Corsair Gaming Inc

Previous wording

Our net revenue was $337.3 million and $354.0 million for the three months ended March 31, 2024,and 2023, respectively. Our gross margin was 25.7% and 24.1% for the three months ended March 31, 2024 and 2023, respectively. We had a net loss of $11.6 million and $2.0 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Our net revenue was $261.3 million and $325.4 million for the three months ended June 30, 2024,and 2023, respectively. Our gross margin was 24.1% and 25.5% for the three months ended June 30, 2024 and 2023, respectively. We had a net loss of $23.5 million and $4.1 million for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

As of March 31, 2024, we had cash and restricted cash, in the aggregate of $130.2 million and the principal balance outstanding on our Term Loan was $184.0 million. Cash used in operations was $26.3 million for the three months ended March 31, 2024, and cash provided by operations was $41.8 million for the three months ended March 31, 2023.

Current wording

As of June 30, 2024, we had cash and restricted cash, in the aggregate of $94.6 million and the principal balance outstanding on our Term Loan was $180.9 million. Cash used in operations was $44.8 million for the six months ended June 30, 2024, and cash provided by operations was $44.0 million for the six months ended June 30, 2023.

Previous wording

Ukraine, the ongoing conflict in Gaza, including the heightened tensions in the Red Sea, and any potential conflicts between China and Taiwan, supply chain constraints, uncertainty in global financial markets and the risk of a recession, inflationary trends, volatility in exchange rates and evolving dynamics in the global trade environment. We also experience seasonality in the sale of our products, which may be affected by general economic conditions. During 2023, we observed continued market uncertainty and inflationary pressures, however, since the second half of 2023, we observed some recovery in the markets, evidenced by the strong retail sales performance in the fourth quarter of 2023. Based on market indicators and other factors, we expect this trend to repeat in the second half of 2024, but if these indicators proved to be incorrect, our financial results could be negatively impacted. We have in the past experienced, and may continue to experience supply chain disruptions leading to increased logistics costs, such as the increased freight costs from increased air-shipments in the three months ended March 31, 2024 due to the shipping delays caused by the tension in the Red Sea.

Current wording

Our business and financial performance depend significantly on worldwide economic conditions. We continue to face global macroeconomic challenges including the ongoing effects of geopolitical conflicts, such as the ongoing war between Russia and Ukraine, the ongoing conflict in Gaza, including the heightened tensions in the Red Sea, and any potential conflicts between China and Taiwan, supply chain constraints, uncertainty in key financial markets and the risk of a recession, inflationary trends, volatility in exchange rates and evolving dynamics in the global trade environment. We also experience seasonality in the sale of our products, which may be affected by general economic conditions. The extent of the impact of macroeconomic conditions and geopolitical tensions on our business, sales, results of operations, cash flows and financial condition will depend on future developments, which are not within our control and are highly uncertain and cannot be predicted. We will continue to evaluate these risks and uncertainties and further our mitigation plans.

Previous wording

We are exposed to fluctuations in foreign currency exchange rates. As a result of our foreign sales and operations, we have revenue, payroll and other operating expenses denominated in foreign currencies, in particular the Chinese Yuan, Euro and British Pound. Unfavorable movement in the exchange rate between the U.S. dollar and the currencies we conduct sales or operate in may negatively impact our financial results. While the foreign currency fluctuations did not have a material impact to our operating results for the three months ending March 31, 2024, there can be no assurance that future foreign currency fluctuations will not have a material impact to our operating results.

Current wording

We are exposed to fluctuations in foreign currency exchange rates. As a result of our foreign sales and operations, we have revenue, payroll and other operating expenses denominated in foreign currencies, in particular the Chinese Yuan, Euro and British Pound. Unfavorable movement in the exchange rate between the U.S. dollar and the currencies we conduct sales or operate in may negatively impact our financial results. While the foreign currency fluctuations did not have a material impact to our operating results for the six months ending June 30, 2024, there can be no assurance that future foreign currency fluctuations will not have a material impact to our operating results.

Previous wording

Introduction of new high-performance computing hardware and sophisticated games. We believe that the introduction of more powerful CPUs and GPUs that place increased demands on other system components, such as memory, power supply or cooling, has a significant effect on increasing the demand for our products. In addition, we believe that the introduction and success of games with sophisticated graphics that place increasing demands on system processing speed and capacity and therefore require more powerful CPUs or GPUs, drives demand for our high-performance gaming components and systems, such as PSUs and cooling solutions, and our gaming PC memory. As a result, our operating results may be materially affected by the timing of, and the rate at which computer hardware companies introduce, new and enhanced CPUs and GPUs, the timing of, and rate at which computer game companies and developers introduce sophisticated new and improved games that require increasingly high levels of system and graphics processing power, and whether these new products and games are widely accepted by gamers. During 2023, we experienced overall demand increase for our gaming components and systems products primarily driven by the self-built PC market expansion from the increase in availability of new and reasonably priced GPUs and CPUs as well as the release of new game titles. In 2024, we will be mid-cycle for new GPU platforms and do not expect a similar increase in demand driven by these new GPU platforms until the next substantial GPU launch which is likely to impact second half of 2024 and 2025. Further, as anticipated, the slowdown in the self-built PC market activity, beginning 2024, led to a decrease in demand for our products in the Gaming Components and Systems segment in the three months ended March 31, 2024.

Current wording

Introduction of new high-performance computing hardware and sophisticated games. We believe that the introduction of more powerful CPUs and GPUs that place increased demands on other system components, such as memory, power supply or cooling, has a significant effect on increasing the demand for our products. In addition, we believe that the introduction and success of games with sophisticated graphics that place increasing demands on system processing speed and capacity and therefore require more powerful CPUs or GPUs, drives demand for our high-performance gaming components and systems, such as PSUs and cooling solutions, and our gaming PC memory. As a result, our operating results may be materially affected by the timing of, and the rate at which computer hardware companies introduce, new and enhanced CPUs and GPUs, the timing of, and rate at which computer game companies and developers introduce sophisticated new and improved games that require increasingly high levels of system and graphics processing power, and whether these new products and games are widely accepted by gamers. During 2023, we experienced overall demand increase for our gaming components and systems products primarily driven by the self-built PC market expansion from the increase in availability in late 2022 of new and reasonably priced GPUs and CPUs as well as the release of new game titles. In 2024, we are mid-cycle for new GPU platforms, and as a result, we do not expect a similar increase in demand driven by these new GPU platforms andsome highly anticipated game title releases until the next substantial GPU launch which isnow expected inlate 2024 and 2025. The slowdown in the self-built PC market activity in the first half of 2024, led to a decrease in demand for our products in the Gaming Components and Systems segment in the six months ended June 30, 2024.

Previous wording

We operate a global sales network that consists primarily of retailers (including e-retailers), as well as distributors we use to access certain retailers. Further, a limited number of retailers and distributors represent a significant portion of our net revenue, with e-retailer Amazon accounting for 27.7% and 25.8% of our net revenue for the three months ended March 31, 2024 and 2023, respectively, and sales to our ten largest customers accounting for approximately 53.4% and 51.5% of our net revenue for the three months ended March 31, 2024 and 2023, respectively. Our customers, including Amazon, typically do not enter into long-term agreements to purchase our products but instead enter into purchase orders with us. As a result of this concentration and the lack of long-term agreements with our customers, a primary driver of our net revenue and operating performance is maintaining good relationships with these retailers and distributors. To help maintain good relationships, we implement initiatives such as our updated packaging design which helps e-retailers such as Amazon process our packages more efficiently. Further, given our global operations, a significant percentage of our expenses relate to shipping costs. Our ability to effectively optimize these shipping costs, for example utilizing expensive shipping options such as air freight for smaller packages and more urgent deliveries and more cost-efficient options, such as ground or ocean freight, for other shipments, has an impact on our expenses and results of operations.

Current wording

We operate a global sales network that consists primarily of retailers (including e-retailers), as well as distributors we use to access certain retailers. Further, a limited number of retailers and distributors represent a significant portion of our net revenue, with e-retailer Amazon accounting for 29.7% and 28.0% of our net revenue for the six months ended June 30, 2024 and 2023, respectively, and sales to our ten largest customers accounting for approximately 52.6% and 54.8% of our net revenue for the six months ended June 30, 2024 and 2023, respectively. Our customers, including Amazon, typically do not enter into long-term agreements to purchase our products but instead enter into purchase orders with us. As a result of this concentration and the lack of long-term agreements with our customers, a primary driver of our net revenue and operating performance is maintaining good relationships with these retailers and distributors. To help maintain good relationships, we implement initiatives such as our updated packaging design which helps e-retailers such as Amazon process our packages more efficiently. Further, given our global operations, a significant percentage of our expenses relate to shipping costs. Our ability to effectively optimize these shipping costs, for example utilizing expensive shipping options such as air freight for smaller packages and more urgent deliveries and more cost-efficient options, such as ground or ocean freight, for other shipments, has an impact on our expenses and results of operations.

Previous wording

Gamers demand new technology and product features, and we expect our ability to accurately anticipate and meet these demands will be one of the main drivers for any future sales growth and market share expansion. In the last few years, we have entered into several new markets, for example the cameras market for content creators and the gaming monitors market for both gamers and content creators. We launched 108 and 19 new products in 2023 and in the three months ended March 31, 2024, respectively. While we intend to continue to develop and release new products, there can be no assurance that our new product introductions will have a favorable impact on our operating results or that customers will choose our new products over those of our competitors.

Current wording

Gamers demand new technology and product features, and we expect our ability to accurately anticipate and meet these demands will be one of the main drivers for any future sales growth and market share expansion. In the last few years, we have entered into several new markets, for example the cameras market for content creators and the gaming monitors market for both gamers and content creators. We launched 108 and 39 new products in 2023 and in the six months ended June 30, 2024, respectively. While we intend to continue to develop and release new products, there can be no assurance that our new product introductions will have a favorable impact on our operating results or that customers will choose our new products over those of our competitors.

Previous wording

We have experienced and expect to continue to experience seasonal fluctuations in sales due to the buying patterns of our customers and spending patterns of gamers. Our net revenue has generally been lower in the first and second calendar quarters due to lower consumer demand following the fourth quarter holiday season and because of the decline in sales that typically occurs in anticipation of the introduction of new or enhanced CPUs, GPUs, and other computer hardware products, which usually take place in the second calendar quarter, and which tend to drive sales in the following two quarters. Further, our net revenue tends to be higher in the third and fourth calendar quarters due to seasonal sales such as “Black Friday” and “Cyber Monday” as well as “Singles Day” in China, as retailers tend to make purchases in advance of these sales. Our sales also tend to be higher in the fourth quarter due to the introduction of new consoles and high-profile games in connection with the holiday season. As a consequence of seasonality, our net revenue for the second calendar quarter is generally the lowest of the year followed by the first calendar quarter. Historical seasonal patterns may not continue in the future and have been impacted, for example, in 2020 and 2021, primarily due to the impacts of the COVID-19 pandemic, and may be further impacted in the future, by macroeconomic factors, increasing supply constraints, GPU shortages, and shifts in customer behavior.

Current wording

We have experienced and expect to continue to experience seasonal fluctuations in sales due to the buying patterns of our customers and spending patterns of gamers. Our net revenue has generally been lower in the first and second calendar quarters due to lower consumer demand following the fourth quarter holiday season and because of the decline in sales that typically occurs in anticipation of the introduction of new or enhanced CPUs, GPUs, and other computer hardware products, which usually take place in the second calendar quarter, and which tend to drive sales in the following two quarters. Further, our net revenue tends to be higher in the third and fourth calendar quarters due to seasonal sales such as “Black Friday” and “Cyber Monday” as well as “Singles Day” in China, as retailers tend to make purchases in advance of these sales. Our sales also tend to be higher in the fourth quarter due to the introduction of new consoles and high-profile games in connection with the holiday season. As a consequence of seasonality, our net revenue for the second calendar quarter is generally the lowest of the year followed by the first calendar quarter. Historical seasonal patterns may not continue in the future and may be further impacted in the future, by macroeconomic factors, increasing supply constraints, GPU shortages, and shifts in customer behavior.

Previous wording

Interest income consists of interest earned on interest-bearing accounts.

Current wording

Interest income consists of interest earned on interest-bearing bank deposits and interest-bearing Bridge Loan, net of amortization of Bridge Loan origination costs.