Transcript of GameStop Corp.'s Q4 2022 Earnings Call on NYSE:GME

The transcript of the earnings call for GameStop Corp. (NYSE:GME) Q4 2022 was on March 21, 2023.

Speaker: Hello everyone, and welcome to GameStop's Fourth Quarter and Full Year 2022 Earnings Conference Call. Please take note that some of the statements shared during this call may be forward-looking statements. These statements are made according to the safe harbor provisions of the Private Securities Litigation Act of 1995, as revised. There are risks and uncertainties associated with such statements, and they may differ from actual results. Please refer to our earnings press release and our filings with the SEC for information on these risks and uncertainties. As of today, the forward-looking statements made in this call reflect our current understanding, and we do not intend to update these statements in the future. Now, I would like to pass the conversation to Matt Furlong, GameStop's CEO.

Hello everyone who has joined today's call, it's great to speak with you all. Firstly, I would like to express my gratitude to our employees for their hard work and commitment over the past year. I would also like to extend my appreciation to our customers, partners, and stockholders for their continued support and enthusiasm, which has been incredibly beneficial to us. This enthusiasm has provided a great help in navigating through the challenge of 2022, as we shifted our focus towards achieving profitability in the short term while continuing to grow sustainably into the future. I believe it is important to provide some insight into where we have come from, where we are now, and where we hope to go. Over the past two years, GameStop has undergone a significant transformation, which has made us a stronger and more efficient business, well-positioned to succeed despite the retail sector's current challenges.

GameStop was in a tough spot at the beginning of 2021, with a lot of debt, not much cash, not great relationships with vendors, and no important stockholders in the boardroom. Things looked pretty bad, and people thought GameStop might go bankrupt. But during the year, we made some big changes. We got new people on the board, made our management team stronger, paid off some debt, and found some new partners. We also worked on improving our infrastructure and finding new ways to grow. But as we started the next fiscal year, things got even harder. Inflation went up, interest rates went up, and there were other big problems in the market. We thought hard about what this would mean for GameStop and the people who own stock in our company.

Last year, we decided to make some changes to improve our business. We wanted to save money, manage our inventory better, and provide better service to our customers. We found new ways to make shipping quicker, make shopping online and in-store easier, and help our employees stay motivated. This meant that we had to let some people go, but we worked hard to make our company more efficient and profitable. Thankfully, our team has adapted to these changes and is doing a great job. We can see that in our financial results this quarter. GameStop made $48.2 million, which is a big improvement from the $147.5 million loss we had in the fourth quarter of last year.

Going forward, we're intensely focused on enhancing our year-on-year profitability while simultaneously pursuing practical long-term expansion. We are making various moves in fiscal year 2023 to boost our efficiency and facilitate the aforementioned goals. These measures encompass further reductions of excess expenses, predominantly in Europe, where we've already started phasing out operations in specific countries; capitalizing on our improved financial standing in order to acquire better terms from suppliers and vendors; attaining full console allocations to cater to the sustained high demand; exploring potential partnerships with gaming and retail businesses to realize cost-effective revenue expansion; utilizing our exceptional refurbishing capacities to stimulate growth in the pre-owned market; and expanding our scope in more profitable categories, such as collectibles and toys, where we've already seen promising growth patterns.

GameStop has made significant strides in improving its business in 2021 despite all the hard work and challenges that lie ahead. We now have a healthy financial position with a sizable cash reserve, little outstanding debt, and an optimized inventory management system that positions us for profitability throughout the year. Our top priority is to use this solid foundation to provide exceptional customer experiences and drive long-term value for our stockholders. Turning to our financial performance, we recorded net sales of $2.226 billion for the quarter, down from $2.254 billion in the fourth quarter of 2021. For the full year, net sales came in at $5.927 billion compared to $6.011 billion in the fiscal year 2021. We also delivered net income of $48.2 million this quarter, or $0.16 per diluted share, which is a marked improvement from the net loss of $147.5 million, or $0.49 per diluted share, reported in the same quarter of the previous year.

The Company didn't make as much money as it spent in the past year, with a net loss of $313.1 million, which is less than the $381.3 million loss from the year before. Expenses related to selling, general, and administrative activities (SG&A) were also lower, at $453.4 million, compared to $538.9 million in the same quarter last year. For the whole year, SG&A totaled $1.68 billion, down from $1.71 billion in 2021. The Company now has $1.39 billion in cash, cash equivalents, and marketable securities, up from $1.27 billion in 2021. The Company spent money to make money and will keep working to keep its finances stable.

By the end of last year, we didn't owe any money under our ABL agreement and had little debt, only a low interest unsecured term loan due to the French government's efforts to address COVID. Our capital expenditures for the quarter amounted to $11.6 million and $55.9 million for the full year. In 2023, we plan on cutting our CapEx and keeping it at a minimal level. During the fourth quarter, we were able to generate $337.2 million in cash flow from operations, whereas during the same period last year, we had a cash outflow of $110.3 million. This was partly due to our focus on reducing our inventory. As of the end of the year, our inventory decreased to $682.9 million from $915 million in fiscal year 2021. Moving forward, we anticipate continuing to have expenses related to our restructuring efforts in the first quarter of 2023 as we prioritize cost-cutting.

Regarding our future plans, we are not giving any specific information right now. We believe that our performance speaks for itself and we want our stockholders to evaluate us based on our actions rather than promises. We acknowledge that there is still a lot of work to do, but we are focusing on making progress rather than celebrating past successes. Our priority is to cut costs, improve efficiency, increase profits, and expand our business in areas that will bring satisfaction to our customers. That's all for today. We want to express our gratitude for the continued support of our customers, employees, and stockholders.

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