GameStop Corp. (NYSE: GME) (“GameStop” or the “Company”) today
released financial results for the first quarter ended April 29,
2023. The Company’s condensed and consolidated financial
statements, including GAAP and non-GAAP results, are below. The
Company’s Form 10-Q and supplemental information can be found at
https://investor.gamestop.com.
FIRST QUARTER OVERVIEW
- Net sales were $1.237 billion for the period, compared to
$1.378 billion in the prior year's first quarter.
- Selling, general and administrative (“SG&A") expenses were
$345.7 million, or 27.9% of net sales for the period, compared to
$452.2 million, or 32.8% of net sales, in the prior year's first
quarter.
- Net loss was $50.5 million for the period, compared to a net
loss of $157.9 million for the prior year’s first quarter.
- Transition costs related to European restructuring efforts were
$14.5 million for the period. For the second quarter, the Company
will continue to incur transition charges.
- Cash, cash equivalents and marketable securities were $1.310
billion at the close of the quarter.
- Long-term debt remains limited to one low-interest, unsecured
term loan associated with the French government’s response to
COVID-19.
The Company will not be holding a conference call today.
Stockholders can review the Company’s Form 10-Q.
NON-GAAP MEASURES AND OTHER METRICS
As a supplement to the Company’s financial results presented in
accordance with U.S. generally accepted accounting principles
("GAAP"), GameStop may use certain non-GAAP measures, such as
adjusted SG&A expense, adjusted operating income (loss),
adjusted net income (loss), adjusted earnings (loss) per share,
adjusted EBITDA and free cash flow. The Company believes these
non-GAAP financial measures provide useful information to investors
in evaluating the Company’s core operating performance. Adjusted
SG&A expense, adjusted operating income (loss), adjusted net
income (loss), adjusted earnings (loss) per share and adjusted
EBITDA exclude the effect of items such as certain transformation
costs, asset impairments, severance, as well as divestiture costs.
Free cash flow excludes capital expenditures otherwise included in
net cash flows from (used in) operating activities. The Company’s
definition and calculation of non-GAAP financial measures may
differ from that of other companies. Non-GAAP financial measures
should be viewed as supplementing, and not as an alternative or
substitute for, the Company’s financial results prepared in
accordance with GAAP. Certain of the items that may be excluded or
included in non-GAAP financial measures may be significant items
that could impact the Company’s financial position, results of
operations or cash flows and should therefore be considered in
assessing the Company’s actual and future financial condition and
performance.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS -
SAFE HARBOR
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. Such statements are based upon management’s current beliefs,
views, estimates and expectations, including as to the Company’s
industry, business strategy, goals and expectations concerning its
market position, strategic and transformation initiatives, future
operations, margins, profitability, sales growth, capital
expenditures, liquidity, capital resources, expansion of technology
expertise, and other financial and operating information, including
expectations as to future operating profit improvement. Such
statements include without limitation those about the Company’s
expectations for fiscal 2023, future financial and operating
results, projections and other statements that are not historical
facts. Forward-looking statements are subject to significant risks
and uncertainties and actual developments, business decisions,
outcomes and results may differ materially from those reflected or
described in the forward-looking statements. The following factors,
among others, could cause actual developments, business decisions,
outcomes and results to differ materially from those reflected or
described in the forward-looking statements: economic, social, and
political conditions in the markets in which we operate; the
competitive nature of the Company’s industry; the cyclicality of
the video game industry; the Company’s dependence on the timely
delivery of new and innovative products from its vendors; the
impact of technological advances in the video game industry and
related changes in consumer behavior on the Company’s sales;
interruptions to the Company’s supply chain or the supply chain of
our suppliers; the Company’s dependence on sales during the holiday
selling season; the Company’s ability to obtain favorable terms
from its current and future suppliers and service providers; the
Company’s ability to anticipate, identify and react to trends in
pop culture with regard to its sales of collectibles; the Company’s
ability to maintain strong retail and ecommerce experiences for its
customers; the Company’s ability to keep pace with changing
industry technology and consumer preferences; the Company’s ability
to manage its profitability and cost reduction initiatives;
turnover in senior management or the Company’s ability to attract
and retain qualified personnel; potential damage to the Company’s
reputation or customers' perception of the Company; risks
associated with new digital asset products and services; the
Company’s ability to maintain the security or privacy of its
customer, associate or Company information; occurrence of weather
events, natural disasters, public health crises and other
unexpected events; potential failure or inadequacy of the Company's
computerized systems; the ability of the Company’s third party
delivery services to deliver products to the Company’s retail
locations, fulfillment centers and consumers and changes in the
terms the Company has with such service providers; the ability and
willingness of the Company’s vendors to provide marketing and
merchandising support at historical or anticipated levels;
restrictions on the Company’s ability to purchase and sell
pre-owned products; the Company’s ability to renew or enter into
new leases on favorable terms; the potential monetary losses, user
disputes, reputational harm and regulatory scrutiny from any
hacking, social engineering or other cyber attacks in connection
with digital assets; the potential failure or inadequacy of the
Company’s or its third party partners’ systems or blockchain
networks related to the Company’s digital asset products and
services; the unique risks and challenges related to content
moderation and control from peer-to-peer NFT marketplaces;
unfavorable changes in the Company’s global tax rate; legislative
actions; the Company’s ability to comply with federal, state, local
and international laws and regulations and statutes; the evolution
of government regulation related to the Company’s business
initiatives; potential future litigation and other legal
proceedings; potential legal, regulatory and other actions arising
from the Company’s digital asset products and services; potential
investigations or litigation arising from the Company’s digital
asset investments, products or services; potential exposure to
litigation arising from violations of law by third parties using
the Company’s digital asset products or services; potential
unfavorable development regarding treatment of digital assets under
U.S. and foreign tax laws; the Company’s ability to comply with
anti-money laundering and sanctions laws in connection with its
digital asset products and services; volatility in the Company’s
stock price, including volatility due to potential short squeezes;
continued high degrees of media coverage by third parties; the
availability and future sales of substantial amounts of the
Company’s Class A common stock; fluctuations in the Company’s
results of operations from quarter to quarter; the restrictions
contained in the agreement governing the Company’s revolving credit
facility; the Company’s ability to generate sufficient cash flow to
fund its operations; the Company’s ability to incur additional
debt; the Company’s ability to implement a new ERP system; the
Company’s ability to maintain effective control over financial
reporting; and the effects of recent developments on the price of
digital assets and reputation of the digital asset industry.
Additional factors that could cause results to differ materially
from those reflected or described in the forward-looking statements
can be found in GameStop's most recent Annual Report on Form 10-K
filed with the SEC on March 28, 2023, in GameStop’s Quarterly
Report on Form 10-Q filed the date hereof, and other filings made
from time to time with the SEC and available at www.sec.gov or on
the Company’s investor relations website
(https://investor.gamestop.com). Forward-looking statements
contained in this press release speak only as of the date of this
press release. The Company undertakes no obligation to publicly
update any forward-looking statement, whether as a result of new
information, future developments or otherwise, except as may be
required by any applicable securities laws.
GameStop Corp.
Consolidated Statements of
Operations
(in millions, except per share
data)
(unaudited)
13 Weeks ended April 29,
2023
13 Weeks ended April 30,
2022
Net sales
$
1,237.1
$
1,378.4
Cost of sales
949.8
1,079.9
Gross profit
287.3
298.5
Selling, general and administrative
expenses
345.7
452.2
Operating loss
(58.4
)
(153.7
)
Interest (income) expense
(9.7
)
0.7
Other expense, net
1.9
—
Loss before income taxes
(50.6
)
(154.4
)
Income tax (benefit) expense
(0.1
)
3.5
Net loss
$
(50.5
)
$
(157.9
)
Loss per share:
Basic loss per share
$
(0.17
)
$
(0.52
)
Diluted loss per share
(0.17
)
(0.52
)
Weighted-average common shares
outstanding:
Basic
304.5
303.6
Diluted
304.5
303.6
Percentage of Net
Sales:
Net sales
100.0
%
100.0
%
Cost of sales
76.8
78.3
Gross profit
23.2
21.7
Selling, general and administrative
expenses
27.9
32.8
Operating loss
(4.7
)
(11.1
)
Interest (income) expense
(0.8
)
0.1
Other expense, net
0.2
—
Loss before income taxes
(4.1
)
(11.2
)
Income tax (benefit) expense
—
0.3
Net loss
(4.1
)%
(11.5
)%
GameStop Corp.
Condensed Consolidated Balance
Sheets
(in millions)
(unaudited)
April 29, 2023
April 30, 2022
ASSETS:
Current assets:
Cash and cash equivalents
$
1,057.0
$
1,035.0
Marketable securities
253.1
—
Receivables, net of allowance of $2.2 and
$3.5, respectively
119.2
103.4
Merchandise inventories
759.5
917.6
Prepaid expenses and other current
assets
65.8
273.6
Total current assets
2,254.6
2,329.6
Property and equipment, net of accumulated
depreciation of $988.3 and $993.6, respectively
123.6
157.4
Operating lease right-of-use assets
595.8
568.7
Deferred income taxes
17.5
16.7
Other noncurrent assets
78.7
53.1
Total assets
$
3,070.2
$
3,125.5
LIABILITIES AND STOCKHOLDERS’
EQUITY:
Current liabilities:
Accounts payable
$
561.4
$
386.8
Accrued liabilities and other current
liabilities
546.4
533.3
Current portion of operating lease
liabilities
200.8
200.3
Current portion of long-term debt
10.9
6.5
Total current liabilities
1,319.5
1,126.9
Long-term debt, net
26.3
35.7
Operating lease liabilities
412.5
374.5
Other long-term liabilities
40.3
137.7
Total liabilities
1,798.6
1,674.8
Total stockholders’ equity
1,271.6
1,450.7
Total liabilities and stockholders’
equity
$
3,070.2
$
3,125.5
GameStop Corp.
Condensed Consolidated
Statements of Cash Flows
(in millions)
(unaudited)
13 Weeks ended April 29,
2023
13 Weeks ended April 30,
2022
Cash flows from operating activities:
Net loss
$
(50.5
)
$
(157.9
)
Adjustments to reconcile net loss to net
cash flows from operating activities:
Depreciation and amortization
13.7
17.1
Stock-based compensation expense
7.9
11.1
Gain on sale of digital assets
—
(6.9
)
Digital asset impairments
—
33.7
Loss on disposal of property and
equipment, net
0.6
0.4
Other
0.2
(4.8
)
Changes in operating assets and
liabilities:
Receivables, net
35.6
36.3
Merchandise inventories
(83.1
)
(9.9
)
Prepaid expenses and other current
assets
(4.0
)
(30.3
)
Prepaid income taxes and income taxes
payable
(0.2
)
3.5
Accounts payable and accrued
liabilities
(22.3
)
(179.8
)
Operating lease right-of-use assets and
liabilities
(0.6
)
(16.4
)
Net cash flows used in operating
activities
(102.7
)
(303.9
)
Cash flows from investing activities:
Proceeds from sale of digital assets
1.3
76.9
Purchases of marketable securities
(211.0
)
—
Proceeds from the maturities and sales of
marketable securities
212.2
—
Capital expenditures
(9.1
)
(10.8
)
Other
(0.1
)
—
Net cash flows (used in) provided by
investing activities
(6.7
)
66.1
Cash flows from financing activities:
Settlements of stock-based awards
(0.1
)
(1.1
)
Repayments of French term loans
(2.7
)
—
Net cash flows used in financing
activities
(2.8
)
(1.1
)
Exchange rate effect on cash, cash
equivalents and restricted cash
(4.0
)
2.6
Decrease in cash, cash equivalents and
restricted cash
(116.2
)
(236.3
)
Cash, cash equivalents and restricted cash
at beginning of period
1,196.0
1,319.9
Cash, cash equivalents and restricted cash
at end of period
$
1,079.8
$
1,083.6
Schedule I
Sales Mix
(in millions)
(unaudited)
13 Weeks ended April 29,
2023
13 Weeks ended April 30,
2022
Net
Percent
Net
Percent
Net Sales:
Sales
of Total
Sales
of Total
Hardware and accessories (1)
$
725.8
58.7
%
$
673.8
48.9
%
Software (2)
338.3
27.3
483.7
35.1
Collectibles
173.0
14.0
220.9
16.0
Total
$
1,237.1
100.0
%
$
1,378.4
100.0
%
(1) Includes sales of new and pre-owned
hardware, accessories, hardware bundles in which hardware and
digital or physical software are sold together in a single SKU,
interactive game figures, strategy guides, mobile and consumer
electronics.
(2) Includes sales of new and pre-owned
video game software, digital software and PC entertainment
software.
GameStop Corp. Schedule II (in
millions, except per share data) (unaudited)
Non-GAAP results
The following tables reconcile the Company's selling, general
and administrative expenses ("SG&A expense"), operating loss,
net loss and loss per share as presented in its unaudited
consolidated statements of operations and prepared in accordance
with U.S. generally accepted accounting principles ("GAAP") to its
adjusted SG&A expense, adjusted operating loss, adjusted net
loss, adjusted EBITDA and adjusted loss per share. The diluted
weighted-average shares outstanding used to calculate adjusted
earnings per share may differ from GAAP weighted-average shares
outstanding. Under GAAP, basic and diluted weighted-average shares
outstanding are the same in periods where there is a net loss. The
reconciliations below are from continuing operations only.
13 Weeks Ended
13 Weeks Ended
April 29, 2023
April 30, 2022
Adjusted SG&A
expense
SG&A expense
$
345.7
$
452.2
Transformation costs(1)
(7.2
)
—
Adjusted SG&A expense
$
338.5
$
452.2
Adjusted
Operating Loss
Operating loss
$
(58.4
)
$
(153.7
)
Transformation costs(1)
7.2
—
Adjusted operating loss
$
(51.2
)
$
(153.7
)
Adjusted Net
Loss
Net loss
$
(50.5
)
$
(157.9
)
Transformation costs(1)
7.2
—
Divestitures and other(2)
1.0
—
Adjusted net loss
$
(42.3
)
$
(157.9
)
Adjusted loss per share
Basic
$
(0.14
)
$
(0.52
)
Diluted
(0.14
)
(0.52
)
Number of shares used in adjusted
calculation
Basic
304.5
303.6
Diluted
304.5
303.6
(1) Transformation costs include
severance, net stock-based compensation of $0.8 million related to
our workforce optimization efforts in the U.S., inventory write
downs, and other costs in connection with our transformation
initiatives. This amount excludes accelerated lease amortization
and fixed asset costs of $5.5 million which have not been factored
into our non-GAAP measures.
(2) Divestitures and other includes a net
loss from our divestiture of business operations in
Switzerland.
13 Weeks Ended
13 Weeks Ended
April 29, 2023
April 30, 2022
Reconciliation of
Net Loss to Adjusted EBITDA
Net loss
$
(50.5
)
$
(157.9
)
Interest (income) expense, net
(9.7
)
0.7
Depreciation and amortization
13.7
17.1
Income tax (benefit) expense
(0.1
)
3.5
EBITDA
$
(46.6
)
$
(136.6
)
Stock-based compensation
9.0
11.1
Transformation costs(1)
7.2
—
Divestitures and other(2)
1.0
—
Adjusted EBITDA
$
(29.4
)
$
(125.5
)
(1) Transformation costs include
severance, net stock-based compensation of $0.8 million related to
our workforce optimization efforts in the U.S., inventory write
downs, and other costs in connection with our transformation
initiatives. This amount excludes accelerated lease amortization
and fixed asset costs of $5.5 million which have not been factored
into our non-GAAP measures.
(2) Divestitures and other includes a net
loss from our divestiture of business operations in
Switzerland.
GameStop Corp. Schedule III
(in millions) (unaudited)
Non-GAAP results
The following table reconciles the Company's cash flows provided
by operating activities as presented in its unaudited Consolidated
Statements of Cash Flows and prepared in accordance with GAAP to
its free cash flow. Free cash flow is considered a non-GAAP
financial measure. Management believes, however, that free cash
flow, which measures our ability to generate additional cash from
our business operations, is an important financial measure for use
by investors in evaluating the company’s financial performance.
13 Weeks Ended
13 Weeks Ended
April 29, 2023
April 30, 2022
Net cash flows used in operating
activities
$
(102.7
)
$
(303.9
)
Capital expenditures
(9.1
)
(10.8
)
Free cash flow
$
(111.8
)
$
(314.7
)
Non-GAAP Measures and Other
Metrics
Adjusted EBITDA, adjusted SG&A expense, adjusted operating
loss and adjusted net loss per share are supplemental financial
measures of the Company’s performance that are not required by, or
presented in accordance with, GAAP. We believe that the
presentation of these non-GAAP financial measures provide useful
information to investors in assessing our financial condition and
results of operations. We define adjusted EBITDA as net income
(loss) before income taxes, plus interest expense, net and
depreciation and amortization, excluding stock-based compensation,
certain transformation costs, business divestitures, asset
impairments, severance and other non-cash charges. Net income
(loss) is the GAAP financial measure most directly comparable to
adjusted EBITDA. Our non-GAAP financial measures should not be
considered as an alternative to the most directly comparable GAAP
financial measure. Furthermore, non-GAAP financial measures have
limitations as an analytical tool because they exclude some but not
all items that affect the most directly comparable GAAP financial
measures. Some of these limitations include:
- certain items excluded from adjusted EBITDA are significant
components in understanding and assessing a company’s financial
performance, such as a company’s cost of capital and tax
structure;
- adjusted EBITDA does not reflect our cash expenditures or
future requirements for capital expenditures or contractual
commitments;
- adjusted EBITDA does not reflect changes in, or cash
requirements for, our working capital needs;
- although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to be
replaced in the future, and adjusted EBITDA does not reflect any
cash requirements for such replacements; and
- our computations of adjusted EBITDA may not be comparable to
other similarly titled measures of other companies.
We compensate for the limitations of adjusted EBITDA, adjusted
SG&A expense, adjusted operating loss, adjusted net loss and
adjusted loss per share as analytical tools by reviewing the
comparable GAAP financial measure, understanding the differences
between the GAAP and non-GAAP financial measures and incorporating
these data points into our decision-making process. Adjusted
EBITDA, adjusted SG&A expense, adjusted operating loss,
adjusted net loss and adjusted net loss per share are provided in
addition to, and not as an alternative to, the Company’s financial
results prepared in accordance with GAAP, and should not be
considered in isolation or as a substitute for analysis of our
results as reported under GAAP. Because adjusted EBITDA, adjusted
SG&A expense, adjusted operating loss, adjusted net income and
adjusted earnings (loss) per share may be defined and determined
differently by other companies in our industry, our definitions of
these non-GAAP financial measures may not be comparable to
similarly titled measures of other companies, thereby diminishing
their utility.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230607005841/en/
GameStop Investor Relations 817-424-2001 ir@gamestop.com
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