sair Gaming(CRSR)2024-11-06 21:55Financial Performance - Net revenue for Q3 2024 was $304.2 million, down from $363.2 million in Q3 2023, representing a decrease of 16.2%[71] - Gross margin decreased to 22.9% in Q3 2024 from 24.6% in Q3 2023[71] - The company reported a net loss of $51.6 million for Q3 2024, compared to a net loss of $2.9 million in Q3 2023[71] - Net revenue decreased by 16.2% and 13.4% for the three and nine months ended September 30, 2024, respectively, compared to the same periods last year[92] - The decrease in net revenue for the three-month period was primarily due to a 25.9% decrease in sales for the Gaming Components and Systems segment, partially offset by a 12.8% increase in the Gamer and Creator Peripherals segment[92] - Operating loss for the three months ended September 30, 2024, was $(20,944), compared to $(758) for the same period last year[89] - Net loss attributable to Corsair Gaming, Inc. for the three months ended September 30, 2024, was $(51,708), compared to $(3,079) for the same period last year[89] Cash Flow and Liquidity - Cash used in operations was $19.7 million for the nine months ended September 30, 2024, compared to cash provided by operations of $32.1 million for the same period in 2023[71] - As of September 30, 2024, the company had cash and restricted cash totaling $61.6 million and a borrowing capacity of $100.0 million under the Revolving Facility[104] - Net cash used in operating activities for the nine months ended September 30, 2024 was $19.7 million, compared to net cash provided of $32.1 million for the same period in 2023[106] - Cash used in investing activities was $50.5 million for the nine months ended September 30, 2024, primarily due to a $43.1 million cash outflow for the Fanatec Acquisition[108] - Cash used in financing activities was $46.6 million for the nine months ended September 30, 2024, which included $21.3 million for debt repayment and $19.8 million for purchasing additional ownership interest in iDisplay[109] - The company had a total principal outstanding of $177.8 million on the Term Loan as of September 30, 2024, with a variable interest rate structure[110] - The company may require additional funding in the future, which could involve raising funds through borrowings or public/private sales of debt or equity securities[104] Segment Performance - The Gamer and Creator Peripherals segment saw a slight improvement in sales during the first nine months of 2024, driven by new product introductions[74] - Net revenue for the Gamer and Creator Peripherals segment increased by 12.8% and 17.5% for the three and nine months ended September 30, 2024, driven by new product launches and post-acquisition revenues from Drop[99] - Net revenue for the Gaming Components and Systems segment decreased by 25.9% and 23.6% for the three and nine months ended September 30, 2024, influenced by a flat-to-low market trajectory in the self-built PC market[100] Expenses and Costs - SG&A expenses increased by $13.2 million, or 6.2%, for the nine months ended September 30, 2024, primarily due to an $8.4 million increase in legal expenses[94] - Product development expenses for the nine months ended September 30, 2024, increased by $2.0 million, or 4.2%, primarily due to a $1.7 million increase in personnel-related costs[95] - The gross margin for the Gamer and Creator Peripherals segment increased to 38.3% for the three months ended September 30, 2024, attributed to a favorable product mix and lower product costs[102] - The gross margin for the Gaming Components and Systems segment decreased by 6.7% for the three months ended September 30, 2024, due to unfavorable product mix and pricing pressures[103] Tax and Interest - Interest expense for the three months ended September 30, 2024, was $(3,011), down from $(4,271) in the same period last year[89] - Interest expense decreased by 29.5% and 22.4% for the three and nine months ended September 30, 2024, respectively, due to lower principal balance and interest rates on the Term Loan[96] - The effective tax rate was (110.0)% for the three months ended September 30, 2024, primarily due to a $28.0 million valuation allowance against U.S. federal and state deferred tax assets[97] - The effective tax rate for the company will vary depending on the proportion of foreign to U.S. income and changes in tax laws[88] Foreign Currency and Risk - Approximately 20.2% of Corsair Gaming's net revenue for the nine months ended September 30, 2024, was denominated in foreign currencies, primarily Euro and British Pound[118] - The outstanding notional principal amount of forward currency contracts was $19.5 million as of September 30, 2024, down from $44.3 million as of December 31, 2023[118] - The impact of changes in foreign currency rates resulted in a net loss of $(1.9) million for the nine months ended September 30, 2024, compared to $(1.5) million for the same period in 2023[118] - A hypothetical ten percent change in exchange rates would affect gains or losses on foreign currency exchange by approximately $3.1 million for the nine months ended September 30, 2024[118] Corporate Governance - There were no changes in internal control over financial reporting that materially affected Corsair Gaming's internal control during the quarter ended September 30, 2024[121] - Corsair Gaming's disclosure controls and procedures were evaluated as effective as of September 30, 2024, providing reasonable assurance for timely reporting[120] - The company does not anticipate that any ongoing legal proceedings will have a material adverse effect on its business or financial condition[121] Acquisitions and Growth - Corsair completed the acquisition of the Fanatec Business for $43.7 million on September 19, 2024, expanding its product offerings in the sim racing market[70] - Corsair launched 65 new products in the nine months ended September 30, 2024, following 108 new products launched in 2023[77] - The company expects continued growth in the peripheral market into late 2024 and 2025, despite a slowdown in the self-built PC market in early 2024[74]