GameStop(GME) - 2026 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Presents the company's unaudited condensed consolidated financial statements and accompanying notes Condensed Consolidated Balance Sheets Summarizes the company's assets, liabilities, and stockholders' equity at specific points in time Balance Sheet Summary | Metric | August 2, 2025 (millions) | August 3, 2024 (millions) | February 1, 2025 (millions) | | :--- | :--- | :--- | :--- | | ASSETS | | | | | Cash and cash equivalents | $8,694.4 | $4,193.1 | $4,756.9 | | Merchandise inventories, net | $484.9 | $560.0 | $480.2 | | Assets held for sale | $177.0 | $2.1 | — | | Digital assets | $528.6 | — | — | | Total assets | $10,341.1 | $5,536.3 | $5,875.4 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | Total current liabilities | $829.9 | $783.5 | $665.4 | | Long-term debt | $4,160.9 | $12.4 | $6.6 | | Total liabilities | $5,164.7 | $1,152.9 | $945.6 | | Total stockholders' equity | $5,176.4 | $4,383.4 | $4,929.8 | | Total liabilities and stockholders' equity | $10,341.1 | $5,536.3 | $5,875.4 | Condensed Consolidated Statements of Operations Details the company's revenues, expenses, and net income or loss over specific periods Operating Results | Metric | Three Months Ended August 2, 2025 (millions) | Three Months Ended August 3, 2024 (millions) | Six Months Ended August 2, 2025 (millions) | Six Months Ended August 3, 2024 (millions) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $972.2 | $798.3 | $1,704.6 | $1,680.1 | | Gross profit | $283.1 | $248.8 | $535.9 | $493.3 | | Operating income (loss) | $66.4 | $(22.0) | $55.6 | $(72.6) | | Interest income, net | $(79.6) | $(39.5) | $(136.5) | $(54.4) | | Unrealized gain on digital assets | $(28.6) | — | $(28.6) | — | | Income (loss) before income taxes | $174.6 | $17.5 | $222.9 | $(18.2) | | Net income (loss) | $168.6 | $14.8 | $213.4 | $(17.5) | | Basic EPS | $0.38 | $0.04 | $0.48 | $(0.05) | | Diluted EPS | $0.31 | $0.04 | $0.42 | $(0.05) | Condensed Consolidated Statements of Comprehensive Income (Loss) Reports net income alongside other comprehensive income items like foreign currency adjustments Comprehensive Income (Loss) | Metric | Three Months Ended August 2, 2025 (millions) | Three Months Ended August 3, 2024 (millions) | Six Months Ended August 2, 2025 (millions) | Six Months Ended August 3, 2024 (millions) | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $168.6 | $14.8 | $213.4 | $(17.5) | | Foreign currency translation adjustment | $14.1 | $0.1 | $21.4 | $0.4 | | Net change in unrealized gain on available-for-sale securities | — | — | — | $0.2 | | Total comprehensive income (loss) | $182.7 | $14.9 | $234.8 | $(16.9) | Condensed Consolidated Statements of Cash Flows Outlines cash movements from operating, investing, and financing activities over specific periods Cash Flow Summary | Cash Flow Activity | Six Months Ended August 2, 2025 (millions) | Six Months Ended August 3, 2024 (millions) | | :--- | :--- | :--- | | Net cash flows provided by (used in) operating activities | $309.9 | $(41.2) | | Net cash flows (used in) provided by investing activities | $(516.0) | $268.2 | | Net cash flows provided by financing activities | $4,153.3 | $3,050.2 | | Increase in cash, cash equivalents and restricted cash | $3,944.1 | $3,278.1 | | Cash, cash equivalents and restricted cash at end of period | $8,733.9 | $4,217.0 | Condensed Consolidated Statements of Stockholders' Equity Shows changes in the company's equity accounts, including stock issuance and retained earnings Stockholders' Equity Changes | Metric | February 1, 2025 (millions) | August 2, 2025 (millions) | February 3, 2024 (millions) | August 3, 2024 (millions) | | :--- | :--- | :--- | :--- | :--- | | Class A Common Stock (Shares) | 447.0 | 447.6 | 305.7 | 426.5 | | Class A Common Stock (Amount) | $0.2 | $0.2 | $0.1 | $0.2 | | Additional Paid-in Capital | $5,105.1 | $5,116.9 | $1,634.9 | $4,696.5 | | Accumulated Other Comprehensive Loss | $(94.0) | $(72.6) | $(83.6) | $(83.0) | | Retained Earnings (Loss) | $(81.5) | $131.9 | $(212.8) | $(230.3) | | Total Stockholders' Equity | $4,929.8 | $5,176.4 | $1,338.6 | $4,383.4 | Notes to Condensed Consolidated Financial Statements 1. General Information Outlines the company's business, operational structure, and the seasonal nature of its sales - GameStop Corp is a Delaware corporation established in 1996, operating as a leading specialty retailer of games and entertainment products through stores and e-commerce platforms[20] - Effective May 4, 2025, the Company operates in three geographic segments: United States, Australia, and Europe, following the divestiture of Canadian operations in Q2 fiscal 2025[21] - The business is seasonal, with the majority of net sales occurring in the fourth quarter, which includes the holiday selling season[23] 2. Summary of Significant Accounting Policies Details key accounting policies, including a new investment policy and the treatment of digital assets - The Board of Directors authorized a revised investment policy on March 18, 2025, delegating authority to an Investment Committee to manage the Company's securities portfolio[30] - On March 25, 2025, Bitcoin was approved as a treasury reserve asset, allowing a portion of cash or future debt/equity issuances to be invested in Bitcoin, classified as Digital assets and recorded at fair value[31] - During Q1 fiscal 2025, management approved plans to divest operations in Canada and France, reclassifying related assets and liabilities as held for sale and recording impairment expenses[34][36] - The Company adopted ASU No 2023-08 for crypto assets on a modified retrospective basis effective February 2, 2025, requiring digital assets to be measured at fair value with gains/losses reported in the statement of operations[38] - During Q2 fiscal 2025, the Company purchased 4,710 Bitcoin for $500 million, recognizing an unrealized gain of $28.6 million as of August 2, 2025[39][40][41] 3. Revenue Breaks down net sales by product category and details remaining performance obligations Net Sales by Product Category | Product Category | Three Months Ended August 2, 2025 (millions) | Three Months Ended August 3, 2024 (millions) | Six Months Ended August 2, 2025 (millions) | Six Months Ended August 3, 2024 (millions) | | :--- | :--- | :--- | :--- | :--- | | Hardware and accessories | $592.1 | $451.2 | $937.4 | $956.5 | | Software | $152.5 | $207.7 | $328.1 | $447.4 | | Collectibles | $227.6 | $139.4 | $439.1 | $276.2 | | Total net sales | $972.2 | $798.3 | $1,704.6 | $1,680.1 | - The Company recognizes revenue over time for extended warranties and the GameStop Pro rewards program, with unredeemed customer liabilities generally redeemed within one year[47] Remaining Performance Obligations | Performance Obligation | August 2, 2025 (millions) | August 3, 2024 (millions) | | :--- | :--- | :--- | | Unredeemed customer liabilities | $113.4 | $140.2 | | Extended warranties | $48.0 | $59.9 | | Subscriptions | $41.9 | $48.1 | | Total performance obligations | $203.3 | $248.2 | 4. Fair Value Measurements Categorizes assets and liabilities measured at fair value on recurring and nonrecurring bases - Assets and liabilities measured at fair value on a recurring basis include cash equivalents, marketable securities, digital assets, and foreign currency contracts, categorized into Level 1 and Level 2[53][54][55][57] Fair Value of Assets and Liabilities | Asset/Liability | Fair Value (August 2, 2025, millions) | Fair Value (August 3, 2024, millions) | Fair Value (February 1, 2025, millions) | | :--- | :--- | :--- | :--- | | Assets | | | | | Time deposits (Level 1) | $23.2 | $11.1 | $18.0 | | Digital assets (Level 1) | $528.6 | — | — | | Company-owned life insurance (Level 2) | $0.1 | $0.2 | $0.1 | | Total assets | $551.9 | $11.3 | $18.1 | | Liabilities | | | | | Nonqualified deferred compensation (Level 2) | $0.1 | $0.1 | $0.1 | | Total liabilities | $0.1 | $0.1 | $0.1 | - Assets measured at fair value on a nonrecurring basis primarily include property and equipment, operating lease ROU assets, and other intangible assets[62] 5. Debt Details the company's outstanding debt, including significant new convertible senior notes Outstanding Debt Summary | Debt Type | August 2, 2025 (millions) | August 3, 2024 (millions) | February 1, 2025 (millions) | | :--- | :--- | :--- | :--- | | Total outstanding debt | $4,160.9 | $23.4 | $16.9 | | Current portion of short-term debt | $0.0 | $11.0 | $10.3 | | Debt related to French disposal group (held for sale) | $13.2 | — | — | - On April 1, 2025, the Company completed a private offering of $1,500 million aggregate principal amount of 0.00% Convertible Senior Notes due 2030[67][69] - On June 17, 2025, the Company completed a private offering of $2,250 million aggregate principal amount of 0.00% Convertible Senior Notes due 2032[74][76] - Both series of Convertible Notes are general unsecured obligations, do not bear regular interest, and mature in 2030 and 2032, respectively[68][75] 6. Commitments and Contingencies Discloses outstanding letters of credit and the status of legal proceedings - As of August 2, 2025, the Company had approximately $8.7 million in outstanding stand-by letters of credit and other bank guarantees[81] - The Company is subject to various legal proceedings but does not believe any will materially affect its financial condition, results of operations, or liquidity[82] 7. Earnings Per Share Provides the calculation for basic and diluted earnings per share, including dilutive securities - Basic EPS is calculated by dividing net income by weighted-average common shares outstanding, while diluted EPS includes potentially dilutive securities[83] Weighted-Average Shares Calculation | Metric | Three Months Ended August 2, 2025 (millions) | Three Months Ended August 3, 2024 (millions) | Six Months Ended August 2, 2025 (millions) | Six Months Ended August 3, 2024 (millions) | | :--- | :--- | :--- | :--- | :--- | | Weighted-average common shares outstanding | 447.4 | 386.4 | 447.3 | 346.2 | | Dilutive effect of stock-based awards | 0.6 | 0.8 | 0.6 | — | | Dilutive effect of Convertible Notes | 98.5 | — | 58.3 | — | | Weighted-average diluted common shares | 546.5 | 387.2 | 506.2 | 346.2 | 8. Segment Information Presents financial performance data for the company's geographic operating segments - Effective May 4, 2025, GameStop operates in three geographic segments: United States, Australia, and Europe, following the divestiture of Canadian operations[86] Segment Performance (Three Months Ended August 2, 2025) | Segment (Three Months Ended August 2, 2025) | Net Sales (millions) | Gross Profit (millions) | Operating Income (Loss) (millions) | | :--- | :--- | :--- | :--- | | United States | $724.6 | $215.3 | $63.7 | | Canada | — | — | — | | Australia | $140.9 | $41.8 | $6.0 | | Europe | $106.7 | $26.0 | $(3.3) | | Total | $972.2 | $283.1 | $66.4 | Segment Performance (Six Months Ended August 2, 2025) | Segment (Six Months Ended August 2, 2025) | Net Sales (millions) | Gross Profit (millions) | Operating Income (Loss) (millions) | | :--- | :--- | :--- | :--- | | United States | $1,262.1 | $409.2 | $97.3 | | Canada | $38.2 | $10.0 | $(22.2) | | Australia | $222.8 | $68.7 | $0.6 | | Europe | $181.5 | $48.0 | $(20.1) | | Total | $1,704.6 | $535.9 | $55.6 | 9. Assets Held for Sale Details assets and liabilities related to the planned divestiture of operations in France - Management approved a plan to divest operations in France during Q1 2025, reclassifying related assets and liabilities as held for sale[95] French Disposal Group (August 2, 2025) | French Disposal Group (August 2, 2025, millions) | Amount | | :--- | :--- | | Total assets held for sale (net) | $177.0 | | Total liabilities held for sale | $151.7 | - An impairment loss of $17.2 million was recognized in Q1 fiscal 2025 for the French disposal group, followed by a $2.1 million asset impairment reversal in Q2 fiscal 2025[95] 10. Income Taxes Reports the company's income tax expense and effective tax rate for the reporting periods Income Tax Summary | Period | Income Tax Expense (millions) | Effective Income Tax Rate | | :--- | :--- | :--- | | Three Months Ended August 2, 2025 | $6.0 | 3.4% | | Three Months Ended August 3, 2024 | $2.7 | 15.4% | | Six Months Ended August 2, 2025 | $9.5 | 4.3% | | Six Months Ended August 3, 2024 | $(0.7) | 3.8% | - The effective income tax rates were primarily influenced by forecasted income taxes in certain jurisdictions and the impact of the Company's valuation allowance[98][99] - The recently enacted One Big Beautiful Bill Act (OBBBA) is not expected to have a material effect on the estimated fiscal 2025 effective tax rate[100] 11. Subsequent Events Announces a warrant dividend distribution to common stockholders declared after the reporting period - On September 9, 2025, the Board declared a warrant dividend distribution to common stockholders, with holders receiving one warrant for every ten shares[101] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Provides management's perspective on financial performance, business priorities, liquidity, and capital resources OVERVIEW Describes the company's core business, geographic segments, and fiscal year structure - GameStop is a leading specialty retailer of games and entertainment products, operating in the United States, Australia, and Europe after divesting Canadian operations in Q2 fiscal 2025[103][104] - The Company's fiscal year is 52 or 53 weeks, with the majority of net sales occurring in the fourth quarter due to the holiday selling season[105] BUSINESS PRIORITIES Outlines strategic goals including shareholder value maximization and retail business optimization - GameStop's strategy focuses on maximizing shareholder value through potential investments/acquisitions and optimizing its retail business for profitability[106] - The revised Investment Policy allows investments in cash, fixed income, equity securities, and certain cryptocurrencies like Bitcoin[107][109][110] - Retail business objectives include achieving omnichannel excellence, cost containment, and expanding the addressable market through new product offerings[114][115] - Ongoing efforts to achieve sustained profitability include evaluating international assets, divesting underperforming operations, and optimizing the store portfolio[112] CONSOLIDATED RESULTS OF OPERATIONS Analyzes key changes in net sales, gross profit, and operating expenses over comparative periods Consolidated Operating Results Comparison | Metric | Three Months Ended August 2, 2025 (millions) | Three Months Ended August 3, 2024 (millions) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $972.2 | $798.3 | $173.9 | 21.8% | | Gross profit | $283.1 | $248.8 | $34.3 | 13.8% | | Selling, general and administrative expenses | $218.8 | $270.8 | $(52.0) | (19.2)% | | Operating income (loss) | $66.4 | $(22.0) | $88.4 | (401.8)% | | Net income | $168.6 | $14.8 | $153.8 | NM | | Metric | Six Months Ended August 2, 2025 (millions) | Six Months Ended August 3, 2024 (millions) | Change ($) | Change (%) | | Net sales | $1,704.6 | $1,680.1 | $24.5 | 1.5% | | Gross profit | $535.9 | $493.3 | $42.6 | 8.6% | | Selling, general and administrative expenses | $446.9 | $565.9 | $(119.0) | (21.0)% | | Operating income (loss) | $55.6 | $(72.6) | $128.2 | 176.6% | | Net income (loss) | $213.4 | $(17.5) | $230.9 | NM | - Net sales increased by 21.8% for the three months and 1.5% for the six months, driven by growth in hardware, accessories, and collectibles[120][121][122][123] - Gross profit margin improved to 31.4% for the six months due to a shift towards higher-margin collectibles and pre-owned hardware/accessories[124][125] - SG&A expenses decreased significantly by 21.0% (six months) due to cost reduction efforts, store closures, and international divestitures[126][127][128][129] - The Company recognized a $2.1 million asset impairment reversal in Q2 2025 but a total asset impairment expense of $33.4 million for the six months[130][131][132] - Net interest income increased significantly due to higher cash balances from recent equity and convertible debt issuances[133] - An unrealized gain of $28.6 million on digital assets was recognized following the purchase of 4,710 Bitcoin[134][135] LIQUIDITY AND CAPITAL RESOURCES Details the company's cash position, financing activities, and cash flow performance Liquidity Summary | Metric | August 2, 2025 (millions) | August 3, 2024 (millions) | February 1, 2025 (millions) | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $8,694.4 | $4,193.1 | $4,756.9 | | Marketable securities | — | $11.1 | $18.0 | | Cash, cash equivalents and marketable securities | $8,694.4 | $4,204.2 | $4,774.9 | - The Company's primary liquidity sources are cash on hand ($8,694.4 million) and cash from operations[141] - Strategic operating alternatives, including divestitures and uses for excess cash like Bitcoin investments, are continuously evaluated[143][145] - The Company completed multiple At-the-Market (ATM) equity offerings in fiscal 2024, raising aggregate gross proceeds of approximately $3,470.4 million[149][150][151] - In April and June 2025, the Company completed private offerings of $1,500 million and $2,250 million of 0.00% Convertible Senior Notes[152][153][155] Cash Flow Activity Comparison | Cash Flow Activity | Six Months Ended August 2, 2025 (millions) | Six Months Ended August 3, 2024 (millions) | Change (millions) | | :--- | :--- | :--- | :--- | | Operating activities | $309.9 | $(41.2) | $351.1 | | Investing activities | $(516.0) | $268.2 | $(784.2) | | Financing activities | $4,153.3 | $3,050.2 | $1,103.1 | | Increase in cash, cash equivalents and restricted cash | $3,944.1 | $3,278.1 | $666.0 | - Cash flows from operating activities significantly improved to $309.9 million (provided) from $(41.2) million (used) in the prior year[157][158] - Cash flows used in investing activities increased to $(516.0) million, primarily due to the $500 million purchase of Bitcoin in Q2 fiscal 2025[159] - Cash flows from financing activities increased to $4,153.3 million, mainly from the issuance of Convertible Notes[161][162][163] CRITICAL ACCOUNTING POLICIES Confirms no material changes to critical accounting policies from the 2024 Annual Report - There have been no material changes to the Company's critical accounting policies from those disclosed in its 2024 Annual Report on Form 10-K[164] OFF-BALANCE SHEET ARRANGEMENTS States the company has no material off-balance sheet arrangements - As of August 2, 2025, the Company had no material off-balance sheet arrangements[165] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Confirms no material changes to market risk disclosures since the 2024 Annual Report - No material changes to quantitative and qualitative disclosures about market risk have occurred since the 2024 Annual Report on Form 10-K[166] ITEM 4. CONTROLS AND PROCEDURES Confirms the effectiveness of disclosure controls and reports no changes in internal controls Evaluation of Disclosure Controls and Procedures Asserts that disclosure controls and procedures were effective as of the end of the period - The Company's disclosure controls and procedures were effective as of August 2, 2025, providing reasonable assurance that required disclosures are appropriately reported[167] Changes in Internal Control Over Financial Reporting Reports no material changes in internal control over financial reporting during the quarter - There were no material changes in internal control over financial reporting during the second quarter of fiscal 2025[168] PART II — OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Refers to disclosures on legal matters within the financial statement notes - Legal proceedings information is incorporated by reference from Note 6, 'Commitments and Contingencies - Legal Proceedings,' in Part I, Item 1 of this report[171] ITEM 1A. RISK FACTORS Highlights new risks related to Bitcoin investments and substantial indebtedness from convertible notes Risks Related to Our Investment Policy and Investment Portfolio Details risks from Bitcoin investments, including price volatility, security, and regulatory uncertainty - Investment in Bitcoin exposes the Company to significant risks, including price volatility, limited liquidity, and regulatory uncertainty, which could adversely impact financial results[173] - Bitcoin holdings do not pay interest, and generating cash depends on selling Bitcoin or implementing income-generating strategies, which may not be successful[173] - Security breaches, cyberattacks, or loss of private keys could result in the loss of some or all Bitcoin holdings, materially affecting financial condition[173] Risks Related to Our Outstanding Notes Discusses risks from substantial convertible note debt, including serviceability and potential dilution - The Company has incurred substantial indebtedness ($4.2 billion in Convertible Notes), which may decrease business flexibility and limit access to capital[174] - The Convertible Notes are obligations of the Company only, and the ability to service this debt depends on cash flow from subsidiaries, which may be subject to restrictions[175][176] - The Company may not have sufficient cash flow to settle conversions of Convertible Notes in cash or repurchase them, potentially leading to default[177][179] - Conversion of Convertible Notes may dilute existing stockholders' ownership interest or depress the price of Class A common stock[181][182][183] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS States no unregistered sales of equity securities occurred during the period - No unregistered sales of equity securities or use of proceeds occurred during the period[184] ITEM 3. DEFAULTS UPON SENIOR SECURITIES Indicates no defaults upon senior securities occurred during the period - No defaults upon senior securities occurred[185] ITEM 4. MINE SAFETY DISCLOSURES States that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the Company[186] ITEM 5. OTHER INFORMATION Provides updates on outstanding shares, trading plans, tax law, and a warrant dividend Outstanding Shares and Ownership Reports the number of outstanding Class A common shares and their holder distribution - As of September 5, 2025, approximately 447.7 million shares of Class A common stock were outstanding[187] Security Trading Plans of Directors and Executive Officers Confirms no directors or officers adopted or terminated Rule 10b5-1 trading plans - None of the Company's directors or executive officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter[188] Recent Tax Law Changes Notes the enactment of new tax legislation and its expected immaterial impact - The One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, is not expected to materially affect the Company's estimated fiscal 2025 effective tax rate[189] Recent Developments Announces a warrant dividend distribution for common stockholders and convertible note holders - On September 9, 2025, the Board declared a warrant dividend distribution, where common stockholders will receive one warrant for every ten shares[190][191] - Holders of Convertible Notes will also receive warrants without conversion, and the warrants are expected to be listed on the NYSE under ticker symbol GME WS[191] ITEM 6. EXHIBITS Lists all exhibits filed with the Form 10-Q, including key corporate and financing documents - The exhibits include the Certificate of Incorporation, Bylaws, Indentures for the 2030 and 2032 Convertible Senior Notes, and various certifications[192]