Corsair Gaming, Inc.
For the period ended Mar 31, 2025. Filed May 7, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 7, 2025
CRSR$11.84-7.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-06.
0000950170-24-122439
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-07.
0000950170-25-064667
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 131 previous paragraphs and 101 current paragraphs.
60 unchanged; 34 reworded; 7 added; 35 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 12 previous and 12 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
Since February 2025, the U.S. government has proposed and in certain cases implemented new, substantial tariffs on imports to the U.S. from various countries, including Taiwan, China and Vietnam, where we manufacture or source our products. These tariffs and any retaliatory actions from other countries have created a volatile environment for global trade. As a global company with a flexible and multi-location manufacturing base, we are actively working to mitigate the potential supply chain challenges. Our products are manufactured in several countries, including the U.S., through a combination of our own factories and a network of reliable assembly subcontractors, and we have in the past demonstrated our ability to shift production locations with minimal disruptions to our business. During the first three months of 2025, the impact of new tariffs on our business was not material to our condensed consolidated financial statements. We expect the global tariff environment to remain volatile throughout 2025, and we are actively monitoring developments in global tariffs and will continue to evaluate the potential impact on our business and financial condition, as well as on our suppliers, and the actions we may take to mitigate any impact. For our risk factor related to the impact of tariffs, see “Changes in trade policy and regulations in the U.S. and other countries, including changes in trade agreements and the imposition of tariffs, as well as retaliatory responses, may have adverse impacts on our business, results of operations and financial condition.” under item 1A of this Form 10-Q.
Current report
SG&A expenses increased by $6.8 million, or 8.4%, for the three months ended March 31, 2025 as compared to the same period last year primarily due to a $4.0 million increase in distribution costs from higher sales volume, a $2.7 million increase in marketing and advertising costs, a $1.8 million increase in stock-based compensation expense, a $1.6 million increase in bad debt expense, and a $0.8 million increase in personnel-related cost. These increases were partially offset by a $5.2 million decrease in legal and other professional service expenses, mainly due to the absence of a one-time legal settlement cost that was recognized in the three months ended March 31, 2024.
Current report
Net revenue of the Gaming Components and Systems segment increased 11.9% for the three months ended March 31, 2025 as compared to the same period last year. This increase was due to an increase in demand for our memory products and our other component products in the self-built PC market, driven by the recent launch of the new generation of GPUs and CPUs.
Current report
The gross margin of the Gamer and Creator Peripherals segment increased by 70 bps for the three months ended March 31, 2025 as compared to the same period last year. The increase was primarily attributable to a 100 bps increase from lower air freight costs, a 60 bps increase from reduced costs to process inventory returns, and a 50 bps increase from an improved product mix within this segment. These increases were partially offset by a 160 bps decrease largely coming from higher royalty payments associated with the sales of our Sim racing products, and lesser benefits from sales to our suppliers.
Current report
The gross margin of the Gaming Components and Systems segment increased by 300 bps for the three months ended March 31, 2025 as compared to the same period last year. The increase was primarily attributable to an improved product mix and lower product material costs within this segment.
Current report
Cash used in investing activities was $3.1 million for the three months ended March 31, 2025 for capital expenditure.
Current report
Critical Accounting Policies and Estimates
Removed paragraphs (35)
Previous report
On September 19, 2024, we completed the acquisition of the Fanatec Business for a purchase consideration of $43.7 million. Refer to Note 5, “Business Combinations-Fanatec Acquisition” for more information on this transaction. The Fanatec sim racing product line, which fully complements our sim racing chassis, gaming PCs, gaming and streaming peripherals, and monitors, will expand our product offerings in these markets. Fanatec’s results of operations are included in our condensed consolidated statements of operations with effect from September 19, 2024.
Previous report
Components of our Operating Results
Previous report
We generate materially all of our net revenue from the sale of gamer and creator peripherals and gaming components and systems to retailers, including e-retailers, gamers and distributors worldwide. Our revenue is recognized net of allowances for returns, discounts, sales incentives and any taxes collected from customers.
Previous report
Cost of Revenue
Previous report
Cost of revenue consists of product costs, including costs of contract manufacturers, inbound freight costs from manufacturers to our distribution hubs as well as inter-hub shipments, cost of materials and overhead, duties and tariffs, warranty replacement cost to process and rework returned items, depreciation of tooling equipment, warehousing costs, excess and obsolete inventory write-downs, and certain allocated costs related to facilities and information technology, or IT, and personnel-related expenses and other operating expenses related to supply chain logistics.
Previous report
Operating Expenses
Previous report
Operating expenses consist of sales, general and administrative expenses and product development expenses.
Previous report
Sales, general and administrative. Sales, general and administrative, or SG&A, expenses represent the largest component of our operating expenses and consist of distribution costs, sales, marketing and other general and administrative costs. Distribution costs include outbound freight and the costs to operate our distribution hubs. Sales and marketing costs relate to the costs to operate our global sales force that works in conjunction with our channel partners, gaming team and event sponsorships, advertising and marketing promotions of our products and services, costs of maintaining our web store and credit card processing fees related to sales on our webstore, personnel-related cost and allocated overhead costs. General and administrative costs consist primarily of personnel-related expenses for our finance, legal, human resources, IT and administrative personnel, as well as the costs of professional services related to these functions and allocated overhead costs.
Previous report
Product development. 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, as well as depreciation costs of equipment used, prototype material costs and allocated overhead costs.
Previous report
Interest Expense
Previous report
Interest expense consists of interest associated with our debt financing arrangements, including our revolving line of credit, and amortization of debt issuance costs and debt discounts.
Previous report
Interest Income
Previous report
Interest income consists of interest earned on interest-bearing bank deposits and interest-bearing Bridge Loan, net of amortization of Bridge Loan origination costs.
Previous report
Other Income (Expense), Net
Previous report
Other expense, net consists primarily of our foreign currency exchange gains and losses relating to transactions and remeasurement of asset and liability balances denominated in foreign currencies, and net fair value gains and losses from our foreign currency forward contracts.
Previous report
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.
Previous report
Net Income Attributable to Noncontrolling Interest
Previous report
Net income attributable to noncontrolling interest represents the share of the net income of subsidiaries in which we own less than 100% of the equity attributable to the ownership interest that we did not acquire.
Previous report
Components of Results of Operations
Previous report
Net Revenue
Previous report
Net revenue decreased by 16.2% and 13.4% for the three and nine months ended September 30, 2024, respectively, as compared to the same periods last year.
Previous report
Gross margin decreased by 1.7% for the three months ended September 30, 2024, as compared to the same period last year. Higher spending on promotional activities as a proportion of net revenue resulted in a 1.8% decrease in gross margin, while higher product costs from suppliers and factory underutilization accounted for 1.7% of the decrease. These decreases were partially offset by an increase of 1.7% in gross margin from an improved product mix shift with more sales in the Gamer and Creator Peripherals segment.
Previous report
Gross margin decreased by 0.4% for the nine months ended September 30, 2024, as compared to the same period last year. Higher spending on promotional activities as a proportion of net revenue accounted for 1.3% of the decrease, and higher inventory reserves accounted for 0.7% of the decrease. These decreases were partially offset by an increase of 1.5% in gross margin from an improved product mix shift with more sales in the Gamer and Creator Peripherals segment.
Previous report
SG&A expenses remained relatively consistent for the three months ended September 30, 2024 as compared to the same period last year with a $1.5 million increase in distribution costs and a $0.5 million increase in professional fees being largely offset by lower bonus payments and marketing spend.
Previous report
SG&A expenses increased by $13.2 million, or 6.2%, for the nine months ended September 30, 2024 as compared to the same period last year primarily due to a $8.4 million increase in legal expense, which were mainly attributable to a one-time settlement and the Fanatec Acquisition, as well as a $3.7 million increase in distribution costs, which was largely attributable to rationalization costs for distribution hubs, as well as increased freight costs.
Previous report
Product development expenses remained relatively consistent for the three months ended September 30, 2024 as compared to the same period last year.
Previous report
Income Tax Benefit (Expense)
Previous report
Our effective tax rates were tax expense of (110.0)% and tax benefit of 3.3% for the three months ended September 30, 2024 and 2023, respectively. The change in our effective rate in the three-month period was primarily due to an income tax provision of $28.0 million for valuation allowance recorded against our U.S. federal and state deferred tax assets, partially offset by a tax benefit recognized for the transfer of customer relationship intangible asset from Hong Kong to United Kingdom as a result of our global tax restructuring initiative completed on July 1, 2024.
Previous report
On December 15, 2022, the European Union (“EU”) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (“OECD”) Pillar Two Framework that was supported by over 130 countries worldwide. The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive. A significant number of other countries are expected to also implement similar legislation, including United Kingdom which approved the legislation on July 11, 2023 with a full effective date of January 1, 2024. We have evaluated the potential impact from the OECD Pillar Two rules and determined that there is no impact to our financial position for the year of 2024.
Previous report
Net revenue of the Gaming Components and Systems segment decreased 25.9% and 23.6% for three and nine months ended September 30, 2024, respectively, as compared to the same periods last year. The demand for our products in this segment is largely driven by the activity in the self-built PC market, which is heavily influenced by the launch of new, reasonably priced GPUs and CPUs, as well as the release of new game titles. However, in 2024, we are mid-cycle for new GPU platforms, resulting in a relatively flat-to-low market trajectory for the self-built PC market since the beginning of the year. This has led to a greater than anticipated decrease in demand for our products in this segment during both the three- and nine-month periods. Additionally, we experienced a downward adjustment in inventory levels at our channel partners during the three- and nine-month periods compared to an increase in channel inventory levels during the same periods last year, contributing to the lower net revenues for those periods.
Previous report
The gross margin of the Gamer and Creator Peripherals segment increased by 7.2% for the nine months ended September 30, 2024 as compared to the same period last year. The increase was primarily attributable to a 4.7% increase from a more favorable product mix within this segment and lower product costs from suppliers and successful launches of new products with higher average margins, a 2.3% increase from lower inventory reserve, and a 1.1% increase due to lower costs to process inventory returns. These increases were partially offset by a 0.9% decrease due to higher air freight costs.
Previous report
The gross margin of the Gaming Components and Systems segment decreased by 6.7% for the three months ended September 30, 2024 as compared to the same period last year. The decrease was primarily attributable to a 2.3% decrease from an unfavorable product mix within this segment and pricing pressures from market competition, a 2.2% decrease from increased promotional activities as a proportion of net revenue, and a 2.2% decrease from higher inventory reserves.
Previous report
The gross margin of the Gaming Components and Systems segment decreased by 5.6% for the nine months ended September 30, 2024 as compared to the same period last year. The decrease was primarily attributable to a 2.5% decrease from an unfavorable product mix within this segment and pricing pressures from market competition, a 1.9% decrease from increased promotional activities as a proportion of net revenue, and a 1.5% decrease from factory underutilization and higher inventory reserves.
Previous report
Cash used in investing activities was $25.0 million for the nine months ended September 30, 2023 and consisted of $14.2 million cash used for the Drop Acquisition and $10.8 million of capital expenditure primarily for equipment and software.
Previous report
Critical Accounting Polices and Estimates
Reworded paragraphs (34)
Previous wording
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q as well as in conjunction with the Risk Factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the United States Securities and Exchange Commission (“SEC”) on February 27, 2024. The following discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those discussed under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023.
Current wording
You should read the following discussion of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q as well as in conjunction with the Risk Factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the United States Securities and Exchange Commission (“SEC”) on February 26, 2025. The following discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those discussed under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, and below in Item 3,“Quantitative and Qualitative Disclosures about Market Risk”.
Previous wording
We are a leading global provider and innovator of high-performance products for gamers and digital creators, such as streamers, Vloggers and broadcasters, many of which build their own PCs using our components. Our industry-leading gaming products help digital athletes, from casual gamers to committed professionals, perform at their peak across PC or console platforms, and our streaming products enable creators to produce studio-quality content to share with friends or to broadcast to millions of fans. Our PC components products offer our customers multiple options to build their customized gaming and workstation desktop PCs. Our solution is the most complete suite of products that address the most critical components for both game performance and streaming. Our product offering is enhanced by our two proprietary software platforms: iCUE for gamers and the Elgato streaming suite for content creators, including our Stream Deck control software, which provide unified, intuitive performance, and aesthetic control and customization across their respective product families. We also offer digital services to enhance the customer experience by integrating esports, Elgato's marketplace, customer care and extended warranty into our product offerings.
Current wording
We are a leading global provider and innovator of high-performance products for gamers and digital creators, such as streamers, vloggers and broadcasters, many of which build their own PCs using our components. Our industry-leading gaming products help digital athletes, from casual gamers to committed professionals, perform at their peak across PC or console platforms, and our streaming products enable creators, particularly streamers, to produce studio-quality content to share with friends or to broadcast to millions of fans. Our PC components products offer our customers multiple options to build their customized gaming and workstation desktop PCs. Our solution is the most complete suite of products that address the most critical components for both game performance and streaming. Our product offering is enhanced by our two proprietary software platforms: iCUE for gamers and the Elgato streaming suite for content creators, including our Stream Deck control software, which provide unified, intuitive performance, and aesthetic control and customization across their respective product families. We also offer digital services to enhance the customer experience by integrating esports, Elgato's marketplace, customer care and extended warranty into our product offerings.
Previous wording
Gaming Components and Systems. Includes our high-performance power supply units, or PSUs, cooling solutions, computer cases, and DRAM modules, as well as high-end prebuilt and custom-built gaming PCs and laptops, sim racing products and gaming monitors, among others.
Current wording
Gaming Components and Systems. Includes our high-performance power supply units, cooling solutions, computer cases, and DRAM modules, as well as high-end prebuilt and custom-built gaming PCs and laptops, and gaming monitors, among others.
Previous wording
Our net revenue was $304.2 million and $363.2 million for the three months ended September 30, 2024, and 2023, respectively. Our gross margin was 22.9% and 24.6% for the three months ended September 30, 2024 and 2023, respectively. We had a net loss of $51.6 million and $2.9 million for the three months ended September 30, 2024 and 2023, respectively.
Current wording
Our net revenue was $369.8 million and $337.3 million for the three months ended March 31, 2025 and 2024, respectively. Our gross margin was 27.7% and 25.7% for the three months ended March 31, 2025 and 2024, respectively. We had a net loss of $10.3 million and $11.0 million for the three months ended March 31, 2025 and 2024, respectively.
Previous wording
As of September 30, 2024, we had cash and restricted cash, in the aggregate of $61.6 million and the principal balance outstanding on our Term Loan was $177.8 million. Cash used in operations was $19.7 million for the nine months ended September 30, 2024, and cash provided by operations was $32.1 million for the nine months ended September 30, 2023.
Current wording
As of March 31, 2025, we had cash and restricted cash, in the aggregate of $102.5 million and the principal balance outstanding on our Term Loan was $149.0 million. Cash generated from operations was $18.8 million and cash used in operations was $26.3 million for the three months ended March 31, 2025 and 2024, respectively.
Previous wording
Our results of operations and financial condition are affected by numerous factors, including those discussed under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 and those described below.
Current wording
Our results of operations and financial condition are affected by numerous factors, including those discussed under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024 and of this Quarterly report on Form 10-Q, as well as those described below.
Previous 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
Current wording
Our business and financial performance depend significantly on worldwide economic conditions. We continue to face global macroeconomic challenges including evolving dynamics in the global trade environment and changes in laws or policies governing the terms of foreign trade, in particular increased trade restrictions, tariffs or taxes on imports or exports from or to countries where we manufacture or sell our products, inflationary trends, uncertainty in key financial markets, volatility in exchange rates and the risk of a recession. Other geopolitical concerns continue such as the effects of the ongoing conflicts in Ukraine and the Middle East, the tensions in the Red Sea, and any potential conflicts between China and Taiwan, and the resulting supply chain constraints.
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 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.
Current wording
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 nine months ending September 30, 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.
Previous wording
Increasing gaming engagement. We believe that gaming’s increasing time share of global entertainment consumption will drive continued growth in spending on both games and gaming products. Gaming continues to become increasingly social, as streaming viewership becomes more widely adopted along with increasing numbers of content creators. More members of the younger generation are gamers and spend more time on gaming related activities than older generations. We believe these trends will over time bring more gamers and creators to purchase dedicated hardware and help grow the market for peripheral products. The growth of these markets will not be linear, as these markets are impacted by macro-economic and consumer confidence conditions, amongst other conditions. Our Gaming Components and Systems segment makes components used for self-built PCs and full gaming systems. The self-built PC market is heavily influenced by the timing of release of new game titles and next-gen CPUs and GPUs, as discussed in the bullet below. As for the peripherals market, during the first nine months of 2024, our Gamer and Creator Peripherals segment benefited from a slight improvement in the peripherals market compared to the same period last year. We were also able to increase our sales in this segment through expanding our product offerings by adding new products such as our teleprompter offerings, new PC controllers and mobile controllers, and several new keyboards. We expect this trend in peripheral market improvement and expansion to continue into late 2024 and in 2025.
Current wording
Increasing gaming engagement. We believe that gaming’s increasing time share of global entertainment consumption will drive continued growth in spending on both games and gaming products. Gaming continues to become increasingly social, as streaming viewership becomes more widely adopted along with increasing numbers of content creators. More members of the younger generation are gamers and spend more time on gaming related activities than older generations. We believe these trends will over time bring more gamers and creators to purchase dedicated hardware and help grow the market for peripheral products. The growth of these markets will not be linear, as these markets are impacted by macroeconomic and consumer confidence conditions, amongst other conditions. Our Gaming Components and Systems segment makes components used for self-built PCs and full gaming systems. The self-built PC market is heavily influenced by the timing of release of new game titles and next-gen CPUs and GPUs, as discussed in the bullet below. As for our Gamer and Creator peripherals segment, we saw continued growth from last year, primarily from the successful integration of the new Fanatec business, which improves product availability and enhances customer experience in this market. For the rest of 2025, we expect our Fanatec products to draw key specialist retailers, further expanding our reach in the enthusiast gaming market.
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 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 and some highly anticipated game title releases until the next substantial GPU launch which is now expected in early 2025. The slowdown in the self-built PC market activity in the first nine months of 2024, led to a decrease in demand for our products in the Gaming Components and Systems segment in the nine months ended September 30, 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 power supply units 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. Following a period of elevated demand in 2023, driven by increased GPU availability and popular game launches, demand moderated during 2024 as we entered into a mid-cycle period for new GPU platforms. In early 2025, the launch of the latest generation of GPUs led to a resurgence in demand for our gaming components and systems products, and we expect this trend to continue for the rest of 2025.
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 31.5% and 29.2% of our net revenue for the nine months ended September 30, 2024 and 2023, respectively, and sales to our ten largest customers accounting for approximately 53.4% and 54.9% of our net revenue for the nine months ended September 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.
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 28.3% and 27.7% of our net revenue for the three months ended March 31, 2025 and 2024, respectively, and sales to our ten largest customers accounting for approximately 50.4% and 53.4% of our net revenue for the three months ended March 31, 2025 and 2024, 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. We have continued to enter new markets both through acquisitions, for example the sim racing market from the Fanatec Acquisition, and through extending our product lines. We launched 108 and 65 new products in 2023 and in the nine months ended September 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.
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. We believe our net revenue for 2024 and for the three months ended March 31, 2025 was favorably impacted by the release of 78 and 18 new products, 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 may be further impacted in the future, by macroeconomic factors, increasing supply constraints, GPU shortages, and shifts in customer behavior. For example, our revenue seasonality for the third quarter of 2024 was negatively impacted due to a lower demand for our products in the Gaming Components and Systems segment which was primarily attributable to the push out of the launch of new, reasonably priced GPUs and CPUs, as well as the release of new game titles to early 2025.
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. For example, our revenue seasonality for the third quarter of 2024 was negatively impacted due to a lower demand for our products in the Gaming Components and Systems segment which was primarily attributable to the delayed launches of new, reasonably priced GPUs and CPUs, as well as the postponed releases of new game titles to early 2025.
Previous wording
The decrease in net revenue in the three-month period was due to a 25.9% decrease in sales for our Gaming Components and Systems segment, which was partially offset by a 12.8% increase in sales for our Gamer and Creator Peripherals segment.
Current wording
Net revenue increased by 9.6% for the three months ended March 31, 2025 as compared to the same period last year. The increase in net revenue in the three-month period was due to an 11.9% increase in sales for our Gaming Components and Systems segment, and a 4.7% increase in sales for our Gamer and Creator Peripherals segment.
Previous wording
The gross margin of the Gamer and Creator Peripherals segment increased by 5.2% for the three months ended September 30, 2024 as compared to the same period last year. The increase was primarily attributable to a 4.2% increase from a more favorable product mix within this segment and lower product costs from suppliers and successful launches of new products with higher average margins, and a 2.2% increase due to lower costs to process inventory returns in the three months ended September 30, 2024. These increases were partially offset by a 1.0% decrease due to higher spending on promotional activities as a proportion of net revenue.
Current wording
Gross margin increased by 200 bps for the three months ended March 31, 2025 as compared to the same period last year. The increase was primarily attributable to a 150 bps increase from an improved product mix and lower product costs, and a 40 bps increase from lower costs to process inventory returns in the three months ended March 31, 2025.
Previous wording
Product development expenses increased by $2.0 million, or 4.2%, for the nine months ended September 30, 2024 as compared to the same period last year primarily due to a $1.7 million increase in personnel-related costs resulting from increase in headcount.
Current wording
Product development expenses increased by $1.0 million, or 6.0%, for the three months ended March 31, 2025 as compared to the same period last year primarily due to higher consulting and contractor costs.
Previous wording
Interest Expense, Interest Income and Other Income (Expense), Net
Current wording
Interest Expense, Interest Income and Other Expense, Net
Previous wording
Interest expense decreased by 29.5% and 22.4% for the three and nine months ended September 30, 2024, respectively, as compared to the same periods last year. The decrease was primarily due to lower principal balance on our Term Loan combined with lower interest rates on our Term Loan in the three and nine months ended September 30, 2024.
Current wording
Interest expense decreased by 27.5% for the three months ended March 31, 2025 as compared to the same period last year primarily due to lower principal balance on our Term Loan combined with lower interest rates.
Previous wording
Interest income decreased by 83.0% and 41.9% for the three and nine months ended September 30, 2024 and 2023, respectively, as compared to the same periods last year primarily due to lower cash balance in our interest-bearing account.
Current wording
Interest income decreased by 59.7% for the three months ended March 31, 2025 as compared to the same period last year primarily due to lower cash balance in our interest-bearing account combined with lower interest rates.
Previous wording
Other expense, net is primarily comprised of foreign exchange gains and losses on cash, accounts receivable and intercompany balances denominated in currencies other than the functional currencies of our subsidiaries. Our foreign currency exposure is primarily driven by fluctuations in the foreign currency exchanges rates of the Euro, British Pound and the Chinese Yuan.
Current wording
Other expense, net for the three months ended March 31, 2025 included a $2.6 million reversal of bargain purchase gain from the Fanatec Acquisition that was recognized in prior year. The remainder of other expense, net for the three months ended March 31, 2025 and 2024 primarily comprised of foreign exchange gains and losses on cash, accounts receivable and intercompany balances denominated in currencies other than the functional currencies of our subsidiaries. Our foreign currency exposure is primarily driven by fluctuations in the foreign currency exchange rates of the Euro and British Pound.
Previous wording
We are subject to income taxes in the United States and foreign jurisdictions in which we do business. These foreign jurisdictions have statutory tax rates different from those in the United States. Accordingly, our effective tax rates will vary depending on the relative proportion of foreign to United States income, the utilization of net operating loss and tax credit carry forwards, changes in geographic mix of income and expense, changes in management’s assessment of matters such as the ability to realize deferred tax assets, and changes in tax laws.
Current wording
We are subject to income taxes in the U.S. and foreign jurisdictions in which we do business. These foreign jurisdictions have statutory tax rates different from those in the U.S.. Accordingly, our effective tax rates will vary depending on the relative proportion of foreign to U.S. income, the utilization of net operating loss and tax credit carry forwards, changes in geographic mix of income and expense, changes in management’s assessment of matters such as the ability to realize deferred tax assets, and changes in tax laws.
Previous wording
Our effective tax rates were tax expense of (32.7)% and tax benefit of 26.0% for the nine months ended September 30, 2024 and 2023, respectively. The change in our effective rate in the nine-month period was primarily due to a change in the mix of income and losses in the various tax jurisdictions in which we operate, an income tax provision of $28.0 million for valuation allowance recorded against our U.S. federal and state deferred tax assets, partially offset by a tax benefit recognized for the transfer of customer relationship intangible asset from Hong Kong to United Kingdom as a result of our global tax restructuring initiative completed on July 1, 2024.
Current wording
Our effective tax rates were tax expense of (25.0)% and tax benefit of 13.9% for the three months ended March 31, 2025 and 2024, respectively. The change in our effective rate in the three-month period was primarily driven by a change in the mix of income and losses in the various tax jurisdictions in which we operate, as well as the impact of valuation allowance on U.S. federal and state deferred tax assets, which reduced the U.S. deferred income tax benefit.
Previous wording
We assess our deferred tax assets and liabilities to determine if it is more likely than not they will be realized; if not, a valuation allowance is required to be recorded. During the three months ended September 30, 2024, we have reached a cumulative loss position over the previous three years, and with consideration of other negative evidence, we concluded that U.S. federal and state deferred tax assets are not more likely than not to be realizable. As a result of the foregoing, a full valuation allowance was recorded in the current quarter. The deferred tax liability related to indefinite-lived assets was excluded from sources of future taxable income, as the timing of its reversal cannot be predicted due to the nature of its indefinite life.
Current wording
We assess our deferred tax assets and liabilities to determine if it is more likely than not that they will be realized; if not, a valuation allowance is required to be recorded. Previously, in the third quarter of 2024, we reached a cumulative loss position over the previous three years, and with consideration of other negative evidence, we concluded that U.S. federal and state deferred tax assets are not more likely than not to be realized. As a result of the foregoing, a full valuation allowance was recorded in 2024. The deferred tax liability related to indefinite-lived assets was excluded from sources of future taxable income, as the timing of its reversal cannot be predicted due to the nature of its indefinite life.
Previous wording
Net revenue of the Gamer and Creator Peripherals segment increased by 12.8% and 17.5% for the three and nine months ended September 30, 2024, respectively, as compared to the same periods last year. The increase was primarily driven by the success of recent new product launches, increased demand for most of the products in this segment and the inclusion of post-acquisition revenues from our July 2023 acquisition of Drop, a community-based e-commerce company.
Current wording
Net revenue of the Gamer and Creator Peripherals segment increased by 4.7% for the three months ended March 31, 2025 as compared to the same period last year primarily due to the inclusion of post-acquisition revenues from our September 2024 Fanatec Acquisition.
Previous wording
We have financed our operations and acquisitions through cash from operations, and when applicable, through debt facilities and issuance of equity securities. As of September 30, 2024, our principal sources of liquidity were cash and restricted cash, in aggregate of $61.6 million, and our borrowing capacity under the Revolving Facility (as defined below) of $100.0 million.
Current wording
We have financed our operations and acquisitions through cash from operations, and when necessary, through debt facilities and issuance of equity securities. As of March 31, 2025, our principal sources of liquidity were cash and restricted cash, in aggregate of $102.5 million, and our borrowing capacity under the Revolving Facility (as defined under “Capital Resources” below) of $99.8 million.
Previous wording
Net cash provided by operating activities for the nine months ended September 30, 2023 was $32.1 million and consisted of non-cash adjustments of $56.0 million, offset partially by a net loss of $8.6 million and a net cash outflow of $15.4 million from changes in our net operating assets and liabilities. The non-cash adjustments primarily consisted of amortization, depreciation and stock-based compensation expense, which were partially offset by changes in deferred income taxes. The net cash outflow from changes in our net operating assets and liabilities was primarily related to an increase in accounts receivable from timing of receipts and an increase in inventories due to higher purchases. These net cash outflows were partially offset by an increase in accounts payable.
Current wording
Net cash provided by operating activities for the three months ended March 31, 2025 was $18.8 million and consisted of non-cash adjustments of $27.1 million, a net cash inflow of $2.0 million from changes in our net operating assets and liabilities, partially offset by a net loss of $10.3 million. The non-cash adjustments primarily consisted of amortization of intangibles, depreciation, stock-based compensation expense, and the reversal of the Fanatec Acquisition bargain purchase gain previously recognized in the year ended December 31, 2024. The net cash inflow from changes in our net operating assets and liabilities was primarily related to an increase in accounts payable due to timing of payments and higher inventory purchases, partially offset by cash outflows from an increase in inventories as we stocked up in anticipation of tariffs, as well as a decrease in other liabilities and accrued expenses primarily due to a reduction in the accruals needed for customer incentives programs and sales returns with lower revenues.
Previous wording
Net cash used in operating activities for the nine months ended September 30, 2024 was $19.7 million and consisted of a net loss of $86.1 million and a net cash outflow of $10.3 million from changes in our net operating assets and liabilities, offset partially by non-cash adjustments of $76.8 million. The net cash outflow from changes in our net operating assets and liabilities was primarily related to a decrease in accounts payable due to timing of payments and a decrease in other liabilities and accrued expenses mainly due to a reduction in the accruals needed for sales returns and customer incentives with lower revenues, and lower bonus, as well as an increase in inventories as we ramp up for year-end sales. These net cash outflows were partially offset by a decrease in accounts receivable from lower revenue. The non-cash adjustments primarily consisted of amortization of intangibles, depreciation and stock-based compensation expense, as well as changes in deferred income taxes.
Current wording
Net cash used in operating activities for the three months ended March 31, 2024 was $26.3 million and consisted of a net loss of $11.0 million and a net cash outflow of $30.3 million from changes in our net operating assets and liabilities, partially offset by non-cash adjustments of $15.0 million. The net cash outflow from changes in our net operating assets and liabilities was primarily related to an increase in inventories, attributable in part to the buildup of safety stock to accommodate supply lead times in our peripherals products and in part due to lower demand for our components products in the first quarter of 2024, as well as a decrease in accounts payable due to timing of payments and a decrease in other liabilities and accrued expenses mainly due to a reduction in the accruals needed for sales returns and customer incentives with lower revenues. These net cash outflows were partially offset by a decrease in accounts receivable from lower revenue and a decrease in prepaid and other assets. The non-cash adjustments primarily consisted of amortization of intangibles, depreciation and stock-based compensation expense, which were partially offset by changes in deferred income taxes.
Previous wording
Cash used in investing activities was $50.5 million for the nine months ended September 30, 2024 and primarily consisted of $43.1 million cash used for the Fanatec Acquisition (refer to Note 5, “Business Combinations” for more information on the Fanatec Acquisition), $8.4 million of capital expenditure, partially offset by $1.0 million cash received from escrow for the purchase price adjustment related to the Drop Acquisition.
Current wording
Cash used in investing activities was $1.5 million for the three months ended March 31, 2024 and consisted of $2.5 million capital expenditure, partially offset by $1.0 million cash received from escrow for the purchase price adjustment related to a business acquisition.
Previous wording
Cash used in financing activities was $13.2 million for the nine months ended September 30, 2023 and primarily consisted of $16.3 million repayment of debt, $1.3 million payment of taxes related to net share settlement of equity awards, as well as $1.0 million payment of dividends to noncontrolling interest, which were partially offset by $6.8 million proceeds received from the issuance of shares through the employee equity incentive plans. We did not borrow from our Revolving Facility for the nine months ended September 30, 2023.
Current wording
Cash used in financing activities was $22.3 million for the three months ended March 31, 2025 and consisted of $25.0 million repayment of debt, $0.4 million payment of taxes related to net share settlement of equity awards, and $0.3 million payment of dividends to noncontrolling interest, partially offset by $3.4 million proceeds received from the issuance of shares through the employee equity incentive plans.
Previous wording
Cash used in financing activities was $46.6 million for the nine months ended September 30, 2024 and primarily consisted of $21.3 million repayment of debt, $19.8 million purchase of additional ownership interest in iDisplay (refer to Note 15, "Redeemable Noncontrolling Interest" for more information on the additional ownership interest purchase), $4.9 million settlement of deferred consideration related to a prior business acquisition in 2019, $5.2 million payment of dividends to noncontrolling interest, and $0.6 million payment of taxes related to net share settlement of equity awards, partially offset by $5.1 million proceeds received from the issuance of shares through the employee equity incentive plans. During the nine months ended September 30, 2024, we borrowed $21.5 million from our Revolving Facility to fund our operations and the full amount was repaid within the same period.
Current wording
Cash used in financing activities was $19.9 million for the three months ended March 31, 2024 and consisted of $15.0 million repayment of debt, $4.9 million settlement of deferred consideration related to a prior business acquisition in 2019, $2.0 million payment of dividends to noncontrolling interest, and $0.4 million payment of taxes related to net share settlement of equity awards, partially offset by $2.4 million proceeds received from the issuance of shares through the employee equity incentive plans.
Previous wording
On September 3, 2021, we refinanced the First Lien Credit and Guaranty Agreement with a new Credit Agreement (as amended, the “Credit Agreement”). The Credit Agreement provides for a total commitment of $350.0 million, consisting of a $100.0 million revolving credit facility (the “Revolving Facility”) and a $250.0 million term loan facility (the “Term Loan”). The Credit Agreement is available for a period of five years, maturing September 2026, and provides for additional incremental facilities up to a maximum aggregate principal amount of $250.0 million, subject to the satisfaction of certain conditions. We may prepay the Term Loan and the Revolving Facility at any time without premium or penalty. We prepaid $11.9 million and $34.1 million of the Term Loan principal in the nine months ended September 30, 2024 and in the year ended December 31, 2023, respectively. As of September 30, 2024, the total principal outstanding of the Term Loan was $177.8 million and the available and uncommitted capacity under the Revolving Facility was $100 million.
Current wording
On September 3, 2021, we refinanced the First Lien Credit and Guaranty Agreement with a new Credit Agreement (as amended, the “Credit Agreement”). The Credit Agreement provides for a total commitment of $350.0 million, consisting of a $100.0 million revolving credit facility (the “Revolving Facility”) and a $250.0 million term loan facility (the “Term Loan”). The Credit Agreement is available for a period of five years, maturing September 2026, and provides for additional incremental facilities up to a maximum aggregate principal amount of $250.0 million, subject to the satisfaction of certain conditions. We may prepay the Term Loan and the Revolving Facility at any time without premium or penalty. We prepaid $21.9 million and $12.5 million of the Term Loan principal in the three months ended March 31, 2025 and in the year ended December 31, 2024, respectively. As of March 31, 2025, the total principal outstanding of the Term Loan was $149.0 million and the available and uncommitted capacity under the Revolving Facility was $99.8 million.
Previous wording
As of September 30, 2024, we had $4.5 million in non-current income tax payable, including interest and penalties, related to our income tax liability for uncertain tax positions. At this time, we are unable to make a reasonably reliable estimate of the timing of payments in individual years in connection with these tax liabilities; therefore, such amounts are not included in the contractual cash obligation table above.
Current wording
As of March 31, 2025, we had $3.8 million in non-current income tax payable, including interest and penalties, related to our income tax liability for uncertain tax positions. At this time, we are unable to make a reasonably reliable estimate of the timing of payments in individual years in connection with these tax liabilities; therefore, such amounts are not included in the contractual cash obligation table above.
Previous wording
There have been no material changes to our critical accounting policies and estimates during the nine months ended September 30, 2024 as compared to the critical accounting policies and estimates described in our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 27, 2024.
Current wording
There have been no material changes to our critical accounting policies and estimates during the three months ended March 31, 2025 as compared to the critical accounting policies and estimates described in our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 26, 2025.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
We are subject to income taxes in the United States and foreign jurisdictions in which we do business. These foreign jurisdictions have statutory tax rates different from those in the United States. Accordingly, our effective tax rates will vary depending on the relative proportion of foreign to United States income, the utilization of foreign tax credits and changes in tax laws. 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.
Previous report — wording carried elsewhere
The decrease in net revenue in the nine-month period was due to a 23.6% decrease in sales for our Gaming Components and Systems segment, which was partially offset by a 17.5% increase in sales for our Gamer and Creator Peripherals segment.