GameStop Corp. (NYSE: GME)
today reported results for the third quarter ended October 31, 2020
that reflect sustained progress toward its long-term strategic
objectives and a positive start to the fourth fiscal quarter
following the launch of the long-awaited next generation of video
game consoles.
George Sherman, GameStop’s chief executive
officer, said, “Our third quarter results were in-line with our
muted expectations and reflected operating during the last few
months of a seven-year console cycle and a global pandemic, which
pressured sales and earnings. That notwithstanding, we
continued to significantly advance our strategic objectives of
creating a digital-first, omni-channel ecosystem for games and
entertainment and optimizing our core operations. Leveraging
our omni-channel capabilities, we increased E-Commerce sales 257% –
demonstrating our ability to serve our customers, wherever,
whenever and however they choose to shop. Investments in improving
our web properties and mobile app and enhanced fulfillment
capabilities contributed to our E-Commerce channel’s sales
contribution rising to nearly 25% year to date, well-above
historical mid-single digit levels. Moreover, as the result
of our ongoing optimization of expenses, stores and inventory, we
delivered a $316 million reduction in SG&A expenses through the
third quarter, ending the period with $603 million cash and
restricted cash after repaying $10 million in debt during the
quarter, and saw a 33% reduction in inventory compared to the prior
year.”
“We begin the fourth quarter with unprecedented
demand in new video game consoles that launched in November, which
drove a 16.5% increase in comparable store sales for the month,
despite being closed on Thanksgiving Day and the impact of COVID-19
related store closures, which affected most of our European
footprint. We anticipate, for the first time in many quarters, that
the fourth quarter will include positive year-on-year sales growth
and profitability, reflecting the introduction of new gaming
consoles, our elevated omni-channel capabilities and continued
benefits from our cost and efficiency initiatives, even with the
potential further negative impacts on our operations due to the
global COVID-19 pandemic. Overall, we remain confident in our
strategy and look forward to executing in 2021 on the many exciting
opportunities to leverage our brand, extensive loyalty member base,
and increased digital capabilities to expand our addressable market
and product offerings, providing growth in all things games and
entertainment,” Sherman concluded.
Third Quarter Sales Results:
- Net sales were $1,004.7 million, down 30.2% from the fiscal
2019 third quarter reflecting:
- The impact of operating during the last few months of the
seven-year-long current generation console cycle and the subsequent
limited availability of hardware and accessories;
- The unplanned shift of software titles later into the fourth
fiscal quarter, and in some cases, into fiscal 2021;
- An 11% reduction in the store base, as part of the Company’s
de-densification strategy, partially offset by recaptured sales
through the transfer to neighboring locations and online
- Comparable store sales declined 24.6%
- Global E-Commerce sales increased 257% and are included in
comparable store sales
Progress Toward Strategy:Optimize the
core business by improving efficiency and effectiveness across the
organization:
- Delivered a $115.0 million reduction in SG&A in the third
quarter and a $315.9 million reduction in the first nine months of
fiscal 2020 from the comparable periods of fiscal 2019 through
continued expense reduction initiatives;
- Continued to transform physical store presence through the
ongoing market optimization and de-densification of the GameStop
store base, closing 74 stores in the quarter and bringing the
year-to-date closures to 462 while transferring sales to
neighboring locations and on-line, and reducing store operating
costs
- Maintained a strong balance sheet with:
- $602.6 million of cash and restricted cash at quarter end and
reduced borrowings under its asset-based revolving credit facility
by $10.0 million to $25.0 million; and
- A 33% decrease in inventory and a 38% decrease in accounts
payable as compared to the third quarter of fiscal 2019
- Executed two sale leaseback transactions related to office
buildings, contributing approximately $43.7 million towards total
liquidity; and
- Subsequent to the end of the third fiscal quarter, the Company
announced the voluntary early redemption of $125 million in
principal amount of its 6.75% senior notes due 2021, on December
11, 2020. This voluntary early redemption covers approximately 63%
of the outstanding Notes and reflects the Company’s strategy to
strengthen and enhance its balance sheet, improve its debt profile
and optimize its capital structure
Build a frictionless digital ecosystem to position
GameStop as a digital-first omni-channel
retailer:
- Delivered a 257% increase in global E-Commerce sales during the
quarter to represent over 18% of total net sales and nearly 25%
year to date.
- Leveraged improved fulfillment capabilities, including the
initial roll-out of same-day delivery option to over 2,000 stores,
enhancing customers’ shopping and delivery experience.
- Continued to enhance the customer experience by offering easier
and more convenient options, including a personalized home page for
website browsing and improved site navigation, post-purchase
experience enhancements, the launch of a new mobile app featuring
an improved shopping experience and a full suite of flexible
payment options.
Additional Third Quarter Highlights:(See
reconciliation table of GAAP results to non-GAAP adjusted results
in Schedule II and III of this press release.)
- Gross margin declined 320 bps from the prior year third
quarter, with an increase in the mix of collectibles sales, a
higher-margin product category, more than offset by the mix of
hardware sales, which carry a lower gross margin, and an increase
in industry-wide freight costs and credit card processing fees as a
result of higher E-Commerce sales penetration
- SG&A was $360.4 million, down $115 million or 24.2%
compared to $475.4 million in the prior year third quarter
- Adjusted SG&A was $359.7 million, a reduction of $100.0
million, or 21.8% from adjusted SG&A in the prior year third
quarter
- Operating loss of ($63.0) million compared to operating loss of
($45.6) million in the prior year third quarter
- Income tax in the third quarter of fiscal 2020 was a benefit of
$53.9 million driven by a change in the tax status of certain
foreign entities and the impact of the CARES Act, including tax
benefits associated with the availability of a five-year carryback
period for certain current year tax losses, compared to income tax
expense of $31.6 million in the prior year third quarter
- Net loss of ($18.8) million, or ($0.29) per diluted share,
compared to net loss of ($83.4) million, or loss per share of
($1.02) per diluted share in the prior year third
quarter
- Adjusted EBITDA of ($61.8) million compared to $7.7 million in
the prior year third quarter
- Adjusted net loss from continuing operations of ($34.4) million
or ($0.53) per diluted share, compared to adjusted net loss from
continuing operations of ($40.2) million, or ($0.49) per diluted
share in the prior year third quarter
Capital Allocation and Liquidity
UpdateAs of October 31, 2020, the Company had $602.6
million in cash and restricted cash compared to $304.4 million in
cash and restricted cash in the prior year third quarter. The
Company reduced its outstanding borrowings under the asset based
revolving credit facility to $25 million.
As of October 31, 2020, the Company had $269.5
million of short-term debt and $216.0 million of long-term debt on
the balance sheet. Subsequent to quarter end, as previously
announced on November 10, 2020, the Company announced the voluntary
early redemption of $125 million in principal amount of its 6.75%
senior notes due 2021, on December 11, 2020. This voluntary early
redemption covers approximately 63% of the outstanding Notes. The
voluntary early redemption is consistent with the Company’s
strategy to strengthen and enhance its balance sheet, improve its
debt profile, and optimize its capital structure.
As part of its strategies to create optimal
financial flexibility and expand liquidity alternatives, the
Company intends to file a shelf registration and prospectus
supplement with the Securities and Exchange Commission today under
which it may offer and sell, from time to time, shares of its Class
A common stock in “at-the-market offerings.” Net proceeds from
sales of shares under the “at-the-market” program, if any,
would be used for working capital and general corporate purposes,
which may include funding of the Company’s ongoing digital-first
omni-channel growth strategy and expansion of its product and
services offering. The timing and amount of sales of shares,
if any, will depend on a variety of factors, including prevailing
market conditions, the trading price of shares, and other factors
as determined by the Company.
Jim Bell, GameStop’s chief financial officer,
said, “As we continue to optimize our business model, we are
shifting focus to execute the transformational components of our
strategy that will position GameStop to be a leading omni-channel
retailer for all things games and entertainment, which we believe
will lead to sustained long-term profitable growth. Over the
past 18 months, we have remained steadfast in focusing on creating
a more efficient business model. These efforts, despite the impacts
of a global pandemic, have led to a stronger balance sheet. We
believe the shelf registration and associated at-the-market
program, if we chose to use it, provide us further options to
enhance our liquidity alternatives to support an efficient and
successful execution of our transformational strategies.”
In respect of the at-the-market program, the
Company intends to file a registration statement (including a
prospectus) with the SEC for the offering of shares thereunder.
Before you invest, you should read the prospectus in that
registration statement and other documents the Company intends to
file with the SEC for more complete information about the Company
and the offering. After these documents are filed, you may
get these documents for free by visiting EDGAR on the SEC Web site
at www.sec.gov. Alternatively, the company will arrange to send you
the prospectus after filing if you request it by calling (817)
424-2001.
This press release shall not constitute an offer
to sell or a solicitation of an offer to buy any security, nor
shall there be any sale of the Company's Class A common stock in
any state or jurisdiction in which such an offer, solicitation or
sale would be unlawful prior to registration or qualification under
the securities laws of any such state or jurisdiction.
Fiscal Fourth Quarter 2020 Outlook (13
weeks ending January 30, 2021)The Company continues to
focus on efforts that position it to manage through this
unprecedented time, including maintaining its balance sheet
strength, prioritizing the allocation of resources to areas of the
business that produce strong cash flow, reducing expenses across
the business, developing and expanding its digital strategy, and
intensifying inventory discipline. Due to the uncertainty around
the duration and evolving impact of COVID-19, the Company is
continuing to suspend guidance, however it expects to realize
positive comparable store sales results and profitability in the
fiscal fourth quarter. For fiscal November
2020, comparable store sales increased 16.5% and total net sales
were $791.1 million compared to $747.6 million in fiscal November
2019.
Conference Call InformationA
conference call with GameStop Corp.’s management is scheduled for
December 8, 2020 at 5:00 p.m. ET to discuss the Company’s financial
results. The phone number for the call is 877-451-6152 and the
confirmation code is 13713035. This call, along with
supplemental information, can also be accessed at GameStop Corp.’s
investor relations home page at http://investor.GameStop.com/. The
conference call will be archived for two months on GameStop’s
corporate website.
About GameStop.GameStop Corp.,
a Fortune 500 company headquartered in Grapevine, Texas, is a
digital-first omni-channel retailer, offering games and
entertainment products in its over 5,000 stores and comprehensive
e-Commerce properties across 10 countries. GameStop, through
its family of brands offers the best selection of new and pre-owned
video gaming consoles, accessories and video game titles, in both
physical and digital formats. GameStop also offers fans a
wide variety of POP! vinyl figures, collectibles, board games and
more. Through GameStop’s unique buy-sell-trade program, gamers can
trade in video game consoles, games, and accessories, as well as
consumer electronics for cash or in-store credit. The
company's consumer product network also includes www.gamestop.com
and Game Informer® magazine, the world's leading print and digital
video game publication.
General information about GameStop
Corp. can be obtained at the Company’s corporate website.
Follow @GameStop and @GameStopCorp on Twitter and
find GameStop on Facebook at www.facebook.com/GameStop.
Non-GAAP Measures and Other MetricsAs a
supplement to our 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 earnings (loss) per share, adjusted
EBITDA and free cash flow. We believe these non-GAAP
financial measures provide useful information to investors in
evaluating our core operating performance. Adjusted selling,
general and administrative expenses (“Adjusted SG&A”), adjusted
operating income (loss), adjusted net income (loss) and adjusted
earnings (loss) per share exclude the effect of items such as
transformation costs, asset impairments, store closure costs,
severance, non-operating tax charges, as well as divestiture costs.
Results reported as constant currency exclude the impact of
fluctuations in foreign currency exchange rates by converting our
local currency financial results using the prior period exchange
rates and comparing these adjusted amounts to our current period
reported results. Our 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. A complete definition
of comparable store sales can be found in the Company’s Form
10-Q.
Cautionary Statement Regarding
Forward-Looking Statements - Safe HarborThis 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, future operations, margins, profitability, capital
expenditures, liquidity and capital resources and other financial
and operating information, including expectations as to future
operating profit improvement. Such statements include without
limitation those about the Company’s financial results,
expectations and other statements that are not historical facts.
Forward-looking statements are subject to significant risks and
uncertainties and actual developments, business decisions and
results may differ materially from those reflected or described in
the forward-looking statements. The following factors, among
others, could cause actual results to differ materially from those
reflected or described in the forward-looking statements:
macroeconomic pressures, including the effects of COVID-19 on
consumer spending and the Company’s ability to keep stores open;
the impact of the COVID-19 pandemic on the Company’s business and
financial results; the economic conditions in the U.S. and certain
international markets; 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
impact of international crises and trade restrictions and tariffs
on the delivery of the Company’s products; the Company’s ability to
obtain favorable terms from its suppliers; the international nature
of the Company’s business; the Company’s dependence on sales during
the holiday selling season; fluctuations in the Company’s results
of operations from quarter to quarter; the Company’s ability to
de-densify its global store base; the Company’s ability to renew,
terminate or enter into new leases on favorable terms; the
competitive nature of the Company’s industry; the Company’s ability
to attract and retain executive officers and key personnel; the
adequacy of the Company’s management information systems; the
Company’s reliance on centralized facilities for refurbishment of
its pre-owned products; the Company’s ability to react to trends in
pop culture with regard to its sales of collectibles and dependence
on licensed products for a substantial portion of such sales; the
Company’s ability to maintain security of its customer, employee or
company information; potential harm to the Company’s reputation;
the Company’s ability to maintain effective control over financial
reporting; the Company’s vendors’ ability to provide marketing and
merchandise support at historical levels; restrictions on the
Company’s ability to purchase and sell pre-owned video games;
potential decrease in popularity of certain types of video games;
changes in the Company’s global tax rate; potential future
litigation and other legal proceedings; changes in accounting rules
and regulations; and the Company’s ability to comply with federal,
state, local and international law. Additional factors that could
cause results to differ materially from those reflected or
described in the forward-looking statements can be found in Exhibit
99.4 of GameStop's Current Report on Form 8-K filed on June 5, 2020
and in GameStop’s Quarterly report on Form 10-Q filed on September
9, 2020 and other filings made from time to time with the SEC and
available at the SEC's Internet site at http://www.sec.gov or
http://investor.GameStop.com. Forward-looking statements contained
in this release speak only as of the date of this 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.Condensed
Consolidated Statements of Operations(in millions,
except per share data)(unaudited)
|
13 Weeks Ended October 31, 2020 |
|
13 Weeks Ended November 2, 2019 |
Net sales |
$ |
1,004.7 |
|
|
|
$ |
1,438.5 |
|
|
Cost of sales |
728.4 |
|
|
|
997.4 |
|
|
Gross profit |
276.3 |
|
|
|
441.1 |
|
|
Selling, general and
administrative expenses |
360.4 |
|
|
|
475.4 |
|
|
Asset impairments |
— |
|
|
|
11.3 |
|
|
Gain on sale of assets |
(21.1 |
) |
|
|
— |
|
|
Operating loss |
(63.0 |
) |
|
|
(45.6 |
) |
|
Interest expense, net |
9.7 |
|
|
|
6.0 |
|
|
Loss from continuing operations before income taxes |
(72.7 |
) |
|
|
(51.6 |
) |
|
Income tax (benefit)
expense |
(53.9 |
) |
|
|
31.6 |
|
|
Net loss from continuing
operations |
(18.8 |
) |
|
|
(83.2 |
) |
|
Loss from discontinued
operations, net of tax |
— |
|
|
|
(0.2 |
) |
|
Net loss |
$ |
(18.8 |
) |
|
|
$ |
(83.4 |
) |
|
|
|
|
|
Basic loss per share: |
|
|
|
Continuing operations |
$ |
(0.29 |
) |
|
|
$ |
(1.01 |
) |
|
Discontinued operations |
— |
|
|
|
— |
|
|
Basic loss per share |
$ |
(0.29 |
) |
|
|
$ |
(1.02 |
) |
|
|
|
|
|
Diluted loss per share: |
|
|
|
Continuing operations |
$ |
(0.29 |
) |
|
|
$ |
(1.01 |
) |
|
Discontinued operations |
— |
|
|
|
— |
|
|
Diluted loss per share |
$ |
(0.29 |
) |
|
|
$ |
(1.02 |
) |
|
|
|
|
|
Weighted-average common shares
outstanding: |
|
|
|
Basic |
65.2 |
|
|
|
82.1 |
|
|
Diluted |
65.2 |
|
|
|
82.1 |
|
|
|
|
|
|
Percentage of Net Sales: |
|
|
|
|
|
|
|
Net sales |
100.0 |
|
% |
|
100.0 |
|
% |
Cost of sales |
72.5 |
|
|
|
69.3 |
|
|
Gross profit |
27.5 |
|
|
|
30.7 |
|
|
Selling, general and
administrative expenses |
35.9 |
|
|
|
33.0 |
|
|
Asset impairments |
— |
|
|
|
0.8 |
|
|
Gain on sale of assets |
(2.1 |
) |
|
|
— |
|
|
Operating loss |
(6.3 |
) |
|
|
(3.1 |
) |
|
Interest expense, net |
0.9 |
|
|
|
0.5 |
|
|
Loss from continuing operations before income taxes |
(7.2 |
) |
|
|
(3.6 |
) |
|
Income tax (benefit)
expense |
(5.4 |
) |
|
|
2.2 |
|
|
Net loss from continuing
operations |
(1.8 |
) |
|
|
(5.8 |
) |
|
Loss from discontinued
operations, net of tax |
— |
|
|
|
— |
|
|
Net loss |
(1.8 |
) |
% |
|
(5.8 |
) |
% |
|
39 Weeks Ended October 31, 2020 |
|
39 Weeks Ended November 2, 2019 |
Net sales |
$ |
2,967.7 |
|
|
|
$ |
4,271.9 |
|
|
Cost of sales |
2,156.8 |
|
|
|
2,960.5 |
|
|
Gross profit |
810.9 |
|
|
|
1,311.4 |
|
|
Selling, general and
administrative expenses |
1,095.1 |
|
|
|
1,411.0 |
|
|
Goodwill and asset
impairments |
4.8 |
|
|
|
375.2 |
|
|
Gain on sale of assets |
(32.4 |
) |
|
|
— |
|
|
Operating loss |
(256.6 |
) |
|
|
(474.8 |
) |
|
Interest expense, net |
23.9 |
|
|
|
20.7 |
|
|
Loss from continuing operations before income taxes |
(280.5 |
) |
|
|
(495.5 |
) |
|
Income tax expense
(benefit) |
14.4 |
|
|
|
(6.2 |
) |
|
Net loss from continuing
operations |
(294.9 |
) |
|
|
(489.3 |
) |
|
Loss from discontinued
operations, net of tax |
(0.9 |
) |
|
|
(2.6 |
) |
|
Net loss |
$ |
(295.8 |
) |
|
|
$ |
(491.9 |
) |
|
|
|
|
|
Basic loss per share: |
|
|
|
Continuing operations |
$ |
(4.54 |
) |
|
|
$ |
(5.16 |
) |
|
Discontinued operations |
(0.01 |
) |
|
|
(0.03 |
) |
|
Basic loss per share |
$ |
(4.56 |
) |
|
|
$ |
(5.19 |
) |
|
|
|
|
|
Diluted loss per share: |
|
|
|
Continuing operations |
$ |
(4.54 |
) |
|
|
$ |
(5.16 |
) |
|
Discontinued operations |
(0.01 |
) |
|
|
(0.03 |
) |
|
Diluted loss per share |
$ |
(4.56 |
) |
|
|
$ |
(5.19 |
) |
|
|
|
|
|
Dividends per common
share |
$ |
— |
|
|
|
$ |
0.38 |
|
|
|
|
|
|
Weighted-average common shares
outstanding: |
|
|
|
Basic |
64.9 |
|
|
|
94.8 |
|
|
Diluted |
64.9 |
|
|
|
94.8 |
|
|
|
|
|
|
Percentage of Net Sales: |
|
|
|
|
|
|
|
Net sales |
100.0 |
|
% |
|
100.0 |
|
% |
Cost of sales |
72.7 |
|
|
|
69.3 |
|
|
Gross profit |
27.3 |
|
|
|
30.7 |
|
|
Selling, general and
administrative expenses |
36.9 |
|
|
|
33.0 |
|
|
Goodwill and asset
impairments |
0.2 |
|
|
|
8.8 |
|
|
Gain on sale of assets |
(1.1 |
) |
|
|
— |
|
|
Operating loss |
(8.7 |
) |
|
|
(11.1 |
) |
|
Interest expense, net |
0.8 |
|
|
|
0.5 |
|
|
Loss from continuing operations before income taxes |
(9.5 |
) |
|
|
(11.6 |
) |
|
Income tax expense
(benefit) |
0.5 |
|
|
|
(0.2 |
) |
|
Net loss from continuing
operations |
(10.0 |
) |
|
|
(11.4 |
) |
|
Loss from discontinued
operations, net of tax |
— |
|
|
|
(0.1 |
) |
|
Net loss |
(10.0 |
) |
% |
|
(11.5 |
) |
% |
|
|
|
|
GameStop Corp.Condensed
Consolidated Balance Sheets(in
millions)(unaudited)
|
October 31, 2020 |
|
November 2, 2019 |
ASSETS: |
|
|
|
|
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
445.9 |
|
|
$ |
290.3 |
|
Restricted cash |
140.7 |
|
|
0.3 |
|
Receivables, net |
77.6 |
|
|
145.7 |
|
Merchandise inventories, net |
861.0 |
|
|
1,286.7 |
|
Prepaid expenses and other current assets |
126.7 |
|
|
127.3 |
|
Assets held-for-sale |
— |
|
|
12.8 |
|
Total current assets |
1,651.9 |
|
|
1,863.1 |
|
Property and equipment,
net |
193.0 |
|
|
287.1 |
|
Operating lease right-of-use
assets |
666.7 |
|
|
758.1 |
|
Deferred income taxes |
29.2 |
|
|
157.8 |
|
Long-term restricted cash |
16.0 |
|
|
13.8 |
|
Other noncurrent assets |
44.6 |
|
|
65.7 |
|
Total assets |
$ |
2,601.4 |
|
|
$ |
3,145.6 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY: |
Current liabilities: |
|
|
|
Accounts payable |
$ |
440.2 |
|
|
$ |
709.9 |
|
Accrued liabilities and other current liabilities |
654.1 |
|
|
625.1 |
|
Current portion of operating lease liabilities |
212.9 |
|
|
238.5 |
|
Short-term debt, including current portion of long-term debt,
net |
244.5 |
|
|
— |
|
Borrowings under revolving line of credit |
25.0 |
|
|
— |
|
Total current liabilities |
1,576.7 |
|
|
1,573.5 |
|
Long-term debt, net |
216.0 |
|
|
419.4 |
|
Operating lease
liabilities |
456.7 |
|
|
516.5 |
|
Other long-term
liabilities |
19.8 |
|
|
19.1 |
|
Total liabilities |
2,269.2 |
|
|
2,528.5 |
|
Total stockholders’ equity |
332.2 |
|
|
617.1 |
|
Total liabilities and stockholders’ equity |
$ |
2,601.4 |
|
|
$ |
3,145.6 |
|
|
|
|
|
GameStop Corp.Condensed
Consolidated Statements of Cash Flows(in
millions)(unaudited)
|
13 Weeks Ended October 31, 2020 |
|
13 Weeks Ended November 2, 2019 |
Cash flows from operating
activities: |
|
|
|
Net loss |
$ |
(18.8 |
) |
|
|
$ |
(83.4 |
) |
|
Adjustments to reconcile net loss to net cash flows from operating
activities: |
|
|
|
Depreciation and amortization (including amounts in cost of
sales) |
19.4 |
|
|
|
23.9 |
|
|
Goodwill and asset impairments |
— |
|
|
|
11.3 |
|
|
Stock-based compensation expense |
2.2 |
|
|
|
2.9 |
|
|
Deferred income taxes |
— |
|
|
|
— |
|
|
(Gain) loss on disposal of property and equipment, net |
(21.0 |
) |
|
|
1.0 |
|
|
Loss on divestiture |
— |
|
|
|
1.3 |
|
|
Other |
2.8 |
|
|
|
(0.6 |
) |
|
Changes in operating assets and liabilities: |
|
|
|
Receivables, net |
5.3 |
|
|
|
(15.2 |
) |
|
Merchandise inventories |
(382.6 |
) |
|
|
(332.1 |
) |
|
Prepaid expenses and other current assets |
(4.6 |
) |
|
|
(3.3 |
) |
|
Prepaid income taxes and income taxes payable |
(58.1 |
) |
|
|
32.3 |
|
|
Accounts payable and accrued liabilities |
272.6 |
|
|
|
351.0 |
|
|
Operating lease right-of-use assets and liabilities |
(1.7 |
) |
|
|
2.9 |
|
|
Changes in other long-term liabilities |
(0.1 |
) |
|
|
(0.1 |
) |
|
Net cash flows used in operating activities |
(184.6 |
) |
|
|
(8.1 |
) |
|
Cash flows from investing
activities: |
|
|
|
Purchase of property and equipment |
(15.1 |
) |
|
|
(20.2 |
) |
|
Proceeds from sale of property and equipment |
43.7 |
|
|
|
— |
|
|
Proceeds from divestitures |
— |
|
|
|
5.2 |
|
|
Other |
(1.3 |
) |
|
|
0.3 |
|
|
Net cash flows provided by (used in) investing activities |
27.3 |
|
|
|
(14.7 |
) |
|
Cash flows from financing
activities: |
|
|
|
Repurchase of common shares |
— |
|
|
|
(114.0 |
) |
|
Proceeds from French term loans |
23.5 |
|
|
|
— |
|
|
Dividends paid |
— |
|
|
|
— |
|
|
Borrowings from the revolver |
— |
|
|
|
— |
|
|
Repayments of revolver borrowings |
(10.0 |
) |
|
|
— |
|
|
Repayments of senior notes |
— |
|
|
|
— |
|
|
Settlement of stock-based awards |
— |
|
|
|
— |
|
|
Net cash flows provided by (used in) financing activities |
13.5 |
|
|
|
(114.0 |
) |
|
Exchange rate effect on cash, cash equivalents and restricted
cash |
(12.2 |
) |
|
|
3.4 |
|
|
Decrease in cash held-for-sale |
— |
|
|
|
0.1 |
|
|
Decrease in cash, cash equivalents and restricted cash |
(156.0 |
) |
|
|
(133.3 |
) |
|
Cash, cash equivalents and
restricted cash at beginning of period |
758.6 |
|
|
|
437.7 |
|
|
Cash, cash equivalents and
restricted cash at end of period |
$ |
602.6 |
|
|
|
$ |
304.4 |
|
|
|
|
|
|
GameStop Corp.Condensed
Consolidated Statements of Cash Flows(in
millions)(unaudited)
|
39 Weeks Ended October 31, 2020 |
|
39 Weeks Ended November 2, 2019 |
Cash flows from operating
activities: |
|
|
|
Net loss |
$ |
(295.8 |
) |
|
|
$ |
(491.9 |
) |
|
Adjustments to reconcile net loss to net cash flows from operating
activities: |
|
|
|
Depreciation and amortization (including amounts in cost of
sales) |
61.1 |
|
|
|
70.1 |
|
|
Goodwill and asset impairments |
4.8 |
|
|
|
375.2 |
|
|
Stock-based compensation expense |
6.1 |
|
|
|
8.1 |
|
|
Deferred income taxes |
45.4 |
|
|
|
(11.8 |
) |
|
(Gain) loss on disposal of property and equipment, net |
(30.6 |
) |
|
|
1.9 |
|
|
Loss on divestiture |
— |
|
|
|
1.3 |
|
|
Other |
2.6 |
|
|
|
3.1 |
|
|
Changes in operating assets and liabilities: |
|
|
|
Receivables, net |
65.8 |
|
|
|
(6.7 |
) |
|
Merchandise inventories |
11.6 |
|
|
|
(61.6 |
) |
|
Prepaid expenses and other current assets |
(2.9 |
) |
|
|
(10.7 |
) |
|
Prepaid income taxes and income taxes payable |
11.7 |
|
|
|
(44.2 |
) |
|
Accounts payable and accrued liabilities |
78.9 |
|
|
|
(488.4 |
) |
|
Operating lease right-of-use assets and liabilities |
1.1 |
|
|
|
0.7 |
|
|
Changes in other long-term liabilities |
(0.9 |
) |
|
|
0.1 |
|
|
Net cash flows used in operating activities |
(41.1 |
) |
|
|
(654.8 |
) |
|
Cash flows from investing
activities: |
|
|
|
Purchase of property and equipment |
(32.6 |
) |
|
|
(61.4 |
) |
|
Proceeds from sale of property and equipment |
95.5 |
|
|
|
— |
|
|
Proceeds from divestitures |
— |
|
|
|
5.2 |
|
|
Other |
0.4 |
|
|
|
(0.7 |
) |
|
Net cash flows provided by (used in) investing activities |
63.3 |
|
|
|
(56.9 |
) |
|
Cash flows from financing
activities: |
|
|
|
Repurchase of common shares |
— |
|
|
|
(176.9 |
) |
|
Proceeds from French term loans |
47.1 |
|
|
|
— |
|
|
Dividends paid |
(0.3 |
) |
|
|
(40.5 |
) |
|
Borrowings from the revolver |
150.0 |
|
|
|
— |
|
|
Repayments of revolver borrowings |
(125.0 |
) |
|
|
— |
|
|
Repayments of senior notes |
(5.3 |
) |
|
|
(404.5 |
) |
|
Settlement of stock-based awards |
(1.0 |
) |
|
|
(0.8 |
) |
|
Net cash flows provided by (used in) financing activities |
65.5 |
|
|
|
(622.7 |
) |
|
Exchange rate effect on cash, cash equivalents and restricted
cash |
1.4 |
|
|
|
(1.7 |
) |
|
Increase (decrease) in cash, cash equivalents and restricted
cash |
89.1 |
|
|
|
(1,336.1 |
) |
|
Cash, cash equivalents and
restricted cash at beginning of period |
513.5 |
|
|
|
1,640.5 |
|
|
Cash, cash equivalents and
restricted cash at end of period |
$ |
602.6 |
|
|
|
$ |
304.4 |
|
|
|
|
|
|
Schedule ISales
Mix(unaudited)
|
13 Weeks Ended October 31, 2020 |
|
13 Weeks Ended November 2, 2019 |
|
Net |
|
Percent |
|
Net |
|
Percent |
Net Sales (in millions): |
Sales |
|
of Total |
|
Sales |
|
of Total |
|
|
|
|
|
|
|
|
Hardware and accessories (1) |
$ |
413.4 |
|
|
41.2 |
% |
|
$ |
546.0 |
|
|
37.9 |
% |
Software (2) |
444.4 |
|
|
44.2 |
|
|
730.6 |
|
|
50.8 |
|
Collectibles |
146.9 |
|
|
14.6 |
|
|
161.9 |
|
|
11.3 |
|
|
|
|
|
|
|
|
|
Total |
$ |
1,004.7 |
|
|
100.0 |
% |
|
$ |
1,438.5 |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39 Weeks Ended October 31, 2020 |
|
39 Weeks Ended November 2, 2019 |
|
Net |
|
Percent |
|
Net |
|
Percent |
Net Sales (in millions): |
Sales |
|
of Total |
|
Sales |
|
of Total |
|
|
|
|
|
|
|
|
Hardware and accessories
(1) |
$ |
1,368.1 |
|
|
46.1 |
% |
|
$ |
1,757.4 |
|
|
41.1 |
% |
Software (2) |
1,247.9 |
|
|
42.0 |
|
|
2,022.0 |
|
|
47.4 |
|
Collectibles |
351.7 |
|
|
11.9 |
|
|
492.5 |
|
|
11.5 |
|
|
|
|
|
|
|
|
|
Total |
$ |
2,967.7 |
|
|
100.0 |
% |
|
$ |
4,271.9 |
|
|
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, and the operations of our
Simply Mac stores, which were sold in September 2019. |
(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 |
|
39 Weeks Ended |
|
39 Weeks Ended |
|
October 31, 2020 |
|
November 2, 2019 |
|
October 31, 2020 |
|
November 2, 2019 |
Adjusted
SG&A |
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A |
$ |
360.4 |
|
|
|
$ |
475.4 |
|
|
|
$ |
1,095.1 |
|
|
|
$ |
1,411.0 |
|
|
Transformation costs |
(0.7 |
) |
|
|
(10.4 |
) |
|
|
(2.0 |
) |
|
|
(27.1 |
) |
|
Significant transactions(1) |
— |
|
|
|
— |
|
|
|
(7.5 |
) |
|
|
— |
|
|
Divestitures, severance and other |
— |
|
|
|
(5.3 |
) |
|
|
(7.8 |
) |
|
|
(25.6 |
) |
|
Adjusted SG&A |
$ |
359.7 |
|
|
|
$ |
459.7 |
|
|
|
$ |
1,077.8 |
|
|
|
$ |
1,358.3 |
|
|
|
|
|
|
|
|
|
|
Adjusted Operating
Loss |
|
|
|
|
|
|
|
Operating loss |
$ |
(63.0 |
) |
|
|
$ |
(45.6 |
) |
|
|
$ |
(256.6 |
) |
|
|
$ |
(474.8 |
) |
|
Transformation costs |
0.7 |
|
|
|
10.4 |
|
|
|
2.0 |
|
|
|
27.1 |
|
|
Goodwill and asset impairments |
— |
|
|
|
11.3 |
|
|
|
4.8 |
|
|
|
375.2 |
|
|
Significant transactions(2) |
(21.1 |
) |
|
|
— |
|
|
|
(24.9 |
) |
|
|
— |
|
|
Divestitures, severance and other |
— |
|
|
|
5.3 |
|
|
|
7.8 |
|
|
|
25.6 |
|
|
Adjusted operating loss |
$ |
(83.4 |
) |
|
|
$ |
(18.6 |
) |
|
|
$ |
(266.9 |
) |
|
|
$ |
(46.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net
Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(18.8 |
) |
|
|
$ |
(83.4 |
) |
|
|
$ |
(295.8 |
) |
|
|
$ |
(491.9 |
) |
|
Loss from discontinued operations, net of tax |
— |
|
|
|
0.2 |
|
|
|
0.9 |
|
|
|
2.6 |
|
|
Net loss from continuing
operations |
$ |
(18.8 |
) |
|
|
$ |
(83.2 |
) |
|
|
$ |
(294.9 |
) |
|
|
$ |
(489.3 |
) |
|
Transformation costs |
0.7 |
|
|
|
10.4 |
|
|
|
2.0 |
|
|
|
27.1 |
|
|
Goodwill and asset impairments |
— |
|
|
|
11.3 |
|
|
|
4.8 |
|
|
|
375.2 |
|
|
Significant transactions(2) |
(21.1 |
) |
|
|
— |
|
|
|
(24.9 |
) |
|
|
— |
|
|
Divestitures, severance and other |
— |
|
|
|
5.3 |
|
|
|
7.8 |
|
|
|
25.6 |
|
|
Tax effect of non-GAAP adjustments |
4.8 |
|
|
|
16.0 |
|
|
|
22.7 |
|
|
|
(3.3 |
) |
|
Tax valuation allowance |
— |
|
|
|
— |
|
|
|
53.0 |
|
|
|
— |
|
|
Adjusted net loss |
$ |
(34.4 |
) |
|
|
$ |
(40.2 |
) |
|
|
$ |
(229.5 |
) |
|
|
$ |
(64.7 |
) |
|
|
|
|
|
|
|
|
|
Adjusted loss per share |
|
|
|
|
|
|
|
Basic |
$ |
(0.53 |
) |
|
|
$ |
(0.49 |
) |
|
|
$ |
(3.54 |
) |
|
|
$ |
(0.68 |
) |
|
Diluted |
$ |
(0.53 |
) |
|
|
$ |
(0.49 |
) |
|
|
$ |
(3.54 |
) |
|
|
$ |
(0.68 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares used in
adjusted calculation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
65.2 |
|
|
|
82.1 |
|
|
|
64.9 |
|
|
|
94.8 |
|
|
Diluted |
65.2 |
|
|
|
82.1 |
|
|
|
64.9 |
|
|
|
94.8 |
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes transaction costs associated with our debt
exchange. |
(2) |
|
Includes the gain
on sale of assets relating to sale-leaseback transactions and
transaction costs associated with our debt exchange. |
|
13 Weeks Ended |
|
13 Weeks Ended |
|
39 Weeks Ended |
|
39 Weeks Ended |
|
October 31, 2020 |
|
November 2, 2019 |
|
October 31, 2020 |
|
November 2, 2019 |
Reconciliation of
Adjusted EBITDA to Net Loss |
|
|
|
|
|
|
|
Net loss |
$ |
(18.8 |
) |
|
|
$ |
(83.4 |
) |
|
|
$ |
(295.8 |
) |
|
|
$ |
(491.9 |
) |
|
Loss from discontinued
operations, net of tax |
— |
|
|
|
0.2 |
|
|
|
0.9 |
|
|
|
2.6 |
|
|
Loss from continuing
operations |
$ |
(18.8 |
) |
|
|
$ |
(83.2 |
) |
|
|
$ |
(294.9 |
) |
|
|
$ |
(489.3 |
) |
|
Interest expense, net |
9.7 |
|
|
|
6.0 |
|
|
|
23.9 |
|
|
|
20.7 |
|
|
Depreciation and amortization |
19.4 |
|
|
|
23.9 |
|
|
|
61.1 |
|
|
|
70.1 |
|
|
Income tax (benefit) expense |
(53.9 |
) |
|
|
31.6 |
|
|
|
14.4 |
|
|
|
(6.2 |
) |
|
EBITDA |
$ |
(43.6 |
) |
|
|
$ |
(21.7 |
) |
|
|
$ |
(195.5 |
) |
|
|
$ |
(404.7 |
) |
|
Stock-based compensation |
2.2 |
|
|
|
2.4 |
|
|
|
6.1 |
|
|
|
7.4 |
|
|
Transformation costs |
0.7 |
|
|
|
10.4 |
|
|
|
2.0 |
|
|
|
27.1 |
|
|
Goodwill and asset impairments |
— |
|
|
|
11.3 |
|
|
|
4.8 |
|
|
|
375.2 |
|
|
Significant transactions(1) |
(21.1 |
) |
|
|
— |
|
|
|
(24.9 |
) |
|
|
— |
|
|
Divestitures, severance and other |
— |
|
|
|
5.3 |
|
|
|
7.8 |
|
|
|
25.6 |
|
|
Adjusted EBITDA |
$ |
(61.8 |
) |
|
|
$ |
7.7 |
|
|
|
$ |
(199.7 |
) |
|
|
$ |
30.6 |
|
|
|
|
|
|
|
|
|
|
(1) Includes the
gain on sale of assets relating to sale-leaseback transactions and
transaction costs associated with our debt exchange. |
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 |
|
39 Weeks Ended |
|
39 Weeks Ended |
|
October 31, 2020 |
|
November 2, 2019 |
|
October 31, 2020 |
|
November 2, 2019 |
Net cash flows used in operating activities |
$ |
(184.6 |
) |
|
|
$ |
(8.1 |
) |
|
|
$ |
(41.1 |
) |
|
|
$ |
(654.8 |
) |
|
Purchase of property and equipment |
(15.1 |
) |
|
|
(20.2 |
) |
|
|
(32.6 |
) |
|
|
(61.4 |
) |
|
Free cash flow |
$ |
(199.7 |
) |
|
|
$ |
(28.3 |
) |
|
|
$ |
(73.7 |
) |
|
|
$ |
(716.2 |
) |
|
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.
ContactGameStop Corp. Investor
Relations(817) 424-2001investorrelations@gamestop.com
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