GameStop Corp. (GME) on Q2 2022 Results - Earnings Call Transcript
Operator: Good afternoon, and welcome to the GameStop Second Quarter 2022 Earnings Conference Call. Please note that certain statements made during the call constitute forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from segments. These risks and uncertainties are described in the company's earnings press release and its filings with the SEC. The forward-looking statements today are made as of the date of this call and the company does not undertake any obligation to update the forward-looking statements. I will now turn the call over to GameStop's CEO, Matt Furlong. Matt Furlong: Thank you, and good afternoon, everyone. I want to begin by reiterating the deep appreciation we have for our stockholders' unrivaled enthusiasm, passion, and support. As we work to transform GameStop, these remain unique tailwinds for us, ones we always recognize and value. I also want to take this opportunity to thank everyone across the organization for bringing continued focus and intensity to our mission, particularly during an active Q2 that represented a transitional quarter for us. Before covering the quarter's specific initiatives and results, I want to provide a high-level update on where we've been and where we're looking to go as our transformation progresses. When our Board began turning over early last year, GameStop was saddled with significant debt, decaying systems, limited employee depth, and a host of other issues. This is why we spent the second half of 2021 and the first half of 2022 making up for years of underinvestment in modernizing the business. The upshot is we now have a more diversified product catalog, strengthened fulfillment network, improved tech stack and e-commerce presence, and fortified corporate infrastructure. Thanks to these improvements, including our SAP implementation, we are able to start focusing on a new set of priorities that include achieving profitability, launching proprietary products, leveraging our brand in new ways, and investing further in our stores. During Q2, we took steps to support each of these new priorities. With respect to pursuing profitability in the coming quarters, we rightsized corporate expenditures and headcount following a period in which the company had hired more than 600 new individuals. These actions, combined with the elimination of one-time expenses in Q1, contributed to a 14.3% reduction in SG&A. We've done this while improving our e-commerce experience and reducing free shipping to customers to one to three days. We're going to retain a strong focus on cost containment and continue promoting an ownership mentality across the organization. On the product front, our enhanced tech capabilities allowed us to follow the launch of our digital wallet with the launch of our new marketplace that allows gamers, creators, collectors, and others to buy, sell, and trade NFTs. The launch of our NFT marketplace supports GameStop's pursuit of long-term growth in the cryptocurrency, NFT, and Web 3.0 gaming verticals, all of which we expect to be increasingly relevant for the collectors and gamers of the future. When it comes to accretive partnerships, we've been actively exploring opportunities to strengthen GameStop's offerings and increase brand visibility. We're building on the momentum established by our previously disclosed partnerships with organizations like Immutable and , whether it be through new relationships that support our commerce business, blockchain group or both. The deal we just announced with FTX is a byproduct of our commerce and blockchain teams, working together to establish something unique in the retail world. Lastly, when it comes to investing in our stores, we rolled out an improved compensation model for US store leaders. Each of these store leaders is being given a time-based equity grant of $21,000 that vests over three years, as well as the opportunity to earn additional compensation every quarter via a performance-based equity grant. In conjunction, we're raising hourly pay for certain store associates. These steps were taken to help us enhance retention and recruitment of passionate, quality talent. When we think about the GameStop of the future, we expect our stores to help us maintain direct connectivity to customers and sustain localized order fulfillment capabilities across more geographies. This is why, even as we continue evolving our e-commerce and digital asset offerings, storage will remain a critical piece of the company's value proposition. Taken together, we believe the aforementioned steps can help us attain profitability in the coming quarters and produce additional revenue growth over the long term. Let me now turn to our financial results for Q2. Net sales were $1.136 billion for the quarter, compared to $1.183 billion in the prior year's second quarter. Sales attributable to new and expanded brand relationships remained strong. It is also worth noting that sales attributable to collectibles, which is a segment we intend to grow over the long term, were $223.2 million for the quarter, compared to $177.2 million in the prior year second quarter. SG&A was $387.5 million or 34.1% of sales, compared to $378.9 million or 32% of sales in last year's second quarter. As noted, we had a strong reduction in SG&A on a sequential basis versus Q1 of this year, and we're taking further steps to reduce SG&A on a go-forward basis. We reported a net loss of $108.7 million or $0.36 per diluted share, compared to a net loss of $61.6 million or a loss per diluted share of $0.21 in the prior year's second quarter. There were no major one-time transformation transaction or related costs during the period. Turning to the balance sheet. We ended the quarter with cash and cash equivalents of $908.9 million. We continue to maintain a sizable cash position even while investing in inventory to sustain strong in-stock levels and mitigate the full impact of lingering supply chain issues. At the close of the second quarter, we had no borrowings under our ABL facility and no debt other than a low-interest, unsecured term loan associated with the French government's response to COVID-19. Total liabilities compared to the second quarter of last year were down $237.8 million. Capital expenditures for the quarter were $20.5 million, up $7 million from last year's second quarter, reflecting investments in our technology and enterprise systems. We anticipate CapEx will remain at modest levels. In the second quarter, cash flow from operations was an outflow of $103.4 million, compared to an outflow of $11.5 million during the same period last year. 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. In terms of an outlook, we're not providing formal guidance at this time. It is worth noting, however, that our ongoing engagement with key suppliers is positioning us to receive stronger supply of next-generation consoles in the months ahead. I want to finish by reinforcing that we're working to accomplish something unprecedented in our industry, transform a legacy brick-and-mortar retailer into a technology-led organization that meets customers' needs through stores, e-commerce properties in both digital marketplaces and new online communities. Our path to becoming a more diversified and tech-centric business is one that obviously carries risk and will take time. This said, we believe GameStop is a much stronger business than it was 18 months ago. Iâll leave it there for this quarter. We look forward to driving more progress in Q3. Thank you. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. End of Q&A:
GameStop Shares Dip 4% as Revenue Misses Despite Surprise Profit
GameStop (NYSE:GME) shares dropped more than 4% intra-day today after the company reported first-quarter revenue that fell short of expectations, overshadowing an unexpected profit.
The company posted adjusted earnings of $0.17 per share—well ahead of Wall Street's $0.04 estimate—while revenue came in at $732.4 million, missing forecasts of $754.2 million. The stronger bottom-line performance was not enough to offset concerns about falling sales, particularly as hardware and accessories revenue slumped roughly 32%.
Despite returning to profitability with net income of $44.8 million, GameStop continues to face headwinds from the industry-wide shift toward digital game purchases. In response, the company has closed hundreds of U.S. stores and expanded its e-commerce initiatives.
However, international restructuring charges pushed the company to an operating loss of $10.8 million, adding to investor caution. The mixed report underscores the ongoing challenges GameStop faces in navigating its digital transformation.
GameStop Corp. (NYSE:GME) Earnings Preview: A Shift Towards Digital Gaming and E-Commerce
- GameStop's earnings per share (EPS) is estimated to be $0.08, marking a significant 166.7% increase from the previous year.
- The company's strategic shift towards digital gaming and e-commerce is crucial for adapting to changing consumer preferences.
- GameStop's financial health is indicated by a low debt-to-equity ratio of 0.08 and a strong current ratio of 8.05.
GameStop Corp. (NYSE:GME) is a well-known retailer in the gaming industry, primarily selling video games, consoles, and gaming accessories. The company has been in the spotlight due to its strategic shift towards e-commerce and digital gaming, aiming to adapt to the evolving market landscape. As GameStop prepares to release its first-quarter fiscal 2025 earnings on June 10, 2025, investors are keenly watching for insights into its financial performance.
Analysts estimate GameStop's earnings per share (EPS) to be $0.08, a significant 166.7% increase from the previous year. This growth is attributed to the company's strategic focus on collectibles and cost-cutting measures, which are expected to enhance profitability despite a projected 16% decline in revenue to $750 million. The shift towards digital gaming and e-commerce is a crucial factor for investors to consider, as it aligns with changing consumer preferences.
GameStop's valuation metrics provide a deeper understanding of its financial standing. The company has a high price-to-earnings (P/E) ratio of 100.31, indicating that investors are willing to pay a premium for its shares. The price-to-sales ratio of 3.45 and enterprise value to sales ratio of 2.31 reflect the market's valuation of GameStop in relation to its revenue. These figures suggest that while the company is valued highly, it faces challenges in its traditional business segments.
The company's financial health is further highlighted by its debt-to-equity ratio of 0.08, indicating a low level of debt compared to equity. This suggests a strong financial position, allowing GameStop to potentially invest in its strategic initiatives. Additionally, the current ratio of 8.05 demonstrates the company's ability to cover short-term liabilities with its short-term assets, providing a cushion for operational stability.
As GameStop releases its earnings, investors will closely examine these financial metrics and strategic shifts to assess the company's future prospects. The focus on digital gaming and e-commerce, along with its valuation and fundamentals, will play a pivotal role in shaping investor sentiment and decisions regarding GameStop stock.
GameStop Surges 14% After Bitcoin Investment Announcement and Profit Spike
GameStop (NYSE:GME) shares soared 14% intra-day today as the company unveiled plans to add Bitcoin to its treasury holdings and posted a significant jump in quarterly profit, despite declining revenue and continued store closures.
The retailer’s board approved a strategy to allocate a portion of its cash and future capital—whether from debt or equity—into Bitcoin, although no upper limit was disclosed for the potential investment. The move marks a bold pivot as GameStop seeks to diversify its balance sheet while reshaping its business in a tough retail environment.
GameStop has been aggressively trimming its store footprint, having closed 590 U.S. locations during fiscal 2024, with more closures planned in 2025. The company also completed its exit from the Italian market and downsized operations in Germany.
For the fourth quarter, net income more than doubled to $131.3 million, up from $63.1 million a year earlier, driven largely by cost-cutting efforts. SG&A expenses dropped to $282.5 million, down from $359.2 million, reflecting tighter operational discipline.
However, revenue continued to decline, falling to $1.28 billion from $1.79 billion in the same quarter last year, mirroring broader industry trends toward digital game downloads and streaming. For the full year, net sales fell to $3.82 billion, down from $5.27 billion in fiscal 2023.
GameStop Surges 14% After Bitcoin Investment Announcement and Profit Spike
GameStop (NYSE:GME) shares soared 14% intra-day today as the company unveiled plans to add Bitcoin to its treasury holdings and posted a significant jump in quarterly profit, despite declining revenue and continued store closures.
The retailer’s board approved a strategy to allocate a portion of its cash and future capital—whether from debt or equity—into Bitcoin, although no upper limit was disclosed for the potential investment. The move marks a bold pivot as GameStop seeks to diversify its balance sheet while reshaping its business in a tough retail environment.
GameStop has been aggressively trimming its store footprint, having closed 590 U.S. locations during fiscal 2024, with more closures planned in 2025. The company also completed its exit from the Italian market and downsized operations in Germany.
For the fourth quarter, net income more than doubled to $131.3 million, up from $63.1 million a year earlier, driven largely by cost-cutting efforts. SG&A expenses dropped to $282.5 million, down from $359.2 million, reflecting tighter operational discipline.
However, revenue continued to decline, falling to $1.28 billion from $1.79 billion in the same quarter last year, mirroring broader industry trends toward digital game downloads and streaming. For the full year, net sales fell to $3.82 billion, down from $5.27 billion in fiscal 2023.
GameStop Corp. (NYSE:GME) Earnings Preview and Financial Analysis
- GameStop is set to release its quarterly earnings with an expected EPS of $0.09 and revenue of $1.48 billion.
- The company has a high P/E ratio of 177.81 and a price-to-sales ratio of 2.64, indicating investor confidence.
- Despite challenges in cash flow, GameStop maintains a strong liquidity position with a current ratio of 5.11.
GameStop Corp. (NYSE:GME) is a prominent player in the retail gaming industry, known for its physical and digital video game sales. The company gained significant attention as a "meme stock," with its stock price experiencing dramatic fluctuations due to retail investor interest. GameStop's competitors include companies like Best Buy and Amazon, which also offer gaming products.
As GameStop prepares to release its quarterly earnings on March 25, 2025, analysts predict an earnings per share (EPS) of $0.09 and revenue of approximately $1.48 billion. This release is part of a busy week for investors, who are also watching for inflation data and other earnings reports, as highlighted by CNBC's Jim Cramer.
GameStop's financial metrics reveal a mixed picture. The company has a high price-to-earnings (P/E) ratio of 177.81, indicating that investors are paying a premium for its earnings. The price-to-sales ratio of 2.64 suggests that investors are willing to pay $2.64 for every dollar of sales, reflecting confidence in the company's revenue potential.
Despite these high valuations, GameStop faces challenges in cash flow generation, as evidenced by its negative enterprise value to operating cash flow ratio of -265.31. However, the company maintains a strong liquidity position with a current ratio of 5.11, indicating its ability to cover short-term liabilities.
GameStop's debt-to-equity ratio of 0.096 shows a conservative approach to leveraging debt, which may appeal to risk-averse investors. As the company releases its earnings, stakeholders will be keen to assess any changes in its financial health and strategic direction.
GameStop Corp. (NYSE:GME) Earnings Preview and Financial Analysis
- GameStop is set to release its quarterly earnings with an expected EPS of $0.09 and revenue of $1.48 billion.
- The company has a high P/E ratio of 177.81 and a price-to-sales ratio of 2.64, indicating investor confidence.
- Despite challenges in cash flow, GameStop maintains a strong liquidity position with a current ratio of 5.11.
GameStop Corp. (NYSE:GME) is a prominent player in the retail gaming industry, known for its physical and digital video game sales. The company gained significant attention as a "meme stock," with its stock price experiencing dramatic fluctuations due to retail investor interest. GameStop's competitors include companies like Best Buy and Amazon, which also offer gaming products.
As GameStop prepares to release its quarterly earnings on March 25, 2025, analysts predict an earnings per share (EPS) of $0.09 and revenue of approximately $1.48 billion. This release is part of a busy week for investors, who are also watching for inflation data and other earnings reports, as highlighted by CNBC's Jim Cramer.
GameStop's financial metrics reveal a mixed picture. The company has a high price-to-earnings (P/E) ratio of 177.81, indicating that investors are paying a premium for its earnings. The price-to-sales ratio of 2.64 suggests that investors are willing to pay $2.64 for every dollar of sales, reflecting confidence in the company's revenue potential.
Despite these high valuations, GameStop faces challenges in cash flow generation, as evidenced by its negative enterprise value to operating cash flow ratio of -265.31. However, the company maintains a strong liquidity position with a current ratio of 5.11, indicating its ability to cover short-term liabilities.
GameStop's debt-to-equity ratio of 0.096 shows a conservative approach to leveraging debt, which may appeal to risk-averse investors. As the company releases its earnings, stakeholders will be keen to assess any changes in its financial health and strategic direction.
GameStop's Q3 Earnings Beat Expectations, Stock Gains 8%
GameStop (NYSE:GME) delivered mixed third-quarter results, with stronger-than-expected earnings offset by a significant revenue shortfall. The news led to an 8% surge in the company’s stock intra-day today.
For the quarter, the video game retailer reported adjusted earnings per share of $0.06, defying analysts’ projections of a $0.05 loss. However, revenue fell to $860.3 million, missing the $919.9 million estimate and marking a sharp 20.2% drop compared to $1.08 billion in the same period last year.
The decline in revenue was evident across the company’s core segments. Hardware and accessories brought in $417.4 million, software contributed $271.8 million, and collectibles generated $171.1 million in sales.
Despite the revenue shortfall, GameStop posted a net income of $17.4 million for the quarter, a marked improvement from the $3.1 million net loss recorded in the prior year. The company ended the period with $4.62 billion in cash and marketable securities, maintaining a strong liquidity position.
