What changed in this filing

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Item 1. Financial Statements

2021-11-02 compared with 2021-08-03 · 173 added, 124 removed, 408 unchanged (42% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Cost of revenue

14 unchanged sentences

Corsair Gaming, Inc.

Condensed Combined Consolidated Statements of Comprehensive Income

Condensed Combined Consolidated Statements of Comprehensive Income (Loss)

(Unaudited, in thousands)

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Other comprehensive gain (loss):

1 unchanged sentence

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

loans, net of tax benefit (expense) of $ 24 and $( 128 ) for the three

months ended September 30, 2021 and 2020, respectively and $ 56

and $( 24 ) for the nine months ended September 30, 2021 and 2020,

Comprehensive income (loss)

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

2 unchanged sentences

(Unaudited, in thousands, except per share amounts)

September 30,

Current assets:

9 unchanged sentences

Accounts payable

Debt maturing within one year

Other liabilities and accrued expenses

Total current liabilities

Long-term debt

Deferred tax liabilities

5 unchanged sentences

5,000 shares authorized, nil and nil shares issued

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

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

Common stock, $ 0.0001 par value:

300,000 shares authorized, 94,186 and 91,935

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

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

Additional paid-in capital

Retained earnings (accumulated deficit)

Accumulated other comprehensive income

Accumulated other comprehensive income (loss)

Total Stockholders’ Equity

4 unchanged sentences

(Unaudited, in thousands)

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Comprehensive

Stockholders’

Balance as of March 31, 2021

Income (Loss)

Balance as of June 30, 2021

Issuance of common stock in

1 unchanged sentence

incentive plans

Taxes paid related to net share

settlement of equity awards

Shares withheld related to net share

Stock-based compensation

Other comprehensive income

Balance as of June 30, 2021

Three Months Ended June 30, 2020

Other comprehensive loss

Balance as of September 30, 2021

Three Months Ended September 30, 2020

Comprehensive

1 unchanged sentence

Income (Loss)

Balance as of March 31, 2020

Issuance of common stock to directors

Balance as of June 30, 2020

Issuance of common stock in

1 unchanged sentence

incentive plans

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 June 30, 2020

Six Months Ended June 30, 2021

Balance as of September 30, 2020

Nine Months Ended September 30, 2021

Comprehensive

Stockholders’

Income (Loss)

Balance as of December 31, 2020

2 unchanged sentences

incentive plans

Taxes paid related to net share

settlement of equity awards

Shares withheld related to net share

Stock-based compensation

Other comprehensive income

Balance as of June 30, 2021

Six Months Ended June 30, 2020

Other comprehensive loss

Balance as of September 30, 2021

Nine Months Ended September 30, 2020

Comprehensive

Stockholders’

Income (Loss)

Balance as of December 31, 2019

3 unchanged sentences

incentive plans

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 June 30, 2020

Balance as of September 30, 2020

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

2 unchanged sentences

(Unaudited, in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

Adjustments to reconcile net income to net cash provided by

operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Stock-based compensation

15 unchanged sentences

Cash flows from financing activities:

Proceeds from issuance of debt, net

Repayment of debt

Payment of debt issuance costs

Proceeds from initial public offering and private placement, net of

underwriting discounts and commissions

Payment of other offering costs

3 unchanged sentences

Effect of exchange rate changes on cash

Net increase in cash and restricted cash

Net (decrease) increase in cash and restricted cash

Cash and restricted cash at the beginning of the period

6 unchanged sentences

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

Initial deferred and contingent purchase consideration

Deferred purchase consideration related to business acquisitions

Measurement period adjustment relating to business acquisitions

1 unchanged sentence

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

8 unchanged sentences

Gaming components and systems .

Includes our high-performance power supply units, or PSUs, cooling solutions, computer cases, DRAM modules, as well as high-end prebuilt and custom-built gaming PCs, 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, and gaming monitor, among others.

Reorganization

33 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 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.

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 September 30, 2021 and our results of operations for the three and nine months ended September 30, 2021 and 2020.

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

Principles of Consolidation

12 unchanged sentences

Due to the COVID-19 pandemic, there has been and will continue to be uncertainty and disruption in the global economy and financial markets.

Since early 2020, we have experienced some business disruptions due to COVID-19 including the stoppage in our factories in early 2020, disruption in our supply chain and increased distribution costs, which led to increase in operating costs.

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, 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 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.

as the significantly elevated ocean freight costs we incurred in the third quarter of 2021 as compared to the same quarter from the prior year and the most recent trailing quarter.

As a result of the COVID-19 pandemic, we are continu ing to experience logistics challenges globally.

Th ese negative financial impact s ha ve 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 , which we believe have limited people’s access to alternative forms of entertainment and social interaction, and thus have increased the demand for ho m e entertainment and connecting with others through content creation .

In contrast, as the COVID-19 pandemic subsides, it has, and could continue to result in shelter-in-place and other similar restrictions being eased.

S uch easing of restrictions likely has, and will continue to result in consumers returning to other alternative forms of entertainment and interaction.

This in turn has, and could continue to, result in a decline in demand for our products.

The full extent of the impact of the COVID-19 pandemic on our business, results of operations , cash flows and financial position 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.

12 unchanged sentences

Our term loan and revolving line of credit have interest payments that are correlated to a reference rate, and we are currently evaluating the impact of adopting this guidance and the potential effects it could have on our condensed combined consolidated financial statements.

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805), which requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers.

Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree.

Historically, such amounts were recognized by the acquirer at fair value in acquisition accounting.

The new guidance is effective for us beginning in year 2023, with early adoption permitted.

We are currently evaluating the impact of adopting this guidance and the potential effects it could have on our condensed combined consolidated financial statements.

Fair Value Measurement

7 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:

June 30, 2021

September 30, 2021

(In thousands)

14 unchanged sentences

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 $ 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.

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, and these estimates represent a level 3 fair value measurement.

The $ 1.3 million liability as of December 31, 2020 consisted 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.

In September 2021, we filed the tax return for the 2020 tax year, and as a result, the $ 1.3 million liability as of September 30, 2021 was updated to consist of.$ 0.3 million based on a contractual amount and the remaining $ 1.0 million is subject to update upon filing our tax return for tax year 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 first quarter of 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 $ 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.

The notional principal amount of outstanding foreign exchange forward contracts was $ 38.5 million and $ 41.6 million as of September 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 $ 0.4 million and $( 1.1 ) million for the three months ended September 30 , 2021 and 2020, respectively, and was $ 0.5 million and $( 1.2 ) million for the nine months ended September 30, 2021 and 2020, respectively.

Business Combinations

9 unchanged sentences

Addition from an immaterial business acquisition

Measurement period adjustments

Effect of foreign currency exchange rates

Balance as of June 30, 2021

Balance as of September 30, 2021

Intangible assets, net

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

June 30, 2021

September 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 June 30, 2021 is as follows:

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

(In thousands)

2 unchanged sentences

Cash and Restricted Cash

September 30,

(In thousands)

3 unchanged sentences

Accounts Receivable, Net

September 30,

(In thousands)

2 unchanged sentences

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.

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

September 30,

(In thousands)

3 unchanged sentences

Property and Equipment, Net

September 30,

(In thousands)

6 unchanged sentences

Property and equipment, net

September 30,

(In thousands)

2 unchanged sentences

Other Liabilities and Accrued Expenses

September 30,

(In thousands)

Accrued reserves for customer incentive programs

Income tax payable

Accrued reserves for sales return

Accrued payroll and related expense

Income tax payable

Accrued freight expenses

Contract liabilities

Operating lease liabilities

Contract liabilities

Other liabilities and accrued expenses

Other Liabilities, Noncurrent

September 30,

(In thousands)

3 unchanged sentences

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.

The balances of this lease as of September 30, 2021 consisted of $ 6.7 million of lease incentive receivables that were recorded under prepaid and other assets, $ 24.6 million of right-of-use assets that were recorded under other assets and $ 32.2 million of lease liabilities that were recorded under other liabilities noncurrent in our condensed combined consolidated balance sheet.

Nonmonetary Transactions

3 unchanged sentences

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.

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.

In connection with such nonmonetary transactions with our manufacturers , as of September 30 , 2021 , we recognized $ 2.9 million prepaid inventory and $ 3.2 million accrued liabilities and as of December 31, 2020, we recognized $ 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 .

First Lien Credit and Guaranty Agreement

Our debt consisted of the following:

September 30,

(In thousands)

Term Loan (variable rate) due September 2026

First Lien Term Loan (variable rate) extinguished in September 2021

Debt discount and issuance cost, net of amortization

debt maturing within one year

Long-term debt

First Lien Credit and Guaranty Agreement (Extinguished in September 2021)

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” ).

The First Lien and the Revolver matures on August 28, 2024 and August 28, 2022 , respectively.

The First Lien and the Revolver was to mature on August 28, 2024 and August 28, 2022 , respectively.

Subsequently, we entered into several amendments to the First Lien and the principal amount of the First Lien Term Loan was increased by $ 10 million in 2017 and increased by $ 115 million in each of 2018 and 2019, primarily to fund various business acquisitions and operation needs.

2 unchanged sentences

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.

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.

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 and $ 25.0 million in March and June 2021, respectively.

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

(In thousands)

Principal amount outstanding

Debt discount, net of amortization

Debt issuance costs, net of amortization

Carrying amount

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.

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.

The First Lien Term Loan includes customary restrictive covenants that impose operating and financial restrictions on Corsair, including restrictions on our ability to take actions that could be in our best interests.

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 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.

Upon the occurrence and during the continuance of an event of default, interest on the obligations may accrue at an increased rate in the case of a non-payment or bankruptcy and insolvency and the lenders may accelerate our obligations under the First Lien Term Loan, except that acceleration will be automatic in the case of bankruptcy and insolvency events of default.

Second Lien Credit and Guaranty Agreement

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 made required repayments of the First Lien Term Loan of $ 59.6 million, in aggregate, in 2020 using the net proceeds from our IPO and excess cash on hand.

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

In 2020, we began to prepay the First Lien Term loan using our excess cash on hand, resulting in $ 80.8 million in 2020 and $ 78.3 million in 2021 through September 2021.

The remainder of First Lien Term Loan of $ 248.5 million was fully prepaid with the proceeds from the Term Loan (defined below) on September 3, 2021, and as a result, all obligations and covenants thereunder were terminated.

In connection with the progressive prepayments of the First Lien Term Loan throughout 2020 and 2021, we have recorded losses on extinguishment of debt of $ 4.1 million and $ 1.6 million for the three months ended September 30, 2021 and 2020, respectively, and $ 4.9 million and $ 1.6 million for the nine months ended September 30, 2021 and 2020, respectively.

Second Lien Credit and Guaranty Agreement (Extinguished in September 2020)

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.

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.

The Second Lien Term Loan initially carried interest at a base rate equal to that of the First Lien loan, plus a margin of 7.25 % for base rate loans and 8.25 % for Eurodollar loans.

In October 2017, we entered into an amendment to the Second Lien and the principal amount of the Second Lien Term Loan was reduced to $ 50 million and the applicable interest rate margins for both the base rate loans and Eurodollar loans were increased by 0.25 %.

The amendment to the Second Lien was accounted for as a loan modification.

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.

Following these repayments, the Second Lien Term Loan was fully repaid and all obligations and covenants thereunder were terminated.

In 2020, with excess cash on hand, we prepaid the entire outstanding balance of $ 50 million on the Second Lien Term Loan without paying any premium or penalty, and as a result, all obligations and covenants thereunder were terminated.

In connection with the progressive prepayments of the Second Lien Term Loan throughout 2020, we have recorded losses on extinguishment of debt of $ 1.3 million and $ 1.6 million for the three and nine months ended September 30, 2020, respectively.

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

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

6 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 6.46 % 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:

The effective interest rate inclusive of the debt discount and debt issuance costs for the First Lien and Second Lien, in aggregate, was approximately 5.7 % and 6.0 % for the three months ended September 30, 2021 and 2020, respectively, and was approximately 5.4 % and 6.4 % for the nine months ended September 30, 2021 and 2020, respectively.

Credit Agreement

On September 3, 2021, we entered into a new Credit Agreement (“ Credit Agreement ”) which provides for a $ 100.0 million five-year revolving credit facility (“ Revolving Facility ”) and a $ 250.0 million five-year term loan facility (“ Term Loan ”), with each maturing in September 2026 .

The Credit Agreement also permits, subject to conditions stated therein, additional incremental facilities in a maximum aggregate principal amount not to exceed $ 250.0 million.

We may prepay the Term Loan and the Revolving Facility at any time without premium or penalty.

The credit facilities under the Credit Agreement replaced our senior credit facilities under the First Lien Credit and Guaranty Agreement.

The net proceeds from borrowings under the Credit Agreement of $ 248.5 million (net of $ 1.5 million of debt discount) were used to repay all amounts outstanding under the First Lien Term Loan on September 3, 2021.

The Term Loan and Revolving Facility under the Credit Agreement will each bear interest at the Company’s election, either (a) LIBOR plus a percentage spread (ranging from 1.25 % to 2.0 %) based on our total net leverage ratio, or (b) the base rate (described in the Credit Agreement as the greatest of (i) the prime rate, (ii) the federal funds rate plus 0.50 % and (iii) one-month LIBOR plus 1.0 %) plus a percentage spread (ranging from 0.25 % to 1.0 %) based on our net leverage ratio.

Our obligations under the Credit Agreement are guaranteed by substantially all of our U.S.

subsidiaries and secured by a security interest in substantially all assets of the Company and the guarantor subsidiaries, subject to certain exceptions detailed in the Credit Agreement and related ancillary documentation.

The Credit Agreement contains covenants with which we must comply during the term of the agreement, which we believe are ordinary and standard for agreements of this nature, including the maintenance of a maximum Consolidated Total Net Leverage Ratio of 3.0 to 1.0 and a minimum Consolidated Interest Coverage Ratio of 3.0 to 1.0 (as defined in our credit facilities) .

The Credit Agreement also includes events of default customary for facilities of this nature and upon the occurrence of such events of default, among other things, all outstanding amounts under the Credit Agreement may be accelerated and/or the lenders’ commitments terminated.

In addition, upon the occurrence of certain events of default, the interest on the Term loan and Revolving Facility can be increased by 2.0 %.

As of September 30, 2021, we were not in default under the Credit Agreement and our Consolidated Total Net Leverage Ratio and Consolidated Interest Coverage Ratio were 0.8 to 1.0 and 10.4 to 1.0 as of September 30, 2021, respectively.

As of September 30, 2021, we had $ 100.0 million available under the Revolving Facility.

As of September 30, 2021, the carrying value of our Term Loan was $ 250.0 million.

The estimated fair value of the Term Loan as of September 30, 2021, which we have classified as a Level 2 financial instrument, approximates its carrying value.

For the three and nine months ended September 30, 2021, total interest expense recognized for the Credit Agreement was $ 0.3 million including amortization of debt discount and debt issuance costs.

The effective interest rate inclusive of the debt discount and debt issuance costs was approximately 1.3 % for both the three and nine months ended September 30, 2021.

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

(In thousands)

Remainder of 2021

Discount and debt issuance costs

Total Debt, net of discount and debt issuance costs

Presented on the condensed combined consolidated balance sheet under:

Current portion of debt, net

Commitments and Contingencies

2 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(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 June 30, 2021 were as follows :

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

(In thousands)

2 unchanged sentences

Letters of Credit

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.

The total letters of credit outstanding, in aggregate, was $ 0.5 million and $ 2.0 million as of September 30, 2021 and December 31, 2020, respectively.

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

8 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 June 30, 2021.

There were no shares of preferred stock outstanding as of September 30, 2021 and December 31, 2020.

Equity Incentive Plans and Stock-Based Compensation

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

As of September 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

September 30,

Nine Months Ended

September 30,

(In thousands)

3 unchanged sentences

Stock-based compensation expense, net of amounts capitalized (1)

Capitalized stock-based compensation expense

Total stock-based compensation expense

Income tax benefits related to stock-based

Income tax benefits (expense) 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.

Total stock-based compensation expense capitalized in inventory was not material for each of the periods presented.

As of September 30, 2021, we had $ 37.1 million of total unrecognized stock-based compensation relating to outstanding unvested awards which is expected to be amortized over a weighted-average period of 2.9 years.

The total intrinsic value of options exercised was $ 8.8 million and $ 62.4 million for the three and nine months ended September 30 , 2021, respectively .

The total intrinsic value of stock options exercises was $ 0.4 million for both the three and nine months ended September 30, 2020.

Net Income Per Share

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands, except per share amounts)

7 unchanged sentences

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:

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

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(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 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 .

Our effective tax rates were 17.4 % and 8.1 % for the three months ended September 30, 2021 and 2020, respectively.

The effective tax rate was higher in the three months ended September 30, 2021, as compared to the same period last year primarily due to 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 result of the Reorganization.

The increase to the effective tax rate for such three-month period was partially offset by the favorable impacts on the effective tax rate for 2021 from higher excess tax benefits related to stock-based compensation recognized in the three months ended September 30, 2021, as well as the change in the mix of income and losses in the various tax jurisdictions in which we operate.

Our effective tax rates were 17.2 % and 14.4 % for the nine months ended September 30, 2021 and 2020, respectively.

The effective tax rate was higher in the nine months ended September 30, 2021, as compared to the same period last year primarily due to a $ 4.3 million tax benefit recognized in the nine months September 30, 2020, 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 tax benefit from the change in tax law resulting from the enactment of the CARES Act .

In the nine months ended September 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.

Th e increase to the effective tax rate for such nine-month period was partially offset by the favorable impacts on the effective tax rate for 2021 from higher excess tax benefits related to stock-based compensation recognized in the nine months ended September 30, 2021, as well as the change in the mix of income and losses in the various tax jurisdictions in which we operate.

Unrecognized tax benefits were $ 1.6 million and $ 1.2 million as of September 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

1 unchanged sentence

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.

4 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

10 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

1 unchanged sentence

Total net revenue

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.

Revenues from sales to customers in the United States represented 41.4 % and 39.6 % for the three months ended September 30, 2021 and, 2020, respectively, and represented 37.3 % and 37.6 % for the nine months ended September 30, 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.

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