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DISCUSSION AND ANALYSIS OF MANAGEMENT’S FINANCIAL STATEMENT

                           AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition
and results of operations together with the condensed consolidated financial
statements and related notes included elsewhere in this Quarterly Report on Form
10-Q. This discussion contains forward-looking statements based upon current
expectations that involve risks and uncertainties. Our actual results may differ
materially from those anticipated in these forward-looking statements as a
result of various factors, including those discussed in the section titled "Risk
Factors" and in other parts of this Quarterly Report on Form 10-Q.

Overview


We are a leading global provider and innovator of high-performance gear for
gamers, streamers and content creators, many of which build their own PCs using
our components. Our gear is sold to end users worldwide through either our
retail channel or our direct-to-consumer channel. In our retail channel, we
distribute our gear either directly to the retailer, such as Amazon and Best
Buy, or through key distributors. In the last two years, we have entered into
three large new markets: microphones and cameras for content creators and gaming
monitors for both gamers and content creators. We continue to optimize the value
of existing products and to introduce new products to the market driving growth.
Over the longer term, we believe we will be able to continue to grow in new
markets as well as the markets that we participate in through innovation and
leading technologies and entry into new categories via organic growth or
acquisition.

We group our products into two categories (business segments):

• Peripherals for gamers and creators. Including our high-performance gaming

keyboards, mice, headsets, controllers and streaming equipment, 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. Including our powerful nutrition

units, or PSUs, cooling solutions, computer cases and DRAM modules, too

such as high-end prebuilt and custom gaming PCs and gaming monitor, among others

others.



Since 2018, we have completed eight acquisitions, including our acquisition of
51% of the share capital of iDisplay, a leader in electronic development and
design specializing in display technology, in January 2022. The iDisplay
acquisition will allow us to direct the development and integration of
iDisplay's display-based touch-screen technologies into our products for
creators, gamers and streamers. iDisplay's results of operations are fully
consolidated with Corsair with effect from January 1, 2022.

Summary of financial results


Our revenue for the three months ended June 30, 2022 decreased by $189.0 million
or 40.0%, compared to the same period last year. Our revenue for the six months
ended June 30, 2022 decreased by $337.7 million or 33.7%, compared to the same
period last year. The decrease in revenue for the three- and six-month periods
was primarily driven by the continuing slowdown in consumer spending in Europe
mainly related to the Russia and Ukraine war and the unexpected high
inflationary pressure on worldwide consumer spending, and also partly due to the
easing of the COVID-19 shelter in-place restrictions which resulted in decreased
demand for our gear as consumers sought alternative forms of entertainment. The
decrease in demand for our gear in the first half of 2022, particularly in the
second quarter of 2022, resulted in a buildup of inventory in our warehouses as
well as in the retail channel, causing our channel partners to delay ordering
while they clear excess inventory. Our gross margins decreased from 27.6% to
12.8% for the three months ended June 30, 2022 and from 29.0% to 19.1% for the
six months ended June 30, 3022, in each case, as compared to the same periods
last year. The decrease in our gross margins for the three- and six-month
periods were primarily due to increased freight and logistics costs and higher
promotional activities, as well as higher inventory impairment and related
charges in connection with our inventory rationalization plan to align our
inventory balance with the current revenue outlook at end of June 2022.

From June 30, 2022 we had cash and limited money, in total: $38.7 million and $246.3 million Term loan outstanding (nominal value). we have generated
$10.1 million cash flow from operations in the six months ended June 30, 2022.

Key Factors Affecting Our Business

Our results of operations and financial condition are affected by many factors, including those discussed in the section entitled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and the factors described below.

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Impact of Industry Trends

Our results of operations and financial condition are affected by industry trends in the gaming market, including:

• Increase engagement in gaming. We believe that gaming has an increasing share of time

of global entertainment consumption will fuel continued spending growth

on both games and gaming gear. Gaming is becoming more and more

social and streaming viewership more widely adopted, along with increasing

number of content creators. We believe this trend will continue and we are

well positioned to serve the streaming market with the best tools for

content creation.

• Introducing new high-performance computer hardware and advanced

spell. We believe that the introduction and availability of more powerful

CPUs and GPUs that place higher demands on other system components, such as

such as memory, power or cooling, has a significant effect on increasing

the demand for our equipment. The shortage of reasonably priced GPUs since the

second half of 2021 negatively impacted our gaming component

revenue. We believe the availability of reasonably priced GPS will improve

in the second half of 2022. In addition, we believe that our company

success partly depends on the introduction and success of games with

advanced graphics that place ever-increasing demands on system processing

speed and capacity and therefore require more powerful CPUs or GPUs, which

in turn, drives demand for our premium gaming components and

systems, such as PSUs and cooling solutions, and our gaming PC memory. Like a

result, our results of operations may be significantly affected by the timing of,

and the speed at which computer hardware companies develop new,

improved CPUs and GPUs, as well as the availability and pricing of such CPUs

and GPUs, the timing and speed at which computer game companies and

developers introduce advanced new and improved games for which:

ever-increasing levels of system and graphics processing power, and

whether these new products and games are widely accepted by gamers.

Impact of product mix


Our gamer and creator peripherals segment has a higher gross margin than our
gaming components and systems segment. As a result, our overall gross margin is
affected by changes in product mix. External factors can have an impact on our
product mix, such as popular game releases that can increase sales of
peripherals and availability of new CPUs and GPUs that can impact component
sales. In addition, within our gamer and creator peripherals and gaming
components and systems segments, gross margin varies between products, and
significant shifts in product mix within either segment may also significantly
impact our overall gross margin.

Impact of customer concentration


We operate a global sales network that consists primarily of retailers
(including eRetailers), 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 eRetailer Amazon accounting for
27.45% and 24.6% of our net revenue for the six months ended June 30, 2022 and
2021, respectively, and sales to our ten largest customers accounting for
approximately 51.96% and 50.0% of our net revenue for the six months ended June
30, 2022 and 2021, respectively. Our customers typically do not enter into
long-term agreements to purchase our gear 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 that helps eRetailers 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 expenses, for example utilizing expensive shipping
options such as air freight for smaller packages and more urgent deliveries and
more cost-efficient options, such as train or boat, for other shipments, has an
impact on our expenses and results of operations.

Impact of new product introductions


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. Since 2021, we had several
product introductions that had a favorable impact on our net revenue and
operating results, such as the introduction of our new K70 Pro RGB keyboard and
Elgato's new accessories including our new Facecam and next generation of HD60 X
Capture card, Corsair DDR5 memory and new high-performance gaming controllers
including SCUF Reflex, Reflex Pro and Reflex FPS, among others. However, 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 gear over
those of our competitors.

Impact of seasonal sales trends

Since 2020, our revenue seasonality has been positively and negatively impacted, and thus has not followed historical patterns, mainly caused by external events, such as shelter-in-place restrictions, global supply chain and logistics issues, and the availability of affordable GPUs. by the Covid19 pandemic. Historically, we experienced seasonal fluctuations in sales before 2020 and we expect to continue to experience this as a result of our customers’ buying patterns and gamers’ spending patterns. Our net income has

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generally been lowest 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 quarter due to seasonal sales such as "Black Friday," "Cyber
Monday" and "Singles Day" in China, as retailers tend to make purchases in
advance of these sales, and 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, and may be further impacted in
the future, by increasing supply constraints, GPU shortages, shifts in customer
behavior and the evolving impacts of the COVID-19 pandemic.

Impact of exchange rate fluctuations


We are subject to inherent risks attributed to operating in a global economy.
Some of our international sales are denominated in foreign currencies and any
unfavorable movement in the exchange rate between U.S. dollars and the
currencies in which we conduct sales in foreign countries, in particular the
Euro and the British Pound could have an adverse impact on our net revenue. In
addition, we generally pay our employees located outside the United States in
the local currency, with a significant portion of those payments being made in
Taiwan dollars and Euros. Additionally, as a result of our foreign sales and
operations, we have other expenses, assets and liabilities that are denominated
in foreign currencies, in particular the Chinese Yuan, Euro and British Pound.

Impact of Fluctuations in Integrated Circuit Prices


Integrated circuits, or ICs, account for most of the cost of producing our
high-performance memory products. IC prices are subject to pricing fluctuations
which can affect the average sales prices of memory modules, and thus impact our
net revenue, and can have an effect on gross margins. The impact on net revenues
can be significant as our high-performance memory products, included within our
gaming components and systems segment, represent a significant portion of our
net revenue.

Impact of macroeconomic conditions, COVID-19 pandemic and supply chain challenges


In February 2022, Russia invaded Ukraine resulting in, among other things, broad
economic sanctions being imposed on Russia, which has further increased existing
global supply chain, logistics, and inflationary challenges. Although our
business in Russia and Ukraine was not material to our results, we believe the
war has degraded the consumer sentiment in Europe and coupled with the
unexpected inflationary pressures which dampened consumer spending, attributed
to the 40.0% and 33.7% decrease in our net revenue in the three and six months
ended June 30, 2022, respectively, compared to the same periods last year.

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 an increase in demand for our gear as more people were 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
resulted in shelter-in-place and other similar restrictions being eased. Such
easing of restrictions has resulted in consumers returning to other alternative
forms of entertainment and interaction. This in turn has resulted in a decline
in demand for our products since the second half of 2021.

In addition, we have experienced and continue to experience supply chain
challenges, including longer production and shipping times, and increased
shipping and logistics costs, each of which has negatively impacted our gross
margins, as well as the need to purchase long-lead time items ahead of demand
due to supply constraints.

The extent of the impact of macroeconomic conditions, the COVID-19 pandemic,
geopolitical tensions and supply chain challenges 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.

Our inventory impairment and related charges increased by $22.7 million in the
three months ended June 30, 2022, as compared to the same period last year,
primarily resulting from our inventory valuation assessment and our plan to
rationalize our inventory level to align with the current revenue outlook at end
of June 2022. In addition, in the three months ended June 30, 2022, in order to
align our expenses with the expected revenue level, we implemented a
restructuring plan and terminated 92 employees worldwide, resulting in
approximately $1.5 million of restructuring costs, primarily consisting of
severance and benefits. Our restructuring plan has been substantially completed
as of June 2022.



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Components of our operating results

Net Income


We generate materially all of our net revenue from the sale of gamer and creator
peripherals and gaming components and systems to retailers, including online
retailers, gamers and distributors worldwide. Our revenue is recognized net of
allowances for returns, discounts, sales incentives and any taxes collected from
customers.

Cost of Revenue

Cost of revenue consists primarily 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.

Operating costs

Operating expenses consist of product development and sales, general and administrative expenses.


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.

We expect our total sales, general and administrative expenses to increase in
absolute dollars as we continue to actively promote and distribute a higher
volume of our products and also due to the anticipated growth of our business
and related infrastructure, including increases in legal, accounting, insurance,
compliance, investor relations and other consulting costs.

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.

We expect our product development spending to increase in absolute dollars as we continue to make significant investments in developing new products and improving existing products.

Interest costs

Interest expense consists of interest in connection with our debt financing arrangements, including our revolving credit line, amortization of debt issuance costs and debt discounts, loss on debt service, consisting of the write-off of unamortized debt discount and fees in connection with the prepayment of our term loans.

Other (cost) income, net


Other (expense) income, 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. We expect our foreign
currency gains and losses to continue to fluctuate in the future due to changes
in foreign currency exchange rates.

Income Tax Expenses


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.

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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.

Net income (loss) attributable to non-controlling interests


Net income (loss) attributable to noncontrolling interests represents the share
of the net income (loss) of iDisplay attributable to the 49% ownership interest
of iDisplay not acquired by Corsair.

Results of operations

The following tables present the components of our condensed consolidated company statements, in dollars (thousands) and as a percentage of total net income, for each of the periods presented.

                                         Three Months Ended              Six Months Ended
                                              June 30,                       June 30,
                                         2022           2021           2022           2021

Net revenue                           $  283,908     $  472,903     $  664,599     $ 1,002,317
Cost of revenue                          247,449        342,552        537,384         711,638
Gross profit                              36,459        130,351        127,215         290,679
Operating expenses:
Sales, general and administrative         73,393         80,169        149,524         158,022
Product development                       18,026         15,469         35,136          30,655
Total operating expenses                  91,419         95,638        184,660         188,677
Operating income (loss)                  (54,960 )       34,713        (57,445 )       102,002
Other (expense) income:
Interest expense                          (1,676 )       (4,508 )       (2,955 )        (9,454 )
Other income (expense), net                  633           (175 )          134          (2,600 )
Total other expense, net                  (1,043 )       (4,683 )       (2,821 )       (12,054 )
Income (loss) before income taxes        (56,003 )       30,030        (60,266 )        89,948
Income tax benefit (expense)               4,164         (2,285 )        5,147         (15,480 )
Net income (loss)                        (51,839 )       27,745     $  (55,119 )   $    74,468
  Less: Net income (loss)
attributable to noncontrolling
interests                                    174              -           (233 )             -
  Net income (loss) attributable to
Corsair Gaming, Inc.                  $  (52,013 )   $   27,745     $  (54,886 )   $    74,468


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                                           Three Months Ended               Six Months Ended
                                                June 30,                        June 30,
                                         2022              2021           2022             2021

Net revenue                                 100.0 %          100.0 %         100.0 %         100.0 %
Cost of revenue                              87.2             72.4            80.9            71.0
Gross profit                                 12.8             27.6            19.1            29.0
Operating expenses:
Sales, general and administrative            25.9             17.0            22.5            15.8
Product development                           6.3              3.4             5.3             3.1
Total operating expenses                     32.2             20.4            27.8            18.8
Operating income (loss)                     (19.4 )            7.2            (8.6 )          10.2
Other (expense) income:
Interest expense                             (0.6 )           (1.0 )          (0.4 )          (0.9 )
Other income (expense), net                   0.2             (0.0 )           0.0            (0.3 )
Total other expense, net                     (0.4 )           (1.0 )          (0.4 )          (1.2 )
Income (loss) before income taxes           (19.8 )            6.2            (9.1 )           9.0
Income tax benefit (expense)                  1.5             (0.5 )           0.8            (1.5 )
Net income (loss)                           (18.3 )            5.7            (0.1 )           0.1
  Less: Net income (loss)
attributable to noncontrolling
interests                                     0.1                -            (0.0 )             -
  Net income (loss) attributable to
Corsair Gaming, Inc.                        (18.4 )%           5.7 %          (0.0 )%          0.1 %



Components of Business Results

Net Income

                Three Months Ended            Six Months Ended
                     June 30,                     June 30,
                2022          2021          2022           2021

                                 (In thousands)
Net revenue   $ 283,908     $ 472,903     $ 664,599     $ 1,002,317




Net revenue decreased $189.0 million, or 40.0%, for the three months ended
June 30, 2022 as compared to the same period last year. The decrease was due to
a 42.6% decrease in sales for our gamer and creator peripherals segment and a
38.7% decrease in sales for our gaming components and systems segment. Net
revenue decreased $337.7 million, or 33.7%, for the six months ended June 30,
2022 as compared to the same period last year. The decrease was due to a 32.6%
decrease in sales for our gamer and creator peripherals segment and a 34.2%
decrease in sales for our gaming components and systems segment.



We believe the decrease in net revenue in both segments for the three- and
six-month periods was primarily due to consumer consumption in Europe being
negatively impacted by the Russia-Ukraine war, coupled with lower consumer
discretionary spending due to higher-than-expected inflationary pressures
world-wide. The decrease in our net revenue to the Europe and Middle East Region
accounted for approximately 62% and 65% of the decline in our total net revenue
in the three and six months ended June 30, 2022, respectively. The decrease in
our net revenue for the three- and six- month periods was also in part due to a
slow-down in demand compared to the same periods last year as a result of the
easing of the COVID-19 shelter-in-place restrictions because more other
entertainment options began to reopen, starting in the second half of 2021.



Gross Profit and Gross Margin (defined as gross profit as a percentage of
revenue)


                 Three Months Ended           Six Months Ended
                      June 30,                    June 30,
                 2022          2021          2022          2021

                                 (In thousands)
Gross profit   $  36,459     $ 130,351     $ 127,215     $ 290,679
Gross margin        12.8 %        27.6 %        19.1 %        29.0 %


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Gross margin decreased by 14.8% for the three months ended June 30, 2022 as
compared to the same period last year. This decrease was primarily attributable
to an increase in inventory impairment and related charges due to our inventory
rationalization plan to align our inventory balance with the current expected
revenue level as well as our planned introduction of new replacement products.
The gross margin in the three months ended June 30, 2022 was also negatively
impacted by an unfavorable shift towards higher mix of net revenue from our
lower margin gaming components and systems segment, increased freight and
logistics costs largely driven by global shipping and logistics challenges
caused by the COVID-19 pandemic, increased promotional activity, as well as
increased amortization of intangible assets from our iDisplay acquisition.



Gross margin decreased by 9.9% for the six months ended June 30, 2022 as
compared to the same period last year. This decrease was primarily attributable
to an increase in inventory impairment and related charges due to our inventory
rationalization plan to align our inventory balance with the current expected
revenue level as well as our planned introduction of new replacement products.
The gross margin in the six months ended June 30, 2022 compared to the same
period last year was also negatively impacted by increased freight and logistics
costs largely driven by global shipping and logistics challenges caused by the
COVID-19 pandemic, increased promotional activity, as well as increased
amortization of intangible assets from the iDisplay acquisition.


Sales, general and administrative (SG&A)

                                      Three Months Ended           Six Months Ended
                                           June 30,                    June 30,
                                       2022          2021         2022          2021

                                                      (In thousands)

Sales, general and administrative $73,393 $80,169 $149,524

  $ 158,022




SG&A expenses decreased $6.8 million, or 8.5%, for the three months ended
June 30, 2022 as compared to the same period last year. The decrease was
primarily due to a $5.8 million decrease in distribution cost including outbound
freight cost due to decreased sales volume, a $2.3 million decrease in
personnel-related costs due to lower bonus expense, a $1.4 million decrease in
marketing and advertising expenses and a $0.4 million decrease in legal and
other professional fees. These decreases were offset partially by a $3.5 million
charge related to the acceleration of the amortization of capitalized cloud
computing implementation costs in the three months ended June 30, 2022.



SG&A expenses decreased $8.5 million, or 5.4%, for the six months ended June 30,
2022 as compared to the same period last year. The decrease was primarily due to
a $5.2 million decrease in distribution cost including outbound freight cost
with lower shipment volume, a $4.7 million decrease in personnel-related costs
with lower bonus expense and a $1.8 million decrease in legal and other
professional fees. These decreases were offset partially by a $3.5 million
charge related to the acceleration of the amortization of capitalized cloud
computing implementation costs in the six months ended June 30, 2022.



Product Development
                        Three Months Ended          Six Months Ended
                             June 30,                   June 30,
                         2022          2021         2022         2021

                                       (In thousands)
Product development   $   18,026     $ 15,469     $ 35,136     $ 30,655




Product development expenses increased $2.6 million, or 16.5%, for the three
months ended June 30, 2022 as compared to the same period last year. The
increase was primarily due to a $0.9 million increase in amortization of
intangible assets acquired in the iDisplay acquisition, a $0.8 million increase
in allocation of corporate IT-related costs and a $0.5 million increase in
consultant and contractor expenses.



Product development expenses increased $4.5 million, or 14.6%, for the six
months ended June 30, 2022 as compared to the same period last year. The
increase was primarily due to a $1.9 million increase in amortization of
intangible assets acquired in the iDisplay acquisition, a $1.1 million increase
in allocation of corporate IT-related and facility-related costs, and a $1.5
million increase in other product development related costs to support our
continued innovation and broadening of our product portfolio.

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Interest expense and other (cost) income, net

                                Three Months Ended          Six Months Ended
                                     June 30,                   June 30,
                                 2022          2021         2022         2021

                                               (In thousands)
Interest expense              $   (1,676 )   $ (4,508 )   $ (2,955 )   $ (9,454 )
Other (expense) income, net          633         (175 )        134       (2,600 )




Interest expense decreased $2.8 million, or 62.8%, for the three months ended
June 30, 2022 as compared to the same period last year. Interest expenses
decreased $6.5 million, or 68.7%, for the six months ended June 30, 2022 as
compared to the same period last year. The decrease in interest expense in both
the three- and six-month periods was primarily due to a lower principal balance
on our Term Loan executed in September 2021 which replaced our First Lien Term
Loan and lower interest rate compared to the same periods last year.

Other (expense) income, 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.

Income Tax Benefit (Expense)
                                      Three Months Ended           Six Months Ended
                                           June 30,                    June 30,
                                       2022          2021         2022          2021

                                                      (In thousands)

Income (loss) before income tax $ (56,003) $30,030 $ (60,266)

  $  89,948
Income tax benefit (expense)             4,164       (2,285 )       5,147       (15,480 )
Effective tax rate                         7.4 %        7.6 %         8.5 %        17.2 %




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, and changes in management's
assessment of matters such as the ability to realize deferred tax assets, and
changes in tax laws.


Our effective tax rates were consistent for the three months ended June 30, 2022
and 2021, at 7.4% and 7.6%, respectively. Our effective tax rates were 8.5% and
17.2% for the six months ended June 30, 2022 and 2021, respectively. The
decrease in effective tax rates was primarily due to an increase in losses in
our foreign subsidiaries offset by a decrease in excess tax benefits from
stock-based compensation recognized in the six months ended June 30, 2022, as
compared to the same period last year. In addition, in the six months ended June
30, 2021, we recorded a $1.4 million one-time tax expense related to the
remeasurement of our United Kingdom deferred tax liabilities as a result of the
enactment of the increased corporate tax rate in the United Kingdom.

Segment Results

Segment Net Income

The following table shows our net sales by segment, expressed in dollars (thousands) and as a percentage of net sales:

                                                   Three Months Ended June 30,                            Six Months Ended June 30,
                                                 2022                      2021                       2022                       2021

Gamer and Creator Peripherals Segment $88,989 31.3% $155,157 32.8% $223,137 33.6% $331,069 33.0% Gaming Components and Systems Segment

    Memory Products                         99,120        34.9       

158,735 33.6 231,274 34.8 320,599 32.0

    Other Component Products                95,799        33.7       159,011        33.6        210,188        31.6         350,649        35.0
                                           194,919        68.7       317,746        67.2        441,462        66.4         671,248        67.0
    Total Net Revenue                    $ 283,908     100.0%      $ 472,903     100.0%       $ 664,599     100.0%      $ 1,002,317     100.0%


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Gamer and Creator Peripherals Segment


Net revenue of the gamer and creator peripherals segment decreased $66.2
million, or 42.6%, for the three months ended June 30, 2022 as compared to the
same period last year, and decreased $107.9 million, or 32.6%, for the six
months ended June 30, 2022 as compared to the same period last year. The
decrease in net revenue was driven primarily by the decline in consumer demand
in Europe due to the war between Russia and Ukraine as well as the inflationary
economic pressures. The decrease in net revenue was also partly due to the
easing of the COVID-19 shelter-in-place restriction because more entertainment
options began to reopen, starting in the second half of 2021

Gaming Components and Systems Segment


Net revenue of the gaming components and systems segment decreased $122.8
million, or 38.7%, for the three months ended June 30, 2022 as compared to the
same period last year, and decreased $229.8 million, or 34.2%, for the six
months ended June 30, 2022 as compared to the same period last year. The
decrease was primarily driven by the decline in consumer demand in Europe due to
the war between Russia and Ukraine as well as the inflationary economic
pressures. The decrease in net revenue was also attributable to the shortage of
reasonably priced GPUs which curtailed the demand for new PC builds and its
components, as well as supply and logistics constraints caused by the COVID-19
pandemic. We believe the availability of reasonably priced GPUs will improve in
the second half of 2022.

Segment Gross Profit and Gross Margin

The following table shows our gross profit in dollars (thousands) and gross margin by segment:

                                          Three Months Ended June 30,                         Six Months Ended June 30,
                                         2022                     2021                      2022                     2021

Gamer and Creator Peripherals
Segment                           $ 10,558     11.9%      $  54,634     

35.2% $53,615 24.0% $123,500 37.3% Gaming Components and Systems Segment

    Memory Products                  8,885       9.0         28,126       

17.7 29,950 13.0 62,049 19.4

    Other Component Products        17,016       17.8        47,591       29.9         43,650       20.8       105,130       30.0
                                    25,901       13.3        75,717       23.8         73,600       16.7       167,179       24.9
    Total Gross Profit            $ 36,459     12.8%      $ 130,351     27.6%       $ 127,215     19.1%      $ 290,679     29.0%



Gamer and Creator Peripherals Segment


The gross margin of the gamer and creator peripherals segment decreased in the
three and six months ended June 30, 2022 by 23.3% and 13.3%, respectively, as
compared to the same periods last year. The decrease was primarily attributable
to an increase in inventory impairment and related charges due to our inventory
rationalization plan to align our inventory balance with the current expected
revenue level and our planned introduction of new replacement products, as well
as increased logistics costs, increased promotional activity, and increased
amortization of intangible assets from the iDisplay acquisition.

Gaming Components and Systems Segment


The gross margin of the gaming components and systems segment decreased in the
three and six months ended June 30, 2022 by 10.5% and 8.2%, respectively, as
compared to the same periods last year. The decrease was primarily attributable
to an increase in inventory impairment and related charges due to our inventory
rationalization plan to align our inventory balance with the current expected
revenue level and our planned introduction of new replacement products, as well
as increased logistics costs, increased promotional activity and downward
pressure on pricing for our memory products.

Liquidity and Capital Resources


Our principal sources of liquidity have been the payments received from
customers purchasing our products and the borrowings under our Credit Agreement
(defined below). Our principal uses of cash generally will include purchases of
inventory, payroll and other operating expenses related to the development and
marketing of our products, capital expenditure, repayments of debt and related
interest, income tax payments, continued investments in businesses and
technology, and selective mergers and acquisitions.

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As of June 30, 2022, we had cash and restricted cash, in aggregate of $38.7
million, including $10.7 million held by our foreign subsidiaries. Amounts held
outside of the United States are generally utilized to support our non-U.S.
liquidity needs. Repatriations of amounts held outside the United States
generally will not be taxable from a U.S. federal tax perspective, but may be
subject to state income or foreign withholding tax. We do not expect
restrictions or potential taxes incurred on repatriation of amounts held outside
of the United States to have a material effect on our overall liquidity,
financial condition or results of operations.

We believe that the anticipated cash flows from operations based on our current
business outlook, combined with our current levels of cash balances at June 30,
2022, supplemented with the borrowings under our Revolving Credit Facility will
be sufficient to fund our principal uses of cash for at least the next twelve
months. In the longer term, liquidity will depend to a great extent on our
future revenues and our ability to appropriately manage our costs based on the
demand for our products. We may require additional funding and need or choose to
raise the required funds through borrowings or public or private sales of debt
or equity securities. The sale of additional equity would result in additional
dilution to our stockholders. The incurrence of debt financing would result in
debt service obligations and the instruments governing such debt could provide
for operating and financial covenants that would restrict our operations. There
can be no assurance that any such equity or debt financing will be available on
favorable terms, or at all.

Liquidity


The following table summarizes our cash flows for the periods presented (in
thousands):

                                    Six Months Ended June 30,
                                      2022               2021

Net cash provided by (used in):
Operating activities              $      10,051       $   59,397
Investing activities                    (32,550 )        (10,931 )
Financing activities                       (677 )        (43,541 )

cashflow from operational activities


Net cash provided by operating activities for the six months ended June 30, 2022
was $10.1 million and consisted of $32.9 million net cash inflow from changes in
our net operating assets and liabilities, offset partially by our net loss of
$55.1 million, which included non-cash adjustments of $32.2 million. The net
cash inflow from changes in our net operating assets and liabilities was
primarily related to a decrease in accounts receivable due to decrease in
revenue and a decrease in inventories mainly from increase in inventory
impairment charges due to our inventory rationalization plan to align our
inventory balance with the current expected revenue level as well as our planned
introduction of new replacement products. These net cash inflows was partially
offset by an increase in prepaid and other assets, 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 lower accrual for sales returns and customer
incentives and bonus expense. The non-cash adjustments consisted primarily of
amortization, depreciation, stock-based compensation expense, and changes in
deferred tax assets.

Net cash provided by operating activities for the six months ended June 30, 2021
was $59.4 million and consisted of net income of $74.5 million, which included
non-cash adjustments of $27.9 million, and was partially offset by $43.0 million
from changes in our net operating assets and liabilities. The non-cash
adjustments consisted primarily of amortization, depreciation, stock-based
compensation expense, loss on debt extinguishment and amortization of debt
issuance costs and change in deferred tax assets. The net cash outflow from
changes in our net operating assets and liabilities was primarily related to
increase in inventory, prepaid expenses and other assets, and a decrease in
accounts payable mainly due to timing of payments. The net cash outflow was
partially offset by a decrease in accounts receivable and an increase in other
liabilities and accrued expenses.

Cash flows from investing activities


Cash used in investing activities was $32.6 million for the six months ended
June 30, 2022 and primarily consisted of $19.5 million for the iDisplay
acquisition (net of cash acquired), $11.9 million capital expenditure including
renovation and furnishing of our new headquarters in Milpitas, California, as
well as purchases of equipment and software, and $1.0 million for the investment
in an available-for-sale convertible note.

Cash used in investing activities was $10.9 million for the six months ended
June 30, 2021 and consisted of $4.9 million for the purchase of capital
equipment and software, $4.3 million for the payment of deferred and contingent
consideration related to the Origin acquisition, and $1.7 million for the
acquisition of an immaterial business.

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Cash flows from financing activities


Cash used in financing activities was $0.7 million for the six months ended June
30, 2022 and consisted of $2.8 million repayment of debt and debt issuance
costs, $1.0 million payment of taxes related to net share settlement of equity
awards, and $0.4 million payment of contingent consideration from previous
acquisitions, partially offset by $3.5 million proceeds received from the
issuance of shares through the employee equity incentive plans. During the six
months ended June 30, 2022, we also borrowed $403.0 million from our revolving
credit facility to fund our operations and the full amount was repaid within the
same period.

Cash used in financing activities was $43.5 million for the six months ended
June 30, 2021 and consisted of $53.0 repayment of debt, partially offset by $9.5
million proceeds received from the issuance of shares through the employee
equity incentive plans.

Resources

Credit Agreement (Term Loan and Revolving Credit Facility)


On September 3, 2021, we refinanced the First Lien Credit and Guaranty Agreement
with a new Credit Agreement ("Credit Agreement"). The new Credit Agreement
provides for a total commitment of $350 million, consisting of a $100 million
revolving credit facility ("Revolving Credit Facility") and a $250 million term
loan facility ("Term Loan"). The net proceeds from borrowings under the Term
Loan 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 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.

The Term Loan and Revolving Credit Facility under the Credit Agreement initially
carried interest at our election at 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 total
net leverage ratio.

The Credit Agreement contains covenants with which we must comply during the
term of the agreement, which we believe are ordinary and standard for agreements
of this nature, including the maintenance of a maximum Consolidated Total Net
Leverage Ratio of 3.0 to 1.0 and a minimum Consolidated Interest Coverage Ratio
of 3.0 to 1.0 (as defined in our Credit Agreement). The Credit Agreement also
includes events of default customary for facilities of this nature and upon the
occurrence of such events of default, among other things, all outstanding
amounts under the Credit Agreement may be accelerated and/or the lenders'
commitments terminated. In addition, upon the occurrence of certain events of
default, the interest on the Term loan and Revolving Credit Facility can
increase by 2.0%.

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.

On June 30, 2022, we entered into a First Amendment of the Credit Agreement
("First Amendment") which among other changes resulted in the Bloomberg
Short-Term Bank Yield Index rate ("BSBY") being utilized as a replacement rate
for LIBOR. Consequently, following the First Amendment, the Term Loan and
Revolving Facility will each bear interest at our election at either (a) BSBY
plus a percentage spread (ranging from 1.25% to 2.25%) based on our total net
leverage ratio, or (b) the base rate as the greatest of (i) the prime rate, (ii)
the federal funds rate plus 0.50% and (iii) one-month BSBY plus 1.0%) plus a
percentage spread (ranging from 0.25% to 1.25%) based on our net leverage ratio.
In addition, pursuant to the First Amendment, the maximum permitted Consolidated
Total Net Leverage Ratio (as defined in the Credit Agreement) was also amended
to increase to 3.50 to 1.0 between the quarters ending September 30, 2022
through and including March 31, 2023, and such ratio will revert to 3.00 to 1.00
from the quarter ended June 30, 2023 and each quarter thereafter, provided that,
upon the occurrence of a Qualified Acquisition (as defined in the Credit
Agreement), such ratio can be increased to 3.50 to 1.0 temporarily provided all
the requirements set forth in the Credit Agreement are met.

As of June 30, 2022, we were not in default under the Credit Agreement. Total
principal outstanding of the Term Loan was $246.3 million and the available and
uncommitted capacity under the Revolving Credit Facility was $99.5 million.

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Contractual obligations and other obligations

The following table provides an overview of our contractual cash and other obligations from:
June 30, 2022 (in thousands):

                                                     Payments Due by Period
                                            Less than         1-3            3-5          More than
                              Total          1 Year          Years          Years          5 Years

Debt principal and          $  288,696     $    16,198     $   43,653     $  228,845     $         -
interest payments (1)
Inventory-related              107,837         107,837              -              -               -
purchase obligations (2)
Operating lease                 66,816           9,086         18,562         11,617          27,551
obligations (3)
Other purchase                  30,926          27,721          3,205              -               -
obligations (4)
Contingent consideration
in connection                      954             954              -              -               -
  with a business
acquisition
Total                       $  495,229     $   161,796     $   65,420     $  240,462     $    27,551


(1) Amounts represent principal cash payments from: June 30, 2022 of our term

Loan based on the repayment schedule according to the Credit Agreement and

    the expected interest payments associated with the Term Loan. See Note 8
    "Debt" to our consolidated financial statements for more information.

(2) Amounts represent an estimate of purchase obligations related to inventory.

(3) Amounts represent contractual obligations under our operating leases for

offices and warehouse spaces.

(4) Amounts represent non-cancellable liabilities related to capital expenditures,

software licensing, marketing and other activities.

From June 30, 2022we had $2.4 million in long-term income tax payable, including interest and penalties, in connection with our income tax liability for uncertain tax positions. At this time, we cannot 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 above table of contractual cash liabilities.

Critical Accounting Policies and Estimates


A critical accounting policy is defined as one that has both a material impact
on our financial condition and results of operations and requires us to make
difficult, complex and/or subjective judgments, often as a result of the need to
make estimates about matters that are inherently uncertain. Our consolidated
financial statements are prepared in accordance with U.S. generally accepted
accounting principles ("GAAP"), which requires us to make estimates, judgments
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent liabilities at the date of the condensed
consolidated financial statements, as well as the reported amounts of revenue
and expenses during the reporting periods. Our estimates are based on our
historical experience and on various other factors that we believe to be
applicable and we evaluate them on an ongoing basis to ensure they remain
reasonable under current conditions. Actual results may differ significantly
from those estimates, which could have a material impact on our business,
results of operations, and financial condition.

Other than the new items discussed in Note 2 of our condensed consolidated
financial statements, there have been no material changes to our critical
accounting policies and estimates during the six months ended June 30, 2022 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, 2021 filed with the SEC on March 1, 2022.

Recent accounting statements


Refer to Note 2 to the condensed consolidated financial statements included in
this Quarterly Report on Form 10-Q for recent accounting pronouncements adopted
and to be adopted.

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