30, 2021 were as follows :

(In thousands)

2 unchanged sentences

Letters of Credit

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.

The total letters of credit outstanding, in aggregate, was $ 1.5 million and $ 2.0 million as of June 30, 2021 and December 31, 2020, respectively.

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

4 unchanged sentences

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

2 unchanged sentences

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 March 31, 2021.

There were no shares of preferred stock outstanding as of June 30, 2021.

Equity Incentive Plans and Stock-Based Compensation

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

As of June 30, 2021, we have two active equity incentive plans:

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

1 unchanged sentence

Three Months Ended

Six Months Ended

(In thousands)

2 unchanged sentences

Product development

Stock-based compensation expense, net of amounts capitalized

Capitalized stock-based compensation expense

Total stock-based compensation expense

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.

Income tax benefits related to stock-based

compensation expense

As of June 30, 2021, we had $ 41.7 million of total unrecognized stock-based compensation relating to outstanding unvested awards which is expected to be amortized over a weighted-average period of 3.0 years.

The total intrinsic value of options exercised for the three and six months ended June 30 , 2021 was $ 49.3 million and $ 53.7 million, respectively .

There were no stock options exercises for the three and six months ended June 30, 2020.

Net Income Per Share

1 unchanged sentence

Three Months Ended

Six Months Ended

(In thousands, except per share amounts)

Net income, basic and diluted

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

Weighted-average shares used to compute net income per

Effect of dilutive securities (1)

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

Weighted-average shares used to compute net income per

share, diluted

Net income per share:

3 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

5 unchanged sentences

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.

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 .

Our effective tax rates were 7.6 % and 15.8 % for the three months ended June 30, 2021 and 2020, respectively.

The change in effective tax rates was primarily due to an increase in excess tax benefits from stock-based compensation recognized in the three months ended June 30, 2021, as well as the change in the mix of income and losses in the various tax jurisdictions in which we operate.

In addition, the U.S.

tax losses and credits in the three months ended June 30, 2020 were subject to a valuation allowance, whereas only an insignificant valuation allowance was necessary for the three months ended June 30, 2021.

Our effective tax rates were 17.2 % and 22.5 % for the six months ended June 30, 2021 and 2020, respectively.

The change in effective tax rates was primarily due to an increase in excess tax benefits from stock-based compensation recognized in the six months ended June 30, 2021, as well as the change in the mix of income and losses in the various tax jurisdictions in which we operate, and also due to lower valuation allowance for our U.S.

tax losses and credits in the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

In addition, in the six months ended June 30, 2021, we recorded a $ 1.4 million one-time tax expense related to the remeasurement of our United Kingdom deferred tax liabilities as a result of the enactment of the increased corporate tax

rate in the United Kingdom .

In the six months ended June 30, 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 June 30, 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

8 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

Gaming and Creator Peripherals

Gamer and Creator Peripherals

Gaming Components and Systems

Total net revenue

Gaming and Creator Peripherals

Gamer and Creator Peripherals

Gaming Components and Systems

5 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

1 unchanged sentence

Total net revenue

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.

Revenues from sales to customers in the United States represented 35.1 % and 39.0 % for the three months ended June 30, 2021 and, 2020, respectively, and represented 35.7 % and 36.3 % for the six months ended June 30, 2021 and, 2020, respectively.

Revenue from sales to customers in the United Kingdom represented 10.0 % and 10.1 % for the three and six months ended June 30, 2021, respectively, and were below 10.0 % for the same periods last year.

No other countries besides the United States and the United Kingdom 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.

Long-lived assets are comprised primarily of property and equipment, net.

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

(In thousands)

United States

Other countries

Total property and equipment, net

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