GameStop (GME) Q3 2021 earnings results show larger than expected loss as revenues beat

GameStop has just released its Q3 2021 earnings results. The company is reporting a loss of $1.39/share with revenues coming in at $1.297 billion. Here's a breakdown of all the interesting data points for the quarterly release.

Here's a breakdown of the highlights from the GameStop Q3 2021 earnings release:

Net sales were $1.297 billion for the quarter, compared to $1.005 billion in the prior year’s third quarter.
Sales attributable to new and expanded brand relationships, such as Samsung, LG, Razer, Vizio and others, contributed to the Company's growth in the quarter.
Inventory was $1.141 billion at the close of the quarter, compared to $861 million at the close of the prior year’s third quarter, reflecting the Company’s focus on front-loading investments in inventory to meet increased customer demand and mitigate supply chain issues.
Ended the period with cash and cash equivalents of as well as no debt other than a low-interest, unsecured term loan associated with the French government’s response to COVID-19.
Established new offices in Seattle, Washington and Boston, Massachusetts, which are technology hubs with established talent markets.
Secured a new $500 million ABL facility, which closed in November just after the end of the third quarter, with improved liquidity and terms, including reduced borrowing costs, lighter covenants and additional flexibility.

Today's results showcase that GameStop is clearly investing for the future. While the company attributed the revenue beat to new partnerships with display companies like Samsung, LG, and Vizio, it is pretty clear that this quarter's results were hampered by chip shortages affecting console sales. Hardware and accessory sales were up from the same quarter a year ago, coming in at $669,900,000 during Q3 2021. That is 62% growth in hardware sales despite the prevalance of shortages.

GameStop's Q3 2021 results highlight the changing mix shift of the company's sales. Software revenues were down slightly, while collectibles and hardware revenues picked up steam from the year ago period.

A less impressive data point from the earnings release is the 2.22% decline in software sales from Q3 2020. Software sales now only comprise 33% of the company's revenues, down from 42% in 2020. Collectibles revenue was another bright spot in the quarter, with sales growing 30% year-over-year in Q3 2021.

GameStop's free cash decreased during the quarter. This was largely due to an increase of inventory on hand ahead of the Holiday 2021 quarter.

GameStop (GME) ended the quarter with $1.468 billion of cash on the balance sheet with only $46 million of debt related to French COVID-19 term loan. The company did experience a decrease in cash on hand that can largely be attributed to a bump in inventory being kept on hand for the upcoming Holiday quarter. The company currently sits with $1.14 billion in merchandise inventories which is up from $861 million in the year ago period.

The GameStop Q3 2021 earnings results conference call is set to kick off at 5:00 PM ET, so be sure to tune in at Shacknews Twitch to hear the latest from the company's leadership. It remains to be seen if there will be a Q&A session on today's call.

The market's initial response to GameStop's Q3 2021 earnings release was a drop down to $160/share.

GameStop (GME) shares are currently trading down in the mid $160s in afterhours trading, but are still above last week's low set on Friday during the latest COVID-induced panic selloff in the broader stock market.

This article is only meant for educational purposes, and should not be taken as investment advice. Please consider your own investment time horizon, risk tolerance, and consult with a financial advisor before acting on this information.

Full Disclosure:

At the time of this article, Shacknews primary shareholder Asif A. Khan, his family members, and his company Virtue LLC had the following positions:

Long GameStop via GME shares (hedged with out-of-the-money put options)

Long GameStop via GME call options