GameStop Corp. (NYSE: GME) (“GameStop” or the “Company”) today
released financial results for the first quarter ended April 30,
2022. 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
http://investor.GameStop.com.
FIRST QUARTER OVERVIEW
- Net sales were $1.378 billion for the quarter, compared to
$1.277 billion in the prior year’s first quarter.
- Sales attributable to new and expanded brand relationships
contributed to the Company's growth in the quarter.
- Inventory was $917.6 million at the close of the quarter,
compared to $570.9 million at the close of the prior year’s first
quarter, reflecting a continued focus on improving in-stock levels
in merchandise to meet increased customer demand and offset supply
chain headwinds.
- Ended the period with cash and cash equivalents of $1.035
billion as well as no debt other than a low-interest, unsecured
term loan associated with the French government’s response to
COVID-19.
- Took steps to support the recent launch of a digital asset
wallet to allow gamers and others to store, send, receive and use
cryptocurrencies and non-fungible tokens (“NFTs”) across
decentralized apps. The wallet extension will enable transactions
on GameStop’s NFT marketplace upon its intended launch in the
second quarter.
- Continued hiring individuals with experience in areas such as
blockchain gaming, ecommerce and technology, and operations,
including a new Chief Operating Officer with a background in retail
and stores.
CONFERENCE CALL INFORMATION
A webcast with management is scheduled for June 1, 2022, at 5:00
p.m. ET to discuss the Company’s quarter activities and financial
results. This call, along with supplemental information, can also
be accessed at http://investor.GameStop.com. The phone number for
the investor conference call is 877-451-6152 and the confirmation
code is 13730321. This webcast will be archived for two months on
GameStop’s investor relations website.
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, adjusted operating income (loss), adjusted net
income (loss), adjusted diluted 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
selling, general and administrative expenses (“Adjusted SG&A”),
adjusted operating income (loss), adjusted net income (loss),
adjusted diluted earnings (loss) per share and adjusted EBITDA
exclude the effect of items such as transformation costs, asset
impairments, store closure costs, severance, as well as divestiture
costs. Results reported as constant currency exclude the impact of
fluctuations in foreign currency exchange rates by converting the
Company’s local currency financial results using the prior period
exchange rates and comparing these adjusted amounts to the
Company’s current period reported results. 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 2022, 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 impact
of the COVID-19 pandemic on the Company’s business and financial
results; 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; the Company’s ability to keep pace with changing
industry technology and consumer preferences; the Company’s ability
to obtain favorable terms from its current and future suppliers and
service providers; 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 Company’s
dependence on sales during the holiday selling season; the decrease
in popularity of certain types of video games containing graphic
violence; the Company’s ability to renew or enter into new leases
on favorable terms; the Company’s ability to maintain strong retail
and ecommerce experiences for its customers; the Company’s
strategic plans and transformation initiatives and the Company’s
ability to achieve the desired results of its transformation
initiatives within the anticipated time-frame or at all; enhanced
risks as new business initiatives lead the Company to engage in new
activities; the competitive nature of the Company’s industry,
including competition from multi-channel retailers, ecommerce
businesses, and others; disruptions or interruptions to the
Company’s logistics capabilities or supply chain or the supply
chain of the Company's suppliers; the Company’s ability to
anticipate, identify and react to trends in pop culture with regard
to its sales of collectibles; 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; changes to tariff
and import/export regulations; 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 blockchain, digital assets and Web 3.0 technology;
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; turnover in senior management or
the Company’s ability to attract and retain qualified personnel;
turnover in the Company’s Board of Directors; the Company’s ability
to maintain the security or privacy of its customer, associate or
Company information; potential damage to the Company’s reputation
or customers' perception of the Company; occurrence of weather
events, natural disasters, public health crises and other
unexpected events; potential failure or inadequacy of the Company's
computerized systems; the Company’s ability to maintain effective
control over financial reporting; volatility in the Company’s Class
A Common 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; and potential future
litigation and other legal proceedings. 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 17, 2022 and available at http://www.sec.gov or
http://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 30,
2022
13 Weeks Ended May 1,
2021
Net sales
$
1,378.4
$
1,276.8
Cost of sales
1,079.9
946.7
Gross profit
298.5
330.1
Selling, general and administrative
expenses
452.2
370.3
Asset Impairments
—
0.6
Operating loss
(153.7
)
(40.8
)
Interest expense, net
0.7
24.7
Loss before income taxes
(154.4
)
(65.5
)
Income tax expense
3.5
1.3
Net loss
$
(157.9
)
$
(66.8
)
Loss per share:
Basic loss per share
$
(2.08
)
$
(1.01
)
Diluted loss per share
$
(2.08
)
$
(1.01
)
Weighted-average common shares
outstanding:
Basic
75.9
66.0
Diluted
75.9
66.0
Percentage of Net Sales:
Net sales
100.0
%
100.0
%
Cost of sales
78.3
74.1
Gross profit
21.7
25.9
Selling, general and administrative
expenses
32.8
29.0
Asset Impairments
—
—
Operating loss
(11.1
)
(3.1
)
Interest expense, net
0.1
2.0
Loss before income taxes
(11.2
)
(5.1
)
Income tax expense
0.3
0.1
Net loss
(11.5
) %
(5.2
) %
GameStop Corp.
Condensed Consolidated Balance
Sheets
(in millions)
(unaudited)
April 30, 2022
May 1, 2021
ASSETS:
Current assets:
Cash and cash equivalents
$
1,035.0
$
694.7
Restricted cash
33.3
57.4
Receivables, net of allowance of $3.5 and
$3.7, respectively
103.4
102.1
Merchandise inventories
917.6
570.9
Prepaid expenses and other current
assets
240.3
232.1
Total current assets
2,329.6
1,657.2
Property and equipment, net of accumulated
depreciation of $993.6 and $1,109.9, respectively
157.4
192.6
Operating lease right-of-use assets
568.7
654.2
Deferred income taxes
16.7
—
Long-term restricted cash
15.3
18.7
Other noncurrent assets
37.8
40.0
Total assets
$
3,125.5
$
2,562.7
LIABILITIES AND STOCKHOLDERS’
EQUITY:
Current liabilities:
Accounts payable
$
386.8
$
388.6
Accrued liabilities and other current
liabilities
533.3
561.8
Current portion of operating lease
liabilities
200.3
219.4
Current portion of long-term debt
6.5
48.1
Total current liabilities
1,126.9
1,217.9
Long-term debt, net
35.7
—
Operating lease liabilities
374.5
445.0
Other long-term liabilities
137.7
20.3
Total liabilities
1,674.8
1,683.2
Total stockholders’ equity
1,450.7
879.5
Total liabilities and stockholders’
equity
$
3,125.5
$
2,562.7
GameStop Corp.
Consolidated Statements of
Cash Flows
(in millions)
(unaudited)
13 Weeks Ended April 30,
2022
13 Weeks Ended May 1,
2021
Cash flows from operating activities:
Net loss
$
(157.9
)
$
(66.8
)
Adjustments to reconcile net loss to net
cash flows from operating activities:
Depreciation and amortization
17.1
18.7
Stock-based compensation expense
11.1
5.7
Gain on sale of digital assets
(6.9
)
—
Digital asset impairments
33.7
—
Asset impairments
—
0.6
Loss on disposal of property and
equipment, net
0.4
0.4
Loss on retirement of debt
—
18.2
Other
(4.8
)
(0.5
)
Changes in operating assets and
liabilities:
Receivables, net
36.3
3.1
Merchandise inventories
(9.9
)
32.4
Prepaid expenses and other current
assets
(30.3
)
(2.9
)
Prepaid income taxes and income taxes
payable
3.5
(1.2
)
Accounts payable and accrued
liabilities
(179.8
)
(11.4
)
Operating lease right-of-use assets and
liabilities
(16.4
)
(15.0
)
Changes in other long-term liabilities
—
(0.1
)
Net cash flows used in operating
activities
(303.9
)
(18.8
)
Cash flows from investing activities:
Proceeds from sale of digital assets
76.9
—
Capital expenditures
(10.8
)
(14.7
)
Net cash flows provided by (used in)
investing activities
66.1
(14.7
)
Cash flows from financing activities:
Proceeds from issuance of common stock,
net of costs
—
551.7
Payments of senior notes
—
(307.4
)
Repayments of revolver borrowings
—
(25.0
)
Settlements of stock-based awards
(1.1
)
(49.9
)
Other
—
(0.1
)
Net cash flows (used in) provided by
financing activities
(1.1
)
169.3
Exchange rate effect on cash, cash
equivalents and restricted cash
2.6
—
(Decrease) increase in cash, cash
equivalents and restricted cash
(236.3
)
135.8
Cash, cash equivalents and restricted cash
at beginning of period
1,319.9
635.0
Cash, cash equivalents and restricted cash
at end of period
$
1,083.6
$
770.8
Schedule I
Sales Mix
(in millions)
(unaudited)
13 Weeks Ended April 30,
2022
13 Weeks Ended May 1,
2021
Net Sales:
Sales
of Total
Sales
of Total
Hardware and accessories (1)
$
673.8
48.9
%
$
703.5
55.1
%
Software (2)
483.7
35.1
397.9
31.2
Collectibles
220.9
16.0
175.4
13.7
Total
$
1,378.4
100.0
%
$
1,276.8
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"), operating loss, net loss
and loss per share as presented in its unaudited consolidated
statements of operations and prepared in accordance with Generally
Accepted Accounting Principles ("GAAP") to its adjusted SG&A,
adjusted operating loss, adjusted net loss, adjusted EBITDA and
adjusted loss per share. The diluted weighted-average shares
outstanding used to calculated 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 30, 2022
May 1, 2021
Adjusted SG&A
SG&A
$
452.2
$
370.3
Transformation costs
—
(6.4
)
Significant transactions(1)
—
(0.2
)
Divestitures, severance and other(2)
—
(12.0
)
Adjusted SG&A
$
452.2
$
351.7
Adjusted Operating Loss
Operating loss
$
(153.7
)
$
(40.8
)
Transformation costs
—
6.4
Asset impairments
—
0.6
Significant transactions(1)
—
0.2
Divestitures, severance and other(3)
—
12.0
Adjusted operating loss
$
(153.7
)
$
(21.6
)
Adjusted Net Loss
Net loss
$
(157.9
)
$
(66.8
)
Transformation costs
—
6.4
Asset impairments
—
0.6
Significant transactions(2)
—
18.4
Divestitures, severance and other(3)
—
12.0
Adjusted net loss
$
(157.9
)
$
(29.4
)
Adjusted loss per share
Basic
$
(2.08
)
$
(0.45
)
Diluted
$
(2.08
)
$
(0.45
)
Number of shares used in adjusted
calculation
Basic
75.9
66.0
Diluted
75.9
66.0
(1)
Prior year includes transaction costs associated with our
ATM offering and voluntary early redemption of the 2023 Senior
Notes.
(2)
Prior year includes transactions costs associated with the
ATM offering and transactions costs, make-whole premium and
accelerated amortization with the voluntary early redemption of the
2023 Senior Notes.
(3)
Prior year severance includes cash and stock based
compensation for key personnel that have separated from the
Company.
13 Weeks Ended
13 Weeks Ended
April 30, 2022
May 1, 2021
Reconciliation of
Net Loss to Adjusted EBITDA
Net loss
$
(157.9
)
$
(66.8
)
Interest expense, net
0.7
24.7
Depreciation and amortization
17.1
18.7
Income tax expense
3.5
1.3
EBITDA
$
(136.6
)
$
(22.1
)
Stock-based compensation
11.1
2.2
Transformation costs
—
6.4
Asset impairments
—
0.6
Significant transactions(1)
—
0.2
Divestitures, severance and other(2)
—
12.0
Adjusted EBITDA
$
(125.5
)
$
(0.7
)
(1)
Prior year includes transaction costs associated with our
ATM offering and voluntary redemption of the 2023 Senior Notes.
(2)
Prior year severance includes cash and stock-based
compensation for key personnel that have separated from the
Company.
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 30, 2022
May 1, 2021
Net cash flows used in operating
activities
$
(303.9
)
$
(18.8
)
Capital expenditures
(10.8
)
(14.7
)
Free cash flow
$
(314.7
)
$
(33.5
)
Non-GAAP Measures and Other
Metrics
Adjusted EBITDA is a supplemental financial measure of the
Company’s performance that is not required by, or presented in
accordance with, GAAP. We believe that the presentation of this
non-GAAP financial measure provides 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, 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 as an
analytical tool 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 is 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 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/20220601005962/en/
GameStop Investor Relations 817-424-2001 ir@gamestop.com
GameStop Public Relations 646-386-0091 media@gamestop.com
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