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GameStop Reports Second Quarter Fiscal Year 2022 Results image

GameStop Reports Second Quarter Fiscal Year 2022 Results

Grapevine, TX — GameStop Corp. released financial results for the second quarter ended July 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.

SECOND QUARTER OVERVIEW

  • Net sales were $1.136 billion for the quarter, compared to $1.183 billion in the prior year’s second quarter.
  • Sales attributable to collectibles, which is a segment the Company intends to grow over the long-term, were $223.2 million for the quarter, compared to $177.2 million in the prior year’s second quarter.
  • Selling, general and administrative expenses were $387.5 million for the quarter, representing a sequential decline of 14.3% from the first quarter of 2022 and reflecting, in part, the Company’s focus on right-sizing costs following a period of significant investment in long-term initiatives.
  • Inventory was $734.8 million at the close of the quarter, compared to $596.4 million at the close of the prior year’s second quarter, reflecting the Company’s focus on maintaining adequate in-stock levels to meet customer demand and offset lingering supply chain headwinds.
  • Followed the launch of the Company’s digital wallet by launching the Company’s non-fungible token (“NFT”) marketplace to allow gamers, creators, collectors and others to buy, sell and trade NFTs.
  • Modernized and strengthened the Company’s systems through the implementation of SAP.
  • Ended the period with cash and cash equivalents of $908.9 million as well as no debt other than a low-interest, unsecured term loan associated with the French government’s response to COVID-19.

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

July 30, 2022

  13 Weeks ended

July 31, 2021

Net sales   $ 1,136.0     $ 1,183.4  
Cost of sales     853.8       862.5  
Gross profit     282.2       320.9  
Selling, general and administrative expenses     387.5       378.9  
Asset Impairments     2.5        
Operating loss     (107.8 )     (58.0 )
Interest (income) expense, net     (0.3 )     0.5  
Loss before income taxes     (107.5 )     (58.5 )
Income tax expense     1.2       3.1  
Net loss   $ (108.7 )   $ (61.6 )
         
Loss per share:        
Basic loss per share   $ (0.36 )   $ (0.21 )
Diluted loss per share     (0.36 )     (0.21 )
         
Weighted-average common shares outstanding:        
Basic     304.2       290.4  
Diluted     304.2       290.4  
         
Percentage of Net Sales:        
         
Net sales     100.0 %     100.0 %
Cost of sales     75.2       72.9  
Gross profit     24.8       27.1  
Selling, general and administrative expenses     34.1       32.0  
Asset Impairments     0.2        
Operating loss     (9.5 )     (4.9 )
Interest (income) expense, net            
Loss before income taxes     (9.5 )     (4.9 )
Income tax expense     0.1       0.3  
Net loss     (9.6 )%     (5.2 )%
GameStop Corp.

Consolidated Statements of Operations

(in millions, except per share data)

(unaudited)

    26 Weeks ended

July 30, 2022

  26 Weeks ended

July 31, 2021

Net sales   $ 2,514.4     $ 2,460.2  
Cost of sales     1,933.7       1,809.2  
Gross profit     580.7       651.0  
Selling, general and administrative expenses     839.7       749.2  
Asset Impairments     2.5       0.6  
Operating loss     (261.5 )     (98.8 )
Interest expense, net     0.4       25.2  
Loss before income taxes     (261.9 )     (124.0 )
Income tax expense     4.7       4.4  
Net loss   $ (266.6 )   $ (128.4 )
         
Loss per share:        
Basic loss per share   $ (0.88 )   $ (0.46 )
Diluted loss per share     (0.88 )     (0.46 )
         
Weighted-average common shares outstanding:        
Basic     304.0       277.2  
Diluted     304.0       277.2  
         
Percentage of Net Sales:        
         
Net sales     100.0 %     100.0 %
Cost of sales     76.9       73.5  
Gross profit     23.1       26.5  
Selling, general and administrative expenses     33.4       30.5  
Asset Impairments     0.1        
Operating loss     (10.4 )     (4.0 )
Interest expense, net           1.0  
Loss before income taxes     (10.4 )     (5.0 )
Income tax expense     0.2       0.2  
Net loss     (10.6 )%     (5.2 )%
GameStop Corp.

Condensed Consolidated Balance Sheets

(in millions)

(unaudited)

    July 30, 2022   July 31, 2021
ASSETS:
Current assets:        
Cash and cash equivalents   $ 908.9   $ 1,720.4
Receivables, net of allowance of $3.5 and $3.7, respectively     99.6     68.5
Merchandise inventories     734.8     596.4
Prepaid expenses and other current assets     275.9     271.7
Total current assets     2,019.2     2,657.0
Property and equipment, net of accumulated depreciation of $990.1 and $1,113.7, respectively     146.8     186.6
Operating lease right-of-use assets     554.3     645.2
Deferred income taxes     16.7    
Other noncurrent assets     62.5     57.0
Total assets   $ 2,799.5   $ 3,545.8
         
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:        
Accounts payable   $ 217.4   $ 409.7
Accrued liabilities and other current liabilities     512.1     563.1
Current portion of operating lease liabilities     194.0     221.5
Current portion of long-term debt     8.9    
Total current liabilities     932.4     1,194.3
Long-term debt, net     32.1     47.5
Operating lease liabilities     367.4     432.0
Other long-term liabilities     124.1     20.0
Total liabilities     1,456.0     1,693.8
Total stockholders’ equity     1,343.5     1,852.0
Total liabilities and stockholders’ equity   $ 2,799.5   $ 3,545.8
GameStop Corp.

Consolidated Statements of Cash Flows

(in millions)

(unaudited)

    13 Weeks ended

July 30, 2022

  13 Weeks ended

July 31, 2021

Cash flows from operating activities:        
Net loss   $ (108.7 )   $ (61.6 )
Adjustments to reconcile net loss to net cash flows from operating activities:        
Depreciation and amortization     15.3       17.6  
Stock-based compensation expense     7.8       8.8  
Asset impairments     2.5        
Loss on disposal of property and equipment, net     1.2       0.1  
Other     (0.2 )     (0.1 )
Changes in operating assets and liabilities:        
Receivables, net     3.0       33.1  
Merchandise inventories     179.5       (31.2 )
Prepaid expenses and other current assets     2.9       (1.1 )
Prepaid income taxes and income taxes payable     (2.6 )     (12.6 )
Accounts payable and accrued liabilities     (204.2 )     36.6  
Operating lease right-of-use assets and liabilities     0.6       (1.1 )
Changes in other long-term liabilities     (0.5 )      
Net cash flows used in operating activities     (103.4 )     (11.5 )
Cash flows from investing activities:        
Proceeds from sale of digital assets     0.4        
Capital expenditures     (20.5 )     (13.5 )
Other           (0.1 )
Net cash flows used in investing activities     (20.1 )     (13.6 )
Cash flows from financing activities:        
Proceeds from issuance of common stock, net of costs           1,121.1  
Settlements of stock-based awards     (1.9 )     (86.7 )
Net cash flows (used in) provided by financing activities     (1.9 )     1,034.4  
Exchange rate effect on cash, cash equivalents and restricted cash     (1.2 )     (4.5 )
(Decrease) increase in cash, cash equivalents and restricted cash     (126.6 )     1,004.8  
Cash, cash equivalents and restricted cash at beginning of period     1,083.6       770.8  
Cash, cash equivalents and restricted cash at end of period   $ 957.0     $ 1,775.6  
GameStop Corp.

Consolidated Statements of Cash Flows

(in millions)

(unaudited)

    26 Weeks ended

July 30, 2022

  26 Weeks ended

July 31, 2021

Cash flows from operating activities:        
Net loss   $ (266.6 )   $ (128.4 )
Adjustments to reconcile net loss to net cash flows from operating activities:        
Depreciation and amortization     32.4       36.3  
Stock-based compensation expense     18.9       14.5  
Gain on sale of digital assets     (6.9 )      
Digital asset impairments     33.7        
Asset impairments     2.5       0.6  
Loss on disposal of property and equipment, net     1.6       0.5  
Loss on retirement of debt           18.2  
Other     (5.0 )     (0.6 )
Changes in operating assets and liabilities:        
Receivables, net     39.3       36.2  
Merchandise inventories     169.6       1.2  
Prepaid expenses and other current assets     (27.4 )     (4.0 )
Prepaid income taxes and income taxes payable     0.9       (13.8 )
Accounts payable and accrued liabilities     (384.0 )     25.2  
Operating lease right-of-use assets and liabilities     (15.8 )     (16.1 )
Changes in other long-term liabilities     (0.5 )     (0.1 )
Net cash flows used in operating activities     (407.3 )     (30.3 )
Cash flows from investing activities:        
Proceeds from sale of digital assets     77.3        
Capital expenditures     (31.3 )     (28.2 )
Other           (0.1 )
Net cash flows provided by (used in) investing activities     46.0       (28.3 )
Cash flows from financing activities:        
Proceeds from issuance of common stock, net of costs           1,672.8  
Payments of senior notes           (307.4 )
Repayments of revolver borrowings           (25.0 )
Settlements of stock-based awards     (3.0 )     (136.6 )
Other           (0.1 )
Net cash flows (used in) provided by financing activities     (3.0 )     1,203.7  
Exchange rate effect on cash, cash equivalents and restricted cash     1.4       (4.5 )
(Decrease) increase in cash, cash equivalents and restricted cash     (362.9 )     1,140.6  
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   $ 957.0     $ 1,775.6  
Schedule I

Sales Mix

(in millions)

(unaudited)

             
    13 Weeks ended July 30, 2022   13 Weeks ended July 31, 2021
    Net   Percent   Net   Percent
Net Sales (in millions):   Sales   of Total   Sales   of Total
                 
Hardware and accessories (1)   $ 596.4   52.5 %   $ 609.6   51.5 %
Software (2)     316.4   27.9       396.6   33.5  
Collectibles     223.2   19.6       177.2   15.0  
                 
Total   $ 1,136.0   100.0 %   $ 1,183.4   100.0 %
                 
             
    26 Weeks ended July 30, 2022   26 Weeks ended July 31, 2021
    Net   Percent   Net   Percent
Net Sales (in millions):   Sales   of Total   Sales   of Total
                 
Hardware and accessories (1)   $ 1,270.1   50.5 %   $ 1,313.1   53.4 %
Software (2)     800.1   31.8       794.5   32.3  
Collectibles     444.2   17.7       352.6   14.3  
                 
Total   $ 2,514.4   100.0 %   $ 2,460.2   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   26 Weeks Ended   26 Weeks Ended
    July 30, 2022   July 31, 2021   July 30, 2022   July 31, 2021
Adjusted SG&A        
SG&A   $ 387.5     $ 378.9     $ 839.7     $ 749.2  
Transformation costs(1)(3)     0.9       (6.5 )     0.9       (24.7 )
Significant transactions(2)           (0.2 )           (0.4 )
Divestitures and other(3)           0.1             (0.1 )
Adjusted SG&A   $ 388.4     $ 372.3     $ 840.6     $ 724.0  
                 
Adjusted Operating Loss                
Operating loss   $ (107.8 )   $ (58.0 )   $ (261.5 )   $ (98.8 )
Transformation costs(1)(3)     (0.9 )     6.5       (0.9 )     24.7  
Asset impairments     2.5             2.5       0.6  
Significant transactions(2)           0.2             0.4  
Divestitures and other(3)           (0.1 )           0.1  
Adjusted operating loss   $ (106.2 )   $ (51.4 )   $ (259.9 )   $ (73.0 )
                 
Adjusted Net Loss                
Net loss   $ (108.7 )   $ (61.6 )   $ (266.6 )   $ (128.4 )
Transformation costs(1)(3)     (0.9 )     6.5       (0.9 )     24.7  
Asset impairments     2.5             2.5       0.6  
Significant transactions(2)           0.2             18.6  
Divestitures and other(3)           (0.1 )           0.1  
Adjusted net loss   $ (107.1 )   $ (55.0 )   $ (265.0 )   $ (84.4 )
                 
Adjusted loss per share                
Basic   $ (0.35 )   $ (0.19 )   $ (0.87 )   $ (0.30 )
Diluted     (0.35 )     (0.19 )     (0.87 )     (0.30 )
                 
Number of shares used in adjusted calculation                
Basic     304.2       290.4       304.0       277.2  
Diluted     304.2       290.4       304.0       277.2  
                 
(1) Current year includes the impact of stock-based compensation forfeitures partially offset by cash severance costs related to workforce optimization efforts in connection with our transformation initiatives. Prior year includes cash severance and stock-based compensation costs for key personnel that separated from the Company and expenses for consultants and advisors related to transformation initiatives.
 
(2) Prior year includes transaction costs associated with the ATM offering. Adjusted net loss in the prior year also includes the impact of the make-whole premium and accelerated amortization associated with the voluntary early redemption of the 2023 Senior Notes.
 
(3) Prior year amounts related to cash severance costs and stock-based compensation have been reclassified to conform to current year presentation.
    13 Weeks Ended   13 Weeks Ended   26 Weeks Ended   26 Weeks Ended
    July 30, 2022   July 31, 2021   July 30, 2022   July 31, 2021
Reconciliation of Net Loss to Adjusted EBITDA                
Net loss   $ (108.7 )   $ (61.6 )   $ (266.6 )   $ (128.4 )
Interest (income) expense, net(1)     (0.3 )     0.5       0.4       25.2  
Depreciation and amortization     15.3       17.6       32.4       36.3  
Income tax expense     1.2       3.1       4.7       4.4  
EBITDA   $ (92.5 )   $ (40.4 )   $ (229.1 )   $ (62.5 )
Stock-based compensation     12.8       4.3       23.9       6.5  
Transformation costs(2)(3)     (0.9 )     6.5       (0.9 )     24.7  
Asset impairments     2.5             2.5       0.6  
Significant transactions(1)           0.2             0.4  
Divestitures and other (3)           (0.1 )           0.1  
Adjusted EBITDA   $ (78.1 )   $ (29.5 )   $ (203.6 )   $ (30.2 )
                 
(1) Prior year includes transaction costs associated with the ATM offering and the impact of the make-whole premium and accelerated amortization associated with the voluntary early redemption of the 2023 Senior Notes.
 
(2) Current year includes the impact of stock-based compensation forfeitures partially offset by cash severance costs related to workforce optimization efforts in connection with our transformation initiatives. Prior year includes cash severance and stock-based compensation costs for key personnel that separated from the Company and expenses for consultants and advisors related to transformation initiatives.
 
(3) Prior year amounts related to cash severance costs and stock-based compensation have been reclassified to conform to current year presentation.

 

  13 Weeks Ended   13 Weeks Ended   26 Weeks Ended   26 Weeks Ended
  July 30, 2022   July 31, 2021   July 30, 2022   July 31, 2021
Net cash flows used in operating activities $ (103.4 )   $ (11.5 )   $ (407.3 )   $ (30.3 )
Capital expenditures   (20.5 )     (13.5 )     (31.3 )     (28.2 )
Free cash flow $ (123.9 )   $ (25.0 )   $ (438.6 )   $ (58.5 )

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