Earnings Call: Q2 2021

Sep 8, 2021

Greetings, and welcome to GameStop's Second Quarter Fiscal 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. As a reminder, this conference call is being recorded and will be archived for 2 months on GameStop's Investor Relations website. This call will include forward looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Any such statement should be considered in conjunction with the cautionary statements and the Safe Harbor statement in the earnings release and risk factors discussed and reports filed with the SEC. GameStop assumes no obligation to update any of these forward looking statements or information. A reconciliation and other information regarding non GAAP financial measures discussed on the call can be found in the company's earnings release issued earlier today as well as the Investors section of the GameStop website. Please note that the company will not be hosting a Q and A session as part of today's call. Now, I would like to turn the call over to the company's Chief Executive Officer, Matt Furlong. Thank you. It's good to be with everyone today. I want to start by thanking our entire team for all of their hard work Given the pace at which the organization is changing, I've had the chance to meet a number of team members across our stores, fulfillment centers and home office. And I look forward to meeting more in the coming weeks months. We appreciate how everyone is stepping up and embracing GameStop's new operating principles. Since you last heard from us in June, our refreshed Board of Directors and new management team have settled in. We now have unified leadership fully focused on 2 long term goals, delighting customers and delivering value for stockholders. In addition to focusing on long term opportunities, we took a number of steps over the past quarter to fortify the company's infrastructure and technology. We are focused on positioning GameStop to scale while obsessing over competitive pricing, expansive selection and fast shipping. Our actions included continuing to add technology talent across the organization, including individuals with experience in e commerce, by adding a 530,000 square foot facility in Reno, Nevada. This new facility, which is expected to be operational next year, will position us to further expand selection and expedite shipping. With this addition, the company's fulfillment network will span both coasts of the continental U. S. For the first time. Our new 700,000 square foot facility in York, Pennsylvania also began shipping orders during the quarter. We grew our catalog by adding new products and leading brands across consumer electronics, collectibles, toys and more. We signed a lease on a new customer care facility in South Florida and started adding talent to that team as we continue to build out raising more than $1,100,000,000 in net proceeds from the June ATM program. Let me now turn to our financial results for the quarter. Net sales increased 25.6 percent to $1,183,000,000 compared to $942,000,000 during the same period in 2020. We achieved this growth while overcoming Roughly 9% reduction in our global store fleet due to de densification efforts and ongoing store closures across certain international markets due to the pandemic. We believe net sales is the primary metric by which stockholders should assess the company's execution. SG and A was $378,900,000 or 32 percent of sales compared to $348,200,000 or 37% of sales in last year's Q2. Adjusting for severance and certain other costs, Our adjusted SG and A was $372,300,000 or 31.5 percent of sales compared to $336,900,000 or 35.8 percent of sales during the same period last year. The 430 basis points of leverage was primarily driven by store reopening after widespread shutdowns due to the pandemic in Q2 2020. We reported a net loss of $61,600,000 or $0.85 per diluted share compared to a net loss of $111,300,000 or loss per diluted share of $1.71 in the prior year Q2. Our adjusted net loss was $55,000,000 or $0.76 per diluted share compared to adjusted net loss of $92,000,000 or a loss of $1.42 per diluted share in the fiscal 20 2Q2. Our global store count was 4,642 at the end of the quarter. Turning to the balance sheet. We ended the quarter with cash and restricted cash of $1,775,000,000 which is just over $1,000,000,000 higher than the end of the Q2 last year. As we announced in June, we raised approximately $1,100,000,000 in net proceeds through the issuance of 5,000,000 shares of common stock under an ATM. We intend to continue using those proceeds for general corporate purposes as well as for outstanding are now approximately $75,900,000 At the end of the quarter, we had no borrowings under our asset based revolving credit facility And no long term debt other than a $47,500,000 low interest unsecured term loan associated with the French government's response Capital expenditures for the quarter were $13,500,000 bringing year to date CapEx investments to $28,200,000 a number we anticipate will increase as the company continues investing in growth initiatives. In the second quarter, Cash flow from operations was an outflow of $11,500,000 compared to an inflow of $192,800,000 during the same period last largely due to the investments in inventory we are making to drive sales growth. In terms of our outlook, we are not providing formal guidance at this time. Thank you again for your support and interest in GameStop. This concludes today's conference call. Thank you for your participation.