GameStop(GME) - 2026 Q1 - Quarterly Report

Part I — FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) The company achieved net income, reversing a prior-year loss, with assets significantly growing from new financing and reclassified operations Condensed Consolidated Balance Sheets Total assets surged to $7.50 billion driven by cash and equivalents, while liabilities increased due to $1.48 billion in new long-term debt, significantly boosting stockholders' equity Condensed Consolidated Balance Sheet Highlights (in millions) | Balance Sheet Item | May 3, 2025 | May 4, 2024 | February 1, 2025 | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | $6,385.8 | $999.9 | $4,756.9 | | Merchandise inventories, net | $421.3 | $675.8 | $480.2 | | Assets held for sale | $226.2 | $9.4 | $— | | Total assets | $7,502.6 | $2,587.1 | $5,875.4 | | Liabilities & Equity | | | | | Total current liabilities | $847.3 | $848.3 | $665.4 | | Long-term debt | $1,480.7 | $14.9 | $6.6 | | Total liabilities | $2,515.2 | $1,279.8 | $945.6 | | Total stockholders' equity | $4,987.4 | $1,307.3 | $4,929.8 | Condensed Consolidated Statements of Operations The company reported a $44.8 million net income, reversing a prior-year loss, despite decreased net sales, driven by improved gross margin and reduced expenses Quarterly Operating Results (in millions, except per share data) | Metric | Three Months Ended May 3, 2025 | Three Months Ended May 4, 2024 | | :--- | :--- | :--- | | Net sales | $732.4 | $881.8 | | Gross profit | $252.8 | $244.5 | | Selling, general and administrative expenses | $228.1 | $295.1 | | Asset impairments | $35.5 | $— | | Operating loss | $(10.8) | $(50.6) | | Net income (loss) | $44.8 | $(32.3) | | Diluted net income (loss) per share | $0.09 | $(0.11) | Condensed Consolidated Statements of Cash Flows Net cash from operating activities significantly improved, while financing activities provided $1.478 billion, primarily from convertible debt issuance, leading to a substantial increase in cash Cash Flow Summary (in millions) | Cash Flow Activity | Three Months Ended May 3, 2025 | Three Months Ended May 4, 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $192.5 | $(109.8) | | Net cash from investing activities | $7.3 | $189.8 | | Net cash from financing activities | $1,478.0 | $(2.7) | | Increase in cash, cash equivalents and restricted cash | $1,634.3 | $78.6 | - Financing activities were primarily driven by $1.5 billion in proceeds from the issuance of convertible debt, offset by $19.3 million in issuance costs[17] Notes to Condensed Consolidated Financial Statements Key notes highlight the divestiture of Canadian and French operations with a $35.5 million impairment, issuance of $1.5 billion in convertible notes, shifts in revenue composition, and a post-quarter Bitcoin purchase - During Q1 2025, management committed to divesting its operations in Canada and France, reclassifying the associated assets and liabilities as held for sale and recognizing an aggregate impairment expense of $35.5 million[36][39][81] - On April 1, 2025, the company issued $1.5 billion in 0.00% Convertible Senior Notes due 2030, with an initial conversion price of approximately $29.85 per share[65][67] Net Sales by Product Category (in millions) | Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Hardware and accessories | $345.3 | $505.3 | | Software | $175.6 | $239.7 | | Collectibles | $211.5 | $136.8 | | Total net sales | $732.4 | $881.8 | - Subsequent to the quarter end, the company purchased 4,710 Bitcoin for cash and completed the sale of its Canadian subsidiary on May 4, 2025[85][86] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management outlines a strategy of investment, retail optimization through divestitures and store closures, and a revised investment policy allowing cryptocurrency, with Q1 results showing sales decline offset by collectibles growth and cost-cutting - The company's strategy focuses on using its cash for investment/acquisition opportunities and optimizing its retail business for profitability[91] - A revised investment policy, approved March 18, 2025, allows for investments in equities and certain cryptocurrencies, including Bitcoin, to be managed by a new Investment Committee[92][94] - The company is optimizing its retail business by divesting international assets, including the planned sale of operations in Canada and France, and continuing a store portfolio optimization review that led to 590 US store closures in fiscal 2024[97][100] Q1 2025 vs Q1 2024 Performance (in millions) | Metric | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $732.4 | $881.8 | (16.9)% | | Gross profit | $252.8 | $244.5 | 3.4% | | SG&A expenses | $228.1 | $295.1 | (22.7)% | | Operating loss | $(10.8) | $(50.6) | 78.7% | | Net income (loss) | $44.8 | $(32.3) | 238.7% | Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the company's market risk disclosures since its 2024 Annual Report on Form 10-K - There have been no material changes to the company's market risk disclosures since the 2024 Annual Report on Form 10-K[139] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of May 3, 2025, with no material changes to internal control over financial reporting during the quarter - The company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of May 3, 2025[140] - There were no material changes in internal control over financial reporting during the first quarter of fiscal 2025[141] Part II — OTHER INFORMATION Item 1. Legal Proceedings The company does not expect any existing legal proceedings to materially impact its financial condition, operations, or liquidity - The company does not expect any existing legal proceedings to have a material impact on its financial condition, operations, or liquidity[73][144] Item 1A. Risk Factors New material risk factors include the volatility and regulatory uncertainty of Bitcoin investments and the increased indebtedness from $1.5 billion in convertible notes, which may limit flexibility and dilute shareholders - A new risk factor relates to the investment in Bitcoin, which exposes the company to significant price volatility, limited liquidity, potential market manipulation, and regulatory uncertainty[146] - The issuance of $1.5 billion in Convertible Senior Notes introduces substantial indebtedness, which may limit business flexibility, increase borrowing costs, and require significant cash for servicing[147] - The company may not have sufficient funds to repurchase the Convertible Notes if required on April 3, 2028, or upon a fundamental change, which could lead to a default[152] - Conversion of the notes could dilute the ownership interest of existing stockholders and potentially depress the stock price[154][155] Item 5. Other Information As of June 5, 2025, the company had approximately 447.3 million shares outstanding, with two executives adopting Rule 10b5-1 trading plans and receiving new long-term equity incentive awards - As of June 5, 2025, there were 447,336,306 shares of Class A common stock outstanding[160] - In April 2025, General Counsel Mark Robinson and Principal Financial Officer Dan Moore each adopted a Rule 10b5-1 trading arrangement for the sale of company shares[161][162] - On June 10, 2025, the Compensation Committee approved new long-term equity incentive awards for Mark Robinson (valued at $2,500,000) and Daniel Moore (valued at $542,500)[164][165][166] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate documents, the convertible notes indenture, sales agreement, and officer certifications