Corsair Gaming, Inc. 10-K

Item 8. Financial Statements and Supplementary Data. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm 58 Consolidated Statements of Operations - Years ended December 31, 2021, 2020, and 2019 60 Consolidated Statements of Comprehensive Income (Loss) – Years ended December 31, 2021, 2020, and 2019 61 Consolidated Balance Sheets – As of December 31, 2021 and 2020 62 Consolidated Statements of Stockholders’ Equity - Years ended December 31, 2021, 2020, and 2019 63 Consolidated Statements of Cash Flows - Years ended December 31, 2021 and 2020, and 2019 64 Notes to Consolidated Financial Statements 65 57 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors Corsair Gaming, Inc.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of Corsair Gaming, Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 58 Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Transaction price in contracts with customers As discussed in Note 2 to the consolidated financial statements, the transaction price received by the Company from sales to distributors and retailers is net of variable consideration that may include product returns and customer incentives. Estimates of expected future product returns are recorded based on historical return rates, among other factors. Customer incentive programs are recorded based on historical experience and forecasted incentives, and include special pricing arrangements, promotions, rebates, volume-based incentives, and price protection credits for certain customers. The amounts recorded for accrued reserves for sales returns and accrued reserves for customer incentive programs were $37.2 million and $66.7 million, respectively, as of December 31, 2021. We identified the evaluation of the transaction price in contracts with customers as a critical audit matter. Subjective auditor judgment was required to evaluate changes in conditions and events affecting (1) the Company’s historical return rates, and (2) the length of time between when a sale occurs and a return is processed, which are used to determine accrued reserves for sales returns. In addition, subjective auditor judgment was required to evaluate the reliability of data used to determine certain accrued reserves for customer incentive programs. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s process to determine the transaction price, including controls related to estimating variable consideration related to product returns and customer incentives. We evaluated the historical return rates by assessing the historical relationship between sales and returns, considering the effect of external market conditions obtained from peer company data and market publications. We evaluated the length of time between when a sale occurs and a return is processed by comparing (1) the return date obtained from return claims from customers to (2) the estimated date the sale occurred obtained from supporting documentation. We evaluated the reliability of data used to determine certain accrued reserves for customer incentive programs by selecting a sample of incentives recorded during the year and (1) comparing the key inputs to correspondence with customers and customer agreements, and (2) recalculating the total incentive amount and comparing it to the incentive recorded or the claim from the customer if it was received by the Company before December 31, 2021. /s/ KPMG LLP We have served as the Company’s auditor since 2007. San Francisco, California March 1, 2022 59 Table of Contents Corsair Gaming, Inc. Consolidated Statements of Operations (In thousands, except per share amounts) Year Ended December 31, 2021 2020 2019 Net revenue $ 1,904,060 $ 1,702,367 $ 1,097,174 Cost of revenue 1,390,206 1,236,938 872,887 Gross profit 513,854 465,429 224,287 Operating expenses: Sales, general and administrative 315,672 257,004 163,033 Product development 60,288 50,064 37,547 Total operating expenses 375,960 307,068 200,580 Operating income 137,894 158,361 23,707 Other (expense) income: Interest expense ( 17,673 ) ( 35,137 ) ( 35,548 ) Other expense, net ( 5,661 ) ( 1,182 ) ( 1,558 ) Total other expense, net ( 23,334 ) ( 36,319 ) ( 37,106 ) Income (loss) before income taxes 114,560 122,042 ( 13,399 ) Income tax (expense) benefit ( 13,600 ) ( 18,825 ) 5,005 Net income (loss) $ 100,960 $ 103,217 $ ( 8,394 ) Net income (loss) per share Basic $ 1.08 $ 1.20 $ ( 0.11 ) Diluted $ 1.01 $ 1.14 $ ( 0.11 ) Weighted-average shares used to compute net income (loss) per share Basic 93,260 86,256 76,223 Diluted 100,004 90,577 76,223 The accompanying notes are an integral part of these consolidated financial statements. 60 Table of Contents Corsair Gaming, Inc. Consolidated Statements of Comprehensive Income (Loss) (In thousands) Year Ended December 31, 2021 2020 2019 \ Net income (loss) $ 100,960 $ 103,217 $ ( 8,394 ) Other comprehensive income (loss): Foreign currency translation adjustments, net of zero tax ( 1,482 ) 2,477 490 Unrealized foreign exchange gain (loss) from long-term intercompany loans, net of tax benefit (expense) of $ 76 , $( 150 ), and $ 55 for the years ended December 31, 2021, 2020, and 2019, respectively ( 385 ) 1,221 ( 278 ) Comprehensive income (loss) $ 99,093 $ 106,915 $ ( 8,182 ) The accompanying notes are an integral part of these consolidated financial statements. 61 Table of Contents Corsair Gaming, Inc. Consolidated Balance Sheets (In thousands, except per share amounts) December 31, 2021 2020 Assets Current assets: Cash $ 62,415 $ 129,543 Restricted cash 2,734 3,795 Accounts receivable, net 291,287 293,629 Inventories 298,315 226,007 Prepaid expenses and other current assets 51,024 37,997 Total current assets 705,775 690,971 Restricted cash, noncurrent 231 230 Property and equipment, net 16,819 16,475 Goodwill 317,054 312,760 Intangible assets, net 225,709 259,317 Other assets 71,808 34,362 TOTAL ASSETS $ 1,337,396 $ 1,314,115 Liabilities and Stockholders’ Equity Current liabilities: Debt maturing within one year $ 4,753 $ — Accounts payable 236,120 299,636 Other liabilities and accrued expenses 205,874 205,745 Total current liabilities 446,747 505,381 Long-term debt 242,898 321,393 Deferred tax liabilities 25,700 29,752 Other liabilities, noncurrent 53,871 20,199 TOTAL LIABILITIES 769,216 876,725 Commitments and Contingencies (Note 9) Stockholders’ Equity: Preferred stock, $ 0.0001 par value: 5,000 shares authorized, nil and nil shares issued and outstanding as of December 30, 2021 and 2020, respectively — — Common stock, $ 0.0001 par value: 300,000 shares authorized, 94,510 and 91,935 shares issued and outstanding as of December 31, 2021 and 2020, respectively 9 9 Additional paid-in capital 470,364 438,667 Retained earnings (accumulated deficit) 98,147 ( 2,813 ) Accumulated other comprehensive income (loss) ( 340 ) 1,527 Total Stockholders’ Equity 568,180 437,390 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,337,396 $ 1,314,115 The accompanying notes are an integral part of these consolidated financial statements. 62 Table of Contents Corsair Gaming, Inc. Consolidated Statements of Stockholders’ Equity (In thousands) Common Stock Additional Paid-in Retained Earnings (Accumulated Accumulated Other Comprehensive Total Stockholders’ Shares Amount Capital Deficit) Income (Loss) Equity Balance as of December 31, 2018 75,896 $ 8 $ 258,238 $ ( 93,161 ) $ ( 2,383 ) $ 162,702 Cumulative effect of adoption of new accounting standard — — — ( 3,686 ) — ( 3,686 ) Issuance of common stock in relation to acquisitions 1,322 — 10,000 — — 10,000 Issuance of common stock in connection with employee equity incentive plans 34 — 124 — — 124 Issuance of common stock for capital contribution from stockholders 7,046 — 53,500 — — 53,500 Repurchase of common stock ( 219 ) — ( 742 ) ( 789 ) — ( 1,531 ) Stock-based compensation — — 3,848 — — 3,848 Other comprehensive income — — — — 212 212 Net loss — — — ( 8,394 ) — ( 8,394 ) Balance as of December 31, 2019 84,079 8 324,968 ( 106,030 ) ( 2,171 ) 216,775 Issuance of common stock to directors 20 — — — — — Issuance of common stock in connection with employee equity incentive plans 336 — 1,337 — — 1,337 Issuance of common stock upon initial public offering, net of underwriting discounts and commissions and other offering costs 7,500 1 106,566 — — 106,567 Stock-based compensation — — 5,796 — — 5,796 Other comprehensive income — — — — 3,698 3,698 Net income — — — 103,217 — 103,217 Balance as of December 31, 2020 91,935 9 438,667 ( 2,813 ) 1,527 437,390 Issuance of common stock in connection with employee equity incentive plans 2,590 — 14,872 — — 14,872 Shares withheld related to net share settlement ( 15 ) — ( 417 ) — — ( 417 ) Stock-based compensation — — 17,242 — — 17,242 Other comprehensive loss — — — — ( 1,867 ) ( 1,867 ) Net income — — — 100,960 — 100,960 Balance as of December 31, 2021 94,510 $ 9 $ 470,364 $ 98,147 $ ( 340 ) $ 568,180 The accompanying notes are an integral part of these consolidated financial statements. 63 Table of Contents Corsair Gaming, Inc. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2021 2020 2019 Cash flows from operating activities: Net income (loss) $ 100,960 $ 103,217 $ ( 8,394 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Stock-based compensation 17,235 5,796 3,848 Depreciation 10,300 9,318 7,384 Amortization of intangible assets 34,794 33,916 30,123 Debt issuance costs amortization 1,458 2,550 2,989 Loss on debt extinguishment 4,868 4,114 — Deferred income taxes ( 11,962 ) ( 7,476 ) ( 11,535 ) Other 3,291 2,594 ( 347 ) Changes in operating assets and liabilities: Accounts receivable 444 ( 91,492 ) ( 48,033 ) Inventories ( 71,316 ) ( 80,086 ) 15,711 Prepaid expenses and other assets ( 13,177 ) ( 7,953 ) ( 1,619 ) Accounts payable ( 63,722 ) 116,522 16,203 Other liabilities and accrued expenses 7,019 77,933 30,773 Net cash provided by operating activities 20,192 168,953 37,103 Cash flows from investing activities: Acquisition of businesses, net of cash acquired ( 4,846 ) ( 1,291 ) ( 126,104 ) Payment of deferred and contingent consideration ( 4,721 ) — ( 10,300 ) Purchase of property and equipment ( 10,974 ) ( 8,989 ) ( 8,848 ) Purchase of intangible asset — — ( 175 ) Net cash used in investing activities ( 20,541 ) ( 10,280 ) ( 145,427 ) Cash flows from financing activities: Proceeds from issuance of debt, net 248,513 — 113,885 Repayment of debt ( 328,188 ) ( 190,394 ) ( 3,969 ) Payment of debt issuance costs ( 204 ) ( 194 ) ( 2,450 ) Borrowings from line of credit 63,500 — — Repayment of line of credit ( 63,500 ) — ( 27,000 ) Proceeds from initial public offering, net of $ 8,925 underwriting discounts and commissions — 118,575 — Payment of other offering costs — ( 8,455 ) ( 245 ) Proceeds from issuance of common stock to common stockholders — — 53,500 Repurchase of common stock — — ( 1,531 ) Proceeds from issuance of shares through employee equity incentive plans 14,872 1,337 124 Payment of taxes related to net share settlement of equity awards ( 397 ) — — Net cash provided by (used in) financing activities ( 65,404 ) ( 79,131 ) 132,314 Effect of exchange rate changes on cash ( 2,435 ) 2,079 37 Net increase (decrease) in cash and restricted cash ( 68,188 ) 81,621 24,027 Cash and restricted cash at the beginning of the year 133,568 51,947 27,920 Cash and restricted cash at the end of the year $ 65,380 $ 133,568 $ 51,947 Supplemental cash flow disclosures: Cash paid for interest $ 11,267 $ 27,957 $ 32,842 Cash paid for income taxes 41,243 13,505 571 Supplemental disclosure of non-cash investing and financing activities: Equipment purchased and unpaid at period end $ 2,122 $ 1,832 $ 927 Issuance of common stock relating to business acquisitions — — 10,000 Deferred purchase consideration related to business acquisitions 202 145 7,641 Measurement period adjustments relating to business acquisitions 50 1,531 — Deferred offering costs included in accounts payable and accrued expenses — — 2,255 The accompanying notes are an integral part of these consolidated financial statements. 64 Table of Contents Corsair Gaming, Inc. Notes to Consolidated Financial Statements 1. Description of Business and Basis of Presentation Description of Business Corsair Gaming, Inc., a Delaware corporation, together with its subsidiaries (collectively, “Corsair” the “Company”, “we”, “us”, or “our”) , is a global provider and innovator of high-performance gear for gamers, streamers and content creators, many of which build their own PCs using our components. Corsair is organized into two reportable segments: • Gamer and creator peripherals . Includes our high-performance gaming keyboards, mice, headsets, controllers, and our streaming gear, which includes capture cards, Stream Decks, USB microphones, our Facecam streaming camera, studio accessories and EpocCam software, as well as coaching and training services, among others. • Gaming components and systems . Includes our high-performance power supply units, or PSUs, cooling solutions, computer cases, DRAM modules, as well as high-end prebuilt and custom-built gaming PCs, among others. Initial Public Offering and Secondary Offering On September 25, 2020, we completed our initial public offering (the “IPO”) . In connection with the IPO, we sold 7,500,000 shares of common stock at $ 17.00 per share, resulting in proceeds of $ 118.6 million, net of the underwriting discounts and commissions and before offering costs. In connection with the IPO, certain selling stockholders sold 6,500,000 shares of common stock at $ 17.00 per share. Subsequent to the IPO, certain selling stockholders further sold 1,135,375 shares pursuant to the underwriters’ exercise of their option to purchase additional shares. 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. 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 consolidated balance sheets. After the IPO, $ 12.0 million of deferred offering costs were reclassified into stockholders’ equity as a reduction of the IPO proceeds in the consolidated balance sheet as of December 31, 2020. Basis of Presentation The accompanying consolidated financial statements include those of Corsair and its subsidiaries, after elimination of all intercompany balances and transactions. These consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). 2. Summary of Significant Accounting Policies Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include, but are not limited to, the valuation of intangible assets, accounts receivable, sales return reserves, reserves for customer incentives, warranty reserves, inventory, derivative instruments, stock-based compensation, deferred income tax, and common stock (prior to the IPO completed in September 2020). These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. We adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. 65 Table of Contents Risks and Uncertainties related to the COVID-19 Pandemic Due to the COVID-19 pandemic, there has been and will continue to be uncertainty and disruption in the global economy and financial markets. Since early 2020, we have experienced 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 in 2021, which led to increases in operating costs such as the significantly elevated ocean freight costs we incurred in the second half of 2021, as compared to the same period of 2020. These negative financial impacts have been offset by revenue growth in 2020 and 2021, partly due to an increase in demand for our gear as more people 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 home 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. Such 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 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. Even after the COVID-19 outbreak has subsided, we may continue to experience significant impacts to our business as a result of its global economic impact, including any economic downturn or recession that has occurred or may occur in the future. As of the date of issuance of these consolidated financial statements, we are not aware of any specific event or circumstance that would require updates to our estimates and judgments or revisions due to COVID-19 to the carrying value of our assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the consolidated financial statements. Revenue Recognition • We determine revenue recognition through the following five-step approach: • identification of the contract, or contracts, with the customer • identification of the performance obligations in the contract • determination of the transaction price • allocation of the transaction price to the performance obligations in the contract, and • recognition of revenue when, or as the performance obligation is fulfilled Revenue is recognized when performance obligations are satisfied under the terms of the contracts, and control of the products is transferred to the customers in an amount that reflects the consideration we expect to receive from the customers in exchange for those products or services. Our products are primarily sold through a network of distributors and retailers, including online retailers, and to a lesser extent direct to consumers. We primarily sell hardware products, such as gamer and creator peripherals and gaming components and systems. These products are hardware devices, which may include embedded software that function together, and are considered as one performance obligation. Hardware devices are generally plug and play, requiring no configuration and little or no installation. Revenue is recognized at a point in time when control of the products is transferred to the customer which generally occurs upon shipment or delivery to customer. We report revenue net of any required taxes collected from customers and remitted to government authorities, with the collected taxes recorded as other liabilities and accrued expenses until remitted to the relevant government authority. Shipping and handling costs associated with outbound freight are accounted for as a fulfillment cost and are included as part of our distribution costs recorded under sales, general and administrative expenses. Costs of maintaining our web store and credit card processing fees related to sales on our webstore are recorded under sales, general and administrative expenses. We generally provide a warranty on products that provides assurance that our products conform to published specifications. Such assurance-type warranties are not deemed to be separate performance obligations from the product, and costs associated with providing these warranties are accrued in accordance with ASC 460-10, Guarantees. We offer return rights and customer incentive programs. Customer incentive programs include special pricing arrangements, promotions, rebates and volume-based incentives. 66 Table of Contents We have agreements with certain customers that contain terms allowing price protection credits to be issued in the event of a subsequent price reduction. Our decision to make price reductions is influenced by product life cycle stage, market acceptance of products, the competitive environment, new product introductions and other factors. Accruals for estimated expected future pricing actions are recognized at the time of sale based on analysis of historical pricing actions by customer and by product, inventories owned by and located at distributors and retailers, current customer demand, current operating conditions, and other relevant customer and product information, such as stage of product life-cycle. The transaction price received by us from sales to distributors and retailers is calculated as selling price net of variable consideration which may include rebates, product returns and price protection. Rights of return vary by customer and range from the right to return products to limited stock rotation rights allowing the exchange of a percentage of the customer’s quarterly purchases. Estimates of expected future product returns qualify as variable consideration and are recorded as a reduction of the transaction price of the contract at the time of sale based on historical return rates. Return rates are influenced by product life cycle status, new product introductions, market acceptance of products, sales levels, the type of customer, seasonality, product quality issues, competitive pressures, operational policies and procedures, and other factors. Return rates can fluctuate over time but are sufficiently predictable to allow us to estimate expected future product returns. We normally require payments from customers within 30 to 90 days from invoice date. We do not generally modify payment terms on existing receivables. Our contracts with customers typically do not include significant financing components as the period between the satisfaction of the performance obligations and timing of payment are generally within one year . Customer incentive programs are considered variable consideration, which we estimate and record as a reduction to revenue at the time of sale. Significant management judgments and estimates must be used to determine the cost of these programs to be included in the transaction price in any accounting period including a reduction for the estimate of amounts that ultimately will not be claimed for certain customer incentive programs. We use the expected value method to arrive at the amount of variable consideration. The Company constrains variable consideration until the likelihood of a significant revenue reversal is not probable. The accrual estimates are based on actual sales data, historical experience, forecasted incentives, anticipated volume of future purchases, and inventory levels in the channel. During the years ended December 31, 2021 and 2020, we did not recognize any material revenue adjustments related to performance obligations satisfied in prior periods as a result of changes in estimated variable consideration. Because the majority of the performance obligations in our contracts with customers relate to contracts with a duration of less than one year , we have elected to apply the optional exemption to not disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. 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 customers. There were no contract assets as of December 31, 2021 and 2020. Contract liabilities are obligations to transfer products or services to a customer for which we have received consideration, or the amount is due, from the customer. Our contract liabilities primarily consist of deferred revenue and unearned revenue. Deferred revenue consists primarily of amounts that have been shipped and invoiced but not recognized as revenue as of period end because the control of the inventory has not passed to the customer. Revenue will be recognized when the customer has obtained control of the inventory sold, which is generally within 3 months or less. The deferred revenue balances as of December 31, 2021 and 2020 were not material. 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 and revenue will be recognized when the customer has obtained control of the inventory sold. The unearned revenue balance as of December 31, 2021 and 2020 was $ 4.8 million and $ 8.0 million, respectively. Contract liabilities are included in other liabilities and accrued expenses and other liabilities noncurrent on the consolidated balance sheets. Cost of Revenue Cost of revenue consists of product costs, including purchases from contract manufacturers, inbound freight costs from manufacturers to our distribution hubs, as well as inter-hubs shipments, duties and tariffs, warranty replacement costs, costs to process and rework returned items, depreciation of tooling equipment, warehousing costs, inventory valuation write-downs, certain allocated costs related to facilities and IT department, and personnel-related expenses and other operating expenses related to supply chain logistics. 67 Table of Contents Distribution Costs Distribution costs, recorded as a component of sales, general and administrative expenses, include the costs to operate two of our distribution hubs internally and the costs paid to third-party logistics providers to operate our remaining four distribution hubs. Distribution costs also include the costs of shipping products to customers through third party carriers. Amounts billed to customers for shipping and handling of products are recorded in net revenue. We do not consider distribution costs to be part of the costs to bring our products to the finished condition and therefore record such distribution costs as sales, general and administrative expense rather than in cost of revenue. Product Development Costs Product development costs are generally expensed as incurred. Product development costs consist primarily of the costs associated with the design and testing of new products and improvements to existing products. These costs relate primarily to compensation of personnel and consultants involved with product design, definition, compatibility testing and qualification. To date, almost all of the software development costs have been expensed as incurred because the period between achieving technological feasibility and the release of the software has been short and development costs qualifying for capitalization have been insignificant. Advertising Costs Advertising costs are expensed as incurred and are included as a component of sales, general and administrative expense in the consolidated statements of operations. Advertising and promotion expenses were $ 19.8 million, $ 19.1 million, and $ 11.3 million for the years ended December 31, 2021, 2020, and 2019, respectively. Stock-Based Compensation We measure and recognize compensation for all stock-based compensation awards, including stock options, stock purchase rights and restricted stock units (“RSU”), based upon the grant-date fair value of those awards. The grant-date fair value of our stock options and stock purchase rights is estimated using a Black-Scholes-Merton option-pricing model. The fair value of our RSUs is calculated based on the market value of our stock at the grant date. Stock-based compensation is recognized on a straight-line basis over the requisite service period and we have elected to recognize actual forfeitures by reducing the stock-based compensation in the same period as the forfeitures occur. Segments Operating segments are based on components of a company that engage in business activity that earn revenue and incur expenses and (a) whose operating results are regularly reviewed by its chief operating decision maker (“CODM”) to make decisions about resource allocation and performance and (b) for which discrete financial information is available. We have two reportable segments: • Gamer and Creator Peripherals , which includes high-performance gaming keyboards, mice, headsets, controllers, and our gaming gear including capture cards, Stream Decks, USB microphones, our Facecam streaming camera, studio accessories and EpocCam software, as well as coaching and training services, among others. • Gaming Components and Systems , 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. Our CODM is determined to be Corsair’s Chief Executive Officer. The results of the reportable segments are derived directly from our reporting system and are based on the methods of internal reporting which are not necessarily in conformity with GAAP. The segmental net revenue and gross profit are used to evaluate the performance of, and allocate resources to, each of the segments. Cash and Restricted Cash Total restricted cash as of December 31, 2021 and 2020 was $ 3.0 million and $ 4.0 million, respectively. The restricted cash serves as collateral for certain bank guarantees, customer deposits and security deposits. Accounts Receivable, net Accounts receivable from contracts with customers are recorded at the invoiced amount when we have an unconditional right to consideration, net of allowance for credit losses. We maintain trade credit insurance to mitigate credit risks on certain of our accounts receivable that reimburse us for up to 90 % of collection losses. We estimate an allowance for credit losses by using a combination of 68 Table of Contents relevant information including historical loss information, adjusted to take into account current market conditions and our customers’ financial condition, the amount of any receivables in dispute, the current receivables aging, and the current payment terms. Concentration of Credit Risk Our financial instruments that are exposed to concentrations of credit risk consist principally of cash, restricted cash and accounts receivable. We maintain our cash and restricted cash with various high-quality financial institutions with investment-grade ratings and we have not experienced any losses. One customer accounted for more than 10 % of our consolidated net revenue for the years ended December 31, 2021, 2020 and 2019. As of December 31, 2021, and 2020, two customers each represented more than 10 % of our accounts receivable, net. Inventories Inventories primarily consist of finished goods and to a lesser extent component parts, which are purchased from contract manufacturers and component suppliers. Inventories are stated at lower of cost and net realizable value using the weighted average cost method of accounting. We assess the valuation of inventory balances including an assessment to determine potential excess and/or obsolete inventory. We may be required to write down the value of inventory if estimates of future demand and market conditions indicate estimated excess or obsolete inventory. For the periods presented, we have not experienced significant write-downs. Property and Equipment, net Property and equipment are stated at cost, less accumulated depreciation. Major improvements that extend the life, capacity or improve the safety of an asset are capitalized, while maintenance and repairs are expensed as incurred. Depreciation is calculated on the straight-line method over the estimated useful lives of the assets, determined to be two to seven years . Leasehold improvements are amortized over the shorter of the remaining lease term or the estimated useful lives of the improvements . Leases Our lease portfolio consists primarily of real estate facilities for manufacturing, distribution, warehousing and office use purposes under operating leases. We determine if an arrangement is or contains a lease at inception. Right-of-use (“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 do not record leases with an initial term of 12 months or less on our consolidated balance sheet but continue to record rent expense on a straight-line basis over the lease term. 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. We account for the lease and non-lease components as a single lease component. Operating lease expense is recognized on a straight-line basis over the lease term. We apply the incremental borrowing rate, in determining the present value of the lease consideration, as 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 do not frequently borrow on a collateralized basis, we consider a combination of factors to determine our incremental borrowing rate, including our credit worthiness, adjusted to approximate a collateralized rating, observable market yield curves, and the U.S. and foreign currency risk-free rates. Our variable lease expense consists primarily of warehousing and distribution services related to our outsourced distribution hubs, and to a lesser extent, variable costs related to office common area maintenance charges. Our service contracts with third-party logistic service providers include both fixed payments for the use of a fixed warehouse space and variable payments based on the usage of their services for distribution and warehouse management. The fixed payments are included in the calculation of the ROU asset and lease liability, but the variable payments are expensed as incurred. In addition, our real estate leases typically contain variable payments for office common area maintenance and these costs are also expensed as incurred. Fair Value of Financial Instruments U.S. GAAP establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The hierarchy is broken down into the following three levels of inputs that may be used to measure fair value: Level 1 —Quoted prices are available in active markets for identical assets or liabilities as of the measurement date. 69 Table of Contents Level 2 —Pricing inputs are other than quoted prices in active market, which are either directly or indirectly observable as of the report date. The nature of these securities includes investments for which quoted prices are available but traded less frequently and investments that are fair valued using other securities, the parameters of which can be directly observed. Level 3 —Securities that have little to no pricing observability as of the report date. These securities are measured using management’s best estimate of fair value, where the inputs into the determination of fair value are not observable and require significant management judgment or estimation. Fair value accounting is applied to all financial assets and liabilities that are recognized or disclosed at fair value in our consolidated financial statements on a recurring basis. Our financial instruments, including cash, restricted cash, accounts receivable, accounts payable, borrowings from credit lines and other liabilities and accrued expenses approximate fair value due to their short-term maturities. Business Combinations We account for business combinations using the acquisition method of accounting, which requires that the assets acquired, liabilities assumed, contractual contingencies and contingent consideration are recorded at the date of acquisition at their respective fair values. Goodwill is recorded when consideration paid in a purchase acquisition exceeds the fair value of the net assets acquired. Amounts recorded in a business combination may change during the measurement period, which is a period not to exceed one year from the date of acquisition, as additional information about conditions existing at the acquisition date becomes available. We include the results of operations of the acquired business in the consolidated financial statements prospectively from the date of acquisition. Acquisition-related charges, including primarily third-party professional fees, accounting fees and legal fees are recognized separately from the business combination and are expensed as incurred. Goodwill and Indefinite-lived Intangible Assets Goodwill and indefinite-lived intangible assets are not amortized and are tested for impairment on an annual basis at October 1 or between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit or asset below its carrying value. We perform our annual goodwill impairment assessment at the reporting unit level and our indefinite-lived intangible assets at the individual asset level. In reviewing impairment, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (greater than 50 %) that the estimated fair value of a reporting unit is less than its carrying amount. We also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment test. The ultimate outcome of the goodwill impairment review for a reporting unit should be the same whether we choose to perform the qualitative assessment or proceed directly to the quantitative impairment test. A qualitative assessment requires that we consider events or circumstances including macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, changes in management or key personnel, changes in strategy, changes in customers, changes in the composition or carrying amount of a reporting segment’s net assets and changes in our stock price. If, after assessing the totality of events or circumstances, we determine that it is more likely than not that the fair values of our reporting units are greater than the carrying amounts, then the quantitative goodwill impairment test is not performed. For the year ended December 31, 2021, we elected to perform the qualitative assessment for both goodwill and indefinite-lived intangible assets and determined that an impairment was not more likely than not for both assets and no further analysis was required. Intangible Assets with finite-lives and Long-Lived Assets Our intangible assets with finite lives principally include acquired technology, patents, tradenames, customer relationships and non-compete agreements. The assets are carried at cost and amortized using a straight-line method over the estimated economic lives of the assets. Amortization expense related to patents is included in cost of revenues. Amortization expense related to developed technology is included in product development costs. Amortization expense related to customer relationships, trade name and non-compete agreements is included in sales, general and administrative costs. Our long-lived assets are primarily comprised of operating lease ROU assets and property and equipment. We evaluate the recoverability of intangible assets with finite lives and long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. For ROU assets such circumstances would include a decision to abandon the use of all or part of an asset, or subleases that do not fully recover the costs of the associated lease. Recoverability is measured by comparing the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If it is determined that an asset may not be recoverable, an impairment loss equal to the excess of the asset’s carrying value over its fair value is recorded. Fair value is determined based on an asset’s projected discounted future cash flow or appraised value, depending on the nature of the asset. Such impairment charges recorded in the periods presented were not material. 70 Table of Contents Warranty Reserve All of our products are covered by warranty to be free from defects in material and workmanship for periods ranging from six months to ten years , and for life for memory products. Our warranty does not provide a service beyond assuring that the product complies with agreed-upon specifications. At the time of sale, an estimate of future warranty costs is recorded as a component of cost of revenue and a warranty liability is recorded for estimated costs to satisfy the warranty obligation. The estimate of the costs to fulfill our warranty obligations is based on historical experience and expectations of future costs to repair or replace. Deferred Issuance Costs and Debt Discounts Costs incurred in obtaining long-term financing paid to parties other than creditors are considered a debt issuance cost. Amounts paid to creditors are recorded as a reduction in the proceeds received by the creditor and are considered a discount on the issuance of debt. Deferred issuance costs and debt discounts are amortized over the terms of the long-term financing agreements using the effective-interest method and recorded as a deduction of the carrying amount of the debt in the consolidated balance sheets. Deferred issuance costs of our revolving line of credit are recorded in prepaid expenses and other current assets and other assets, according to the timing of amortization. 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 repurchase 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 December 31, 2021, we recognized $ 5.0 million prepaid inventory and $ 5.4 million accrued liabilities, and as of December 31, 2020, we recognized $ 5.9 million prepaid inventory and accrued liabilities. Because the transactions are nonmonetary, they have not been included in the consolidated statements of cash flows pursuant to ASC 230, Statement of Cash Flows. Foreign Currency For subsidiaries that have non-U.S. dollar functional currencies, the assets and liabilities of these subsidiaries are translated using period-end exchange rates. Revenues and expenses are translated using average exchange rates in effect during the reporting period. Cumulative translation gains and losses are included as a component of stockholders’ equity in accumulated other comprehensive income (loss). Monetary assets or liabilities denominated in currencies other than the functional currency are remeasured using exchange rates prevailing on the balance sheet date. Foreign currency remeasurement gains and (losses), net is included in other (expense) income, net in the consolidated statements of operations and the amounts were $( 6.3 ) million, $ 1.6 million and $ 1.4 million for the years ended December 31, 2021, 2020 and 2019, respectively. These amounts do not include the change in fair value of our foreign currency forward contracts. Refer to Note 4, Derivative Financial Instruments for more information on our hedging instruments. Gains and losses on long-term intercompany loans not intended to be repaid in the foreseeable future are recorded as a component of accumulated other comprehensive income (loss). Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the tax and financial reporting bases of our assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in future years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced through the establishment of a valuation allowance, if, based upon available evidence, it is determined that it is more likely than not that the deferred tax assets will not be realized. We are subject to foreign income taxes on our foreign operations. All deferred tax assets and liabilities are classified as non-current in the consolidated financial statements. We recognize the effect of income tax positions only if those positions are more likely than not of being sustained on examination based on the technical merit of the position. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on examination, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50 % likely of being realized upon ultimate settlement. 71 Table of Contents We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments. Interest charges and penalties related to unrecognized tax benefits are recognized as a component of the income tax (expense) benefit. Net Income (Loss) per Share Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares outstanding during the period, without consideration of potential dilutive securities. Diluted net income per share is computed based on the weighted-average number of shares outstanding during the period, adjusted to include the incremental shares expected to be issued for assumed exercise of options under the treasury stock method. Recently Adopted Accounting Pronouncements 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 consolidated financial statements. Recently Issued Accounting Pronouncements, Not Yet Adopted In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848), to provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The new guidance is effective, at our election, beginning March 12, 2020 through December 31, 2022. We plan to adopt ASU 2019-12 effective January 1, 2022, and we do not expect the adoption will have a material impact on our consolidated financial statements. 3. Fair Value Measurement The balances of our financial assets that were measured at fair value on a recurring basis as of December 31, 2021 and 2020 were not material. The following tables summarize our financial 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 (in thousands): December 31, 2021 (Level 1) (Level 2) (Level 3) Total Liabilities: Contingent cash consideration in connection with a business acquisition—SCUF (2) $ — $ — $ 1,250 $ 1,250 Foreign currency forward contracts (1) — 427 — 427 Other — — 224 224 Total liabilities $ — $ 427 $ 1,474 $ 1,901 December 31, 2020 (Level 1) (Level 2) (Level 3) Total Liabilities: Contingent cash consideration in connection with a business acquisition—Origin (3) $ — $ — $ 2,887 $ 2,887 Contingent consideration in connection with a business acquisition—SCUF (2) — — 1,250 1,250 Deferred cash consideration in connection with a business acquisition—Origin (3) — — 1,505 1,505 Foreign currency forward contracts (1) — 819 — 819 Total liabilities $ — $ 819 $ 5,642 $ 6,461 (1) 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. (2) The fair value of the contingent consideration from our SCUF acquisition in 2019 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 December 31, 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. 72 Table of Contents (3) T otal earn-out liability of $ 2.9 million and deferred cash consideration of $ 1.5 million from our Origin acquisition in 2019 were fully paid and settled in 2021. 4. Derivative Financial Instruments 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 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 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 $ 48.6 million and $ 41.6 million as of December 31, 2021 and December 31, 2020, respectively. The net fair value gain (loss) recognized in other (expense) income, net in relation to these derivative instruments was $ 0.5 million, $( 3.0 ) million, and $( 0.2 ) million for the year ended December 31, 2021, 2020, and 2019, respectively. 5. Business Combinations We completed four acquisitions in the last two years, namely, Visual by Impulse and BoxFX Ltd in 2021, and EpocCam and Gamer Sensei in 2020, none of which were material, both individually and in the aggregate, to our consolidated financial statements. They were accounted for using the acquisition method of accounting. 6. Goodwill and Intangible Assets Goodwill We have four reporting units: Gaming Peripherals, Gaming Components, Gaming Memory and Gaming Systems. The Gamer and Creator Peripherals segment includes the Gaming Peripherals reporting unit, and the Gaming Components and Systems segment includes the Gaming Components, Gaming Memory and Gaming Systems reporting units. The following table summarizes the changes in the carrying amount of goodwill by reportable segment (in thousands): Gaming Components and Systems Gamer and Creator Peripherals Total December 31, 2019 $ 145,375 $ 167,375 $ 312,750 Addition from business acquisitions — 690 690 Measurement period adjustments ( 47 ) ( 1,326 ) ( 1,373 ) Effect of foreign currency exchange rates 316 377 693 December 31, 2020 145,644 167,116 312,760 Addition from business acquisitions — 4,481 4,481 Measurement period adjustments — 50 50 Effect of foreign currency exchange rates ( 334 ) 97 ( 237 ) December 31, 2021 $ 145,310 $ 171,744 $ 317,054 73 Table of Contents Intangible assets, net The following table is a summary of intangible assets, net (in thousands): December 31, 2021 December 31, 2020 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Developed technology $ 32,086 $ 14,922 $ 17,164 $ 31,016 $ 8,892 $ 22,124 Trade name 30,665 4,942 25,723 30,632 2,873 27,759 Customer relationships 218,566 94,910 123,656 218,469 72,892 145,577 Patent 31,481 8,196 23,285 31,802 4,207 27,595 Non-competition agreements 2,521 2,193 328 2,521 1,689 832 Total finite-life intangibles 315,319 125,163 190,156 314,440 90,553 223,887 Indefinite life trade name 35,430 — 35,430 35,430 — 35,430 Other 123 — 123 — — — Total intangible assets $ 350,872 $ 125,163 $ 225,709 $ 349,870 $ 90,553 $ 259,317 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. Amortization expense of intangible assets is recognized in our consolidated statements of operations as follows (in thousands): Year Ended December 31, 2021 2020 2019 Cost of revenue $ 4,860 $ 3,898 $ 130 Sales, general and administrative 24,611 24,535 23,035 Product development 5,323 5,483 6,958 Total amortization of intangible assets $ 34,794 $ 33,916 $ 30,123 The estimated future amortization expense of intangible assets as of December 31, 2021 is as follows (in thousands): Amounts 2022 $ 34,419 2023 32,813 2024 31,362 2025 31,058 2026 27,684 Thereafter 32,820 Total $ 190,156 7. Balance Sheet Components The following tables present the components of certain balance sheet amounts (in thousands): December 31, 2021 2020 Cash $ 62,415 $ 129,543 Restricted cash—short term 2,734 3,795 Restricted cash—noncurrent 231 230 Total cash and restricted cash $ 65,380 $ 133,568 Accounts receivable $ 291,816 $ 293,975 Allowance for credit losses ( 529 ) ( 346 ) Accounts receivable, net $ 291,287 $ 293,629 74 Table of Contents Raw materials $ 62,110 $ 52,165 Work in progress 4,931 9,654 Finished goods 231,274 164,188 Inventories $ 298,315 $ 226,007 Manufacturing equipment $ 26,094 $ 22,035 Computer equipment, software and office equipment 9,407 9,407 Leasehold improvements 5,154 4,521 Furniture and fixtures 4,709 3,675 Total property and equipment $ 45,364 $ 39,638 Less: Accumulated depreciation and amortization ( 28,545 ) ( 23,163 ) Property and equipment, net $ 16,819 $ 16,475 Right-of-use assets $ 51,387 $ 25,998 Deferred tax asset 12,737 4,792 Other 7,684 3,572 Other assets $ 71,808 $ 34,362 Accrued reserves for customer incentive programs $ 66,733 $ 49,619 Accrued reserves for sales returns 37,166 35,673 Accrued payroll and related expenses 20,526 26,877 Accrued freight expenses 18,296 7,523 Income tax payable 6,316 22,445 Other 56,837 63,608 Other liabilities and accrued expenses $ 205,874 $ 205,745 Operating lease liabilities, noncurrent $ 51,153 $ 17,571 Other 2,718 2,628 Other liabilities, noncurrent $ 53,871 $ 20,199 8. Debt Our debt consisted of the following (in thousands): December 31, 2021 2020 X Term Loan (variable rate) due September 2026 $ 248,750 $ — First Lien Term Loan (variable rate) extinguished in September 2021 — 326,938 Debt discount and issuance cost, net of amortization ( 1,099 ) ( 5,545 ) Total debt 247,651 321,393 Less: debt maturing within one year 4,753 — Long-term debt $ 242,898 $ 321,393 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 mature on August 28, 2024 and August 28, 2022 , respectively. Subsequently, we entered into several amendments to the 75 Table of Contents 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 al needs. 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 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. 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 voluntary prepayments of $ 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 $ 4.9 million and $ 2.5 million for the years ended December 31, 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 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 %. 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 prepayments of the Second Lien Term Loan in 2020, we have recorded losses on extinguishment of debt of $ 1.6 million for the year ended December 31, 2020. The weighted average effective interest rate inclusive of the debt discount and debt issuance costs for the First Lien and Second Lien, in aggregate, was approximately 5.4 % and 6.4 % for years ended December 31, 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 76 Table of Contents 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 rate on the Term loan and Revolving Facility can be increased by 2.0 %. As of December 31, 2021, we were not in default under the Credit Agreement and our Consolidated Total Net Leverage Ratio and Consolidated Interest Coverage Ratio were 1.1 to 1.0 and 11.5 to 1.0 as of December 31, 2021, respectively. As of December 31, 2021, we had no outstanding balance under the Revolving Facility. As of December 31, 2021, the carrying value of our Term Loan was $ 247.7 million. The estimated fair value of our Term Loan as of December 31, 2021, which we have classified as a Level 2 financial instrument, was approximately $ 261.7 million. The effective interest rate inclusive of the debt discount and debt issuance costs for the Term Loan was approximately 1.4 % for the year ended December 31, 2021. The following table summarizes the interest expense recognized for all periods presented (in thousands): Year Ended December 31, 2021 2020 2019 First and Second Lien Guaranty Agreement: Contractual interest expense for term loan $ 9,818 $ 27,387 $ 29,757 Contractual interest expense for revolving facility — 16 2,758 Amortization of debt discount and issuance cost 1,343 2,632 2,989 Loss on debt extinguishment 4,904 4,114 — Credit Agreement: Contractual interest expense for term loan 1,113 — — Contractual interest expense for revolving facility 53 — — Amortization of debt discount and issuance cost 115 — — Other 327 988 44 Total interest expense recognized $ 17,673 $ 35,137 $ 35,548 The estimated future principal payments under our total long-term debt as of December 31, 2021 are as follows (in thousands): Amounts 2022 $ 5,000 2023 6,875 2024 12,500 2025 12,500 2026 211,875 Total debt $ 248,750 9. Commitments and Contingencies Product Warranties Changes in our assurance-type warranty obligations were as follows (in thousands): December 31, 2021 2020 Beginning of the period $ 5,865 $ 3,991 Warranty provision related to products shipped 6,549 7,201 Deductions for warranty claims processed ( 6,758 ) ( 5,327 ) End of period $ 5,656 $ 5,865 Unconditional Purchase Obligations In the normal course of business, we enter into various purchase commitments for goods or services. 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 77 Table of Contents marketing sponsorship. The total long-term non-cancelable purchase commitment s as of December 31, 2021 was as follows (in thousands) : Amounts x 2022 $ 2,614 2023 2,524 2024 1,699 2025 308 2026 — Total $ 7,145 Our total non-cancelable long-term purchase commitments outstanding as of December 31, 2020 was $ 6.8 million. Letters of Credit The letters of credit outstanding, in aggregate, was $ 0.5 million and $ 2.0 million as of December 31, 2021 and 2020, respectively. No amounts have been drawn upon the letters of credit for all periods presented. Indemnification In the ordinary course of business, we may provide indemnifications of varying scope and terms with respect to certain transactions. We have entered into indemnification agreements with directors and certain officers and employees that will require Corsair, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No demands have been made upon Corsair to provide indemnification under such agreements, and thus, there are no claims that we are aware of that could have a material effect on our consolidated balance sheets, statements of operations, or statements of cash flows. We currently have directors’ and officers’ insurance. 10. Stockholders’ Equity 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 December 31, 2021 and 2020. 11. Equity Incentive Plans and Stock-Based Compensation Equity Incentive Plans In 2017, we adopted the 2017 Equity Incentive Program ( the “2017 Plan” ). In September 2020, we adopted the 2020 Incentive Award Plan ( the “2020 Plan ”). 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, RSUs, 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 were 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 with respect of the award. According to the provisions in the 2020 Plan, in March 2021, our Board approved an annual increase in the shares of common stock reserved for issuance by 3,677,385 shares. As of December 31, 2021, there were 7,626,827 shares reserved for future issuance the 2020 Plan. 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. Employee Stock Purchase Plan In September 2020, we adopted the 2020 Employee Stock Purchase Plan ( 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. The ESPP initially reserved 1,025,000 shares of our common stock for issuance. According to the provisions in the ESPP, in March 2021, our Board approved an annual increase in the shares of common stock reserved for issuance by 919,346 shares. The first ESPP offering 78 Table of Contents period began on January 1, 2021. For the year ended December 31, 2021, 205,464 shares of common stock were sold to our employees under the ESPP. As of December 31, 2021, there were 1,738,882 shares reserved for future issuance under the ESPP. Stock Options Activities The following table summarizes the stock option activities and related information for the year ended December 31, 2021: Number of Shares Weighted- Average Exercise Price Per Share Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value (In years) (In thousands) Outstanding as of December 31, 2020 10,211,737 $ 5.68 7.7 $ 311,869 Granted 695,122 40.16 Exercised ( 2,335,250 ) 4.37 Forfeited/cancelled ( 408,000 ) 6.64 Outstanding as of December 31, 2021 8,163,609 $ 8.94 6.9 $ 112,411 Vested and exercisable as of December 31, 2021 4,173,467 $ 5.33 6.4 $ 65,617 The weighted-average grant date fair value per share for stock options granted in years ended December 31, 2021, 2020 and 2019 was $ 16.77 , $ 3.68 and $ 2.89 , respectively. The total intrinsic value of options exercised for the years ended December 31, 2021, 2020 and 2019 was $ 66.0 million, $ 1.5 million, and $ 0.1 million, respectively. RSU Activities The following table summarizes the RSU activities and related information for the year ended December 31, 2021: Number of Shares Weighted- Average Grant Date Fair Value Per Share Outstanding as of December 31, 2020 153,488 $ 29.35 Granted 572,785 34.78 Vested ( 50,327 ) 28.02 Forfeited/cancelled ( 34,086 ) 33.82 Outstanding as of December 31, 2021 641,860 $ 34.06 The weighted-average grant date fair value per share for RSUs granted in years ended December 31, 2021 and 2020 was $ 34.78 and $ 28.66 , respectively. The total fair value of RSUs vested in the years ended December 31, 2021 and 2020 was $ 1.4 million and $ 0.1 million, respectively. Stock-based Compensation The following table summarizes stock-based compensation expense by line item in our consolidated statements of operations (in thousands): Year Ended December 31, 2021 2020 2019 Cost of revenue $ 1,006 $ 268 $ 197 Sales, general and administrative 13,772 4,883 3,084 Product development 2,457 645 567 Stock-based compensation expense, net of amounts capitalized (1) $ 17,235 $ 5,796 $ 3,848 Income tax benefits (expense) related to stock-based compensation expense $ 6,796 $ ( 476 ) $ — (1) Total stock-based compensation expense capitalized in inventory was not material for each of the periods presented. 79 Table of Contents The following table summarizes by type of grant, the total unrecognized stock-based compensation expense and the remaining period over which such expense is expected to be recognized (in thousands, except number of years): December 31, 2021 Unrecognized Expense Remaining weighted average period (In years) RSUs $ 17,542 3.1 Stock Options 16,591 2.2 ESPP — — Total unrecognized stock-based compensation expense $ 34,133 Valuation Assumptions We estimate the fair value of the stock options at the date of grant using the Black-Scholes-Merton pricing model, with the following valuation assumptions and values: Year Ended December 31, 2021 2020 2019 Expected term (years) 6.01 6.37 6.48 Expected volatility 43.1% - 47.0% 35.8% - 44.0% 34.3% - 36.1% Dividend yield — — — Risk-free interest rate 0.05% - 1.34% 0.3% - 1.8% 1.4 - 2.6% We estimate the fair value of the shares under the ESPP at the date of grant using the Black-Scholes-Merton pricing model, with the following valuation assumptions and inputs: Year Ended December 31, 2021 Expected term (years) 0.50 Expected volatility 43.2% - 45.1% Dividend yield — Risk-free interest rate 0.05% - 0.09% Each of the inputs to the Black-Scholes-Merton pricing model, as discussed below, is subjective and generally requires significant judgment and estimation by management. Expected Term —The expected term represents the period that stock options are expected to be outstanding. Since we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time our common stock has been publicly traded, the simplified method is used to estimate the expected term of our stock options. The simplified method calculates the expected term as the average of the time-to-vesting and the contractual life of the stock option. Expected Volatility —Since we do not have a trading history for our common stock, the expected volatility was derived from the historical stock volatilities of comparable peer public companies within our industry that are considered to be comparable to our business over a period equivalent to the expected term of the stock-based awards. Risk-Free Interest Rate —The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the expected term of the stock-based awards. Expected Dividend Rate —The expected dividend is zero as we do not anticipate paying any dividends on our common stock in the foreseeable future. The expense is recognized over the requisite service period. 80 Table of Contents 12. Net Income (Loss) Per Share The following table summarizes the calculation of basic and diluted net income (loss) per share (in thousands, except per share amounts): Year Ended December 31, 2021 2020 2019 Numerator Net income (loss) $ 100,960 $ 103,217 $ ( 8,394 ) Denominator Weighted-average shares used to compute net income (loss) per share, basic 93,260 86,256 76,223 Effect of dilutive securities 6,744 4,321 — Weighted-average shares used to compute net income (loss) per share, diluted 100,004 90,577 76,223 Net income (loss) per share: Basic $ 1.08 $ 1.20 $ ( 0.11 ) Diluted $ 1.01 $ 1.14 $ ( 0.11 ) Anti-dilutive potential common shares (1) 927 1,605 8,091 (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. 13. Income Taxes Income (loss) before income tax consists of the following (in thousands): Year Ended December 31, 2021 2020 2019 Domestic $ 26,889 $ ( 1,190 ) $ ( 18,407 ) Foreign 87,671 123,232 5,008 Income (loss) before income tax $ 114,560 $ 122,042 $ ( 13,399 ) Income tax (expense) benefit consists of the following (in thousands): Year Ended December 31, 2021 2020 2019 United States federal taxes: Current $ ( 3,723 ) $ ( 363 ) $ ( 2,177 ) Deferred 4,805 4,801 5,948 State taxes: Current ( 968 ) ( 1,313 ) ( 529 ) Deferred 3,855 813 1,421 Foreign taxes: Current ( 20,871 ) ( 24,625 ) ( 3,824 ) Deferred 3,302 1,862 4,166 Income tax (expense) benefit $ ( 13,600 ) $ ( 18,825 ) $ 5,005 81 Table of Contents The income tax (expense) benefit differs from the amount which would result by applying the applicable statutory deferral rate to income before income taxes as follows (in thousands): Year Ended December 31, 2021 2020 2019 Provision at federal statutory rate $ ( 24,058 ) $ ( 25,629 ) $ 2,814 State taxes ( 3,033 ) ( 5,363 ) 911 Foreign rate differential 3,149 10,185 300 Taxes on foreign operations 8,595 ( 1,776 ) ( 1,520 ) Research and development credits 2,586 1,534 — Net operating loss — — 2,557 Change in valuation allowance 4,171 4,407 719 Change in tax rate on deferred tax assets ( 1,507 ) ( 743 ) ( 469 ) Other ( 3,503 ) ( 1,440 ) ( 307 ) Income tax (expense) benefit $ ( 13,600 ) $ ( 18,825 ) $ 5,005 The major drivers for the change in tax (expense) benefit in 2021 were the excess tax benefits from stock-based compensation and a decrease in valuation allowance in 2021 as a result of the release of our California valuation allowance due to increased U.S. profitability. The disclosure for foreign rate differential reflects the impact of the effective tax rate benefit from operations in jurisdictions where the applicable foreign tax rate is lower than the U.S. statutory rate. We were not subject to any tax holidays or tax holiday terminations subject to disclosure during these periods that impacted loss per share. Deferred tax assets and liabilities comprise the following: December 31, 2021 2020 Deferred tax assets: Accrued expenses and reserves $ 17,903 $ 14,387 Stock-based compensation 2,379 1,794 NOL and capital losses 7,608 10,708 Capitalized research expenditures 2,846 575 Tax credits 2,287 2,686 Other 790 692 Total deferred tax assets 33,813 30,842 Less valuation allowance ( 4,038 ) ( 8,209 ) Deferred tax liabilities: Intangible assets ( 42,738 ) ( 47,589 ) Net deferred tax liabilities $ ( 12,963 ) $ ( 24,956 ) We have established a valuation allowance of $ 4.0 million and $ 8.2 million as of December 31, 2021 and 2020, respectively, against our net deferred tax assets. We determine valuation allowance on deferred tax assets by considering both positive and negative evidence in order to ascertain whether it is more likely than not that deferred tax assets will be realized. Realization of deferred tax assets is dependent upon the generation of future taxable income, if any, the timing and amount of which are uncertain. Due to the anticipated future taxable income under the GILTI regime, we have released most of our valuation allowance except on $ 1.2 million of foreign tax credit carryovers for U.S. federal purposes and maintained a valuation allowance on our Luxemburg deferred tax assets. As of December 31, 2021, we had net operating loss carry forwards for federal, state and foreign tax purposes of $ 9.6 million, $ 26.4 million, and $ 13.6 million, respectively. The federal, state and foreign net operating losses will begin to expire starting in 2037 , 2030 , and 2034 , respectively. As defined under Internal Revenue Code Section 382, certain tax attributes are subject to an annual limitation as a result of our change in ownership in August 2017. In August 2017, we acquired the interests of the operating subsidiaries from Corsair Components (Cayman) Ltd. We do not expect our tax attributes to be materially affected by the annual limitation. Change in gross unrecognized tax benefits, excluding interest and penalties, as a result of uncertain tax positions are as follows (in thousands): 82 Table of Contents Year Ended December 31, 2021 2020 2019 Beginning balance $ 1,216 $ 746 $ 477 Tax position related to current year Increase 690 262 24 Decrease — — — Tax position related to prior year Increase 1,851 477 245 Decrease — ( 269 ) — $ 3,757 $ 1,216 $ 746 All of these unrecognized tax benefits will favorably impact our effective tax rate in future periods to the extent benefits are recognized. There are no provisions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date. We did no t recognize significant expense for interest and penalties related to uncertain tax positions for the years ended December 31, 2021, 2020 and 2019. We file income tax returns with the U.S. federal government, various U.S. states and foreign jurisdictions including China, France, Germany, Hong Kong, Luxembourg, Netherlands, Slovenia, Taiwan, United Kingdom and Vietnam. Our tax returns in the U.S., various U.S. states and foreign jurisdictions remain open to examination from 2013 to 2020 . 14. Accumulated Other Comprehensive Income (Loss) The components of accumulated other comprehensive income (loss) were as follows (in thousands): December 31, 2021 2020 Accumulated foreign currency translation gain $ 622 $ 2,104 Unrealized foreign exchange loss from long-term intercompany loans, net of tax ( 962 ) ( 577 ) Total Accumulated Other Comprehensive Income (Loss) $ ( 340 ) $ 1,527 15. Segment and Geographic Information The table below summarizes the financial information for each reportable segment (in thousands): Year Ended December 31, 2021 2020 2019 Net revenue Gamer and Creator Peripherals $ 647,202 $ 539,366 $ 294,141 Gaming Components and Systems 1,256,858 1,163,001 803,033 Total net revenue $ 1,904,060 $ 1,702,367 $ 1,097,174 Gross Profit Gamer and Creator Peripherals $ 224,920 $ 189,742 $ 81,363 Gaming Components and Systems 288,934 275,687 142,924 Total gross profit $ 513,854 $ 465,429 $ 224,287 The CODM manages assets on a total company basis, not by operating segments; therefore, asset information and capital expenditures by operating segments are not presented. 83 Table of Contents Geographic Information The following table summarizes our net revenue by geographic region based on the location of the customer (in thousands): Year Ended December 31, 2021 2020 2019 Net revenue Americas $ 841,653 $ 775,423 $ 460,256 Europe and Middle East 735,151 624,214 406,435 Asia Pacific 327,256 302,730 230,483 Total net revenue $ 1,904,060 $ 1,702,367 $ 1,097,174 Revenues from sales to customers in the United States represented 38 % , 38 % and 35 % for the years ended December 31, 2021, 2020 and 2019, respectively. No other single country represented 10 % or more of total net revenue during these periods. Long-lived assets consist primarily of property and equipment, net and right-of-use assets. The following table summarizes long-lived assets by regions that represent 10 % of more of our total long-lived assets (in thousands): December 31, 2021 2020 United States $ 44,825 $ 20,854 China 8,465 7,567 Taiwan 7,387 7,742 Other 7,529 6,310 Total long-lived assets $ 68,206 $ 42,473 16. Leases Our lease portfolio consists primarily of real estate facilities for manufacturing, distribution, warehousing and office use purposes under operating leases. The components of lease expenses were as follows (in thousands): Year Ended December 31, 2021 2020 Operating lease expense $ 13,048 $ 9,406 Variable lease expense 9,636 7,305 Total lease expense $ 22,684 $ 16,711 Supplemental cash flow information related to operating leases was as follows (in thousands): Year Ended December 31, 2021 2020 Cash paid for amounts included in the measurement of operating lease liabilities $ 10,466 $ 8,949 Right-of-use assets recognized in exchange for operating lease obligations 36,689 15,976 Supplemental balance sheet information related to operating leases was as follows (in thousands): Year Ended December 31, 2021 2020 Right-of-use assets (included in other assets) $ 51,387 $ 25,998 Lease incentive receivable (included in prepaid expenses and other current assets) 6,505 — Operating lease liabilities (included in other liabilities and accrued expenses) 9,457 9,070 Operating lease liabilities, noncurrent (included in other liabilities, noncurrent) 51,153 17,571 Weighted-average remaining lease term (in years) 7.6 3.9 Weighted-average discount rate 3.8 % 3.9 % The following table summarizes the maturity of operating lease liabilities as of December 31, 2021 (in thousands): 84 Table of Contents Amounts 2022 $ 10,164 2023 11,266 2024 9,959 2025 6,078 2026 5,988 Thereafter 29,413 Total future lease payments 72,868 Less: Imputed interest ( 12,258 ) Present value of operating lease liabilities $ 60,610 17. Subsequent event On January 1, 2022, we acquired a 51 % stake in iDisplay Technology (“iDisplay”), a leader in electronic development and design specializing in display technology. Pursuant to the Share Purchase Agreement, and in consideration for its 51% interest in iDisplay, the Company paid $ 25.3 million in cash and issued 690,333 shares of its Common Stock, having an aggregate value of $ 14.5 million, for total purchase consideration of $ 39.8 million. The purchase consideration is subject to adjustment for certain working capital adjustments and post-closing indemnities. Due to the proximity of the acquisition date to the filing of our annual report on Form 10-K for the year ended December 31, 2021, the initial accounting for the iDisplay business combination is incomplete, and therefore we are unable to disclose certain information required by ASC 805, Business Combinations, including the provisional amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed and goodwill. We are currently in the process of finalizing the accounting for this transaction and expect to complete our preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed by the end of the first quarter of 2022 . 85 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None.